1

ABOITIZ SHIPPING CORP VS GENERAL FIRE AND LIFE ASSURANCE CORP

FACTS:

Aboitiz Shipping is the owner of M/V P. Aboitiz, a vessel w/c sank on a voyage from Hongkong to the
Philippines. This sinking of the vessel gave rise to the filing of several suits for recovery of the lost
cargo either by the shippers their successors-in-interest, or the cargo insurers like General Accident
(GAFLAC).

Board of Marine Inquiry (BMI), on its initial investigation found that such sinking was due to force
majeure and that subject vessel, at the time of the sinking was seaworthy. The trial court rules against
the carrier on the ground that the loss did not occur as a result of force majeure. This was affirmed
by the CA and ordered the immediate execution of the full judgment award.

However, other cases have resulted in the finding that vessel was seaworthy at the time of the
sinking, and that such sinking was due to force majeure.

Due to these different rulings, Aboitiz seeks a pronouncement as to the applicability of the doctrine of
limited liability on the totality of the claims vis a vis the losses brought about by the sinking of the
vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of maritime law.

Aboitiz argued that the Limited Liability Rule warrants immediate stay of execution of judgment to
prevent impairment of other creditors' shares.

ISSUE: Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime
law should apply in this and related cases.

RULING: The SC ruled in the affirmative.

The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of
the conditions and risks attending maritime trade in its earliest years when such trade was replete
with innumerable and unknown hazards since vessels had to go through largely uncharted waters to
ply their trade. It was designed to offset such adverse conditions and to encourage people and
entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding.
Thus, the liability of the vessel owner and agent arising from the operation of such vessel were
confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to
induce capitalists into effectively wagering their resources against the consideration of the large
profits attainable in the trade.

The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce,
particularly in Articles 587, 590, and 837, hereunder quoted in toto:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but
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he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it
may have earned during the voyage.

Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part
of the vessel belonging to him.

Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on collisions),
shall be understood as limited to the value of the vessel with all its appurtenances and freightage
served during the voyage.

The only time the Limited Liability Rule does not apply is when there is an actual finding of
negligence on the part of the vessel owner or agent.

ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case.

RULING 2: The SC ruled in the negative.

In its Decision, the trial court merely held that:

. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo
were not lost due to fortuitous event or force majeure.

Decisions in other cases affirmed the factual findings of the trial court, adding that the cause of the
sinking of the vessel was because of unseaworthiness due to the failure of the crew and the master to
exercise extraordinary diligence. Indeed, there appears to have been no evidence presented
sufficient to form a conclusion that Aboitiz the shipowner itself was negligent, and no tribunal,
including this Court will add or subtract to such evidence to justify a conclusion to the contrary.

The findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness"
clearly did not pertain to the structural condition of the vessel which is the basis of the BMI's findings,
but to the condition it was in at the time of the sinking, which condition was a result of the acts of the
captain and the crew.

The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of
shareholders to limited liability under our corporation law. Both are privileges granted by statute, and
while not 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
 3

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.

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.
 4

CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR
OLIT

G.R. No. 74811 September 30, 1988

FACTS:

Petitioner contracted with the herein private respondent to deliver 1,000 sacks of copra, valued at
P101,227.40, on board the vessel M/V Luzviminda I owned by the latter. However it did not reach its
destination, the vessel capsized and sank with all its cargo.

Petitioner instituted a complaint against private respondent for breach of contract incurring damages.

Private respondents defense is that even assuming that the alleged cargo was truly loaded aboard
their vessel, their liability had been extinguished by reason of the total loss of said vessel.

RTC rendered judgment in favor of Chua Yek Hong however CA reversed the decision by applying
Article 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941])
and held that private respondents' liability, as ship owners, for the loss of the cargo is merely co-
extensive with their interest in the vessel such that a total loss thereof results in its extinction.

ISSUE:

Whether or not respondent Appellate Court erred in applying the doctrine of limited liability under
Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.

HELD:

As this Court held:

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If the ship owner or agent may in any way be held civilly liable at all for injury to or death of
passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability
is merely co-extensive with his interest in the vessel such that a total loss thereof results in its
extinction. (Yangco vs. Laserna, et al., supra).

The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship
owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is
insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there
is nothing in the records to show that the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent negligence with the captain of the vessel. The
judgment sought to be reviewed is hereby AFFIRMED
 6

MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon. Judge
AMANTE PURISIMA,petitioners, vs. COURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION, respondents. G.R. No. 92735 June 8, 2000

ALLIED GUARANTEE INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS, Presiding

Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING CORPORATION,respondents. G.R. No. 94867
June 8, 2000

EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, Former First

Division Composed of Hon. Justices RODOLFO NOCON, PEDRO RAMIREZ, and JESUS
ELBINIAS and ABOITIZ SHIPPING CORPORATION, respondents. G.R. No. 95578 June 8, 2000

These are three consolidated cases. All cases arose from the loss of cargoes of various shippers
when the M/V P. Aboitiz, a common carrier owned and operated by Aboitiz, sank on her
voyage from Hong Kong to Manila on October 31, 1980. The claims numbered one hundred and
ten (110) for the total amount of P41,230,115.00 which is almost thrice the amount of the insurance
proceeds of P14,500,000.00 plus earned freight of 500,000.00 according to Aboitiz.

Facts: The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980
after securing a departure clearance from the Hong Kong Port Authority. The departure was delayed
for two hours because he (Capt. Racines) was observing the direction of the storm that crossed the
Bicol Region. He proceeded with the voyage only after being informed that the storm had abated. The
M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980.

Justo Iglesias, meteorologist of PAGASA, testified in both cases that during the inclusive dates of
October 28-31, 1980, a stormy weather condition prevailed within the Philippine area of responsibility,
particularly along the sea route from Hong Kong to Manila, because of tropical depression
"Yoning."

Petitioners Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost
due to force majeure, relying mainly on the marine protest filed by Capt. Racines under scale No. 4
that describes the sea condition as "moderate breeze," and "small waves becoming longer,
fairly frequent white horses."

Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and
were consequently subrogated to their rights, interests and actions against Aboitiz. Because Aboitiz
refused to compensate Monarch, it filed two complaints against Aboitiz. In its answer with
counterclaim, Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo
vessel was due to force majeure or an act of God.

Aboitiz had repeatedly failed to appear in court, it then allowed Monarch and Tabacalera to present
evidence ex-parte. The survey established that on her voyage to Manila from Hong Kong, the
vessel did not encounter weather so inclement that Aboitiz would be exculpated from liability
for losses.The survey added that the seaworthiness of the vessel was in question especially
because the breaches of the hull and the serious flooding of two (2) cargo holds occurred
simultaneously in "seasonal weather."
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In due course, the trial court rendered judgment against Aboitiz. It was appealed to the Court of
Appeals but the appeal was dismissed for its failure to file appellant's brief.

Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted the
motion and issued separate writs of execution. However, Aboitiz, invoking the real and
hypothecary nature of liability in maritime law, filed an urgent motion to quash the writs of
execution.

According to Aboitiz, since its liability is limited to the value of the vessel which was
insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify Monarch and
Tabacalera ahead of the other claimants would be prejudicial to the latter.

Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order, the same was granted by the court.

Issue:Whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is
entitled to the benefit of the limited liability rule.

Held:NO. (PAUL: The discussion in this case about the limited liability rule is basically the same as
whats in the book of Aquino, the cases cited in the case at bar were the same cases cited in the
book)

Rule on Limited Liability

The petitioners assert in common that the vessel M/V P. Aboitiz did not sink by reason offorce
majeure but because of its unseaworthiness and the concurrent fault and/or negligence of Aboitiz, the
captain and its crew, thereby barring Aboitiz from availing of the benefit of the limited liability rule.

In Yangco v. Laserna,this Court elucidated on the import of Art. 587 as follows:

The provision accords a shipowner or agent the right of abandonment; and by necessary implication,
his liability is confined to that which he is entitled as of right to abandon-"the vessel with all her
equipments and the freight it may have earned during the voyage." It is true that the article appears to
deal only with the limited liability of the shipowners or agents for damages arising from the
misconduct of the captain in the care of the goods which the vessel carries, but this is a mere
deficiency of language and in no way indicates the true extent of such liability. The consensus of
authorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit
of limited liability therein provided for, applies in all cases wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain.

"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's or
agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. The total destruction of the vessel extinguishes maritime liens because there
is no longer any res to which it can attach.

In cases where the ship owner is likewise to be blamed, Article 587 does not apply. Such a situation
will be covered by the provisions of the Civil Code on common carriers.
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A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would absolve
Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which provides in part
that common carriers are responsible for the loss, destruction, or deterioration of the goods they
carry, unless the same is due to flood, storm, earthquake, lightning, or other natural disaster or
calamity. On the other hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render inapplicable the
rule on limited liability. These issues are therefore ultimately questions of fact which have been
subject of conflicting determinations by the trial courts, the Court of Appeals and even this Court.

The Court of Appeals brushed aside the issue of Aboitiz' negligence and/or fault and proceeded to
allow the application of the limited liability rule "to accomplish the aims of justice." It elaborated thus:
"To execute the judgment in this case would prejudice the substantial right of other claimants
who have filed suits to claim their cargoes that was lost in the vessel that sank and also
against the petitioner to be ordered to pay more than what the law requires."

After reviewing the records of the instant cases, we categorically state that by the facts on record, the
M/V P. Aboitiz did not go under water because of the storm "Yoning."Captain Racines also testified in
open court that the ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning"
when it sank.

On the matter of Aboitiz' negligence, we adhere to our ruling in Aboitiz Shipping Corporation v. Court
of Appeals, thatfound Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been
concurrently negligent.The said survey established that the cause of the sinking of the vessel was
the leakage of water into the M/V P. Aboitiz.

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

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
 9

completed its action earlier than the rest.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.
 10

The Phil. American Gen. Insurance Co., Inc.

vs Court of Appeals and Felman Shipping Lines

Ponente: Bellosillo

Facts:

July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500 cases of
1-liter Coca-Cola soft drink bottles to be transported to Zamboanga City to Cebu. The shipment was
insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim with respondent
Felman for recovery of damages. Felman denied thus prompted cocacola to file an insurance claim
with Philamgen. Philamgen later on claimed its right of subrogation against Felman which disclaimed
any liability for the loss.

Philamgen alleged that the sinking and loss were due to the vessel's unseaworthiness, that the vessel
was improperly manned and its officers were grossly negligent. Felman filed a motion to dismiss
saying that there is no right of subrogation in favor of Philamgen was transmitted by the shipper.

RTC dismissed the complaint of Philamgen. CA set aside the dismissal and remanded the case to the
lower court for trial on the merits. Felman filed a petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy when it left the port
of Zamboanga as evidenced by the certificate issued by the Phil. Coast Guard and the ship owners
surveyor. Thus, the loss is due to a fortuitous event, in which, no liability should attach unless there is
stipulation or negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo for being top-heavy
and the cocacola bottles were also improperly stored on deck. Nonetheless, the CA denied the claim
of Philamgen, saying that Philamgen was not properly subrogated to the rights and interests of the
shipper plus the filing of notice of abandonment had absolved the ship owner from liability under the
limited liability rule.
 11

Issues: (a) Whether the vessel was seaworthy, (b) whether limited liability rule should apply and (c)
whether Philamgen was properly subrogated to the rights against Felman.

Ruling:

(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc., is
the vessel's being top-heavy. Evidence shows that days after the sinking coca-cola bottles were
found near the vicinity of the sinking which would mean that the bottles were in fact stowed on deck
which the vessel was not designed to carry substantial amount of cargo on deck. The inordinate
loading of cargo deck resulted in the decrease of the vessel's metacentric height thus making it
unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of the
captain in the care of the goods. This liability however can be limited through abandonment of the
vessel, its equipment and freightage. Nonetheless, there are exceptions wherein the ship agent could
still be held answerable despite the abandonment, as where the loss or injury was due to the fault of
the ship owner and the captain. The international rule is that the right of abandonment of vessels, as
legal limitation of liability, does not apply to cases where the injury was occasioned by the fault of the
ship owner. Felman was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the
vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the
face of the policy. However, the implied warranty of seaworthiness can be excluded by terms in
writing in the policy of the clearest language. The marine policy issued by Philamgen to cocacola has
dispensed that the "seaworthiness of the vessel as between the assured and the underwriters in
hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty of
seaworthiness is fulfilled and (2) the risk of unseaworthiness is assumed by the insurance company.
This waiver clause would mean that Philamgen has accepted the risk of unseaworthiness, therefore
Philamgen is liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
 12

the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the insurance company of the insurance claim.
It accrues simply upon payment by the insurance company of the insurance claim.

Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the
former the right to bring an action as subrogee against FELMAN. Having failed to rebut the
presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft
drink bottles is inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay
petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.
 13

Rodolfo R. Vasquez v. Court of Appeals
G.R. No. 118971
September 15, 1999

Facts:
Petitioner Rodolfo R. Vasquez is a resident of the Tondo Foreshore Area. Sometime in April 1986, he
and some 37 families from the area went to see then National Housing Authority (NHA) General
Manager Lito Atienza regarding their complaint against their Barangay Chairman, Jaime Olmedo, a
public official. After their meeting with Atienza and other NHA officials, petitioner and his companions
were met and interviewed by newspaper reporters at the NHA compound concerning their complaint.
The next day, April 22, 1986, the following exerpts of the news article appeared in the newspaper Ang
Tinig ng Masa. In the article, pulished were supposed allegations by Vasquez that (1)
nakipagsabwatan umano si Chairman Jaime Olmedo upang makamkam ang may 14 na lote ng
lupa; (2) ang mga lupa ay ilegal na patituluhan, nagawa ito ni Olmedo sa pakikipagsabwatan sa mga
project manager at legal officers ng NHA; (3) kasangkot din umano si Olmedo sa mga ilegal na
pasugalan sa naturang lugar at maging sa mga nakawan ng manok. x x x
Based on the newspaper article, Olmedo filed a complaint for libel against petitioner alleging that the
latters statements cast aspersions on him and damaged his reputation.
On May 28, 1992, the trial court rendered judgment finding petitioner guilty of libel and sentencing
him to pay a fine of P1,000.00. On appeal, the Court of Appeals affirmed in toto. Hence, this petition
for review.

Issue:
Whether or not the atual malice standard in New York Times versus Sullivan is to be applied in
prosecutions for criminal libel.

Held:
The standard of actual malice in New York Times versus Sullivan is to be applied in criminal
prosecutions for libel.
For that matter, even if the defamatory statement is false, no liability can attach if it relates to official
conduct, unless the public official concerned proves that the statement was made with actual malice
that is, with knowledge that it was false or with reckless disregard of whether it was false or not.
In this case, the prosecution failed to prove not only that the charges made by petitioner were false
but also that petitioner made them with knowledge of their falsity or with reckless disregard of whether
they were false or not.
A rule placing on the accused the burden of showing the truth of allegations of official misconduct
and/or good motives and justifiable ends for making such allegations would not only be contrary to
Art. 361 of the Revised Penal Code. It would, above all, infringe on the constitutionally guaranteed
freedom of expression.

Libel was used as a form of harassment:

Instead of the claim that petitioner was politically motivated in making the charges against
 14

complainant, it would appear that complainant filed this case to harass petitioner.
It is curious that the ones most obviously responsible for the publication of the allegedly offensive
news report, namely, the editorial staff and the periodical itself, were not at all impleaded. The charge
was leveled against the petitioner and, "curiouser" still, his clients who have nothing to do with the
editorial policies of the newspaper.
 15

DIONISIA ABUEG, ET AL.,vs. BARTOLOME SAN DIEGO

G.R. No. L-773

December 17, 1946

FACTS:

1. Dionisia, Marciana and Rosario are widows of machinists working in the motor ships/fishing
boats (San Diego II and Bartolome S), who perished when the boats sank (they were caught in
a typhoon on Oct. 1, 1941 while around Mindoro Island,filed a case against the owner, San
Diego for compensation

2. CFI Manila granted the petition, and awarded compensation provided for in the Workmens
Compensation Act. San Diego appealed

3. CA forwarded to SC, since there were no questions of fact.

4. Claims of the owner:

a. Article 587-Code of Commerce =if the vessel together with all her tackle and freight
money earned during the voyage are abandoned, the agent's liability to third persons for
tortious acts of the captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil., 330)

b. Article 837- CoC= in cases of collision, the ship owners' liability is limited to the value of
the vessel with all her equipment and freight earned during the voyage (Philippine
Shipping Company vs. Garcia, 6 Phil., 281)

c. Article 643-CoC= if the vessel and freight are totally lost, the agent's liability for wages
of the crew is extinguished

5.

ISSUE/S:

W/N the owner of the ships which sank as a result of a typhoon is liable for compensation? YES

HELD:
 16

Provisions of the Code of Commerce invoked have no room in the application of the
Workmen's Compensation Act (WCA) which seeks to improve, and aims at the amelioration of,
the condition of laborers and employees.

It is not the liability for the damage or loss of the cargo or injury to, or death of, a passenger by
or through the misconduct of the captain or master of the ship; nor the liability for the loss of
the ship as result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or inflicted
upon them, while engaged in the performance of their work or employment, or the heirs and
dependents and laborers and employees in the event of death caused by their employment.

Such compensation has nothing to do with the provisions of the Code of Commerce regarding
maritime commerce. It is an item in the cost of production, which must be included in the
budget of any well-managed industry.

The WCA was enacted to abrogate the common law and our Civil Code upon culpable acts
and omissions, and that the employer need not be guilty of neglect or fault, in order that
responsibility may attach to him.

o The rights and responsibilities defined in WCA must be governed by its own peculiar
provisions in complete disregard of other similar mercantile law. If an accident is
compensable under the WCA, it must be compensated even when the workman's right
is not recognized by or is in conflict with other provisions of the Civil Code or the Code
of Commerce

Note: The new point raised by the owner(the motorboats engaged in fishing could not be deemed to
be in the coastwise and interisland trade, as contemplated in section 38 of the Workmen's
Compensation Act (No. 3428), as amended by Act no. 3812) was inconsistent with the provisions
they invoked, since CoC would then not apply to them.

