Transportation Laws (Maritime Commerce)

TRANSPORTATION LAWS based on the lectures of ATTY. RIZADA

2SR 2015: BASIR. BIRUAR. BUNIEL. DEIPARINE. GADIA. GUMBOC. IBAY. SUAN. TITO.

MARITIME COMMERCE Maritime Pertaining to navigable waters, i.e. to the sea, ocean, great lakes, navigable rivers, or the navigation or commerce thereof (Black’s Law Dictionary)

Governing Laws on Maritime Commerce 1. Code of Commerce 2. COGSA [Carriage of Goods by Sea Act]

Other Applicable Laws

1. PD 474 (Reorganization of Maritime Functions of MARINA) 2. RA 1937 (Tariff and Customs Code) 3. Act 2616 (Salvage Law) 4. PD 1521 (Ship Mortgage Decree of 1978)

Governing Body in Maritime Transportation MARINA (Maritime Industry Authority)

General Functions of MARINA 1. Issue Certificates of Public Convenience for the operation of domestic and overseas water carriers 2. Register and issue certificates, licenses, or documents necessary or incident thereto

What is the requirement for a carrier to operate domestic sea voyages? Certificate of Public Convenience (CPC)

Vessel Any barge, lighter, bulk carrier, passenger ship freighter, tanker, container ship, fishing boats or other artificial contrivance utilizing any source of motive power, designed, used or capable of being used as a means of water transportation operating either as common contract carrier, including fishing vessels covered under Presidential Decree No. 43, except (1) those owned and/or operated by the Armed Forces of the Philippines and by foreign governments for military purposes, and (2) bancas, sailboats and other waterborne contrivance of less than three gross tons capacity and not motorized. (Section 3(b), Presidential Decree 474)

Code of Commerce on Vessels (Art. 573-585)]

Art. 573. Merchant vessels constitute property which may be

acquired and transferred by any of the means recognized

by law. The acquisition of a vessel must appear in a written

instrument, which shall not produce any effect with respect

to third persons if not inscribed in the registry of vessels.

The ownership of a vessel shall likewise be acquired by

possession in good faith, continued for three years, with a

just title duly recorded. In the absence of any of these

requisites, continuous possession for ten years shall be

necessary in order to acquire ownership.

A captain may not acquire by prescription the vessel of

which he is in command.

How ownership of a vessel may be acquired 1. By any means recognized by law (Art. 712 Civil Code): a. By law (sale or dacion en pago) b. By donation c. By testate or intestate succession d. In consequence of certain contracts e. By tradition 2. By prescription a. 3 years – if possession thereof was in good faith with just title duly recorded, or b. 10 years – in the absence of above requisites

Requisites for Legal Acquisition of a Merchant Vessel under[Art. 573 1. The mode of transfer must appear in a written instrument 2. It must be recorded in the registry or vessels to bind 3rd persons: a. Under EO 125 – transaction must be registered with MARINA, b. But, this is also being conducted by the PPA

What kind of property is a vessel? It is a personal or movable property but a. ownership thereof must be evidenced by a certificate of ownership, and b. transfer thereof must be registered in the proper registry [to bind 3rd persons] (Art. 585)



RUBISO vs RIVERA (1920) FACTS The counsel of plaintiff (Rubiso) brought a suit alleging that his clients were the owners of the pilot boat named Valentine, which has been in bad condition and on the date of the complaint, was stranded in the place called Tingly, of the municipality of Battings. The defendant Rivera took charge or took possession of the said boat without the knowledge or consent of the plaintiff and refused to deliver it to them, under the claim that he was the owner thereof. The refusal on the part of the defendant has caused the plaintiff damages because they were unable to derive profit from the voyages for which the said pilot boat was customarily used. The defendant, on the other hand, alleged that they purchased the subject pilot boat. The plaintiff alleged that the sale on behalf of the defendant Rivera was prior to that made at public auction to Rubio, but the registration of this latter sale was prior to the sale made to the defendant. ISSUE Whether or not, the plaintiff still has the better right over the subject vessel? RULING Yes. Under the Code of Commerce, Art 573 provides: “Merchant vessels constitute property that may be acquired and 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.” The requisite of registration in the registry of the purchase of a vessel is necessary and indispensable in order that the purchaser’s rights may be maintained against a claim filed by third person. It is undeniable that Rivera’s right cannot prevail over those acquired by Rubiso in the ownership of the pilot boat, though the latter’s acquisition of the vessel at public auction was subsequent to its purchase by the defendant, Rivera.

Policy: What is controlling is not the date of sale but the date of registration. A registered owner, even if he belatedly purchased the vessel, has a better right than the one who earlier bought the same vessel but failed to register it.

Obligations of the Captain if Repair and Maintenance of Vessel is Required During the Voyage (Art. 583)]

Art. 583. If the ship being on a voyage the captain should

find it necessary to contract one or more of the obligations

mentioned in Nos. 8 and 9 of Article 580, he shall apply to

the judge or court if he is in Philippine territory, and

otherwise to the Filipino Consul should there be one, and,

in his absence to the judge or court or to the proper local

authority, presenting the certificate of the registry of the

vessel treated of in Article 612, and the instruments proving

the obligation contracted.

The judge or court, the consul or the local authority as the

case may be, in view of the result of the proceedings

instituted, shall make a temporary memorandum in the

certificate of their result, in order that it may be recorded

in the registry when the vessel returns to the port of her

registry, or so that it can be admitted as a legal and

preferred obligation in case of sale before the return, by

reason of the sale of the vessel by virtue of a declaration of

unseaworthiness.

The lack of this formality shall make the captain personally

liable to the creditors who may be prejudiced through his

fault.

1. The captain shall apply to: a. If in Philippine territory – the judge or the courts, or

b. If outside the Philippine territory:

i. the Filipino consul (if there is one), or ii. the judge or court of the local authority, if no consul is available

2. He must present: a. the certificate or registry of the vessel, and

b. the instruments proving the obligation contracted Note: Why are these formalities required for the captain when he contracts obligations for the repair and equipment of the vessel (Article 580[8]) or when he obtains loans on bottomry (Article 580[9])? This is because omission to follow these requirements will make the captain personally liable for the credits which may be prejudiced through his fault. He cannot ask for a refund from the carrier.



Persons Who Take Part in Marine Commerce (Art. 586-651) 1. Ship Owner – the owner of the vessel 2. Ship Agent – the person: a. entrusted with provisioning of the vessel, or

b. who represents the vessel in the port where she (vessel) happens to be

3. Captain or Master – the one who governs the vessel 4. Sailing Mate – the second chief of the vessel 5. Second Mate – the one who takes command of the vessel in case of disability or disqualification of captain or sailing mate 6. Crew or Sailors – the persons who man the vessel and those who perform other duties

Ship Owner and Ship Agent

Art. 586. The ship owner and the ship agent shall be civilly

liable for the acts of the captain and for the obligations

contracted by the latter to repair, equip, and provision the

vessel, provided the creditor proves that the amount

claimed was invested for the benefit of the same.

By ship agent is understood the person entrusted with

provisioning or representing the vessel in the port in which

it may be found.

MACONDRAY vs PROVIDENT INSURANCE (2004) FACTS CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade Carrier certain goods in favor of ATLAS FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all risks. When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same. MACONDRAY denies liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator of the vessel who transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade Carrier and not party to

this case; that it has no control over the acts of the captain and crew of the carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the port, M/V Trade Carrier discharged the full amount of shipment as shown by the draft survey. ISSUE Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel owned by Trade & Transport. RULING Yes. Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel. The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom’s Clearance. Petitioner’s employees were present at the port of destination one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that it was the entity that represented the vessel at the port of destination and was the ship agent within the meaning and context of Article 586 of the Code of Commerce.

Powers and Duties of a Ship Agent

1. Art. 595 (2) - Represent the ownership of the vessel and may, in his own name and in such capacity, take judicial and extra-judicial steps in matters relating to commerce 2. Art. 596 (1) – Occupy the duties of the captain, if he has the qualifications of a captain 3. Art. 597 – Select and come into an agreement with the captain and contract in the name of the owners, who shall be bound in all that refers to repairs, details of equipment,



armament, provisions, fuel, freight, and in general that pertains to the requirement of navigation. 4. Art. 602 – Indemnify the captain for all expenses he may have incurred from his own funds or from those of other persons for the benefit of the vessel Note: The owner, ship agent and captain can be one and the same person. This in relation to Art. 595, 596, and 606.

Captain and Master of the Vessel Captain - one who governs vessels:

a. that navigate the high seas, or b. of large dimensions and importance (although

engaged in coastwise trade) Master - one who commands smaller ships engaged exclusively in the coastwise trade. Note: For purposes of Maritime Commerce, the terms “captain” and “master” (which are sometimes referred to as patron) have the same meaning, both being the chiefs and commanders of vessels.

Art. 609. Captains and masters of vessels must be Filipino

having legal capacity to bind themselves in accordance with

this Code, and must prove that they have the skill, capacity,

and qualifications required to command and direct the

vessel, as established by marine laws, ordinances, or

regulations, or by those of navigation, and that they are

not disqualified according to the same for the discharge of

the duties of that position.

If the owner of a vessel desires to be the captain thereof

and does not have the legal qualifications therefor, he shall

limit himself to the financial administration of the vessel,

and shall intrust her navigation to a person possessing the

qualifications required by said ordinances and regulations.

Qualifications of a Captain under Art 609 of the Code of Commerce 1. Filipino 2. Legal capacity to bind himself 3. Proof that they have skill, capacity, and qualification required to command and direct a vessel as established by:

a. marine laws, ordinances or regulations b. those of navigation 4. Not disqualified according to the same for the discharge of the duties of that position

COASTWISE LIGHTERAGE vs CA (1995) FACTS Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corp., using the latter’s dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching Manila Bay, while approaching Pier 18, one of the barges, “Coastwise 9″, struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole “2 inches wide and 22 inches long”. As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, Philippine General Insurance Company (PhilGen) and against the carrier, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, the amount of P700,000.00 representing the value of the damaged cargo of molasses. In turn, PhilGen then filed an action against Coastwise Lighterage before the RTC of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales for the latter’s lost cargo PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may have against the carrier, which is presumed to have violated the contract of carriage. ISSUE Whether or not there is a violation of Art 609. RULING Yes. Article 609 of the Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code) provides that “captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation



laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position.” Far from having rendered service with the greatest skill and outmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties. For one, Jesus R. Constantino, the patron of the vessel “Coastwise 9″ admitted that he was not licensed. Clearly, Coastwise Lighterage’s embarking on a voyage with an unlicensed patron violates Article 609 of the Code of Commerce. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that would have prevented the vessel’s hitting the sunken derelict ship that lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence.

General Functions of a Captain 1. General agent of the shipowner 2. Technical director of the vessel

3. Representative of the government of the country under whose flag he navigates (3-fold character)

Art. 610. The following powers are inherent in the position

of captain or master of a vessel:

1. To appoint or make contracts with the crew in the

absence of the agent and propose said crew, should said

agent be present; but the agent shall not be permitted to

employ any member against the captain's express refusal.

2. To command the crew and direct the vessel to the port

of its destination, in accordance with the instructions he

may have received from the agent.

3. To impose, in accordance with the agreements and the

laws and regulations of the merchants marine, on board the

vessel, correctional punishment upon those who do not

comply with his orders or who conduct themselves against

discipline, holding a preliminary investigation on the crimes

committed on board the vessel on the high seas, which shall

be turned over to the authorities, who are to take

cognizance thereof, at the first port touched.

4. To make contracts for the charter of the vessel in the

absence of the agent or of her consignee, acting in

accordance with the instructions received and protecting

the interests of the owner most carefully.

5. To adopt all the measures which may be necessary to

keep the vessel well supplied and equipped, purchasing for

the purpose all that may be necessary, provided there is no

time to request instructions of the agent.

6. To make, in similar urgent cases and on a voyage, the

repairs to the hull and engines of the vessel and to her

rigging and equipment which are absolutely necessary in

order for her to be able to continue and conclude her

voyage; but if she should arrive at a point where there is a

consignee of the vessel, he shall act in concurrence with the

latter.

INTER-ORIENT MARITIME vs NLRC (1994) FACTS

Captain Tayong was hired by Trenda World Shipping and Sea Horse Ship Management through Inter-Orient Maritime Enterprises for a period of 1 year.

He took command of Inter-Orients vessel in Hong Kong. o He was instructed to replenish bunker and

diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120, 000 metric tons of coal.

Since a storm would hit Hong Kong, precautionary measures were taken to secure the vessel’s safety considering that the turbo-charger was leaking and the vessel was 14 years old.

Captain Tayong followed-up the requisition by the former Captain for supplies of oxygen and acetylene, necessary for the welding-repair of the turbo-charger and economizer.

The vessel sailed to Singapore. o On the way to Singapore, the vessel stopped in

the middle of the ocean for 6 hours and 45 minutes due to a leaking economizer.

o He was instructed to shut down the economizer and use the auxiliary boiler instead.

When the vessel arrived in Singapore, the Chief Engineer reminded Captain Tayong that the oxygen and acetylene



supplies had not been delivered. o Upon inquiry, the Captain was informed that the

supplies could only be delivered on Aug. 1 as the stores had closed.

Captain Tayong called the shipowner, Seahorse Ship Management and informed them that the departure of the vessel for South Africa may be affected because of the delay in the delivery of the supplies.

o He was advised to contact Mr. Clark, the Technical Director.

o According to Mr. Clark, after being informed that the ship cannot travel without the supplies, Captain Tayong agreed with him when he said by shutting off the water to the turbo chargers and using the auxiliary boilers, there should be no further problem.

o According to Captain Tayong, he was informed by Sea Horse to wait for the supplies.

Captain Tayong immediately sailed for South Africa upon the delivery of the supplies.

Upon reaching South Africa, Captain Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to the Philippines.

o He was not informed of the charges against him.

He then instated a complaint for illegal dismissal. ISSUE Whether or not Captain Tayong was remiss of his duties that would justify his dismissal. RULING No. It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate investigation. Such employees, too, are entitled to security of tenure, fair standards of employment and the protection of labor laws. The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. Of these roles, by far the most important is the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the

captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. To the captain is committed the governance, care and management of the vessel. Clearly, the captain is vested with both management and fiduciary functions. More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of underwriters. It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications.

FAR EASTERN SHIPPING vs CA (1998) FACTS M/V PAVLODAR, a Russian vessel owned and operated by Far Eastern Shipping Company (FESC), arrived at the Port of Manila and was assigned Berth 4 of the Manila International Port, as its berthing space. Captain Roberto Abellana was tasked by the Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino, on the other hand, was assigned by the Appellant Manila Pilots' Association (MPA) to conduct docking maneuvers for the safe berthing of the vessel to Berth No. 4. Captain Gavino (pilot of the vessel) boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the particulars of



the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and proceeded to the Manila International Port. The sea was calm and the wind was ideal for docking maneuvers. When the vessel reached the landmark, one-half mile from the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles, were dropped. However, the anchor did not take hold as expected. The speed of the vessel did not slacken. A commotion ensued between the crew members. After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern. Abellana, who was then on the pier apron, noticed that the vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the "full-astern" code. Before the right anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier as well as the vessel. ISSUE (1) Is the pilot of a commercial vessel (Capt. Gavino), under compulsory pilotage, liable for the damage caused by the vessel to the pier, at the port of destination, for his negligence? RULING (1) Yes. A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it is to guide vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation of vessels on the high seas. However, the term "pilot" is more generally understood as a person taken on board at a particular place for the purpose of conducting a ship through a river, road or channel, or from a port. Generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the master pro hac vice and should give all directions as to speed, course, stopping and reversing anchoring, towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to act as pilot. Under certain systems of foreign law, the pilot does not take entire charge of the vessel, but is deemed merely the adviser of the master, who retains command and control of the navigation even in localities where pilotage is compulsory.

Upon assuming such office as compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and knowledge in respect to navigation in the particular waters over which his license extends superior to and more to be trusted than that of the master. He is not held to the highest possible degree of skill and care, but must have and exercise the ordinary skill and care demanded by the circumstances, and usually shown by an expert in his profession. Under extraordinary circumstances, a pilot must exercise extraordinary care. In this case, Capt. Gavino failed to measure up to such strict standard of care and diligence required of pilots in the performance of their duties. As pilot, he should have made sure that his directions were promptly and strictly followed. ISSUE (2) Would the owner of the vessel (Far Eastern) be liable likewise if the damage is caused by the concurrent negligence of the master of the vessel (Capt. Kavankov) and the pilot (Capt. Gavino) under a compulsory pilotage? RULING (2) Yes. The negligence on the part of Capt. Gavino is evident; but Capt. Kavankov is no less responsible for the allision. His unconcerned lethargy as master of the ship in the face of troublous exigence constitutes negligence. While it is indubitable that in exercising his functions a pilot-is in sole command of the ship and supersedes the master for the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated and the circumstances may require the master to displace a compulsory pilot because of incompetency or physical incapacity. If, however, the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot, but not blindly. The master is not wholly absolved from his duties while a pilot is on board his vessel, and may advise with or offer suggestions to him. He is still in command of the vessel, except so far as her navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on and the usual precaution taken. Thus, in particular, he is bound to see that there is sufficient watch on deck, and that the men are attentive to their duties, also that engines are stopped,



towlines cast off, and the anchors clear and ready to go at the pilot's order. A perusal of Capt. Kavankov's testimony makes it apparent that he was remiss in the discharge of his duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of maintaining watchful vigilance over this risky maneuver. In sum, where a compulsory pilot is in charge of a ship, the master being required to permit him to navigate it, if the master observes that the pilot is incompetent or physically incapable, then it is the duty of the master to refuse to permit the pilot to act. But if no such reasons are present, then the master is justified in relying upon the pilot, but not blindly. Under the circumstances of this case, if a situation arose where the master, exercising that reasonable vigilance which the master of a ship should exercise, observed, or should have observed, that the pilot was so navigating the vessel that she was going, or was likely to go, into danger, and there was in the exercise of reasonable care and vigilance an opportunity for the master to intervene so as to save the ship from danger, the master should have acted accordingly. The master of a vessel must exercise a degree of vigilance commensurate with the circumstances. In general, a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of the pilot in the performance of duty constitutes a maritime tort. At common law, a shipowner is not liable for injuries inflicted exclusively by the negligence of a pilot accepted by a vessel compulsorily. The exemption from liability of the shipowner for such negligence shall apply if the pilot is actually in charge and solely in fault. Since, a pilot is responsible only for his own personal negligence, he cannot be held accountable for damages proximately caused by the default of others, or, if there be anything which concurred with the fault of the pilot in producing the accident, the vessel master and owners are liable. In other words, Even though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners are also liable.

Note: There is such a thing as compulsory pilotage in maritime commerce. If there is a vessel owned by a foreign company, the master of this vessel is not familiar with the set up here in the Philippines. So in order to facilitate its docking, a pilot is assigned to that vessel for its berthing or parking. It is quite common for states and localities to provide for compulsory pilotage, and safety laws have been enacted requiring vessels approaching their ports, with certain exceptions, to take on board pilots duly licensed under local law. The purpose of these laws is to create a body of seamen

thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and property from the dangers of navigation. Compare the Far Eastern case to the WildValley case.

WILDVALLEY SHIPPING vs CA (2000) FACTS In the Orinoco River in Venezuela, it is a rule that ships passing through it must be piloted by pilots familiar to the river. Hence, in 1988 Captain Nicandro Colon, master of Philippine Roxas, a ship owned by Philippine President Lines, Inc. (PPL), obtained the services of Ezzar Vasquez, a duly accredited pilot in Venezuela to pilot the ship in the Orinoco River. The vessel experienced some vibrations but the pilot assured that they were just a result of the shallowness of the channel. Unfortunately, Philippine Roxas ran aground in the Orinoco River while being piloted by Vasquez. As a result, the stranded ship blocked other vessels. One such vessel was owned Wildvalley Shipping Co., Ltd. (WSC). The blockade caused $400k worth of losses to WSC as its ship was not able to make its delivery. Subsequently, WSC sued PPL in the RTC of Manila. It averred that PPL is liable for the losses it incurred under the laws of Venezuela, which provide that the master and owner of the ship are liable for the negligence of the pilot of the ship. Vasquez was proven to be negligent when he failed to check on certain vibrations that the ship was experiencing while traversing the river. ISSUE Whether or not the master of the vessel (Capt. Colon) is liable for the negligence of the pilot (Capt. Vasquez). RULING No. The master remains the overall commander of the vessel even when there is a pilot on board. He remains in control of the ship as he can still perform the duties conferred upon him by law despite the presence of a pilot who is temporarily in charge of the vessel. The Orinoco River being a compulsory pilotage channel necessitated the engaging of a pilot who was presumed to be knowledgeable of every shoal, bank, deep and shallow ends of the river. In his deposition, pilot Ezzar Solarzano Vasquez testified that he is an official pilot in the Harbour at Port Ordaz, Venezuela, and that he had been a pilot for twelve (12) years. He also had experience in navigating the waters of



the Orinoco River. The law does provide that the master can countermand or overrule the order or command of the harbor pilot on board. The master of the Philippine Roxas deemed it best not to order him (the pilot) to stop the vessel, mayhap, because the latter had assured him that they were navigating normally before the grounding of the vessel. Moreover, the pilot had admitted that on account of his experience he was very familiar with the configuration of the river as well as the course headings, and that he does not even refer to river charts when navigating the Orinoco River. Based on these declarations, it comes as no surprise to us that the master chose not to regain control of the ship. Admitting his limited knowledge of the Orinoco River, Captain Colon relied on the knowledge and experience of pilot Vasquez to guide the vessel safely. We find that the grounding of the vessel is attributable to the pilot. When the vibrations were first felt the watch officer asked him what was going on, and pilot Vasquez replied that “(they) were in the middle of the channel and that the vibration was a result of the shallowness of the channel.” Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel Philippine Roxas as well as other vessels on the Orinoco River due to his knowledge of the same. In his experience as a pilot, he should have been aware of the portions which are shallow and which are not. His failure to determine the depth of the said river and his decision to plod on his set course, in all probability, caused damage to the vessel. Thus, we hold him as negligent and liable for its grounding.

Commentary: There are conflicting decisions in the Far Eastern case and the WildValley case. In the former, the master of the vessel, who was a Russian, was held liable together with the Filipino pilot. In the latter, the Filipino master of the vessel was absolved and the Venezuelan pilot was held solely liable. The common denominator? The Supreme Court ruled in favor of Filipinos.

Books to be Carried by the Captain on Board the Vessel under Art. 612[(3)] 1. Logbook - where he shall enter everyday everything significant about the voyage

2. Accounting Book - where he shall enter all the amounts collected and paid for the account of the vessel 3. Freight Book – where he shall record the entry and exit of goods

Art. 612. The following obligations are inherent in the

office of captain:

x x x

3. To have three folioed and stamped books, placing at the

beginning of each one a note of the number of folios it

contains, signed by the maritime official, and in his absence

by the competent authority.

In the first book, which shall be called "log book", he shall

enter every day the condition of the atmosphere, the

prevailing winds, the course sailed, the rigging carried, the

horsepower of the engines, the distance covered, the

maneuvers executed, and other incidents of navigation. He

shall also enter the damage suffered by the vessel in her

hull, engines, rigging, and tackle, no matter what is its

cause, as well as the imperfections and averages of the

cargo, and the effects and consequence of the jettison,

should there be any; and in cases of grave resolutions which

require the advice or a meeting of the officers of the vessel,

or even of the passengers and crew, he shall record the

decision adopted. For the informations indicated he shall

make use of the binnacle book, and of the steam or engine

book kept by the engineer.

In the second book, called the "accounting book", he shall

enter all the amounts collected and paid for the account of

the vessel, entering specifically article by article, the sources

of the collection, and the amounts invested in provisions,

repairs, acquisition of rigging or goods, fuel, outfits, wages,

and all other expenses. He shall furthermore enter therein a

list of all the members of the crew, stating their domiciles,

their wages and salaries, and the amounts they may have

received on account, either directly or by delivery to their

families.

