128. Yu Con v. Ipil, G.R. No. L-10195. Dec.

29, 1916
Doctrine:
Persons participating in Maritime Commerce:

Master: The name of captain or master is given, according to the kind of

vessel, to the person in charge of it.The first denomination(Captain) is
applied to those who govern vessels that navigate the high seas or ships of
large dimensions and importance, although they be engaged in the
coastwise trade. Masters are those who command smaller ships engaged
exclusively in the coastwise trade. For the purposes of maritime commerce,
the words "captain" and "master" have the same meaning; both being the
chiefs or commanders of ships.

Agent/Shipowner: proprietor and owner of the ship or vessel engaged in

maritime commerce.

Vessel: serves to designate every kind of craft by whatever particular or

technical name it may now be known or which nautical advancements may
give it in the future. This term designates every kind of craft, large or small,
whether belonging to the merchant marine or to the navy. It also designates
every craft, large or small,
so long as it be not an accessory of another, such as the small boat of a
vessel, of greater or less tonnage. This definition comprises both the craft
intended for ocean or for coastwise navigation, as well as the floating docks,
mud lighters, dredges, dumpscows or any other floating apparatus used in
the service of an industry or
in that of maritime commerce.

Summar:
Plaintiff Yu Con is suing defendants for the return of his P450 which was to
be transported along with his goods on the vessel Maria from port of Cebu to
town of Catmon. The money was allegedly stolen from the vessel on the
night it was set to sail. Court found that the loss was due to the fault and
negligence of the master and the supercargo of the vessel. The owner was
likewise found negligent as the employer, who has the power of appointment
over the master and supercargo whose negligence was the proximate cause
of the
loss suffered by the plaintiff.

Facts
●
Plaintiff Yu Con, a merchant and a resident of the town of San Nicolas, of the
city of Cebu, engaged in the sale of cloth and domestic articles and having a
share in a shop, or small store, situated in the town of Catmon, of said
province, had several times chartered from the defendant Narciso Lauron, a
banca named Maria belonging to the latter, of which Glicerio Ipil was master
and Justo Solamo, supercargo, for the transportation of certain merchandise
and some money to and from the said town and the port of Cebu, that,
●
17th of October, 1911, the plaintiff chartered the said banca from the
defendant Lauron for the transportation of various merchandise from the
port of Cebu to Catmon, at the price of P45 for the round
trip, which merchandise was loaded on board the said craft which was then
at anchor in front of one of the graded fills of the wharf of said port;
●
that in the afternoon of the following day, he delivered to the other two
defendants, Ipil, and Solamo, master and supercargo, respectively, of the
afore-named banca, the sum of P450, which was in a trunk belonging to the
plaintiff and was taken charge of by said two defendants, who received this
money from the plaintiff, for the purpose of its delivery to the latter's shop in
Catmon for the
Purchase of corn in this town; that while the money was still in said truck
abroad the vessel, on the night of the said 18th of October, the time
scheduled for the departure of the Maria from the port of Cebu, said master
and said supercargo transferred the P450 f
rom the plaintiff's trunk, where it was, to theirs, which was in a
stateroom of the banca, from which stateroom both the trunk and the
money disappeared during that same night, and that the investigations,
made to ascertain their whereabouts, produced no result.
●
Thus, plaintiff filed suit against the defendants to recover the money he lost.
Defendants Ipil and Solamo who were aboard the vessel admit to these facts
but claim that the loss was due to theft committed in the vessel when they
saw that the window where the trunk was kept was broken. Though, they
don’t know of the identity of the person who committed the theft.

Issues/Ratio
(1)W/N the loss of the money was due to the fault and negligence of the
master and the supercargo
(YES)
●
According to the evidences and affidavits submitted by the defendants, the
master, supercargo and some cabin-boys were aboard the vessel when the
theft happened. They admitted that the money was indeed given to the
master for the purpose of transporting it to town of Catmon and it was under
the guard and
care of the master and the supercargo. They further admitted that no one
knows of the existence of the trunk where the money was being kept other
than the crew members of the vessel.
●
The defendants failed to provide evidence that the loss was due to robbery.
They merely stated that there was a broken window from the stateroom
where the trunk was located and that the size of the
breakage from the window could fit the size of the trunk lost. The Court
found this as insufficient explanation to relieve them of liability.
●
No evidence whatever was offered by counsel for the defendants to prove
that it might have been possible to remove the trunk from the stateroom
through the opening made by the breaking of the small window, neither was
the size of the trunk proven, in relation to the Chinaman's trunk which was
also present in the same room but was not lost. that it might have been
possible to remove from the stateroom through said opening the trunk in
which the P450 were contained, which sum, the same as the trunk, its
container, had not been found, in spite of the investigation made for the
purpose. Furthermore, it was not proven, nor is there any circumstantial
evidence to show, that the robbery in question was
committed by persons not belonging to the craft
●
It is evident that the loss occurred through the manifest fault and negligence
of said defendants, for, not only did they fail to take the necessary
precautions in order that the stateroom containing the
Trunk in which they kept the money should be properly guarded by
members of the crew and put in such condition that it would be impossible
to steal the trunk from it or that persons not belonging
to the vessel might force an entrance into the stateroom from the outside,
but also they did not expressly station some person inside the stateroom for
the guarding and safe-keeping of the trunk, for it was not proven that the
cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor
that the other Cabin-boy, Simeon Solamo, was on guard that night, for the
latter contradicted the statements made by the two defendants on this point.
On the contrary, it was proven by the master's own statement that all the
people of the vessel, including himself and the supercargo Solamo, slept
soundly that night; which fact cannot, in any manner, serve them as an
excuse, nor can it be accepted as an explanation of the statement that they
were not aware of what was then occuring on board, if the trunk was
actually stolen by outsiders and remov
ed through the small window of the stateroom, a detail which
also was not proven, but, on the contrary, increases their liability, because it
is very strange that none of them, who were six and were around or near
the stateroom, should have heard the noise
which the robbers must have made in breaking its window.
●
All of these circumstances, together with that of its having been impossible
to know who took the trunk and the money and the failure to recover the
one or the other make the conduct of the two defendants and of the other
members of the crew of banca, eminently supicious and prevent our holding
that the disappearance or loss of the money was due to a fortuitous event,
to force majeure, or that it was an occurrence which could not have been
foreseen,
or which, if foreseen, was inevitable
●
As carriers acting as depositaries of the money of plaintiff, defendants are
held to be liable in accordance with the provisions of the Civil Code.
o
Liability of carriers.
—
In order that a thing may be transported, it must be delivered to the carrier,
as the Code says. From the time it is delivered to the carrier or shipper until
it is received by the consignee, the carrier has it in his possession, as a
necessary condition for its transportation, and is obliged to preserve and
guard it; wherefore it is but natural and logical that he should be responsible
for it.
The Code discovers in the relation of all these elements the factors which go
to make up the conception of a trust, and, taking into account that the
delivery of the thing on the part of the shipper is unavoidable, if the
transportation is to take place, esteem that, at least in certain respects, such
trusts are necessary.

