TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
Abaño
PHILAMGEN vs. SWEET LINES
FACTS
A total 7,000 bags of low density polyethylene (600 bags of polyethylene
641 and 6,400 bags of polyethylene 647) were shipped from Baton Rouge,
LA to Manila on board SS Vishva Yash, a vessel belonging to the Shipping
Corporation of India (SCI). From Manila, the cargoes were shipped to
Davao on board MV Sweet Love, a vessel owned by Sweet Lines. The
consignee was Far East Bank with arrival notice to Tagum Plastics, Inc.,
Tagum, Davao City. The cargoes were insured by Far East Bank with the
Philippine American General Insurance Co (Philamgen) and were covered
by bills of lading which contained the following stipulation in paragraph 5:
Claims for shortage, damage, must be made at the time of
delivery to consignee or agent, if container shows exterior
signs of damage or shortage. Claims for non-delivery,
misdelivery, loss or damage must be filed within 30
days from accrual. Suits arising from shortage,
damage or loss, non-delivery or misdelivery shall be
instituted within 60 days from date of accrual of
right of action. Failure to file claims or institute judicial
proceedings as herein provided constitutes waiver of claim
or right of action. In no case shall carrier be liable for any
delay, non-delivery, misdelivery, loss of damage to cargo
while cargo is not in actual custody of carrier.
On May 15, 1977, the shipment(s) were discharged from the interisland
carrier into the custody of the consignee. A survey conducted on July 8,
1977 showed that of the shipment totalling 7,000 bags, originally
contained in 175 pallets, only a total of 5,820 bags were delivered to the
consignee in good order condition, leaving a balance of 1,080 bags. Some
of the 1,080 bags were either MISSING OR DAMAGED beyond the point
of being useful for the intended purpose.
FEBTC and Tagum Plastics sued the international carrier, SCI, the inter-
island carriers, Sweet Lines, the arrastre company, Davao Arrastre and FE
Zuellig (which I assume is the shipper). Before trial, a compromise
agreement was entered into between the complainants and SCI and F.E.
Zuellig, thus, only Sweet Lines and Davao Arrastre remained as
defendants.
3B Digest Group SY 09-10
TRANSPORTATION – Atty.
The trial court ruled in favour of Philamgen and Tagum Plastics. The CA
reversed on the ground of prescription and denied the motion for
reconsideration.
ISSUES
(1) Was there a prescriptive period?
(2) If yes, was the prescriptive period valid and legal?
(3) If it was valid and legal, did Philamgen act within the prescriptive
period?
RULING
(1) Yes. There was a prescriptive period. When the complaint was filed,
prescription as an affirmative defense was seasonably raised by
Sweet Lines in its answer. Though the bills of lading were not presented
in evidence, the SC said that: “As petitioners are suing upon SLI's
contractual obligation under the contract of carriage as contained in the
bills of lading, such bills of lading can be categorized as actionable
documents which under the Rules must be properly pleaded either as
causes of action or defenses, and the genuineness and due execution
of which are deemed admitted unless specifically denied under
oath by the adverse party. The rules on actionable documents cover
and apply to both a cause of action or defense based on said documents.”
In their answer, Sweet Lines included the prescriptive period under
paragraph 5 of the bills of lading. Philamgen did not deny the existence of
the bill of lading under oath. Instead, in its reply to the answer, Philamgen
asserted that the bills of lading were contracts of adhesion and that such
provisions were “contrary to law and public policy” and thus, Sweet Lines
cannot avail of such prescriptive period as a valid defense. The SC said
that Philamgen’s failure to deny under oath the existence of the bills of
lading was tantamount to an admission of its existence, together with
paragraph 5 containing the prescriptive period. Thus, the existence of the
prescriptive period was duly proved even if the bills of lading were not
presented in court.
(2) Yes. The prescriptive periods were valid and legal. Philamgen insists
that the bills of lading were contracts of adhesion and that the prescriptive
periods stated therein were void for being contrary to law and public
policy. The SC, citing Ong Yu vs CA, said “that contracts of adhesion are
not entirely prohibited. The one who adheres to the contract is in reality
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free to reject it entirely; if he adheres he gives his consent.” Philamgen,
thus, gave its consent to the contracts – the bills of lading – including
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
consent to the prescriptive periods therein. The SC also agreed with the
CA that parties can stipulate a shorter prescriptive period for the filing of
suits. The SC quoted the CA, “It must be noted, at this juncture, that the
aforestated time limitation (paragraph 5) in the presentation of claim for
loss or damage, is but a restatement of the rule prescribed under
Art. 366 of the Code of Commerce... ” The SC said that, “... the
validity of a contractual limitation of time for filing the suit itself
against a carrier shorter than the statutory period therefor has
generally been upheld as such stipulation merely affects the
shipper's remedy and does not affect the liability of the carrier. In
the absence of any statutory limitation and subject only to the
requirement on the reasonableness of the stipulated limitation period,
the parties to a contract of carriage may fix by agreement a shorter time
for the bringing of suit on a claim for the loss of or damage to the
shipment than that provided by the statute of limitations. Such limitation
is not contrary to public policy for it does not in any way defeat the
complete vestiture of the right to recover, but merely requires the
assertion of that right by action at an earlier period than would be
necessary to defeat it through the operation of the ordinary statute of
limitations.” The SC also said that, “..., the shortened period for filing suit
is not unreasonable and has in fact been generally recognized to be a valid
business practice in the shipping industry.” This is in recognition of the
inherent dangers of carriage by sea.
(3) No. Philamgen did not act within the prescriptive period. The shipment
was discharged into the custody of the consignee on May 15, 1977, and it
was from this date that petitioners' cause of action accrued, with thirty
(30) days therefrom within which to file a claim with the carrier for any
loss or damage which may have been suffered by the cargo and thereby
perfect their right of action. Claim was filed only on April 28, 1978, way
beyond the period provided in the bills of lading and violative of the
contractual provision, the inevitable consequence of which is the loss
of petitioners' remedy or right to sue. The SC said, “Even the filing of
the complaint on May 12, 1978 is of no remedial or practical consequence,
since the time limits for the filing thereof, whether viewed as a condition
precedent or as a prescriptive period, would in this case be productive of
the same result, that is, that petitioners had no right of action to begin
with or, at any rate, their claim was time-barred.”
