WEEK VIII

MARITIME RISKS

A) AVERAGE; KINDS OF AVERAGES; JETTISON; “JASON CLAUSE” RULE D (York-

Antwerp Rules) – (Arts 806 to 816, 864 to 869, Code of Commerce)

1. G.R. No. L-6393 – 96 Phil. 504 – Mercantile Law – Transportation - General

Averages - Stranding of a Vessel

In 1949, SS San Antonio, owned by A. Magsaysay, Inc. (AMInc), embarked on its

voyage to Batanes via Aparri. It was carrying various cargoes, one of which was
owned by Anastacio 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.

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2. G.R. No. L-11515 – 42 Phil. 845 – Mercantile Law – Law on Transportation –
General Averages – Stranding by Reason of War

The International Harvester Company in Russia (IHCR), an American Company,

contracted the Hamburg-American Line (HAL) to transport 852 crates of
agricultural machinery from Baltimore, Maryland (USA) to Hamburg, Germany,
and that after it reached Hamburg, the crates were to be delivered, at the order
of the consignor, to Vladivostok, Russia. The crates were delivered via the vessel
Bulgaria to Hamburg, at the expense of HAL. It was transferred to the German
ship Suevia to resume journey from Hamburg to Russia. During Suevia’s journey,
war broke out between Russia and Germany. Suevia’s captain ordered the ship to
be placed on neutral ground, which happened to be the nearest port of Manila.
IHCR demanded HAL to continue the journey by transferring the cargoes to a non-
German ship (as agreed upon in the Bill of Lading in case of war). HAL declined.
IHCR sued HAL in Manila. RTC Manila issued a writ of replevin hence IHCR
recovered its cargoes, it then contracted a separate ship to continue the
transport. HAL claimed that IHCR is liable for general averages for the expenses of
the Suevia while at the port of Manila. IHCR claimed that HAL is liable for the
expenses incurred by ICHR in contracting a different shipping line.

ISSUE: Whether or not IHCR is liable for general averages.

HELD: No. The cargoes were not contraband and are not in danger at war.
Suevia’s captain merely thought about the safety of the ship, not of the cargos
hence there is no common benefit here between the ship and the cargo;
therefore, general averages does not exist. HAL is liable for the expenses incurred
by IHCR in contracting a different shipper. By the terms of the contract of
affreightment HAL was bound to forward the cargo to Vladivostok at the
steamer’s expense, not necessarily by a steamer belonging to HAL; and it does not
by any means follow that it is not liable for the expense incurred by IHCR in
completing the unfinished portion of the voyage in another ship.

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3. G.R. No. L-10986 March 31, 1917COMPAGNIE DE COMMERCE ET DE
NAVIGATION D'EXTREME ORIENT, plaintiff-appellant,vs.THE HAMBURG AMERIKA
PACKETFACHT ACTIEN GESELLSCHAFT, defendant-appellant.FACTS:

1. COMPAGNIE DE COMMERCE ET DE NAVIGATION D'EXTREME ORIENT

(Compagnie) is acorporation duly organized and existing under and by virtue of
the laws of France, with its principal office inParis and a branch office in Saigon,
Vietnam. THE HAMBURG AMERIKA PACKETFACHT
ACTIENGESELLSCHAFT(Hamburg) is a corporation organized under the laws of
Germany with its principal office inHamburg and represented in Manila by Behn,
Meyer & Company (Limited), a corporation.2. HAMBURG owned a steamship
named SAMBIA, which proceeded to the port of Saigon and on board wasthe
cargo belonging to COMPAGNIE. There were rumors of impending war between
Germany and Franceand other nations of Europe. The master of the steamship
was told to take refuge at a neutral port (becauseSaigon was a French port).3.
COMPAGNIE asked for compulsory detention of its vessel to prevent its property
from leaving Saigon.However, the Governor of Saigon refused to issue an order
because he had not been officially notified of thedeclaration of the war.4. The
steamship sailed from Saigon, and was bound for Manila, because it was issued a
bill of health by theUS consul in Saigon. The steamship stayed continuously in
Manila and where it contends it will be compelledto stay until the war ceases. No
attempt was made on the part of the defendants to transfer and deliver the
cargoto the destinations as stipulated in the charter party.5. BEHN, MEYER and
COMPANY (agent of HAMBURG in Manila) offered to purchase the cargo
fromCOMPAGNIE, but the latter never received the cable messages so they never
answered. When a survey wasdone on the ship, it was found that the cargo was
infested with beetles, so BEHN asked for court authority tosell the cargo and the
balance to be dumped at sea. The proceeds of the sale were deposited in the
court, waitingfor orders as to what to do with it.6. BEHN wrote COMPAGNIE again
informing the latter of the disposition which it made upon the cargo.COMPAGNIE
answered that it was still waiting for orders as to what to do. COMPAGNIE wanted
all the proceeds of the sale to be given to them (damages, for the
defendants’ failure to deliver the cargo to the
destinations Dunkirk and Hamburg), while defendants contended that they have a
lien on the proceeds of thesale (amount due to them because of the upkeep and
maintenance of the ship crew and for commissions for thesale of the cargo).6.
The trial court ruled in favor of the plaintiffs. On appeal, the defendants made the

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following assignments onappeal (that the court had no jurisdiction, that the fear
of capture was not force majeure, that the court erred inconcluding that
defendant is liable for damages for non-delivery of cargo, and the value of the
award ofdamages). On appeal, the plaintiffs also contended that the court erred
in not giving the full value of damages

ISSUE: WONthe master of the steamship was justified in taking refuge in Manila
(therefore being the cause ofthe non-delivery of the cargo belonging to the
plaintiffs)COMPAGNIE contends that the master should have in mind the
accepted principles of public internationallaw, the established practice of nations,
and the express terms of the Sixth Hague Convention (1907). Themaster should
have confidently relied upon the French authorities at Saigon to permit him to sail
to his port ofdestination under a laissez-passer or safe-conduct, which would have
secured both the vessel and her cargofrom all danger of capture by any of the
belligerents. The SHIPOWNER contends that the master was justifiedin declining
to leave his vessel in a situation in which it would be exposed to danger of seizure
by the Frenchauthorities, should they refuse to be bound by the alleged rule of
international law.HELD:A shipmaster must be allowed a reasonable time in which
to decide what course he will adopt as to thedisposition of his cargo, after
entering a port of refuge; and though he must act promptly thereafter, when
thecargo is a perishable one, neither he nor the shipowner is responsible for loss
or damage suffered by the cargoas a result of its detention aboard the vessel
during such time as may reasonably necessary to come to adecision in this
regard.Under the circumstances set out in the opinion, the master of the Sambia
proceeded with all reasonable dispatchand did all that could be required of a
prudent man to protect the interests of the owner of the cargo aboard isvessel; so
that any losses which resulted from the detention of the cargo aboard the Sambia
must be attributed to
the act of the “Enemy of the King” which compelled the Sambia to
flee to a port of refuge, and made necessarythe retention of the cargo aboard the
vessel at anchor under a tropical sun and without proper ventilation until itcould
be ascertained that the interests of the absent owner would be consulted by the
sale of this perishablecargo in the local market.In fleeing from the port of Saigon,
and taking refuge in Manila Bay the master of the Sambia was not acting forthe
common safety of the vessel and her cargo. The French cargo was absolutely
secure from danger of seizureor confiscation so long as it remained in the port in
Saigon, and the flight of the vessel was a measure of precaution adopted solely
and exclusively for the preservation of the vessel from the danger of seizure
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orcapture.Dispositive: So much of the judgment as provides for the delivery to the
plaintiff of the net proceeds of the saleof the cargo (P128,977.71) affirmed; but so
much thereof as allowed damages for a breach of the charter party(P60,841.32)
reversed.