(2)W/N the shipowner may be held solidarily liable with the captain or
crewmembers for damages due to
latter’s negligent acts (YES)
●
Court noted first the relation between the parties. Plaintiff contracted with
the shipowner for the transportation of merchandise by hiring the former’s
vessel to transport his goods. Meanwhile, the
shipowner employed the services of the master and the supercargo to man
and operate his vessel to serve its purpose of transportation of
merchandise.
●
It also defines the terms vessels, masters and agents for the purposes of
determining their legal relations.
SEE DOCTRINE.
●
The banca hired by plaintiff is considered a vessel in accordance with the
provisions of the Code of Commerce in force at that time. Ipil, as master of
that banca, is also considered as the captain.
Provisions of Code of Commerce provide:
○
Art. 587: The agent shall be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the goods
which the vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight he may have
earned during the trip
○
Art. 618: The captain shall be civilly liable to the agent and the latter to the
third persons who may have made contracts with the former
—
1.
For all the damages suffered by the vessel and its cargo by reason of want
of skill or negligence on his part, If a misdemeanor or crime has been
committed he shall be liable in accordance with the Penal Code.
2.
For all the thefts committed by the crew, reserving his right of action against
the guilty parties.
●
Thus, from these provisions, the agent is liable for the negligent acts of the
captain, which in this case the acts of Ipil.

Held:
Petition DENIED. Judgment appealed from is AFFIRMED. Costs against
defendants-appellants.

129. Inter-Orient Maritime Enterprises Inc. v. National Labor

Relations Commission, G.R. No. 115286. Aug. 11, 1994
Facts:
The instant petition seeks the reversal and/or modification of the Resolution
dated March 30, 1994 of public respondent National Labor Relations
Commission dismissing the appeals of petitioners and affirming the decision
dated November 16, 1992 of Philippine Overseas Employment Administration
(POEA) Administrator Felicisimo C. Joson, This is a claim for death
compensation benefits filed by Constancia Pineda as heir of her deceased son,
seaman Jeremias Pineda, against Interorient Maritime Enterprises, Inc. and
its foreign principal, Fircroft Shipping Corporation and the Times Surety and
Insurance Co., Inc. The following facts were found by the POEA Administrator.
On September 28, 1989, he finished his contract and was discharged from the
port of Dubai for repatriation to Manila; that his flight schedule from Dubai to
the Philippines necessitated a stopover at Bangkok, Thailand, and during said
stopover he disembarked on his own free will and failed to join the connecting
flight to Hongkong with final destination to Manila; that on October 5, 1990,
it received a fax
transmission from the Department of Foreign Affairs to the effect that
Jeremias Pineda was shot by a Thai Officer on duty on October 2, 1989 at
around 4:00 P.M.; that the police report submitted to the Philippine Embassy
in Bangkok confirmed that it was Pineda who "approached and tried to stab
the police sergeant with a knife and that therefore he was forced to pull out
his gun and shot Pineda" Petitioner contends that they are not liable to pay
any death/burial benefits pursuant to the provisions of Par. 6, Section C. Part
II, POEA Standard Format of Employment which state(s) that "no
compensation shall be payable in respect of any injury, (in)capacity, disability
or death resulting from a willful (sic) act on his own life by the seaman"; that
the deceased seaman died due to his own willful (sic) act in attacking a
policeman in Bangkok who shot him in self-defense.
After the parties presented their respective evidence, the POEA Administrator
rendered his decision holding petitioners liable for death
compensation benefits and burial expenses.
Petitioners appealed the POEA decision to the public respondent. In a Decision
dated March 30, 1994, public respondent upheld the
POEA.
Thus, this recourse to this Court by way of a special civil action for certiorari
per Rule 65 of the Rules of Court.
Issue:
Whether the petitioners can be held liable for the death of seaman Jeremias
Pineda?
Held:
The petitioners contention that the assailed Resolution has no factual and legal
bases is belied by the adoption with approval by the public respondent of the
findings of the POEA Administrator, which recites at length the reasons for
holding that the deceased Pineda was mentally sick prior to his death and
concomitantly, was no longer in full control of his mental faculties.
In this instance, seaman Pineda, who was discharged in Dubai, a foreign land,
could not reasonably be expected to immediately resort to and avail of
psychiatric examination, assuming that he was still capable of submitting
himself to such examination at that time, not to mention the fact that when
he disembarked in Dubai, he was already discharged and without employment
— his contract having already run its full term — and he had already been put
on a plane bound for the Philippines. Such mental disorder became evident
when he failed to join his connecting flight to Hongkong, having during said
stopover wandered out of the Bangkok airport's immigration area on his own.
This Court agrees with the POEA Administrator that seaman Pineda was no
longer acting sanely when he attacked the Thai policeman. The report of the
Philippine Embassy in Thailand dated October 9, 1990 depicting the
deceased's strange behavior shortly before he was shot dead, after having
wandered around Bangkok for four days, clearly shows that the man was not
in full control of his own self.
The POEA Administrator ruled, and this Court agrees, that since Pineda
attacked the Thai policeman when he was no longer in complete control of his
mental faculties, the aforequoted provision of the Standard Format Contract
of Employment exemption the employer from liability should not apply in the
instant case. Firstly, the fact that the deceased suffered from mental disorder
at the time of his repatriation means that he must have been deprived of the
full use of his reason, and that thereby, his will must have been impaired, at
the very least.
Thus, his attack on the policeman can in no wise be characterized as a
deliberate, willful or voluntary act on his part. Secondly, and apart from that,
we also agree that in light of the deceased's mental condition, petitioners
"should have observed some precautionary measures and should not have
allowed said seaman to travel home alone", and their failure to do so
rendered them liable for the death of Pineda.

130. Far Eastern Shipping Company v. CA, G.R. No. 130068. Oct. 1,
1998
FACTS:
• M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company
(FESC), arrived at the Port of Manila and was assigned Berth 4 of the Manila
International Port, as its berthing space. Gavino, who was assigned by the
Appellant Manila Pilots' Association to conduct the docking maneuvers for the
safe berthing, boarded the vessel at the quarantine anchorage and stationed
himself in the bridge, with the master of the vessel, Victor Kavankov, beside
him.
• After a briefing of Gavino by Kavankov of the particulars of the vessel and
its cargo, the vessel lifted anchor from the quarantine anchorage and
proceeded to the Manila International Port. The sea was calm and the wind
was ideal for docking maneuvers.
• When the vessel reached the landmark, one-half mile from the pier, Gavino
ordered the engine stopped. When the vessel was already about 2,000 feet
from the pier, Gavino ordered the anchor dropped.
• Kavankov relayed the orders to the crew of the vessel on the bow. The left
anchor, with two (2) shackles, were dropped. However, the anchor did not
take hold as expected. The speed of the vessel did not slacken. A commotion
ensued between the crew members.
 • After Gavino noticed that the anchor did not take hold, he ordered the
engines half-astern. Abellana, who was then on the pier apron, noticed that
the vessel was approaching the pier fast.
• Kavankov likewise noticed that the anchor did not take hold. Gavino
thereafter gave the "full-astern" code. Before the right anchor and additional
shackles could be dropped, the bow of the vessel rammed into the apron of
the pier causing considerable damage to the pier as well as the vessel.
ISSUES:
(1) Whether the pilot of a commercial vessel, under compulsory pilotage, is
liable for the damage caused by the vessel to the pier for his negligence?
(2) Whether the owner of the vessel be liable if the damage is caused by the
concurrent negligence of the master of the vessel and the pilot under a
compulsory pilotage?

