Case 1

CHUA YEK HONG, PETITIONER, v. INTERMEDIATE APPELLATE

COURT, MARIANO GUNO AND DOMINADOR OLIT,
RESPONDENTS.
G.R. NO. L-74811 SEPTEMBER 30, 1988
MELENCIO-HERRERA, J.
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.
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 respondent’s 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.
RULING:
NO. Respondent Appellate Court did not err in applying the
doctrine of limited liability under Article 587 of the Code of
Commerce as expounded in Yangco vs. Laserna, supra.
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.

Motion for Reconsideration

No. L-74811. December 14, 1988
Petitioner argues that this Court failed to consider the Trial
Court’s finding that the loss of the vessel with its cargo was due
to the fault of the shipowner or to the concurring negligence of
the shipowner and the captain. The Appellate Court Decision,
however, mentions only the ship captain as having been
negligent in the performance of his duties (p. 3, Court of
Appeals Decision, p. 15, Rollo). This is a factual finding binding
on this Court. For the exception to the limited liability rule
(Article 587, Code of Commerce) to apply, the loss must be due
to the fault of the shipowner, or to the concurring negligence of
the shipowner and the captain. As we held, there is nothing in
the records showing such negligence.
The invocation by petitioners of Articles 1733 and 1735 of the
Civil Code is misplaced. while the primary law governing the
instant case is the Civil Code, in all matters not regulated by
said Code, the Code of Commerce and other special laws shall
govern. Since the Civil Code contains no provisions regulating
liability of shipowners or agents in the event of total loss or
destruction of the vessel, it is the provisions of the Code of
Commerce, particularly Article 587, that governs.
Case 2
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO,
AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA
CAINAY, petitioners, vs. THE COURT OF APPEALS and
FILIPINAS PIONEER LINES, INC., respondents.
G.R. No. L-42926 September 13, 1985

FACTS:
• MV Pioneer Cebu was owned and operated by the defendant
Filipinas Pioneer and used in the transportation of goods and
passengers in the inter-island shipping.
• Plaintiffs Pedro Vasquez and Soledad Ortega are the parents
of Alfonso Vasquez; plaintiffs Cleto Bagaipo and Agustina
Virtudes are the parents of Filipinas Bagaipo; and plaintiffs
Romeo Vasquez and Maxima Cainay are the parents of the
child, Mario Marlon Vasquez.
• In May 1966, it left the port of Manila and bounded for Cebu.
It had on board the spouses Alfonso Vasquez and Filipinas
Bagaipo and a four-year old boy, Mario Marlon Vasquez, among
her passengers.
• The MV "Pioneer Cebu" encountered typhoon "Klaring" and
struck a reef somewhere north of the island of Cebu and
subsequently sunk. The aforementioned passengers were
unheard from since then.
• Plaintiffs seek the recovery of damages due to the loss of
their children during said voyage.
• Defenses alleged by the defendant that the sinking of the
vessel was caused by force majeure, and that the defendant's
liability had been extinguished by the total loss of the vessel.
• CFI awarded the damages. On appeal, CA reversed the
decision, absolving Flipinas Pioneer from liabilities.
Issue: Whether total loss of the vessel could extinguish the
liability of the shipowner
Ruling: No.
With respect to private respondent's submission that the total
loss of the vessel extinguished its liability pursuant to Article
587 of the Code of Commerce as construed in Yangco vs.
Laserna, 73 Phil. 330 [1941], suffice it to state that even in the
cited case, it was held that the liability of a shipowner is limited
to the value of the vessel or to the insurance thereon. Despite
the total loss of the vessel therefore, its insurance answers for
the damages that a shipowner or agent may be held liable for
by reason of the death of its passengers.