B) ARRIVALS UNDER STRESS (Articles 819 to 825, Code of Commerce)

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C) COLLISIONS; CLASSES OF COLLISIONS; PERSONS LIABLE FOR DAMAGES
CAUSED DURING COLLISIONS

1. National Development Corporation v. Court of Appeals

G.R. No. L-49407, 19 August 1988, 164 SCRA 593

FACTS:

NDC as the first preferred mortgagee of three ocean going vessels including one
with the name ‘Dona Nati’ appointed MCP as its agent to manage and operate
said vessel for and in its behalf and account. Thus, the E. Philipp Corporation of
New York loaded on board the vessel “Dona Nati” at San Francisco, California, a
total of 1,200 bales of American raw cotton consigned to the order of Manila
Banking Corporation, Manila and the People’s Bank and Trust Company acting for
and in behalf of the Pan Asiatic Commercial Company, Inc., who represents
Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were
the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil.

En route to Manila the vessel Dofia Nati figured in a collision at Ise Bay, Japan
with a Japanese vessel ‘SS Yasushima Maru’ as a result of which 550 bales of
aforesaid cargo of American raw cotton were lost and/or destroyed. The damaged
and lost cargoes were paid by the insurer to the Riverside Mills Corporation as
holder of the negotiable bills of lading duly endorsed.

Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa
Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila. The total loss was paid by the insurer to Guilcon as holder of the
duly endorsed bill of lading. Hence, plaintiff filed this complaint to recover said
amount from the NDC and MCP as owner and ship agent respectively, of the said
‘Dofia Nati’ vessel.

ISSUE:

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Which laws govern loss or destruction of goods due to collision of vessels outside
Philippine waters?

HELD:

This issue has already been laid to rest by this Court in Eastern Shipping Lines Inc.
v. IAC where it was held under similar circumstance “that the law of the country
to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration” (Article 1753, Civil Code).
Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of commerce and by laws (Article
1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provision of the Civil Code.

It is immaterial that the collision actually occurred in foreign waters, such as Ise
Bay, Japan. It appears, however, that collision falls among matters not specifically
regulated by the Civil Code, so that no reversible error can be found in
respondent courses application to the case at bar of Articles 826 to 839, Book
Three of the Code of Commerce, which deal exclusively with collision of vessels.

2. Smith Bell and Company Phils. v. CA

Facts:

M/V “Don Carlos,” an inter-island vessel owned and operated by private

respondent Go Thong was sailing south bound for Cebu, when it collided with
M/S “Yotai Maru,” a merchant vessel of Japanese registry which was approaching
the port of Manila coming in from Kobe, Japan. The bow of the “Don Carlos”
rammed the left side of the “Yotai Maru” inflicting a gaping hole through which
seawater rushed in and flooded the hatch, damaging all the cargo stowed therein.
The consignees of the damaged cargo having been paid by their insurance
companies, the latter in turn commenced actions against private respondent Go
Thong for damages sustained by the various shipments. 2 cases were filed before
the RTC. The first case (Smith Bell and Sumitomo Insurance v. Go Thong) reached

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the SC which ruled in finality that negligence was with the officers and crew of
“Don Carlos.” On the contrary, the second case (Smith Bell and Tokyo Insurance v.
Go Thong) was decided by the CA holding the officers and crew of “Yotai Maru” at
fault in the collision. Hence the present petition.

Issue:

Whether or not inscrutable fault is present in said collision.

Ruling: NO.

The Court believes that there are three (3) principal factors which are constitutive
of negligence on the part of the “Don Carlos,” which negligence was the
proximate cause of the collision.

(1) The first of these factors was the failure of the “Don Carlos” to comply with
the requirements of Rule 18 (a) of the International Rules of the Road which
provides as follows: (a) When two power-driven vessels are meeting end on, or
nearly end on, so as to involve risk of collision, each shall alter her course to
starboard, so that each may pass on the port side of the other. The evidence on
this factor state that “Don Carlos” altered its course by five degrees to the left
instead of to the right which maneuver was the error that caused the collision in
question. Why it did so is because “Don Carlos” was overtaking another vessel,
the “Don Francisco”, and was then at the right side of the aforesaid vessel. It was
in the process of overtaking “Don Francisco” that “Don Carlos” was finally brought
into a situation where he was meeting end-on or nearly end-on “Yotai Maru, thus
involving risk of collision.