HELD: GAVINO AND KAVANKOV ARE BOTH NEGLIGENT.

(1) YES. Generally speaking, the pilot supersedes the master for the time
being in the command and navigation of the ship, and his orders must be
obeyed in all matters connected with her navigation. He becomes the master
pro hac vice and should give all directions as to speed, course, stopping and
reversing anchoring, towing and the like. And when a licensed pilot is
employed in a place where pilotage is compulsory, it is his duty to insist on
having effective control of the vessel, or to decline to act as pilot. Under certain
systems of foreign law, the pilot does not take entire charge of the vessel, but
is deemed merely the adviser of the master, who retains command and control
of the navigation even in localities where pilotage is compulsory. It is quite
common for states and localities to provide for compulsory pilotage, and safety
laws have been enacted requiring vessels approaching their ports, with certain
exceptions, to take on board pilots duly licensed under local law. The purpose
of these laws is to create a body of seamen thoroughly acquainted with the
harbor, to pilot vessels seeking to enter or depart, and thus protect life and
property from the dangers of navigation. Pursuant to an ADMIN ORDER
requiring compulsory pilotage, Capt. GAVINO was assigned to pilot MV
Pavlodar into the port. Upon assuming such office as compulsory pilot, Capt.
Gavino is held to the universally accepted high standards of care and diligence
required of a pilot, whereby he assumes to have skill and knowledge in respect
to navigation in the particular waters over which his license extends superior
to and more to be trusted than that of the master. He is not held to the highest
possible degree of skill and care, but must have and exercise the ordinary skill
and care demanded by the circumstances, and usually shown by an expert in
his profession. Under extraordinary circumstances, a pilot must exercise
extraordinary care. In this case, Capt. Gavino failed to measure up to such
strict standard of care and diligence required of pilots in the performance of
their duties. As pilot, he should have made sure that his directions were
promptly and strictly followed. In this case, the Court found that GAVINO was
negligent because he was late in ordering the dropping of the anchor.
Moroever, when he realized that the anchor did not attach properly, Gavino
ordered merely "half-astern". It took Gavino another minute to order a "full-
astern". By then, it was too late. The vessel's momentum could no longer be
slowed and, barely a minute thereafter, the bow of the vessel hit the apron of
the pier.
(2) YES. The master is still in command of the vessel notwithstanding the
presence of a pilot. A perusal of Capt. Kabankov's testimony makes it
apparent that he was remiss in the discharge of his duties as master of the
ship, leaving the entire docking procedure up to the pilot, instead of
maintaining watchful vigilance over this risky maneuver. The owners of a
vessel are not personally liable for the negligent acts of a compulsory pilot,
but by admiralty law, the fault or negligence of a compulsory pilot is
imputable to the vessel and it may be held liable therefor in rem. Where,
however, by the provisions of the statute the pilot is compulsory only in the
sense that his fee must be paid, and is not in compulsory charge of the
vessel, there is no exemption from liability. Even though the pilot is
compulsory, if his negligence was not the sole cause of the injury, but the
negligence of the master or crew contributed thereto, the owners are liable.
But the liability of the ship in rem does not release the pilot from the
consequences of his own negligence. The master is not entirely absolved of
responsibility with respect to navigation when a compulsory pilot is in
charge. Except insofar as their liability is limited or exempted by statute, the
vessel or her owners are liable for all damages caused by the negligence or
other wrongs of the owners or those in charge of the vessel. As a general
rule, the owners or those in possession and control of a vessel and the
vessel are liable for all natural and proximate damages caused to persons or
property by reason of her negligent management or navigation.

131. Philippine National Bank v. CA, G.R. No. 128661. Aug. 8, 2000;
337 SCRA 381
FACTS:
To finance the acquisition of seven (7) ocean-going vessels, the Philippine
International Shipping Corporation (hereinafter "PISC") applied for and was
granted by petitioner National Investment and Development Corporation
(hereinafter "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 (hereinafter "CBC") a standby
letter of credit for US$545,000.00 in favor of Citibank, N.A. (hereinafter
"Citibank") to cover the repair and partial conversion of the vessel M/V "Asean
Liberty". PISC executed an Application and Agreement for Commercial Letter
of Credit for $545,000.00 with private respondent CBC in favor of Citibank.
CBC issued its Irrevocable Standby Letter of Credit for US$545,000.00 in favor
of Citibank for account of PISC. 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.7 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 accomodations, 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.

RULINGS:
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. Sections 17 and 21 of the said Presidential Decree
provides as follows: "Sec. 17. Preferred Maritime Liens, Priorities, Other Liens
– (a) Upon the sale of any mortgaged vessel in any extra-judicial sale or by
order of a district court of the Philippines in any suit in rem in admiralty for
the enforcement of a preferred mortgage lien thereon, all pre-existing claims
on the vessel, including any possessory common-law lien of which a lienor is
deprived under the provisions of Section 16 of this Decree, shall be held
terminated and shall thereafter attach, in like amount and in accordance with
the priorities established herein to the proceeds of the sale. The preferred
mortgage lien shall have priority over all claims against the vessel, except the
following claims in the order stated: (1) expenses and fees allowed and costs
taxed by the court and taxes due to the government; (2) crew’s wages; (3)
general average; (4) salvage; including contract salvage; (5) maritime liens
arising prior in time to the recording of the preferred mortgage; and (6)
damages arising out of tort; and (7) preferred mortgage registered prior in
time. (b) If the proceeds of the sale should not be sufficient to pay all creditors
included in one number or grade, the residue shall be divided among them
pro rata. All credits not paid, whether fully or partially shall subsist as ordinary
credits enforceable by personal action against the debtor. The record of
judicial sale or sale by public auction shall be recorded in the Record of
Transfers & Encumbrances of Vessels in the port of documentation." "Sec. 21.
Maritime Lien for Necessaries; persons entitled to such lien. – Any person
furnishing repairs, supplies, towage, use of dry dock or maritime railway, or
other necessaries to any vessel, whether foreign or domestic, upon the order
of the owner, shall have a maritime lien on the vessel, which may be enforced
by suit in rem, and it shall be necessary to allege or prove that credit was
given to the vessel." 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. Section 7 of the said Agreement provides
as follows: "(7) a) The Owner will, before the commencement of work, provide
an Irrevocable Documentary Credit for the Contract Price plus an estimate to
cover the cost of extra work. The banks and wording of the Credit are to be
agreed by the Contractor. b) Payment will be: (1) Before departure of vessel
from Contractor’s yard: 20% of contract price; (2) 60 days from departure of
vessel from Contractors yard: 40% of contract price; (3) 90 days from
departure of vessel from Contractors yard: 40% of contract price."20 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 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." Thus, when private respondent
CBC chose to exercise its right to the maritime lien during the proceedings in
the trial court, it was actually enforcing a privilege that attached to the ship
as early as March 12, 1979. The maritime lien of private respondent CBC
thus arose prior in time to the recording of petitioners’ mortgage on
September 25, 1979. As such, 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."