In the third book, called "freight book", he shall record the

entry and exit of all the goods, stating their marks and

packages, names of the shippers and of the consignees,

ports of loading and unloading, and the freight earned. In

the same book he shall record the names and places of

sailing of the passengers and the number of packages of

which their baggage consists, and the price of the passage.

In the case of Haverton, what is the probative value of the entries in the logbook?



HAVERTON SHIPPING vs NLRC (1985)

FACTS The records show that on March 12, 1982, Alfredo BENITEZ was hired by OFSI Services, the local manning agent of Haverton Shipping, as a boatswain on the M.V. Gold Alisa, owned and operated by the latter, for a period of one year with a monthly salary of US $485.00. On May 24, 1982, while the vessel was berthed at the port of Durban, South Africa, a fight occurred between BENITEZ and his shipmates, Arnel Candelaria and Maximo Espiritu, as a result of which the latter suffered injury on the fingers of his left hand. An investigation of the incident was conducted by the Master who made a written report of his findings and decision in the ship's "log book". BENITEZ was found to have breached the disciplinary code of merchant service on several counts among which was "assault with a knife on a member of the ship's crews," which behavior "seriously detract(ed) from the safe and efficient working of the ship." He was then repatriated to the Philippines after serving only two and a half months of his contract. ISSUE Whether or not the facts in the logbook shall be considered. RULING Yes. In declaring that copy of the Official Entry in the Ship's Log Book was not legally binding for being hearsay, public respondents overlooked the fact that under our laws the ship's captain is obligated to keep a "log book" where, among others, he records the decisions he has adopted. Even according to the law of the vessel's registry, that book is also "required by law" as disclosed by the entry itself. There is no controversy as to the genuineness of the said entry. The vessel's log book is an official record and entries made by a person in the performance of a duty required by law are prima facie evidence of the facts stated therein. In the light of all the foregoing, the inevitable conclusion is that public respondents had misappreciated the significance of the entry in the vessel's official log book regarding the incident. The probative value of the facts stated therein has not been overcome by BENITEZ's submittals.

Commentary: So the logbook was used as evidence. So may 2 crew members na nag-away. Then this occurrence was noted by the ship captain in the logbook and it was offered in evidence. So what is the probative value of the logbook? The Supreme Court said it is an official record of entries made by a person in the performance of his duties as required by law

and are prima facie evidence of the facts entered therein. So whatever cause provided therein in the logbook, it’s provided as evidence, and you want to rebut that, you have to present proof to the contrary. But in the case of Centennial vs. Dela Cruz, what happened to the logbook?

CENTENNIAL VS. DELA CRUZ (2008)

FACTS On May 9, 2000, petitioner Centennial Transmarine, Inc., for and in behalf of its foreign principal, petitioner Centennial Maritime Services, Corp., hired respondent Dela Cruz as Chief Officer of the oil tanker vessel "MT Aquidneck," owned by petitioner B+H Equimar, Singapore, Pte. Ltd., for a period of nine months. On May 15, 2000, respondent boarded "MT Aquidneck" and performed his functions as Chief Officer. However, on September 14, 2000, respondent was relieved of his duties and repatriated to the Philippines. Failing to get a satisfactory explanation from petitioners for his relief, respondent filed a complaint for illegal dismissal with prayer for payment of his salaries for the unexpired portion of contract, moral and exemplary damages and attorney’s fees. Respondent alleged that while the vessel was docked in Lake Charles in the United States, another Chief Officer boarded the vessel. He inquired from the master of the vessel, Captain Kowalewski, why he had a reliever, however the latter disclaimed any knowledge. At the same time, he showed respondent an electronic mail (e-mail) from petitioner B+H Equimar Singapore, Pte. Ltd. stating that there was an incoming Chief Officer who was to take over the operations upon boarding. On September 19, 2000, Captain Kowalewski gave respondent his flight schedule. He was subsequently repatriated on September 22, 2000. Upon arrival in Manila, respondent inquired from Mr. Eduardo Jabla, President of petitioner Centennial Transmarine, Inc., why he was relieved. However, Jabla could only surmise that his relief was possibly due to the arguments he had with Capt. P. Bajaj, a company superintendent who came on board in August 2000 while the vessel was berthed in Los Angeles, regarding deck operations and deck work, and documentation and safety procedures in the cargo control room. On the other hand, petitioner alleged that respondent was relieved of his functions as Chief Officer due to his inefficiency and lack of job knowledge. Capt. Kowalewski allegedly informed them of respondent’s lack of experience in tanker operations which exposed the vessel and its crew to



danger and caused additional expenses. Petitioners allegedly advised respondent to take a refresher course in order to facilitate his deployment to another vessel. However, instead of taking a refresher course, respondent filed a case for illegal dismissal. ISSUE Whether or not entries in the official logbook of a vessel should not be given weight for being self-serving. RULING Petitioners’ basis for dismissing respondent was the alleged entry by Captain Kowalewski in the ship’s logbook regarding respondent’s inexperience and inefficiency. A ship’s log/logbook is the official record of a ship’s voyage which its captain is obligated by law to keep wherein he records the decisions he has adopted, a summary of the performance of the vessel, and other daily events. A logbook is a respectable record that can be relied upon when the entries therein are presented in evidence. In the instant case, however, respondent correctly pointed out that the issue is not whether an official logbook entry is acceptable in evidence, but whether a document purporting to be a copy of a logbook entry has been duly established to be authentic and not spurious. In Wallem Maritime Services, Inc. v. National Labor Relations Commission, citing Haverton Shipping Ltd. v. National Labor Relations Commission, the Court ruled that a copy of an official entry in the logbook is legally binding and serves as an exception to the hearsay rule. In the said case, however, there was no controversy as to the genuineness of the said entry and the authenticity of the copy presented in evidence. In the instant case, respondent has consistently assailed the genuineness of the purported entry and the authenticity of such copy. He alleged that before his repatriation, there was no entry in the ship’s official logbook regarding any incident that might have caused his relief; that Captain Kowalewski’s signature in such purported entry was forged. In support of his allegations, respondent submitted three official documents bearing the signature of Capt. Sczepan Kowalewski which is different from the one appearing in Annex E. Thus, it was incumbent upon petitioners to prove the authenticity of Annex E, which they failed to do. Likewise, the purported report of Capt. Kowalewski dated September 1, 2000 (Annex D), and the statements of Safety Officer Khaldun Nacem Faridi and Chief Officer Josip Milin also cannot be given weight for lack of authentication. Although technical rules of evidence do not strictly apply to labor proceedings, however, in the instant case, authentication of the above-mentioned documents is

necessary because their genuineness is being assailed, and since petitioners offered no corroborating evidence. These documents and their contents have to be duly identified and authenticated lest an injustice would result from a blind adoption of such contents. Thus, the unauthenticated documents relied upon by petitioners are mere self-serving statements of their own officers and were correctly disregarded by the Court of Appeals.

Commentary: So in the earlier case, there was no question in the genuineness of the entries in the logbook. So it is binding and that’s an exception to the hearsay rule according to the rules in evidence. The authenticity and genuineness of the entries are not in question. But in this case, the entries in question were allegedly entered only after the fact. So sabi nila, the entries that were stated there by the Chief Engineer were just written down by somebody else. It’s not a question about the admissibility of the logbook. The question here is the authenticity of the statements made therein. So if there’s a question as to that and it is proven na the entries were just drawn by a person not during that particular incident, the entries will not bind the Court and cannot be used as evidence.

Captain’s Duration of Responsibility for the Cargo Article 619 talks about the duration of the responsibility of the captain where cargo is on board his vessel.

Art. 619. The captain shall be liable for the cargo from the time it is turned over to him at the dock, or afloat alongside the ship, at the port of loading, until he delivers it on the shore or on the discharging wharf, of the port of unloading unless the contrary has been expressly agreed upon.

So the captain technically has a shorter responsibility than that of a common carrier.

Maritime Protest A written statement under oath made by the captain or master of the vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or injured with respect to circumstances attending such occurrence. A maritime protest will have to be signed or done by the captain if the vessel is lost or impaired. Now what is the purpose for one to file a maritime protest?



Purpose of a Maritime Protest It is usually intended to show 1) That the loss or damage resulted from:

a) a peril of the sea, or b) some other cause for which neither the master or owner was responsible;

2) It concludes with the protestation against any liability of the owner for such loss or damage. Now take a look at Article 624. It provides for the procedure or duties when the captain whose vessel has gone through a hurricane or whose cargo suffered damages or averages.

Procedure (Duties of the Captain whose Vessel or

Cargo has Suffered Damages or Averages): 1) He shall make a PROTEST thereon before a competent authority at the first port he touches within 24 hours following his arrival. 2) He must RATIFY it within 24 hours when he arrives at the place of destination where he must proceed immediately with the proof of the facts. 3) He must not open the hatches until all of the above is done. (Art. 624, Com. Code) So if you want to invoke your doctrine of limited liability, the owner of the vessel may escape liability for loss of the goods when it is due to perils of the sea. We will learn that later on. Are you familiar with corsair or men of war?

Corsair and Men of War A corsair is a pirate ship. A man of war is a battle ship of the navy used by the government. Why did I discuss about men of war or corsair? It is in 622. What is the duty of the captain in seas of corsair? What is his action against this man of war? Read 622. The captain must proceed to the nearest neutral port. Just read the procedure under 622 when you see a corsair or man of war. Art. 622. If when on a voyage, the captain should receive news of the appearance of privateers or men of war against his flag, he shall be obliged to make the nearest neutral port, inform his ship agent or shippers, and await an occasion to sail under convoy or until the danger is over or to receive final orders from the ship agent or shippers.

Under Article 623, what if the captain does not manage to outrun the corsair or the man of war of the enemy country and what if the goods were forcibly taken by the corsair? Art. 623. If he should be attacked by a privateer and after having tried to avoid the encounter and having resisted the delivery of the equipment of the vessel or of its cargo, they should be forcibly taken away from him, or he should be obliged to deliver them, he shall make an entry in his freight book and shall prove the fact before the competent authority at the first port he touches. After the force majeure has been proven, he shall be exempted from liability. This is very common in Africa because there are a lot of pirates there. So take note of your duty if in the future you will be a captain. Let’s proceed to another captain in maritime commerce, the officers and crew of the vessel. We have the sailing mate.

Sailing Mate Who is a sailing mate? Art. 627. The sailing mate, as the second chief of the vessel and unless the ship agent does not order otherwise, shall take the place of the captain in case of absence, sickness or death, and shall then assume all his powers, obligations, and liabilities. This obligation of the sailing mate was discussed in Centennial.

CENTENNIAL vs. DELA CRUZ (2008)

FACTS On May 9, 2000, petitioner Centennial Transmarine, Inc., for and in behalf of its foreign principal, petitioner Centennial Maritime Services, Corp., hired respondent Dela Cruz as Chief Officer of the oil tanker vessel "MT Aquidneck," owned by petitioner B+H Equimar, Singapore, Pte. Ltd., for a period of nine months. On May 15, 2000, respondent boarded "MT Aquidneck" and performed his functions as Chief Officer. However, on September 14, 2000, respondent was relieved of his duties and repatriated to the Philippines. Failing to get a satisfactory explanation from petitioners for his relief, respondent filed a complaint for illegal dismissal with prayer for payment of his salaries for the unexpired portion of contract, moral and exemplary damages and attorney’s fees.



Respondent alleged that while the vessel was docked in Lake Charles in the United States, another Chief Officer boarded the vessel. He inquired from the master of the vessel, Captain Kowalewski, why he had a reliever, however the latter disclaimed any knowledge. At the same time, he showed respondent an electronic mail (e-mail) from petitioner B+H Equimar Singapore, Pte. Ltd. stating that there was an incoming Chief Officer who was to take over the operations upon boarding. On September 19, 2000, Captain Kowalewski gave respondent his flight schedule. He was subsequently repatriated on September 22, 2000. Upon arrival in Manila, respondent inquired from Mr. Eduardo Jabla, President of petitioner Centennial Transmarine, Inc., why he was relieved. However, Jabla could only surmise that his relief was possibly due to the arguments he had with Capt. P. Bajaj, a company superintendent who came on board in August 2000 while the vessel was berthed in Los Angeles, regarding deck operations and deck work, and documentation and safety procedures in the cargo control room. On the other hand, petitioner alleged that respondent was relieved of his functions as Chief Officer due to his inefficiency and lack of job knowledge. Capt. Kowalewski allegedly informed them of respondent’s lack of experience in tanker operations which exposed the vessel and its crew to danger and caused additional expenses. Petitioners allegedly advised respondent to take a refresher course in order to facilitate his deployment to another vessel. However, instead of taking a refresher course, respondent filed a case for illegal dismissal. ISSUE Whether or not the position of chief officer of an ocean going vessel is a managerial position or one of trust and confidence. RULING The petition lacks merit. Petitioners allege loss of trust and confidence due to incompetence as the ground for respondent’s dismissal. Loss of trust and confidence is premised on the fact that the employee holds a position whose functions may only be performed by someone who has the confidence of management. Such employee may be managerial or rank-and-file, but the nature of his position determines the requirements for a valid dismissal. With respect to a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Proof beyond reasonable doubt is not required, only substantial

evidence which must establish clearly and convincingly the facts on which the loss of confidence rests. Article 627 of the Code of Commerce defines the Chief Mate, also called Chief Officer or Sailing Mate, as "the second chief of the vessel, and unless the agent orders otherwise, shall take the place of the captain in cases of absence, sickness, or death, and shall then assume all his powers, duties, and responsibilities." A Chief Officer, therefore, is second in command, next only to the captain of the vessel. Moreover, the Standards of Training, Certification and Watchkeeping for Seafarers 1978 (STCW ’78), to which the Philippines is a signatory, defines a Chief Mate as "the deck officer next in rank to the master and upon whom the command of the ship will fall in the event of incapacity of the master." In Association of Marine Officers and Seamen of Reyes and Lim Co. v. Laguesma, the Court held that the Chief Mate is a managerial employee because the said officer performed the functions of an executive officer next in command to the captain; that in the performance of such functions, he is vested with powers or prerogatives to lay down and execute management policies. The exercise of discretion and judgment in directing a ship’s course is as much managerial in nature as decisions arrived at in the confines of the more conventional board room or executive office. Important functions pertaining to the navigation of the vessel like assessing risks and evaluating the vessel’s situation are managerial in nature. Thus, respondent, as Chief Officer, is a managerial employee; hence, petitioners need to show by substantial evidence the basis for their claim that respondent has breached their trust and confidence.

Ok, thank you. So that’s a sailing mate. What about a second mate?

Second Mate A second mate takes the command of the vessel in case of the inability or disqualification of the captain and sailing mate, assuming therefore their powers and responsibilities.

Crew Sailors The crew sailors are the other persons who man the vessel.



Discharge of Captain and Crew Who will discharge or terminate the services of the person despite of the vessel? 1) The ship agent or shipowner may discharge the captain or the crew 2) The captain may discharge lower level sailors or crew

Effects if the captain and crew are discharged during the voyage General Rule (during the voyage) Art. 604. If the captain or any other member of the crew should be discharged during the voyage, they shall receive their salary until the return to the place where the contract was made, UNLESS there are good reasons for the discharge, all in accordance with Articles 636 et seq., of this code.

Exception (definite period or voyage) Art. 605. If the contract of the captain and members of the crew with the ship agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, EXCEPT for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, an damage caused to the vessel or to its cargo by malice, or manifest or proven negligence.

MADRIGAL SHIPPING vs OGILVIE (1958)

FACTS The captain, employed by Madrigal Shipping, engaged the services of several seamen to fetch and man the vessel SS Bridge owned by the latter from Sasebu, Japan to the port of Manila. The seamen were flown to Sasebu and they manned the vessel. Upon arrival of the vessel in Hongkong, the seamen were dismissed, replaced by a Chinese crew and were flown back to Manila and paid their salaries up to the date of their discharge. The seamen brought this action to collect their salaries and subsistence allowance from day of dismissal to the date when the vessel arrived in manila. CFI dismissed complaint on the ground that the respondents failed to prove that the petitioner is a corporation organized under Philippine laws and therefore it has no jurisdiction over the subject matter of the action. CA reversed CFI decision and ordered petitioner to pay respondents. Petitioner for certiorari.

RULING The services of the respondents were engaged by the petitioner to man its vessel for a determinate time or voyage, with an express stipulation that "this contract expires on the arrival of this boat at the port of Manila." Article 605 of the Code of Commerce gives the causes for dismissal. Not having been discharged for any of the causes enumerated in the foregoing article, the respondents are entitled to the amounts they respectively seek to collect from the petitioner.

Commentary: So this was for a definite voyage galing Manila to Japan to Hong Kong then back to Manila. They were dismissed sa Hong Kong. So ang bayad sa kanila is from Manila up to Hong Kong. So they’re asking now for damages and salary up to their return to Manila. The Supreme Court said they are entitled to their salary up to their return to Manila. So definite voyage, up to the fulfillment of the contract. Let’s go to Wallem.

WALLEM vs MINISTER OF LABOR (1981) FACTS Private respondents were hired by petitioner sometime in May 1975 to work as seamen for a period of ten months on board the M/V Woermann Sanaga, a Dutch vessel owned and operated by petitioner's European principals. While their employment contracts were still in force, private respondents were dismissed by their employer, petitioner herein, and were discharged from the ship on charges that they instigated the International Transport Federation (ITF) to demand the application of worldwide ITF seamen's rates to their crew. Private respondents were repatriated to the Philippines on October 27, 1975 and upon their arrival in Manila, they instituted a complaint against petitioner for illegal dismissal and recovery of wages and other benefits corresponding to the five months' unexpired period of their shipboard employment contract. ISSUE The whole controversy is centered around the liability of petitioner when it ordered the dismissal of herein private respondents before the expiration of their respective employment contracts.



RULING In its Order of December 19, 1977 5 the Board, thru its Chairman, Minister Blas F. Ople, held that there is no showing that the seamen conspired with the ITF in coercing the ship authorities to grant salary increases, and the Special Agreement was signed only by petitioner and the ITF without any participation from the respondents who, accordingly, may not be charged as they were, by the Secretariat, with violation of their employment contract. The Board likewise stressed that the crew members may not be discharged until after the expiration of the contract which is for a definite period, and where the crew members are discharged without just cause before the contract shall have been performed, they shall be entitled to collect from the owner or agent of the vessel their unpaid salaries for the period they were engaged to render the services, applying the case of Madrigal Shipping Co., Inc. vs. Jesus Ogilivie et al. The findings and conclusion of the Board should be sustained. As already intimated above, there is no logic in the statement made by the Secretariat's Hearing Officer that the private respondents are liable for breach of their employment contracts for accepting salaries higher than their contracted rates. Said respondents are not signatories to the Special Agreement, nor was there any showing that they instigated the execution thereof. Respondents should not be blamed for accepting higher salaries since it is but human for them to grab every opportunity which would improve their working conditions and earning capacity. It is a basic right of all workingmen to seek greater benefits not only for themselves but for their families as well, and this can be achieved through collective bargaining or with the assistance of trade unions. The Constitution itself guarantees the promotion of social welfare and protection to labor. It is therefore the Hearing Officer that gravely erred in disallowing the payment of the unexpired portion of the seamen's respective contracts of employment. It is petitioner who is guilty of breach of contract when they dismissed the respondents without just cause and prior to the expiration of the employment contracts. As the records clearly show, petitioner voluntarily entered into the Special Agreement with ITF and by virtue thereof the crew men were actually given their salary differentials in view of the new rates. It cannot be said that it was because of respondents' fault that petitioner made a sudden turn-about and refused to honor the special agreement.

So it was for a definite period of 10 months. There’s this case because they wanted to demand higher wages. Is that a just cause for termination? No.

Discharge by the Captain of the Sailor Art. 637. Neither can the captain discharge a sailor during the time of his contract except for sufficient cause, the following being considered as such:

1. The perpetration of a crime which disturbs order on the vessel.

2. Repeated offenses of insubordination, against

discipline, or against the fulfillment of the service.

3. Incapacity and repeated negligence in the fulfillment of the service he should render.

4. Habitual drunkenness.

5. Any occurrence which incapacitates the sailor to

carry out the work under his charge, with the exception of the provisions contained in Article 644.

6. Desertion.

The captain may, however, before setting out on a voyage and without giving any reason whatsoever, refuse to permit a sailor whom he may have engaged to go on board, and may leave him on land, in which case he will be obliged to pay him his wages as if he had rendered services. This indemnity shall be paid from the funds of the vessel if the captain should have acted for reasons of prudence and in the interest of the safety and good services of the former. Should this not be the case, it shall be paid by the captain personally. After the vessel has sailed, and during the voyage and until the conclusion thereof, the captain may not abandon any member of his crew and land or on the sea, unless by reason of being guilty of some crime, his imprisonment and delivery to the competent authority should be proper in the first port touched, which shall be obligatory to the captain.

Supercargo A person especially employed by the owner of a cargo to take charge of and sell the best advantage merchandise which has been shipped, and to purchase returning cargoes and to receive freight, as he may be authorized.

Duties of a Supercargo The supercargoes shall discharge on board the vessel the administrative duties which the ship agent or shippers may have assigned to them; they shall keep an account and record of their transactions in a book which shall have the same conditions and requisites as those required for the accounting



book of the captain, and shall respect the latter in his duties as chief of the vessel. (Art. 649, par 1, Com. Code)

Effect When There is a Supercargo The power and responsibilities of the captain shall cease, when there is a supercargo, with regard to that part of the administration legitimately conferred upon the latter, but they shall continue in force for all acts which are inseparable from his authority and office. (Art. 649, par 2, Com. Code)

Prohibited Acts of Supercargoes

1. Supercargoes, cannot, without authorization or express agreement, make any transaction for their own account during the voyage, with the exception of the ventures which, in accordance with the custom of the port of destination, they are permitted to do. (Art. 651, par. 1, Com. Code)

2. Neither can they invest in the return voyage more

than the profit from the ventures, unless there is an express authorization from the principals. (Art. 651, par. 2, Com. Code)

Note: All the provisions contained in the Second Section of Title III, Book II, with regard to qualifications, manner of making contracts, and liabilities of factors, shall be applicable to supercargoes. (Art. 650, Com. Code)

Doctrine Of Limited Liability Under Maritime Commerce, vessels also may be able to limit their liability even without a stipulation because it is the law that provides for that. Articles 586 and 587 talk about the liability of the ship owner and ship agent. Liability of Ship Owner and Ship Agent Art. 586. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same. By ship agent is understood the person entrusted with provisioning of a vessel, or who represents her in the port in which she happens to be.

Art. 587. The ship agents shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the

vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freightage it may have earned during the voyage.

So when is the ship owner and ship agent civilly liable?

1. For the acts of the captain

2. For the obligations contracted by the captain to repair, equip, and provision the vessel

3. For the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried

But when can a ship agent be exempt from liability? By abandoning the vessel with all her equipment and the freightage it may have earned during the voyage. The doctrine of limited liability is invoked by the common carrier in case of loss or damage to the goods due to perils of the sea because of the real and hypothecary nature of maritime commerce.

YANGCO vs LASERNA (1941) FACTS Petitioner Yangco’s vessel SS Negros left Romblon. The captain was duly advised and his attention was called by the passengers that typhoon signal No. 2 was up. But the boat proceeded to sail after some loading. As the sea became very violent, the captain ordered that the ship return to the port but was caught by waves causing it to capsize and sink. Many passengers died. Respondent heirs of deceased filed separate civil actions against the petitioner to recover damages which the lower court awarded. Petitioner, however, in a pleading sought to abandon the vessel to plaintiff/respondents with all its equipment. Abandonment was denied. CA affirmed the judgment. Hence, this petition for review on certiorari. ISSUE May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its passengers? RULING If the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks,



his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. The steamship Negros, as a vessel engaged in interisland trade, is a common carrier and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively “real and hypothecary nature” of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law of not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony.

