CASE DIGEST

82. LITONJUA SHIPPING V. NATIONAL SEAMEN BOARD; GR 51910, 10 AUGUST

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.
Litonjua 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 ship-owner 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 ship-owner. 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 Caltex [Philippines], Inc. vs. Sulpicio Lines, Inc.
 83. PNB V. CA IS GR 128661, 8 AUGUST 2000
FACTS: To finance the acquisition of seven (7) ocean-going vessels, the Philippine
International Shipping Corporation (PISC) applied for and was granted by petitioner National
Investment and Development Corporation (NIDC) guaranty accommodations. As security for
these guaranty accommodations, PISC executed in favor of petitioners mortgages. PISC then
entered into a Contract Agreement with Hong Kong United Dockyards, Ltd. for the repair and
conversion of one vessel, M/V "Asean Liberty.
The Central Bank of the Philippines authorized PISC to open with private respondent China
Banking Corporation (CBC) a standby letter of credit for US$545,000.00 in favor of Citibank, to
cover the repair and partial conversion of the vessel M/V "Asean Liberty". A Promissory note for
US$545,000.00 was executed by PISC in favor of Citibank pursuant to the Loan Agreement for
US$545,000.00 between PISC, as borrower, and Citibank, as lender. Upon failure of PISC to
fulfill its obligations under the said promissory note, Citibank sent to private respondent CBC a
letter drawing on the Letter of Credit. CBC instructed its correspondent Irving Trust Co., by
cable, to pay to Citibank the amount of US$242,225.00. For failure of PISC to settle its
obligations under the guaranty accommodations, the PNB conducted an auction sale of the
mortgaged vessels. NIDC emerged as the highest bidder in these auctions. Claiming that the
foreclosure sale of its mortgaged vessels was illegal, unjust, irregular, and oppressive, PISC
instituted before the Regional Trial Court of Makati, a civil case against petitioners for the
annulment of the foreclosure and auction sale of its vessels and damages. CBC filed a complaint
in intervention for recovery upon maritime lien against the proceeds of the foreclosed vessels.
ISSUES:
1. Whether or not said claims of CBC is the nature of a maritime lien.
2. Whether or not said maritime lien is preferred over the mortgage lien of PNB/NIDC on the
foreclosed vessel, M/V Asean Liberty.

RULING:
1. YES. The claims are in the nature of a maritime lien. The applicable law on the matter is
Presidential Decree No. 1521, otherwise known as the Ship Mortgage Decree of 1978.
Under these provisions, any person furnishing repairs, supplies, or other necessaries to a
vessel on credit will have a maritime lien on the said vessel. Such maritime lien, if it
arose prior to the recording of a preferred mortgage lien, shall have priority over the said
mortgage lien.

In the instant case, it was Hongkong United Dockyards, Ltd. which originally possessed a
maritime lien over the vessel M/V "Asean Liberty" by virtue of its repair of the said
vessel on credit. Under the Contract Agreement dated March 12, 1979 between
Hongkong United Dockyards, Ltd. and PISC, the former, as contractor, obligated itself to
repair and convert the vessel M/V "Asean Liberty," which was owned by PISC. The
 foregoing provision of the contract agreement indubitably shows that credit was given to
the vessel M/V "Asean Liberty" by Hongkong United Dockyards, Ltd. and as a result, a
maritime lien in favor of Hongkong United Dockyards, Ltd. was constituted on the said
vessel by virtue of Section 21 of the Ship Mortgage Decree of 1978.

2. The maritime lien has priority over the mortgage lien. The said maritime lien has
priority over the said mortgage lien. Pursuant to Section 17 of the Ship Mortgage Decree
of 1978, a "preferred mortgage lien shall have priority over all claims against the vessel"
except, among others, "maritime liens arising prior in time to the recording of the
preferred mortgage."

The maritime lien over the vessel M/V "Asean Liberty" arose or was constituted at the
time Hongkong United Drydocks, Ltd. made repairs on the said vessel on credit. As such,
as early as March 12, 1979, the date of the contract for the repair and conversion of M/V
"Asean Liberty," a maritime lien had already attached to the said vessel. When Citibank
advanced the amount of US$242,225.00 for the purpose of paying off PISC’s debt to
Hongkong United Dockyards, Ltd., it acquired the existing maritime lien over the vessel.
When private respondent honored its contract of guarantee with Citibank on March 30,
1983, it likewise acquired by subrogation the maritime lien that was already existing over
the vessel M/V "Asean Liberty."

84. MONARCH INSURANCE CO. V. CA, GR 92735, 8 JUNE 2000

FACTS: Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions against Aboitiz,
the cargo carrier. Because Aboitiz refused to compensate Monarch, it filed two complaints
against Aboitiz which were consolidated and jointly tried, for its part, Tabacalera also filed two
complaints against the same defendant.
Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo vessel
was due to force majeure or an act of God. Aboitiz was subsequently declared as in default and
allowed Monarch and Tabacalera to present evidence ex-parte.
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo vessel. The survey
established that on her voyage to Manila from Hong Kong, the vessel did not encounter weather
so inclement that Aboitiz would be exculpated from liability for losses.
ISSUE:
1. Whether or not the doctrine of limited liability applies in the instant case.
2. Whether or not the sinking was due to force majeure.
HELD:
1. YES. That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its
vessel was not due to its fault and/or negligence should not however mean that the limited
liability rule will not be applied to the present cases. The peculiar circumstances here demand
that there should be no strict adherence to procedural rules on evidence lest the just claims of
shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with
the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd.,] promulgated on January 21, 1993, that claimants be treated as "creditors in an
insolvent corporation whose assets are not enough to satisfy the totality of claims against it."

2. NO. The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the face of the foregoing expert testimony constrains the
court to hold that Aboitiz was concurrently at fault and/or negligent with the ship captain and
crew of the M/V P. Aboitiz. This is in accordance with the rule that in cases involving the limited
liability of ship-owners, the initial burden of proof of negligence or unseaworthiness rests on the
claimants. However, once the vessel owner or any party asserts the right to limit its liability, the
burden of proof as to lack of privity or knowledge on its part with respect to the matter of
negligence or unseaworthiness is shifted to it. This burden, Aboitiz had unfortunately failed to
discharge.