CHAPTER 10- CHARTER PARTIES

CASE FACTS ISSUE/S RULING

LITONJUA SHIPPING COMPANY INC., petitioner Petitioner is the duly appointed local crewing Whether or not Litonjua may YES
vs. managing office of the Fairwind Shipping be held liable to the private
NATIONAL SEAMEN BOARD and GREGORIO P. Corporation. respondent on the contract of The first basis is the charter party which existed between Mullion, the
CANDONGO respondents On September 11, 1976 M/V Dufton Bay an ocean- employment? shipowner, and Fairwind, the charterer.
going vessel of foreign registry owned by the R.D.
Mullion ship broking agency under charter by It is well settled that in a demise or bare boat charter, the charterer is
Fairwind, while in the port of Cebu contracted the treated as owner pro hac vice of the vessel, the charterer assuming in large
services (among others) of Gregorio Candongo as measure the customary rights and liabilities of the shipowner in relation to
Third Engineer for 12 months with a monthly wage of third persons who have dealt with him or with the vessel. In such case, the
US$500.00. The agreement was executed before the Master of the vessel is the agent of the charterer and not of the shipowner.
Cebu Area Manning Unit of the NSB, after which The charterer or owner pro hac vice, and not the general owner of the
respondent boarded the vessel. vessel, is held liable for the expenses of the voyage including the wages of
the seamen.
On December 28, 1976 before the expiration of
contract, respondent was required to disembark at Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to
Port Kilang, Malaysia. Describe in his seaman’s show that it was not such, we believe and so hold that petitioner Litonjua, as
handbook is the reason “by owner’s arrange.” Philippine agent of the charterer, may be held liable on the contract of
employment between the ship captain and the private respondent.
Condongo filed a complaint against Mullion (Shipping
company) for violation of contract and against There is a second and ethically more compelling basis for holding petitioner
Litonjua as agent of shipowner. Litonjua liable on the contract of employment of private respondent. The
charterer of the vessel, Fairwind, clearly benefitted from the employment of
On February 1977, NSB rendered a judgment by private respondent as Third Engineer of the Dufton Bay, along with the ten
default for failure of petitioners to appear during the (10) other Filipino crewmembers recruited by Captain Ho in Cebu at the
initial hearing, rendering the same to pay Candongo same occasion.
because there was no sufficient or valid cause for the
respondents to terminate the service of the If private respondent had not agreed to serve as such Third Engineer, the
complainant. ship would not have been able to proceed with its voyage. The equitable
consequence of this benefit to the charterer is, moreover, reinforced by
Litonjua’s defense: convergence of other circumstances of which the Court must take account.
Contends that the shipowner, nor the charterer, was There is the circumstance that only the charterer, through the petitioner,
the employer of private respondent; and that liability was present in the Philippines.
for damages cannot be imposed upon petitioner
which was a mere agent of the charterer. Secondly, the scope of authority or the responsibility of petitioner Litonjua
was not clearly delimited. Petitioner as noted, took the position that its
commission was limited to taking care of vessels owned by Fairwind. But
the documentary authorization read into the record of this case does not
make that clear at all. The words "our ships" may well be read to
refer both to vessels registered in the name of Fairwind and vessels owned
by others but chartered by Fairwind. Indeed the commercial, operating
requirements of a vessel for crew members and for supplies and provisions
have no relationship to the technical characterization of the vessel as owned
by or as merely chartered by Fairwind

The statement of account which the Dufton Bay'sMaster had signed and
which pertained to the salary of private respondent had referred to a
Philippine agency which would take care of disbursing or paying such
account. 'there is no question that Philippine agency was the Philippine
agent of the charterer Fairwind. Moreover, there is also no question that
petitioner Litonjua did assist the Master of the vessel in locating and
 recruiting private respondent as Third Engineer of the vessel as well as ten
(10) other Filipino seamen as crew members. In so doing, petitioner
Litonjua certainly in effect represented that it was taking care of the
crewing and other requirements of a vessel chartered by its principal,
Fairwind.15

Last, but certainly not least, there is the circumstance that extreme hardship
would result for the private respondent if petitioner Litonjua, as Philippine
agent of the charterer, is not held liable to private respondent upon the
contract of employment. Clearly, the private respondent, and the other
Filipino crew members of the vessel, would be defenseless against a breach
of their respective contracts

While wages of crew members constitute a maritime lien upon the vessel,
private respondent is in no position to enforce that lien. If only because the
vessel, being one of foreign registry and not ordinarily doing business in the
Philippines or making regular calls on Philippine ports cannot be effectively
held to answer for such claims in a Philippine forum.

Upon the other hand, it seems quite clear that petitioner Litonjua, should it
be held liable to private respondent for the latter's claims, would be better
placed to secure reimbursement from its principal Fairwind. In turn,
Fairwind would be in an indefinitely better position (than private
respondent) to seek and obtain recourse from Mullion, the foreign
shipowner, should Fairwind feel entitled to reimbursement of the amounts
paid to private respondent through petitioner Litonjua

PLANTERS PRODUCTS, INC., petitioner, Planters Products, Inc. (PPI), purchased from whether a common carrier It is not disputed that respondent carrier, in the ordinary course of business,
vs. Mitsubishi International Corporation (MITSUBISHI) becomes a private carrier by operates as a common carrier, transporting goods indiscriminately for all
COURT OF APPEALS, SORIAMONT STEAMSHIP of New York, U.S.A., 9,329.7069 metric tons (M/T) of reason of a charter-party; in persons. When petitioner chartered the vessel M/V "Sun Plum", the ship
AGENCIES AND KYOSEI KISEN KABUSHIKI Urea 46% fertilizer which the latter shipped in bulk the negative, whether the captain, its officers and compliment were under the employ of the
KAISHA, respondents. on 16 June 1974 aboard the cargo vessel M/V "Sun shipowner in the instant case shipowner and therefore continued to be under its direct supervision and
Plum" owned by private respondent Kyosei Kisen was able to prove that he had control. Hardly then can we charge the charterer, a stranger to the crew and
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., exercised that degree of to the ship, with the duty of caring for his cargo when the charterer did not
to Poro Point, San Fernando, La Union, Philippines, as diligence required of him under have any control of the means in doing so. This is evident in the present case
evidenced by Bill of Lading No. KP-1 signed by the the law. considering that the steering of the ship, the manning of the decks, the
master of the vessel and issued on the date of determination of the course of the voyage and other technical incidents of
departure. maritime navigation were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. 27
On 17 May 1974, or prior to its voyage, a time
charter-party on the vessel M/V "Sun Plum" pursuant It is therefore imperative that a public carrier shall remain as such,
to the Uniform General Charter2 was entered into notwithstanding the charter of the whole or portion of a vessel by one or
between Mitsubishi as shipper/charterer and KKKK more persons, provided the charter is limited to the ship only, as in the case
as shipowner, in Tokyo, Japan.3 of a time-charter or voyage-charter. It is only when the charter includes
both the vessel and its crew, as in a bareboat or demise that a common
Before loading the fertilizer aboard the vessel, four carrier becomes private, at least insofar as the particular voyage covering
(4) of her holds4 were all presumably inspected by the charter-party is concerned. Indubitably, a shipowner in a time or voyage
the charterer's representative and found fit to take a charter retains possession and control of the ship, although her holds may,
load of urea in bulk for the moment, be the property of the charterer. 28

In an action for recovery of damages against a common carrier on the goods

After the Urea fertilizer was loaded in bulk by shipped, the shipper or consignee should first prove the fact of shipment
stevedores hired by and under the supervision of the and its consequent loss or damage while the same was in the possession,
shipper, the steel hatches were closed with heavy actual or constructive, of the carrier. Thereafter, the burden of proof shifts
iron lids, covered with three (3) layers of tarpaulin, to respondent to prove that he has exercised extraordinary diligence
then tied with steel bonds. The hatches remained required by law or that the loss, damage or deterioration of the cargo was
closed and tightly sealed throughout the entire due to fortuitous event, or some other circumstances inconsistent with its
voyage.5 liability. 31

Upon arrival of the vessel at her port of call on 3 July To our mind, respondent carrier has sufficiently overcome, by clear and
1974, the steel pontoon hatches were opened with convincing proof, the prima faciepresumption of negligence.
the use of the vessel's boom. Petitioner unloaded the
cargo from the holds into its steelbodied dump trucks
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition
which were parked alongside the berth, using metal
taken on 19 April 1977 before the Philippine Consul and Legal Attache in
scoops attached to the ship, pursuant to the terms
the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer
and conditions of the charter-partly (which provided
was loaded, the four (4) hatches of the vessel were cleaned, dried and
for an F.I.O.S. clause).6 The hatches remained open
fumigated. After completing the loading of the cargo in bulk in the ship's
throughout the duration of the discharge.7
holds, the steel pontoon hatches were closed and sealed with iron lids, then
covered with three (3) layers of serviceable tarpaulins which were tied with
Each time a dump truck was filled up, its load of Urea steel bonds. The hatches remained close and tightly sealed while the ship
was covered with tarpaulin before it was transported was in transit as the weight of the steel covers made it impossible for a
to the consignee's warehouse located some fifty (50) person to open without the use of the ship's boom. 32
meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale
It was also shown during the trial that the hull of the vessel was in good
where they were individually weighed for the
condition, foreclosing the possibility of spillage of the cargo into the sea or
purpose of ascertaining the net weight of the cargo.
seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum"
The port area was windy, certain portions of the
docked at its berthing place, representatives of the consignee boarded, and
route to the warehouse were sandy and the weather
in the presence of a representative of the shipowner, the foreman, the
was variable, raining occasionally while the discharge
stevedores, and a cargo surveyor representing CSCI, opened the hatches and
was in progress. Tarpaulins and GI sheets were
inspected the condition of the hull of the vessel. The stevedores unloaded
placed in-between and alongside the trucks to contain
the cargo under the watchful eyes of the shipmates who were overseeing
spillages of the ferilizer.9
the whole operation on rotation basis. 34

It took eleven (11) days for PPI to unload the cargo,

Verily, the presumption of negligence on the part of the respondent carrier
has been efficaciously overcome by the showing of extraordinary zeal and
assiduity exercised by the carrier in the care of the cargo.
10A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by
PPI to determine the "outturn" of the cargo shipped,
Indeed, we agree with respondent carrier that bulk shipment of highly
by taking draft readings of the vessel prior to and
soluble goods like fertilizer carries with it the risk of loss or damage. More
after discharge. 11 The survey report submitted by
so, with a variable weather condition prevalent during its unloading, as was
CSCI to the consignee (PPI) dated 19 July 1974
the case at bar. This is a risk the shipper or the owner of the goods has to
revealed a shortage in the cargo of 106.726 M/T and
face. Clearly, respondent carrier has sufficiently proved the inherent
that a portion of the Urea fertilizer approximating 18
character of the goods which makes it highly vulnerable to deterioration; as
M/T was contaminated with dirt. The same results
well as the inadequacy of its packaging which further contributed to the
were contained in a Certificate of Shortage/Damaged
loss. On the other hand, no proof was adduced by the petitioner showing
Cargo dated 18 July 1974 prepared by PPI which
that the carrier was remise in the exercise of due diligence in order to
showed that the cargo delivered was indeed short of
minimize the loss or damage to the goods it carried.
94.839 M/T and about 23 M/T were rendered unfit
for commerce, having been polluted with sand, rust
and
dirt. 12

Consequently, PPI sent a claim letter dated 18

December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for
P245,969.31 representing the cost of the alleged
 shortage in the goods shipped and the diminution in
value of that portion said to have been contaminated
with dirt. 13

Respondent SSA explained that they were not able to

respond to the consignee's claim for payment
because, according to them, what they received was
just a request for shortlanded certificate and not a
formal claim, and that this "request" was denied by
them because they "had nothing to do with the
discharge of the shipment."