Commentary: Okay. So there are several cases discussing about the hypothecary nature of maritime contract. In accordance with Article 587 of the Code of Commerce, the law allows a ship owner or a ship agent the right of abandonment. So what are those that can be abandoned? The vessel with all her equipment and the freightage it may have earned during the voyage. So the reasons why the ship owner and ship agent are given the right to abandon, let’s hear the case of Heirs of dela Santos.

HEIRS OF DELOS SANTOS vs CA (1990) FACTS The petition for certiorari seeks to set aside the CA decision in affirming the CFI decision which dismissed the petitioner’s claim for damages against Compania Maritima for the injury and death of the victims as a result of the sinking of M/V Mindoro on November 4, 1967. ISSUE Whether or not the CA erred in not concentrating to the provision of law in the New Civil Code as expressed in Art. 1766 which provides that, “In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.” RULING The petition has merit. At the outset, We note that there is no dispute as to the finding of the captain’s negligence in the mishap. The present controversy centers on the questions of Maritima’s negligence and of the application of Article 587 of the Code of Commerce.

Under this provision, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon-“the vessel with all her equipments and the freight it may have earned during the voyage” (Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of maritime law which is exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, Ibid). As correctly stated by the appellate court, “(t)his rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine commerce. Contrary to the petitioners’ supposition, the limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions of the New Civil Code on Common Carriers. Owing to the nature of their business and for reasons of public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Guided by the above legal provisions, We painstakingly reviewed the records of the case and found imprints of Maritima’s negligence which compel Us to reverse the conclusion of the appellate court. Maritima claims that it did not have any information about typhoon ‘Welming’ until after the boat was already at sea. Modem technology belie such contention. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming atmospheric disturbances. In his summary report on tropical cyclone ‘Welming’ which occurred within the Philippine Area of Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the periods of November 15, 1967, the Bureau issued a total of seventeen (17) warnings or advisories of typhoon ‘Welming’ to shipping companies. If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of ‘Welming.’ In allowing the ship to depart late from Manila despite the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of its



passengers taking into account the surrounding circumstances of the case. While We agree with the appellate court that the captain was negligent for overloading the ship, We, however, rule that Maritima shares equally in his negligence. We find that while M/V Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ship’s departure was, however, delayed for four hours. As the appellate court stated, ‘(v) erily, if it were not for have reached (its) destination and this delay, the vessel could thereby have avoided the effects of the storm.” This conclusion was buttressed by evidence that another ship, M/V Mangaren, an interisland vessel, sailed for New Washington, Aklan on November 2, 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived safely. Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary diligence in this case. M/V Mindoro was drydocked for about a month. Necessary repairs were made on the ship. Lifesaving equipment and navigational instruments were installed. While indeed it is true that all these things were done on the vessel, Maritima, however, could not present evidence that it specifically installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. With the impending threat of ‘Welming,’ an important device such as the radar could have enabled the ship to pass through the river and to safety. The foregoing clearly demonstrates that Maritima’s lack of extraordinary diligence coupled with the negligence of the captain as found by the appellate court were the proximate causes of the sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the victims.

Commentary: So if you’re asking about what is abandonment, abandonment parang you are invoking exception to liability. So instead of paying, you can just abandon the value of the vessel with all her equipment and the freightage. In most instances, when an abandonment is made, the purpose is to offset against the numerable hazards against perils of the sea.

CHUA YEK HONG vs IAC (1988)

FACTS Petitioner Chua is a duly licensed copra dealer based at

Puerto Galera, Oriental Mindoro, while private respondents are the owners of the vessels, M/V Luzviminda I, a common carrier engaged in the coastwise trade from the different ports of Oriental Mindoro to the Port of Manila. In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40 on board the vessel M?V Luzviminda I for shipment from Puerto Galera, Oriental Mindoro to Manila. Said cargo, however, did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo. ISSUE Whether the doctrine of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna was correctly applied by the Appellate Court. RULING The term “shipagent” as used in Article 587 of the Code of Commerce is broad enough to include the shipowner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256). Pursuant to said provision, therefore, both the shipowner and shipagent are civilly and directly liable for the indemnities in favor of thid persons, which may arise from the conduct of the captain in the care of goods transported, as well as for the safety to passengers transported (Yangco vs. Laserna; Manila Steamship vs. Abdulhaman). However, under the same Articles, this direct liability is moderated and limited by the shipagent’s or shipowner’s right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the shipagent/owner (Switzerland General vs. Ramirez). The ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]). The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as shipowners, or to their



concurrent negligence with the captain of the vessel. What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability under maritime law, these provisions would not have any effect on the principle of limited liability for ship owners or ship agents. As was expounded by this Court: In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a vessel engaged in interisland trade, is a common carrier, and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively 'real and hypothecary nature of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. (Yangco vs. Laserila, et al., supra). Moreover, Article 1766 of the Civil Code provides: Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of Commerce and other special laws are applied. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case. In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this case.

-END OF FEBRUARY 3 DISCUSSION-



REVIEW

What is the governing body? MARINA or Maritime Industry

Authority.

What are the general functions of MARINA?

1. Issue certificate of public convenience for the operation of domestic and overseas water carriers; and

2. Register and issue certificate, licenses, or documents necessary or incident thereto.

RA 1937, Sec. 911. Vessels Eligible for Bay and River License.

— To be eligible for the bay and river license, a vessel must

be built in the Philippines, and the ownership of such vessel

must be vested in:

a) citizens of the Philippines;

b) domestic corporations or companies seventy-five

per centum of whose corporate capital belongs to citizens of

the Philippines: Provided, That the present owners of vessels

with bay and river license under existing law who do not

possess any of the requirements herein prescribed may

nevertheless continue operating such vessels as eligible for

said bay and river license.

RA 1937, Sec. 912. Exemption of Certain Craft from

Requirement of Bay and River License.— No bay and river

license shall be required of any of the following classes of

vessels:

a) Vessels of three tons net or less.

b) Yachts, launches and other craft used exclusively for

pleasure and recreation.

c) Ship’s boats and launches bearing the name and

home port of the vessel plainly marked thereon.

d) Vessels owned by the Government of the

Philippines.

The exemption of any vessel shall at once cease if it engages

in the business of transporting cargo or passengers, for hire.

So if you have to use a yacht for business to transport, you

have to apply for a bay or river license.

We discussed Article 573 on how to acquire ownership of a

vessel. It can be acquired by prescription and by any other

means prescribed by law.

What type of property is a vessel? It is a personal or movable

property but there are requisites to be complied with. The

ownership thereof must be evidenced by a certificate of

ownership, and the transfer must be registered in the proper

registry to bind 3rd

persons.

Take note of the case of Rubiso vs. Rivera.

Art. 575 .Co-owners of vessels shall have the right of

repurchase and redemption in sales made to strangers, but

they may exercise the same only within the nine days

following the inscription of the sale in the registry, and by

depositing the price at the same time.

Right of preemption and right of redemption? Let’s say for

example, a vessel is co-owned by 3 persons – A, B, and C. And

A wants to sell his share of the vessel. So even before the

share of A is sold to a stranger or 3rd person, the other co-

owners can exercise the right of preemption. Meaning, you

preempt the sale of the share of the co-owner to a 3rd person.

That’s the right of preemption.

What if the sale has already been consummated? It was

already sold to a 3rd person. What would be the remedy of

the co-owners? Exercise the right of redemption. So in right

of redemption, you pay to the 3rd

person the amount that the

3rd person paid to the co-owner-seller.

But when it comes to vessels, you take note of Art. 575. That

right can only be exercised with 9 days following the

inscription of the sale in the registry and by depositing the

price at the same time.

Art. 577. If the alienation of the vessel should be made

while it is on a voyage, the freightage which it earns from

the time it receives its last cargo shall pertain entirely to the

purchaser, and the payment of the crew and other persons

who make up its complement for the same voyage shall be

for his account.If the sale is made after the vessel has

arrived at the port of its destination, the freightage shall

pertain to the vendor, and the payment of the crew and

other individuals who make up its complement shall be for

his account, unless the contrary is stipulated in either case.



Article 577 also discusses the rights and obligations.

1. If alienation is made while the vessel is on a voyage, the freightage which it earns from the time it receives its last cargo shall belong entirely to the purchaser. The payment of the crew and other persons shall also be for his account.

2. If the sale is made after the vessel arrived at its destination, the freightage shall belong to the vendor and the payment of the crew shall be for his own account.

Art. 583. If while on a voyage the captain should find it

necessary to contract one or more of the obligations

mentioned in subdivisions 8 and 9 of Article 580, he shall

apply to the judge or court if he is in Philippine territory,

and otherwise to the consul of the Republic of the

Philippines, should there be one, and, in his absence, to the

judge or court or proper local authority, presenting the

certificate of the registration sheet treated of in Article 612

and the instruments proving the obligation contracted.

The judge or court, the consul, or the local authority, as the

case may be, in view of the result of the proceedings

instituted, shall make a temporary memorandum of their

result in the certificate, in order that it may be recorded in

the registry when the vessel returns to the port of its

registry, or so that it can be admitted as a legal and

preferred obligation in case of sale before its return, by

reason of the sale of the vessel on account of a declaration

of unseaworthiness.The omission of this formality shall

make the captain personally liable for the credits prejudiced

on his account.

Article 583 is a situation that is contemplated by the captain

when he has to borrow money to have the vessel fixed. Is the

captain obligated to use his own money to have the vessel

repaired?

If while on voyage and within the Philippines, the captain shall apply to the judge or court.

If not in the Philippines, apply to the consul of the Republic of the Philippines. In the absence of a consul, to the judge or court or proper local authority.

What is the effect if the captain would not comply with the

requirements? He will be personally liable. He will not be

reimbursed.

What if he spent the borrowed money? He will be the one to

pay for the same.

These formalities are also required when the captain acquires

a loan on bottomry. A loan on bottomry is a loan that the

collateral is the vessel. But loan on respondentia, the

collateral is the cargo.

Now, the different persons who take part in maritime

commerce.

1. Ship owner is the owner of the vessel. 2. Ship agent is the person entrusted with the

provisioning of the vessel, or who represents the vessel in the port where she happens to be.

3. Captain or master is the one who governs the vessel. 4. Sailing mate is the second chief of the vessel. 5. Second mate is the one who takes command of the

vessel in case of disability or disqualification of captain or sailing mate.

6. Crew or sailors are the persons who man the vessel and those who perform other duties. They are enlisted by the captain.

How is ship agent chosen? The co-owner shall elect him.

Art. 594. The co-owners shall elect the manager who is to

represent them in the capacity of ship agent. The

appointment of director or ship agent shall be revocable at

the will of the members.

Art. 595. The ship agent, whether he is at the same time the

owner of the vessel, or a manager for an owner or for an

association of co-owners, must have the capacity to trade

and must be recorded in the merchant's registry of the

province.The ship agent shall represent the ownership of

the vessel, and may, in his own name and in such capacity,

take judicial and extrajudicial steps in matters relating to

commerce.

What are the powers and duties of the ship agent?

1. He represents the ownership of the 2. He may take judicial and extrajudicial steps in

matters relating to commerce, in his own name and in such capacity.

So technically, the ship agent is as powerful as the ship

owner. But it’s different because the ship owner collects

freight. It will always be in favor of the ship owner. Ship agent



can be sued for breach of contract of carriage. Even if your

contract is with the ship owner.

Take note of the case of Macondray vs. Provident. Even if

you’re not related at all to the carrier or the shipper, if you

act as agent of the vessel, you can be sued for breach of

contract of carriage.

Now, the captain. He is the one who governs the vessels that

navigate the high seas or of large dimensions and

importance. For purposes of maritime commerce, the captain

is the same as the master.

What are the qualifications of a captain?

1. Must be a citizen of the Philippines 2. Legal capacity to bind himself 3. Proof that they have skill, capacity, and qualification

required to command and direct a vessel as established by marine laws, ordinances or regulations and those of navigation

4. Not disqualified according to the same for the discharge of the duties of that position

Art. 609. Captains, masters or patrons of vessels must be

Filipinos, have legal capacity to contract in accordance with

this code, and prove the skill, capacity, and qualifications

necessary to command and direct the vessel, as established

by marine or navigation laws, ordinances, or regulations,

and must not be disqualified according to the same for the

discharge of the duties of the position.If the owner of a

vessel desires to be the captain thereof, without having the

legal qualifications therefor, he shall limit himself to the

financial administration of the vessel, and shall intrust the

navigation to a person possessing the qualifications

required by said ordinances and regulations.

Art. 610. The following powers shall be inherent in the

position of captain, master or patron of a vessel:

1. To appoint or make contracts with the crew in the

absence of the ship agent, and to propose said crew, should

said agent be present; but the ship agent may not employ

any member against the captain's express refusal.

2. To command the crew and direct the vessel to the

port of its destination, in accordance with the instructions

he may have received from the ship agent.

3. To impose, in accordance with the contracts and

with the laws and regulations of the merchant marine, and

when on board the vessel, correctional punishment upon

those who fail to comply with his orders or are wanting in

discipline, holding a preliminary hearing on the crimes

committed on board the vessel on the seas, which crimes

shall be turned over to the authorities having jurisdiction

over the same at the first port touched.

4. To make contracts for the charter of the vessel in

the absence of the ship agent or of its consignee, acting in

accordance with the instructions received and protecting

the interests of the owner with utmost care.

5. To adopt all proper measures to keep the vessel well

supplied and equipped, purchasing all that may be

necessary for the purpose, provided there is no time to

request instruction from the ship agent.

6. To order, in similar urgent cases while on a voyage,

the repairs on the hull and engines of the vessel and in its

rigging and equipment, which are absolutely necessary to

enable it to continue and finish its voyage; but if he should

arrive at a point where there is a consignee of the vessel, he

shall act in concurrence with the latter.

General functions of the captain?

1. General agent of the ship owner – this is the most important!

2. Technical director of the vessel 3. Representative of the government in the country

under whose flag he navigates

Art. 611. In order to comply with the obligations mentioned

in the preceding article, the captain, when he has no funds

and does not expect to receive any from the ship agent,

shall obtain the same in the successive order stated below:

1. By requesting said funds from the consignee of the

vessel or correspondents of the ship agent.

2. By applying to the consignees of the cargo or to

those interested therein.

3. By drawing on the ship agent.

4. By borrowing the amount required by means of a

loan on bottomry.

5. By selling a sufficient amount of the cargo to cover the sum absolutely indispensable for the repair of the vessel

and to enable it to continue its voyage.

In these two last cases he must apply to the judicial

authority of the port, if in the Philippines, and to the consul

of the Republic of the Philippines if in a foreign country,

and where there is none, to the local authority, proceeding



in accordance with the provisions of Article 583, and with

the provisions of the law of civil procedure.

Also take note of Article 612. Remember the cases of Far

Eastern and Wildvalley on compulsory pilotage.

Books that have to be carried by the captain on board:

1. Logbook – most important! 2. Accounting book 3. Freight book

What is the duration of the responsibility?

Art. 619. The captain shall be liable for the cargo from the

time it is delivered to him at the dock or afloat alongside

the at the port of loading, until he delivers it on the shore

or on the discharging wharf at the port of unloading, unless

the contrary has been expressly agreed upon.

Remember in CCOG, when will carrier be liable? If the cargo

has been unconditionally placed in his possession.

Prohibited acts

1. Cannot make separate transactions for his own account (Art. 613)

2. Fails to make the agreed voyage (Art. 614) 3. Substitute himself by other persons (Art. 615) – but

the sailing mate may take over the duties of the captain, especially when the captain is taking a break; consequence if he allows an unqualified person, the captain will be liable for the acts of such substitute and may be ground for his discharge

4. Contract loans on respondentia, where the collateral is the cargo (Art. 617)

5. Borrow money on bottomry for his own transaction (Art. 617)

6. Borrow or sell outside of the cases and without the formalities prescribed by law (Art. 621)

7. Commit fraud in his accounts (Art. 621)

But if the captain is part owner of the vessel, can he sell or

mortgage his exclusive share? Yes. As long as the vessel is not

already mortgaged and there exists no current lien

chargeable to the vessel.

When is captain not liable?

Art. 620. The captain shall not be liable for the damages

caused to the vessel or to the cargo by force majeure; but

he shall always be so for those arising through his own

fault, no agreement to the contrary being valid.Neither

shall he be personally liable for the obligations he may have

contracted for the repair, equipment, and provisioning of

the vessel, which shall devolve upon the ship agent, unless

the former has expressly bound himself personally or has

signed a bill of exchange or promissory note in his name.

Again, what is corsair? Corsair is a pirate ship or privateer.

Art. 622. If while on a voyage the captain should learn of

the appearance of privateers or men of war against his flag,

he shall be obliged to make the nearest neutral port, inform

his agent or shippers, and await an occasion to sail under

convoy, or until the danger is over or he has received

express orders from the ship agent or the shippers.

What is a man of war? A battleship or war ship used by the

government or navy.

What is the duty of the captain if he would see a corsair or

man of war? He should make it to the nearest neutral port,

inform and await an occasion to sail under convoy or until

danger is over or he has received express orders from the

ship agent. In other words, he should flee from the pirates.

What if the captain acted slowly? He did not overrun the

corsair and they are now to board the vessel?

Art. 623.If he should be attacked by a privateer, and, after

having tried to avoid the encounter and having resisted the

delivery of the effects of the vessel or its cargo, they should

be forcibly taken away from him, or he should be obliged to

deliver them, he shall make an entry thereof in his freight

book and shall prove the fact before the competent

authority at the first port he touches.

After the force majeure has been proved, he shall be

exempted from liability.

Now, maritime protest.

Art. 624. A captain whose vessel has gone through a

hurricane or who believes that the cargo has suffered

damages or averages, shall make a protest thereon before

the competent authority at the first port he touches, within

twenty-four hours following his arrival and shall ratify it

within the same period when he arrives at his destination,

immediately proceeding with the proof of the facts, and he

may not open the hatches until after this has been

done.The captain shall proceed in the same manner, if,

the vessel having been wrecked; he is saved alone or with

part of his crew, in which case he shall appear before the



nearest authority, and make a sworn statement of

facts.The authority or the consul shall verify the said facts

receiving sworn statements of the members of the crew and

passengers who may have been saved; and taking such

other steps as may assist in arriving at the facts he shall

make a statement of the result of the proceedings in the

log book and in that of the sailing mate, and shall deliver

to the captain the original record of the proceedings,

stamped and folioed, with a memorandum of the folios,

which he must rubricate, in order that it may be presented

to the judge or court of the port of destination.The

statement of the captain shall be accepted if it is in

accordance with those of the crew and passengers; if they

disagree, the latter shall be accepted, always saying proof

to the contrary.

A maritime protest is a written statement under oath made

by the captain or master of the vessel after the occurrence of

an accident or disaster in which the vessel or cargo is lost

with respect to circumstances attending to such occurrence.

But there must be no participation on the part of the crew. It

must be purely accidental.

What is the purpose of maritime protest? It is intended to

show that the loss or damage resulted from a peril of the sea,

or from some other cause for which neither master nor

owner was responsible, and concludes with the protestation

against any liability of the owner for such loss or

damage.

What is the procedure? It is under Article 624.

If you have entries in the logbook of maritime protest, those

are just prime facie evidence. For example, the entries of the

captain are not in agreement with the contentions of the

crew or sailors. The evidence in the logbook of a maritime

protest, that is merely prima facie. Disputable. So if the crew

or sailors or other persons who take part in the vessel allege

on the contrary the contention of the captain, then the

entries in his logbook can be rebutted by the crews and

sailors.

What are the instance when you have to file a maritime

protest?

1. When the vessel has gone through a hurricane 2. If the cargo has suffered damages or averages 3. Vessel is wrecked

Now, the officers or crew. Sailing mate is the second chief of

the vessel. He shall also take the place of the captain in cases

of absence, sickness, or death.

Art. 627. The sailing mate, as the second chief of the vessel,

and unless the agent orders otherwise, shall take the place

of the captain in cases of absence, sickness, or death, and

shall then assume all his powers, duties, and

responsibilities.

Then we have the crew and sailors. The qualifications of the

crew are under Art. 634.

Art. 634. The captain may make up the crew of his vessel

with such number of men as he may consider proper, and in

the absence of Filipino sailors, he may take on foreigners

residing in the country, the number thereof not to exceed

one-fifth of the crew. If in foreign ports the captain should

not find a sufficient number of Filipino sailors, he may

complete the crew with foreigners, with the consent of the

consul or marine authorities.

The agreement which the captain may make with the

members of the crew and others who go to make up the

complement of the vessel, to which reference is made in

Article 612, must be reduced to writing in the account

book, without the intervention of a notary public or clerk

of court ("escribano"), signed by the parties thereto and

visaed by the marine authority if they be executed in

Philippine territory or by the consuls or consular agents of

the Republic of the Philippines if executed abroad, stating

therein all the obligations which each one contracts and all

the rights he acquires said authorities taking care that these

obligations and rights are recorded in a clear and definite

manner which give no room for doubts or claims.

The captain shall take care to read to them the articles of

this Code which concern them, stating in said document

that they were read.If the book contains the requisites

prescribed in Article 612, and there should not appear any

signs of alterations in its entries, it shall be admitted as

evidence in questions which may arise between the captain

and the crew with respect to the agreements contained

therein and the amounts paid on account of the same.

Every member of the crew may demand of the captain a

copy, signed by the latter, of the agreement and of the

liquidation of his wages, as they appear in the book.



What is the rule?

1. The captain shall enlist Filipino crew. 2. In the absence of Filipinos, resident aliens.

But if they are in a foreign port and there are no Filipino

sailors or not enough Filipino sailors, he may complete the

crew with foreigners but with the consent of the consul or

marine authorities.

What are the prohibited acts of crew members?

Art. 635. A seaman who has been contracted to serve on a

vessel may not rescind his contract or fail to comply

therewith except by reason of a legitimate impediment

which may have happened to him.

Neither may he transfer from the service of one vessel to

another without obtaining the written permission of the

captain of the vessel on which he may be.

If, without obtaining said permission, the seaman who has

signed for one vessel should sign for another one, the

second contract shall be void, and the captain may choose

between forcing him to fulfill the service to which he first

bound himself, or at his expense to look for a person to

substitute him.Furthermore, he shall lose the wages earned

on his first contract, to the benefit of the vessel for which

he had signed.A captain who, knowing that a seaman is in

the service of another vessel, should have made a new

agreement with him without having required of him the

permission referred to in the preceding paragraphs, shall be

subsidiarily responsible to the captain of the vessel to which

the seaman first belonged, for that part of the indemnity,

referred to in the third paragraph of this article, which the

seaman may not be able to pay.

And now, discharge. So, who can discharge? It is the ship

owner and ship agent, or the captain. Ship owner and ship

agent can discharge the captain or master. Captain can

discharge all other lower levels, the crew.

Art. 604. If the captain or any other member of the crew

should be discharged during the voyage, they shall receive

their salary until they return to the port where the contract

was made, unless there should be just cause for the

discharge, all in accordance with Article 636 and following

of this Code.

Article 604 is the general rule.

What are the rules on discharge of captain or crew if

contract is for a definite voyage?

Art. 605. If the contracts of the captain and members of

the crew with the ship agent should be for a definite period

or voyage, they may not be discharged until after the

fulfillment of their contracts, except by reason of

insubordination in serious matters, robbery, theft, habitual

drunkenness, or damage caused to the vessel or to its cargo

through malice or manifest or proven negligence.

As to discharge of a sailor or crew member by captain?

Art. 637. Neither may the captain discharge a seaman

during the time of his contract except for just cause, the

following being considered as such:

1. The perpetration of a crime which disturbs order

on the vessel.

2. Repeated insubordination, want of discipline, or

non-fulfillment of the service.

3. Repeated incapacity and negligence in the

fulfillment of the service he should render.