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
Other things discussed by the SC:
1. “...where the contract of shipment contains a reasonable requirement of
giving notice of loss of or injury to the goods, the giving of such notice
is a condition precedent to the action for loss or injury or the right
to enforce the carrier's liability. Such requirement is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not
to relieve the carrier from just liability, but reasonably to inform it that the
shipment has been damaged and that it is charged with liability therefor,
and to give it an opportunity to examine the nature and extent of the
injury. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so
as to safeguard itself from false and fraudulent claims.”
2. Philamgen also asserted that since the purpose of the notice of claim or
loss was to charge Sweet Lines with actual knowledge of the loss and
damage involved, then the issuance of Sweet Lines of a “Report on Losses
and Damage” dated May 15, 1977, “would obviate the need for or render
superfluous the filing of a claim within the stipulated period.” The SC said,
“The report on losses and damages is not the claim referred to and
required by the bills of lading for it does not fix responsibility for the
loss or damage, but merely states the condition of the goods shipped. The
claim contemplated herein, in whatever form, must be something
more than a notice that the goods have been lost or damaged; it
must contain a claim for compensation or indicate an intent to
claim.” Furthermore, the report bears an annotation at its lower part that
says “this Copy should be submitted together with your claim invoice or
receipt within 30 days from date of issue otherwise your claim will not be
honored."
3. The claim against the carrier, Sweet Lines, has prescribed but what
about the claim against Davao Arrastre. The SC said that there was not
enough proof to pinpoint the party responsible for the lost and damaged
bags. (What I found surprising was that the SC also said, “Unlike a
common carrier, an arrastre operator does not labor under a
presumption of negligence in case of loss, destruction or deterioration
of goods discharged into its custody. In other words, to hold an arrastre
operator liable for loss of and/or damage to goods entrusted to it there
must be preponderant evidence that it did not exercise due diligence in the
handling and care of the goods.”
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EVERETT STEAMSHIP vs. CA
FACTS
Hernandez trading company imported three crates of bus spare parts
marked as Marco 12, Marco 13, Marco 14 from its supplier Maruman
trading company.
Said crates were shipped from Japan to Manila on board the vessel owned
by Everette Orient Lines. Upon arrival in Manila, it was discovered that
Marco 14 was missing.
Hernandez makes a formal claim to Everett in an amount of 1 mill ++ Yen,
which is the amount of the cargo lost. However, Everett offers an amount
of 100k because it is the amount that was stipulated in its Bill of Lading.
Hernandez files a case at the RTC of Caloocan, RTC rules 1 in favor of
Hernandez holding Everett liable for the amount of 1M++ Yen. THE CA
affirmed the RTC’s ruling and made an additional observation that since
Hernandez is not a privy to the contract in the bill of lading ( the contract
was entered by Everett and Maruman trading [shipper]), and so the 100k
limit stipulated will not bind Hernandez making Everett liable for the full
amount of 1M ++ Yen.
ISSUE
1. Is Everett liable for the full amount or the amount that was
stipulated in the contract?- what was stipulated in the contract
2. Is Hernandez a privy to the contract which says that Petitioner is
liable only for 100k? Yes
1
Art. 1750. ‘A contract fixing the sum that may be recovered by
the owner or shipper for the loss, destruction or deterioration of the goods
is valid, if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon.’
“It is required, however, that the contract must be reasonable and just under the circumstances
and has been fairly and freely agreed upon.XXX
the Court is of the view that the requirements of said article have not been met. The fact that
those conditions are printed at the back of the bill of lading in letters so small that they are hard
to read would not warrant the presumption that the plaintiff or its supplier was aware of these
conditions such that he had “fairly and freely agreed” to these conditions. It can not be said
that the plaintiff had actually entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was issued by the defendant to
plaintiff.”
3B Digest Group SY 09-10
A.M.+D.G. TRANSPORTATION – Atty. Abaño
RULING
1. Controlling provisions for this issue would be 1749 and 1750 of the
Civil Code.
In Sea Land Service, Inc. vs Intermediate Appellate Court
That said stipulation is just and reasonable is arguable from the fact that it
echoes Art. 1750 itself in providing.
a limit to liability only if a greater value is not declared for the shipment in
the bill of lading. To hold otherwise would amount to questioning the
justness and fairness of the law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just
and reasonable character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding accrual of liability limitation by the
simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading
The clause of the contract goes:
“The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight unit (whichever is
least) unless the value of the goods higher than this amount is declared in
writing by the shipper before receipt of the goods by the carrier and
inserted in the Bill of Lading and extra freight is paid as required.”
(Emphasis supplied)
The shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited
liability of the carrier. Considering that the shipper did not declare
a higher valuation, it had itself to blame for not complying with the
stipulations.
The trial court’s ratiocination that private respondent could not have
“fairly and freely” agreed to the limited liability clause in the bill of lading
because the said conditions were printed in small letters does not make
the bill of lading invalid.
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In Ong Yiu VS. CA the court said that
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“ contracts of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited
A contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his
own negligence
The shipper, Maruman Trading, we assume, has been extensively engaged
in the trading business. It can not be said to be ignorant of the business
transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading has not been
heard to complain that it has been deceived or rushed into agreeing to
ship the cargo in petitioner’s vessel. A stipulation in the bill of lading
limiting the common carrier's liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is
sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code
which provide:
“ART. 1749. A stipulation that the common carrier’s liability is
limited to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.”
“ART. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been
freely and fairly agreed upon.”
2. Even if the consignee was not a signatory to the contract of
carriage between the shipper and the carrier.
The consignee can still be bound by the contract. private respondent
(Hernandez) formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the
very same bill of lading, it (private respondent) accepted the provisions of
the contract and thereby made itself a party thereto, or at least has come
to court to enforce it.i Thus, private respondent cannot now reject or
disregard the carrier’s limited liability stipulation in the bill of lading. In
other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
3B Digest Group SY 09-10
A.M.+D.G. TRANSPORTATION – Atty. Abaño
PROVIDENT INSURANCE vs. CA
FACTS
On or about June 5, 1989, the vessel MV "Eduardo II" took and received
on board at Sangi, Toledo City a shipment of 32,000 plastic woven bags of
various fertilizer in good order and condition for transportation to Cagayan
de Oro City. The subject shipment was consigned to Atlas Fertilizer
Corporation, and covered by Bill of Lading No. 01 and Marine Insurance
Policy No. CMI-211/89-CB.