(2) The second circumstance constitutive of negligence on the part of the “Don
Carlos” was its failure to have on board that night a “proper look-out” as required
by Rule I (B) Under Rule 29 of the same set of Rules, all consequences arising from
the failure of the “Don Carlos” to keep a “proper look-out” must be borne by the
“Don Carlos.” In the case at bar, the failure of the “Don Carlos” to recognize in a
timely manner the risk of collision with the “Yotai Maru” coming in from the
opposite direction, was at least in part due to the failure of the “Don Carlos” to
maintain a proper look-out.

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(3) The third factor constitutive of negligence on the part of the “Don Carlos”
relates to the fact that Second Mate Benito German was, immediately before and
during the collision, in command of the “Don Carlos.” Second Mate German
simply did not have the level of experience, judgment and skill essential for
recognizing and coping with the risk of collision as it presented itself that early
morning when the “Don Carlos,” running at maximum speed and having just
overtaken the “Don Francisco” then approximately one mile behind to the right
side of the “Don Carlos,” found itself head-on or nearly head on vis-a-vis the
“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.

3. Mecenas v. CA

Facts:

On April 22, 1980, two vessels, “Tacloban City” and “Don Juan” collided at the
Talbas Strait within the vicinity of Mindoro. M/V Don Juan sank and hundreds of
passengers died. Among them were petitioners’ parents, whose bodies were
never recovered. Petitioners filed a complaint seeking damages against Negros
Navigation. The trial court awarded P400,000, but the Court of Appeals reduced
the award to P100,000.

Issue:

Whether the reduction of the award was properly ruled upon by the Court of
Appeals

Held:

In an action based upon a breach of the contract of carriage, the carrier under our
civil law is liable for the death of passengers arising from the negligence or wilful
act of the carrier's employees although such employees may have acted beyond

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the scope of their authority or even in violation of the instructions of the carrier,
which liability may include liability for moral damages. It follows that petitioners
would be entitled to moral damages so long as the collision with the "Tacloban
City" and the sinking of the "Don Juan" were caused or attended by negligence on
the part of private respondents.

Whether petitioners are entitled to exemplary damages as claimed must depend

upon whether or not private respondents acted recklessly, that is, with gross
negligence. We believe that the behaviour of the captain of the "Don Juan" in this
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. There is also evidence that the "Don Juan" was
carrying more passengers than she had been certified as allowed to carry. We
conclude that Capt. Santisteban and Negros Navigation are properly held liable
for gross negligence. 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.

Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour. In requiring compliance with the
standard of extraordinary diligence, a standard which is in fact that of the highest
possible degree of diligence, from common carriers and in creating a presumption
of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate
care of human beings and their property. Both the demands of substantial justice
and the imperious requirements of public policy compel us to the conclusion that
the trial court's implicit award of moral and exemplary damages was erroneously
deleted and must be restored and augmented and brought more nearly to the
level required by public policy and substantial justice.

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4. Luzon Stevedoring Corp. vs. CA

5. Ernesto Kramer Jr., VS CA

ERNESTO KRAMER v. CA, GR No. 83524, 1989-10-13

Facts:
The record of the case discloses that in the early morning of April 8, 1976, the F/B
Marjolea, a fishing boat owned by the petitioners Ernesto Kramer, Jr. and Marta
Kramer, was navigating its way from Marinduque to Manila. Somewhere near
Maricabon Island and Cape

Santiago, the boat figured in a collision with an inter-island vessel, the M/V Asia
Philippines owned by the private respondent Trans-Asia Shipping Lines, Inc. As a
consequence of the collision, the F/B Marjolea sank, taking with it its fish catch.

After the mishap, the captains of both vessels filed their respective marine
protests with the Board of Marine Inquiry of the Philippine Coast Guard. The
Board conducted an investigation for the purpose of determining the proximate
cause of the maritime... collision.