OTHER NOTES: On defense of caso fortuito: Upon the evidence

and the applicable law, we sustain the trial Court. "To
constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must be
independent of the human will; (2) the occurrence must render
it impossible for the debtor to fulfill the obligation in a normal
manner; and that (3) the obligor must be free of participation
in, or aggravation of, the injury to the creditor." In the language
of the law, the event must have been impossible to foresee, or
if it could be foreseen, must have been impossible to avoid.
There must be an entire exclusion of human agency from the
cause of injury or loss.
Under the circumstances, while, indeed, the typhoon was an
inevitable occurrence, yet, having been kept posted on the
course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they
were taking as they hopped from island to island from Romblon
up to Tanguingui. They held frequent conferences, and
oblivious of the utmost diligence required of very cautious
persons, they decided to take a calculated risk. In so doing, they
failed to observe that extraordinary diligence required of them
explicitly by law for the safety of the passengers transported by
them with due regard for any circumstances and unnecessarily
exposed the vessel and passengers to the tragic mishap. They
failed to overcome that presumption of fault or negligence that
arises in cases of death or injuries to passengers.
Case 3
[G.R. No. 110398. November 7, 1997]
NEGROS NAVIGATION CO., INC. vs. THE COURT OF APPEALS,
RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA
VICTORIA
Doctrine: The carrier is liable for the damages to the full extent
and not up to the value of the vessel if it was established that
the carrier was guilty of negligence, in failing to maintain the
ship as seaworthy and in allowing the ship to carry more
passengers than it was allowed to carry.
FACTS: Private respondent Ramon Miranda purchased from the
Negros Navigation Co., Inc. four special cabin tickets for his
wife, daughter, son and niece. The tickets were for Voyage No.
457-A of the M/V Don Juan. The Don Juan collided with the M/T
Tacloban City, an oil tanker owned by the Philippine National
Oil Company (PNOC) and the PNOC Shipping and Transport
Corporation (PNOC/STC). As a result, the M/V Don Juan sank.
Several of her passengers perished in the sea tragedy. The
bodies of the four members of private respondents families
were never found.
Private respondents filed a complaint in the RTC against the
Negros Navigation, the Philippine National Oil Company
(PNOC), and the PNOC Shipping and Transport Corporation
(PNOC/STC), seeking damages for the death of their family
members. The RTC ruled in favor of the complainants and
ordered petitioner to pay for the damages. The CA affirmed the
said decision.
ISSUE: Whether petitioner is liable for damages to the full
extent.
RULING: YES.
The rule is well-entrenched in our jurisprudence that a
shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of
maritime law if fault can be attributed to the shipowner.
Petitioner is guilty of negligence in (1) allowing or tolerating the
ship captain and crew members in playing mahjong during the
voyage, (2) in failing to maintain the vessel seaworthy and (3) in
allowing the ship to carry more passengers than it was allowed
to carry. Petitioner is, therefore, clearly liable for damages to
the full extent.
Prior to this case, a previous case was brought for the death of
other passengers. Said case is entitled Mecenas v. Intermediate
Appellate Court. In that case it was found that although the
proximate cause of the mishap was the negligence of the crew
of the M/T Tacloban City, the crew of the Don Juan was equally
negligent as it found that the latter’s master, Capt. Rogelio
Santisteban, was playing mahjong at the time of collision, and
the officer on watch, Senior Third Mate Rogelio De Vera,
admitted that he failed to call the attention of Santisteban to
the imminent danger facing them. This Court found that Capt.
Santisteban and the crew of the M/V Don Juan failed to take
steps to prevent the collision or at least delay the sinking of the
ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in
tolerating the playing of mahjong by the ship captain and other
crew members while on board the ship and failing to keep the
M/V Don Juan seaworthy so much so that the ship sank within
10 to 15 minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded.
On the Doctrine of stare decisis: Adherence to the Mecenas
case is dictated by this Courts policy of maintaining stability in
jurisprudence in accordance with the legal maxim stare decisis
et non quieta movere (Follow past precedents and do not
disturb what has been settled.) Where, as in this case, the same
questions relating to the same event have been put forward by
parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar
to any attempt to relitigate the same issue.
Case 4
PHIL-NIPPON KYOEI v. ROSALIA T. GUDELOSAO, GR
No. 181375, 2016-07-13
Facts:
Phil-Nippon Kyoei, Corp., a domestic shipping corporation
purchased a "Ro-Ro" passenger/cargo vessel "MV Mahlia"
in Japan in February 2003.
For the vessel's one month conduction voyage from Japan
to the Philippines, petitioner, as local principal, and Top
Ever Marine Management Maritime Co., Ltd. (TMCL), as
foreign principal, hired Edwin C. Gudelosao, Virgilio A.
Tancontian, and six other crewmembers.
They were hired through the local manning agency of
TMCL, Top Ever Marine Management Philippine
Corporation (TEMMPC). TEMMPC, through their president
and general manager, Capt. Oscar Orbeta (Capt. Orbeta),
and the eight crewmembers signed separate contracts of
employment. Petitioner secured a Marine Insurance Policy
(Maritime Policy No. 00001) from SSSICI over the vessel
for P10,800,000.00 against loss, damage, and third party
liability or expense, arising from the occurrence of the
perils of the sea for the voyage of the vessel from
Onomichi, Japan to Batangas, Philippines. This Marine
Insurance Policy included Personal Accident Policies for
the eight crewmembers for P3,240,000.00 each in case of
accidental death or injury.
On February 24, 2003, while still within Japanese waters,
the vessel sank due to extreme bad weather condition.
Only Chief Engineer Nilo Macasling survived the incident
while the rest of the crewmembers, including Gudelosao
and Tancontian, perished.
Respondents, as heirs and beneficiaries of Gudelosao and
Tancontian, filed separate complaints for death benefits
and other damages against peti... tioner, TEMMPC, Capt.
Orbeta, TMCL, and SSSICI, with the Arbitration Branch of
the National Labor Relations Commission (NLRC).
Labor Arbiter
Magat rendered a Decision... finding solidary liability
among petitioner, TEMMPC, TMCL and Capt. Orbeta.
The LA also found SSSICI liable to the respondents for the
proceeds of the Personal Accident Policies and attorney's
fees. The LA, however, ruled that the liability of petitioner
shall be deemed extinguished only upon SSSICI's
payment of the insurance proceeds.
On appeal, the NLRC modified the LA Decision in a
Resolution
The NLRC absolved petitioner, TEMMPC and TMCL and
Capt. Orbeta from any liability based on the limited liability
rule.
It, however, affirmed SSSICI's liability after finding that the
Personal Accident Policies answer for the death benefit
claims under the Philippine Overseas Employment
Administration Standard Employment Contract (POEA-
SEC)
The CA found that the NLRC erred when it ruled that the
obligation of petitioner, TEMMPC and TMCL for the
payment of death benefits under the POEA-SEC was ipso
facto transferred to SSSICI upon the death of the
seafarers
TEMMPC and TMCL cannot raise the defense of the total
loss of the ship because its liability under POEA-SEC is
separate and distinct from the liability of the shipowner.
To disregard the contract, which has the force of law
between the parties, would defeat the purpose of the
Labor Code and the rules and regulations issued by the
Department of Labor and Employment (DOLE) in setting
the minimum terms and conditions of employment for the
protection of Filipino seamen.
The CA noted that the benefits being claimed are not
dependent upon whether there is total loss of the vessel,
because the liability attaches even if the vessel did not
sink.
Thus, it was error for the NLRC to absolve TEMMPC and
TMCL on the basis of the limited liability rule.
Significantly though, the CA ruled that petitioner is not
liable under the POEA-SEC, but by virtue of its being a
shipowner.
Thus, petitioner is liable for the injuries to passengers
even without a determination of its fault or negligence. It is
for this reason that petitioner obtained insurance from
SSSICI - to protect itself against the consequences of a
total loss of the vessel caused by the perils of the sea.
Consequently, SSSICI's liability as petitioner's insurer
directly arose from the contract of insurance against
liability
The CA then ordered that petitioner's liability will only be
extinguished upon payment by SSSICI of the insurance
proceeds.
Issues:
Whether the doctrine of real and hypothecary nature of
maritime law (also known as the limited liability rule)
applies in favor of petitioner.
Ruling:
Doctrine of limited liability is not applicable to claims under
POEA-SEC.
Article 837 applies the limited liability rule in cases of
collision. Meanwhile, Articles 587 and 590 embody the
universal principle of limited liability in all cases wherein
the shipowner or agent may be properly held liable for the
negligent or illicit acts of the captain.[
These articles precisely intend to limit the liability of the
shipowner or agent to the value of the vessel, its
appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel.