Upon its arrival at General Santos City on June 7, 1989, the vessel MV
"Eduardo II" was instructed by the consignee's representative to proceed
to Davao City and deliver the shipment to its Davao Branch in Tabigao.
On June 10, 1989, the MV "Eduardo II" arrived in Davao City where the
subject shipment was unloaded. In the process of unloading the shipment,
three bags of fertilizer fell overboard and 281 bags were considered to be
unrecovered spillages. Because of the mishandling of the cargo, it was
determined that the consignee incurred actual damages in the amount of
P68,196.16.
As the claims were not paid, petitioner Provident Insurance Corporation
indemnified the consignee Atlas Fertilizer Corporation for its damages.
Thereafter, petitioner, as subrogee of the consignee, filed on June 3, 1991
a complaint against respondent carrier seeking reimbursement for the
value of the losses/damages to the cargo.
ISSUE
Whether stipulation No. 7 in the bill of lading which limited the time to file
a claim in case of loss or spillage was valid and therefore absolves the
carrier from liability?
RULING
It is a fact admitted by both parties that the losses and damages were
caused by the mishandling of the cargo by respondent carrier. There is
also no dispute that the consignee failed to strictly comply with Stipulation
No. 7 of the Bill of Lading in not making claims for damages to the goods
within the twenty-four hour period from the time of delivery, and that
there was no exterior sign of damage of the goods. Consequently, the only
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issue left to be resolved is whether the failure to make the prompt notice
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of claim as required is fatal to the right of petitioner to claim
indemnification for damages.
The bill of lading defines the rights and liabilities of the parties in reference
to the contract of carriage. Stipulations therein are valid and binding in the
absence of any showing that the same are contrary to law, morals,
customs, public order and public policy. Where the terms of the contract
are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of the stipulations shall control.
A bill of lading is in the nature of a contract of adhesion, defined as one
where one of the parties imposes a ready-made form of contract which the
other party may accept or reject, but which the latter cannot modify. One
party prepares the stipulation in the contract, while the other party merely
affixes his signature or his "adhesion" thereto, giving no room for
negotiation and depriving the latter of the opportunity to bargain on equal
footing. Nevertheless, these types of contracts have been declared as
binding as ordinary contracts, the reason being that the party who adheres
to the contract is free to reject it entirely.
In light of the foregoing, there can be no question about the validity and
enforceability of Stipulation No. 7 in the bill of lading. The twenty-four
hour requirement under the said stipulation is, by agreement of the
contracting parties, a sine qua non for the accrual of the right of action to
recover damages against the carrier.
BELGIAN OVERSEAS vs. PHIL FIRST
FACTS
On June 13, 1990, CMC Trading A.G. shipped on board M/V Anangel
Sky at Hamburg, Germany, 242 coils of various Prime Cold Rolled Steel
sheets for transportation to Manila consigned to Philippine Steel
Trading Corporation.
Upon arrival, four coils were discovered to be in bad order, consignee
declared the shipment as total loss. Petitioner Belgian refused to submit to
consignee’s claim, thus respondent Philippine First Insurance paid
P506,086.50 and was subrogated to consignee’s rights and causes of
action.
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
Petitioners contend that the damage was due to pre-shipment, inherent
nature and defect of the goods, to perils, insufficiency of packing, act or
omission on the part of the shipper. In addition, they argue that their
liability, if any, should not exceed the limitations of liability provided for in
the bill of lading.
RTC dismissed the complaint while the CA reversed, ruling that petitioners
were liable who failed to overcome the presumption of negligence. As to
the extent of liability, CA held the COGSA package limitation was not
applicable and that the words “L/C No. 90/02447” indicating a higher value
prevailed.
ISSUE
W/N Petitioner has overcome the presumption of negligence? No.
W/N the claim is barred by prescription? No.
W/N Petitioner’s liability is limited to stipulation in the Bill of Lading or the
L/C? Bill of Lading.
RULING
In the case at hand, there was mere proof of delivery of the goods in good
order to the common carrier and the fact of their arrival in bad order
constitutes a prima facie case of fault or negligence against the carrier. If
no adequate explanation is given as to how the deterioration, the loss, or
the destruction of the goods happened, the transporter shall be held
responsible.
Furthermore, the records provide that prior to the unloading of the cargo,
Inspection Report prepared and signed by representative of both parties
showed the steel bands broken and the contents thereof exposed and
rusty.
Petitioners claim that pursuant to Sec. 3 of COGSA, respondent should
have filed its Notice of Loss within three days from delivery. The cargo was
discharged on July 31, 1990 but the respondent filed its claim only on
Sept. 18, 1990. SC that the notice of claim need not be given if the state
of the goods, at the time of their receipt, has been the subject of a joint
inspection or survey. Also, a failure to file a notice within three days will
not bar recovery if it is nonetheless filed within one year.
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Lastly, respondent argues that COGSA limitation of $500 per package also
stipulated in the Bill of Lading is inapplicable, because the value of the
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subject shipment was declared by petitioners through the insertion of the
Letter of Credit which provides a per metric ton price. The Bill of Lading
serves as receipt for the goods shipped and as a contract and a limitation
of liability therein is sanctioned by law provided that (1) it is reasonable
and just and (2) it has been fairly and freely agreed upon. SC decision
affirmed all except on this last issue, modifying petitioner’s liability as
found in the bill of lading in the total amount of $2k.
PLANTERS PRODUCTS vs. CA
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 Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan.
Before loading the fertilizer aboard the vessel, four (4) of her holds were
all presumably inspected by the charterer's representative and found fit to
take a load of urea in bulk pursuant to par. 16 of the charter-party.
After the Urea fertilizer was loaded in bulk by stevedores hired by and
under the supervision of the shipper, the steel hatches were closed with
heavy iron lids, covered with three (3) layers of tarpaulin, then tied with
steel bonds. The hatches remained closed and tightly sealed throughout
the entire voyage.
Upon arrival of the vessel at her port of call on 3 July 1974, the steel
pontoon hatches were opened with the use of the vessel's boom. Petitioner
unloaded the cargo from the holds into its steelbodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-partly (which provided
for an F.I.O.S. clause). The hatches remained open throughout the
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
duration of the discharge.