14 Hence, on 18 July 1975, PPI filed an action for

damages with the Court of First Instance of Manila.

The defendant carrier argued that the strict public
policy governing common carriers does not apply to
them because they have become private carriers by
reason of the provisions of the charter-party

CFI MANILA - sustained the claim of the plaintiff

against the defendant carrier

respondent Court of Appeals reversed the lower court

and absolved the carrier from liability for the value of
the cargo that was lost or damaged

appellate court ruled that the cargo vessel M/V "Sun

Plum" owned by private respondent KKKK was a
private carrier and not a common carrier by reason of
the time charterer-party.
CALTEX (PHILIPPINES), INC., petitioner, W/N Caltex as a voyage NO. In this case, the charter party agreement did not convert the common
vs. On December 19, 1987, motor tanker MT Vector charterer of a sea vessel liable carrier into a private carrier. The parties entered into a voyage charter,
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, for damages resulting from which retains the character of the vessel as a common carrier.
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, tanker owned and operated by Vector Shipping collision between the chartred
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. vessel and a passenger ship.
Corporation left Limay, Bataan, at about 8:00 p.m., The charterer of a vessel has no obligation before transporting its cargo to
GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO,
ensure that the vessel it chartered complied with all legal requirements. The
FRANCISCO SORIANO, VECTOR SHIPPING enroute to Masbate, loaded with 8,800 barrels of duty rests upon the common carrier simply for being engaged in "public
CORPORATION, TERESITA G. CAÑEZAL, AND
service." 22 The Civil Code demands diligence which is required by the
SOTERA E. CAÑEZAL, respondents. petroleum products shipped by petitioner Caltex. nature of the obligation and that which corresponds with the circumstances
of the persons, the time and the place. Hence, considering the nature of the
During that particular voyage, the MT Vector carried obligation between Caltex and MT Vector, liability as found by the Court of
on board gasoline and other oil products owned by Appeals is without basis.1âwphi
Caltex by virtue of a charter contract

On December 20, 1987, at about 6:30 a.m., the The relationship between the parties in this case is governed by special
passenger ship MV Doña Paz, a passenger and cargo laws. Because of the implied warranty of seaworthiness, 23 shippers of
vessel owned and operated by Sulpicio Lines, Inc. left goods, when transacting with common carriers, are not expected to inquire
the port of Tacloban headed for Manila with a into the vessel's seaworthiness, genuineness of its licenses and compliance
complement of 59 crew members including the with all maritime laws. To demand more from shippers and hold them liable
master and his officers, and passengers totaling 1,493 in case of failure exhibits nothing but the futility of our maritime laws
as indicated in the Coast Guard Clearance insofar as the protection of the public in general is concerned. By the same
token, we cannot expect passengers to inquire every time they board a
At about 10:30 p.m. of December 20, 1987, the two common carrier, whether the carrier possesses the necessary papers or that
vessels collided in the open sea within the vicinity of all the carrier's employees are qualified. Such a practice would be an
absurdity in a business where time is always of the essence. Considering the
 Dumali Point between Marinduque and Oriental nature of transportation business, passengers and shippers alike
Mindoro. All the crewmembers of MV Doña Paz died, customarily presume that common carriers possess all the legal requisites
while the two survivors from MT Vector claimed that in its operation.
they were sleeping at the time of the incident.
Thus, the nature of the obligation of Caltex demands ordinary diligence like
any other shipper in shipping his cargoes.
The MV Doña Paz carried an estimated 4,000
passengers; many indeed, were not in the passenger
Caltex and Vector Shipping Corporation had been doing business since
manifest. Only 24 survived the tragedy after having
1985, or for about two years before the tragic incident occurred in 1987.
been rescued from the burning waters by vessels that
Past services rendered showed no reason for Caltex to observe a higher
responded to distress calls. 5 Among those who
degree of diligence.
perished were public school teacher Sebastian
Cañezal (47 years old) and his daughter Corazon
Cañezal (11 years old), both unmanifested passengers Clearly, as a mere voyage charterer, Caltex had the right to presume that the
but proved to be on board the vessel. ship was seaworthy as even the Philippine Coast Guard itself was convinced
of its seaworthiness. All things considered, we find no legal basis to hold
petitioner liable for damages.
On March 22, 1988, the board of marine inquiry in
BMI Case No. 659-87 after investigation found that
the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector
Shipping Corporation, were at fault and responsible
1.nêt
for its collision with MV Doña Paz. 6

MT Vector is a common carrier

On February 13, 1989, Teresita Cañezal and Sotera E.
Cañezal, Sebastian Cañezal's wife and mother
respectively, filed with the Regional Trial Court, A common carrier is a person or corporation whose regular business is to
Branch 8, Manila, a complaint for "Damages Arising carry passengers or property for all persons who may choose to employ and
from Breach of Contract of Carriage" against Sulpicio to remunerate him. 16 MT Vector fits the definition of a common carrier
Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a under Article 1732 of the Civil Code.
third party complaint against Francisco Soriano,
Vector Shipping Corporation and Caltex (Philippines),
Inc. Sulpicio alleged that Caltex chartered MT Vector
with gross and evident bad faith knowing fully well
that MT Vector was improperly manned, ill-equipped,
unseaworthy and a hazard to safe navigation; as a
result, it rammed against MV Doña Paz in the open
sea setting MT Vector's highly flammable cargo
ablaze.

the trial court rendered decision dismissing, the third

party complaint against petitioner.

Court of Appeal modified the trial court's ruling and

included petitioner Caltex as one of the those liable
for damages.

1âwphi1

CHAPTER 13- COLLISION

CASE FACTS ISSUE/S RULING

C. B. WILLIAMS, plaintiff-appellant, The steamer Subic, owned by the defendant, collided Whether or not plaintiff should In cases of a disaster arising from the mutual negligence of two parties, the
vs. with the lunch Euclid owned by the plaintiff, in the not be held liable on account of party who has a last clear opportunity of avoiding the accident,
TEODORO R. YANGCO, defendant-appellant. Bay of Manila at an early hour on the morning of doctrine of last clear chance— notwithstanding the negligence of his opponent, is considered wholly
January 9, 1911, and the Euclid sank five minutes the defendant having the last responsible for it under the common-law rule of liability as applied in the
thereafter. This action was brought to recover the opportunity to avoid the courts of common law of the United States. But this rule (which is not
value of the Euclid. collision recognized in the courts of admiralty in the United States, wherein the loss
is divided in cases of mutual and concurring negligence, as also where the
error of one vessel has exposed her to danger of collision which was
The court below held from the evidence submitted
consummated by he further rule, that where the previous application by the
that the Euclid was worth at a fair valuation P10,000;
further rule, that where the previous act of negligence of one vessel has
that both vessels were responsible for the collision;
created a position of danger, the other vessel is not necessarily liable for the
and that the loss should be divided equally between
mere failure to recognize the perilous situation; and it is only when in fact it
the respective owners, P5,000 to be paid the plaintiff
does discover it in time to avoid the casualty by the use of ordinary care,
by the defendant, and P5,000 to be borne by the
that it becomes liable for the failure to make use of this last clear
plaintiff himself. From this judgment both defendant
opportunity to avoid the accident. (See cases cited in Notes, 7 Cyc., pp. 311,
and plaintiff appealed.
312, 313.) So, under the English rule which conforms very nearly to the
common-law rule as applied in the American courts, it has been held that
the fault of the first vessel in failing to exhibit proper lights or to take the
proper side of the channel will relieve from liability one who negligently
runs into such vessels before he sees it; although it will not be a defense to
one who, having timely warning of the danger of collision, fails to use proper
care to avoid it. (Pollock on Torts, 374.).

In the case at bar, the most that can be said in support of plaintiff's
contention is that there was negligence on the part of the officers on
defendant's vessel in failing to recognize the perilous situation created by
the negligence of those in charge of plaintiff's launch, and that had they
recognized it in time, they might have avoided the accident. But since it does
not appear from the evidence that they did, in fact, discover the perilous
situation of the launch in time to avoid the accident by the exercise of
ordinary care, it is very clear that under the above set out limitation to the
rule, the plaintiff cannot escape the legal consequences of the contributory
negligence of his launch, even were we to hold that the doctrine is
applicable in the jurisdiction, upon which point we expressly reserve our
decision at this time.

SMITH BELL AND COMPANY (PHILIPPINES), INC. M/V “Don Carlos,” an inter-island vessel owned and Whether or not inscrutable NO.
and TOKYO MARINE AND FIRE INSURANCE CO., operated by private respondent Go Thong was sailing fault is present in said collision. The Court believes that there are three (3) principal factors which are
INC.,petitioners, south bound for Cebu, when it collided with M/S constitutive of negligence on the part of the “Don Carlos,” which negligence
vs. “Yotai Maru,” a merchant vessel of Japanese registry was the proximate cause of the collision.
THE COURT OF APPEALS and CARLOS A. GO which was approaching the port of Manila coming in (1) The first of these factors was the failure of the “Don Carlos” to comply
THONG AND CO., respondents. from Kobe, Japan. with the requirements of Rule 18 (a) of the International Rules of the Road
which provides as follows: (a) When two power-driven vessels are meeting
The bow of the “Don Carlos” rammed the left side of end on, or nearly end on, so as to involve risk of collision, each shall alter her
the “Yotai Maru” inflicting a gaping hole through course to starboard, so that each may pass on the port side of the other. The
which seawater rushed in and flooded the hatch, evidence on this factor state that “Don Carlos” altered its course by five
damaging all the cargo stowed therein. The degrees to the left instead of to the right which maneuver was the error that
consignees of the damaged cargo having been paid by caused the collision in question. Why it did so is because “Don Carlos” was
their insurance companies, the latter in turn overtaking another vessel, the “Don Francisco”, and was then at the right
commenced actions against private respondent Go side of the aforesaid vessel. It was in the process of overtaking “Don
Thong for damages sustained by the various Francisco” that “Don Carlos” was finally brought into a situation where he
shipments. was meeting end-on or nearly end-on “Yotai Maru, thus involving risk of
collision.
2 cases were filed before the RTC. (2) The second circumstance constitutive of negligence on the part of the
“Don Carlos” was its failure to have on board that night a “proper look-out”
 The first case (Smith Bell and Sumitomo Insurance v. as required by Rule I (B) Under Rule 29 of the same set of Rules, all
Go Thong) reached the SC which ruled in finality that consequences arising from the failure of the “Don Carlos” to keep a “proper
negligence was with the officers and crew of “Don look-out” must be borne by the “Don Carlos.” In the case at bar, the failure of
Carlos.” the “Don Carlos” to recognize in a timely manner the risk of collision with
the “Yotai Maru” coming in from the opposite direction, was at least in part
On the contrary, the second case (Smith Bell and due to the failure of the “Don Carlos” to maintain a proper look-out.
Tokyo Insurance v. Go Thong) was decided by the CA (3) The third factor constitutive of negligence on the part of the “Don Carlos”
holding the officers and crew of “Yotai Maru” at fault relates to the fact that Second Mate Benito German was, immediately before
in the collision. Hence the present petition. and during the collision, in command of the “Don Carlos.” Second Mate
German simply did not have the level of experience, judgment and skill
essential for recognizing and coping with the risk of collision as it presented
itself that early morning when the “Don Carlos,” running at maximum speed
and having just overtaken the “Don Francisco” then approximately one mile
behind to the right side of the “Don Carlos,” found itself head-on or nearly
head on vis-a-vis the “Yotai Maru. ” It is essential to point out that this
situation was created by the “Don Carlos” itself.
FOR ALL THE FOREGOING, the Decision of the Court of Appeals is hereby
REVERSED and SET ASIDE.
*Inscrutable Fault – where it cannot be determined which of the 2
vessels caused the collision, each vessel shall suffer its own damages,
and both shall be solidarily responsible for the losses and damages
occasioned to their cargoes.