When the vessel is totally lost, in which case
abandonment is not required because there is no vessel to
abandon, the liability of the shipowner or agent for
damages is extinguished.
Nonetheless, the limited liability rule is not absolute and is
without exceptions. It does not apply in cases: (1) where
the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring negligence of the
shipowner and the captain; (2) where the vessel is
insured; and (3) in workmen's compensation claims.
In Abueg v. San Diego,... we ruled that the limited liability
rule found in the Code of Commerce is inapplicable in a
liability created by statute to compensate employees and
laborers, or the heirs and dependents, in cases of injury
received by or inflicted upon them while engaged in the
performance of their work or employment, to wit:
The real and hypothecary nature of the liability of the
shipowner or agent embodied in the provisions of the
Maritime Law, Book III, Code of Commerce, had its origin
in the prevailing conditions of the maritime trade and sea
voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and
maritime commerce, it was deemed necessary to confine
the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight,
or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability
was extinguished.
But the provisions of the Code of Commerce invoked by
appellant have no room in the application of the
Workmen's Compensation Act 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 a 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 of such laborers
and employees in the event of death caused by their
employment.
We see no reason why the above doctrine should not
apply here.
Thus, the claim for death benefits under the POEA-SEC is
the same species as the workmen's compensation claims
under the Labor Code - both of which belong to a different
realm from that of Maritime Law. Therefore, the limited
liability rule does not apply to petitioner's liability under the
POEA-SEC.
Case 5
AGUSTIN P. DELA TORRE v. THE HONORABLE COURT OF
APPEALS, ET AL.
G.R. NOS. 160088 & 160565, THIRD DIVISION, 13 JULY 2011,
(MENDOZA, J.)
The only person who could avail of the Limited Liability Rule is
the shipowner – he is the very person whom the Rule has been
conceived to protect; charterers cannot invoke this as a defense.
FACTS:
Crisostomo G. Concepcion (Concepcion) owned the vessel LCT-
Josephine. He entered into a Preliminary Agreement with
Roland de la Torre (Roland), wherein Concepcion agreed that
the LCT-Josephine would be chartered after its dry-docking and
repair. Concepcion and the Philippine Trigon Shipyard
Corporation (PTSC), represented by Roland, entered into a
Contract of Agreement, wherein the latter would charter LCT-
Josephine. Subsequently, PTSC/Roland sub-chartered LCT-
Josephine to Trigon Shipping Lines (TSL), a single proprietorship
owned by Roland’s father, Agustin de la Torre (Agustin). TSL,
this time represented by Roland per Agustin’s Special Power of
Attorney, sub-chartered LCT-Josephine to Ramon Larrazabal
(Larrazabal) for the transport of cargo consisting of sand and
gravel to Leyte.
During the unloading of the vessel’s cargo in Leyte, LCT-
Josephine sank. Concepcion demanded that PTSC/Roland
refloat LCT-Josephine. The latter assured Concepcion that
negotiations were underway for the refloating of his vessel, but
this did not materialize. This prompted Concepcion to file a
complaint for Sum of Money and Damages against PTSC and
Roland. The Regional Trial Court (RTC) declared that the
efficient cause of the sinking of the LCT-Josephine was the
improper lowering or positioning of the ramp, which was well
within the charge or responsibility of the captain and crew of
the vessel. The Court of Appeals (CA) affirmed. The charterers
and sub- charterers insist the application of the Limited Liability
Rule to them.
ISSUE: Whether or not the Limited Liability Rule should be
applied to the charterers and sub-charterers.
RULING: NO.
The Limited Liability Rule under the Code of Commerce has
been explained to be that of the real and hypothecary doctrine
in maritime law where the shipowner or ship agent’s liability is
held as merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction. In this
jurisdiction, this rule is provided in three articles of the Code of
Commerce. Article 837 specifically applies to cases involving
collision which is a necessary consequence of the right to
abandon the vessel given to the shipowner or ship agent under
Article 587. Similarly, Article 590 is a reiteration of Article 587,
only this time the situation is that the vessel is co-owned by
several persons. Obviously, the forerunner of the Limited
Liability Rule under the Code of Commerce is Article 587. Now,
the latter is quite clear on which indemnities may be confined
or restricted to the value of the vessel pursuant to the said
Rule, and these are 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. Thus, what is
contemplated is the liability to third persons who may have
dealt with the shipowner, the agent or even the charterer in
case of demise or bareboat charter.
The only person who could avail of this is the shipowner,
Concepcion. He is the very person whom the Limited Liability
Rule has been conceived to protect. The petitioners cannot
invoke this as a defense. Concepcion, as the real shipowner, is
the one who is supposed to be supported and encouraged to
pursue maritime commerce. Thus, it would be absurd to apply
the Limited Liability Rule against him who, in the first place,
should be the one benefitting from the said rule. Even if the
contract is for a bareboat or demise charter where possession,
free administration and even navigation are temporarily
surrendered to the charterer, dominion over the vessel remains
with the shipowner. Ergo, the charterer or the sub-charterer,
whose rights cannot rise above that of the former, can never
set up the Limited Liability Rule against the very owner of the
vessel.
Case 6
ALEJANDRO ARADA, doing business under the name and style
"SOUTH NEGROS ENTERPRISES" vs. CA
G.R. No. 98243 July 1, 1992
Facts:
Alejandro Arada was the proprietor and operator of the firm
South Negros Enterprises engaged in the business of small-scale
shipping as a common carrier. On 24 March 1982, Arada
entered into a contract with San Miguel Corporation (SMC) to
safely transport cargoes of the latter to Mandaue City using one
of Arada’s vessels, M/L Maya. On the same day it applied for a
clearance with the Philippine Coast Guard for M/L but due to a
typhoon, it was denied clearance. M/L Maya was given
clearance on the next day as there was no storm and the sea
was calm. Hence, said vessel left for Mandaue City. While it was
navigating towards Cebu, a typhoon developed and hit the
vessel; as a result, the vessel sank with whatever was left of its
cargoes. The crew was rescued by a passing pump boat. A
marine protest was filed by the captain and on the basis of such
marine protest; the Board of Marine Inquiry conducted a
hearing of the sinking of M/L Maya wherein SMC was duly
represented. Said Board made it findings and recommendation
absolving the owner/operator, officers and crew of M/L Maya
from any administrative liability. The Board’s report containing
its findings and recommendation was then forwarded to the
headquarters of the Philippine Coast Guard for appropriate
action. On the basis of such report, the Commandant of the
Philippine Coast Guard rendered a decision exonerating the
owner/operator officers and crew of the ill-fated vessel from
any administrative liability on account of said incident.
SMC then filed an action for the recovery of the value of the
cargoes anchored in breach of contract of carriage. The trial
court held that there was no showing of negligence on the part
of the defendant nor did it fail to observe diligence over the
cargoes and that the sinking was due to a fortuitous event. The
CA decided otherwise, hence this petition.
Issue: Whether or not petitioner is liable for the loss of the
cargoes
Held:
Petitioner contends that it was only a private carrier so it need
not exercise extraordinary diligence over the care of the
respondent’s cargoes and that and that the factual findings of
the Board of Marine Inquiry are binding and conclusive on the
court.
The SC ruled that that petitioner’s vessel is a common carrier
and should have exercised extraordinary diligence in the
vigilance over the ensuring of safety of the cargoes transported
by it. In order that it may be exempted from responsibility due
to fortuitous events, it must prove that the fortuitous event is
the proximate cause and only cause of the loss or destruction
of goods and the common carrier must have exercised due
diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event. Such was not
observed by the common carrier, the captain knew that there
was a typhoon before it departed, it was given clearance on the
departure day but the captain should have checked where the
typhoon was headed, neither did the captain of the vessel
monitor and record the weather conditions everyday as
required by Art, 612 of the Code of Commerce. It was also
found that the crew were unlicensed. The carrier is therefore
liable for the damages it caused to the respondents as it failed
to observe due diligence.
As to the Board decision, it only exonerated the petitioner and
the crew and officers of the M/V Maya from administrative
liability which is not equal to the exoneration of the petitioner’s
liability as a common carrier for his failure to observe
extraordinary diligence in the vigilance over the goods it was
transporting and for the negligent acts or commissions of his
employees. Such is the function of the Court, not the Special
Board of Marine Inquiry.