Each time a dump truck was filled up, its load of Urea was covered with
tarpaulin before it was transported to the consignee's warehouse located
some fifty (50) meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale where they were
individually weighed for the purpose of ascertaining the net weight of the
cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress. The petitioner's warehouse was made
of corrugated galvanized iron (GI) sheets, with an opening at the front
where the dump trucks entered and unloaded the fertilizer on the
warehouse floor. Tarpaulins and GI sheets were placed in-between and
alongside the trucks to contain spillages of the ferilizer.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July
1974 (except July 12th, 14th and 18th). A private marine and cargo
surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI
to determine the "outturn" of the cargo shipped, by taking draft readings
of the vessel prior to and after discharge. The survey report submitted by
CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same results were
contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was indeed short
of 94.839 M/T and about 23 M/T were rendered unfit for commerce,
having been polluted with sand, rust and dirt.
Consequently, PPI sent a claim letter dated 18 December 1974 to
Soriamont Steamship Agencies (SSA), the resident agent of the carrier,
KKKK, for P245,969.31 representing the cost of the alleged shortage in the
goods shipped and the diminution in value of that portion said to have
been contaminated with dirt.
Respondent SSA explained that they were not able to respond to the
consignee's claim for payment because, according to them, what they
received was just a request for shortlanded certificate and not a formal
claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." Hence, on 18 July
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1975, PPI filed an action for damages with the Court of First Instance of
Manila.
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The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become
private carriers by reason of the provisions of the charter-party.
The trial court however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged.
On appeal, respondent Court of Appeals reversed the lower court and
absolved the carrier from liability for the value of the cargo that was lost
or damaged. Relying on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., the appellate court ruled that the cargo vessel
M/V "Sun Plum" owned by private respondent KKKK was a private carrier
and not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers which set forth
a presumption of negligence do not find application in the case at bar.
ISSUE
W/N a charter-party between a shipowner and a charterer transform a
common carrier into a private one as to negate the civil law presumption
of negligence in case of loss or damage to its cargo?
RULING
It is not disputed that respondent carrier, in the ordinary course of
business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the
employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a
stranger to the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in doing so. This
is evident in the present case considering that the steering of the ship, the
manning of the decks, the determination of the course of the voyage and
other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner.
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
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
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.
In an action for recovery of damages against a common carrier on the
goods shipped, the shipper or consignee should first prove the fact of
shipment and its consequent loss or damage while the same was in the
possession, actual or constructive, of the carrier. Thereafter, the burden of
proof shifts to respondent to prove that he has exercised extraordinary
diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability.
Although it is considered a common carrier, respondent has
sufficiently overcome, by clear and convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition
taken on 19 April 1977 before the Philippine Consul and Legal Attache in
the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer
was loaded, the four (4) hatches of the vessel were cleaned, dried and
fumigated. After completing the loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were closed and sealed with iron lids,
then covered with three (3) layers of serviceable tarpaulins which were
tied with steel bonds. The hatches remained close and tightly sealed while
the ship was in transit as the weight of the steel covers made it impossible
for a person to open without the use of the ship's boom.
It was also shown during the trial that the hull of the vessel was in good
condition, foreclosing the possibility of spillage of the cargo into the sea or
seepage of water inside the hull of the vessel. When M/V "Sun Plum"
docked at its berthing place, representatives of the consignee boarded,
and in the presence of a representative of the shipowner, the foreman, the
stevedores, and a cargo surveyor representing CSCI, opened the hatches
and inspected the condition of the hull of the vessel. The stevedores
unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis.
Verily, the presumption of negligence on the part of the respondent carrier
Page14
has been efficaciously overcome by the showing of extraordinary zeal and
assiduity exercised by the carrier in the care of the cargo.
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
CALTEX vs. SULPICIO LINES
FACTS
MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate,
loaded with 8,800 barrels of petroleum products shipped by petitioner
Caltex. MT Vector is a tramping motor tanker owned and operated by
Vector Shipping Corporation, engaged in the business of transporting fuel
products such as gasoline, kerosene, diesel and crude oil.
The passenger ship MV Doña Paz left the port of Tacloban headed for
Manila with a complement of 59 crew members including the master and
his officers, and passengers totaling 1,493 as indicated in the Coast Guard
Clearance. The MV Doña Paz is a passenger and cargo vessel owned and
operated by Sulpicio Lines.
The two vessels collided in the open sea within the vicinity of Dumali Point
between Marinduque and Oriental Mindoro. All the crewmembers of MV
Doña Paz died, while the two survivors from MT Vector claimed that they
were sleeping at the time of the incident.
The MV Doña Paz carried an estimated 4,000 passengers; many indeed,
were not in the passenger manifest. Only 24 survived the tragedy after
having been rescued from the burning waters by vessels that responded to
distress calls. Among those who perished were public school teacher
Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11
years old), both unmanifested passengers but proved to be on board the
vessel.
The 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.
Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and
mother respectively, filed with the Regional Trial Court, Branch 8, Manila,
a complaint for “Damages Arising from Breach of Contract of Carriage”
against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a
third party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex
chartered MT Vector with gross and evident bad faith knowing fully well
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
that MT Vector was improperly manned, ill-equipped, unseaworthy and a
hazard to safe navigation; as a result, it rammed against MV Doña Paz in
the open sea setting MT Vector’s highly flammable cargo ablaze.
The trial court dismissed the 3rd party complaint and held Sulpicio lines
liable.
The Court of Appeal modified the trial court’s ruling and included petitioner
Caltex as one of those liable for damages:
“Third party defendants Vector Shipping Co. and Caltex (Phils.),
Inc. are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-
mentioned damages, attorney’s fees and costs which the latter is adjudged
to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being
the vessel at fault for the collision) and the other half by Caltex (Phils.),
Inc. (being the charterer that negligently caused the shipping of
combustible cargo aboard an unseaworthy vessel).”
Hence the appeal.
ISSUE
1) Should Caltex (charterer) be held liable? NO
2) Is MT Vector a common carrier and therefore liable? YES
3) Should Caltex be held liable for damages? NO
RULING
1) The charterer has no liability for damages under Philippine
Maritime laws.
Petitioner CALTEX 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
Page14
payment of freight.
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
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 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.
Under a demise or bareboat charter on the other hand, the 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.
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.
2) MT Vector is a common carrier.
Charter parties fall into three main categories: (1) Demise or bareboat,
(2) time charter, (3) voyage charter. Does a charter party agreement turn
the common carrier into a private one?
In this case, 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.
In Planters Products, Inc. vs. Court of Appeals, we said:
“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 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.”