132. Yangco v. Laserna, G.R. No. L-47447-47449. Oct. 29, 1941; 73

Phil. 330
Facts:
On the afternoon of May 26, 1927, the STEAMER SS NEGROS left the port of
Romblon on its return trip to Manila, typhoon signal no. 2 was then up and in
fact, the passengers duly advised the captain before sailing. The boat was
overloaded. After 2hours of sailing, the boat encountered strong winds and
rough seas between the islands of Banton and Simara. While in the act of
maneuvering, the vessel was caught sidewise by a big wave which caused it
to capsize and sink. Many of the passengers died on the mishap. Civil actions
were instituted in the CFI of Capiz.
Issue:
Whether or not, the shipowner or ship agent is liable for damages for the death
of its passengers notwithstanding the total loss of the vessel?
Ruling:
No. Under Article 587 of the Code of Commerce, the agent shall be civilly liable
for the indemnities in favor of third persons which arise from the conduct of
the captain in the vigilance of the goods which the vessel carried; but he may
exempt himself therefrom by abandoning the vessel with all her equipment
and the freight he may have earned during the trip. Whether the abandonment
of the vessel sought by the petitioner in the case was in accordance with the
law or not, is immaterial. The vessel having totally perished, any act of
abandonment would be idle ceremony.

133. Chua Yek Hong v. IAC, G.R. No. 74811. Sept. 30, 1988
Facts:
Chua Yek Hong (petitioner) is a duly licensed copra dealer based at Puerto
Galera, Oriental Mindoro, while Mariano Guno & Dominador Olit (defendants)
are owners of the vessel, “M/V Luzviminda I,” a common carrier engaged in
coastwise trade from the different ports of Oriental Mindoro to the Port of
Manila. In October 1977, petitioner loaded 1,000 sacks of copra, valued at P
101,227.40, on board the said vessel for shipment from Puerto Galera to
Manila. Said cargo, however, did not reach Manila because, somewhere
between Cape Santiago and Calatagan, Batangas, the vessel capsized and
sank with all its cargo. On 30 March 1979, petitioner instituted before the then
CFI of Oriental Mindoro, a Complaint for damages based on breach of contract
of carriage against defendants. In their Answer, defendants averred 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. On
17 May 1983, the Trial Court rendered a Decision, holding that the
preponderance of evidence militates in favor of petitioner and orders thed
efendants, jointly and severally, to pay the former the sum of P101,227.40
representing the value of the cargo belonging to petitioner which was lost
while in the custody of defendants; P65,550.00 representing miscellaneous
expenses; attorney’s fees in the amount of P5,000.00, and to pay the costs of
suit. In the Appellate Court, decision was reversed when it applied Article 587
of the Code of Commerce and the doctrine in Yangco vs. Laserna (73 Phil
330) and held that defendants’ 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. Unsuccessful in his Motion for
Reconsideration of the Decision, petitioner filed a petition for review on
certiorari.
Issue:
Whether or not respondents can avail of the limited liability.
Ruling:
Yes. The ship owner’s or agent’s liability is merely co-extensive with his
interests in the vessel. The total destruction of the vessel extinguishes
maritime liens as there is no longer any res to which it can attach. The primary
law is the Civil Code and in default thereof, the Code of Commerce and other
special laws are applied. Since the Civil Code contains no provisions regulating
liability of ship owners or agents in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce that govern in this case.

134. Luzon Stevedoring Corp. v. CA, G.R. No. L-58897. Dec. 3, 1987;
156 SCRA 169
Facts:
A maritime collision occurred between the tanker CAVITE owned by LSCO and
MV Fernando Escano (a passenger ship) owned by Escano, as a result the
passenger ship sunk. An action in admiralty was filed by Escano against Luzon.
The trial court held that LSCO Cavite was solely to blame for the collision and
held that Luzon’s claim that its liability should be limited under Article 837 of
the Code of Commerce has not been established. The Court of Appeals
affirmed the trial court. The SC also affirmed the CA. Upon two motions for
reconsideration, the Supreme Court gave course to the petition.
Issue: Whether or not it is necessary that the owner abandon the vessel in
order to claim limited liability under Article 837 of the Code of Commerce?

Held:
Yes, abandonment is necessary to claim the limited liability wherein it shall be
limited to the value of the vessel with all the appurtenances and freightage
earned in the voyage. However, if the injury was due to the ship owner’s fault,
the ship owner may not avail of his right to avail of limited liability by
abandoning the vessel.
The real nature of the liability of the ship owner or agent is embodied in the
Code of Commerce. Articles 587, 590 and 837 are intended to limit the liability
of the ship owner, provided that the owner or agent abandons the vessel.
Although Article 837 does not specifically provide that in case of collision there
should be abandonment, to enjoy such limited liability, said article is a mere
amplification of the provisions of Articles 587 and 590 which makes it a mere
superfluity.
The exception to this rule in Article 837 is when the vessel is totally lost in
which case there is no vessel to abandon, thus abandonment is not required.
Because of such loss, the liability of the owner or agent is extinguished.
However, they are still personally liable for claims under the Workmen’s
Compensation Act and for repairs on the vessel prior to its loss.

In case of illegal or tortious acts of the captain, the liability of the owner and
agent is subsidiary. In such cases, the owner or agent may avail of Article 837
by abandoning the vessel. But if the injury is caused by the owner’s fault as
where he engages the services of an inexperienced captain or engineer, he
cannot avail of the provisions of Article 837 by abandoning the vessel. He is
personally liable for such damages.
In this case, the Court held that the petitioner is at fault and since he did not
abandon the vessel, he cannot invoke the benefit of Article 837 to limit his
liability to the value of the vessel, all appurtenances and freightage earned
during the voyage.