Notes:
• Vessel owner negligent for hiring unlicensed crew even if
they have special coast guard permits.
• Exoneration of vessel by Special Board of Marine Inquiry
affects only its administrative liability.
Case 7
LORENZO V. NPC (OCTOBER 2015 - LEONEN, J.)

FACTS: • Lorenzo Shipping is the owner and operator of the

commercial vessel MV Lorcon Luzon.
• NPC is the owner of Power Barge 104, "a non-propelled
power plant barge.”
• Power Barge 104 was stationed at the Makar Wharf in
General Santos City when the MV Lorcon Luzon "hit and
rammed it.”
Nelson Homena, who was the Plant Manager of the Power
Barge from NPC, filed a MARINE PROTEST before the Board of
Marine Inquiry.
In his testimony, Captain Villarias, who also filed his own
marine protest, claimed that:
- At the time of the incident, Captain Villarias served as the
Master of the MV Lorcon Luzon. - But, the MV Lorcon Luzon
was then being piloted by Captain Yape, a Harbor Pilot from the
General Santos City pilotage district — as it was mandatory to
yield navigational control to the Harbor Pilot while docking. -
Despite this, he “always” remained at the side of Captain Yape
and and knew of Captain Yape's orders for he had to repeat
them. - When MV Lorcon Luzon was docking, Captain Yape
ordered the vessel to proceed "slow ahead," making it move at
the speed of about one (1) knot. As it moved closer to dock,
Captain Yape gave the order "dead slow ahead," making the
vessel move even slower. He then ordered the engine stopped.
- When the ship got really close to the wharf, Captain Yape
ordered the vessel to move backward, i.e., go "slow astern,"
and subsequently "full astern." - Despite his orders, the engine
failed to timely respond. - Thus, Captain Yape ordered the
dropping of the anchor, which led to MV Lorcon Luzon ramming
into Power Barge 104
Captain Yape filed a Marine Accident Report.
*The Board of Marine Inquiry conducted joint hearings on all of
these.
To forestall the prescription of its cause of action for damages,
NPC filed before RTC-QC a Complaint for Damages against
Lorenzo Shipping claiming that: - Due to the ramming, the
nylon ropes attached to hold the barge were instantaneously
ripped off - The take-off tower of the barge swayed when it was
hit, causing flash over on the 69 KV line tripping the line and
isolated General Santos City from the Mindanao Grid — this
caused a blackout, causing generation losses for NPC as there
was a failure to generate electricity immediately after the
accident. - The tanks of the barge were also severely damaged;
they were cracked and caused a leak of waste of oil in the sea.
Lorenzo Shipping filed a Motion to Dismiss grounded on the
RTC’s alleged lack of jurisdiction (should be with Board of
Marine Inquiry/Philippine Coast Guard) over the subject matter
and NPC’s failure to exhaust administrative remedies — The
RTC denied this.
RTC ruling: absolved Lorenzo Shipping of liability due to NPC’s
failure to establish Lorenzo Shipping's negligence.
CA ruling: reversed the RTC; ordered Lorenzo Shipping to pay
NPC the amount of P876,286.00 as actual damages and
P50,000.00 as attorney's fees and expenses of litigation.
Lorenzo Shipping filed an MR. CA issued the Amended Decision,
noting that the amount of actual damages was not proven by
NPC, so in lieu thereof, P300,000.00 as temperate damages
were awarded to them.
Lorenzo Shipping filed the Petition for Review on Certiorari to
the SC.
ISSUE: W/N LORENZO SHIPPING CORPORATION IS LIABLE FOR
THE DAMAGE SUSTAINED BY POWER BARGE EVEN IF IT WAS
UNDER MANDATORY PILOTAGE BY CAPTAIN YAPE?
Ruling: Yes.
Contrary to Lorenzo Shipping's assertion, the MV Lorcon
Luzon's having been piloted by Captain Yape at the time of the
ramming does not automatically absolve Lorenzo Shipping of
liability.
- Harbor Pilots are liable only to the extent that they can
perform their function through the officers and crew of the
piloted vessel.
- Where there is failure by the officers and crew to adhere to
their orders, Harbor Pilots cannot be held liable.
- Clearing it of liability requires a demonstration of how the
Master, Captain Villarias, conducted himself in those moments
when it became apparent that the MV Lorcon Luzon's engine
had stopped and Captain Yape's orders to go "slow astern" and
"full astern" were not being heeded — which were not
substantiated.
- In his testinomy, Captain Villarias admitted that about six (6)
minutes had passed before he even realized that there was an
engine failure, let alone acted on this fact.
- During the he just stood beside the harbour pilot waiting for a
response from the engine department, he could have called the
attention of Capt. Yape on his miscalculations in the docking
maneuvers of the vessel.
6 minutes were more than enough time for Captain Villarias to
have done something to remedy the situation, but he did
nothing.
- As Master of the MV Lorcon Luzon, he should have been on
his toes, keen and ready to make decisions in a split second,
especially in an evidently precarious situation.
- Lorenzo Shipping tried to argue that within those 6 minutes,
there was a battle of control as to how to successfully
maneuver the ship between the master and the harbor pilot,
but both Captain Villarias and Captain Yape must be presumed
to have been disciplined officers who knew fully well how to
conduct themselves in such a situation.
- The crew must also be presumed to have been trained in the
same manner
— Lorenzo Shipping tried to argue that the crew were confused
also on how to act because they did not know whose voice was
ordering them to work.
- But, from Captain Villarias' quoted testimony, the crew was
already listening to both his and Captain Yape's voices. He
admitted that he repeated Captain Yape's orders. The crew
was, thus, properly disposed to heed instructions coming from
him. If at all, his failure to timely act despite the crew's
presumptive readiness to heed his command only highlights his
negligence.
There is no basis for holding that Power Barge 104's presence in
the Makar Wharf was improper and tantamount to an
assumption of risk. - Lorenzo Shipping could have very easily
adduced proof attesting to Makar Wharf's supposedly being
exclusive to self-propelled vessels, but it did not produce a copy
of any appropriate regulation, if any, that restricts the use of
Makar Wharf to selfpropelled vessels or absolutely prohibits
NPC from using it as a berthing place for a power barge.
If at all, the MV Lorcon Luzon's ramming of a stationary object
is even more damaging to Lorenzo Shipping's cause. - Such
accidents simply do not occur in the ordinary course of things
unless the vessel has been mismanaged in some way.