4. Habitual drunkenness.

5. Any occurrence which incapacitates the seaman to perform the work entrusted to him, with theexception of

that provided in Article 644.

6. Desertion.

The captain may, however, before getting out on a voyage

and without giving any reason, refuse to permit a seaman

whom he may have engaged to go on board, and leave him

on land, in which case he will be obliged to pay him his

wages as if he had rendered services.This indemnity shall

be paid from the funds of the vessel if the captain should

have acted for reasons of prudence and in the interest of

the safety and good services of the farmer. Should this not

be the case, it shall be paid by the captain personally.

aisadcAfter the voyage has begun, during the same, and

until the conclusion thereof, the captain may not abandon

any member of his crew on land or on sea, unless, by reason

of some crime, his imprisonment and delivery to the

competent authority in the first port touched should be

proper, a matter obligatory for the captain.

Art. 644. A seaman who falls sick shall not lose his right to

wages during the voyage, unless the sickness is the result of

his own fault. At any rate, the costs of the attendance and



cure shall be defrayed from the common funds, in the form

of a loan.If the sickness should come from an injury

received in the service or defense of the vessel, the seaman

shall be attended and cured at the expense of the common

funds deducting, before anything else, from the proceeds

of the freightage the cost of the attendance and cure.

Who is a supercargo? A representative of the ship’s owner on

board a merchant ship, responsible for overseeing the cargo

and its sale.

Art. 649. Supercargoes shall discharge on board the vessel

the administrative duties which the ship agent or the

shippers may have assigned to them; they shall keep an

account and record of their transactions in a book which

shall have the same conditions and requisites as required for

the accounting book of the captain, and they shall respect

the latter in his capacity as chief of the vessel.The powers

and responsibilities of the captain shall cease, when there is

a supercargo, with regard to that part of the administration

legitimately conferred upon the latter, but shall continue in

force for all acts which are inseparable from his authority

and office.

Art. 650. All the provisions contained in the second section

of Title III, Book II, with regard to capacity, manner of

making contracts, and liabilities of factors, shall be

applicable to supercargoes.

Art. 651. Supercargoes may not, without special

authorization or agreement, make any transaction for their

own account during the voyage, with the exception of the

ventures which, in accordance with the custom of the port

of destination, they are permitted to do.

Neither shall they be permitted to invest in the return trip

more than the profits from the ventures, unless there is an

express authorization from the principals.

Now, DOCTRINE OF LIMITED LIABILITY.

Art. 586. The shipowner and the ship agent shall be civilly

liable for the acts of the captain and for the obligations

contracted by the latter to repair, equip, and provision the

vessel, provided the creditor proves that the amount

claimed was invested for the benefit of the same.By ship

agent is understood the person entrusted with provisioning

or representing the vessel in the port in which it may be

found.

Art. 587. The ship agent shall also be civilly liable for the

indemnities in favor of third persons which may arise from

the conduct of the captain in the care of the goods which

he loaded on the vessel; but he may exempt himself

therefrom by abandoning the vessel with all her equipments

and the freight it may have earned during the voyage.

So how to exempt himself from liability? Through exercising

the right of abandonment. Abandon the vessel and other

equipments and the freightage it may have earned during the

voyage.

Take note of the real and hypothecathery nature of maritime

law discussed in Yangco vs. Laserna. It can only be applied

when the vessel sinks because you cannot abandon if the

vessel is still there.

Reasons why it is impossible to do away with the privilege

of giving vessel owner the right to abandon

1. The risk to which the thing is exposed. It is not cheap for a shipowner to operate a vessel. And one must spend so much if he wants to own a vessel. And if a vessel is lost, your entire fortune will likewise be lost.

2. The real nature of maritime law exclusively … according to which the liability of the parties is limited to a thing which is at the mercy of the …

If the agent is only liable if the vessel and freight money and

boat may be lost, it is only just that the maritime creditor …

Reasons why ship owner is given the right of abandonment

1. To offset against enumerable hazards 2. To encourage shipbuilding and marine commerce

If you exercise the right to abandon, you still have to prove

the exercise of extraordinary diligence.

Can a charterer make an abandonment? No. It cannot be

regarded as being in the place of the owner or agent in

matters relating to the responsibility pertaining to ownership

and possession of the vessel.



Instances when abandonment can be made/Provisions

which speak of the doctrine of limited liability

1. For civil liability to third persons arising from the conduct of the captain in the vigilance over the goods which the vessel carried

2. For the proportionate contribution of co-owners or the vessel to a common fund for the results of the acts of the captain

3. For civil liability incurred by the ship owner in case of collision

When can the ship agent be held liable for more than value

of the vessel?

1. When the vessel is properly insured 2. When the liability for repairs of the vessel was

incurred before the loss of such vessel 3. When the liability is one that arises from the

provisions of the labor code

When abandonment cannot be made?

1. When the ship owner or ship agent is at fault 2. When the voyage is not maritime 3. When the vessel is not acting as a common carrier

but a private carrier

Now, these are 4 cases which arose from the same incident:

ABOITIZ vs GENERAL ACCIDENT (1993)

FACTS

Malayan Insurance Company, Inc. filed five separate actions

against several defendants for the collection of the amounts

of the cargoes allegedly paid by Malayan under various

marine cargo policies issued to the insurance claimants. In

the five consolidated cases, Malayan sought the recovery of

amounts totaling P639,862.02.

Aboitiz raised the defenses that M/V P. Aboitiz was

seaworthy, that it exercised extraordinary diligence and that

the loss was caused by a fortuitous event.

ISSUE

WON the real and hypothecary doctrine may be invoked by

the ship owner to limit its liability

RULING

Yes. Aboitiz was not negligent. The only time the Limited

Liability Rule does not apply is when there is an actual finding

of negligence on the part of the vessel owner or agent. A

careful reading of the decision rendered by the trial court as

well as the entirety of the records in the instant case will

show that there has been no actual finding of negligence on

the part of petitioner.

The real and hypothecary doctrine in maritime law is that the

shipowner or agent's liability is merely co-extensive with his

interest in the vessel such that a total loss thereof results in

its extinction. "No vessel, no liability" expresses in a nutshell

the limited liability rule. In this jurisdiction, the limited

liability rule is embodied in Articles 587, 590 and 837. These

articles precisely intend to limit the liability of the shipowner

or agent to the value of the vessel, its appurtenances and

freightage earned in the voyage, provided that the owner or

agent abandons the vessel. When the vessel is totally lost in

which case there is no vessel to abandon, abandonment is

not required. Because of such total loss the liability of the

shipowner or agent for damages is extinguished. However,

despite the total loss of the vessel, its insurance answers for

the damages for which a shipowner or agent may be held

liable.

Nonetheless, there are exceptional circumstances wherein

the ship agent could still be held answerable despite the

abandonment of the vessel, as where the loss or injury was

due to the fault of the shipowner and the captain. The

international rule is to the effect that the right of

abandonment of vessels, as a legal limitation of a shipowner's

liability, does not apply to cases where the injury or average

was occasioned by the shipowner's own fault.

In the instant case, there is, however, a need to collate all

claims preparatory to their satisfaction from the insurance

proceeds on the vessel M/V P. Aboitiz and its pending

freightage at the time of its loss. No claimant can be given

precedence over the others by the simple expedience of

having filed or completed its action earlier than the rest.

Thus, execution of judgment in earlier completed cases, even

those already final and executory, must be stayed pending

completion of all cases occasioned by the subject sinking.

Then and only then can all such claims be simultaneously

settled, either completely or pro-rata should the insurance

proceeds and freightage be not enough to satisfy all claims.



Discussion: In this case, it was allowed to abandon despite

the fact that it was not a fortuitous event that caused the

sinking of the vessel. But there were more than a hundred

claims. The court found it necessary to collate all the things

first before payment of the insurance proceeds.

MONARCH INSURANCE vs CA (2000)

ISSUE

WON the doctrine of limited liability applies

RULING

Yes. The failure of Aboitiz to present sufficient evidence to

exculpate itself from fault and/or negligence in the sinking of

its vessel in the face of the foregoing expert testimony

constrains us to hold that Aboitiz was concurrently at fault

and/or negligent with the ship captain and crew of the M/V P.

Aboitiz. This is in accordance with the rule that in cases

involving the limited liability of shipowners, the initial burden

of proof of negligence or unseaworthiness rests on the

claimants. However, once the vessel owner or any party

asserts the right to limit its liability, the burden of proof as to

lack of privity or knowledge on its part with respect to the

matter of negligence or unseaworthiness is shifted to it.

This burden, Aboitiz had unfortunately failed to discharge.

That Aboitiz failed to discharge the burden of proving that the

unseaworthiness of its vessel was not due to its fault and/or

negligence should not however mean that the limited liability

rule will not be applied to the present cases. The peculiar

circumstances here demand that there should be no strict

adherence to procedural rules on evidence lest the just claims

of shippers/insurers be frustrated. The rule on limited liability

should be applied in accordance with the latest ruling in

Aboitiz Shipping Corporation vs. General Accident that

claimants be treated as "creditors in an insolvent corporation

whose assets are not enough to satisfy the totality of claims

against it."

Discussion: Aboitiz was held liable. It was found out that the

sinking of the vessel was because the vessel was

unseaworthy, the negligence of both Aboitiz and the crew

and master, and that the sinking was not due to a fortuitous

event but nothwithstanding the ruling, it did not reverse its

ruling in the 1993 case. Instead, it reiterated its

pronouncement to the effect that … is treated as creditor in

an insolvent corporation whose assets are not enough to

satisfy the totality of the claims. Why? Because the claim

amounted to 43 million but the insurance proceed were only

14 million. You cannot get the entire 43 million, you have to

share pro-rata the proceeds of the insurance and there is no

preference of credit.

ABOITIZ vs NEW INDIA (2006)

ISSUE

WON the limited liability doctrine applies in this case

RULING

No. Where the shipowner fails to overcome the presumption

of negligence, the doctrine of limited liability cannot be

applied.

From the nature of their business and for reasons of public

policy, common carriers are bound to observe extraordinary

diligence over the goods they transport according to all the

circumstances of each case. In the event of loss, destruction

or deterioration of the insured goods, common carriers are

responsible, unless they can prove that the loss, destruction

or deterioration was brought about by the causes specified in

Article 1734 of the Civil Code. In all other cases, common

carriers are presumed to have been at fault or to have acted

negligently, unless they prove that they observed

extraordinary diligence. Moreover, where the vessel is found

unseaworthy, the shipowner is also presumed to be negligent

since it is tasked with the maintenance of its vessel. Though

this duty can be delegated, still, the shipowner must exercise

close supervision over its men.

In the present case, petitioner has the burden of showing that

it exercised extraordinary diligence in the transport of the

goods it had on board in order to invoke the limited liability

doctrine. Differently put, to limit its liability to the amount of

the insurance proceeds, petitioner has the burden of proving

that the unseaworthiness of its vessel was not due to its fault

or negligence.

Considering the evidence presented and the circumstances

obtaining in this case, we find that petitioner failed to

discharge this burden. Both the trial and the appellate courts,

in this case, found that the sinking was not due to the

typhoon but to its unseaworthiness. Evidence on record

showed that the weather was moderate when the vessel



sank. These factual findings of the Court of Appeals,

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

appeal, but must be accorded great weight. These findings

are conclusive not only on the parties but on this Court as

well.

Discussion: In this case, the SC changed its mind again. It

considered the exception to the doctrine of limited liability. If

that is the case, then the ship owner is liable to the full extent

of the damage.

If you fail to overcome the presumption of negligence, the

doctrine of limited liablty canont apply. Hence, Aboitiz is

liable for the total value of the last cargo. Thus it rejected the

argument that the damages should be limited to the pro-rata

share in the insurance proceeds.

So first, limited to the amount of the vessel only. Second, pro-

rata share in the insurance. Third, total value of the lost

cargo.

ABOITIZ vs EQUITABLE (2008)

ISSUE

WON the limited liability doctrine applies

RULING

No. A perusal of the decisions of the courts below in all three

petitions reveals that there is a categorical finding of

negligence on the part of Aboitiz. For instance, in G.R. No.

121833, the RTC therein expressly stated that the captain of

M/V P. Aboitiz was negligent in failing to take a course of

action that would prevent the vessel from sailing into the

typhoon. In G.R. No. 130752, the RTC concluded that Aboitiz

failed to show that it had exercised the required

extraordinary diligence in steering the vessel before, during

and after the storm. In G.R. No. 137801, the RTC categorically

stated that the sinking of M/V P. Aboitiz was attributable to

the negligence or fault of Aboitiz. In all instances, the Court of

Appeals affirmed the factual findings of the trial courts.

The finding of actual fault on the part of Aboitiz is central to

the issue of its liability to the respondents. Aboitizs

contention, that with the sinking of M/V P. Aboitiz, its liability

to the cargo shippers and shippers should be limited only to

the insurance proceeds of the vessel absent any finding of

fault on the part of Aboitiz, is not supported by the record.

Thus, Aboitiz is not entitled to the limited liability rule and is,

therefore, liable for the value of the lost cargoes as so duly

alleged and proven during trial.

Discussion: The ruling in 2008 affirmed the 2006 ruling in

New India. So as a general rule, a ship owner’s liability is

really just coextensive with its interest in the vessel. Except if

there was actual fault attributable to the ship owner. Thus an

exception to the limited liability rule is when a ship owner or

agent is liable for damages and the sinking of the vessel is

attributable to its negligence or its failure to ensure the

seaworthiness of the vessel.And in this case, as it was found

by the courts below, that both Aboitiz and its crew failed to

insure the seaworthiness of M/V Aboitiz. It failed to prove

that it exercised extra diligence. So it is liable.

Lets go to charter parties.

These are special contracts of maritime commerce, what are

the special contracts of maritime commerce?

1) Charter party 2) Bill of lading 3) Loan on bottomry or respondentia

How is charter party defined?

Contracts in which an entire ship or some principal parts

thereof is left by the owner to another person or a specified

time or used in consideration or for payment of a fee.

What are the two kinds of charter party?

1) contract of affreightment – control is retained by the owner. What is leased is the use of ship or a part thereof Two kinds of contract of affreightment

a) time charter - for a particular time only

b) voyage charter – the vessel is leased for

one or series of voyage

2) bareboat or demise – full possession and control of the vessel is given to the charterer. The entire command, possession and control of navigation, including the master, and crew are turned over to the charterer.



You know already that if it’s a contract of affreightment, is it a

common carrier or a private carrier? COMMON CARRIER.

If it is a bareboat or demise, it is a private carrier.

What is meant by owner pro hac vice? Is it a bareboat or

contract of affreightment? BAREBOAT

But there are some formal requirements so as to constitute a

charter party under Article 652 of the Code of Commerce.

The following are the formal requirements:

1) it must be drawn in duplicates 2) must be signed by contracting parties or by two

witnesses at the request of party who does not know or is not able to sign

What are the substantial requirements of a charter party

under Article 652? There are formal requirements and we

also have substantial requirements. The following are the

substantial requisites:

1) Conditions freely stipulated 2) Indicate the kind, name and tonnage of vessel 3) Flag and port of registry 4) Name, surname and domicile of captain ship,

agent and charterer 5) Port of loading and unloading 6) Capacity, weight or measure the parties

respectively bind themselves to load and transport, or whether it is a total cargo

7) Freightage to be paid 8) Primage to be paid by the captain 9) Days agreed for loading and unloading 10) Lay days and extra lay days to be allowed and

the date of demurrage

There are terms in maritime commerce. First what is a

primage?

A primage is a small allowance or compensation payable :

1. to the master or owner of the vessel

for the use of his cables and ropes to

discharge the goods, and

2. to the mariners for lading and

unlading in any port

Demurrage is the amount stipulated in the charter party to

be paid by the charterer or shipper to the shipowner for any

DELAY in the sailing of his ship (it must state when it shall

leave)

Lay days refer to the number of days between the loading

and departure. Take note of this.

What is the probative value of charter party? That’s Article

654. If it is executed with intervention of a broker who

certifies to the authenticity of the signatures of the

contracting parties, because they were signed in his presence

shall be FULL EVIDENCE in COURT, so kelangan na may

broker. What if there is a discrepancy? Then we refer to the

copy of the broker which the broker filed or kept in the

registry. Just take note of Article 654.

Rescission. Who can rescind a charter party? Either party can

rescing. Pwd si charterer or pwd rin si shipowner. But there

are differences lang and different consequences. Take note

lng of Article 688 if the rescission is made by charterer and

Article 699 if made by the shipowner.

If the rescission is made by the charterer, the following are

the grounds and consequences:

1. Ground: Abandonment of charter before

Consequence: The charterer must pay ½ of freight

agreed upon

2. Ground: Capacity of vessel not found to be in conformity

with that stated in certificate of tonnage

Consequence: He will be indemnified by owner for

damages suffered

3. Ground: Error in the statement of the flag under which

vessel navigates


damages suffered

4. Ground: Non-placement of vessel at disposal of charterer

within period and manner agreed upon


damages suffered

5. Ground: Vessel returns to port of departure on account of

risk from pirates, enemies or inclement weather

Consequence: if he unloads the vessel, owner shall

have the right to freight in full for voyage out



6. Ground: Vessel makes port in order to make repairs

Consequence: He must dispose of the goods

If the rescission is made by the shipowner, the following are

the grounds and consequences:

1. Ground: Failure of charterer to place cargo alongside

vessel at the termination of extra lay days

Consequence: Charter is rescinded but he must pay

the charterer ½ of the freight stipulated and demurrage for

the lay days and extra lay days

2. Ground: Sale of vessel before the charterer has begun to

load the vessel

Consequences: 1) Charter is rescinded if the buyer of

the vessel has loaded the vessel for his own account BUT

seller/owner must indemnify charterer for damages suffered

2) Charter is NOT rescinded if buyer has

NOT loaded the vessel for his own account BUT the seller

shall indemnify the buyer if he did not inform the buyer of

the charter at the time of making the sale (if new owner has

no intention of using the vessel but only bought it as

investment, then the charterer can still use it. But if the

owner has a plan and he will use the vessel on the same dates

of the charter contract, then the previous ship owner shall

be liable to the charterer.

Charter party is also different from a contract of lease.

Contract of lease, if the lease is for a definite period, you

cannot terminate the lease by just paying a portion of the

amount agreed upon. But if it’s a charter party, even if it is for

a definite period, the charterer may rescind the charter party

but you have to pay half of the freightage. What is the second

difference? If a leased property, you sell to other person, and

that third person knows of the existence of lease, he must

respect the lease. In case of charter party, if the vessel is sold

to another person, the new owner cannot be compelled to

respect the charter party, for as long the new owner can

already move his vessel or can already load on his vessel.

In the case of Santiago Lighterage vs CA, Sister ____

executed a contract with Pelaez, and then Sister filed a

complaint for damages against Pelaez because of his

misrepresentation that the vessel was seaworthy. Pelaez filed

a third-party complaint against Santiago Lighterage under the

agreement because it was Santiago who made the

misrepresentation that the vessel was seaworthy at the time

it was delivered to Pelaez. Santiago argued that when the

vessel was turned over to Pelaez, the latter already took an

inspection of the vessel.

ISSUE: WON the delivery of the vessel to the charterer Pelaez

constitutes full performance of its obligation.

RULING: The SC held in the negative. The mere physical

transfer of the vessel from petitioner to Pelaez does not

constitute full performance of its obligation under their

bareboat charter agreement and neither can it be considered

a delivery. Specifically, the SC interpreted paragraph 3 of

their charter agreement, which states that Santiago

Lighterage can make the vessel seaworthy at the time of

delivery. And here, petitioner failed to perform his obligation.

There was also contention by Santiago that vessel made

further voyages within the philppines, the SC held that the

subsequent voyage within the Philippines does not guaranty

that it is seaworthy to withstand a ___ voyage to south korea.

The SC said that to be seaworthy, a vessel must have fitness

which an ordinary person and a prudent owner would require

his vessel to have a ____ having regard to probable

circumstances of it. It must be efficient under the instrument

of transport and ________. (READ THE CASE, inaudible)

So take note of Santiago Lighterage vs CA.

Is subchartering allowed? Pwede sya if it is bareboat. You can

further charter it to another person, either time or voyage or

charter. Santiago rules on whether seaworthiness can be

agreed upon by the parties, the SC ruled that they cannot

agree as to its seaworthiness. So take note of the liability of

Santiago as shipowner and the definition of seaworthiness

and take note also of dual nature of the carrier’s obligation

under a contract of affreightment.

Two important things, when is a ship seaworthy? And when is

a ship’s cargo worthy?

Bill of Lading – according to Black’s law dictionary, it is an

instrument in writing signed by a carrier or his agent.

Describing the freight so as to identify it stating the name of



the consignor (shipper), the terms of the contract of carriage,

and agreeing or directing that the freight be delivered to the

order or assigns of a specified person at a specified place.

What are the 3-fold character of a Bill of Lading? This has

been asked by the BAR many times already.

1. A RECEIPT which:

a. specifies the quantity, condition and

character of the goods received, and

b. recites the date and place of shipment and

the fees paid by the shipper

2. It is evidence of a CONTRACT by which the 3

parties [shipper, carrier, consignee] undertake

specific responsibilities and assume stipulated

obligations; also fixes the route, destination,

freight charges, and stipulates the rights and

obligations assumed by the parties [Art. 353]

3. Document of title, under Negotiable instruments law

What are the different kinds of bill of lading?

1. A clean bill of lading, says that the goods were

received in good order/does not say anything on the

condition of the goods. Meaning no defect.

2. Foul, there are notations, goods are rusty,

packaging has holes.

3. Spent, the goods are already delivered but the

bill of lading was not returned by consignee to the carrier.

4. Through, one issued by the carrier who is

obliged to use the facilities of other carriers. So we have here

Carrier A, B, C, D from davao to manial to hongkong so no

need for each carrier to issue a Bill of lading pwede na si A

lang and in w/c bill of lading is honoured by the second and

other interested carriers who do not issue their own bills.

5. Custody, one wherein the goods are already

received by the carrier but the vessel indicated therein has

not yet arrived in the port.

6. Port, issued by the carrier to whom the goods

have been delivered, and the vessel indicated in the bill of

lading by which the goods are to be shipped is already in the

port where the goods are held for shipment. Of course the

shipper wants to know if the vessel arrived especially for

perishable goods

7. On board, issued when the goods have been

actually placed abroad the ship w/ very reasonable

expectation that the shipment is as good as on its way.

8. Received, one in which it is stated that the goods have been received for shipment w/ or w/o specifying the vessel by which the goods are to be shipped.

What if the carrier issued an UNSIGNED bill of lading? What is

the effect? In the case of Keng Hua vs CA

The Supreme Court held that acceptance with full knowledge

of its contents gives rise to the presumption that the same

was a perfected and binding contract. (A "bill of lading

delivered and accepted constitutes the contract of carriage

even though not signed," because the "(a)cceptance of a

paper containing the terms of a proposed contract generally

constitutes an acceptance of the contract and of all of its

terms and conditions of which the acceptor has actual or

constructive notice." In a nutshell, the acceptance of a bill of

lading by the shipper and the consignee, with full knowledge

of its contents, gives rise to the presumption that the same

was a perfected and binding contract. Keng Hua Paper

Products Co, Inc. vs. CA)

A Bill of Lading is not indispensable to a contract of carriage

for as long as there is a meeting of the minds of the parties, a

contract of carriage exists. But under Art. 350, the shipper or

carrier may mutually demand that a bill of lading be made.

What must be done to the Bill of Lading upon fulfillment of

the contract of transportation?

After the contract has been complied with, the bill of lading

shall be returned to the carrier who may have issued it and it

(the surrender) is proof that the goods have been delivered.

And after the delivery or return of the bill of lading, the

respective obligations and actions between the parties shall

be considered as cancelled.

What if the consignee/shipper cannot return the bill of

lading?