Later, we ruled in Coastwise Lighterage Corporation vs. Court of
Appeals:
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
“Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of affreightment
xxx”
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. MT Vector fits the definition of a common carrier
under Article 17322 of the Civil Code.
Article 1732 also carefully avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled
basis and one offering such services on a an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the “general public,” i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population.
Under the 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;
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.
The provisions owed their conception to the nature of the business of
common carriers. This business is impressed with a special public duty.
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
2
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers for passengers or
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goods or both, by land, water, or air for compensation, offering their services to the
public
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
because with the modern development of science and invention,
transportation has become more rapid, more complicated and somehow
more hazardous.
3) Sulpicio argues that Caltex negligently shipped its highly
combustible fuel cargo aboard an unseaworthy vessel such as the
MT Vector when Caltex:
Did not take steps to have M/T Vector’s certificate of inspection and
coastwise license renewed; Proceeded to ship its cargo despite defects
found by Mr. Carlos Tan of Bataan Refinery Corporation; Witnessed M/T
Vector submitting fake documents and certificates to the Philippine Coast
Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo
despite these deficiencies:
The master of M/T Vector did not posses the required Chief Mate
license to command and navigate the vessel;The second mate,
Ronaldo Tarife, had the license of a Minor Patron, authorized to
navigate only in bays and rivers when the subject collision occurred in
the open sea; The Chief Engineer, Filoteo Aguas, had no license to
operate the engine of the vessel; The vessel did not have a Third
Mate, a radio operator and a lookout; and The vessel had a defective
main engine.
As basis for the liability of Caltex, the Court of Appeals relied on Articles
203 and 21764 of the Civil Code.
In Southeastern College, Inc. vs. Court of Appeals, we said that
negligence, as commonly understood, is conduct which naturally or
reasonably creates undue risk or harm to others. It may be the failure to
observe that degree of care, precaution, and vigilance, which the
3
Article 20. - Every person who contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
4 the ship was seaworthy as even the Philippine Coast Guard itself was
Article 2176. - Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.”
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
circumstances justly demand, or the omission to do something which
ordinarily regulate the conduct of human affairs, would do.
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 upon the common carrier simply for being engaged in
“public service.” The Civil Code demands diligence which is required by
the nature of the obligation and that which corresponds with the
circumstances of the persons, the time and the place. Hence, considering
the nature of the obligation between Caltex and MT Vector, the liability as
found by the Court of Appeals is without basis.
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. By the same token, we cannot expect passengers to inquire
every time they board a common carrier, whether the carrier possesses
the necessary papers or that all the carrier’s employees are qualified.
Such a practice would be an absurdity in a business where time is always
of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers
possess all the legal requisites in its operation.
Thus, the 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.
Clearly, as a mere voyage charterer, Caltex had the right to presume that
convinced of its seaworthiness.
Page14
NFA vs. CA
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
FACTS
National Food Authority (NFA), thru its officers then, Emil Ong, Roselinda
Geraldez, Ramon Sargan and Adelina A. Yap, entered into a “Letter of
Agreement for Vessel /Barge Hire” with Hongfil Shipping Corporation
(Hongfil) for the shipment of 200,000 bags of corn grains from Cagayan de
Oro City to Manila. NFA sent Hongfil a Letter of Advice that its (Hongfil)
vessel should proceed to Cagayan de Oro City. On 6 February 1987, M/V
DIANE/CHARLIE of Hongfil arrived in Cagayan de Oro City. Hongfil notified
the Provincial Manager of NFA in Cagayan de Oro, Eduardo A. Mercado, of
its said vessel’s readiness to load and the latter received the said
notification on 9 February 1987. A certification of charging rate was then
issued by Gold City Integrated Port Services, Inc. (INPORT), the arrastre
firm in Cagayan de Oro City, which certified that it would take them
(INPORT) 7 days, 8 hours and 43 minutes to load the 200,000 bags of NFA
corn grains. On 10 February 1987, loading on the vessel commenced and
was terminated on 4 March 1987. As there was a strike staged by the
arrastre workers and in view of the refusal of the striking stevedores to
attend to their work, the loading of said corn grains took 21 days, 15 and
18 minutes to finish. On 6 March 1987, the NFA Provincial Manager
allowed MV CHARLIE/DIANE to depart for the Port of Manila. On 11 March
1987, the vessel arrived at the Port of Manila and a certification of
discharging rate was issued at the instance of Hongfil, stating that it would
take 12 days, 6 hours and 22 minutes to discharge the 200, 000 bags of
corn grains. Unfortunately, unloading only commenced on 15 March 1987
and was completed on 7 April 1987. It took a total period of 20 days, 14
hours and 33 minutes to finish the unloading, due to the unavailability of a
berthing space for M/V CHARLIE/DIANE. After the discharging was
completed, NFA paid Hongfil the amount of P1,006,972.11 covering the
shipment of corn grains. Thereafter, Hongfil sent its billing to NFA,
claiming payment for freight covering the shut-out load or deadfreight as
well as demurrage, allegedly sustained during the loading and unloading of
subject shipment of corn grains.
When NFA refused to pay the amount reflected in the billing, Hongfil
brought an action against NFA and its officers for recovery of deadfreight
and demurrage, before the RTC in Pasig City (Civil Case 55892, Branch
165). On 29 February 1989, after trial, the RTC handed down its decision
in favor of Hongfil and against NFA and its officers, ordering (1) the NFA to
pay Hongfil (a) P242,367.30, in and as payment of the deadfreight or
unloaded cargo; and (b) P1,152,687.50, in and as payment as of
demurrage claim; (2) the NFA and its officers to pay Hongfil, jointly and
severally the amount of P50,000.00, for and as attorney’s fees; and
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
expenses of litigation or the costs of the suit. The trial court dismissed
NFA’s counterclaim for lack of merit.
On appeal, and on 29 November 1990, the Court of Appeals affirmed with
modification the judgment by deleting therefrom the award of attorney’s
fees (CA GR CV 21243). Hence, the petition for review on certiorari.
ISSUE
Is NFA liable for demurrage?
RULING
No. Delay in loading or unloading, to be deemed as a demurrage, runs
against the charterer as soon as the vessel is detained for an unreasonable
length of time from the arrival of the vessel because no available berthing
space was provided for the vessel due to the negligence of the charterer or
by reason of circumstances caused by the fault of the charterer.