Case 8
COMMISSIONER OF CUSTOMS vs. THE COURT OF APPEALS
G.R. Nos. 111202-05 January 31, 2006

FACTS:
The whole controversy revolves around a vessel and its cargo.
On January 7, 1989, the vessel M/V "Star Ace," coming from
Singapore laden with cargo, entered the Port of San Fernando,
La Union (SFLU) for needed repairs. The vessel and the cargo
had an appraised value, at that time, of more or less Two
Hundred Million Pesos (P200,000,000). When the Bureau of
Customs later became suspicious that the vessel’s real purpose
in docking was to smuggle its cargo into the country, seizure
proceedings were instituted under S.I. Nos. 02-89 and 03-89
and, subsequently, two Warrants of Seizure and Detention
were issued for the vessel and its cargo.

Respondent Cesar S. Urbino, Sr., does not own the vessel or any
of its cargo but claimed a preferred maritime lien under a
Salvage Agreement dated June 8, 1989. To protect his claim,
Urbino initially filed two motions in the seizure and detention
cases: a Motion to Dismiss and a Motion to Lift Warrant of
Seizure and Detention. Apparently not content with his
administrative remedies, Urbino sought relief with the regular
courts by filing a case for Prohibition, Mandamus and Damages
before the RTC of SFLU, seeking to restrain the District Collector
of Customs from interfering with his salvage operation. The RTC
of SFLU dismissed the case for lack of jurisdiction because of
the pending seizure and detention cases. Urbino then elevated
the matter to the CA. The Commissioner of Customs, in
response, filed a Motion to Suspend Proceedings, advising the
CA that it intends to question the jurisdiction of the CA before
this Court. The motion was denied. Hence, in this petition the
Commissioner of Customs assails the Resolution "F" recited
above and seeks to prohibit the CA from continuing to hear the
case.

ISSUE: Whether Urbino's claim is a preferred lien in this case.

HELD:
No.

xxx

First of all, the Court finds the decision of the RTC of Manila, in
so far as it relates to the vessel M/V "Star Ace," to be void as
jurisdiction was never acquired over the vessel. In filing the
case, Urbino had impleaded the vessel as a defendant to
enforce his alleged maritime lien. This meant that he brought
an action in rem under the Code of Commerce under which the
vessel may be attached and sold. However, the basic operative
fact for the institution and perfection of proceedings in rem is
the actual or constructive possession of the res by the tribunal
empowered by law to conduct the proceedings. This means
that to acquire jurisdiction over the vessel, as a defendant, the
trial court must have obtained either actual or constructive
possession over it. Neither was accomplished by the RTC of
Manila.

In his comment to the petition, Urbino plainly stated that

"petitioner has actual[sic] physical custody not only of the
goods and/or cargo but the subject vessel, M/V Star Ace, as
well." This is clearly an admission that the RTC of Manila did not
have jurisdiction over the res. While Urbino contends that the
Commissioner of Custom’s custody was illegal, such fact, even if
true, does not deprive the Commissioner of Customs of
jurisdiction thereon. This is a question that ought to be
resolved in the seizure and forfeiture cases, which are now
pending with the CTA, and not by the regular courts as a
collateral matter to enforce his lien. By simply filing a case in
rem against the vessel, despite its being in the custody of
customs officials, Urbino has circumvented the rule that regular
trial courts are devoid of any competence to pass upon the
validity or regularity of seizure and forfeiture proceedings
conducted in the Bureau of Customs, on his mere assertion that
the administrative proceedings were a nullity.
On the other hand, the Bureau of Customs had acquired
jurisdiction over the res ahead and to the exclusion of the RTC
of Manila. The forfeiture proceedings conducted by the Bureau
of Customs are in the nature of proceedings in rem and
jurisdiction was obtained from the moment the vessel entered
the SFLU port. Moreover, there is no question that forfeiture
proceedings were instituted and the vessel was seized even
before the filing of the RTC of Manila case.