In case the consignee cannot return upon receive the

merchandise the bill of lading, he must give the said carrier a



receipt for the goods delivered, this receipt producing the

same effects as the return of the bill of lading. (Art. 353)

Why is there presumption that the carrier did not deliver the

goods of the consignee if the carrier does not hold the bill of

lading after the fulfillment of the contract of transportation?

Therefore, the burden of proof is on the carrier to establish

that there was delivery of the goods to the consignee.

You review the case of Mapa vs CA.

Who may change the consignee? Answer is Article 360 of the

Code of Commerce.

Art 360. The shipper may, without changing the place

where the delivery is to be made, change the consignment

of the goods delivered to the carrier, and the latter shall

comply with his orders, provided that at the time of making

the change of the consignee the bill of lading subscribed by

the carrier be returned to him, if one were issued,

exchanging it for another containing the novation of the

contract.

Transshipment? Are you familiar with transshipment?

Transshipment is the act of taking cargo from one ship and

loading it on another. It is immaterial whether the same

person or entity owns the other vessel. This must be stated in

the Bill of Lading and the shipper must be informed.

There is transshipment without legal cause if there is

transshipping of the cargoes of the shipper without his

consent. It is important to know or inform the shipper if there

is transshipment because it can be, at the time of

transshipment, damage to the cargo can be had. Because it is

very dangerous in transferring you cargo from one vessel to

another. So if you didn’t inform your shipper, that is

transshipment without legal cause.

What are the effects of transshipment without legal cause?

1. It is a violation of the contract of carriage since it

will tell you the terms of contract like it says shipped

not transshipped.

2. Carrier shall be liable to the shipper if cargo is lost

even by a cause otherwise excepted.

So even if the cause of the loss of the cargoes is force

majeure, you are still liable because you did not inform the

shipper.

Can a carrier refuse to accept goods? In general, NO because

a common carrier is required to offer his services to the

general public. However, it can refuse if the goods are unfit

for transportation. There are also instances when a carrier

must examine the goods for transportation. If there is a

reason of well-founded belief or suspicion of falsity, it can

refuse, but the carrier must take steps before it can refuse to

transport. The following are the steps to be taken by the

carrier:

1. It must made in the presence of witnesses

2. The Shipper/consignee must be in attendance/

before a notary public

3. It must open the goods in front of the shipper

4. If after examination, the declaration is found to

be true, like totoo pala na old clothes even though it is very

heavy, the expenses for examination and repackage shall be

borne by the carrier, otherwise, it shall be paid by the shipper

Another very important topic and has been asked in the bar is

how can you bring an action or claim against the carrier?

There is a difference between bringing a claim against the

carrier and bringing a claim against a carrier in court. Before

you go to court, you have to bring your claim first against the

carrier, and the procedure that you have to follow is covered

in Article 366 of the Code of Commerce.

Art 366. Within the twenty-four hours following the receipt

of the merchandise a claim may be brought against the

carrier on account of damage or average found therein on

opening the packages, provided that the indications of the

damage or average giving rise to the claim can not be

ascertained from the exterior of said packages, in which

case said claim would only be admitted on the receipt of

the packages.

After the periods mentioned have elapsed, or after the

transportation charges have been paid, no claim

whatsoever shall be admitted against the carrier with

regard to the condition in which the goods transported

were delivered.



When you a bring claim to the carrier it only happens if there

is damage and deterioration of the goods, but is not available

if it is loss of goods. Take note of that. Article 366 applies only

when there is damage or deterioration, but not to loss. Why?

Because immediately after receipt of the package, the

damage is already apparent, for such purpose, you have to

make a verbal claim. But what if the damage to the cargo is

not apparent, within 24 hours, following receipt of the

damaged goods, if the damage cannot be known to the

exterior of the package. You can file a claim within 24 hours.

But what if you fail to file a claim against the carrier beyond

the 24 hour period, you cannot anymore claim it. Bringing

this claim within 24 hours is a condition precedent before you

can file a claim in court.

What are the periods in bringing your claim? Again, it must be

immediately if the damage is apparent, if not apparent,

within 24 hours.

What is the purpose of the above rules?

In the case of Roldan vs Lim Ponzo, the SC ruled that the

purpose of the abovementioned rules is to compel the

consignee of goods entrusted to a carrier to make prompt

demand for settlement of alleged damages suffered by the

goods while in transport, so that the carrier will be enabled to

verify all claims, fix responsibility and secure evidence as to

the goods while the matter is still fresh in the minds of the

parties. So if the damage is apparent, file a claim, which may

be verbal, immediately upon receipt.

It is also important to know when will you bring your action.

Also, such rules will never apply if the goods are not delivered

at all. It only applies if the goods are damaged or

deteriorated. If the goods are not delivered at all, the period

within which to bring your claim does not commence to run.

Because if the consignee receives the goods, that is the

moment when the period of bringing action will start to run.

-END OF FEBRUARY 17 DISCUSSION-



REVIEW

Art 360. The shipper may, without changing the place

where the delivery is to be made, change the consignment

of the goods delivered to the carrier, and the latter shall

comply with his orders, provided that at the time of making

the change of the consignee the bill of lading subscribed by

the carrier be returned to him, if one were issued,

exchanging it for another containing the novation of the

contract.

Can the consignee be changed by the shipper? Yes.

Conditions

1. Carrier has to be informed.

2. The carrier must comply with the change of the consignee if the place of delivery shall not be altered.

Atty Resci: Kunyari nandoon na ang goods, the

consignee is in Tokyo and refuses to pay tapos

naka kita yung shipper ng consignee sa San

Francisco, then di pwede, he can look for another

consignee but dapat sa Tokyo pa rin.

3. The original bill of lading must be returned to the carrier who will issue another one containing the novation of contract and expenses in the change of consignee shall be paid by the shipper, so just read Art. 363-365.

Art 363. Outside of the cases mentioned in the second

paragraph of Article 361, the carrier shall be obliged to

deliver the goods shipped in the same condition in which,

according to the bill of lading, they were found at the time

they were received, without any damage or impairment,

and failing to do so, to pay the value which those not

delivered may have at the point and at the time at which

their delivery should have been made.

If those not delivered form part of the goods transported,

the consignee may refuse to receive the latter, when he

proves that he cannot make use of them independently of

the others.

Art 364. If the effect of the damage referred to in Article

361 is merely a diminution in the value of the goods, the

obligation of the carrier shall be reduced to the payment of

the amount which, in the judgment of experts, constitutes

such difference in value.

Art 365. If, in consequence of the damage, the goods are

rendered useless for sale and consumption for the purposes

for which they are properly destined, the consignee shall

not be bound to receive them, and he may have them in the

hands of the carrier, demanding of the latter their value at

the current price on that day.

If among the damaged goods there should be some pieces

in good condition and without any defect, the foregoing

provision shall be applicable with respect to those damaged

and the consignee shall receive those which are sound, this

segregation to be made by distinct and separate pieces and

without dividing a single object, unless the consignee

proves the impossibility of conveniently making use of them

in this form.

The same rule shall be applied to merchandise in bales or

packages, separating those parcels which appear sound.

Bringing an Action/Claim against the Carrier

Art 366. Within the twenty-four hours following the receipt

of the merchandise, the claim against the carrier for

damage or average be found therein upon opening the

packages, may be made, provided that the indications of

the damage or average which gives rise to the claim cannot

be ascertained from the outside part of such packages, in

which case the claim shall be admitted only at the time of

receipt.

After the periods mentioned have elapsed, or the

transportation charges have been paid, no claim shall be

admitted against the carrier with regard to the condition in

which the goods transported were delivered.

Rule

Immediately upon receipt of the package – if damage is apparent from exterior of package for such purpose, a verbal claim made immediately is sufficient compliance with the law

Within 24 hours following receipt of package – if the damage cannot be known from exterior of package

Note: All claims are extinguished if the consignee receives the

merchandise, and pays the freight charges without protest.



CLASS PROPER

NEW ZEALAND vs CHOA JOY (1955)

There must be delivery of the goods to the consignee at the

place of destination for Article 366 to apply.

FACTS

Shipper - Lee Teh & Co., Inc, Samar

Consignee - Lee Teh & Co., Inc, Manila

Goods - 107 bundles of first class loose weight hemp

Route - Carangian, Samar to Manila

Carrier - South Sea Shipping Line

Ship owner - Adriano Choa Joy

Insurance co - New Zealand Insurance Co., Ltd.

The cargo failed to arrive in Manila because the vessel ran

aground while entering the Laoang Bay, Samar, on May 20,

1950, due to the negligence of its captain.

CFI of Manila – Dismissed the case. The liability of the carrier

did not attach because of the failure of the shipper or of the

consignee to file its claim for damages within 24 hours from

receipt of the cargo as required by law.

ISSUE

Whether 24-hour period provided Article 366 of the Code of

Commerce is applicable.

RULING

No. There must be delivery of the merchandise by the carrier

to the consignee at the place of destination. In the instant

case, the consignor is the branch office of Lee Teh & Co., Inc.,

at Catarman, Samar, which placed the cargo on board the

ship Jupiter, and the consignee, its main office at Manila. The

lower court found that the cargo never reached Manila, its

destination, nor was it ever delivered to the consignee, the

office of the shipper in Manila, because the ship ran aground

upon entering Laoang Bay, Samar on the same day of the

shipment.

Such being the case, it follows that the aforesaid Article 366

does not have application because the cargo was never

received by the consignee. Moreover, under the bill of lading

issued by the carrier, it was the letter's undertaking to bring

the cargo to its destination—Manila, —and deliver it to

consignee, which undertaking was never complied with. The

carrier, therefore, breached its contract, and, as such, it

forfeited its right to invoke in its favor the conditions required

by Article 366.

Article 366 of the Commercial Code is limited to cases of

claims for damages to goods actually turned over by the

carrier and received by the consignee, whether those

damages be apparent from an examination of the packages in

which the goods are delivered, or of such character that the

nature and extend of the damage is not apparent until the

packages are opened and the contents examined. Clearly it

has no application in cases wherein the goods entrusted to

the carrier are not delivered by the carrier to the consignee.

In such cases there can be no question of a claim for damages

suffered by the goods while in transport, since the claim for

damages arises exclusively out of the failure to make delivery.

The 24-hour period never started to run.

IRON BULK SHIPPING vs REMINGTON (2003)

FACTS

Remington Industrial Sales Corporation (Remington) ordered

from defendant Wangs Company, Inc. (Wangs) 194 packages

of hot rolled steel sheets. The 194 packages were loaded on

board the vessel MV Indian Reliance at the Port of Gdynia,

Poland, for transportation to the Philippines, under a Bill of

Lading. The vessels owner/charterer is represented in the

Philippines by Iron Bulk Shipping Phils., Inc. (Iron Bulk). Upon

the arrival in Manila, the cargoes were discharged from the

vessel. The cargo was inspected twice and found to be wet

and rusty. A case was filed against Iron Bulk for damages.

Note that a clean bill of lading was issued, i.e., it does not

indicate any defect in the goods covered by it, as shown by

the notation, CLEAN ON BOARD and Shipped at the Port of

Loading in apparent good condition on board the vessel for

carriage to Port of Discharge.

ISSUE

WON a clean bill of lading can be relied upon to establish the

condition of the cargo upon landing.



RULING

Yes. It is settled that a bill of lading has a two-fold character.

[A] bill of lading operates both as a receipt and as a contract.

It is a receipt for the goods shipped and a contract to

transport and deliver the same as therein stipulated. As a

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

the goods as to quantity, weight, dimensions, identification

marks and condition, quality and value. As a contract, it

names the contracting parties, which include the consignee,

fixes the route, destination, and freight rate or charges, and

stipulates the rights and obligations assumed by the parties.

Evidence shows that the cargo covered by the subject bill of

lading, although it was partially wet and covered with rust

was, nevertheless, found to be in a fair, usually accepted

condition when it was accepted for shipment.

The fact that the issued bill of lading is pro forma is of no

moment. If the bill of lading is not truly reflective of the true

condition of the cargo at the time of loading to the effect that

the said cargo was indeed in a damaged state, the carrier

could have refused to accept it, or at the least, made a

marginal note in the bill of lading indicating the true

condition of the merchandise. But it did not. On the contrary,

it accepted the subject cargo and even agreed to the issuance

of a clean bill of lading without taking any exceptions with

respect to the recitals contained therein. Since the carrier

failed to annotate in the bill of lading the alleged damaged

condition of the cargo when it was loaded, said carrier and

the petitioner, as its representative, are bound by the

description appearing therein and they are now estopped

from denying the contents of the said bill.

Did the prescriptive period in the Civil Code repeal Article 366

of the Code of Commerce?

No. The Code Commerce provides that failure to file a claim

within 24 hours from receipt extinguishes the right of the

aggrieved party against the carrier. It is a condition

precedent. Hence, you can no longer file a case in court.

Will the 24 hour period affect the prescriptive period

provided by the Civil Code?

No. The provision of Article 366 only refers to those notice of

claim against the carrier. It does not affect the right to file a

case in court. Since the Code of Commerce does not provide

for a period for filing a case in court, the Civil Code applies.

Hence, the following are the prescriptive periods to file a case

in court :

1. If there is a bill of lading – 10 years (Art. 1144 – based on a written contract)

2. If there is NO bill of lading – 6 years (Art. 1145 – based on an oral or quasi-contract)

3. If it involves overseas trading – 1 year (COGSA,

Article 3.6)

LORENZO SHIPPING vs CHUBB and SONS (2004)

FACTS

On November 21, 1987, steel pipes were loaded for shipment

from Manila to Davao. A clean bill of lading was issued for the

account of the consignee, a corporation in San Francisco. So

the voyage is Manila-Davao-San Francisco, USA. The vessel

arrived in Sasa wharf in Dec. 2, 1987. When the shipment

reached in Davao, it was discovered that sea water was in the

vessel and the steel pipes were submerged in water. It was

found out that the cargo was no longer suitable and was

flooded with sea water. The rusty condition of the cargo was

noted on the mate's receipts and the checker of M/V A signed

his conforme thereon. The shipment was later loaded on

board another vessel, for carriage to the United States. It

issued Bills of Lading covering 364 bundles of steel pipes to

be discharged at Oakland, U.S.A. All bills of lading were

marked "ALL UNITS HEAVILY RUSTED."

While the cargo was in transit from Davao City to the U.S.A.,

consignee sent a letter of intent dated December 7, 1987, to

the carrier filing a claim based on the damaged cargo.

On January 17, 1988, the vessel arrived at Oakland, California,

U.S.A. Due to its heavily rusted condition, the consignee

rejected the damaged steel pipes and declared them unfit for

the purpose they were intended.

On December 2, 1988, a complaint was filed for collection of

a sum of money, against the carrier. The carrier contends that

a notice of claim should have been filed when the goods

arrived in Davao on December 2, 1987. Thus, the right to file

a claim already prescribed.

ISSUE

Whether or not the notice of claim was timely filed by the

consignee.



RULING

Yes. The twenty-four-hour period prescribed by Art. 366 of

the Code of Commerce within which claims must be

presented does not begin to run until the consignee has

received the merchandise. In other words, there must be

delivery of the cargo by the carrier to the consignee at the

place of destination.

In the case at bar, consignee has not received possession of

the cargo, and has not physically inspected the same at the

time the shipment was discharged in Davao City. The carrier

failed to establish that an authorized agent of the consignee

Sumitomo received the cargo at Sasa Wharf in Davao City.

Respondent Transmarine Carriers as agent of respondent

Gearbulk, Ltd., which carried the goods from Davao City to

the United States, and the principal, respondent Gearbulk,

Ltd. itself, are not the authorized agents as contemplated by

law. What is clear from the evidence is that the consignee

received and took possession of the entire shipment only

when the latter reached the United States' shore. Only then

was delivery made and completed. And only then did the 24-

hour prescriptive period start to run.

PCIC vs CHEMOIL (2005)

This involves storage tanks. The Supreme Court held that

there was no proper notice of claim since it was only a

telephone call and there was no date indicated.

FACTS

Insurance Company - Philippine Charter Insurance

Corporation

Carrier - Chemoil Lighterage Corporation

Shipper - Samkyung Chemical Company, Ltd., based in Ulsan,

South Korea

Goods - liquid chemical

Consignee - Plastic Group Phils., Inc. (PGP) in Manila.

Upon inspection by PGP, the samples taken from the

shipment showed discoloration from yellowish to amber,

demonstrating that it was damaged. On 15 July 1991, an

action for damages was instituted by the petitioner-insurer

against respondent-carrier before the RTC.

ISSUE

WON there was a sufficient notice of claim against the carrier

RULING

No. The notice was allegedly made by the consignee through

telephone. The claim for damages was denied. This Court

ruled that such a notice did not comply with the notice

requirement under the law. There was no evidence presented

that the notice was timely given. Neither was there evidence

presented that the notice was relayed to the responsible

authority of the carrier.

The object sought to be attained by the requirement of the

submission of claims in pursuance of this article is to compel

the consignee of goods entrusted to a carrier to make prompt

demand for settlement of alleged damages suffered by the

goods while in transport, so that the carrier will be enabled to

verify all such claims at the time of delivery or within twenty-

four hours thereafter, and if necessary fix responsibility and

secure evidence as to the nature and extent of the alleged

damages to the goods while the matter is still fresh in the

minds of the parties.

The filing of a claim with the carrier within the time limitation

therefore actually constitutes a condition precedent to the

accrual of a right of action against a carrier for loss of, or

damage to, the goods. The shipper or consignee must allege

and prove the fulfillment of the condition. If it fails to do so,

no right of action against the carrier can accrue in favor of the

former. The aforementioned requirement is a reasonable

condition precedent; it does not constitute a limitation of

action.

Another exception on filing the claim: The second paragraph

of Article 366 of the Code of Commerce is also edifying. It is

not only when the period to make a claim has elapsed that no

claim whatsoever shall be admitted, as no claim may similarly

be admitted after the transportation charges have been paid.

In this case, there is no question that the transportation

charges have been paid, as admitted by the petitioner, and

the corresponding official receipt.

Note: An oral claim may be made however in the case at bar,

the timeliness of the claim was not established.



ABOITIZ vs ICNA (2008)

RULING

Under the Code of Commerce, the notice of claim must be

made within twenty four (24) hours from receipt of the cargo

if the damage is not apparent from the outside of the

package. For damages that are visible from the outside of the

package, the claim must be made immediately.

The periods, as well as the manner of giving notice may be

modified in the terms of the bill of lading, which is the

contract between the parties. Notably, neither of the parties

in this case presented the terms for giving notices of claim

under the bill of lading issued by petitioner for the goods.

The shipment was delivered on August 11, 1993. Although

the letter informing the carrier of the damage was dated

August 15,1993, that letter, together with the notice of claim,

was received by petitioner only on September 21, 1993. But

petitioner admits that even before it received the written

notice of claim, Mr. Mayo B. Perez, Claims Head of the

company, was informed by telephone sometime in August 13,

1993. Mr. Perez then immediately went to the warehouse

and to the delivery site to inspect the goods in behalf of

petitioner.

The call to petitioner was made two days from delivery, a

reasonable period considering that the goods could not have

corroded instantly overnight such that it could only have

sustained the damage during transit. Moreover, petitioner

was able to immediately inspect the damage while the matter

was still fresh. In so doing, the main objective of the

prescribed time period was fulfilled. Thus, there was

substantial compliance with the notice requirement in this

case.

Note: Pro hac vice – cannot be used as a precedent to other

cases; the general rule still governs

MALAYAN INSURANCE vs JARDINE DAVIES (2009)

FACTS

Petrosul shipped on board the vessel from Vancouver,

Canada yellow crude sulphur said to weigh 6,599.23 metric

tons as per draft survey for transportation to Manila,

consigned to LMG Chemicals Corporation (LMG). Upon arrival

in Manila, the stevedores of respondent Asian Terminals, Inc.

(ATI) undertook discharging operations of the shipment or

cargo from the vessel directly onto the steel barges of Creed

Customs Brokerage, Inc. (CCBI), which barges were later

towed upriver and arrived at the consignee LMGs storage

area in Pasig, Manila. The consignees hired workers

thereupon received and unloaded the cargo.

During the discharge of the cargo ex vessel onto CCBIs barges,

the surveyors, reported the cargo at 6,247.199 Metric Tons

(MT). Hence, a shortage of 352.031 MT. Once on board the

barges, the weight of the cargo was again taken and recorded

at 6,122.023 MT, thus reflecting a shortage of 477.207 MT.

The weight of the cargo, taken a third time upon discharge at

LMGs storage area, was recorded at 6,206.748 MT[4] to thus

reflect a shortage of 392.482 MT.

Petitioner as subrogee filed on September 5, 1995 a

Complaint against herein respondents ATI and Jardine Davies

in RTC of Manila, for recovery of the amount it paid to LMG.

ISSUE

WON the Bill of Lading is a sufficient basis for the claims

against Jardine Davies.

RULING

No. Petitioner argues, in the main, that the appellate court

erred in failing to consider the bill of lading as a binding

contract between the carrier and shipper or consignee insofar

as the accuracy of the weight of the cargo is concerned.

The presumption that the bill of lading, which petitioner

relies upon to support its claim for restitution, constitutes

prima facie evidence of the goods therein described have

been rebutted in light of abundant evidence casting doubts

on its veracity. To wit:

1. Under such clause, the shipper is solely responsible for the

loading of the cargo while the carrier is oblivious of the

contents of the shipment. Nobody really knows the actual

weight of the cargo inasmuch as what is written on the bill of

lading, as well as on the manifest, is based solely on the

shipper’s declaration.

2. The bill of lading carried an added clause the shipments

weight, measure, quantity, quality, condition, contents and

value unknown. Evidently, the weight of the cargo could not

be gauged from the bill of lading.



In the absence of clear, convincing and competent evidence

to prove that the cargo indeed weighed, albeit the Bill of

Lading qualified it by the phrase said to weigh, 6,599.23 MT

at the port of origin when it was loaded onto the MV Hoegh,

the fact of loss or shortage in the cargo upon its arrival in

Manila cannot be definitively established. The legal basis for

attributing liability to either of the respondents is thus sorely

wanting. The Bill of Lading cannot be used as a basis. Hence,

there is no evidence that any shortage occurred.

When does a consignee be bound by the stipulation in the bill

of lading?

MOF COMPANY vs SHIN TANG (2009)

FACTS

Halla Trading Co., a company based in Korea, shipped to

Manila secondhand cars and other articles on board the

vessel Hanjin. The bill of lading covering the shipment which

was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin),

named respondent Shin Yang Brokerage Corp. (Shin Yang) as

the consignee and indicated that payment was on a Freight

Collect basis, i.e., that the consignee/receiver of the goods

would be the one to pay for the freight and other charges in

the total amount of P57,646.00.

The shipment arrived in Manila. Thereafter, MOF Company,

Inc. (carrier), Hanjin’s exclusive general agent in the

Philippines, repeatedly demanded the payment and other

handling charges from the consignee. The consignee,

however, failed and refused to pay contending that it did not

cause the importation of the goods, that it is only the

Consolidator of the said shipment, that the ultimate

consignee did not endorse in its favor the original bill of

lading and that the bill of lading was prepared without its

consent. Thus, the carrier filed a case for sum of money

before the MeTC Pasay.

ISSUE

WON the consignee, not a signatory thereof, be bound by the

terms in the Bill of Lading.

RULING

No. In sum, a consignee, although not a signatory to the

contract of carriage between the shipper and the carrier,

becomes a party to the contract by reason of either a) the

relationship of agency between the consignee and the

shipper/ consignor; b) the unequivocal acceptance of the bill

of lading delivered to the consignee, with full knowledge of

its contents or c) availment of the stipulation pour autrui, i.e.,

when the consignee, a third person, demands before the

carrier the fulfillment of the stipulation made by the

consignor/shipper in the consignees favor, specifically the

delivery of the goods/cargoes shipped.