NATIONAL DEVELOPMENT COMPANY, petitioner- National Development Company (NDC) appointed Which laws govern the loss and This issue has already been laid to rest by this Court of Eastern Shipping
appellant, Maritime Company of the Philippines (MCP) as its destruction of goods due to Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it was held under
vs. agent to manage and operate its vessel, ‘Dona Nati’, collision of vessels outside similar circumstance "that the law of the country to which the goods are to
THE COURT OF APPEALS and DEVELOPMENT for and in behalf of its account. In 1964, while en Philippine waters? be transported governs the liability of the common carrier in case of their
INSURANCE & SURETY route to Japan from San Francisco, Dona Nati collided loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule
CORPORATION, respondents-appellees. with a Japanese vessel, ‘SS Yasushima Maru’, causing was specifically laid down that for cargoes transported from Japan to the
its cargo to be damaged and lost. The private Philippines, the liability of the carrier is governed primarily by the Civil
respondent, as insurer to the consigners, paid almost Code and in all matters not regulated by said Code, the rights and
No. L-49469 August 19, 1988
Php400,000.00 for said lost and damaged cargo. obligations of common carrier shall be governed by the Code of commerce
Hence, the private respondent instituted an action to and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea
MARITIME COMPANY OF THE recover from NDC. Act, a special law, is merely suppletory to the provision of the Civil Code.
PHILIPPINES, petitioner-appellant,
vs. The evidence before us shows that in accordance with
In the case at bar, it has been established that the goods in question are
THE COURT OF APPEALS and DEVELOPMENT a memorandum agreement entered into between
transported from San Francisco, California and Tokyo, Japan to the
INSURANCE & SURETY defendants NDC and MCP on September 13, 1962,
Philippines and that they were lost or due to a collision which was found to
CORPORATION, respondents- appellees. defendant NDC as the first preferred mortgagee of
have been caused by the negligence or fault of both captains of the colliding
three ocean going vessels including one with the
vessels. Under the above ruling, it is evident that the laws of the Philippines
name 'Dona Nati' appointed defendant MCP as its
will apply, and it is immaterial that the collision actually occurred in foreign
agent to manage and operate said vessel for and in its
waters, such as Ise Bay, Japan
behalf and account (Exh. A). Thus, on February 28,
1964 the E. Philipp Corporation of New York loaded
on board the vessel "Dona Nati" at San Francisco,
California, a total of 1,200 bales of American raw It appears, however, that collision falls among matters not specifically
cotton consigned to the order of Manila Banking regulated by the Civil Code, so that no reversible error can be found in
Corporation, Manila and the People's Bank and Trust respondent courses application to the case at bar of Articles 826 to 839,
Company acting for and in behalf of the Pan Asiatic Book Three of the Code of Commerce, which deal exclusively with collision
Commercial Company, Inc., who represents Riverside of vessels.
Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A).
Also loaded on the same vessel at Tokyo, Japan, were
More specifically, Article 826 of the Code of Commerce provides that where
the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to
collision is imputable to the personnel of a vessel, the owner of the vessel at
the order of Manila Banking Corporation consisting of
fault, shall indemnify the losses and damages incurred after an expert
200 cartons of sodium lauryl sulfate and 10 cases of
appraisal. But more in point to the instant case is Article 827 of the same
aluminum foil (Exhs. M & M-1). En route to Manila the Code, which provides that if the collision is imputable to both vessels, each
vessel Dofia Nati figured in a collision at 6:04 a.m. on one shall suffer its own damages and both shall be solidarily responsible for
April 15, 1964 at Ise Bay, Japan with a Japanese vessel the losses and damages suffered by their cargoes.
'SS Yasushima Maru' as a result of which 550 bales of
aforesaid cargo of American raw cotton were lost
Significantly, under the provisions of the Code of Commerce, particularly
and/or destroyed, of which 535 bales as damaged
Articles 826 to 839, the shipowner or carrier, is not exempt from liability for
were landed and sold on the authority of the General
damages arising from collision due to the fault or negligence of the captain.
Average Surveyor for Yen 6,045,-500 and 15 bales
Primary liability is imposed on the shipowner or carrier in recognition of
were not landed and deemed lost (Exh. G). The
the universally accepted doctrine that the shipmaster or captain is merely
damaged and lost cargoes was worth P344,977.86
the representative of the owner who has the actual or constructive control
which amount, the plaintiff as insurer, paid to the
over the conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v.
Riverside Mills Corporation as holder of the
Urrutia & Co., 12 Phil. 751 [1909]).
negotiable bills of lading duly endorsed (Exhs. L-7-A,
K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}.
Also considered totally lost were the aforesaid There is, therefore, no room for NDC's interpretation that the Code of
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to Commerce should apply only to domestic trade and not to foreign trade.
the order of Manila Banking Corporation, Manila, Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65)
acting for Guilcon, Manila, The total loss was does not specifically provide for the subject of collision, said Act in no
P19,938.00 which the plaintiff as insurer paid to uncertain terms, restricts its application "to all contracts for the carriage of
Guilcon as holder of the duly endorsed bill of lading goods by sea to and from Philippine ports in foreign trade." Under Section I
(Exhibits M-1 and S-3). Thus, the plaintiff had paid as thereof, it is explicitly provided that "nothing in this Act shall be construed
insurer the total amount of P364,915.86 to the as repealing any existing provision of the Code of Commerce which is now in
consignees or their successors-in-interest, for the said force, or as limiting its application." By such incorporation, it is obvious that
lost or damaged cargoes. Hence, plaintiff filed this said law not only recognizes the existence of the Code of Commerce, but
complaint to recover said amount from the more importantly does not repeal nor limit its application.
defendants-NDC and MCP as owner and ship agent
respectively, of the said 'Dofia Nati' vessel. (Rollo, L-
On the other hand, Maritime Company of the Philippines claims that
49469, p.38
Development Insurance and Surety Corporation, has no cause of action
against it because the latter did not prove that its alleged subrogers have
, the trial court rendered a decision ordering the
either the ownership or special property right or beneficial interest in the
defendants MCP and NDC to pay jointly and solidarity
cargo in question; neither was it proved that the bills of lading were
to DISC the sum of P364,915.86 plus the legal rate of
transferred or assigned to the alleged subrogers; thus, they could not
interest
possibly have transferred any right of action to said plaintiff- appellee in
this case. (Brief for the Maritime Company of the Philippines, p. 16).

On November 17,1978, the Court of Appeals

The records show that the Riverside Mills Corporation and Guilcon, Manila
promulgated its decision affirming in toto the
are the holders of the duly endorsed bills of lading covering the shipments
decision of the trial court.
in question and an examination of the invoices in particular, shows that the
actual consignees of the said goods are the aforementioned companies.
Moreover, no less than MCP itself issued a certification attesting to this fact.
Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the
total amount of P364,915.86 to said consignees for the loss or damage of the
insured cargo, it is evident that said plaintiff-appellee has a cause of action
to recover (what it has paid) from defendant-appellant MCP (Decision, CA-
G.R. No. 46513-R, p. 10; Rollo, p. 43).

MCP next contends that it can not be liable solidarity with NDC because it is
merely the manager and operator of the vessel Dona Nati not a ship agent.
As the general managing agent, according to MCP, it can only be liable if it
acted in excess of its authority.

As found by the trial court and by the Court of Appeals, the Memorandum
Agreement of September 13, 1962 (Exhibit 6, Maritime) shows that NDC
appointed MCP as Agent, a term broad enough to include the concept of
Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers
of the owner of the vessel, including the power to contract in the name of
the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently,
under the circumstances, MCP cannot escape liability.

It is well settled that both the owner and agent of the offending vessel are
liable for the damage done where both are impleaded (Philippine Shipping
Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the
owner and the agent are civilly responsible for the acts of the captain
(Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article
586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez
Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of
the naviero in the sense of charterer or agent, is not expressly provided in
Article 826 of the Code of Commerce, it is clearly deducible from the general
doctrine of jurisprudence under the Civil Code but more specially as regards
contractual obligations in Article 586 of the Code of Commerce. Moreover,
the Court held that both the owner and agent (Naviero) should be declared
jointly and severally liable, since the obligation which is the subject of the
action had its origin in a tortious act and did not arise from contract
(Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the owner of the vessel,
is liable to the shippers and owners of the cargo transported by it, for losses
and damages occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value of the vessel,
its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil.
276 [1908]).

As to the extent of their liability, MCP insists that their liability should be
limited to P200.00 per package or per bale of raw cotton as stated in
paragraph 17 of the bills of lading. Also the MCP argues that the law on
averages should be applied in determining their liability.

MCP's contention is devoid of merit. The declared value of the goods was
stated in the bills of lading and corroborated no less by invoices offered as
evidence ' during the trial. Besides, common carriers, in the language of the
court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot
limit its liability for injury to a loss of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the colliding
vessel being the cause of the collision, and the cargoes not being jettisoned
to save some of the cargoes and the vessel, the trial court and the Court of
Appeals acted correctly in not applying the law on averages (Articles 806 to
818, Code of Commerce).

MCP's claim that the fault or negligence can only be attributed to the pilot of
the vessel SS Yasushima Maru and not to the Japanese Coast pilot navigating
the vessel Dona Nati need not be discussed lengthily as said claim is not only
at variance with NDC's posture, but also contrary to the factual findings of
the trial court affirmed no less by the Court of Appeals, that both pilots were
at fault for not changing their excessive speed despite the thick fog
obstructing their visibility.