In the present case, charterer NFA could not be held liable for demurrage
for the delay resulting from the aforementioned circumstances. The
provision "Laydays: Customary Quick Dispatch" invoked by Hongfil is
unavailing as a basis for requiring the charterer to pay for demurrage
absent convincing proof that the time for the loading or unloading in
question was beyond the "reasonable time" within the contemplation of
the charter party. Here, the Court holds that the delay sued upon was still
within the "reasonable time" embraced in the stipulation of "Customary
Quick Dispatch."
In a contract of affreightment, the shipper or charterer merely contracts a
vessel to carry its cargo with the corresponding duty to provide for the
berthing space for the loading or unloading. Charterer is merely required
to exercise ordinary diligence in ensuring that a berthing space be made
available for the vessel. The charterer does not make itself an absolute
insurer against all events which cannot be foreseen or are inevitable. The
law only requires the exercise of due diligence on the part of the charterer
to scout or look for a berthing space.
Furthermore, considering that subject contract of affreightment contains
an express provision "Demurrage/Dispatch: NONE," the same left the
parties with no other recourse but to apply the literal meaning of such
Page14
stipulation. The cardinal rule is that where, as in this case, the terms of
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
the contract are clear and leave no doubt over the intention of the
contracting parties, the literal meaning of its stipulations is controlling.
The provision "Demurrage/Dispatch: NONE" can be interpreted as a waiver
by Hongfil of the right to claim for demurrages. Waiver is a renunciation of
what has been established in favor of one or for his benefit, because he
prejudices nobody thereby; if he suffers loss, he is the one to blame. As
Hongfil freely entered into subject charter party which providing for
"Demurrage/Dispatch: NONE," it cannot escape the inevitable
consequence of its inability to collect demurrage. Well-settled is the
doctrine that a contract between parties which is not contrary to law,
morals, good customs, public order or public policy, is the law binding on
both of them.
Terms defined by the Supreme Court in the Case
1. Charter Party
A charter party is classified into (1) “bareboat” or “demise” charter and
(2) contract of affreightment. Subject contract is one of affreightment,
whereby the owner of the vessel leases part or all of its space to haul
goods for others. It is a contract for special service to be rendered by
the owner of the vessel. Under such contract the ship owner retains
the possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his
payment of the charter hire.
2. Deadfreight
Under the law, the cargo not loaded is considered as deadfreight. It is
the amount paid by or recoverable from a charterer of a ship for the
portion of the ship’s capacity the latter contracted for but failed to
occupy.
3. Demurrage
Demurrage is the sum fixed in a charter party as a remuneration to the
owner of the ship for the detention of his vessel beyond the number of
days allowed by the charter party for loading or unloading or for sailing.
NATIONAL STEEL vs. CA
FACTS
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
The MV Vlasons I is a vessel which renders tramping service and, as such,
does not transport cargo or shipment for the general public. Its services
are available only to specific persons who enter into a special
contract of charter party with its owner. The ship is a private carrier,
and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA),
entered into a contract of affreightment or contract of voyage charter hire
with National Steel Corporation (NSC) on 17 July 1974, whereby NSC hired
VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products
at Iligan City and discharge them at North Harbor, Manila, under certain
terms and conditions5.
5
(2) Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at
Master’s option.
(4) Freight/Payment: P30.00/metric ton, FIOST (defn. Freight In and Out including Stevedoring
and Trading’, which means that the handling, loading and unloading of the cargoes are the
responsibility of the Charterer.) basis. Payment upon presentation of Bill of Lading within fifteen
(15) days.
(5) Laydays ( which runs according to the particular clause of the charter party. If laytime is
expressed in “running days,” this means days when the ship would be run continuously, and
holidays are not excepted. A qualification of “weather permitting” excepts only those days when
bad weather reasonably prevents the work contemplated.)/Cancelling: July 26, 1974/Aug. 5,
1974.
(6) Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24
consecutive hours, Sundays and Holidays Included).
(7) Demurrage (defn as the compensation provided for in the contract of affreightment for the
detention of the vessel beyond the laytime or that period of time agreed on for loading and
unloading of cargo. It is given to compensate the shipowner for the nonuse of the vessel)
/Dispatch: P8,000.00/P4,000.00 per day. xxx
(9) Cargo Insurance: Charterer’s and/or Shipper’s must insure the cargoes.
Shipowners not responsible for losses/damages except on proven willful negligence
of the officers of the vessel.
(10) Other terms NONYAZAI C/P [sic] or other internationally recognized Charter Party
Agreement shall form part of this Contract. xxx”
 Under paragraph 10 of the NANYOZAI Charter Party, it is provided that “owners shall,
before and at the beginning of the voyage, exercise due diligence to make the vessel
seaworthy and properly manned, equipped and supplied and to make the holds and all
other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of
the cargo arising or resulting from: unseaworthiness unless caused by want
of due diligence on the part of the owners to make the vessel seaworthy, and
Page14
to secure that the vessel is properly manned, equipped and supplied and to
make the holds and all other parts of the vessel in which cargo is carried, fit
and safe for its reception, carriage and preservation; . . ; perils, dangers and
accidents of the sea or other navigable waters; . . ; wastage in bulk or weight or any
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
In accordance with the Contract of Voyage Charter Hire, the MV ‘VLASONS
I’ loaded at NSC’s pier at Iligan City, the NSC’s shipment of 1,677 skids of
tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages
with a total weight of about 2,481.19 metric tons for carriage to Manila.
The shipment was placed in the 3 hatches of the ship. Chief Mate
Gonzalo Sabando, acting as agent of the vessel, acknowledged
receipt of the cargo on board and signed the corresponding bill of
lading, BLPP 0233 on 8 August 1974.
The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on 12
August 1974. The following day, when the vessel’s 3 hatches
containing the shipment were opened by NSC’s agents, nearly all
the skids of tinplates and hot rolled sheets were allegedly found to
be wet and rusty. The cargo was discharged and unloaded by
stevedores hired by the Charterer. Unloading was completed only
on 24 August 1974 after incurring a delay of 11 days due to the
heavy rain which interrupted the unloading operations.