But even if so true, owner is still liable since the deceasedofficers of the motor ships in question were
still industrial employees within the purview of section 39, paragraph (d), as amended, for industrial
employment "includes all employment or work at a trade, occupation or profession exercised by an
employer for the purpose of gain."

BUT-BUT the term "coastwise and interisland trade" cannot have a narrow meaning as to confine it to
the carriage for hire of passengers and/or merchandise on vessels between ports and places in the
Philippines, because while fishing is an industry, if the catch is brought to a port for sale, it is at the
same time a trade.
 17

Luzon Stevedoring Corporation vs. Court of Appeals

(156 SCRA 169)

Facts: A maritime collision occurred between the tanker CAVITE owned by LSCO and MV Fernando
Escano (a passenger ship) owned by Escano, as a result the passenger ship sunk. An action in
admiralty was filed by Escano against Luzon. The trial court held that LSCO Cavite was solely to
blame for the collision and held that Luzons claim that its liability should be limited under Article 837
of the Code of Commerce has not been established. The Court of Appeals affirmed the trial court.
The SC also affirmed the CA. Upon two motions for reconsideration, the Supreme Court gave course
to the petition.

Issue: Whether or not in order to claim limited liability under Article 837 of the Code of Commerce, it
is necessary that the owner abandon the vessel

Held: Yes, abandonment is necessary to claim the limited liability wherein it shall be limited to the
value of the vessel with all the appurtenances and freightage earned in the voyage. However, if the
injury was due to the ship owners fault, the ship owner may not avail of his right to avail of limited
liability by abandoning the vessel.

The real nature of the liability of the ship owner or agent is embodied in the Code of Commerce.
Articles 587, 590 and 837 are intended to limit the liability of the ship owner, provided that the owner
or agent abandons the vessel. Although Article 837 does not specifically provide that in case of
collision there should be abandonment, to enjoy such limited liability, said article is a mere
amplification of the provisions of Articles 587 and 590 which makes it a mere superfluity.

The exception to this rule in Article 837 is when the vessel is totally lost in which case there is no
vessel to abandon, thus abandonment is not required. Because of such loss, the liability of the owner
or agent is extinguished. However, they are still personally liable for claims under the Workmens
Compensation Act and for repairs on the vessel prior to its loss.

In case of illegal or tortious acts of the captain, the liability of the owner and agent is subsidiary. In
such cases, the owner or agent may avail of Article 837 by abandoning the vessel. But if the injury is
caused by the owners fault as where he engages the services of an inexperienced captain or
engineer, he cannot avail of the provisions of Article 837 by abandoning the vessel. He is personally
liable for such damages.
 18

In this case, the Court held that the petitioner is a t fault and since he did not abandon the vessel, he
cannot invoke the benefit of Article 837 to limit his liability to the value of the vessel, all
appurtenances and freightage earned during the voyage.
 19

Yangco vs. Laserna

(73 Phil 330)

Facts: On the afternoon of May 26, 1927, the steamer SS Negros left the port of Romblon on its
return trip to Manila. Typhoon signal no. 2 was then up and in fact, the passengers duly advised the
captain before sailing. The boat was overloaded. After 2 hours of sailing, the boat encountered strong
winds and rough seas between the islands of Banton and Simara. While in the act of maneuvering,
the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the
passengers died on the mishap. Civil actions were instituted in the CFI of Capiz, the petitioner sought
to abandon the vessel to the plaintiffs in three cases.

Issue: Whether the shipowner or agent is liable for damages for the consequent death of its
passengers notwithstanding the total loss of the vessel?

Held: The petitioner is absolved from all complaints.

Under Article 587 the ship agent shall also be civilly liable for indemnities in favor of third persons
which arise from the conduct of the captain in the vigilance over the goods which the vessels carried;
BUT he may exempt himself therefrom by abandoning the vessel with all her equipment and the
freight he may have earned during the voyage.

Whether the abandonment of the vessel sought by the petitioner in the case was in accordance with
the law or not, is immaterial. The vessel having totally perished, any act of abandonment would be
idle ceremony.

NO VESSEL, NO LIABILITY.

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 20

Yu Con vs Ipil

FACTS: (chronological order)

The purpose of the action brought in these proceedings is to enable the plaintiff to recover from the
defendants jointly and severally the sum of P450, which had been delivered by the plaintiff to the first
and third of the above-named defendants, master and supercargo, respectively, of a banca named
Maria belonging to the second defendant, to be carried, together with various merchandise belonging
to the plaintiff, from the port of Cebu to the town of Catmon of the Province of Cebu.

By virtue of the contract executed between the said second defendant and the plaintiff, the money and
merchandise were to be transported by the said craft between the points above-named in
consideration of the payment of a certain sum for each voyage. The money disappeared from said
craft during the night of October 18, 1911, while it was anchored in the port of Cebu and ready to sail
for its destination, Catmon, and was not afterwards found. The plaintiff based his action on the charge
that the disappearance of said sum.

The defendants, besides denying the allegations of the complaint, pleaded in special defense that the
plaintiff, at his own expense and under his exclusive responsibility, chartered the said banca, the
property of the defendant Lauron, for the fixed period of three days, at the price of P10 per diem, and
that, through the misfortune, negligence, or abandonment of the plaintiff himself, the loss complained
of occurred, while said banca was at anchor in the port of Cebu, and was caused by theft committed
by unknown thieves. They further alleged that said defendant Lauron, the owner of the banca merely
placed this craft at the disposal of the plaintiff for the price and period agreed upon, and did not go
with the banca on its voyage from Catmon to Cebu.

At the termination of the trial, the court, in view of the evidence adduced, held that there was no room
to doubt that the sole cause of the disappearance of the money from the said banca was the
negligence of the master and the supercargo, the defendants Ipil and Solamo, respectively, and that
the defendant NarcisoLauron was responsible for that negligence, as owner of the banca, pursuant to
articles 586, 587, and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover
the amount lost.
 21

ISSUE(S): Are defendants liable for the loss of the plaintiff? Is Lauron, shipowner, liable for the
negligence of his crew and captain?