Finally on the issue of prescription, the trial court correctly found that the
 bills of lading issued allow trans-shipment of the cargo, which simply means
that the date of arrival of the ship Dona Nati on April 18,1964 was merely
tentative to give allowances for such contingencies that said vessel might
not arrive on schedule at Manila and therefore, would necessitate the trans-
shipment of cargo, resulting in consequent delay of their arrival. In fact,
because of the collision, the cargo which was supposed to arrive in Manila
on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15,
1964. Hence, had the cargoes in question been saved, they could have
arrived in Manila on the above-mentioned dates. Accordingly, the complaint
in the instant case was filed on April 22, 1965, that is, long before the lapse
of one (1) year from the date the lost or damaged cargo "should have been
delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of
Goods by Sea Act.
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. On the morning of 22 April 1980, the M/T “Tacloban , whether or not Negros We begin by noting that both the trial court and the Court of Appeals
MECENAS, ORLANDO P. MECENAS, VIOLETA M. City,” a barge-type oil tanker owned and operated by Navigation and Capt. considered the action (Civil Case No. Q-31525) brought by the sons and
ACERVO, LUZVIMINDA P. MECENAS; and OFELIA Philippine National Oil Company (PNOC), having Santisteban were grossly daughters of the deceased Mecenas spouses against Negros Navigation as
M. JAVIER, petitioners, unloaded its cargo of petroleum products, left Negros negligent during the events based on quasi-delict. We believed that action is more appropriately
vs. Occidental and headed towards Bataan. On the same which culminated in the regarded as grounded on contract, the contract of carriage between the
HON. COURT OF APPEALS, CAPT. ROGER day, the M/V “Don Juan,” an interisland vessel owned collision with "Tacloban City" Mecenas spouses as regular passengers who paid for their boat tickets and
SANTISTEBAN and NEGROS NAVIGATION CO., and operated by Negros Navigation, left Manila bound and the sinking of the "Don Negros Navigation; the surviving children while not themselves passengers
INC., respondents. for Bacolod with 750 passengers listed in its manifest, Juan" and the resulting heavy are in effect suing the carrier in representation of their deceased
and a complete set of officers and crew members. On loss of lives. Making the parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the widow Lilia
the evening of the same day, the two vessels became petitioners entitled to Ciocon was correctly treated by the trial and appellate courts as based on
aware of each other’s presence in the area by visual exemplary damages . contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis
contact at a distance of 6 miles. They were fully aware PNOC and PNOC Shipping).
that if they continued on their course, they will meet
head on. Don Juan steered to the right; Tacloban City
In an action based upon a breach of the contract of carriage, the carrier
continued its course to the left. The two vessels thus
under our civil law is liable for the death of passengers arising from the
collided and as a result, the “Don Juan” sank and W/N petitioners are entitled to
negligence or willful act of the carrier's employees although such employees
hundreds of its passengers perished. Petitioners who moral damages.
may have acted beyond the scope of their authority or even in violation of
were the children of the spouses Perfecto and Sofia
the instructions of the carrier, 4 which liability may include liability for
Mecenas, their parents among the passengers whose
moral damages. 5 It follows that petitioners would be entitled to moral
bodies were never found, filed a complaint against
damages so long as the collision with the "Tacloban City" and the sinking of
Negros Navigation and its Captain Roger Santisteban.
the "Don Juan" were caused or attended by negligence on the part of private
respondents.
Another complaint, docketed as Civil Case No. Q-
33932, was filed in the same court by Lilia Ciocon
claiming damages against Negros Navigation, PNOC In respect of the petitioners' claim for exemplary damages, it is only
and PNOC Shipping for the death of her husband necessary to refer to Article 2232 of the Civil Code:
Manuel Ciocon, another of the luckless passengers of
the "Don Juan." Manuel Ciocon's body, too, was never
Article 2332. In contracts and quasi-contracts, the
found
court may exemplary damages if the defendant acted
in a wanton, fraudulent, reckless, oppressive or
two (2) cases were consolidated and heard jointly by
malevolent manner. 6
the Regional Trial Court of Quezon City,

The trial court ruled that both vessels were at fault in Thus, whether petitioners are entitled to exemplary damages as claimed
the collision and awarded petitioners actual or must depend upon whether or not private respondents acted recklessly,
compensatory damages, which was reduced on that is, with gross negligence.
appeal. Petitioners likewise claim for exemplary
damages.
There is, therefore, no question that the "Don Juan" was at least as negligent
as the M/T "Tacloban City" in the events leading up to the collision and the
sinking of the "Don Juan." The remaining question is whether the negligence
on the part of the "Don Juan" reached that level of recklessness or gross
negligence that our Civil Code requires for the imposition of exemplary
damages. Our own review of the record in the case at bar requires us to
answer this in the affirmative.

the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while
holding the "Tacloban City" as "primarily and solely [sic] at fault and
responsible for the collision," did itself set out that there had been fault or
negligence on the part of Capt. Santisteban and his officers and crew before
the collision and immediately after contact of the two (2) vessels. The
decision of Commodore Ochoco said:

M/S Don Juan's Master, Capt. Rogelio Santisteban, was

playing mahjong before and up to the time of collision.
Moreover, after the collision, he failed to institute
appropriate measures to delay the sinking MS Don
Juan and to supervise properly the execution of his
order of abandonship. As regards the officer on watch,
Senior 3rd Mate Rogelio Devera, he admitted that he
failed or did not call or inform Capt. Santisteban of the
imminent danger of collision and of the actual collision
itself Also, he failed to assist his master to prevent the
fast sinking of the ship. The record also indicates that
Auxiliary Chief Mate Antonio Labordo displayed laxity
in maintaining order among the passengers after the
collision.

We believe that the behaviour of the captain of the "Don Juan" in tills
instance-playing mahjong "before and up to the time of collision constitutes
behaviour that is simply unacceptable on the part of the master of a vessel
to whose hands the lives and welfare of at least seven hundred fifty (750)
passengers had been entrusted. Whether or not Capt. Santisteban was "off-
duty" or "on-duty" at or around the time of actual collision is quite
immaterial; there is, both realistically speaking and in contemplation of law,
no such thing as "off-duty" hours for the master of a vessel at sea that is a
common carrier upon whom the law imposes the duty of extraordinary
diligence-

[t]he duty to carry the passengers safely as far as

human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due
regard for all the circumstances. 14

The record does not show that was the first or only time that Capt.
Santisteban had entertained himself during a voyage by playing mahjong
with his officers and passengers; Negros Navigation in permitting, or in
failing to discover and correct such behaviour, must be deemed grossly
negligent.

Capt. Santisteban was also faulted in the Philippine Coast Guard decision for
failing after the collision, "to institute appropriate measures to delay the
sinking of M/V Don Juan." This appears to us to be a euphemism for failure
to maintain the sea-worthiness or the water-tight integrity of the "Don
Juan." The record shows that the "Don Juan" sank within ten (10) to fifteen
(15) minutes after initial contact with the "Tacloban City. 15 While the failure
of Capt. Santisteban to supervise his officers and crew in the process of
abandoning the ship and his failure to avail of measures to prevent the too
rapid sinking of his vessel after collision, did not cause the collision by
themselves, such failures doubtless contributed materially to the
consequent loss of life and, moreover, were indicative of the kind and level
of diligence exercised by Capt. Santisteban in respect of his vessel and his
officers and men prior to actual contact between the two (2) vessels. The
officer-on-watch in the "Don Juan" admitted that he had failed to inform
Capt. Santisteban not only of the "imminent danger of collision" but even of
"the actual collision itself "

Passengers
allowed :
810

Total
Persons
Allowed :
864

The grossness of the negligence of the "Don Juan" is underscored when one
considers the foregoing circumstances in the context of the following facts:
Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City."
The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City"
was 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of
officers and crew members specified for a passenger vessel of her class.
Thirdly, the "Don Juan" was equipped with radar which was functioning that
night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban
City" on his radar screen while the latter was still four (4) nautical miles
away. Visual confirmation of radar contact was established by the "Don
Juan" while the "Tacloban City" was still 2.7 miles away. 20In the total set of
circumstances which existed in the instant case, the "Don Juan," had it taken
seriously its duty of extraordinary diligence, could have easily avoided the
collision with the "Tacloban City," Indeed, the "Don Juan" might well have
avoided the collision even if it had exercised ordinary diligence merely.

It is true that the "Tacloban City" failed to follow Rule 18 of the International
Rules of the Road which requires two (2) power- driven vessels meeting
end on or nearly end on each to alter her course to starboard (right) so that
each vessel may pass on the port side (left) of the other.21 The "Tacloban
City," when the two (2) vessels were only three-tenths (0.3) of a mile apart,
turned (for the second time) 150 to port side while the "Don Juan" veered
hard to starboard. This circumstance, while it may have made the collision
immediately inevitable, cannot, however, be viewed in isolation from the
rest of the factual circumstances obtaining before and up to the collision. In
any case, Rule 18 like all other International Rules of the Road, are not to be
obeyed and construed without regard to all the circumstances surrounding
a particular encounter between two (2) vessels. 22 In ordinary
circumstances, a vessel discharges her duty to another by a faithful and
literal observance of the Rules of Navigation, 23 and she cannot be held at
fault for so doing even though a different course would have prevented the
collision. This rule, however, is not to be applied where it is apparent, as in
 the instant case, that her captain was guilty of negligence or of a want of
seamanship in not perceiving the necessity for, or in so acting as to create
such necessity for, a departure from the rule and acting accordingly. 24 In
other words, "route observance" of the International Rules of the Road will
not relieve a vessel from responsibility if the collision could have been
avoided by proper care and skill on her part or even by a departure from the
rules. 25

In the petition at bar, the "Don Juan" having sighted the "Tacloban City"
when it was still a long way off was negligent in failing to take early
preventive action and in allowing the two (2) vessels to come to such close
quarters as to render the collision inevitable when there was no necessity
for passing so near to the "Tacloban City" as to create that hazard or
inevitability, for the "Don Juan" could choose its own distance. 26, It is
noteworthy that the "Tacloban City," upon turning hard to port shortly
before the moment of collision, signalled its intention to do so by giving two
(2) short blasts with horn. 26A The "Don Juan " gave no answering horn blast
to signal its own intention and proceeded to turn hatd to starboard. 26B