In the instant case, Shin Yang consistently denied that it

authorized Halla Trading, Co. to ship the goods on its behalf;

or that it got hold of the bill of lading covering the shipment

or that it demanded the release of the cargo. Basic is the rule

in evidence that the burden of proof lies upon him who

asserts it. Thus, MOF has the burden to controvert all these

denials, it being insistent that Shin Yang asserted itself as the

consignee and the one that caused the shipment of the goods

to the Philippines.

Here, MOF failed to meet the required quantum of proof.

MOF has not adduced any other credible evidence to

strengthen its cause of action. There is also nothing in the

records which would indicate that Shin Yang was an agent of

Halla Trading Co. or that it exercised any act that would bind

it as a named consignee. Thus, the CA correctly dismissed the

suit for failure of petitioner to establish its cause against

respondent.

Rule in cases of doubts and disputes between consignee and

carrier

Art. 367. If doubts and disputes should arise between the

consignee and the carrier with respect to the condition of

the goods transported at the time their delivery to the

former is made, the goods shall be examined by experts

appointed by the parties, and, in case of disagreement, by a

third one appointed by the judicial authority, the results to

be reduced to writing; and if the interested parties should

not agree with the expert opinion and they do not settle

their differences, the merchandise shall be deposited in a

safe warehouse by order of the judicial authority, and they

shall exercise their rights in the manner that may be proper.

When shall the goods be delivered?

Art. 370. If a period has been fixed for the delivery of the

goods, it must be made within such time, and, for failure to

do so, the carrier shall pay the indemnity stipulated in the

bill of lading, neither the shipper nor the consignee being

entitled to anything else.



If no indemnity has been stipulated and the delay exceeds

the time fixed in the bill of lading, the carrier shall be liable

for the damages which the delay may have caused.

If the carrier has the right to abandon, can the consignee also

abandon the goods that were delivered to him in case there is

delay?

Yes, if the delay was through the fault of the carrier.

Art 371. In case of delay through the fault of the carrier,

referred to in the preceding articles, the consignee may

leave the goods transported in the hands of the former,

advising him thereof in writing before their arrival at the

point of destination.

When this abandonment takes place, the carrier shall pay

the full value of the goods as if they had been lost or

mislaid. If the abandonment is not made, the

indemnification for losses and damages by reason of the

delay cannot exceed the current price which the goods

transported would have had on the day and at the place in

which they should have been delivered; this same rule is to

be observed in all other cases in which this indemnity may

be due.

What is the effect to the carrier then?

The carrier shall pay the full value of the goods as if they had

been lost or mislaid.

However, if the consignee does not opt to abandonIf the

abandonment is not made, the indemnification for losses and

damages by reason of the delay cannot exceed the current

price which the goods transported would have had on the

day and at the place in which they should have been

delivered; this same rule is to be observed in all other cases in

which this indemnity may be due. (Article 371)

Liability of Carriers in Combined Services

Art. 373. The carrier who makes the delivery of the

merchandise to the consignee by virtue of combined

agreements or services with other carriers shall assume the

obligations of those who preceded him in the conveyance,

reserving his right to proceed against the latter if he was

not the party directly responsible for the fault which gave

rise to the claim of the shipper or consignee.

The carrier who makes the delivery shall likewise acquire all

the actions and rights of those who preceded him in the

conveyance.

The shipper and the consignee shall have an immediate

right of action against the carrier who executed the

transportation contract, or against the other carriers who

may have received the goods transported without

reservation.

However, the reservation made by the latter shall not

relieve them from the responsibilities which they may have

incurred by their own acts.

Who shall the consignee sue among the initial carrier,

forwarding carrier, delivering carrier? For convenience

purposes, sue against the last carrier (delivering carrier) for

breach of contract.

If the last carrier is not at fault, his remedy is to file a third

party complaint against the carrier at fault.

Who shall the shipper sue among the three? Sue the initial

carrier.

Loan on Bottomry and Respondentia

What is a loan on bottomry?

1. A loan: - Under which any condition whatsoever, - The repayment of the sum loaned and of the

premium stipulated depends upon the safe arrival of the effects,

- In the port on which it is made

Note: Under a loan on bottomry, if the vessel used as

collateral is faced with marine peril, there shall be no

repayment of the sum loaned. This is its difference from an

ordinary loan.

2. A loan with things exposed to maritime risks as collateral, to be paid if the collateral are safely transported, and the lender shall lose his money if the collateral is lost.

If the security is a vessel, it is a loan on bottomry. If the

security is cargo, it is respondentia.



Art. 719. A loan in which under any condition whatever, the

repayment of the sum loaned and of the premium

stipulated depends upon the safe arrival in port of the

goods on which it is made, or of the price they may receive

in case of accident, shall be considered a loan on bottomry

or respondentia.

The characteristics of these two loans are:

1. It is a loan or a security which is the vessel itself or again the cargo on the vessel. It is the cargo loaded on the vessel. Must be loaded;

2. It is conditioned on the safe arrival at the port where the loan was made and; very important

3. The vessel must be exposed to maritime peril. So it must have left the port.

For example, di nakaalis si vessel then nag typhoon and then

nasira and it was a loan on bottomry, are you still liable to

pay for the amount of the loan? Nandyan lang sa port di naka

alis.

Yes, it’s not a loan on bottomry anymore, it’s an ordinary

loan. The element that was missing there was the vessel must

be exposed to maritime risk.

Now the question is who may contract the loan?

If it is a loan on bottomry, it should be the owner of the

vessel or the captain. Remember, if the captain will have to

make repairs for the vessel and then he has no money, the

captain can obtain a loan on bottomry but he has to comply

with the provisions of Article 580 on the petitions that must

be complied with by the captain in case he incurs a loan to

repair the vessel.

If it is a loan on respondentia who may contract the loan?

It must be the owner of the cargo or the shipper.

Ordinary loan vs Loan on Bottomry/Respondentia

Ordinary Loan Loan on Bottomry/

Respondentia May or may not have

collateral Must always have collateral

Collateral may be real or

personal property

Collateral must be a vessel or a

cargo subject to maritime risk

Absolutely repayable

Payment depends on the safe arrival

by the collateral at the port of the

loan

Need not be in writing Must be in writing

To be binding on 3rd

persons, need not be

registered

Must be registered in the registry of

vessels

Loss of collateral, if any

does not extinguish the

loan

Loss of collateral extinguishes the

loan.

Ordinary loan pwede meron or walang collateral whereas, a loan on respondentia or bottomry must always have a collateral.

In an ordinary loan, the collateral can be a real or personal property whereas, in bottomry or respondentia the collateral must a vessel or a cargo subject to maritime risk.

An ordinary loan is in all instances absolutely repayable whereas, in loan of bottomry or respondentia there is a condition that payment depends upon the safe arrival of the collateral at the port of the loan. So it must arrive safely at the port.

In ordinary loan it need not be in writing. In bottomry and respondentia it must be in writing.

In an ordinary loan in order to bind third persons it may not be registered but in loan on bottomry or respondentia it must be registered in the registry of vessels.

Finally, in an ordinary loan if the collateral is lost it does not extinguish the loan. But in bottomry or respondentia the loss of the collateral extinguishes the loan.

Article 726 provides for the rule on the amount of the loan

that can be honored. For example you obtain a loan, an

ordinary loan, if you make a loan and ang collateral is a parcel

of land, the land will have to be appraised by the appraisers.

The amount of the loan whenever it exceeds the maximum

amount/value of the land, for example the value of the land is

10M, you cannot really loan an amount of 10M because your

collateral is 10M. The amount will be lower. Usually you only

take 70%. So if the value of the land is 10M you can only loan

70% of that. So how much? You calculate! That is also the

same principle in maritime loans. If the vessel is only worth

10M the amount that you can loan will only be up to 70% of

the value of the vessel. That is the only maximum amount

that you can loan.



But say for example, if the appraisers are in cahoots with the

owner of the vessel. So sabihin natin na ang value ng aking

vessel is 10M actually pero pag appraise mo taas taasan mo

naman para mataas ang loan ko, say 50M. 50M ang niloan sa

bank. Dapat ang loan lang na allowable is how much? It will

only be based on the 10M, 70% of the 10M. What happens to

the excess? The amount of credit na pwede ma loan is 7M

but ang na loan mo sa bank is 50M. What happens to the

excess? The excess will be considered as ordinary loan in

which they will be repayable. In case there is a loss of the

vessel because it was exposed to maritime risk, the loan will

only be extinguished up to the amount of 7M and the

difference will be payable by the owner of the vessel. Did you

get me? You have no choice.

Basta the excess if there is conspiracy between the appraiser

and the owner of the vessel to bloat the value of the vessel

compared to what really is true, yung excess na yun will be

considered as ordinary loan, not a maritime loan. Remember

the differences between a maritime loan and ordinary loan,

okay? Ang maritime loan will be extinguished if the collateral

is lost an ordinary loan not extinguished if the collateral is

lost.

You read also Article 727, and 731.

Article 731 is important also.

What are the effects of the total loss of collateral on the loan

on bottomry or respondentia? The loan will be extinguished

provided the two requisites are present:

1. The loss arose from an accident of the sea at the time and during the voyage indicated in the contract;

2. It is proven in case it is a loan on respondentia that the cargo was on board.

The loan will not be extinguished (ibig sabihin they still have

to pay for the full amount) when the loss was caused by the

following:

1. Inherent defect of the thing; 2. Malice of the borrower; 3. Barratry of the captain; 4. Damages suffered by the vessel as a consequence of

being engaged in contraband; and 5. When the cargo on the vessel is different from that

agreed upon unless the change should have been made by reason of force majeure. For example if it

was a loan on respondentia, the cargo you said was a box of banana but it was found that the one that was loaded is actually a box of marijuana. So, the loan will not be extinguished if there is a different cargo that was loaded from that agreed upon.

Barratry

Barratry of the captain is any willful misconduct on the part of

the master or crew in pursuance of some lawful or fraudulent

purpose without the consent of the owners and to the

prejudice of the owner’s interest.

Let’s go to risks, damages, and accidents of maritime

commerce.

Averages

Averages are the all extraordinary or accidental expenses

which may be incurred during the voyage for the preservation

of the vessel, cargo, or both.

(We are already going to Article 806) Averages also mean all

damages or deterioration which the vessel may suffer from

the time she puts to sea at the port of departure until she

casts anchor at the port of destination. Or all the damages

that were suffered by the goods from the time they are

loaded in the port of shipment until they are unloaded in the

port of their consignment.

Averages can be two different things. It can be:

1. Extraordinary; 2. Ordinary or petty expenses;

What are the petty expenses?

Petty expenses are provided under Article 807.

Petty and ordinary expenses incident to navigation such as

those of:

1. Pilotage of coast and ports; 2. Lighterage; 3. Towage; 4. Anchorage; 5. Inspection; 6. Health; 7. Quarantine; 8. Lazaretto; and



9. Other so called port expenses, costs of barges, and unloading, until the goods are placed on the wharf; and

10. Other usual expenses of navigation.

Lazaretto is a quarantine station for maritime travellers.

Other ordinary expenses are under petty expenses or

averages under Article 807.

Who would pay for ordinary expenses?

Under Article 807, as a general rule, petty expenses are paid

for by the ship owner unless there is an express agreement to

the contrary.

Article 808 on the other hand also differentiates two more

kinds of averages:

1. Simple or Particular Average; and 2. General Average.

As defined under Article 809, particular averages are all

expenses and damage caused to the vessel or to the cargo

which have not inured to the common benefit and profit of

all the persons interested in the vessel or the cargo. It must

be an expense that does not inure to the common benefit

and profit of all.

Who will bear the loss?

It will be the owner of the things which gave rise to the

expenses or suffered the damaged as provided under Article

810. The examples of particular averages are the following,

marami 1-9. This is Article 809. Article 809, just read them

and love them.

Examples of Particular Average under Article 809:

1. The damages suffered by the cargo from the time of its embarkation until it is unloaded, either on account of the nature of the goods or by reason of an accident at sea or force majeure, and the expenses incurred to avoid and repair the same.

2. The damages suffered by the vessel in her hull, rigging, arms, and equipment, for the same causes and reasons, from the time she puts to sea from the port of departure until she anchored in the port of destination.

3. The damages suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it.

4. The wages and victuals of the crew when the vessel should be detained or embargoed by a legitimate order or force majeure, if the charter should have been for a fixed sum for the voyage.

5. The necessary expenses on arrival at a port, in order

to make repairs or secure provisions.

6. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to cover any other requirement of the vessel against which the proper amount shall be charged.

7. The victuals and wages of the crew during the time

the vessel is in quarantine.

8. The damage suffered by the vessel or cargo by reason of an impact or collision with another, if it were accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the damages caused.

9. Any damage suffered by the cargo through the

faults, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freight.

General average is provided under Article 811. These are

damages and expenses which are deliberately caused in order

to save the vessel, its cargo, or both at the same time, from a

real or known risk.

Who will bear the loss?

All the persons having an interest in the vessel and cargo

therein at the time of the occurrence of the average shall

contribute.

Requisites of a general average (for an expense to constitute

as a general average):

1. There must be a common danger, a danger in which ship, cargo and crew all participate;



2. It must be for the common safety or for the purpose of avoiding an imminent peril, part of the vessel or cargo or both is sacrificed deliberately;

3. This attempt of avoiding the peril must be successful

in a sense that the vessel and some of the cargo are saved; and

4. The expenses were incurred or damages were

inflicted after taking proper legal steps and authority.

For example, pirates are already running after a vessel and

then hinay kaau ang vessel and diba usually in maritime

commerce for the vessel to gain more speed you have to

unlighten. What will be your remedy? You have to jettison

cargo, ipanlabay nimo. Say for example if the cargo of ABCDE,

the cargo of A and B were jettisoned, syempre the vessel

gained speed and was able to avoid the pirates. Whose cargo

was saved? The cargoes of C D E. What is the remedy of A and

B? They may be reimbursed through payment of general

average. General average is like there is fund or there is

money. Who will pay for the general average in order to

compensate A and B for the loss of their cargo? All those who

have been benefited. Those whose cargo was saved, C D and

E. Who else? The carrier because the ship was saved. So C D E

and the carrier.

Jason Clause (Bar Q)

Jason Clause was provided under Rule D, York Antwerp Rules.

The clause says rights to contribution in general average shall

not be affected though the event which gave rise to the

sacrifice or expenditure may have been due to the fault of

one of the parties to the adventure, but this shall not

prejudice any remedies which may be open against that party

for such clause.

Example, I have a cargo and I misstated the weight of my

cargo, meaning gamay akong gibutang na weight sa cargo but

in fact bug-at kayo siya and it was placed on the deck so the

vessel was not heavy. And pirates were there chuchuchu.

What was jettisoned cargo was my cargo. Sinong may

kasalanan na naging top heavy ang vessel? Diba ako?! Tapos

akong cargo ang nalabay. Syempre kung ikaw ang may cargo

na na save, you will say na I will not contribute to the general

average kasi si Resci ang may kasalanan. But under the Jason

Clause, even if that person who was the reason for that

sacrifice, he can still be compensated through the general

average.

What will be the remedy of all those who contributed?

It is not without prejudice to their right to go against me or

to the person who misstated the weight of his cargo for

proper actions.

You will still be indemnified but it is without prejudice of the

suit that may be filed against him. You take note also Article

665.

Take note also of the differences between general and

particular average.

a. General average deliberately caused in order to save the vessel or cargo or both. Particular average may be due to causes other than a deliberate act.

b. A general average inures to the benefit of those interested in the vessel or a cargo. PA it does not inure to the common benefit of all persons interested in the vessel or cargo.

c. In GA it will be shared and contributed by all persons benefited but in PA borne only by the owner of the things that were damaged.

MAGSAYSAY VS. AGAN (1955)

FACTS

Magsaysay is the owner of SA San Antonio which was bound

from Manila to Batanes via Apari. When it stopped at the port

in Apari it run about (?) to Cagayan River. In order to afloat

the vessel the shipper engaged the services of Rural Services

Corporation (?). The issues in this case really started when

one of the owners of cargo, Agan, refused to contribute

regarding the shortage. Hence here, the shipper filed a case

for it to be liable for P841.

ISSUE

WON Agan is liable

RULING

Here, the court differentiated between general average and

specific average, and their requisites.

a. There must be a common danger which means that

both the ship and the cargo has been subject to the same

danger whether during the voyage or in the port of loading or

unloading that will make the presence or accidents of the sea



dispositions of the authority provided that the circumstances

producing the peril should be ascertained;

b. The common safety of the vessel or the cargo both

be sacrificed deliberately;

c. That from the expenses or damages caused follows

the successful saving of the vessel and the cargo;

d. The expenses or damages should have been incurred

after taking proper or legal steps and authority.

Here, in the first requisite the SC said there was no payment

made as provided in the testimonies. The testimony stated

that it is in order for the vessel to continue the voyage. In the

second cargo, although the sacrifice was made it was not for

the benefit of both the vessel and the cargo owners but only

for the vessel. Lastly, in the 4th requisite the expenses the

court said, it should have followed Art 813 in order to be

liable.

Art 813 provides in order to incur the expenses and cause the

damages corresponding the gross average, there must a

resolution of the captain adopted after deliberation with the

sailing mate and other officers of the vessel and after hearing

the persons interested in the cargo who may be present. If

the latter should object, the captain and officers or majority

or the captain if opposed, the majority should consider

certain measures necessary being may be executed under his

liability without prejudice to the right of the shipper to

proceed against the captain before a judge or court of

competent jurisdiction. They can prove that the captain acted

with malice, lack of skill, or negligence. If the person

interested in the cargo being on board the vessel will not be

heard, they shall not contribute with the gross average, their

share being chargeable against the captain, unless the

urgency of the case should be such that the time necessary

for the previous deliberation was not made. Here, all

requisites were not followed. Hence, Agan was not liable.

Atty. Resci: It was considered as?

Student: It was considered as simple, Ma’am. It should be

borne by the shipper.

Atty. Resci: It should be considered as a particular average.

Remember this is a case of payment for expenses caused in

order to float a vessel. The stranding of the vessel was due to

the sudden shifting of the sandbars at the mouth of the river

which the port pilot did not anticipate. So, in the expenses of

making the vessel afloat, who should contribute? Did the

benefit inure to the vessel and the cargo? Or was it pertaining

to the vessel alone? So it was checked with respect to the

requisites of the general average. As stated by your classmate

it did not meet the requisites of GA. So it was considered as a

particular average.

STANDARD OIL vs CASTELO (1921)

FACTS

A time charter voyage agreement was made by Castelo and

Shibuki. In this case, Standard Oil delivered several gallons of

petroleum in the ship that was chartered by Shibuki. The ship

here was from Manila going to Sorsogon. However, before

the ship reached the port of Sorsogon they encountered a

typhoon. The captain of the ship was forced to jettison all the

goods, not all the petroleum but a huge amount of

petroleum. When the ship docked at a port of Sorsogon,

Standard Oil filed a claim against Castelo to recover the

jettison goods that was made by the captain.

ISSUE

WON the loss of this petroleum was a GA loss or a PA to be

borne solely by the owner of the cargo.

RULING

Ordinarily, no jettison of deck cargo shall be made as general

average. This is based on the York Antwerp rule. However,

with the advent of steamship as the principal conveyer of

cargo by sea it has been felt that the reason for the rule has

become less weighty.

According to the SC, the reason why deck cargo can be

jettison first rather than the cargo that was placed on-deck is

because it is extra hazardous and also when you talk about

small ship, it can render the vessel top heavy. But with regard

to that, with the advent of the steam ship, the SC said that

jettison goods carried on-deck according to the custom of

trade by steam vessels navigating coastwise and inland

waters are entitled to contribution as a general average loss.

The loss of this petroleum is a general and not a special

average, with the result that the plaintiff is entitled to recover

in some way and from somebody an amount bearing such

proportion to its total loss as the value of both the ship and

the saved cargo bears to the value of the ship and entire

cargo before the jettison was effected.



Atty. Resci: When you jettison goods there is an order that

must be followed. You check Article 815. Those which are on

deck beginning those which unbalance the handling of the

vessel or damage preferring, if possible, the heaviest ones,

and those of least utility. Next, those which are below the

upper deck, always beginning with those of the greatest

weight and smallest value, to the amount and number

absolutely indispensable.

Article 677 on Effects of a Declaration of War or Blockade

when there is a charter party.

If there is a war and there is a blockade the law says:

a. The charter party shall remain force if the captain should not have any instruction from the charterer.

b. The captain must proceed to the nearest safe and neutral port.

c. At said port, the captain must request and await

orders from the shippers.

d. Expenses and salaries accruing during detention in said port shall be paid as general average.

e. If, by order of the shipper, the cargo should be

discharged at the port of arrival, the freight for the voyage out shall be paid in full.

INTERNATIONAL vs HAMBURG (1918)

FACTS

The International Harvester Company in Russia (IHCR), an

American Company, contracted the Hamburg-American Line

(HAL) to transport 852 crates of agricultural machinery from

Baltimore, Maryland (USA) to Hamburg, Germany and that

after it reached Hamburg, the crates were to be delivered, at

the order of the consignor, to Vladivostock, Russia. The crates

were delivered via the vessel Bulgaria to Hamburg, at the

expense of HAL. It was transferred to the German ship Suevia

to resume journey from Hamburg to Russia.

During Suevia’s journey, war broke out between Russia and

Germany. Suevia’s captain ordered the ship to be placed on

neutral ground, which happened to be the nearest port of

Manila. IHCR demanded HAL to continue the journey by

transferring the cargoes to a non-German ship (as agreed

upon in the Bill of Lading in case of war). HAL declined. IHCR

sued HAL in Manila. RTC Manila issued a writ of replevin

hence IHCR recovered its cargoes, it then contracted a

separate ship to continue the transport. HAL claimed that

IHCR is liable for general averages for the expenses of the

Suevia while at the port of Manila. IHCR claimed that HAL is

liable for the expenses incurred by ICHR in contracting a

different shipping line.

ISSUE

Whether or not IHCR is liable for general averages

RULING

No. It is clear that the cargo in question is not liable to a

general average. It is not claimed that this agricultural

machinery was contraband of war; and being neutral goods,

it was not liable to forfeiture in the event of capture by the

enemies of the ship’s flag. It follows that when the master of

the Suevia decided to take refuge in the port of Manila, he

acted exclusively with a view to the protection of his vessel.

There was no common danger to the ship and cargo; and

therefore it was not a case for a general average.

The cargoes were not contraband and are not in danger at

war. Suevia’s captain merely thought about the safety of the

ship, not of the cargos hence there is no common benefit

here between the ship and the cargo; therefore, general

averages does not exist.

HAL is liable for the expenses incurred by IHCR in contracting

a different shipper. By the terms of the contract of

affreightment HAL was bound to forward the cargo to

Vladivostock at the steamer’s expense, not necessarily by a

steamer belonging to HAL; and it does not by any means

follow that it is not liable for the expense incurred by IHCR in

completing the unfinished portion of the voyage in another

ship.

Atty. Resci: In International Harvester vs. Hamburg the vessel

was German the goods or cargo were American. The

destination was in Russia. On the way to Russia, there was a

war that broke out between Germany and Russia and then

for reasons I don’t know why they reached Manila, nasaag

silag Manila. In Manila, they incur expenses. The IH does not

have to contribute to the GA because the expenses that were

incurred in Manila, you check it with the requisites of General

Average. The element missing there was (1) no common

danger shared or participated in by the cargo and the crew



because there was no danger attributed to the American

cargo. The war was only between Germany and Russia.

America was never involved there. The danger was only with

respect to the German vessel because it was the one in war

with Russians. The first requisite was not present.

In Compagnie vs. Hamburg, this is the same German vessel,

at that time it was from the port of Saigon, Vietnam to the

port of Hamburg. The Vietnam was occupied at that time by

the French. The cargo from Saigon was supposed to be

delivered to ___. Vessel was German, and shipper was

French. While loading the cargo in the Port of Saigon there

were rumours that there is going to be a war between France

and Germany. So the master of the German vessel upon

completion of the loading immediately left Saigon and then

fled to the nearest port, Manila. So they parked in Manila

that time they waited for instructions, likewise they spent

several expenses while they stayed there. So the German

vessel now was claiming GA for contribution to the GA from

the French shipper of the Cargo.