135. Vasquez v. CA, G.R. No. L-42926. Sept. 13, 1985; 138 SCRA 553
Facts:
Petitioners Vasquez sued for damages before the Court of First Instance,
defendant Filipinas Pioneer Lines, Inc. due to the loss of their children in a
shipwreck involving the vessel of defendant when it sailed despite a typhoon.
The trial court awarded damages but was reversed by the Court of Appeals.
Hence, a petition for certiorari is filed before the SC. Respondent Filipinas
Pioneer Lines’ raised their defense on the plea of caso fortuito and the
extinction of its liability by the actual total loss of the vessel.
Issue/s:
1. Whether or not it is a fortuitous event
2. Whether or not the defendant is liable
Ruling:
1. No. To constitute a caso fortuito that would exempt a person from
liability, it is necessary that:

i. The event must be independent of the human will;

ii. The occurrence must render it impossible for the debtor to fulfill
the obligation in a normal manner; and

iii. 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.
In the instant case, the defendant’s case does not constitute a caso
fortuito for the reason that, while it is true that a typhoon is 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 an
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.
Yes. Private respondent's submission that the total loss of the vessel
extinguished its liability pursuant to Article 587 of the Code of Commerce
(Limited Liability Rule - liability of ship owner is limited to ship owner’s
interest over the vessel. Consequently, in case of loss, the ship owner’s
liability is also extinguished. Limited liability likewise extends to ship’s
appurtenances, equipment, freightage, and insurance proceeds. The ship
owner’s or agent’s liability is merely co-extensive with his interest in the
vessel, such that a total loss of the vessel results in the liability’s extinction.)
is untenable since the rule admits exceptions One such exception is f an
insurance exists. 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.

136. The Philippine Shipping Company v. Vergara, G.R. No. L-1600.

June 1, 1906; Phil. 281
Facts:
The Philippine Shipping Company, the owner of the steamchip Naestra Sra
de Lourdes, clams an indemnification of 44,000 pesos for the loss of the said
ship as a result of a collision. Yochests & Co also claimed 24,705 64 pesos as
an indemnification for the loss of the cargo of heme and contrar carried by
the said ship on her last trip. The defendant, Francisco Garcia Vergara, was
the owner of the steamship Navarra, which collided with the Lourdes

The court below found as a matter of fact that the stramship Loseden was
sailing in accordance with law, but that the Navarra was not, and was
therefore responsible for the collision. The court also found as a fact that
"both ships with their respective cargoes were entrely loz Contraing article
37 of the Code Commerce, the court below held "that the defendant was not
responsible to the plaintiff fee the value of the steamship Lourdes, with the
costs against the latter

But the appellant, the Philippine Shipping Company, cuments that the
defendant should pay to 18,000 peses, the value of the Navarra at the time
of its loss, that this is the sense in which the provisions of article 837 of the
Code of Commerce should be understood; that said code has followed the
principles of the English law and not those of the American law, and that it
was immaterial whether the Navarru had hon entitels lint provided her value
at the time she was lost could be ascertained, since the extent of the liabdity
of the owner of the colding vessel for the damages resulting from the
collision is to be determined in accordance with such value

From the judgment of the trial court the Philippine Shipping Company and
the defendant Vergara appealed, but the latter has failed to prosecute his
appeal by a bill of exceptions or otherwise The only appellant who has
prosecuted this appeal now reduced its claim to 18,000 pesos, the valce of
the colliding vessel

Issues:
WON Philippine Shipping should be indemnify for 18,000 you sent

Held:
No, the defendant is liable for the indemnification to which the plaintiff is
entitled by reason of the collision, but he is not required to pay such
indemnification of the reason that the obligation thus incurred has been
extinguished on account of the loss of the thing bound for the payment
thereof, and in this respect the judgment of the court below is affirmed
except in so far as it requires the plaintiff to pay the costs of this action,
which is not exactly proper

There is no doubt that if the Navarra had not been entirely lost, the agent,
having held liable for the negligence of the captain of the vessel, could have
abandoned her with all her equipment and the freight money earned during
the voyage, thes bringing himself within the provisions of the article 837 in
so far as the subsidiary civil liability is concerned. This abandonment which
would have amounted to an offer of the value of the vessel, of her
equipment, and freight money earned could not have been refused, and the
agent could not have been personally compelled, under such circumstances,
to pay the 18,000 pesos, the estimated value of the vessel at the time of the
collision

Ratio: The spirit of our code is accurately set forth in a treatise on maritime
law, from which we deem proper to quote the following as the basis of this
decision:

That which distinguishes the maritime from the civil law and even from the
mercantile law in general is the real and hypothecary nature of the former,
and the many securities of a real nature that maritime customs from time
immemorial, the laws, the codes, and the later jurisprudence, have provided
for the protection of the various and conflicting interest which are ventured
and risked in maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those who
salvage the ship, those who make loams upon the cargo, those of the sailors
and members of the crew as to their wages, and those of a constructor as to
repairs made to the vessel
As evidence of this "real" nature of the maritime law we have (1) the
limitation of the liability of the agents to the
You sent
actual value of the vessel and the freight money, and (2) the right to retain
the cargo and the embargo and detention of the vessel even cases where
the ordinary civil law would not allow more than a personal action against
the debtor or person hable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempe himself from
liability by abandoning the vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the business, it is also just that his
maritime creditor may for any reason attach the vessel self to secure his
claim without waiting for a settlement of his rights by a final judgment, even
to the prejudice of a third person.

This repeals the civil law to such an extent that, in certain cases, where the
mortgaged property is lost no personal action lies against the owner or
agent of the vessel. For instance, where the vessel is lost the sailors and
members of the crew can not recover their wages in case of collision, the
liability of the agent is limited as aforesaid, and in case of shipwrecks, those
who loan their money on the vessel and cargo lose all their rights and can
not claim reimbursement under the law.

There are two reasons why it is impossible to do away with these privileges,
to wit (1) The risk to which the thing is exposed, and (2) the "real" nature of
maritime law, exclusively "real," according to which the liability of the
parties is limited to a thing to which is at mercy of the waves. If the agent is
only liable with the vessel and freight money and both may be lost through
the accidents of navigation it is only just that the maritime creditor have
some means of obviating this precarious nature of his rights by detaining the
ship, his only security, before it is lost

The lies, tacit or legal, which may exist upon the vessel and which a
purchaser of the same would be obliged to respect and recognize in addition
to those existing in favor of the State by virtue of the privileges which are
granted to it by all the laws-pilot, tonnage, and port dues and other similar
charges, the wages of the crew carned during the last voyage as provided in
article 646, of the Code of Commerce, salvage dues under article 842 the
indemnification due to the captain of the vessel in case his contract is
terminated on account of the voluntary sale of the ship and the insolvency of
the owner as provided in article 608, and other liabilities arising from
collisions under article 837 and 838. (Madariaga, pp. 60-62, 63, 85)

137. Manila Steamship Co., Inc. v. Abdulhaman, G.R. No. L-9534.

Sept. 29, 1956; 100 Phil. 32
Facts: Respondent Abdulhaman filed a case against Manila Steamship Co
Inc, owner of MS Bowline Knot, and Lim Hong To, owner of MLConsuelo V to
recover damages for the death of his 5 children and loss of personal
properties on board the ML-Consuelo V as a result of a maritime collision
between the 2 vessels In 1948, the M/L Consuelo V left the port of
Zamboanga City for Ssokon On the same night, The M/S Bowline Knot was
heading toZamboanga City. The weather was good and fair Abdulhaman, his
wife and 5 children had paid their fare beforehand It began raining and there
were strong winds for an hour. This weather lasted for an hour then it
became fait although it was showering and the visibility was good enough