We conclude that Capt. Santisteban and Negros Navigation are properly

held liable for gross negligence in connection with the collision of the "Don
Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the
death of hundreds of passengers. We find no necessity for passing upon the
degree of negligence or culpability properly attributable to PNOC and PNOC
Shipping or the master of the "Tacloban City," since they were never
impleaded here.
ABOITIZ SHIPPING CORPORATION, petitioner, Petitioner is a corporation engaged in the business of is whether or not respondent We rule in the affirmative.
vs. maritime trade as a carrier. As such, it owned and court erred in granting
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE operated the M/V P/ ABOITIZ, a common carrier that execution of the full judgment
The real an hypothecary nature of maritime law simple means that the
CORPORATION, LTD., respondent sank on voyage from Hong Kong to Manila. Private award in Civil Case No. 14425
liability of the carrier in connection with losses related to maritime
respondent GAFLAC is a foreign insurance company (G.R. No. 89757), thus
contracts is confined to the vessel, which is hypothecated for such
pursuing its remedy as a subrogee of several cargo effectively denying the
obligations or which stands as the guaranty for their settlement. It has its
consignees whose respective cargo sank with the said application of the limited
origin by reason of the conditions and risks attending maritime trade in its
vessel and for which it has priory paid. The sinking of liability enunciated under the
earliest years when such trade was replete with innumerable and unknown
vessel gave rise to filling of suit to recover the lost appropriate articles of the Code
hazards since vessels had to go through largely uncharted waters to ply
cargo either by shippers, their successors-in-interest, of Commerce.
their trade. Thus, the liability of the vessel owner and agent arising form the
or the cargo insurers like GAFLAC as subrogees. The
operation of such vessel were confined to the vessel itself, its equipment,
sinking was initially investigated by the Board of
freight and insurance, if any, which limitation served to induce capitalist
Marine Inquiry, which found that such sinking was
into effectively wagering their resources against consideration of the large
due to fortuitous event.
attainable in the trade.
One such ruling was likewise elevated to this Court in
G.R. No. 100373, Country Bankers Insurance
Corporation v. Court of Appeals, et al., August 28, 1991
and was sustained. Part of the task resting upon this The rights of a vessel owner or agent under the Limited Liability Rule are
Court, therefore, is to reconcile the resulting apparent akin to those of the rights of shareholders to limited liability under our
contrary findings in cases originating out of a single corporation law. Both are privileges granted by statute, and while not
set of facts. absolute, must be swept aside only in the established existence of the most
compelling of reasons. In the absence of such reasons, this Court chooses to
exercise prudence and shall not sweep such rights aside on mere whim or
surmise, for even in the existence of cause to do so, such incursion is
definitely punitive in nature and must never be taken lightly.

More to the point, the rights of parties to claim against an agent or owner of
a vessel may be compared to those of creditors against an insolvent
corporation whose assets are not enough to satisfy the totality of claims as
against it. While each individual creditor may, and in fact shall, be allowed to
prove the actual amounts of their respective claims, this does not mean that
they shall all be allowed to recover fully thus favoring those who filed and
proved their claims sooner to the prejudice of those who come later. In such
an instance, such creditors too would not also be able to gain access to the
assets of the individual shareholders, but must limit their recovery to what
is left in the name of the corporation. Thus, in the case of Lipana v.
Development Bank of Rizal earlier cited, We held that:

In the instant case, the stay of execution of judgment is

warranted by the fact that the respondent bank was
placed under receivership. To execute the judgment
would unduly deplete the assets of respondent bank to
the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank v.
Morfe (63 SCRA 114), after the Monetary Board has
declared that a bank is insolvent and has ordered it to
cease operations, the Board becomes the trustee of its
assets for the equal benefit of all creditors, and after its
insolvency, one cannot obtain an advantage or
preference over another by an attachment, execution
or otherwise. (at p. 261).

In both insolvency of a corporation and the sinking of a vessel, the claimants

or creditors are limited in their recovery to the remaining value of
accessible assets. In the case of an insolvent corporation, these are the
residual assets of the corporation left over from its operations. In the case of
a lost vessel, these are the insurance proceeds and pending freightage for
the particular voyage.

In the instant case, there is, therefore, 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.

Finally, the Court notes that petitioner has provided this Court with a list of
all pending cases (pp. 175 to 183, Rollo), together with the corresponding
claims and the pro-rated share of each. We likewise note that some of these
cases are still with the Court of Appeals, and some still with the trial courts
and which probably are still undergoing trial. It would not, therefore, be
entirely correct to preclude the trial courts from making their own findings
of fact in those cases and deciding the same by allotting shares for these
claims, some of which, after all, might not prevail, depending on the
evidence presented in each. We, therefore, rule that the pro-rated share of
 each claim can only be found after all the cases shall have been decided.

In fairness to the claimants, and as a matter of equity, the total proceeds of

the insurance and pending freightage should now be deposited in trust.
Moreover, petitioner should institute the necessary limitation and
distribution action before the proper admiralty court within 15 days from
the finality of this decision, and thereafter deposit with it the proceeds from
the insurance company and pending freightage in order to safeguard the
same pending final resolution of all incidents, for final pro-rating and
settlement thereof.

CHAPTER 15 – SALVAGE

CASE FACTS ISSUE/S RULING

ERLANGER & GALINGER vs. THE SWEDISH EAST S.S. Nippon was bound for Manila to Singapore, (1) Was the ship abandoned? The relief of property from an impending peril of the
ASIATIC CO., (LTD.) loaded mainly with copra and with some other (2) Was the salvage conducted with skill, diligence, sea, by the voluntary exertions of those who are
general merchandise. The ship struck the and efficiency? under no legal obligation to render assistance, and
Scarborough Reef, and it was filled with water. (3) Was the award justified? the consequent ultimate safety of the property,
Immediately the chief officer wired the Director of constitute a case of salvage.
Navigation at Manila for assistance for rescue. Shortly Three elements necessary for a valid salvage claim:
thereafter, the captain and crew left the Nippon and (1) A marine peril. (2) Service voluntarily rendered
went on board of SS. Manchuria and headed for Hong when not required as an existing duty or from a
Kong. special contract. (3) Success, in whole or in part, or
Plaintiff Erlanger & Galinger applied to the Director of that the service rendered contributed to such success.
Navigation for a charter of a coast guard cutter.
Through the said cutter, the Nippon was floated and (1) The evidence proves that the Nippon was
towed to Olongapo, where temporary repairs were in peril; that the captain left in order to protect his life
made, and then brought to Manila. and the lives of the crew; that the animo revertendi
The trial court found that the plaintiffs were "entitled was slight.
to recover one-half of the net proceeds from the When a man finds property thus temporarily left to
property salved and sold, and one-half the value of the mercy of the elements, whether from necessity or
the property delivered to the claimants. any other cause, though not finally abandoned and
legally derelict, and he takes possession of it with the
bona fide intention of saving it for the owner, he will
not be treated as a trespasser. On the contrary, if by
his exertions he contributes materially to the
preservation of the property, he will entitle himself to
a remuneration according to the merits of his service
as a salvor.

(2) The plaintiffs were diligent in commencing

the work and were careful and efficient in its pursuit
and conclusion. While the plaintiff entered upon the
salvage proceedings without proper means and not
being adapted by their business to conduct their
work, and while it may appear that possibly the
salvage might have been conducted in a better
manner and have accomplished somewhat better
results in the saving of the copra cargo, yet it appears
that they quickly remedied their lack of means and
corrected the conduct of the work so that it
accomplished fairly good results.
 (3) The award granted to the plaintiff must be
reduced.
Compensation as salvage is a reward given for
perilous services, voluntarily rendered, and as an
inducement to mariners to embark in such dangerous
enterprises to save life and property.
One of the grounds for liberality in salvage awards is
the risk assumed by the salvor, — that he can have no
recompense for service or expense unless he is
successful in the rescue of property, and that his
reward must be within the measure of his success. In
other words, he can only have a portion, in any event;
and the fact that his exertions were meritorious and
that their actual value, or the expense actually
incurred, exceeded the amount produced by the
service, cannot operate to absorb the entire proceeds
against the established rules of salvage.

Barrios vs. Go Thong Petitioner Honorio Barrios, captain and/or master of Whether under the facts of the case, the service It is not a salvage service.
the MV Henry I, received or otherwise intercepted an rendered by plaintiff to defendant constituted
S.O.S. distress signal by blinkers from the MV Alfredo, "salvage" or "towage", and if so, whether plaintiff may Salvage defined
owned and/or operated by respondent Carlos Go recover from defendant compensation for such “Salvage” has been defined as “the compensation
Thong & Company. Thereafter, he altered the course service. allowed to persons by whose assistance a ship or her
of said vessel, and steered and headed towards the cargo has been saved, in whole or in part, from
beckoning MV Don Alfredo, which Barrios found to be impending peril on the sea, or in recovering such
in trouble, due to engine failure and the loss of her property from actual loss, as in case of shipwreck,
propeller. Upon getting close to the MV Don Alfreco, derelict, or recapture.”
with the consent and knowledge of the captain
and/or master of the MV Don Alfredo, Barrios caused Elements for a valid salvage claim; Erlanger &
the latter vessel to be tied to, or well-secured and Galinger case
connected with tow lines from the MV Henry, and In the Erlanger & Galinger case, it was held that three
proceeded moving until such time that a sister ship of elements are necessary to a valid salvage claim,
MV Don Alfredo was sighted so that the tow lines namely, (1) a marine peril, (2) service voluntarily
were also released. rendered when not required as an existing duty or
from a special contract, and (3) success in whole or in
Brought to the CFI of Manila, the court therein part, or that the service rendered contributed to such
dismissed the case; with cost against Barrios. Barrios success.
interposed an appeal.
No marine peril to justify valid salvage claim
There was no marine peril to justify a valid salvage
claim by Barrios against Go Thong. It appears that
although Go Thong’s vessel in question was, on the
night of 1 May 1958, in a helpless condition due to
engine failure, it did not drift too far from the place
where it was. The weather was fair, clear, and good.
The waves were small and too slight, so much so, that
there were only ripples on the sea, which was quite
smooth. During the towing of the vessel on the same
night, there was moonlight. Although said vessel was
drifting towards the open sea, there was no danger of
its foundering or being stranded, as it was far from
any island or rocks. In case of danger of stranding, its
anchor could be released, to prevent such occurrence.
There was no danger that Go Thong’s vessel would
sink in view of the smoothness of the sea and the
fairness of the weather. That there was absence of
danger is shown by the fact that said vessel or its
crew did not even find it necessary to lower its launch
and two motor boats, in order to evacuate its
passengers aboard. Neither did they find occasion to
jettison the vessel’s cargo as a safety measure.
Neither the passengers nor the cargo were in danger
of perishing. All that the vessel’s crew members could
not do was to move the vessel on its own power. That
did not make the vessel a quasi-derelict.

Contract of towage perfected even without

written agreement
Herein, in consenting to Barrios’ offer to tow the
vessel, Go Thong (through the captain of its vessel MV
Don Alfredo) thereby impliedly entered into a
juridical relation of “towage” with the owner of the
vessel MV Henry I, captained by Barrios, the William
Lines.

Only owner entitled to remuneration in towage

If the contract thus created is one for towage, then
only the owner of the towing vessel, to the exclusion
of the crew of the said vessel, may be entitled to
remuneration. The courts have to draw a distinct line
between salvage and towage; for the reason that a
reward ought sometimes to be given to the crew of
the salvage vessel and to other participants in salvage
services, and such reward should not be given if the
services were held to be merely towage. The master
and members of the crew of a tug were not entitled to
participate in payment by liberty ship for services
rendered by tug which were towage services and not
salvage services. The distinction between salvage and
towage is of importance to the crew of the salvaging
ship, for the following reasons: If the contract for
towage is in fact towage, then the crew does not have
any interest or rights in the remuneration pursuant to
the contract. But if the owners of the respective
vessels are of a salvage nature, the crew of the
salvaging ship is entitled to salvage, and can look to
the salved vessel for its share.