Is the French shipper obliged to pay the General Average? SC

said, NO.

COMPAGNIE vs HAMBURG (1917)

ISSUE

Is the French shipper obliged to pay the General Average?

RULING

No, because only the German vessel, at that time, was at risk.

And if the French cargo just stayed at Saigon, it would still be

safe.

‘That inasmuch as the French cargo was absolutely safe in the

French port of Saigon, and the deviation of the steamship

Sambia from her intended voyage to Dunkirk and Hamburg

and her entry into Manila Bay were induced by fear of the

capture of the vessel by one of the belligerents at war with

Germany, the alleged peril which induced the master of said

vessel to enter Manila Bay was not common to both ship and

cargo as required by the York-Antwerp Rules as a condition

precedent to the levying of a general average; that this cargo

under the law of nations was not subject to confiscation by

any enemy of Germany, and the cargo not having been

imperilled, the expense and loss to the ship and its owners

occasioned by the deviation and by taking refuge in Manila

Bay during the European war were not for the benefit of the

cargo, but for the sole benefit of the ship and its crew; and

therefore the cargo should not in any event be called upon

for contribution under general average.’

Liability of Lenders for Average

Art. 723. Loans may be made in goods and in merchandise,

fixing their value in order to determine the principal of the

loan.

Arrival under Stress

Art. 819. If during the voyage the captain should believe

that the vessel cannot continue the trip to the port of

destination on account of the lack of provisions, well-

founded fear of seizure, privateers, or pirates, or by reason

of any accident of the sea disabling it to navigate, he shall

assemble the officers and shall summon the persons

interested in the cargo who may be present, and who may

attend the meeting without the right to vote; and if, after

examining the circumstances of the case, the reason should

be considered well-founded, the arrival at the nearest and

most convenient port shall be agreed upon, drafting and

entering the proper minutes, which shall be signed by all, in

the log book. The captain shall have the deciding vote, and

the persons interested in the cargo, may make the

objections and protests they may deem proper, which shall

be entered in the minutes in order that they may make use

thereof in the manner they may consider advisable.

Art. 820. An arrival shall not be considered lawful in the

following cases:

1. If the lack of provisions should arise from the

failure to take the necessary provisions for the voyage

according to usage and customs, or if they should have

been rendered useless or lost through bad stowage or

negligence in their care.

2. If the risk of enemies, privateers, or pirates

should not have been well known, manifest, and based on

positive and provable facts.

3. If the defect of the vessel should have arisen

from the fact that it was not repaired, rigged, equipped,

and prepared in a manner suitable for the voyage, or from

some erroneous order of the captain.



4. When malice, negligence, want of foresight, or

lack of skill on the part of the captain exists in the act

causing the damage.

Art. 821. The expenses of an arrival under stress shall

always be for the account of the shipowner or agent, but

they shall not be liable for the damages which may be

caused the shippers by reason of the arrival provided the

latter is legitimate. Otherwise, the ship agent and the

captain shall be jointly liable.

Arrival under stress means the arrival of the vessel at the

nearest and most convenient port, because the vessel

CANNOT continue the trip to the port of destination, on

account of:

1. Lack of provisions,

2. Well founded fear of seizure, privateers or pirates, or

3. By reason of any accident of the sea disabling the

vessel to navigate.

So say, for example, from MNL to San Francisco, then for lack

of provision, wala kayo food. You have to stop by Germany.

So what are the effects?

Well, arrival under stress can be lawful or unlawful. If it is a

lawful arrival under stress, it is considered only as a

particular average and damages need not be paid to the

shipper. If it is lawful, syempre may damages man, you are

liable for a particular average but you are not liable to pay for

damages. But if it is an unlawful arrival under stress (there

are requirements that must have to be complied with for it to

be considered as lawful), then damages must be paid. So the

issue in lawful and unlawful arrival under stress will be the

issue on the payment of damages.

Let’s go to the first ground.

1. A. If your reason is because of lack of provisions. It will be considered unlawful if the lack of provisions should arise from the failure to take the necessary provisions for the voyage according to usage and customs.

For example, your trip is from MNL to San

Francisco and your trip will have to take a period

of 2 weeks so syempre you have to store food

enough for 2 weeks, but on the 3rd day naubusan

na kayo. For failure to foresee the needs of the

vessel for the 2 weeks voyage, it is not in

accordance to usage and customs. So there was

failure to comply with the necessary provisions

accdg to usage and customs, and you arrived at a

different port, the same is not lawful.

B. Or, if they should have been rendered useless or lost

through bad stowage or negligence in their care.

For example naa lagi mo food for 2 weeks, but

inyo gi store sa bodega wala sa freezer. There

was negligence on your part. So the food can no

longer be utilized. Even if you invoke na wala

kayo food, but it was proven that the lack of

provision was due to bad stowage or negligence,

so the arrival under stress will be considered

unlawful and you are made to pay damages.

2. If your reason is a well-founded fear of seizure, privateers or pirates. It is unlawful if the risk should not have been well known, manifest, and based on positive and provable facts.

So if the captain diverted or arrived at the nearest

convenient port because he only dreamt that pirates

were going to board the ship, and he believed in his

dream. Gi daman si Captain. So the risk here is not

manifest, so the arrival under stress is unlawful.

3. If it is by reason of any accident of the sea disabling the vessel to navigate. It is considered unlawful if the defect arises from the fact that it was not repaired, rigged, equipped and prepared in a manner suitable for voyage, or for some erroneous order of the captain. AND, when there is malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the damage.

Collisions

Art.826. If a vessel should collide with another, through or

the fault, negligence, or lack of skill of the captain, sailing

mate, or any other member of the complement, the owner

of the vessel at fault shall indemnify the losses and

damages suffered, after an expert appraisal.

Art. 827. If the collision is imputable to both vessels, each

one shall suffer its own damages, and both shall be



solidarily responsible for the losses and damages occasioned

to their cargoes.

Art. 828. The provisions of the preceding article are

applicable to the use in which it cannot be determined

which of the two vessels has caused the collision.

Art. 829. In the cases above mentioned the civil action of

the owner against the person causing the injury as well as

the criminal liabilities, which may be proper, are reserved.

Art. 830. If a vessel should collide with another, through

fortuitous event or force majeure, each vessel and its cargo

shall bear its own damages.

Art. 831. If a vessel should be forced by a third vessel to

collide with another, the owner of the third vessel shall

indemnify the losses and damages caused, the captain

thereof being civilly liable to said owner.

Art. 832. If by reason of a storm or other cause of force

majeure, a vessel which is properly anchored and moored

should collide with those nearby, causing them damages,

the injury occasioned shall be considered as particular

average of the vessel run into.

Art. 833. A vessel which, upon being run into, sinks

immediately, as well as that which, having been obliged to

make a port to repair the damages caused by the collision,

is lost during the voyage or is obliged to be stranded in

order to be saved, shall be presumed as lost by reason of

collision.

Art. 834. If the vessels colliding with each other should

have pilots on board discharging their duties at the time of

the collision, their presence shall not exempt the captains

from the liabilities they incur, but the latter shall have the

right to be indemnified by the pilots, without prejudice to

the criminal liability which the latter may incur.

Art. 835. The action for the recovery of losses and damages

arising from collisions cannot be admitted if a protest or

declaration is not presented within twenty-four hours

before the competent authority of the point where the

collision took place, or that of the first port of arrival of the

vessel, if in Philippine territory, and to the consul of the

Republic of the Philippines if it occurred in a foreign

country.

Art. 836. With respect to damages caused to persons or to

the cargo, the absence of protest may not prejudice the

persons interested who were not on board or were not in a

condition to make known their wishes.

Art. 837. The civil liability incurred by the shipowners in the

case prescribed in this section, shall be understood as

limited to the value of the vessel with all its appurtenances

and freightage earned during the voyage.

Art. 838. When the value of the vessel and her

appurtenances should not be sufficient to cover all the

liabilities, the indemnity due by reason of the death or

injury of persons shall have preference.

In a strict sense:

a. Collision – the impact of 2 vessels, both or which are

moving

b. Allision - the striking of a moving vessel against one that is

stationary

In a broad sense – collision includes allision, and perhaps

another species of encounters between vessels, or a vessel

and other floating, though non-navigable object (so even a

vessel hitting an iceberg can be considered collision).

What we need to remember is what will be the liability of the

vessels in case of collisions. Well, you have to determine who

is at fault.

If two vessels are to be blamed to the collision:

Art. 827. If the collision is imputable to both vessels, each

one shall suffer its own damages, and both shall be

solidarily responsible for the losses and damages occasioned

to their cargoes.



Art. 828. The provisions of the preceding article are

applicable to the use in which it cannot be determined

which of the two vessels has caused the collision.

Art 829. In the cases above mentioned the civil action of

the owner against the person causing the injury as well as

the criminal liabilities, which may be proper, are reserved.

Art. 830. If a vessel should collide with another, through

fortuitous event or force majeure, each vessel and its cargo

shall bear its own damages.

Art. 831. If a vessel should be forced by a third vessel to

collide with another, the owner of the third vessel shall

indemnify the losses and damages caused, the captain

thereof being civilly liable to said owner.

So if one vessel is at fault, said vessel shall be liable for:

1. damage caused to the innocent vessel, and

2. damages suffered by the owners of the cargo of:

a. the innocent vessel, and

b. its own vessel

If both vessels are at fault, or it cannot be determined which

vessel is at fault:

1. Each vessel must bear its own loss, and

2. Both shipowners shall be solidarily liable to the

shippers for damages suffered

If a third vessel is at fault, said vessel shall be liable for: [Art.

831]

1. damage caused to 2 the innocent vessels, and

2. damages suffered by the owners of the cargo of:

a. the 2 innocent vessels, and

b. its own vessel

If no vessel was at fault [ e.g. Fortuitous event] [Art. 830],

Liability will be none – each one must bear his own loss.

Error in Extremis

Where a navigator, suddenly realizing that a collision is imminent by no fault of his own, in confusion and excitement of the moment, does something which contributes to the collision, or omits to do something by which the collision may be avoided.

Such act or omission is ordinarily considered to be in extremis, and the ordinary rules of strict accountability do NOT apply.

For example (in ordinary sense, instead of vessels kuntahay

cars), a collision between Car A and Car B, and you see the

two of you are about to collide. Instead of stepping on the

break, you stepped on the gas. You collided. So na shock ka,

in confusion and excitement of the moment, your error is

considered an error in extrimis. What will apply there

depends on the facts, but not the rules of collision.

When does the rule of “error in extremis” apply?

A: It must appear that there was an imminent danger and

it is the actual risk of danger and not apprehension

merely that determines the question whether the error is

one in extremis. It must appear that there was an

imminent danger since the error of judgment is

excusable only if it was committed during such peril. It is

the actual risk of danger and not apprehension merely

that determines the question whether the error is one

extremis.

Doctrine of Inscrutable Fault

Means that the court can see that a fault has been committed, but is unable, from the conflict of testimony or otherwise to locate it. Hence, when it is impossible to determine to what direct and specific acts the collision is attributable, it is a case of damage arising for a cause that is inscrutable.

So, when it is impossible to determine to what direct and

specific acts the collision is attributable, it is a case of damage

arising from a cause that is inscrutable. ~ so what rule will

apply? Art. 831, the rule when both vessels are at fault but

you cannot determine who really was at fault.



What kind of AVERAGE is damage caused by a collision due to

a storm or force majeure?

A: The injury shall be considered as a particular

average of the vessel run into [Art. 832] and each

will bear its own loss.

Can a shipowner raise the defense of good father of a family?

Manila Steamship vs Abdulhaman (1956)

FACTS

May 4, 1948 - M/L “Consuelo V” (owned by Lim Hong To) and

M/S “Bowline Knot” (owned by Manila Steamship Co.)

collided, which resulted to the death of 9 passengers

including the 5 children of Insa Abdulhaman, and the lost of

the cargoes including those of Abdulhaman. Now,

Abdulhaman filed an action for damages for the death of his

five children and loss of personal properties on board the M/L

“Consuelo V” as a result of a maritime collision.

The Court held the owners of both vessels solidarily liable to

plaintiff for damages caused to the latter under Article 827 of

the Code of Commerce but exempted defendant Lim Hong To

from liability due to the sinking and total loss of his vessel.

While Manila steamship, owner of the Bowline Knot was

ordered to pay all of plaintiff’s damages.

Petitioner Manila Steamship Co. pleads that it is exempt from

any liability under Article 1903 of the Civil Code because it

had exercised the diligence of a good father of a family in the

selection of its employees, particularly the officer in

command of the M/S Bowline Knot.

ISSUE

Whether or not petitioner Manila Steamship Co. is exempt

from any liability.

RULING

No. Petitioner is not exempted from liabilities. While it is true

that plaintiff’s action against petitioner is based on a tort or

quasi delict, the tort in question is not a civil tort under the

Civil Code but a maritime tort resulting in a collision at sea,

governed by Articles 826-939 of the Code of Commerce.

Under Art. 827 of the Code of Commerce, in case of collision

between two vessels imputable to both of them, each vessel

shall suffer her own damage and both shall be solidarily liable

for the damages occasioned to their cargoes. The shipowner

is directly and primarily responsible in tort resulting in a

collision at sea, and it may not escape liability on the ground

that exercised due diligence in the selection and supervision

of the vessel’s officers and crew.

Further, if the SC will adopt the contention of Manila

steamship, Shipowners would be able to escape liability in

practically every case, considering that the qualifications and

licensing of ship masters and officers are determined by the

State, and that vigilance is practically impossible to exercise

over officers and crew of vessels at sea. To compel the parties

prejudiced to look to the crew for indemnity and redress

would be an illusory remedy for almost always its members

are, from captains down, mere wage earners.

Re: Doctrine of Limited Liability – not applied to this case

because both vessels were found to be at fault.

Remember: The rule on Civil Tort will not apply to Maritime

Tort.

Shipwreck

It is a demolition or shattering of a vessel, caused by her

driving ashore or on rocks and shoals in the mid-seas, or by

the violence of the winds and waves in tempests.

General Rule: If there is a shipwreck, as a general rule,

damage is borne individually by the respective owners.

Exception: You may demand from the captain:

If the wreck or stranding should be caused by the

malice, negligence, or lack of skill of the captain, or

because the vessel put to sea was insufficiently

repaired and equipped, the ship agent or the

shippers may demand indemnity of the captain for

the damages caused to the vessel or to the cargo by

the accident, in accordance with the provisions

contained in Articles 610, 612, 614, and 621. (Art.

841)

Obsolete provisions in the Code of Commerce

Articles 608, 613, 635, 642, 645, 649, 650, 651



Salvage

The service which one person renders to the owner of a ship

or goods, by his own labor, preserving the goods or the ship

which the owner or those entrusted with the care of them

have either abandoned in distress at sea, or are unable to

protect and secure.

Salvage Law (Act No. 2616)

Act 2616, Section 1. When in case of shipwreck, the vessel or

its cargo shall be beyond the control of the crew, or shall

have been abandoned by them, and picked up and conveyed

to a safe place by other persons, the latter shall be entitled to

a reward for the salvage.

Those who, not being included in the above paragraph, assist

in saving a vessel or its cargo from shipwreck, shall be entitled

to a like reward.

Provides for a compulsory reward for those who brave the perils of the sea to save the vessel.

How much are you entitled to?

The owner of the vessel has to give 50% of

the value of the property that was saved.

50% is the maximum. But there are

requisites.

Requisites:

1. There must be a valid object to salvage, not a person.

2. The subject to be salvage must have been exposed to a grave peril.

3. The salvage service must have been

rendered voluntarily, and must not arise from a pre-existing contract or from special contract. So, it must be from a third party.

4. The efforts must be successful.

Difference between Salvage vs. Towage

Salvage is when a vessel by towing is dedicated(?) to

escape present or prospective danger, while towage

is made to take the vessel from one place to

another.

Salvage, the captain and crew are entitled to share

in the reward, while in towage, the captain and crew

are not entitled to share in the towage service

payment.

-END OF MARCH 2 DISCUSSION-



Last meeting, we started already with COGSA. Carriage of Goods by Sea Act is more interesting. Contracts covered are transport of goods by sea to and from the Philippine ports in foreign trade. You have to remember that this only applies to foreign trade and not domestic trade. Foreign trade can be to the Philippines from another country or from the Philippines to another country. The very first question that you should ask whether COGSA applies or Civil Code applies is to take note whether what type of carriage is involved: if foreign trade – COGSA shall apply, if domestic – Civil Code shall apply.

AMERICAN INSURANCE VS COMPANIA MARITIMA (1967)

FACTS Macondray moved to dismiss the amended complaint on the ground that plaintiff’s action had already prescribed under the Carriage of Goods by Sea Act which provides in Sec. 3(6): “In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods shall have been delivered; x xx.” Plaintiff avers that the one year prescriptive period provided for in the Carriage of Goods by Sea Act does not apply in this case, which should be governed by the statute of limitations in the Civil Code. RULING The action is based on the contract of carriage up to the final port of destination, which was Cebu City, for which the corresponding freight had been prepaid. The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the “M/S TOREADOR”. It was part of Macondray’s obligation under the contract of carriage and the fact that the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act.

Ma’am: This case speaks of the applicability of COGSA in case of transshipment. The journey sa goods kay from Ney York to Manila then Cebu. Transhipment is the transfer of good from one ship to another. Naay is aka vessel from Manila to Cebu – something happened to the vessel. What law will govern regarding the filing of claim against the carrier? Under COGSA, when you file a claim against Common Carrier – you only have a prescriptive period of 1 year. Under, Civil

Code – you either have 6 or 10 years. So what would govern? COGSA or Civil Code? So you take a look at the type of contract involved. Does it involve a foreign trade? The contention was ‘no’ because the damage happened between the travel from Manila to Cebu. So you take a look at the argument of the transshipment. The SC said, the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act. The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the “M/S TOREADOR”. So the contract of carriage here was from NY-Cebu and was an undivided contract which the corresponding freight has already been paid. This is one type of Bill of Lading(BOL) issued as through BOL. What do you mean by this? Only one carrier issues a BOL which is recognized by the succeeding carrier. Hence, it was not removed from the operation of COGSA. Now, what is the effect of the COGSA on our Maritime Laws on our Code of Commerce? A: It shall not:

1. repeal any existing provision of the Code of Commerce which is now in force, or

2. limit its application So in other words, we apply the Code of Commerce and the COGSA, that is why in some of the cases we discussed that the Code of Commerce applies despite the fact that the COGSA could be applied, so obviously the COGSA is “lower” than the code of commerce. We learned last week that in case of damage of goods, you have to file a notice of claim against the carrier – when? When the damage is apparent – immediately, if not apparent – within 24 hours and the filing of claim under Code of Commerce is immediately or 24 hours. If COGSA – this is under 3.6. What is the procedure undertaken by shipper or consignee in case of Loss or Damage of the cargo? You have to file a notice of loss or damage. The general nature of such loss or damage must be in writing. What about Code of Commerce? Pwede ba oral? Yes. Does it have to be in writing? Hindi. But in COGSA it is explicit that the notice of Loss or Damage must be in writing and this must



be given to the carrier or representative at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. So, it’s still the same, if loss is apparent, you report it immediately otherwise 3 days with notice of loss. Now what is the prescriptive period? Under the Code, it depends on whether there is a written contract – 6 or 10 years. Under COGSA - In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. In COGSA what is important here is the filing of claim and when did it commenced -3.6 and 3.6.4. What is the effect of failure of giving notice within the period prescribed? Remember, under the Code of Commerce, if you failed to file a notice of claim within 24 hours, can you still file a case in the court? Remember that under the code of commerce the filing of the notice of claim is a condition precedent. If you did not file a notice within 24 hours/immediately – you are barred from filing a case in court against the common carrier. So we are talking about 2 different things : (1) you file first your claim against the carrier and then you go to court. (2) In COGSA there is also such thing as filing of notice of loss with the carrier and the filing of case in the court against the carrier. The filing of notice again under COGSA is either immediately or within 3 days from delivery. The filing of the case again is within 1 year from the date of deliver or date when the goods should have been delivered.

Unlike Code of Commerce, if wala ka naka-file sa notice of loss within the prescribed period, you can still file a case against the carrier – ok lang basta it is within the 1 year period. Compared to the Code of Commerce, kung wala jud ka naka-file ug notice within 24 hours, you cannot file a case anymore in the court. Now what if the notice was filed and no claim in court was filed within 1 year? What is the effect? Action already prescribed. The SC says that this shall not affect/prejudice the right of the shipper to bring the suit within the period. The most important things to remember about is that you have to file a claim within 1 year period. If wala ka naghimo ug claim within 1 year, the effect will be the carrier and ship agent will be dischargerd from the liability from such loss/damage. Take note about the distinction between provisions of Code and COGSA. (i.e. period to file, effect of failure to file, prescription blah2x) One is a condition precedent, the other is not. It is very important.

CHUA KUY vs EVERRETT STEAMSHIP (1953) FACTS The S/S H.H. Raymond arrived at the port of Manila on February 21,1947, discharged the cargo covered by the above bill of lading and delivered it to the custody of the Manila Terminal Company. On February 26, 1947, the Manila Terminal Company delivered the cargo to Mun Sheng Trading, through the Serrano Transportation, a local broker, under a receipt of the following tenor: “Received from the Serrano Transportation the following merchandise in good order and condition.” When the contends of the cases were unpacked, the plaintiff discovered that the cargo delivered to him consisted of 500 cases of 48 babies of evaporated milk, and not 96 babies as ordered by him. The plaintiff immediately gave notice to the defendant of the shortage in the cargo delivered, and later on filed with the latter a formal claim for said loss which amounted to P3,911.06. Certain negotiations for the amicable settlement of the matter having failed, this action was instituted on May 7, 1948. ISSUES (1) Whether the Carriage of Goods by Sea Act is applicable to this particular case, as claimed by respondent, or the same should be governed by the Code of Commerce or other laws, as claimed by petitioner;



(2) Whether the action of petitioner has already prescribed; RULING 1. What Law Governs Shipments from United States to

Philippines . — Contracts for the carriage of goods by sea, after July 4, 1946, from the United States to Philippine ports is governed, not by the Code of Commerce, but by the Carriage of Goods by Sea Act enacted by the United States Congress on April 16, 1936 (Commonwealth Act No. 65, section 1).

2. Prescriptive Period is One Year from Delivery of the

Cargo. — Where action is brought for recovery of alleged shortage of cargo from the United States to the City of Manila, andthe suit was filed more than one year from receipt of the cargo and from the discovery of the shortage, the action has prescribed. Under section 3, subsection 6, of the Carriage of Goods by Sea Act, suit can only be brought against the carrier within one year after delivery of the cargo.

The prescriptive period embodied in the Code of Civil Procedure (Act No. 190) is not applicable for the simple reason that this is a general law which only applies to cases not covered by any special act. The transaction under consideration is covered by the Carriage of Goods by Sea Act and since this is a special act, its provisions must of necessity limit or restrict a law of general application. 3. When Prescriptive Period is not Interrupted by

Arbitration. — A mere proposal for arbitration or the fact that negotiations have been made for the adjustment of the contraversy between the local importer and the carrier does not suspend the running of the period of prescription, unless there is an express agreement to the contrary.

In this case the cargo was received – Feb.26, 1947. The case against the carrier was filed May 7, 1948 – so it was already beyond the prescriptive period. Case has already prescribed.

What will prevail with respect to prescriptive period – will it be prescriptive period under Civil Code or COGSA?

MARITIME AGENCIES & SERVICES, INC. vs CA (1990)

FACTS Maritime Agencies & Services, Inc. was appointed as the charterer's agent and Macondray Company, Inc. as the owner's agent.