On May 30, 1985, the petitioners instituted a Complaint for damages against the
private respondent before Branch 117 of the Regional Trial Court in Pasay City.

Issues:
The principal issue in this Petition for Review is whether or not a Complaint for
damages instituted by the petitioners against the private respondent arising from
a marine collision is barred by the statute of limitations.

Ruling:
For one, while it is true that the findings and recommendation of the Board and
the decision of the

Commandant may be helpful to the court in ascertaining which of the parties are
at fault, still the former (court) is not bound by said findings and decision.

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Indeed, the same findings and decision could be entirely or partially admitted,
modified,... amended, or disregarded by the court according to its lights and
judicial discretion.

For another, if the accrual of a cause of action will be made to depend on the
action to be taken by certain government agencies, then necessarily, the tolling of
the prescriptive... period would hinge upon the discretion of such agencies.

Said alternative it is easy to foresee would be fraught with hazards. Their

investigations might be delayed and lag, and then witnesses in the meantime
might not be available or disappear, or... certain documents may no longer be
available or might be mislaid.

The petition is devoid of merit. Under Article 1146 of the Civil Code, an action
based upon a quasi-delict must be instituted within four (4) years. The
prescriptive period begins from the day the quasi-delict is committed. In Paulan
vs.

Sarabia,[16] this Court ruled that in an action for damages arising from the
collision of two (2) trucks, the action being based on a quasi-delict, the four (4)
year prescriptive period... must be counted from the day of the collision.

From the foregoing ruling, it is clear that the prescriptive period must be counted
when the last element occurs or takes place, that is, the time of the commission
of an act or omission violative of the right of the plaintiff, which is... the time
when the cause of action arises.

Principles:

It is therefore clear that in this action for damages arising from the collision of
two (2) vessels the four (4) year prescriptive period must be counted from the day
of the collision. The aggrieved party need not wait for a determination by an...
administrative body like a Board of Marine Inquiry, that the collision was caused
by the fault or negligence of the other party before he can file an action for
damages. The ruling in Vasquez does not apply in this... case. Immediately after
the collision the aggrieved party can seek relief from the courts by alleging such
negligence or fault of the owners, agents or personnel of the other vessel.

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WEEK IX
VII. SPECIAL CONRACTS IN MARITIME CONTRACTS

A) BILL OF LADING – Articles 706 to 708, Code of Commerce

1. MOF COMPANY vs. Shin Yang Brokerage Corporation

G.R. NO. 172822 : December18, 2009

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

secondhand cars and other articles on board the vessel covered by bill of lading
prepared by the carrier Hanjin Shipping Co., On the bill lading, Shin Yang
Brokerage Corp. named as the consignee and that payment was on a “Freight
Collect” basis, i.e., that the consignee of the goods would be the one to pay for
the freight and other charges in the total amount of P57,646.00. When the
shipment arrived in Manila, the MOF Company, Hanjin’s exclusive general agent
in thePhilippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin Yang, however, the
latter failed and refused to pay. MOF filed for sum of money before MeTC Pasay
against Shin Yang, the latter, contended that it did not cause the importation
of the goods, that it is only the Consolidator/forwarder of the said shipment, that
the ultimate consignee did not endorse in its favor the original bill of lading and it
was prepared without its consent and it never authorized Halla Trading Corp. to
ship the articles or to have its name included in the bill of lading. MeTC Pasay
ruled in favor of MOF, it ruled that Shin Yang cannot disclaim being a party to the
contract of affreightment as shown in the bill of lading. The RTC affirmed the
decision of the MeTC. CA reversed the Decision of the lower courts and ruled that
except for the Bill of Lading, MOF Company has not presented any other evidence
that Shin Yang has entered into a contract of affreightment, be it verbal or
written. Moreover, that the Bill of Lading was prepared by Hanjin Shipping, not by
Shin Yang, being only the agent of Hanjin.