The two vessels collided while the passengers were sleeping ML Consuelo V.
capsized quickly (before the passengers realized it, they were already
floating and swimming) 9 died and the cargo was lost Before the collmon,
none of the passengers were warned or informed of the impending danger
as the collision was so sudden and unexpected All those rescued at sea were
brought by the MV-Bowline Knot to Zamboanga City

The Board of Marine Inquiry found that the commanding officer of the
colliding vessels had both been negligent in

operating their respective vessels. It held the owners of both vessels

solidarily liable to Abdulhaman for the damages

caused to him by the collision, under Article 827of the Code of Commerce;
but exempted Defendant Lim Hong To from

liability by reason of the sinking and total loss of his vessel, the ML-Consuelo
V CA affirmed Manila Steamship appealed because it was the one who was
ordered to pay damages It is exempt from any liability under Article 1903 of
the Civil Code because it had exercised the diligence of a good father of a
family in the selection of its employees, particularly Third Mate Simplicio
Ilagan, the officer in command of its vessels, the MS Bowline Knot, at the
time of the collision. It shouldn't be liable for the actions of its agent
(captain) and employees.

Issur: WON Manila Steamship is liable

Held: YES

Ratio: DUE DILIGENCE. The defense of due diligence is untenable. While it is

true that Plantiff's action is based on a

tort or quas delict, the tort in question is not a civil tort under the Civil Code
but a maritime tort resulting in a collision at

sea, governed by Articles 826-939 of the Code of Commerce

Under Article 827 of the Code of Commerce, in case of collision between two
vessels imputable to both of them, each vessel shall suffer her own damage
and both shall be solidarily liable for the damages occasioned to their
cargoes. The characteristic language of the law in making the vessels
solidarily Irable for the damages due to the maritime collision emphasizes
the direct nature of the responsibilities on account of the collision incurred
by the ship owner under maritime law, as distinguished from the civil law
and mercantile law in general. This direct responsibility is recognized in
Article 615 of the Code of Commerce under which the captain shall be civilly
liable to the shup agent, and the latter is the one hable to third persons

It is a general principle, well established maritime law and custom, that ship
owners and ship agents are crvilly liable for

the acts of the captain (Code of Commerce, Article 586) and for the
indemnities due the third persons (Article 587), 0

that injured parties may immediately look for reimbursement to the owner of
the slup, it being universally recognized that

the shup master of captain is primarily the representative of the owner

This direct liability, moderated and lunited by the owner's night of

abandonment of the vessel and earned frnight (Article

587) has been declared to exist, not only in case of berached contracts, but
also in cases of textionis negligence

ACT OF AGENT

It is proven that the agents and employees, through whose negligence the
explosion and fire in question occurred, agents, employees and mandatinies
of Manila Steamahip. Whane the vessel is one of fright, a public concs or
public utility, its owner or agents a liable for the tuitious acts of his agents
(Articles 587, 013 & 635 Code of Connor, & Article 1902, 190, 1908, Cral
Code) Manila Steamship cites cases which are about principals and apaits in
general BUT this case is about the relancs between ship apent and his
agents and employers
You sent
It is easy to see that to admit the defeme of due diligence of a bonus
paterfamilias (in the selection and vigilance of the officers and crew) as
exempting the slup owner from any liability for their faults, would render
nugatory the solidary liability established by Article 827 of the Code of
Commerce for the greater protection of injured parties Ship owners would be
able to escape liability in practically every case, considering that the
qualifications and licensing of shup masters and officers are determined by
the State, and that vigilance is practically impossible to exercise over officers
and crew of vessels at sea.To compel the parties prejudiced to look to the
crew for indemnity and redress would be an illusory remedy for almost
always its members are, from captains down, mere wage earners

Liability of Lim Hong To- HEISLIABLE

Both the master and the engineer of the motor launch-Consuelo V were not
duly licensed as such. In applying for permission to operate, despite the lack
of properly trained and experienced, crew, Lim Hong To gave as a reason
that the income derived from the vessel is insufficient to pay licensed
officers who demand high salaries, and expressly declared That in case of
any accident, damage or loss, I shallassume full risk and responsibility for all
the consequences thereof

His permit to operate, in fact, stipulated that in case of any accident,

damage or loss, the registered owner thereof shall assume full risk and
responsibility for all the consequences thereof, and that sad vessel shall be
held answerable for any negligence, disregard or violation of any of the
conditions herein imposed and for any consequence arumg from such
negligence, disregard or violations.

CA held that his permit and letter didn't contain waivers of his right to limit
his liability to the value of his motor launch and that he did not lose the
statutory right to limit his liability by abandonment of the vessel is a vague
argument.

By operating with an unlicensed master, Lim Hong To deliberately increased

the risk to which the passengers and shippers of cargo aboard the Consuelo
VI would be subjected. In his desire to reap greater benefits in the maritime
trade, Lim Hong To willfully augmented the dangers and hazards to his
vessel's unwarry passengers, who would normally assume that the launch
officers possested the necessary skill and experience to evade the perds of
the sea. Hence, the his liability cannot be the identical to that of a ship
owner who bears in mind the safety of the passengers and cargo by
employing duly licensed officers. The international rule is to the effect that
the right of abandonment of vessels, as a legal limitation of a ship owner's
liability, does not apply to cases where the injury or the average is due to
ship owner's own failt. Lim Hong To expressly assumed the full risk and
responsibility of such a collision

138. Philippine American General Insurance Company, Inc. v. CA,

G.R. No. 116940. June 11, 1997; 339 Phil. 455
Facts:
16 July 1983- Coca Cola Bottlers Philippines, Inc, loaded on board "Af
Asilda," s vessel owned and operated by respondent Felman Shipping Lines
(FELMAN), 1,500 cases of 1-Inter Coca-Cola softdrink bottles 10 be
transported from Zamboanga City to Cebu City for consignee Coca Cola
Bottlers Philippines, Inc, Cebu
• The shipment was insured with petitioner Philippine American General
Insurance Co. Inc 2. "MV Asilda" left the port of Zamboanga in fine weather
at eight o'clock in the evening of the same day (PHILAMGEN)

3. 7 July 1983-The vessel sank in the waters of Zamboanga del Norte

together with its cargo, which includes the 7,500 cases of Coca-Cola
softdrink bottles 15 July 1983 The consignee Coca-Cola Bottlers Philippines,
Inc, Cebu plant, filed a claim with respondent