The vessel arrived in Manila on October 3, 1979, and unloaded part of the consignee's goods, then proceeded to Cebu on October 19, 1979, to discharge the rest of the cargo. On October 31, 1979, the consignee filed a formal claim against Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C & F value of the 1,383 shortlanded bags. 5 On January 12, 1980, the consignee filed another formal claim, this time against Viva Customs Brokerage, for the amount of P36,030.23, representing the value of 574 bags of net unrecovered spillage. These claims having been rejected, the consignee then went to Union, which on demand paid the total indemnity of P113,123.86 pursuant to the insurance contract. As subrogee of the consignee, Union then filed on September 19, 1980, a complaint for reimbursement of this amount, with legal interest and attorney's fees, against Hongkong Island Company, Ltd., Maritime Agencies & Services, Inc. and/or Viva Customs Brokerage. On April 20, 1981, the complaint was amended to drop Viva and implead Macondray Company, Inc. as a new defendant. ISSUE WON the action has prescribed RULING The one-year period in the cases at bar should commence on October 20, 1979 when the last item was delivered to the consignee. Union’s complaint was filed against Hongkong on September 19, 1980, but tardily against Macondray on April 20, 1981. The consequence is that the action is considered prescribed as far as Macondray is concerned but not against its principal, which is what matters anyway.

Commentary : So in maritime agencies, the new civil code did not intend to repeal the period of prescription under COGSA. You have learned hat between a general and special law, what will govern? Special law. COGSA is a special law which applies to foreign trade. When it comes to prescriptive period, the special law – COGSA will prevail over provisions of Civil Code.

We are settled that COGSA shall apply – 1 year prescriptive period. You have to take note when was the delivery of the of the goods or if the goods were not delivered, then when was it supposed to be delivered? The last item was delivered Oct. 20, 1979. 1st case was filed on September 19, 1980. May dinagdag siyang defendant. Diba when you file an amendment on pleading, you implead additional defendant. Jurisdiction will only be acquired upon the filing of the



amended complaint. So if you file the original on Sept 1980, nagamendka the following year – it will not retroact. The filing in April 1981 will not retroact to the earlier Sept pleading. When the first case was filed for example shipowner as defendant – so shipowner and ship agent – different but both can be sued in different action. Say for example you filed against the shipowner on Sept 1980 – so pasok sa 1 year. Pero yung ship agent inimplead mo on April 1981 na and the last item delivered was Oct 1980 pa – so lampas nasa 1 year period. SC said with respect to the Shipowner – action did not prescribe but with respect to the shipagent, it is already beyond the prescriptive period, hence action has already been barred or prescribed.

So take note of the distinctions and when do you reckon the prescriptive period.

What is now the effect of extrajudicial demand made to the carrier? Diba we learned in our Civ Pro kung ano ang effect ng Extra Judicial Demand. Will it stop the running of the prescriptive period? Have you studied that?

DOLE PHILIPPINES, INC vs MARITIME COMPANY OF THE PHILIPPINES (1987)

FACTS The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee, Dole Philippines. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant, Maritime Company on May 4, 1972. On June 11, 1973 the plaintiff filed a complaint in the CFI Manila embodying 3 causes of action involving 3 separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation. On December 11, 1974, Judge Serafin Cuevas issued an Order dismissing the first two causes of action. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. Because of the dismissal of the complaint with respect to the third cause of action, DOLE instituted this present complaint on January 6, 1975. Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act. The Trial Court granted the motion,

scheduling the preliminary hearing on April 27, 1977. The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription. The Trial Court, after due consideration, resolved the matter in favor of Maritime and dismissed the complaint. ISSUE Whether or not Article 1155 of the Civil Code applies in lieu of the COGSA. RULING No. Article 1155 of the Civil Code provides that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor Section 3, paragraph 6 of the COGSA provides that: “The carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.” 1. Dole argues that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter and there being a patent deficiency with respect to the tolling of the prescriptive period provided for in the Carriage of Goods by Sea Act, prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling. Since Dole's claim for loss or damage was filed on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, Inc. 2. Dole argues that it was error for the court not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss on August 22, 1952.



Court noticed that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 — which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) We hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. Under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted and began to run anew from May 4, 1972, affording Dole another period of one year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed.

So as explained, an extra judicial demand shall not toll the running of the prescriptive period. ONLY the filing of the case in court will interrupt the running of the prescriptive period. So what are the instances where one year prescriptive period in COGSA shall not be interrupted? We said Extra Judicial demand will not toll the period. So what will interrupt?

STEVENS vs NORDDEUSCHER (1962)

FACTS On July 8, 1960, defendant moved to dismiss the complaint upon the ground that plaintiff's causes of action had prescribed, it having been filed on June 24, 1960, or more than a year from May 21, 1959, when plaintiff was notified of the delivery of the case containing the thermometers in question. This motion having been granted and the complaint dismissed, plaintiff interposed this appeal, maintaining that the period of one (1) year prescribed in Commonwealth Act

No. 65, in relation to Carriage of Goods by Sea Act — within which the liability of carriers, based upon a contract of carriage goods by sea, may be enforced by suit — was suspended by the commencement of the first action in the municipal court, on April 27, 1960; that the running of said period was resumed or continued on June 13, 1960, when said action was dismissed; and that, excluding said period from April 27, 1960 to June 13, 1960, or forty-seven (47) days, less than one (1) year has elapsed from May 21, 1959 to June 24, 1960, when this case was filed in the court of first instance. In support of this pretense, plaintiff invokes Article 1155 of the Civil Code of the Philipines, reading: The prescription of actions is interrupted when they filed before the court, when there is a written extrajudicial command by the creditors, and when there is any written acknowledged judgment of the debt by the debtor. ISSUE WON the action has prescribed RULING No. Upon mature deliberation, we are of the opinion, and so hold, that the order appealed from should be reversed, not only because of the operation of said Article 1155 of our Civil Code, but, also, in view of the provisions section 49 of Act No. 190, pursuant to which: If, in an action commenced, in due time, a judgment for the plaintiff be reversed, or if the plaintiff fail otherwise than upon the merits, and the time limited for the commencement of such action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and the cause of action survive, his representatives may commence a new action within one year after such date, and this provision shall apply to any claim asserted in any pleading by a defendant. The action commenced by the plaintiff in the Municipal Court of Manila, on April 27, 1960, was dismissed June 13, 1960, or over twenty (20) days after the expiration of the period of one (1) year, beginning from May 21, 1959, within which plaintiff's action could be brought pursuant to Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act. Under said section of Act No. 190, the period within which plaintiff could initiate the present case was renewed, therefore, for another year, beginning from June 14, 1960 (TolentinoVitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 986). The case at bar was commenced on June 24, 1960, or within the period last mentioned.



Commentaries: Ma’am: Why did it dismiss the case? Student: Lack of jurisdiction ma’am. Ma’am: hindi ba because the party is not the real party in interest? (Blank stares and air, sorry, no commentaries on the case) Okay, one instance in which the 1 year prescriptive period under COGSA will be interrupted is in case the action has been filed in the court. BUT, if you were able to file a case in court, there is a qualification there. The filing of the case must be against the real party in interest. If you file it against the wrong party-defendant, it will not toll the running of the prescriptive period.

AETNA INSURANCE vs BARBER STEAMSHIP (1975)

FACTS Aetna Insurance Company, as insurer, filed a complaint against Barber Steamship Lines, Inc., Luzon Stevedoring Corporation and Luzon Brokerage Corporation. It sought to recover the sum of P12,100.06 as the amount of the damages which were caused to a cargo of truck parts shipped on the SS Turandot . The insurer paid the damages to Manila Trading & Supply Company, the consignee. Barber Steamship Lines, Inc. alleged that it was a foreign corporation not licensed to do business in the Philippines, that it was not engaged in business here, that it had no Philippine agent and that it did notown nor operate the SS Turandot. Aetna filed a manifestation stating that the name of defendant Barber Steamship Lines, Inc. wasincorrect and that the correct name was Barber Line Far East Service. Barber Line Far East Service moved for the dismissal of the amended complaint on the grounds 1. that it is not a juridical person and, hence, it could not be

sued; 2. that the court had no jurisdiction over its person; 3. that it was not the real party in interest and 4. that the action had prescribed according to the bill of

lading and the Carriage of Goods by Sea Act. " The case was dismissed as to Barber Line Far East Service based on the prescription period. ISSUE Whether the action of Aetna Insurance Company against Barber Line Far East Service, as ventilated in its amended complaint, which was filed on April 7, 1965, had prescribed.

RULING Yes. The trial court correctly held that the one-year statutory and contractual prescriptive period had already expired .The one year period commenced on February 25, 1964 when the damaged cargo was delivered to the consignee. Aetna invokes: the rule that where the original complaint states a cause of action but does it imperfectly, and afterwards an amended complaint is filed, correcting the defect, the plea of prescription will relate to the time of the filing of the original complaint.- Untenable. The filing of the original complaint interrupted the prescriptive period as to Barber Steamship Lines, Inc. but not as to Barber Line Far East Service, an entity supposedly distinct from the former. That ruling would apply to defendants Luzon Stevedoring Corporation and Luzon Brokerage Corporation. But it would not apply to Barber Line Far East Service which was impleaded for the first time in theamended complaint.

Feb. 25, 1964 – delivery of cargo. 1st complaint was made within 1 year period but it was against an entity not who is not a real party in interest. Now will the filing against the wrong defendant toll the running of the period because the amended complaint was already beyond the prescriptive period? When it filed the case against the wrong defendant the 1 year period continued to run. So when it caused the amendment of the complaint beyond the 1 year period – so it totally, just categorically barred the action of the carrier for having the amendment beyond the 1 year period. So the case must be against the real party in interest. If you file a case against a wrong defendant, it will not interrupt the running of the period. From what part should the 1 year period be counted? Under COGSA – it depends, if the delivery was made, from date of delivery. And this delivery includes the kind of delivery that was paid to an arrastre operator. What if no delivery? Then from the date when it should have been delivered.



INSURANCE vs PHILIPPINE PORTS (1965) FACTS Consignee sued arrastre operator for failure to deliver goods from abroad which the latter received from the carrier for delivery to the consignee. The action was brought within 4 years but after the lapse of 1 year. The case was dismissed on the ground of prescription. ISSUE Has the action prescribed? RULING No. The one year period will only apply to foreign trade of foreign trade of goods by sea. The arrastre operator is no longer within the purview of a foreign transport of goods by sea. The prescriptive period in this case is 4 years because there is no written contract.

ANG vs AMERICAN STEAMSHIP (1967) FACTS The shipper agreed to sell to consignee steel sheets. Consignee was supposed to pay to the shipper a bank draft upon arrival of the goods at the port. If the shipper received the bank draft, then the bill of lading would be delivered to the carrier, and the latter has to issue a permit to deliver to be presented to the customs warehouse. But the consignee did not issue the bank draft. So the shipper decided to change the consignee to Ang. But the consignee obtained a bank guarantee in favor of the carrier. The latter in turn issued a permit to deliver to the consignee and therefore the consignee was able to retrieve the goods. So when Ang got there, the goods were no longer there. Ang filed a complaint against the carrier for wrongful delivery. The carrier filed a motion to dismiss on the ground of prescription because more than 1 year has lapsed since the goods were delivered to the consignee ISSUE Has the action prescribed? RULING NO, delivery should be made to the correct consignee. Where the imported goods are delivered to a wrong person, the 1 year limitation under COGSA which refers to loss or

damage does NOT apply. The applicable rule on prescription is found in the Civil Code.

The COGSA will not apply in case of misdelivery. Then what will apply is the prescriptive period under the civil code. What do you mean by “loss”?

MITSUI vs CA (1998) FACTS The carrier undertook to deliver goods loaded by the shipper to France. The goods were bathing suits, etc. The commitment of the carrier was to deliver the goods within 28 days from loading. However, the latter failed to ship the goods within the stipulated date. So the consignee in France paid half of the value of the goods on the ground that they arrived off season. The remaining half of the value of the goods were charged by the shipper to the carrier. The carrier denied liability which prompted the shipper to file a case against the former. The carrier filed a motion to dismiss alleging that the claim against it has prescribed under the COGSA. ISSUE Has the action prescribed? RULING No, even if the case was filed more than one year after delivery. The loss was not a physical loss, but loss of income. Loss of income is not the loss contemplated under COGSA. The goods here were not deteriorated or damaged, either. “Loss” refers to the deterioration or disappearance of goods. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, “loss” contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. Conformably with this concept of what constitutes “loss” or “damage,” this Court held in another case that the deterioration of goods due to delay in their transportation constitutes “loss” or “damage” within the meaning of §3(6), so that as suit was not brought within one year the action



was barred. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier’s breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. So apply Civil Code provision on prescription which is 10 years.

For COGSA to apply, LOSS means practically the meaning of the word loss – physical loss – when the same had gone perished, gone out of commerce or disappeared in such a way that there existence is unkown or that they cannot be recovered. Is the loss of income – the loss contemplated under COGSA? NO, because here, the goods were not deteriorated or damaged. Loss must refer to deterioration or disappearance of goods. In the case at bar, naa xay loss of income because apparently nadelay ang products so dili na xa on season. Then nagfile ng case then the contention of the carrier was that it was filed out of time, beyond 1 year. So, applicable ba ang COGSA or ang Civil Code? So check first, what is the ground for filing a claim against the carrier. LOSS. Is it physical loss or loss of income? Loss of income is not the loss contemplated under the law so COGSA will not apply. So the applicable prescriptive period is 10 years and the case was filed within the 10-year period. What is the effect of the prescriptive period under the COGSA on the liability of the insurer? Will the filing of the case against the insurer also has a prescriptive period? Do you also have to file a case against the insurer within the 1 year period such that if you will not file a case against the insurer, you are already barred from claiming under the insurance contract?

MAYER STEEL vs CA (1997) FACTS Hong Kong Government Supplies Department contracted Mayer Steel Pipe Corporation to manufacture and supply various steel pipes and fittings. Prior to the shipping, Mayer insured these pipes and fittings against all risks with South

Sea Surety and Insurance Co., Inc. and Charter Insurance Corp., with Industrial Inspection Inc. appointed as third-party inspector. After examining the pipes and fittings, Industrial Inspection certified that they are in good order condition. However, when the goods reached Hong Kong, it was discovered that a substantial portion thereof was damaged. The trial court found in favor of the insured. However, when the case was elevated to the CA, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the action was barred under Sec. 3(6) of the Carriage of Goods by Sea Act (COGSA) since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel. ISSUE Has the action prescribed? RULING No. Sec. 3(6) of the COGSA states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the contract of insurance. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An “all risks” insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when private respondents issued the “all risks” policies to Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

Kaya maraming insurance2x sa carrier kasi mas mabilis kumolekta sa insurance kesa sa carrier. The first one sued is really the insurer. Then the latter will later on sue the carrier. In this case, COGSA 1-year prescriptive period is not applicable such that if you did not file a claim within a 1 yr period against the insurer, the claim is not extinguished. The rule on extinguishment of liability is only applicable in cases filed against the carrier and not the insurer.



FILIPINO MERCHANTS vs CA (1989) FACTS

Choa Tiek Seng, consignee of the shipment of fishmeal

loaded, insured in "all risks policy" 600 metric tons of

fishmeal in new gunny bags of 90 kilos each from Bangkok,

Thailand to Manila against all risks under warehouse to

warehouse terms but only 59.940 metric tons was imported

When it was unloaded unto the arrastre contractor E. Razon, Inc. and Filipino Merchants's surveyor ascertained and certified that in such discharge 105 bags were in bad order condition which was reflected in the survey report of Bad Order cargoes. Before delivery to Choa, E. Razon's Bad Order Certificate showed that a total of 227 bags in bad order condition. Choa brought an action against Filipino Merchants Insurance Co. who brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc. alleging that it is the carrier who must be held liable. However, the carrier contended that Filipino Merchants is already barred from filing such claim on the ground that under the COGSA, the suit against the carrier must be filed within one year after the delivery of the goods. ISSUE WON the action instituted by the insurer has prescribed? RULING Yes. COGSA does not only apply to the claims filed by the shipper/consignee but also to those filed by the insurer. Filipino Merchants filed the case beyond the 1 year period.

If you are filing a suit against the insurer, 1 year period under COGSA will not apply. But if you are filing the suit against the carrier, regardless of who is the plaintiff (shipper, consignee, insurer), the 1 year prescriptive period under COGSA will apply. Sec. 4.5 of COGSA -- note that under the COGSA, there is no need to provide for a stipulation limiting liability.

Section 4 (5). Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in

other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. Neither the carrier nor the ship shall be responsible in any event for loss, damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.

Previously, in your first exam coverage, when it comes to stipulations limiting the liability of the carrier, the stipulations will apply if you did not declare the actual value or did not declare a higher freight. If walang stipulations about liability or the stipulations are void, apply suppletorily the provisions under the COGSA as follows: 1. The liability is limited to US$500 per package unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. 2. The carrier and shipper may agree for another maximum amount but not be less than US$500 per package. In no event shall the carrier be liable for more than the amount of damage actually sustained. 3. The carrier or the ship shall not be responsible in any event for loss, damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.

EASTERN SHIPPING vs IAC (1987) FACTS

A vessel operated by petitioner Eastern Shipping Lines, Inc.,

loaded at Kobe, Japan for transportation to Manila, 5000

pieces of calorized lance pipes in 28 packages consigned to

Philippine Blooming Mills Co., Inc., and 7 cases of spare parts

consigned to Central Textile Mills, Inc.; both sets of goods

were insured with Development Insurance and Surety Corp.



The vessel caught fire and sank, resulting in the total loss of ship and cargo. ISSUE What is the extent of the carrier’s liability? RULING

Note: fire – not considered a natural disaster or calamity

within the contemplation of Art. 1734 for it arises almost

invariably from some act of man or by human means; it does

not fall within the category of an act of God unless caused by

lightning or by other natural disaster or calamity having failed

to discharge the burden of proving that it had exercised the

extraordinary diligence required by law, Eastern Shipping

Lines cannot escape liability for the loss of the cargo.

As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods by Sea Act which provides: “Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from x x x (b) Fire, unless caused by the actual fault or privity of the carrier.” There was actual fault of the carrier shown by lack of diligence in that when the smoke was noticed, the fire was already big; that the fire must have started 24 hours before the same was noticed; and that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. There’s no stipulation in the Bills of Lading limiting the carrier’s liability for the loss or destruction of the goods; no declaration of a higher value of the goods. Hence, Eastern Shipping Lines’ liability should not exceed US$500 per package (as provided in 4(5) of the COGSA), or its peso equivalent, at the time of payment of the value of the goods lost, but in no case more than the amount of damage actually sustained.

Though the provisions of COGSA are not provided for in the Bill of Lading, SC said that such provisions of COGSA regarding the carrier’s limited liability are as much a part of the bill of lading as though placed in it by agreement of the parties.

BELGIAN vs FIRST INSURANCE (2002) FACTS

CMC Trading A.G. shipped on board the M/V Anangel Sky at

Hamburg, Germany 242 coils of various Prime Cold Rolled

Steel sheets for transportation to Manila consigned to the

Philippine Steel Trading Corporation.

On July 28, 1990, M/V Anangel Sky arrived at the port of

Manila and, within the subsequent days, discharged the

subject cargo. Four (4) coils were found to be in bad order.

Finding the four (4) coils in their damaged state to be unfit for

the intended purpose, the consignee Philippine Steel Trading

Corporation declared the same as total loss.

Philippine First Insurance paid the claim of Philippine Steel

and was thus subrogated. Philippine First then instituted a

complaint for recovery of the amount paid to the consignee

as insured.

Belgian claims that the damage and/or loss was due to pre-

shipment damage, to the inherent nature, vice or defect of

the goods, or to perils, danger and accidents of the sea, or to

insufficiency of packing thereof, or to the act or omission of

the shipper of the goods or their representatives. Belgian

further argued that their liability, if there be any, should not

exceed the limitations of liability provided for in the bill of

lading and other pertinent laws. Finally, Belgian averred that,

in any event, they exercised due diligence and foresight

required by law to prevent any damage/loss to said shipment.

The RTC dismissed the complaint. The CA reversed and ruled

that Belgian were liable for the loss or the damage of the

goods shipped, because they had failed to overcome the

presumption of negligence imposed on common carriers. As

to the extent of Belgian’s liability, the CA held that the

package limitation under COGSA was not applicable, because

the words "L/C No. 90/02447" indicated that a higher

valuation of the cargo had been declared by the shipper.

ISSUE Whether the package limitation of liability under COGSA is applicable. (Belgian contends that assuming that they are liable their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5) of COGSA) RULING

Yes. In this case, there was no stipulation in the Bill of Lading

limiting the carrier's liability. Neither did the shipper declare a

higher valuation of the goods to be shipped. This fact



notwithstanding, the insertion of the words "L/C No.

90/02447 cannot be the basis for Belgian’s liability.

First, a notation in the Bill of Lading which indicated the

amount of the Letter of Credit obtained by the shipper for the

importation of steel sheets did not effect a declaration of the

value of the goods as required by the bill. That notation was

made only for the convenience of the shipper and the bank

processing the Letter of Credit.

Second, a bill of lading is separate from the Other Letter of

Credit arrangements. Thus, Belgian’s liability should be

computed based on US$500 per package and not on the per

metric ton price declared in the Letter of Credit.

Additional cases cited by Maam Resci:

PCIC vs NEPTUNE (2008) Shipper claimed for the whole amount of the cargo. Carrier invoked exemption from liability because the loss was due to fortuitous even, and that if there’s any liability on the part of the carrier, it should not be liable for the whole amount of the cargo but only limited to the US$500 per package. SC said that said COGSA provisions will apply. The rights and obligations of respondent common carrier, Neptune are thus governed by the provisions of the Civil Code, and the COGSA, which is a special law, applies suppletorily.

UNSWORTH TRANSPORT vs CA (2010) Is a freight forwarder a common carrier? Normally NO. Check the circumstances of the case. If it assumes the responsibility of a common carrier, it will be held liable. A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself. The freight forwarder in this case alleged that if in any case it is liable, it will only be limited to the US$500 per package as

provided under COGSA. SC said that such limitation of liability also applies in this case.

What is an arrastre? Arrastre - Arrastre is the verb, it is the unloading and loading of goods from a vessel. In Mercantile Law, the term “arrastre” has a technical meaning, it applies only to overseas trade of goods. The biggest arrastre company in the Philippines is Enrique Razon. The consignee cannot unload the cargo by itself. It is the arrastre who will pass on the cargo to the customs warehouse. The parties to an arrastre contract are the Republic of the Philippines, and the party awarded with the arrastre service. This is done by bidding. The arrastre operator does not deal with the shipper or the consignees, not even the carriers. It is the government which is the contracting party. Therefore, this is not a contract of carriage with shippers and consignees. The arrastre operator is technically not a common carrier. It does not offer its services to the public, the Government is its only client. But it is required to observe the same due diligence. When you enter into these maritime shipping contracts – bananas, and all these items, you enter with the: F.0.B. (Freight on Board) / FAS – it presumes that the seller will comply with his obligation to deliver the cargoes to the vessel. Once the cargo is delivered to the vessel, the custody is transferred to the carrier. It is the buyer who will pay the freightage. So if the loss incurred while the cargo is in the custody of the carrier under this shipping agreement, the carrier is considered as the agent of the buyer, such that in case of loss, damage, deterioration, the shipper is no longer liable. C.I.F. (Cost, Packaging, Insurance) – the shipper shall shoulder the costs of crating, packaging, insurance , and freightage. The seller will shoulder the cost of the packaging. The carrier is deemed the agent of the seller. During the entire trip, ownership is retained by the seller and passes only to the buyer upon reaching the place of destination. So, res perit domino. If there something happens to the cargo before the carrier reaches its destination, the seller assumes liability. In case of loss, carrier is liable as the agent of the seller.

-END OF MARCH 9 DISCUSSION-

Transportation Laws (Maritime Commerce)

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