ISSUE: WHETHER SHIN YANG, WHO IS NOT A SIGNATORY TO THE BILL OF LADING,
IS BOUND BY THE STIPULATIONS THEREOF.

RULING: No. A consignee, although not a signatory to the contract of carriage

between the shipper and the carrier, becomes a party to the contract by reason
of either: a) the relationship of agency between

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the consignee and the shipper/consignor; b) the unequivocal acceptance of the
bill of lading delivered to the consignee, with full knowledge of its contents; or c)
availment of the stipulation pour autrui, i.e., when the consignee, a third person,
demands before the carrier the fulfillment of the stipulation made by the
consignor/shipper in the consignee’s favor, specifically the delivery of the
goods/cargoes shipped. Here, Shin Yang denied in all of its pleadings that it
authorized Halla Trading, Co. to ship the goods in its behalf; or that it got hold of
the bill of lading covering the shipment or that it demanded the release
of the cargo. Basic is the rule in evidence that the burden of proof lies upon him
who asserts it, thus, MOF Company, has the burden to controvert it all but it
failed to do present any evidence other than the bill of lading.

2. Phil. Charter Insurance Corp. vs. Neptune Orient Lines/Overseas Agency Services
Inc.

3. Philam Insurance Co. Inc. vs. Heung-A Shipping Corp.

PHILAM INSURANCE COMPANY, INC. V. HEUNG-A SHIPPING CORPORATION G.R.
No. 187701,
23 July 2014, FIRST DIVISION (Reyes, J.)
In a contract of affreightment, the voyage remains under the responsibility of the
carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect of the ship.

FACTS
Novartis Consumer Health Philippines Inc. (NOVARTIS) imported from Jinsuk
Trading Co. Ltd. (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power
18 Glaminated plastic packaging material. In order to ship, JINSUK engaged the
services of Protop Shipping Corporation (PROTOP), a freight forwarder. PROTOP
shipped the cargo through DONGNAMA Shipping Co. Ltd. (DONGNAMA)
which in turn loaded the same on M/V Heung-A Bangkok V-019, owned and
operated by Heung-A Shipping Corporation (HEUNG-A), pursuant to a ‘slot charter
arrangement’ whereby a space in the latter’s vessel was reserved for the exclusive
use of the former. NOVARTIS insured the shipment with Philam Insurance
Company Inc. (PHILAM). The shipment reached NOVARTIS, and upon inspection,
the boxes of the shipment were wet and damp. The shipment is entirely damaged

14
and was found out that the damage was caused by salt water. NOVARTIS rejected
the shipment and filed an insurance claim with PHILAM and the latter was
subrogated to all the rights and claims of NOVARTIS. PHILAM filed a complaint for
damages against the parties to the shipment. HEUNG- A denied liability by arguing
that he is not the carrier in so far as NOVARTIS is concerned and asserted that its
only obligation was to provide DONGNAMA a space on board his ship.
The trial court ruled declaring HEUNG-A as the common carrier and held it liable.
The ruling was affirmed by the appellate court.

ISSUE
Whether or not HEUNG-A is the common carrier that should be liable to the
damage sustained by the package while on transit.

RULING
YES, HEUNG-A is the common carrier. HEUNG-A’s slot charter arrangement with
DONGNAMA is a charter party arrangement. A charter party is a contract whereby
an entire ship or some principal part thereof, is let by the owner to another
person for a specified time or use. It has two types. First it could be a contract of
affreightment whereby the use of shipping space on vessels were leased in part or
as a whole, to carry goods for others. The charter-party provides for the hire of
vessel only, either for a definite period of time (time charter) of for a single or
consecutive voyage (voyage charter). The ship owner supplies the ship’s stores,
pay for the wages of the master and the crew, and defray the expenses for
the maintenance of the ship. The voyage remains under the responsibility of the
carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect to the ship.
Second, charter by demise or bareboat charter under which the whole vessel is let
to the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who
are his servants. The charterer mans the vessel with his own people and becomes,
in effect, the owner for the voyage or service stipulated and hence liable for
damages or loss sustained by the goods transported. Clearly, the ‘slot charter
arrangement’ between HEUNG-A and DONGNAMA, where the latter is
reserved a space in the vessel is a contract of affreightment. The arrangement did
not divest HEUNG-A its character as the common carrier nor relieve it of any
accountability for the shipment. As a common carrier, it is presumed to have been