To determine the nature and extent of the wetting and rusting, NSC called
for a survey of the shipment by the Manila Adjusters and Surveyors
Company (MASCO). In a letter to the NSC dated 17 March 1975, MASCO
made a report of its ocular inspection conducted on the cargo, both while it
was still on board the vessel and later at the NDC warehouse in Pureza St.,
Sta. Mesa, Manila where the cargo was taken and stored. MASCO
reported that it found wetting and rusting of the packages of hot
rolled sheets and metal covers of the tinplates; that tarpaulin
hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over. The MIT
Testing Laboratories issued Report 1770 which in part, states, “The
analysis of bad order samples of packing materials shows that wetting was
caused by contact with sea water.”
other loss or damage arising from inherent defect, quality or vice of the cargo;
insufficiency of packing; . . .; latent defects not discoverable by due diligence; any
other cause arising without the actual fault or privity of Owners or without the fault of
the agents or servants of owners.”
 Paragraph 12 of said NANYOZAI Charter Party also provides that “owners shall not be
responsible for split, chafing and/or any damage unless caused by the negligence or
default of the master and crew.”
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
Thus, NSC filed with VSI its claim for damages suffered due to the
downgrading of the damaged tinplates in the amount of P941,145.18.
Then on 3 October 1974, NSC formally demanded payment of said
claim but VSI refused and failed to pay. Thus prompting NSC to file
its complaint against VSI on 21 April 1976
CFI RIZAL: judgment in favor of VSI and against NSC dismissing its
complaint. It also ordered NSC to pay VSI on the counterclaim for the
sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with
interest at the legal rate on both until the same shall have been fully paid;
attorney’s fees and expenses of litigation in the sum of P100,000.00; and
cost of suit.
CA: modified the decision of the trial court by reducing the demurrage
from P88,000.00 to P44,000.00 and deleting the award of attorneys fees
and expenses of litigation.
NSC and VSI filed separate MRS- denied; thus, this petition
consolidated by the court.
ISSUE
W/N VSI is liable?
RULING
NO. IT is the Stevedores who are liable. CA decision affirmed
Article 1732 of the Civil Code defines a common carrier as “persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.” It has been held that
the true test of a common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of its
transportation service for a fee.
A carrier which does not qualify under the test of a common carrier is
deemed a private carrier. “Generally, private carriage is undertaken by
special agreement and the carrier does not hold himself out to carry goods
for the general public. The most typical, although not the only form of
private carriage, is the charter party, a maritime contract by which the
Page14
charterer, a party other than the shipowner, obtains the use and service of
all or some part of a ship for a period of time or a voyage or voyages.”
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ITCAB, VSI did not offer its services to the general public. It
carried passengers or goods only for those it chose under a
“special contract of charter party.” The MV Vlasons I “was not a
common but a private carrier.” Consequently, the rights and
obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party. As the MV
Vlasons I was a private carrier, the shipowner’s obligations are
governed by the foregoing provisions of the Code of Commerce and
not by the Civil Code which, as a general rule, places the prima facie
presumption of negligence on a common carrier.
From the parties’ Contract of Voyage Charter Hire, VSI “shall not be
responsible for losses except on proven willful negligence of the officers of
the vessel.” The NANYOZAI Charter Party, which was incorporated in the
parties’ contract of transportation further provided that the shipowner shall
not be liable for loss of or damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due diligence
to make the vessel seaworthy or to ensure that the same was “properly
manned, equipped and supplied,” and to “make the holds and all other
parts of the vessel in which cargo was carried, fit and safe for its
reception, carriage and preservation.” The NANYOZAI Charter Party also
provided that “owners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the master or crew.”
Thus, burden of proof was on NSC to prove that the damage to its
shipment was caused by VSI’s willful negligence or failure to exercise due
diligence in making MV Vlasons I seaworthy and fit for holding, carrying
and safekeeping the cargo. HOWEVER, NSC failed to do this.
On the issue of seaworthiness, VSI exercised due diligence to make the
ship seaworthy and fit for the carriage of NSC’s cargo of steel and
tinplates. This is shown by the fact that it was drydocked and harbored by
the Philippine Coast Guard before it proceeded to Iligan City for its voyage
to Manila under the contract of voyage charter hire. The vessel’s voyage
from Iligan to Manila was the vessel’s first voyage after drydocking. The
Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and
equipped; it met all requirements for trading as cargo vessel.
Due diligence was exercised by the officers and the crew of the MV Vlasons
I. This was further demonstrated by the fact that, despite encountering
rough weather twice, the new tarpaulin did not give way and the ship’s
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
hatches and cargo holds remained waterproof. Herein, the ship used the
old tarpaulin, only in addition to the new one used primarily to make the
ship’s hatches watertight. The foregoing are clear from the marine protest
of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition
of the ship’s boatswain, Jose Pascua, where it was stated that every time
the strong winds and big waves caused the first layer of the canvass
covering to give way, the new canvass covering still hold on. NSC failed to
discharge its burden to show negligence on the part of the officers and the
crew of MV Vlasons
WHO IS LIABLE: It was the stevedores of NSC who were negligent
in unloading the cargo from the ship. The stevedores employed
only a tent-like material to cover the hatches when strong rains
occasioned by a passing typhoon disrupted the loading of the
cargo. This tent-like covering, however, was clearly inadequate for
keeping rain and seawater away from the hatches of the ship. NSC
attempts to discredit the testimony of Vicente Angliongto, an
officer of VSI, by questioning his failure to complain immediately
about the stevedores’ negligence on the first day of unloading,
pointing out that he wrote his letter to NSC only 7 days later. 7
days lapsed because he first called the attention of the stevedores,
then the NSC’s representative, about the negligent and defective
procedure adopted in unloading the cargo. This series of actions
constitutes a reasonable response in accord with common sense
and ordinary human experience. Angliongto could not be blamed
for calling the stevedores’ attention first and then the NSC’s
representative on location before formally informing NSC of the
negligence he had observed, because he was not responsible for
the stevedores or the unloading operations. In fact, he was merely
expressing concern for NSC which was ultimately responsible for
the stevedores it had hired and the performance of their task to
unload the cargo. A stevedore company engaged in discharging cargo
has the duty to load the cargo in a prudent manner, and it is liable for
injury to, or loss of, cargo caused by its negligence and where the officers
and members and crew of the vessel do nothing and have no responsibility
in the discharge of cargo by stevedores, the vessel is not liable for loss of,
or damage to, the cargo caused by the negligence of the stevedores.