Equity cannot be resorted if there is an express

provision of law
Barrios cannot invoke equity in support of his claim
for compensation against Go Thong. There being an
express provision of law (Art. 2142, Civil Code)
applicable to the relationship created in the case, i.e.
that of a quasi-contract of towage where the crew is
not entitled to compensation separate from that of
the vessel, there is no occasion to resort to equitable
considerations.
CHAPTER 16 – CARRIAGE OF GOODS BY SEA ACT

CASE FACTS ISSUE/S RULING

It appears that in the month of December, Which of these two provisions should prevail? Is it COGSA should prevailClause 18 must of necessity
1945 the goods specified in the Bill of that contained in clause18 of the bill of lading, or that yields to the provisions of the Carriage of Goods by
Lading marked as Annex A, were shipped appearing in the Carriage of Goods by Sea Act? SeaA ct i n vi ew o f t h e pr o vi so c o nta i ne d i n
on the 'S.S. Sea Hydra,' of Isthmian t h e sa me Ac t w h ic h sa y s: "a ny
Steamship Company, from New York to c l a u s e, covenant, or agreement in a contract of
Manila, and were received by the consignee carriage relieving the carrier or the shipfrom
'Udharam Bazar and Co.', except one case liability for loss or damage to or in connection with
of vanishing cream valued at P159.78. The the goods . . . or lesseningsuch liability otherwise
goods were insured against damage or loss than as provided in this Act, shall be null and void
by the 'Atlantic Mutual Insurance Co.' and of noeffect." (Section 3.) This means that a
`Udharam Bazar and Co.' Inc., who denied carrier cannot limit its liability in a
having received the goods for custody, and mannercontrary to what is provided for in said
the 'International Harvester Co. of the act. And so clause 18 of the bill of ladingmust of
Philippines,' as agent for the shipping necessity be null and void.
company, who answer that the goods were
landed and delivered to the Customs
authorities. Finally, 'Udaharam Bazar and
There is merit in this contention. If this case were to
Co.' claimed for indemnity of the loss from
be governed by clause 18 of the bill of lading
the insurer, 'Atlantic Mutual Insurance Co.',
regardless of the provisions of the Carriage of Goods
and was paid by the latter's agent 'E. E.
by Sea Act of 1936, the conclusion reached by the
Elser Inc.' the amount involved, that is,
Court of Appeals would indeed the correct, but in our
P159.78..
opinion this Act cannot be ignored or disregard in
determining the equities of the parties it appearing
As may be noted, the Court of Appeals held that that the same was made an integral part of the bill of
petitioners have already lost their right to press their lading by express stipulation. It should be noted, in
claim against respondent because of their failure to this connection, that the Carriage of Goods by Sea Act
serve notice thereof upon the carrier within 30 days of 1936 was accepted and adopted by our
after receipt of the notice of loss or damage as government by the enactment of Commonwealth Act
required by clause 18 of the bill of lading which was No. 65 making said Act "applicable to all contracts for
issued concerning the shipment of the merchandise the carriage in foreign trade." And the pertinent
which had allegedly disappeared. In this respect, the provisions of the Carriage of the Goods by Sea Act of
court said that, "appellant unwittingly admitted that 1936 are:
they were late in claiming the indemnity for the loss
of the case of the vanishing cream as their written
6. Unless notice of loss or damage and the
claim was made on April 25, 1946, or more than 30
general nature of such loss or damage be
days after they had been fully aware of said loss," and
given in writing to the carrier of his agent
because of this failure, the Court said the action of
at the port of discharge or at the time of the
petitioners should, and must, fall. Petitioners now
removal of the goods into the custody of
contend that this finding is erroneous in the light of
the person entitled to delivery thereof
the provisions of the Carriage of Goods by Sea Act of
under the contract of carriage, such
1936, which apply to this case, the same having been
removal shall be prima facie evidence of
made an integral part of the covenants agreed upon in
the delivery by the carrier of the goods as
the bill of lading.
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.
 xxx xxx xxx

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. (Section 3; Emphasis supplied.).

It would therefore appear from the above that a

carrier can only be discharged from liability in
respect of loss or damage if the suit is not brought
within one year after the delivery of the goods or the
date when the goods should have been delivered, and
that, even if a notice of loss or damage is not given as
required, "that fact shall not affect or prejudice the
right of the shipper to bring suit within one year after
the delivery of the goods." In other words, regardless
of whether the notice of loss or damage has been
given, the shipper can still bring an action to recover
said loss or damage within one year after the delivery
of the goods, and, as we have stated above, this is
contrary to the provisions of clause 18 of the bill of
lading.

But respondents contend that while the United States

Carriage of Goods by Sea Act of 1936 was accepted
and adopted by our government by virtue of
Commonwealth Act No. 65, however, said Act does
not have any application to the present case because
the shipment in question was made in December,
1945, and arrived in Manila in February, 1946 and at
that time the Philippines was still a territory or
possession of the United States and, therefore it may
be said that the trade then between the Philippines
and the United States was not a "foreign trade". In
other words, it is contended that the Carriage of
Goods by Sea Act as adopted by our government is
only applicable "to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign
trade," and, therefore, it does not apply to the
shipment in question..

Granting arguendo that the Philippines was a

territory or possession of the United States for the
purposes of said Act and that the trade between the
Philippines and the United States before the advent of
independence was not foreign trade or can only be
considered in a domestic sense, still we are of the
opinion that the Carriage of Goods by Sea Act of 1936
may have application to the present case it appearing
that the parties have expressly agreed to make and
incorporate the provisions of said Act as integral part
of their contract of carriage. This is an exception to
the rule regarding the applicability of said Act. This is
expressly recognized by section 13 of said Act which
contains the following proviso:

Nothing in this Act shall be held to apply to

contracts for carriage of gods by sea
between any port of the United States or its
possessions, and any other port of the
United States or its possessions: Provided,
however, That any bill of lading or similar
document of title which evidence of a
contract for the carriage of goods by sea
between such ports, containing an express
statement that it shall be subject to the
provisions of this Act, shall be subjected
hereto as fully as if subject hereto by the
express provisions of this Act. (Emphasis
supplied.).

This is also recognized by the very authority cited by

counsel for respondents, who, on this matter, has
made the following comment:

The Philippine Act of 1936 like the U.S. Act

of 1936, applies propio vigore only to
foreign commerce to all contracts for the
carriage of goods by sea and from
Philippine ports in foreign trade.

Prior to Philippine Independence on July 4,

1946, trade between the Philippines and
other ports and places under the American
Flag, was not, by an ordinary definition,
foreign commerce. Hence, the U. S. and
Philippine Acts did not apply to such
trades, even though conducted under
foreign bottoms and under foreign
flag, unless the carrier expressly exercised
the option given by section 13 of the U.S. Act
to carry under the provisions of that Act.
The fact that the U.S. coastwise flag
monopoly did not extend to the Philippine
trade did not alter the fact that the U.S.
Trade with the Islands is domestic.
 (knaught, Ocean Bills of Lading, 1947 ed. p.
250 (Emphasis supplied.).

Having reached the foregoing conclusion, it would

appear clear that action of petitioners has not yet
lapsed or prescribed, as erroneously held by the
Court of Appeals, it appearing that the present action
was brought within one year after the delivery of the
shipment in question..

As regards the contention of respondents that

petitioners have the burden of showing that the loss
complained of did not take place under after the
goods left the possession or custody of the carrier
because they failed to give notice of their loss or
damage as required by law, which failures gives rise
to the presumption that the goods were delivered in
the bill of lading, suffice it to state that, according to
the Court of Appeals, the required notice was given by
the petitioners to the carrier or its agent on April 25,
1946. That notice is sufficient to overcome the above
presumption within the meaning of the law..
DOMINGO ANG, plaintiff-appellant, In the instant case, Ang on September 26, 1963, as the W/N the action has already prescribed. In the American Steamship Agencies cases, it was held
vs. assignee of a bill of lading held by Yau Yue that the action of Ang is based on misdelivery of the
COMPANIA MARITIMA, MARITIME COMPANY OF Commercial Bank, Ltd. of Hongkong, sued Compania cargo which should be distinguished
THE PHILIPPINES and C.L. DIOKNO, defendants- Maritima, Maritime Company of the Philippines and from loss thereof. The one-year period provided for in
appellees C.L. Diokno. He prayed that the defendants be section 3 (6) of the Carriage of Goods by Sea Act
ordered to pay him solidarily the sum of refers to loss of the cargo. What is applicable is the
US$130,539.68 with interest from February 9, 1963 four-year period of prescription for quasi-delicts
plus attorney's fees and damages. prescribed in article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided
for in article 1144 (1) of the same Code.
Ang alleged that Yau Yue Commercial Bank agreed to
sell to Herminio G. Teves under certain conditions
559 packages of galvanized steel, Durzinc sheets. The As Ang filed the action less than three years from the
merchandise was loaded on May 25, 1961 at Yawata, date of the alleged misdelivery of the cargo, it has not
Japan in the M/S Luzon a vessel owned and operated yet prescribed. Ang, as indorsee of the bill of lading, is
by the defendants, to be transported to Manila and a real party in interest with a cause of action for
consigned "to order" of the shipper, Tokyo Boeki, Ltd., damages.
which indorsed the bill of lading issued by Compania
Maritima to the order of Yau Yue Commercial Bank.
WHEREFORE, the order of dismissal is reversed and
set aside. The case is remanded to the trial court for
Ang further alleged that the defendants, by means of a further proceedings. Costs against the defendants.
permit to deliver imported articles, authorized the
delivery of the cargo to Teves who obtained delivery
from the Bureau of Customs without the surrender of
the bill of lading and in violation of the terms thereof.
Teves dishonored the draft drawn by Yau Yue against
him.

The Hongkong and Shanghai Banking Corporation

made the corresponding protest for the draft's
dishonor and returned the bill of lading to Yau Yue.
 The bill of lading was indorsed to Ang.

The defendants filed a motion to dismiss Ang's

complaint on the ground of lack of cause of action.
Ang opposed the motion. As already stated, the trial
court on May 22, 1964 dismissed the complaint on
the grounds of lack of cause of action and prescription
since the action was filed beyond the one-year period
provided in the Carriage of Goods by Sea Act.