HELD:Yes

RATIO:The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San
Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a
shop, or small store, situated in the town of Catmon, of said province, had several times chartered
from the defendant NarcisoLauron, a banca named Maria belonging to the latter, of which GlicerioIpil
was master and Justo Solamo, supercargo, for the transportation of certain merchandise and some
money to and from the said town and the port of Cebu, that, on or about the 17th of October, 1911,
the plaintiff chartered the said banca from the defendant Lauron for the transportation of various
merchandise from the port of Cebu to Catmon, at the price of P45 for the round trip, which
merchandise was loaded on board the said craft which was then at anchor in front of one of the
graded fills of the wharf of said port; that in the afternoon of the following day, he delivered to the other
two defendants, Ipil, and Solamo, master and supercargo, respectively, of the aforenamedbanca, the
sum of P450, which was in a trunk belonging to the plaintiff and was taken charge of by said two
defendants, who received this money from the plaintiff, for the purpose of its delivery to the latters
shop in Catmon for the purchase of corn in this town; that while the money was still in said trunk
aboard the vessel, on the night of the said 18th of October, the time scheduled for the departure of the
Maria from the port of Cebu, said master and said supercargo transferred the P450 from the plaintiffs
trunk, where it was, to theirs, which was in a stateroom of the banca, from which stateroom both the
trunk and the money disappeared during that same night, and that the investigations, made to
ascertain their whereabouts, produced no result.

It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the
P450, the property of the plaintiff, which, were in the possession of the defendants, the master and the
supercargo of the banca Maria, occurred through the manifest fault and negligence of said
defendants, for, not only did they fail to take the necessary precautions in order that the stateroom
containing the trunk in which they kept the money should be properly guarded by members of the
crew and put in such condition that it would be impossible to steal the trunk from it or that persons not
belonging to the vessel might force an entrance into the stateroom from the outside, but also they did
not expressly station some person inside the stateroom for the guarding and safe-keeping of the trunk,
for it was not proven that the cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated,
nor that the other cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted the
statements made by the two defendants on this point.

It is unquestionable that the defendants GlicerioIpil and Justo Solamo were the carriers of the said
P450 belonging to the plaintiff, and that they received this sum from the latter for the purpose of
delivering it to the store of the town of Catmon, to which it had been consigned. Under such
circumstances, said defendants were the depositories of the money.
 22

The said two defendants being the depositaries of the sum in question, and they having failed
to EXERCISE for its safe-keeping the diligence required by the nature of the obligation assumed by
them and by the circumstances of the time and the place, it is evident that, in pursuance of the
provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as prescribed in
article 1770, of the Civil Code, they are liable for its loss or misplacement and must restore it to the
plaintiff, together with the corresponding interest thereon as an indemnity for the losses and damages
caused him through the loss of the said sum.

With respect to the other defendant, NarcisoLauron, as he was the owner of the vessel in which the
loss or misplacement of the P450 occurred, of which vessel, as aforestated, GlicerioIpil was master
and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the positions they
held, by the defendant himself, and, as the aforementioned sum was delivered to the said master, Ipil,
and the merchandise to be transported by means of said vessel from the port of Cebu to the town of
Catmon was laden by virtue of a contract executed by and between the plaintiff and the owner of the
vessel, NarcisoLauron, it behooves us to examine whether the latter, also, should be held to be liable,
as requested by the plaintiff in his complaint.

For legal purposes, that is, for the determination of the nature and effect of the relations created
between that plaintiff, as owner of the merchandise laden on said craft and of the money that was
delivered to the master, Ipil, and the defendant Lauron, as owner of the craft, the latter was a vessel,
according to the meaning and construction given to the word vessel in the Mercantile Code, in treating
of maritime commerce, under Title 1, Book 3.

"The word vessel serves to designate every kind of craft by whatever particular or technical name it
may now be known or which nautical advancements may give it in the future." (Commentaries on the
Code of Commerce, in the General Review of Legislation and Jurisprudence, founded by D. Jose
Reus y Garcia, Vol. 2, p. 136.)

According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft,
considering solely the hull.

Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the words
"ship" and "vessels," says, in his work aforecited, that these terms designate every kind of craft, large
or small, whether belonging to the merchant marine or to the navy. And referring to their juridical
meaning, he adds: "This does not differ essentially from the grammatical meaning; the words ship
and vessel also designate every craft, large or small, so long as it be not an accessory of another,
such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft
intended for ocean or for coastwise navigation, as WELL as the floating docks, mud lighters,
dredges, dumpscows or any other floating apparatus used in the service of an industry or in that of
maritime commerce. . . ." (Vol. 1, p. 389.)
 23

According to the foregoing definitions, then, we hold that the banca called Maria, chartered by the
plaintiff Yu Con from the defendant NarcisoLauron, was a "vessel", pursuant to the meaning this word
has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force.

GlicerioIpil, the master of the said banca, Maria, must also be considered as its captain, in the legal
acceptation of this word.

The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624,
provided that the agent or shipowner should not be liable for any excesses which, during the
navigation, might be committed by the captain and crew, and that, for the reason of such excesses it
was only proper to bring action against the persons and property of those found guilty.

Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following remarks,
in referring to the exposition of reasons presented by the Code Commission which prepared and
presented for approval the Code of Commerce now in force, in which exposition of reasons were set
forth the fundamental differences between the provisions contained in both codes, with respect to the
subject-matter now under discussion. . He says:j

"The old code declares the captain civilly liable for all damage sustained by the vessel or its cargo
through lack of skill or care on his part, through violations of the law, or through unlawful acts
committed by the crew. As regards the agent or shipowner, it declares in unmistakable terms that he
shall in no wise be liable for any excesses which, during the navigation, may be committed by the
captain and the crew.

"Upon an examination, in the light of the principles of modern law, of the standing legal doctrine on the
nonliability of the shipowner for the unlawful acts, that is, the crimes or quasi crimes, committed by the
captain and the crew, it is observed that it cannot by maintained in the absolute and categorical terms
in which it is formulated.