15
at fault or negligent if the goods they transported deteriorated or got lost or
destroyed, unless they prove that they exercise extraordinary diligence
in transporting the same. HEUNG-A failed to rebut this prima facie presumption;
hence, it is answerable for the damages incurred by the goods received for
transportation. WHEREFORE, all the foregoing considered, the Decision dated
January 30, 2009 of the Court of Appeals in CA-G.R. CV No. 89482 is hereby
AFFIRMED with MODIFICATION in that the interest rate on the award of
US$8,500.00 shall be six percent (6%) per annum from the date of finality of this
judgment until fully paid.

4. Designer Baskets, Inc. vs. Air Transport Inc.

5. National Trucking and Forwarding Corp. vs. Lorenzo Shipping Corp

B) LOANS ON BOTTOMRY AND RESPONDENTIA (Articles 719 to 735, Code of

Commerce)

C) CHARTER PARTIES; Kinds of Charter Parties; Obligations of the shipowner and

charterer; rescission of charter parties (Articles 652 to 659, Code of Commerce)

1. Planters Products, Inc. vs. CA

Planters Products, Inc. v. Court of Appeals
G.R. No. 101503, 15 September 1993, 226 SCRA 476

FACTS:

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation

(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel
M/V “Sun Plum” owned by private respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the
vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V
“Sun Plum” pursuant to the Uniform General Charter2 was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3 Riders
to the aforesaid charter-party starting from par. 16 to 40 were attached to the

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pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974,
respectively.

ISSUE:

Whether a common carrier becomes a private carrier by reason of a charter-

party.

RULING:

A “charter-party” is defined as a contract by which an entire ship, or some

principal part thereof, is let by the owner to another person for a specified time
or use; 20 a contract of affreightment by which the owner of a ship or other
vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of
freight; 21 Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a
whole, to carry goods for others; and, (b) charter by demise or bareboat charter,
by the terms of which the whole vessel is let to the charterer with a transfer to
him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants. Contract of
affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased
for a single voyage. 22 In both cases, the charter-party provides for the hire of
vessel only, either for a determinate period of time or for a single or consecutive
voyage, the shipowner to supply the ship’s stores, pay for the wages of the
master and the crew, and defray the expenses for the maintenance of the ship.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. It is only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common carrier becomes private, at
least insofar as the particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of
the charterer.

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2. Maritime Agencies & Services, Inc. vs. CA

3. Caltex (Phil.) vs. Sulpicio Lines

Facts:

On December 20, 1987, motor tanker MV Vector, carrying petroleum products of

Caltex, collided in the open sea with passenger ship MV Doña Paz, causing the
death of all but 25 of the latter’s passengers. Among those who died were
Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the
board of marine inquiry found that Vector Shipping Corporation was at fault. On
February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s
wife and mother respectively, filed with the Regional Trial Court of Manila a
complaint for damages arising from breach of contract of carriage against Sulpicio
Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial
court dismissed the complaint against Caltex, but the Court of Appeals included
the same in the liability. Hence, Caltex filed this petition.

Issue:

Is the charterer of a sea vessel liable for damages resulting from a collision
between the chartered vessel and a passenger ship?

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

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

voyage charter.

A charter party is a contract by which an entire ship, or some principal part

thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment is 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. A
contract of affreightment may be either time charter, wherein the leased vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. In both cases, the charter-party provides for the

18
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 ship’s store, pay for the wages
of the master of the crew, and defray the expenses for the maintenance of the
ship. If the charter is a contract of affreightment, which leaves the general owner
in possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from liability
to third persons in respect of the ship.