DOLE PHILIPPINES, INC., plaintiff-appellant, This appeal, which was certified to the Court by the is whether or not Article 1155 of the Civil Code These arguments might merit weightier
vs. Court of Appeals as involving only questions of providing that the prescription of actions is consideration were it not for the fact that the
MARITIME COMPANY OF THE law, 1 relates to a claim for loss and/or damage to a interrupted by the making of an extrajudicial written question has already received a definitive answer,
PHILIPPINES, defendant-appellee. shipment of machine parts sought to be enforced by demand by the creditor is applicable to actions adverse to the position taken by Dole, in The Yek
the consignee, appellant Dole Philippines, Inc. brought under the Carriage of Goods by Sea Act Tong Lin Fire & Marine Insurance Co., Ltd. vs.
(hereinafter caged Dole) against the carrier, Maritime American President Lines, Inc. 15 There, in a parallel
Company of the Philippines (hereinafter called factual situation, where suit to recover for damage to
Maritime), under the provisions of the Carriage of cargo shipped by vessel from Tokyo to Manila was
Goods by Sea Act. 2 filed more than two years after the consignee's
receipt of the cargo, this Court rejected the contention
that an extrajudicial demand toiled the prescriptive
Before the plaintiff started
period provided for in the Carriage of Goods by Sea
presenting evidence at today's
Act, viz:
trial at the instance of the Court
the lawyers entered into the
following stipulation of facts: In the second assignment of
error plaintiff-appellant argues
that it was error for the court a
1. The cargo subject of the
quo not to have considered the
instant case was discharged in
action of plaintiff-appellant
Dadiangas unto the custody of
suspended by the extrajudicial
the consignee on December 18,
demand which took place,
1971;
according to defendant's own
motion to dismiss on August 22,
2. The corresponding claim for 1952. We notice that while
the damages sustained by the plaintiff avoids stating any date
cargo was filed by the plaintiff when the goods arrived in
with the defendant vessel on Manila, it relies upon the
May 4, 1972; allegation made in the motion to
dismiss that a protest was filed
on August 22, 1952 — which
3. On June 11, 1973 the plaintiff
goes to show that plaintiff-
filed a complaint in the Court of
appellant's counsel has not been
First Instance of Manila,
laying the facts squarely before
docketed therein as Civil Case
the court for the consideration
No. 91043, embodying three (3)
of the merits of the case. We
causes of action involving three
have already decided that in a
(3) separate and different
case governed by the Carriage of
shipments. The third cause of
Goods by Sea Act, the general
action therein involved the
provisions of the Code of Civil
cargo now subject of this
Procedure on prescription
present litigation;
should not be made to apply.
(Chua Kuy vs. Everett Steamship
4. On December 11, 1974, Judge Corp., G.R. No. L-5554, May 27,
 Serafin Cuevas issued an Order 1953.)
in Civil Case No. 91043
dismissing the first two causes
Similarly, we now hold that in
of action in the aforesaid case
such a case the general
with prejudice and without
provisions of the new Civil
pronouncement as to costs
Code (Art. 1155) cannot be
because the parties had settled
made to apply, as such
or compromised the claims
application would have the
involved therein. The third
effect of extending the one-
cause of action which covered
year period of prescription
the cargo subject of this case
fixed in the law. It is desirable
now was likewise dismissed but
that matters affecting
without prejudice as it was not
transportation of goods by sea
covered by the settlement. The
be decided in as short a time as
dismissal of that complaint
possible; the application of the
containing the three causes of
provisions of Article 1155 of the
action was upon a joint motion
new Civil Code would
to dismiss filed by the parties;
unnecessarily extend the period
and permit delays in the
5. Because of the dismissal of the settlement of questions affecting
(complaint in Civil Case No. transportation, contrary to the
91043 with respect to the third clear intent and purpose of the
cause of action without law. * * *
prejudice, plaintiff instituted this
present complaint on January 6,
Moreover, no different result would obtain even if the
1975.
Court were to accept the proposition that a written
extrajudicial demand does toll prescription under the
To the complaint in the subsequent action Maritime Carriage of Goods by Sea Act. The demand in this
filed an answer pleading inter alia the affirmative instance would be the claim for damage-filed by Dole
defense of prescription under the provisions of the with Maritime on May 4, 1972. The effect of that
Carriage of Goods by Sea Act, 5 and following pre-trial, demand would have been to renew the one- year
moved for a preliminary hearing on said prescriptive period from the date of its making.
defense. 6 The Trial Court granted the motion, Stated otherwise, under Dole's theory, when its claim
scheduling the preliminary hearing on April 27, was received by Maritime, the one-year prescriptive
1977. 7 The record before the Court does not show period was interrupted — "tolled" would be the more
whether or not that hearing was held, but under date precise term — and began to run anew from May 4,
of May 6, 1977, Maritime filed a formal motion to 1972, affording Dole another period of one (1) year
dismiss invoking once more the ground of counted from that date within which to institute
prescription. 8 The motion was opposed by Dole 9 and action on its claim for damage. Unfortunately, Dole let
the Trial Court, after due consideration, resolved the the new period lapse without filing action. It
matter in favor of Maritime and dismissed the instituted Civil Case No. 91043 only on June 11, 1973,
complaint 10 Dole sought a reconsideration, which more than one month after that period has expired
was denied, 11 and thereafter took the present appeal and its right of action had prescribed.
from the order of dismissal.
SEA-LAND SERVICE, INC., petitioner, : Sea-land, a foreign shipping and forwarding whether or not the consignee of seaborne freight is Yes.There is no question of the right of a consignee in
vs. company licensed to do businessin the bound by stipulations in the covering bill of lading a bill of lading to recoverfrom the carrier or
INTERMEDIATE APPELLATE COURT and PAULINO Philippines, received from Seaborne Trading limiting to a fixed amount the liability of the carrier shipper for loss of, or damage to, goods being
CUE, doing business under the name and style of Company in California a shipmentc o n s i g n e d for loss or damage to the cargo where its value is not transported under said bill, although that
"SEN HIAP HING," respondents. to Sen Hiap Hing. The shipper not declared in the bill. document may have been drawn up only by the
having declared the value of consignor andthe carrier without the intervention of
t h e shipment, no value was indicated in the BOL. the consignee.
The shipment was discharged in Manila,and while
awaiting transshipment to Cebu the cargo was
stolen and never recovered.T h e l o w e r c o u r t
Since the liability of a common carrier for loss of or
sentences Sea-land to pay Cue the damage to goods transported by it under a contract of
v a l u e o f t h e l o s t c a r g o , t h e unrealized carriage is governed by the laws of the country of
profit and attorneys fees. The CA affirmed the destination 12 and the goods in question were
decision, hence the petition. shipped from the United States to the Philippines, the
liability of petitioner Sea-Land to the respondent
consignee is governed primarily by the Civil Code,
The factual antecedents, for the most part, are not in
and as ordained by the said Code, suppletorily, in all
dispute.
matters not determined thereby, by the Code of
Commerce and special laws. 13 One of these
On or about January 8, 1981, Sea-Land Service, Inc. suppletory special laws is the Carriage of Goods by
(Sea-Land for brevity), a foreign shipping and Sea Act, U.S. Public Act No. 521 which was made
forwarding company licensed to do business in the applicable to all contracts for the carriage of goods by
Philippines, received from Seaborne Trading sea to and from Philippine ports in foreign trade by
Company in Oakland, California a shipment consigned Commonwealth Act No. 65, approved on October 22,
to Sen Hiap Hing the business name used by Paulino 1936. Sec. 4(5) of said Act in part reads:
Cue in the wholesale and retail trade which he
operated out of an establishment located on
(5) Neither the carrier nor the
Borromeo and Plaridel Streets, Cebu City.
ship shall in any event be or
become liable for any loss or
The shipper not having declared the value of the damage to or in connection with
shipment, no value was indicated in the bill of lading. the transportation of goods in an
The bill described the shipment only as "8 CTNS on 2 amount exceeding $500 per
SKIDS-FILES. 1 Based on volume measurements Sea- package lawful money of the
land charged the shipper the total amount of United States, or in case of goods
US$209.28 2 for freight age and other charges. The not shipped in packages, per
shipment was loaded on board the MS Patriot, a customary freight unit, or the
vessel owned and operated by Sea-Land, for equivalent of that sum in other
discharge at the Port Of Cebu. currency, unless the nature and
value of such goods have been
declared by the shipper before
The shipment arrived in Manila on February 12,
shipment and inserted in the bill
1981, and there discharged in Container No. 310996
of lading. This declaration, if
into the custody of the arrastre contractor and the
embodied in the bill of lading,
customs and port authorities. 3 Sometime between
shall be prima facie evidence,
February 13 and 16, 1981, after the shipment had
but shall not be conclusive on
been transferred, along with other cargoes to
the carrier.
Container No. 40158 near Warehouse 3 at Pier 3 in
South Harbor, Manila, awaiting trans-shipment to
Cebu, it was stolen by pilferers and has never been By agreement between the
recovered. 4 carrier, master, or agent of the
carrier, and the shipper another
maximum amount than that
On March 10, 1981, Paulino Cue, the consignee, made
mentioned in this paragraph
formal claim upon Sea-Land for the value of the lost
may be fixed: Provided, That
shipment allegedly amounting to P179,643.48. 5 Sea-
such maximum shall not be less
Land offered to settle for US$4,000.00, or its then
than the figure above named. In
Philippine peso equivalent of P30,600.00. asserting
no event shall the carrier be
that said amount represented its maximum liability
liable for more than the amount
for the loss of the shipment under the package
of damage actually sustained.
limitation clause in the covering bill of lading.6 Cue
rejected the offer and thereafter brought suit for
damages against Sea-Land in the then Court of First xxx xxx xxx
Instance of Cebu, Branch X.7 Said Court, after trial,
rendered judgment in favor of Cue, sentencing Sea-
Clause 22, first paragraph, of the long form bill of
Land to pay him P186,048.00 representing the
lading customarily issued by Sea-Land to its shipping
Philippine currency value of the lost cargo,
P55,814.00 for unrealized profit with one (1%) clients 14 is a virtual copy of the first paragraph of
percent monthly interest from the filing of the the foregoing provision. It says:
complaint until fully paid, P25,000.00 for attorney's
fees and P2,000.00 as litigation expenses.8
22. VALUATION. In the event of
any loss, damage or delay to or
in connection with goods
exceeding in actual value $500
per package, lawful money of the
United States, or in case of goods
not shipped in packages, per
customary freight unit, the value
of the goods shall be deemed to
be $500 per package or per
customary freight unit, as the
case may be, and the carrier's
liability, if any, shall be
determined on the basis of a
value of $500 per package or
customary freight unit, unless
the nature and a higher value
shall be declared by the shipper
in writing before shipment and
inserted in this Bill of Lading.

And in its second paragraph, the bill states:

If a value higher than $500 shag have been declared

in writing by the shipper upon delivery to the carrier
and inserted in this bill of lading and extra freight
paid, if required and in such case if the actual value of
the goods per package or per customary freight unit
shall exceed such declared value, the value shall
nevertheless be deemed to be declared value and the
carrier's liability, if any, shall not exceed the declared
value and any partial loss or damage shall be adjusted
pro rata on the basis of such declared value

the Court fails to fathom the reason or justification for

the Appellate Court's pronouncement in its appealed
Decision that the Carriage of Goods by Sea Act " ... has
no application whatsoever in this case. 15 Not only is
there nothing in the Civil Code which absolutely
prohibits agreements between shipper and carrier
limiting the latter's liability for loss of or damage to
cargo shipped under contracts of carriage; it is also
quite clear that said Code in fact has agreements of
such character in contemplation in providing, in its
Articles 1749 and 1750, that:

ART. 1749 A stipulation that the

common carrier's liability is
limited to the value of the goods
 appearing in the bill of lading,
unless the shipper or owner
declares a greater value, is
binding.