"It is WELL and good that the shipowner be not held criminally liable for such crimes or quasi
crimes; but he cannot be excused from liability for the damage and harm which, in consequence
of those acts, may be suffered by the third parties who contracted with the captain, in his double
capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and
passengers in making contracts with the captain do so through the confidence they have in the
shipowner who appointed him; they presume that the owner made a most careful investigation before
appointing him, and, above all, they themselves are unable to make such an investigation, and even
though they should do so, they could not obtain complete security, inasmuch as the shipowner can,
whenever he sees fit, appoint another captain instead.

"The shipowner is in the same case with respect to the members of the crew, for, though he does not
 24

appoint directly, yet, expressly or tacitly, he contributes to their appointment.

"On the other hand, if the shipowner derives profits from the results of the choice of the captain and
the crew, when the choice turns out successful, it is also just that he should suffer the consequences
of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas,
viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue
therefrom.

"The Code of Commerce in force omits the declaration of non-liability contained in the old code, and
clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the
captain, in consequence of the misdemeanors and crimes committed by the latter or by the members
of the crew."cralaw virtua1aw library
It is therefore evident that, in accordance with the provisions of the Code of Commerce in force, which
are applicable to the instant case, the defendant NarcisoLauron, as the proprietor and owner of the
craft of which GlicerioIpil was the master and in which, through the fault and negligence of the latter
and of the supercargo Justo Solamo, there occurred the loss, theft, or robbery of the P450 that
belonged to the plaintiff and were delivered to said master and supercargo, a theft which, on the other
hand, as shown by the evidence, does not appear to have been committed by a person not belonging
to the craft, should, for said loss or theft, be held civilly liable to the plaintiff, who executed with said
defendant Lauron the contract for the transportation of the merchandise and money aforementioned
between the port of Cebu and the town of Catmon, by means of the said craft.

Therefore, and for all the reasons above set forth, we affirm the judgment appealed from, with the
costs of this instance against the appellants. So ordered.

Torres, Carson, Moreland and Trent, JJ., concur.

 25

INTERORIENT MARITIME ENTERPRISES, INC., FIRCROFT SHIPPING CORPORATION and

TIMES SURETY & INSURANCE CO., INC., petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION and CONSTANCIA PINEDA, respondents.

G.R. No. 115497

September 16, 1996

Facts:

The instant petition seeks the reversal and/or modification of the Resolution dated March 30, 1994 of
public respondent National Labor Relations Commission dismissing the appeals of petitioners and
affirming the decision dated November 16, 1992 of Philippine Overseas Employment Administration
(POEA) Administrator Felicisimo C. Joson, This is a claim for death compensation benefits filed by
Constancia Pineda as heir of her deceased son, seaman Jeremias Pineda, against Interorient
Maritime Enterprises, Inc. and its foreign principal, Fircroft Shipping Corporation and the Times
Surety and Insurance Co., Inc. The following facts were found by the POEA Administrator.

On September 28, 1989, he finished his contract and was discharged from the port of Dubai for
repatriation to Manila; that his flight schedule from Dubai to the Philippines necessitated a stopover at
Bangkok, Thailand, and during said stopover he disembarked on his own free will and failed to join
the connecting flight to Hongkong with final destination to Manila; that on October 5, 1990, it received
a fax transmission from the Department of Foreign Affairs to the effect that Jeremias Pineda was shot
by a Thai Officer on duty on October 2, 1989 at around 4:00 P.M.; that the police report submitted to
the Philippine Embassy in Bangkok confirmed that it was Pineda who "approached and tried to stab
the police sergeant with a knife and that therefore he was forced to pull out his gun and shot Pineda"

Petitioner contends that they are not liable to pay any death/burial benefits pursuant to the provisions
of Par. 6, Section C. Part II, POEA Standard Format of Employment which state(s) that "no
compensation shall be payable in respect of any injury, (in)capacity, disability or death resulting from
a willful (sic) act on his own life by the seaman"; that the deceased seaman died due to his own willful
(sic) act in attacking a policeman in Bangkok who shot him in self-defense.

After the parties presented their respective evidence, the POEA Administrator rendered his decision
holding petitioners liable for death compensation benefits and burial expenses.

Petitioners appealed the POEA decision to the public respondent. In a Decision dated March 30,
1994, public respondent upheld the POEA.

Thus, this recourse to this Court by way of a special civil action for certiorari per Rule 65 of the Rules
of Court.
 26

Issue:

Whether the petitioners can be held liable for the death of seaman Jeremias Pineda?

Held:

The petitioners contention that the assailed Resolution has no factual and legal bases is belied by the
adoption with approval by the public respondent of the findings of the POEA Administrator, which
recites at length the reasons for holding that the deceased Pineda was mentally sick prior to his death
and concomitantly, was no longer in full control of his mental faculties.

In this instance, seaman Pineda, who was discharged in Dubai, a foreign land, could not reasonably
be expected to immediately resort to and avail of psychiatric examination, assuming that he was still
capable of submitting himself to such examination at that time, not to mention the fact that when he
disembarked in Dubai, he was already discharged and without employment his contract having
already run its full term and he had already been put on a plane bound for the Philippines. Such
mental disorder became evident when he failed to join his connecting flight to Hongkong, having
during said stopover wandered out of the Bangkok airport's immigration area on his own. This Court
agrees with the POEA Administrator that seaman Pineda was no longer acting sanely when he
attacked the Thai policeman. The report of the Philippine Embassy in Thailand dated October 9, 1990
depicting the deceased's strange behavior shortly before he was shot dead, after having wandered
around Bangkok for four days, clearly shows that the man was not in full control of his own self.

The POEA Administrator ruled, and this Court agrees, that since Pineda attacked the Thai policeman
when he was no longer in complete control of his mental faculties, the aforequoted provision of the
Standard Format Contract of Employment exemption the employer from liability should not apply in
the instant case. Firstly, the fact that the deceased suffered from mental disorder at the time of his
repatriation means that he must have been deprived of the full use of his reason, and that thereby, his
will must have been impaired, at the very least. Thus, his attack on the policeman can in no wise be
characterized as a deliberate, willful or voluntary act on his part. Secondly, and apart from that, we
also agree that in light of the deceased's mental condition, petitioners "should have observed some
precautionary measures and should not have allowed said seaman to travel home alone", and their
failure to do so rendered them liable for the death of Pineda.