Second: MT Vector is a common carrier

The charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of
the vessel as a common carrier. It is imperative that a public carrier shall remain
as such, notwithstanding the charter of the whole or portion of a vessel by one or
more persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be
the property of the charterer. A common carrier is a person or corporation whose
regular business is to carry passengers or property for all persons who may
choose to employ and to remunerate him. 16 MT Vector fits the definition of a
common carrier under Article 1732 of the Civil Code.

The public must of necessity rely on the care and skill of common carriers in the
vigilance over the goods and safety of the passengers, especially because with the
modern development of science and invention, transportation has become more
rapid, more complicated and somehow more hazardous. For these reasons, 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.

Third: Is Caltex liable for damages under the Civil Code?

The charterer of a vessel has no obligation before transporting its cargo to ensure
that the vessel it chartered complied with all legal requirements. The duty rests

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upon the common carrier simply for being engaged in "public service." The
relationship between the parties in this case is governed by special laws. Because
of the implied warranty of seaworthiness, shippers of goods, when transacting
with common carriers, are not expected to inquire into the vessel’s
seaworthiness, genuineness of its licenses and compliance with all maritime laws.
To demand more from shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the protection of the public
in general is concerned. Such a practice would be an absurdity in a business
where time is always of the essence. Considering the nature of transportation
business, passengers and shippers alike customarily presume that common
carriers possess all the legal requisites in its operation.

4. Litonjua Shipping Company vs. National Seamen Board

FACTS

Petitioner is the duly appointed local crewing managing office of the Fairwind
Shipping Corporation.
On September 11, 1976 M/V Dufton Bay an ocean-going vessel of foreign registry
owned by the R.D. Mullion ship broking agency under charter by Fairwind, while
in the port of Cebu contracted the services (among others) of Gregorio Candongo
as Third Engineer for 12 months with a monthly wage of US$500.00. The
agreement was executed before the Cebu Area Manning Unit of the NSB, after
which respondent boarded the vessel.

On December 28, 1976 before the expiration of contract, respondent was

required to disembark at Port Kilang, Malaysia. Describe in his seaman’s
handbook is the reason “by owner’s arrange.”

Condongo filed a complaint against Mullion (Shipping company) for violation of

contract and against Litonjua as agent of shipowner.

On February 1977, NSB rendered a judgment by default for failure of petitioners

to appear during the initial hearing, rendering the same to pay Candongo because
there was no sufficient or valid cause for the respondents to terminate the service
of the complainant.

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Litonjua’s defense:
Contends that the shipowner, nor the charterer, was the employer of private
respondent; and that liability for damages cannot be imposed upon petitioner
which was a mere agent of the charterer.

ISSUE

Whether or not Litonjua may be held liable to the private respondent on the
contract of employment?

HELD

YES.

The first basis is the charter party which existed between Mullion, the shipowner,
and Fairwind, the charterer.

It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the
customary rights and liabilities of the shipowner in relation to third persons who
have dealt with him or with the vessel. In such case, the Master of the vessel is
the agent of the charterer and not of the shipowner. The charterer or owner pro
hac vice, and not the general owner of the vessel, is held liable for the expenses
of the voyage including the wages of the seamen

Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show
that it was not such, we believe and so hold that petitioner Litonjua, as Philippine
agent of the charterer, may be held liable on the contract of employment
between the ship captain and the private respondent.

There is a second and ethically more compelling basis for holding petitioner
Litonjua liable on the contract of employment of private respondent. The
charterer of the vessel, Fairwind, clearly benefitted from the employment of
private respondent as Third Engineer of the Dufton Bay, along with the ten (10)
other Filipino crewmembers recruited by Captain Ho in Cebu at the same
occasion.

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In so doing, petitioner Litonjua certainly in effect represented that it was taking
care of the crewing and other requirements of a vessel chartered by its principal,
Fairwind.

Last, but certainly not least, there is the circumstance that extreme hardship
would result for the private respondent if petitioner Litonjua, as Philippine agent
of the charterer, is not held liable to private respondent upon the contract of
employment.

5. De la Torre vs. CA, et. Al.

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