ART. 1750. A contract fixing the

sum that may be recovered by
the owner or shipper for the
loss, destruction, or
deterioration of the goods is
valid, if it is reasonable and just
under the circumstances, and
has been fairly and freely agreed
upon.

Nothing contained in section 4(5) of the Carriage of

Goods by Sea Act already quoted is repugnant to or
inconsistent with any of the just-cited provisions of
the Civil Code. Said section merely gives more flesh
and greater specificity to the rather general terms of
Article 1749 (without doing any violence to the plain
intent thereof) and of Article 1750, to give effect to
just agreements limiting carriers' liability for loss or
damage which are freely and fairly entered into.

It seems clear that even if said section 4(5) of the

Carriage of Goods by Sea Act did not exist, the validity
and binding effect of the liability limitation clause in
the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code
provisions. That said stipulation is just and
reasonable is arguable from the fact that it echoes Art.
1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the
bill of lading. To hold otherwise would amount to
questioning the justice and fairness of that law itself,
and this the private respondent does not pretend to
do.

the right of a party in the same situation as

respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only
by and between the shipper and the carrier, springs
from either a relation of agency that may exist
between him and the shipper or consignor, or his
status as a stranger in whose favor some stipulation is
made in said contract, and who becomes a party
thereto when he demands fulfillment of that
stipulation, in this case the delivery of the goods or
cargo shipped. In neither capacity can he assert
personally, in bar to any provision of the bill of lading,
the alleged circumstance that fair and free agreement
to such provision was vitiated by its being in such fine
print as to be hardly readable. Parenthetically, it may
be observed that in one comparatively recent
case 16where this Court found that a similar package
limitation clause was "(printed in the smallest type on
the back of the bill of lading, it nonetheless ruled that
the consignee was bound thereby on the strength of
authority holding that such provisions on liability
limitation are as much a part of a bill of lading as
though physically in it and as though placed therein
by agreement of the parties.

There can, therefore, be no doubt or equivocation

about the validity and enforceability of freely-agreed-
upon stipulations in a contract of carriage or bill of
lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value
and inserts it into said contract or bill. This pro
position, moreover, rests upon an almost uniform
weight of authority. 17

The issue of alleged deviation is also settled by Clause

13 of the bill of lading which expressly authorizes
trans-shipment of the goods at any point in the
voyage in these terms:

13. THROUGH CARGO AND

TRANSSHIPMENT. The carrier
or master, in the exercise of its
or his discretion and although
transshipment or forwarding of
the goods may not have been
contemplated or provided for
herein, may at port of discharge
or any other place whatsoever
transship or forward the goods
or any part thereof by any
means at the risk and expense of
the goods and at any time,
whether before or after loading
on the ship named herein and by
any route, whether within or
outside the scope of the voyage
or beyond the port of discharge
or destination of the goods and
without notice to the shipper or
consignee. The carrier or master
may delay such transshipping or
forwarding for any reason,
including but not limited to
awaiting a vessel or other means
of transportation whether by the
carrier or others.
 Said provision obviates the necessity to offer any
other justification for offloading the shipment in
question in Manila for transshipment to Cebu City, the
port of destination stipulated in the bill of lading.
Nonetheless, the Court takes note of Sea-Land's
explanation that it only directly serves the Port of
Manila from abroad in the usual course of voyage of
its carriers, hence its maintenance of arrangements
with a local forwarder. Aboitiz and Company, for
delivery of its imported cargo to the agreed final
point of destination within the Philippines, such
arrangements not being prohibited, but in fact
recognized, by law. 18
MARITIME AGENCIES & SERVICES, INC., petitioner, Transcontinental Fertilizer Company of London who, in this kind of charter, shall be liable for the A voyage charter being a private carriage, the parties
vs. chartered from Hongkong Island Shipping Company cargo. may freely contract respecting liability for damage to
COURT OF APPEALS, and UNION INSURANCE of Hongkong the motor vessel named "Hongkong the goods and other matters. The basic principle is
SOCIETY OF CANTON, LTD., respondents. Island" for the shipment of 8073.35 MT (gross) that "the responsibility for cargo loss falls on the one
bagged urea from Novorossisk, Odessa, USSR to the who agreed to perform the duty involved" in
Philippines, the parties signing for this purpose a accordance with the terms of most voyage charters. 14
G.R. No. 77674 July 12, 1990
Uniform General Charter dated August 9, 1979. 1
As regards the goods damaged or lost during
UNION INSURANCE SOCIETY OF CANTON,
Of the total shipment, 5,400.04 MT was for the unloading, the charterer is liable therefor, having
LTD., petitioner,
account of Atlas Fertilizer Company as consignee, assumed this activity under the charter party "free of
vs.
3,400.04 to be discharged in Manila and the expense to the vessel." The difficulty is that
COURT OF APPEALS, HONGKONG ISLAND CO.,
remaining 2,000 MT in Cebu. 2 The goods were Transcontinental has not been impleaded in these
LTD., MARITIME AGENCIES & SERVICES, INC.,
insured by the consignee cases and so is beyond our jurisdiction. The liability
and/or VIVA CUSTOMS BROKERAGE, respondents.
with the Union Insurance Society of Canton, Ltd. for imposable upon it cannot be borne by Maritime
P6,779,214.00 against all risks. 3 which, as a mere agent, is not answerable for injury
caused by its principal. It is a well-settled principle
that the agent shall be liable for the act or omission of
Maritime Agencies & Services, Inc. was appointed as
the principal only if the latter is undisclosed. 19
the charterer's agent and Macondray Company, Inc.
as the owner's agent.4
But we do agree that the period for filing the claim is
one year, in accordance with the Carriage of Goods by
The vessel arrived in Manila on October 3, 1979, and
Sea Act. This was adopted and embodied by our
unloaded part of the consignee's goods, then
legislature in Com. Act No. 65 which, as a special law,
proceeded to Cebu on October 19, 1979, to discharge
prevails over the general provisions of the Civil Code
the rest of the cargo. On October 31, 1979, the
on prescription of actions. Section 3(6) of that Act
consignee filed a formal claim against Maritime, copy
provides as follows:
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 In any event, the carrier and the
another formal claim, this time against Viva Customs ship shall be discharged from all
Brokerage, for the amount of P36,030.23, liability in respect of loss or
representing the value of 574 bags of net unrecovered damage unless suit is brought
spillage. 6 within one year after delivery of
the goods or the date when the
goods should have been
These claims having been rejected, the consignee then
delivered; Provided, that if a
went to Union, which on demand paid the total
notice of loss for damage; either
indemnity of P113,123.86 pursuant to the insurance
apparent or concealed, is not
contract. As subrogee of the consignee, Union then
given as provided for in this
filed on September 19, 1980, a complaint for
section, that fact shall not effect
reimbursement of this amount, with legal interest and
or prejudice the right of the
attorney's fees, against Hongkong Island Company,
shipper to bring suit within one
Ltd., Maritime Agencies & Services, Inc. and/or Viva year after the delivery of the
Customs Brokerage. 7 On April 20, 1981, the goods or the date when the
complaint was amended to drop Viva and implead goods should have been
Macondray Company, Inc. as a new defendant. 8 delivered.

trial court rendered judgment holding the defendants This period was applied by the Court in the case
liable of Union Carbide, Philippines, Inc. v. Manila Railroad
Co., 17 where it was held:
CA: the decision appealed from is modified, finding
the charterer Transcontinental Fertilizer Co., Ltd. Under the facts of this case, we
represented by its agent Maritime Agencies & held that the one-year period
Services, Inc. liable for the amount of P87,163.54 plus was correctly reckoned by the
interest at 12% plus attorney's fees of P1,000.00. trial court from December 19,
Defendant Hongkong Island Co., Ltd. represented by 1961, when, as agreed upon by
Macondray Co., Inc. are accordingly exempted from the parties and as shown in the
any liability. 10 tally sheets, the cargo was
discharged from the carrying
vessel and delivered to the
Maritime and Union filed separate motions for
Manila Port Service. That one-
reconsideration which were both denied. The
year period expired on
movants are now before us to question the decision of
December 19, 1962. Inasmuch
the respondent court.
as the action was filed on
December 21, 1962, it was
In G.R. No. 77638, Maritime pleads non-liability on barred by the statute of
the ground that it was only the charterer's agent and limitations.
should not answer for whatever responsibility might
have attached to the principal. It also argues that the
The one-year period in the cases at bar should
respondent court erred in applying Articles 1734 and
commence on October 20, 1979, when the last item
1735 of the Civil Code in determining the charterer's
was delivered to the consignee. 18 Union's complaint
liability.
was filed against Hongkong on September 19, 1980,
but tardily against Macondray on April 20, 1981. The
In G.R. No. 77674, Union asks for the modification of consequence is that the action is considered
the decision of the respondent court so as to make prescribed as far as Macondray is concerned but not
Maritime solidarily and solely liable, its principal not against its principal, which is what matters anyway.
having been impleaded and so not subject to the
jurisdiction of our courts.

These two cases were consolidated and given due

course

Hong Kong Government Supplies Department o Whether or not the action is barred by prescription Sec. 3(6) of the COGSA states that the carrier and the
contracted Mayer Steel Pipe Corporation to ship shall be discharged from all liability for loss or
manufacture and supply various steel pipes and damage to the goods if no suit is filed within one year
fittings. Prior to the shipping, Mayer insured these after delivery of the goods or the date when they
pipes and fittings against all risks with South Sea should have been delivered. Under this provision,
Surety and Insurance Co., Inc. and Charter Insurance only the carrier’s liability is extinguished if no suit is
Corp., with Industrial Inspection Inc. appointed as brought within one year. But the liability of the
third-party inspector. insurer is not extinguished because the insurer’s
liability is based not on the contract of carriage but on
After examining the pipes and fittings, Industrial the contract of insurance.
Inspection certified that they are in good order
condition. However, when the goods reached Hong An insurance contract is a contract whereby one
Kong, it was discovered that a substantial portion party, for a consideration known as the premium,
thereof was damaged. agrees to indemnify another for loss or damage which
he may suffer from a specified peril. An “all risks”
The trial court found in favor of the insured. However, insurance policy covers all kinds of loss other than
when the case was elevated to the CA, it set aside the those due to willful and fraudulent act of the insured.
decision of the trial court and dismissed the Thus, when private respondents issued the “all risks”
complaint on the ground of prescription. It held that policies to Mayer, they bound themselves to
the action was barred under Sec. 3(6) of the Carriage indemnify the latter in case of loss or damage to the
of Goods by Sea Act (COGSA) since it was filed only on goods insured. Such obligation prescribes in ten
April 17, 1986, more than two years from the time the years, in accordance with Article 1144 of the New
goods were unloaded from the vessel. Civil Code