Petitioners further argue that the cause of Pineda's death "is not one of the occupational diseases
listed by law", and that in the case of De Jesus vs. Employee's Compensation Commission, this Court
held that ". . . for the sickness and the resulting disability or death to be compensable, the sickness
must be the result of an occupational disease listed under Annex 'A' of the Rules (the Amended Rules
on Employee's Compensation) with the conditions set therein satisfied; otherwise, proof must be
shown that the risk of contracting the disease is increased by the working conditions."

The foreign employer may not have been obligated by its contract to provide a companion for a
returning employee, but it cannot deny that it was expressly tasked by its agreement to assure the
 27

safe return of said worker. The uncaring attitude displayed by petitioners who, knowing fully well that
its employee had been suffering from some mental disorder, nevertheless still allowed him to travel
home alone, is appalling to say the least. Such attitude harks back to another time when the landed
gentry practically owned the serfs, and disposed of them when the latter had grown old, sick or
otherwise lost their usefulness.

WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision assailed in
this petition is AFFIRMED. Costs against petitioners.

SO ORDERED.
 28

FAR EASTERN SHIPPING COMPANY vs.
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY
G.R. No. 130150; October, 1998

FACTS:
M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company (FESC), arrived at the
Port of Manila and was assigned Berth 4 of the Manila International Port, as its berthing space.
Gavino, who was assigned by the Appellant Manila Pilots' Association to conduct the docking
maneuvers for the safe berthing, boarded the vessel at the quarantine anchorage and stationed
himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing of
Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from the
quarantine anchorage and proceeded to the Manila International Port. The sea was calm and the
wind was ideal for docking maneuvers. When the vessel reached the landmark, one-half mile from
the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from the
pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on
the bow. The left anchor, with two (2) shackles, were dropped. However, the anchor did not take hold
as expected. The speed of the vessel did not slacken. A commotion ensued between the crew
members. After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern.
Abellana, who was then on the pier apron, noticed that the vessel was approaching the pier fast.
Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the "full-astern"
code. Before the right anchor and additional shackles could be dropped, the bow of the vessel
rammed into the apron of the pier causing considerable damage to the pier as well as the vessel.

ISSUES:
(1) Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage
caused by the vessel to the pier, at the port of destination, for his negligence?;
(2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent
negligence of the master of the vessel and the pilot under a compulsory pilotage?

HELD:
(1) Generally speaking, the pilot supersedes the master for the time being in the command and
navigation of the ship, and his orders must be obeyed in all matters connected with her navigation.
He becomes the master pro hac vice and should give all directions as to speed, course, stopping and
reversing anchoring, towing and the like. And when a licensed pilot is employed in a place where
pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to
act as pilot. Under certain systems of foreign law, the pilot does not take entire charge of the vessel,
but is deemed merely the adviser of the master, who retains command and control of the navigation
even in localities where pilotage is compulsory. It is quite common for states and localities to provide
for compulsory pilotage, and safety laws have been enacted requiring vessels approaching their
ports, with certain exceptions, to take on board pilots duly licensed under local law. The purpose of
these laws is to create a body of seamen thoroughly acquainted with the harbor, to pilot vessels
seeking to enter or depart, and thus protect life and property from the dangers of navigation. Upon
assuming such office as compulsory pilot, Capt. Gavino is held to the universally accepted high
 29

standards of care and diligence required of a pilot, whereby he assumes to have skill and knowledge
in respect to navigation in the particular waters over which his license extends superior to and more
to be trusted than that of the master. He is not held to the highest possible degree of skill and care,
but must have and exercise the ordinary skill and care demanded by the circumstances, and usually
shown by an expert in his profession. Under extraordinary circumstances, a pilot must exercise
extraordinary care. In this case, Capt. Gavino failed to measure up to such strict standard of care and
diligence required of pilots in the performance of their duties. As pilot, he should have made sure that
his directions were promptly and strictly followed.

(2) The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible
for the allision. The master is still in command of the vessel notwithstanding the presence of a pilot. A
perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of his
duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of
maintaining watchful vigilance over this risky maneuver. The owners of a vessel are not personally
liable for the negligent acts of a compulsory pilot, but by admiralty law, the fault or negligence of a
compulsory pilot is imputable to the vessel and it may be held liable therefor in rem. Where, however,
by the provisions of the statute the pilot is compulsory only in the sense that his fee must be paid, and
is not in compulsory charge of the vessel, there is no exemption from liability. Even though the pilot is
compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or
crew contributed thereto, the owners are liable. But the liability of the ship in rem does not release the
pilot from the consequences of his own negligence. The master is not entirely absolved of
responsibility with respect to navigation when a compulsory pilot is in charge. Except insofar as their
liability is limited or exempted by statute, the vessel or her owners are liable for all damages caused
by the negligence or other wrongs of the owners or those in charge of the vessel. As a general rule,
the owners or those in possession and control of a vessel and the vessel are liable for all natural and
proximate damages caused to persons or property by reason of her negligent management or
navigation.
 30

Transportation Case Digest: Caltex V. Sulpicio Lines (1999)

G.R.No. 131166 September 30, 1999

Lessons Applicable: Charter Party (Transportation)

FACTS:

December 19, 1987 8 pm: motor tanker MT Vector owned and operated by Vector Shipping
Corporation carried 8,800 barrels of petroleum products of Caltex by virtue of a charter
contract

December 20, 1987 6:30 am: MV Doa Paz passenger and cargo vessel owned and operated
by Sulpicio Lines, Inc. left the port of Tacloban headed for Manila with 1,493
passengers indicated in the Coast Guard Clear

December 20, 1987: MT Vector collided with MV Doa Paz in the open sea within the vicinity
of Dumali Point between Marinduque and Oriental Mindoro, killing almost all the passengers
and crew members of both ships except for 24 survivors

MV Doa Paz carried an estimated 4,000 passengers most were not in the passenger
manifest

board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector,
its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping
Corporation, were at fault and responsible for its collision with MV Doa Paz

February 13, 1989: Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and
mother respectively, filed a complaint for Damages Arising from Breach of Contract of
Carriage against Sulpicio Lines, Inc. for the death of Sebastian E. Caezal (public school
teacher 47 years old) and his 11-year old daughter Corazon G. Caezal

Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex

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

RTC: dismissed the third party complaint and favored the Caezal's against Sulpicio Lines

CA: included Caltex as liable party

ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for damages resulting from a collision
between the chartered vessel and a passenger ship

HELD: NO. Grants Petition. CA set aside.