4 FELMAN for recovery of damages due to the loss of its softdrink bottles.

5. Respondent denied the claim so Coca-Cola filed an insurance claim with

PHILAMGEN which paid its claim of P755,250.00,

6. Claiming its right of subrogation PHILAMGEN now seeks recourse againt

respondent FELMAN
Consequently, on 29 November 1983, PHILAMGEN sued the shipowner for
sum of money and damages. 7. PHILAMGEN's contentions . The sinking and
total loss of "AV Asilda" and its cargo were due to the vessel's
unseaworthiness since it was put to sea in an unstable condition, and The
vessel was improperly manned and that its officers were grossly negligent in
failing to take appropriate measures to proceed to a nearby port or beach
after the vessel started to list 8. FELMAN's contentions
No right of subrogation in favor of PHILAMGEN was transmitted by the
shipper, and FELMAN had abandoned all its rights, interests and ownership
over "MV Asilda" together with her freight and appurtenances for the
purpose of limiting and extinguishing its liability under Art. 587 of the Code
of Commerce. 9. RTC-Roled in favor of FELMAN
It found that "MV Astida" was seaworthy when it left the port of Zamboanga
(as confirmed by certificates issued by the Philippine Coast Guard and the
shipowner's surveyor atfesting to its seaworthiness). Thus the loss of the
vessel and its entire shipment could only be attributed to either a fortuitous
event, in which case, no liability should attach unless there was a stipulation
to the contrary, or to the negligence of the captain and his crew, in which
case, Art 587 of the Code of Commerce should apply.
10. CA-Ruled in favor of FELMAN
"MV Asilda" was found to be unseaworthy for being top-heavy as 2,500
cases of Coca-Cola softdrink bottles were improperly stowed on deck. In
other words, while the vessel possessed the necessary Coast Guard
certification indicating its seaworthiness with respect to the structure of the
shup itself, it was not seaworthy with respect to the cargo Nonetheless, the
appellate court denied the claim of PHILAMGEN on the ground that the
assured's implied warranty of seaworthiness was not complied with

Issue:
Whether the limited liability under Art. 587 of the Code of Commerce should
apply you sent

Held: No

Ratio:
1 Art. 587 of the Code of Commerce is not applicable to the case at bar.
Simply put, the ship agent is liable for the negligent acts of the captam in
the care of goods loaded on the vessel This liability however can be limited
through abandonment of the vessel, its equipment and freightage as
provided in Art 587. Nonetheless, there are exceptional circumstances
wherein the ship agent could still be held answerable despite the
abandonment, as where the loss or injury was due to the fault of the
shipowner and the captain The international rule is to the effect that the
right of abandonment of vessels, as a legal limitation of a shipowner's
liability, does not apply to cases where the injury or average was occasioned
by the shipowner's own fault. It must be stressed at this point that Art. 587
speaks only of situations where the fault or negligence is committed solely
by the captain Where the shipowner is likewise to be blamed, Art. 587 will
not apply, and such situation will be covered by the provisions of the Civil
Code on common carrier.

2 It was already established at the outset that the sinking of "MV Arilda" was
due to its unseaworthiness even at the time of its departure from the port of
Zamboanga. It was top-heavy as an excessive amount of cargo was loaded
on deck Closer supervis on the part of the shipowner could have prevented
this fatal miscalculation. As such, FELMAN was equally negligent It cannot
therefore escape liability through the expedient of filing a notice of
abandonment of the vessel by virtue of Art. 587 of the Code of Commerce

3. Under Art 1733 of the Civil Code, "(c)ommon carriers, from the nature of
their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of
each case In the event of loss of goods, common carriers are presumed to
have acted negligently. FELMAN, the shipowner, was not able to rebut this
presumption.

140. Switzerland General Insurance Co., Ltd. v. Ramirez, G.R. No. L-

48264. Feb. 21, 1980; 96 SCRA 297
FACTS:

Petitioner Switzerland General Insurance Company, Ltd, a foreign insurance

company authorized to do business in the Philippines thru its agent, F.
E:.Zuellig, Inc., filed an admiralty case against private respondents Oyama
Shipping Co., Ltd. (Oyama Lines), a foreign firm doing business in the
Philippines, and Citadel Lines, Inc (Citadel). which is the local agent of
private respondent Oyama Shipping Co., Inc. and/or Mabuhay Brokerage
Co., Inc. (Mabuhay)

The complaint alleged that 60,000 bags of Urea Nitrogen were shipped from
Japan, on board the S/S “St Lourdes”, claimed to be owned and operated by
defendant Citadel. The goods were consigned to Borden International Phils.,
Inc., and insured by petitioner against all risks. The shipment was
discharged from the vessel shipside into lighters owned by Mabuhay, but
when the same was subsequently delivered to and received by the
consignee, it was found to have sustained losses and/or damage which was
paid by petitioner insurance company to the consignee/assured, by virtue of
which payment it became subrogated to the rights of the latter. Petitioner
made repeated demands against private respondents for payment of the
losses but no payment was made and, uncertain in whose custody the goods
were damaged, impleaded the private respondents as alternative defendants
to determine their respective liability.

Defendant filed an Answer alleging that defendant Citadel Lines was merely
the civil agent in the Philippines for the Japanese firm Oyama Lines., the
charterer of the vessel S/S “St. Lourdes”, said vessel being owned by
Companie Maritime de Brios, Sociedad Anonima (CMBSA), a Panamanian
corporation. It was further alleged that the principal agency relationship
between the said Oyama Lines and defendant Citadel Lines, Inc. was
terminated on August 21, 1975 when the Tokyo District Court declared and
decreed its insolvency. It was argued that defendant Citadel Lines “has
always acted as an agent of a disclosed principal and, therefore, the herein
defendant is without any liability at all” in connection with the plaintiff’s
claim. Defendant alleged that said corporation should be held liable and
interposed a counterclaim for damages against plaintiff. Defendant Oyama
Lines alleged that it ceased to be represented in the Philippines upon the
declaration of its insolvency by the Tokyo Court; that it was a mere
charterer of the S/S “St. Lourdes” which is owned by CMBSA; that due to the
insolvency of Oyama lines, the case as against it should be dismissed, the
remedy for the plaintiff being to file its claim before the insolvency court in
Tokyo, Japan. Further, it imputed the loss or damage to the shipment to the
shipper, Sumitomo Shoji Kaisha, Ltd. for failing to provide seaworthy
packages for the goods, and/or the Mabuhay Brokerage for failure to
exercise utmost diligence after it took possession of the cargo from the
vessel S/S “St. Lourdes.”

After trial on the merits, respondent court rendered a decision in favor of

petitioner as against therein defendant Oyama Lines but absolving Citadel
Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability. Petitioner filed a
Motion for Reconsideration insofar as it absolves respondents Citadel Lines,
Inc. and Mabuhay Brokerage Co., Inc. from liability, but said Motion for
Reconsideration was denied; hence, the instant petition for review.

ISSUE:

Whether respondent Citadel Lines, Inc., the local agent of a foreign ocean
going vessel, the S/S “St. Lourdes”, may be held primarily liable for the
loss/damage found to have been sustained by subject shipment while on
board and/or still in the custody of the said vessel.