The obligation of NSC to insure the cargo stipulated in the Contract of
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Voyage Charter Hire is totally separate and distinct from the contractual or
statutory responsibility that may be incurred by VSI for damage to the
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TRANSPORTATION DIGEST – CONTRACTS IN MARTIME COMMERCE A.M.+D.G.
cargo caused by the willful negligence of the officers and the crew of MV
Vlasons I . Thus, NSC’s failure to insure the cargo will not affect its right,
as owner and real party in interest, to file an action against VSI for
damages caused by the latter’s willful negligence. Nothing in the charter
party would make the liability of VSI for damage to the cargo contingent
on or affected in any manner by NSC’s obtaining an insurance over the
cargo.
COMPANIA vs. ALLIED WORKERS
FACTS
Compania Maritima and Allied Free Workers Union entered into a written
contract whereby the union agreed to perform arrastre and stevedoring
work for the consignees vessels at Iligan City, effective 1 month from
August 12, 1952. It was stipulated that the company can revoke the
contract before the expiration of the term if the union failed to render
proper service, and the contract could be renewed by agreement of the
parties. The union also agreed to the stipulation that the company would
not be liable for the payment of the services of the union “for the loading,
unloading, and deliveries of cargoes” and that the compensation for such
services wouldd be paid “by the owners and consignees of the cargoes” as
“has been the practice in the port of Iligan City.” The union found out later
that the stipulation was oppressive and that the company was unduly
favored by that arrangement.
The shippers and consignees paid the union for the arrastre work
(handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ship’s tackle), but refused to pay for the
stevedoring service (handling of the cargo in the holds of the vessel or
between the ship’s tackle and the holds of the vessel). They claimed that
the shipowner was the one obligated to pay for the latter as stated in the
bill of lading. But the company refused to pay because of the contract.
Although the arrastre and stevedoring contract was disadvantageous to
the union, it did not terminate the contract due to dire need of work,
though inadequately compensated. Upon the expiration of the contract, it
was verbally renewed. The union requested that it be recognized as the
exclusive bargaining unit to load and unload the corgo of its vessels, but
such request was ignored. Upon the union’s filing of a certification case,
the company served a written notice on the union that it would terminate
the contract. Thus, the union filed an unfair labor practice case.
3B Digest Group SY 09-10
TRANSPORTATION – Atty. Abaño
Meanwhile, the company had entered into a new stevedoring and arrastre
contract with Iligan Stevedoring Association. The union members picketed
the wharf and prevented the Iliaan Stevedoring Association from
performing arrastre and stevedoring work.
ISSUE
Was the company entitled to damages for the union’s poor service?
RULING
No. The company claims that under the contract, the union was obligated
to provide for forklifts in the loading and unloading of cargo. Inasmuch as
the union allegedly did not have forklifts, the company, to expedite the
arrastre and stevedoring work, purchased forklifts, hired laborers to
operate the same, and paid for the maintenance expenses. Now, the
company is claiming as damages expenses for the forklifts, pallet boards,
tarpaulins, and wire rope slings.
The court however held that said expenses, if really incurred, cannot be
properly treated as damages to the company. The union witness testified
that the forklifts were not exclusively used on the wharf, but also in the
fertilizer and carbide plants. Sometimes, the union supplied the driver and
the gasoline for the operation of the forklifts.
Moreover, the company was not paying the union a single centavo for
arrastre and stevedoring work. The shippers and consignees paid for the
arrastre service rendered by the union. The union did not receive any
compensation for stevedoring work. The company’s claim that the union
had been been rendering unsatisfactory arrastre and stevedoring services
was controverted by the union.
The use of the forklifts, tarpaulins pallet boards and wire rope slings
immeasurably benefitted the company. It is not proper nor just that the
consignees investment in those pieces of equipment should be considered
damages, just because it was able to bind the union to a one-sided
contract which exempted it from the payment of arrastre and stevedoring
Considering and which impliedly obligated the union to purchase the said
equipment. Besides, if the service rendered by the union members was
unsatisfactory, it must be because the poor stevedores were underfed and
underpaid. They were underfed and underpaid because the company was
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astute enough to insure that it would obtain stevedoring service without
paying for it. If to improve the arrastre and stevedoring service, the
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company had to incur expenses for the purchase of forklifts, pallet boards,
tarpaulins and wire rope slings and for the operation of the forklifts, the
union should not be required to reimburse the company for those
expenses. The company should bear those expenses. because the same
redounded to its benefit.
BARRIOS vs. GO THONG
FACTS
At about 8pm on May 1, 1958, petitioner Honorio Barrios, captain of MV
Henry I- vessel owned by William Lines Inc., received a distress signal or
S.O.S. from MV Don Alfredo owned and operated by respondent Carlos
A. Go Thong.
The MV Henry I, therefore, altered its course and headed to MV Don
Alfredo which was experiencing engine failure and the loss of her propeller.
The MV Don Alfredo was tied to MV Henry I and in tow proceeded in the
direction of Dumaguete City and later the tow lines were released upon the
arrival of the MV Lux, sister ship of MV Don Alfredo.
Petitioner Captain claimed for remuneration for the salvage of the ship.
ISSUE
W/N the service rendered by petitioner to respondent constituted salvage
or towage and whether petitioner may recover from defendant
compensation for such service? Towage and no compensation.
-there was no danger of the vessel capsizing
-the vessel had a motor launch and two lifeboats
-the distress signal was not authorized by the captain, rather what was
intended for the radio operator to convey was a general call.
No remuneration is due to the captain. Salvage has been defined as “the
compensation allowed to persons by whose assistance a ship or her cargo
has been saved, in whole or in part, from impending peril in the sea, or in
recovering such property from actual loss, as in case of shipwreck,
derelict, or recapture.”
To be a valid salvage claim there must be : (1) a marine peril (2) service
voluntarily rendered when not required as an existing duty or from a
special contract, and (3) success in whole or in part, or that the service
rendered contributed to such success. In the case at had, there was no
marine peril.
With regard to compensation, since the contract created is one of towage,
then only the owner of the towing vessel, to the exclusion of the crew of
the said vessel, may be entitled to remuneration. However, as the vessel-
owner William Lines Inc. had expressly waived its claim for compensation,
it is clear the captain is not entitled to payment for the towage service.

RULING
Petitioner bases his claim upon the provisions of the Salvage Law wherein
it is provided that a ship which is lost or abandoned at sea is considered a
derelict and therefore a proper subject of salvage.

SC said that MV Don Alfredo was not a lost ship, nor was it abandoned.
This is gleaned from the following facts:

-it did not drift too far from the place where it was at the time it had an

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engine failure
-the weather was fair

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