 31

respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage:

bill of lading or equivalent shipping documents; or

charter party or similar contract on the other

Caltex and Vector entered into a contract of affreightment, also known as a

voyage charter

charter party

contract by which an entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or use

Charter parties fall into three main categories:

(1) Demise or bareboat

charterer mans the vessel with his own people and becomes, in effect, the owner
for the voyage or service stipulated, subject to liability for damages caused by
negligence

common carrier becomes private

contract of affreightment

one by which the owner of a ship or other vessel lets the whole or part of her to a
merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight

may be either:

(2)time charter - wherein the leased vessel is leased to the charterer for a
fixed period of time

(3) voyage charter - wherein the ship is leased for a single voyage

charter-party provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the ship owner to supply the
ships store, pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship

charterer is free from liability to third persons in respect of the ship

does not convert the common carrier into a private carrier

Carriage of Goods by Sea Act :

 32

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due
diligence to -

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code

a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship

and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness

nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two
years before the tragic incident occurred in 1987. Past services rendered showed no reason
for Caltex to observe a higher degree of diligence.

Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast
Guard itself was convinced of its seaworthiness
 33

Transportation Case Digest: Planters Products Inc V. CA (1993)

G.R. No. 101503 September 15, 1993

Lessons Applicable: Charter Party (Transportation)

FACTS:

June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A.,

9,329.7069 M/T of Urea 46% fertilizer bought by Planters Products, Inc. (PPI) on aboard the
cargo vessel M/V "Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha (KKKK) from
Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by
Bill of Lading

May 17 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform
General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan

Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by
the charterer's representative and found fit

The hatches remained closed and tightly sealed throughout the entire voyage

July 3, 1974: PPI unloaded the cargo from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly

hatches remained open throughout the duration of the discharge

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before
it was transported to the consignee's warehouse located some 50 meters from the wharf

Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of
the cargo.

The port area was windy, certain portions of the route to the warehouse were sandy and
the weather was variable, raining occasionally while the discharge was in progress.

Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain
spillages of the ferilizer

It took 11 days for PPI to unload the cargo

Cargo Superintendents Company Inc. (CSCI), private marine and cargo surveyor, was hired by
PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior
to and after discharge
 34

shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt

Certificate of Shortage/Damaged Cargo prepared by PPI

short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted with sand, rust and dirt

PPI sent a claim letter 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

SSA: what they received was just a request for shortlanded certificate and not a formal
claim, and that they "had nothing to do with the discharge of the shipment

RTC: failure to destroy the presumption of negligence against them, SSA are liable

CA: REVERSED - failed to prove the basis of its cause of action

ISSUE: W/N a time charter between a shipowner and a charterer transforms a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo

HELD: NO. petition is DISMISSED

When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment
were under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to
the ship, with the duty of caring for his cargo when the charterer did not have any control of the
means in doing so

carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence. The hatches remained close and tightly sealed while the ship was in transit as the
weight of the steel covers made it impossible for a person to open without the use of the ship's
boom.

bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage.
More so, with a variable weather condition prevalent during its unloading

This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has
sufficiently proved the inherent character of the goods which makes it highly vulnerable
to deterioration; as well as the inadequacy of its packaging which further contributed to
the loss.
 35

On the other hand, no proof was adduced by the petitioner showing that the carrier was
remise in the exercise of due diligence in order to minimize the loss or damage to the
goods it carried.
 36

Magsaysay Inc vs Agan

In 1949, SS San Antonio, owned by AMInc, embarked on its voyage to Batanes via Aparri. It was
carrying various cargoes, one of which was owned by Agan. One fine weather day, it accidentally ran
aground the mouth of the Cagayan River due to the sudden shifting of the sands below. SS San
Antonio then needed the services of Luzon Stevedoring Co. to tow the ship and make it afloat so that
it can continue its journey. Later, AMInc required the cargo owners to pay the expenses incurred in
making the ship afloat (P841.40 each). The expenses, AMInc claims, fall under the General Averages
Rule under the Code of Commerce, which is to be shared by ship owner and cargo owners as well.

ISSUE: Whether or not general averages exist in the case at bar.

HELD: No. General averages contemplate that the stranding of the vessel is intentionally done in
order to save the vessel itself from a certain and imminent danger. Here, the stranding was accidental
and it was made afloat for the purpose of saving the voyage and not the vessel. Note that this
happened on a fine weather day. Also, it cannot be said that the towing was made to save the cargos,
for the cargos were not in danger imminent danger.
 37

MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February, 2005

Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade
carrier certain goods in favor of ATLAS FERTILIZER CORPORATION. Subject shipments were
insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid
for said losses. Formal claims were then filed with Trade & Transport but MACONDRAY refused and
failed to settle the same. MACONDRAY denies liability over the losses, it, having no absolute relation
with Trade & Transport, the alleged operator of the vessel who transported the shipment; that
accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade
Carrier and not party to this case; that it has no control over the acts of the captain and crew of the
carrier and cannot be held responsible for any damage arising from the fault or negligence of said
captain and crew; that upon arrival at the port, M/V Trade Carrier discharged the full amount of
shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained
by any party from the vessel owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the
vessel M/V Trade Carrier. A ship agent is the person entrusted with provisioning or representing the
vessel in the port in which it may be found. Hence, whether acting as agent of the owner of the vessel
or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as
such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the vessel. Further, the CA found that the evidence
shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the
Statement of Facts, the Completion Notice, the Sailing Notice and Customs Clearance. Petitioners
employees were present at the port of destination one day before the arrival of the vessel, where they
stayed until it departed. They were also present during the actual discharging of the cargo. Moreover,
Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts
all point to the conclusion that it was the entity that represented the vessel at the port of destination
and was the ship agent within the meaning and context of Article 586 of the Code of Commerce.