The Court is aware that Urbino seeks to enforce a maritime lien

and, because of its nature, it is equivalent to an attachment
from the time of its existence. Nevertheless, despite his lien’s
constructive attachment, Urbino still cannot claim an
advantage as his lien only came about after the warrant of
seizure and detention was issued and implemented. The
Salvage Agreement, upon which Urbino based his lien, was
entered into on June 8, 1989. The warrants of seizure and
detention, on the other hand, were issued on January 19 and
20, 1989. And to remove further doubts that the forfeiture case
takes precedence over the RTC of Manila case, it should be
noted that forfeiture retroacts to the date of the commission of
the offense, in this case the day the vessel entered the country.
A maritime lien, in contrast, relates back to the period when it
first attached, in this case the earliest retroactive date can only
be the date of the Salvage Agreement. Thus, when the vessel
and its cargo are ordered forfeited, the effect will retroact to
the moment the vessel entered Philippine waters.
Accordingly, the RTC of Manila decision never attained finality
as to the defendant vessel, inasmuch as no jurisdiction was
acquired over it, and the decision cannot be binding and the
writ of execution issued in connection therewith is null and
void.

Case 9
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 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;
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. 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.
Case 10
Litonjua Shipping Company Inc VS National Seaman Board and
Gregorio P. Candongo
G.R. No. L-51910 August 10, 1989

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.
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.
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.
Case 11
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 Doña

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 Doña 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 Doña 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 Doña
Paz
▪ February 13, 1989: Teresita Cañezal and
Sotera E. Cañezal, Sebastian Cañezal’s 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.
Cañezal (public school teacher 47 years
old) and his 11-year old daughter Corazon G.
Cañezal
▪ 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 Cañezal'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.

▪ 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 ship’s 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 :

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
Case 12
FEDERAL PHOENIX ASSURANCE CO., LTD. vs. FORTUNE SEA
CARRIER, INC
G.R. No. 188118 November 23, 2015
Facts:
Fortune Sea agreed to lease its vessel M/V Ricky Rey to
Northern Mindanao Transport Co., Inc.
The Time Charter Party agreement executed by the parties
provides that the vessel shall be leased to Northern Transport
for 90 days to carry bags of cement to different ports of
destination. The parties extended the period of lease for
another 90 days. Northern Transport ordered 2,069 bales of
abaca fibers to be shipped onboard M/V Ricky Rey by shipper
Manila Hemp Trading Corporation, for delivery to consignee
Newtech Pulp, Inc. in Iligan City. The shipment was covered by
Bill of Lading and was insured by petitioner Federal Phoenix.
Upon arrival of M/V Ricky Rey at the Iligan City port the
stevedores started to discharge the abaca shipment the
following day. However, the stevedores noticed smoke coming
out of the cargo haul where the bales of abaca where located.
The fire was put off by the Iligan City Fire Department but it
was discovered that 60 bales of abaca were damaged.
Newtech filed an insurance claim with Federal Phoenix. Federal
Phoenix paid Newtech P162,419.25 for the losses it incurred
due to the damaged and undelivered bales of abaca. Upon
payment, Federal Phoenix was subrogated to the rights of
Newtech and pursued its claim against Fortune Sea. Despite
several demands to Fortune Sea, however, Federal Phoenix’s
claims were not settled. As a result, Federal Phoenix filed a
Complaint for Sum of Money against Fortune Sea.
For its defense, Fortune Sea insisted that it was acting as a
private carrier at the time the incident occurred. It alleged that
the Time Charter Party agreement executed by the parties
expressly provided that M/V Ricky Rey shall be under the
orders and complete control of Northern Transport.
RTC rendered a Decision in favor of Federal Phoenix. The CA
reversed and set aside RTC’s decision and ordered the dismissal
of the complaint for sum of money filed by Federal Phoenix
against Fortune Sea.
Issue:
whether the time-charter converted Fortune Sea into a private
carrier
Ruling:
Yes
In determining the nature of a contract, courts are not bound
by the title or name given by the parties. The decisive factor in
evaluating an agreement is the intention of the parties, as
shown, not necessarily by the terminology used in the contract
but by their conduct, words, actions and deeds prior to, during
and immediately after executing the agreement.”
The Time Charter Party agreement executed by Fortune Sea
and Northern Transport clearly shows that the charter includes
both the vessel and its crew thereby making Northern
Transport the owner pro hac vice of M/V Ricky Rey during the
whole period of the voyage.
Conformably, M/V Ricky Rey was converted into a private
carrier notwithstanding the existence of the Time Charter Party
agreement with Northern Transport since the said agreement
was not limited to the ship only but extends even to the control
of its crew. Despite the denomination as Time Charter by the
parties, their agreement undoubtedly reflected that their
intention was to enter into a Bareboat Charter Agreement.
Case 13
MARKET DEVELOPERS, INC. (MADE), petitioner, vs. HON.
INTERMEDIATE APPELLATE COURT and GAUDIOSO UY,
respondents
G.R. No. 74978 September 8, 1989
Facts:
Petitioner Market Developers, Inc. (MADE) entered into a
written barging and towage contract with private respondent
Gaudioso Uy for the shipment of the former’s cargo from Iligan
City to Kalibo, Aklan, at the rate of P1.45 per bag. On June 26,
1978, Uy sent a barge and a tugboat to Iligan City and loading
of the petitioner’s cargo began immediately. It is not clear who
made the request, but upon completion of the loading, the
parties agreed to divert the barge to Culasi, Roxas City, with the
cargo being consigned per bill of lading to Modern Hardware in
that city. This new agreement was not reduced to writing. The
shipment arrived in Roxas City, and the cargo was eventually
unloaded and duly received by the consignee. There is some
dispute as to the time consumed for such unloading. About six
months later, Uy demanded payment of demurrage charges in
the sum of P40,855.40 for an alleged delay of eight days and
4/25 hours. MADE ignored this demand, and Uy filed suit. the
trial court, which ordered the petitioner to pay him the said
amount with interest plus P4,000.00 attorney’s fees and the
cost of the suit. This decision was fully affirmed on appeal to
the respondent court on the basis that since the diversion of
the cargo to Roxas City wa not covered by a new written
agreement, the original agreement must prevail. Hence, this
petition.
Issues:
1. the first written contract was replaced by a new verbal
agreement that did not contain any stipulation for demurrage
2. Whether or not the second contract is invalid because it was
not in writing
Ruling:
1. Yes, the first written contract was replaced by a new verbal
agreement.
The private respondent said he felt there was no need to draft
another agreement as anyway the rates remained unchanged
at P1.45 per sack of the petitioner’s cargo. He did not consider,
however, that there was a substantial difference between
Roxas City and Kalibo, Aklan, as ports of destination, that
affected the continued existence of the first contract.
Roxas City is a much busier port than Kalibo, Aklan, where
unloading of its cargo could have been accomplished faster
because of the lighter traffic. That is why he agreed to pay
demurrage charges under the original contract but not under
the revised verbal agreement.
To hold that the old agreement was still valid and subsisting
notwithstanding this substantial change was to impose upon
the petitioner a condition he had not, and would not have,
accepted under the new agreement.
2. No, the second contract is valid.
The contract executed by MADE and Uy was a contract of
affreightment. A contract of affreightment is a contract with
the shipowner to hire his ship or part of it, for the carriage of
goods, and generally takes the form either of a charter party or
a bill of lading.
While the rule clearly shows that this kind of contract must be
in writing, the meaning of Article 653 provides that the charter
party may be oral, in which case the terms thereof, not having
been reduced to writing, shall be those embodied in the bill of
lading.
We see no reason why the second agreement of the parties to
deliver the petitioner’s cargo to Roxas City instead of Kalibo,
Aklan, should not be recognized simply because it was not in
writing. Law and jurisprudence support the validity of such a
contract. And there is no justification either to incorporate in
such contract the stipulation for demurrage in the original
written contract which provided for a different port of
destination than that later agreed upon by the parties. It was
precisely this vital change in the second contract that rendered
that first contract ineffectual.
Case 14
NEGROS NAVIGATION vs. BACQUING
G.R. No. 134753 March 9, 2005
Facts:
Respondents entered into a contract of affreightment with
petitioner for the shipment of five (5) 10-footer container vans
of crated tomatoes on board petitioner's M/S Florentina on its
advertised November 10, 1988 voyage from Cagayan de Oro
City to Manila. In connection therewith, and upon respondents'
payment of the corresponding freight charges, petitioner issued
in favor of respondents Bill of Lading No. 354068 for the four
(4) container vans and Bill of Lading No. 0-354067 for the
remaining container van.
The shipment, however, was not loaded on board M/S Sta.
Florentina on the scheduled date of its voyage because the
vessel immediately departed for llolio after unloading
passengers and cargoes at the Cagayan de Oro City pier.
As shippers, respondents lodged a protest with Noel Tabor,
petitioner's branch manager in Cagayan de Oro City, who
promised respondents that their cargoes of tomatoes will be
shipped on the next trip. Four (4) days later, the five (5) vans of
crated tomatoes were shipped to Manila. Unfortunately, the
consignee refused acceptance thereof because the tomatoes
were already rotten. Respondents filed their claim with Tabor.
The negotiation resulted in an amicable settlement whereby
petitioner agreed to pay 60% of the value of the shipment.
Petitioner failed to pay the agreed amount, prompting
respondents to a complaint against petitioner for breach of
contract, sum of money and damages. Petitioner raised the
defenses that respondents' claim has prescribed and that the
complaint states no cause of action. , the trial court granted
petitioner's demurrer and accordingly dismissed respondents'
complaint.
Eventually, the respondents went to the Court of Appeals which
reversed and set aside the appealed order of the trial court
Issue:
Whether the CA committed reversible error in declaring that
respondents' claim is based on the parties' compromise
agreement and in applying Article 1145 of the Civil Code
instead of the Carriage of Goods by Sea Act.
Ruling:
No reversible error was then committed by the Court of
Appeals when it reversed and set aside the challenged order of
the trial court.
It is undisputed that respondents initially filed their claim with
petitioner's branch manager Noel Tabora who concluded an
amicable settlement with them. However, despite demands,
petitioner failed to pay the agreed amount. Consequently,
respondents filed an action for breach of the compromise
agreement.
The trial court's finding of prescription based on the 1-year
prescriptive period appearing in the bill of lading is erroneous.
The prescriptive period in the bill does not apply to a violation
of a compromise agreement mutually binding upon the
contracting parties.
In this connection, Article 1145 of the Civil Code is pertinent. It
provides: The following actions must be commenced within six
years: (1) Upon an oral contract; (2) Upon a quasi-contract.
Here, the parties' compromise agreement was not reduced to
writing. Hence, and conformably with aforequoted provision of
the Civil Code, the action must be commenced within six (6)
years from violation of respondents' right. Records show that
the parties arrived at an amicable settlement in 1998 and
petitioner failed to comply therewith despite demands. The
complaint having been filed on November 20, 1990, the trial
court erred in dismissing the complaint on ground of
prescription.
Case 15
Keng Hua Products v. CA
G.R No. 116863, 12 February 1998
FACTS:
Plaintiff (herein private respondent), a shipping company, is a
foreign corporation licensed to do business in the Philippines.
On June 29, 1982, plaintiff received at its Hong Kong terminal a
sealed container, containing seventy-six bales of unsorted
waste paper for shipment to defendant (herein petitioner),
Keng Hua Paper Products, Co. in Manila. A bill of lading to cover
the shipment was issued by the plaintiff.
On July 9, 1982, the shipment was discharged at the Manila
International Container Port. Notices of arrival were
transmitted to the defendant but the latter failed to discharge
the shipment from the container during the free time period or
grace period. The said shipment remained inside the plaintiff’s
container from the moment the free time period expired on
July 29, 1982 until the time when the shipment was unloaded
from the container on November 22, 1983, or a total of four
hundred eighty-one (481) days. During the 481-day period,
demurrage charges accrued. Within the same period, letters
demanding payment were sent by the plaintiff to the defendant
who, however, refused to settle its obligation which eventually
amounted to P67,340.00. Numerous demands were made on
the defendant but the obligation remained unpaid. Plaintiff
thereafter commenced this civil action for collection and
damages.
In its answer, defendant, by way of special and affirmative
defense, alleged that it purchased fifty (50) tons of waste paper
from the shipper in Hong Kong, Ho Kee Waste Paper, as
manifested in Letter of Credit issued by Equitable Banking
Corporation, with partial shipment permitted; that under the
letter of credit, the remaining balance of the shipment was only
ten (10) metric tons as shown in Invoice that the shipment
plaintiff was asking defendant to accept was twenty (20) metric
tons which is ten (10) metric tons more than the remaining
balance; that if defendant were to accept the shipment, it
would be violating Central Bank rules and regulations and
custom and tariff laws; that plaintiff had no cause of action
against the defendant because the latter did not hire the
former to carry the merchandise; that the cause of action
should be against the shipper which contracted the plaintiffs
services and not against defendant; and that the defendant
duly notified the plaintiff about the wrong shipment through a
letter dated January 24, 1983.
ISSUE:
Whether or not the petitioner was bound by the bill of lading.
RULING:
A bill of lading serves two functions. First, it is a receipt for the
goods shipped. Second, it is a contract by which three parties,
namely, the shipper, the carrier, and the consignee undertake
specific responsibilities and assume stipulated obligations.
Petitioner admits that it received the bill of lading immediately
after the arrival of the shipment on July 8, 1982. Having been
afforded an opportunity to examine the said document,
petitioner did not immediately object to or dissent from any
term or stipulation therein. It was only six months later, on
January 24, 1983, that petitioner sent a letter to private
respondent saying that it could not accept the shipment.
Petitioners inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill
of lading. Moreover, said letter spoke only of petitioner’s
inability to use the delivery permit, i.e. to pick up the cargo, due
to the shippers failure to comply with the terms and conditions
of the letter of credit, for which reason the bill of lading and
other shipping documents were returned by the banks to the
shipper. The letter merely proved petitioners refusal to pick up
the cargo, not its rejection of the bill of lading.
In the case at bar, the prolonged failure of petitioner to receive
and discharge the cargo from the private respondent’s vessel
constitutes a violation of the terms of the bill of lading. It
should thus be liable for demurrage to the former.
Case 16
MOF COMPANY, INC. vs. SHIN YANG BROKERAGE
CORPORATION
G.R. No. 172822 December 18, 2009
Facts:
Halla Trading Co., a company based in Korea, shipped to Manila
secondhand cars and other articles on board the vessel Hanjin
Busan 0238W. The bill of lading covering the shipment, which
was prepared by the carrier Hanjin Shipping Co., Ltd., named
respondent Shin Yang Brokerage Corp. as the consignee and
indicated that payment was on a “Freight Collect” basis. The
shipment arrived in Manila on October 29, 2001. Thereafter,
petitioner MOF Company, Inc. (MOF), Hanjin’s exclusive general
agent in the Philippines, repeatedly demanded the payment of
ocean freight, documentation fee and terminal handling
charges from Shin Yang. The latter, however, failed and refused
to pay contending that it did not cause the importation of the
goods, that it is only the Consolidator of the said shipment, that
the ultimate consignee did not endorse in its favor the original
bill of lading and that the bill of lading was prepared without its
consent.
MOF filed a case for sum of money. MOF alleged that Shin
Yang, a regular client, caused the importation and shipment of
the goods and assured it that ocean freight and other charges
would be paid upon arrival of the goods in Manila. Yet, after
Hanjin’s compliance, Shin Yang unjustly breached its obligation
to pay. MOF argued that Shin Yang, as the named consignee in
the bill of lading, entered itself as a party to the contract and
bound itself to the “Freight Collect” arrangement.

Issue:
1. whether a consignee, who is not a signatory to the bill of
lading, is bound by the stipulations thereof.
2. whether respondent who was not an agent of the shipper
and who did not make any demand for the fulfillment of the
stipulations of the bill of lading drawn in its favor is liable to pay
the corresponding freight and handling charges.

Ruling:
1. A consignee, although not a signatory to the contract of
carriage between the shipper and the carrier, becomes a party
to the contract by reason of either a) the relationship of agency
between the consignee and the shipper/consignor; b) the
unequivocal acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or c) availment of
the stipulation pour autrui, i.e., when the consignee, a third
person, demands before the carrier the fulfillment of the
stipulation made by the consignor/shipper in the consignee’s
favor, specifically the delivery of the goods/cargoes shipped.
In Keng Hua Paper Products Co., Inc. v. Court of Appeals, we
held that once the bill of lading is received by the consignee
who does not object to any terms or stipulations contained
therein, it constitutes as an acceptance of the contract and of
all of its terms and conditions, of which the acceptor has actual
or constructive notice.
2. No
In civil cases, the party having the burden of proof must
establish his case by preponderance of evidence, which means
evidence which is of greater weight, or more convincing than
that which is offered in opposition to it.
Here, MOF failed to meet the required quantum of proof. Other
than presenting the bill of lading, which, at most, proves that
the carrier acknowledged receipt of the subject cargo from the
shipper and that the consignee named is to shoulder the
freightage, MOF has not adduced any other credible evidence
to strengthen its cause of action. It did not even present any
witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that
Shin Yang consented to shoulder the shipment costs. There is
also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act
that would bind it as a named consignee. Thus, the CA correctly
dismissed the suit for failure of petitioner to establish its cause
against respondent