RULING:

In fine, private respondents do not dispute that a ship agent is liable to third
persons under certain circumstances as provided in the Code of Commerce,
but insists that it is not a ship agent but a mere agent and hence, not liable.
We find the instant petition meritorious. The error of the lower court lies in
its application of the general rule on agency to the case a quo, when the
applicable law is contained in the pertinent provisions of the Code of
Commerce as applied in relevant decisions of this Court. Its finding,
therefore, that respondent Citadel Lines, Inc. was a mere agent of Oyama
Shipping Co., Ltd. was a result of its erroneous application of the law on
agency to the instant case. Considering the peculiar relationship of the
parties, respondent Citadel Lines, Inc. cannot be considered as a “mere
agent” under the civil law on agency as distinguished from a ship agent,
within the context of the Code of Commerce. In Yu Biao Sontua& Co. v.
Ossorio 1 for example, it was held that the doctrines having reference to the
relations between principal and agent cannot be applied in the case of ship
agents and ship owners. For this reason, respondent cannot validly claim
that the court a quo made a finding of fact which is conclusive upon this
Court. A ship agent, according to Article 586 of the Code of Commerce, is
“the person entrusted with the provisioning of a vessel, or who represents
her in the port in which she happens to be.” (Emphasis supplied.)

It is not disputed by the private respondent that it is the local representative

in the Philippines of the Oyama Lines and, as alleged by petitioner, upon
arrival of the vessel S/S “St. Lourdes” in Manila, it took charge of the
unloading of the cargo and issued cargo receipts (or tally sheets) in its own
name, for the purpose of evidencing discharge of cargoes and the conditions
thereof from the vessel to the arrastre operators and/or unto
barges/lighters, and that claims against the vessel S/S “St. Lourdes” for
losses/damages sustained by shipments were in fact filed and processed by
respondent Citadel Lines, Inc. These facts point to the inevitable conclusion
that private respondent is the entity that represents the vessel in the port of
Manila and hence is a ship agent within the meaning and context of Article
586 of the Code of Commerce.

At any rate, the liabilities of the ship agent are not disputed by private
Respondent. It appearing that the Citadel Lines is the ship agent for the
vessel S/S “St. Lourdes” at the port of Manila, it is, therefore, liable to the
petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an
amount representing the value of the goods lost and or damaged, amounting
to P38,698.94, which was likewise the amount paid by petitioner, as insurer,
to the insured/consignee. As found by the court a quo, there has been no
proof presented to show that the officers of the vessel, in whose custody the
goods were lost or damaged, are exempt from liability therefrom and that
the damage was caused by factors and circumstances exempting them from
liability.

The insolvency of Oyama Lines has no bearing on the instant case insofar as
the liability of Citadel Lines, Inc. is concerned. The law does not make the
liability of the ship agent dependent upon the solvency or insolvency of the
ship owner.

WHEREFORE, the decision appealed from is modified, and private respondent

Citadel Lines, Inc. is hereby ordered to pay, solidarily with its principal,
Oyama Lines (Oyama Shipping Co., LTD.), the amount of P38,698.94, with
interest thereon at the legal rate from the date of the filing of the complaint
on December 24, 1975 until fully paid, P5,000.00 as attorney’s fees and the
costs of suit. The rest of the decision is affirmed. No pronouncement as to
costs.

141. Aboitiz Shipping Corp. v. CA, G.R. No. 121833, 130752, 137801.
Oct. 17, 2008; 569 SCRA 294
Facts:
Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping
Corporation, at the port at San Jose, Occidental Mindoro, bound for Manila.
After said vessel had landed, the Pioneer Stevedoring Corporation took over
the exclusive control of the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement between Pioneer and petitioner Aboitiz.

The crane owned by Pioneer was placed alongside the vessel and one (1)
hour after the passengers of said vessel had disembarked, it started
operation by unloading the cargoes from said vessel. While the crane was
being operated, Anacleto Viana who had already disembarked from said
vessel obviously remembering that some of his cargoes were still loaded in
the vessel, went back to the vessel, and it was while he was pointing to the
crew of the said vessel to the place where his cargoes were loaded that the
crane hit him, pinning him between the side of the vessel and the crane. He
was thereafter brought to the hospital where he later expired three (3) days
thereafter.

Private respondents Vianas filed a complaint for damages against petitioner

for breach of contract of carriage. Aboitiz denied responsibility contending
that at the time of the accident, the vessel was completely under the control
of respondent Pioneer Stevedoring Corporation as the exclusive stevedoring
contractor of Aboitiz, which handled the unloading of cargoes from the
vessel of Aboitiz.

Issue:
Whether or not Aboitiz is negligent and is thus liable for the death.

Held:
Yes.

x x x [T]he victim Anacleto Viana guilty of contributory negligence, but it

was the negligence of Aboitiz in prematurely turning over the vessel to the
arrastre operator for the unloading of cargoes which was the direct,
immediate and proximate cause of the victim's death.

The rule is that the relation of carrier and passenger continues until the
passenger has been landed at the port of destination and has left the vessel
owner's dock or premises. 11 Once created, the relationship will not
ordinarily terminate until the passenger has, after reaching his destination,
safely alighted from the carrier's conveyance or had a reasonable
opportunity to leave the carrier's premises. All persons who remain on the
premises a reasonable time after leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a reasonable delay within this
rule is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his departure. 12
The carrier-passenger relationship is not terminated merely by the fact that
the person transported has been carried to his destination if, for example,
such person remains in the carrier's premises to claim his baggage.

It is apparent from the foregoing that what prompted the Court to rule as it
did in said case is the fact of the passenger's reasonable presence within the
carrier's premises. That reasonableness of time should be made to depend
on the attending circumstances of the case, such as the kind of common
carrier, the nature of its business, the customs of the place, and so forth,
and therefore precludes a consideration of the time element per se without
taking into account such other factors. It is thus of no moment whether in
the cited case of La Mallorca there was no appreciable interregnum for the
passenger therein to leave the carrier's premises whereas in the case at bar,
an interval of one (1) hour had elapsed before the victim met the accident.
The primary factor to be considered is the existence of a reasonable cause
as will justify the presence of the victim on or near the petitioner's vessel.
We believe there exists such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business

as a shipper, the passengers of vessels are allotted a longer period of time
to disembark from the ship than other common carriers such as a passenger
bus. With respect to the bulk of cargoes and the number of passengers it
can load, such vessels are capable of accommodating a bigger volume of
both as compared to the capacity of a regular commuter bus. Consequently,
a ship passenger will need at least an hour as is the usual practice, to
disembark from the vessel and claim his baggage whereas a bus passenger
can easily get off the bus and retrieve his luggage in a very short period of
time. Verily, petitioner cannot categorically claim, through the bare
expedient of comparing the period of time entailed in getting the passenger's
cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On
the contrary, if we are to apply the doctrine enunciated therein to the instant
petition, we cannot in reason doubt that the victim Anacleto Viana was still a
passenger at the time of the incident. When the accident occurred, the
victim was in the act of unloading his cargoes, which he had every right to
do, from petitioner's vessel. As earlier stated, a carrier is duty bound not
only to bring its passengers safely to their destination but also to afford
them a reasonable time to claim their baggage.

142. The Government of the Philippine Islands v. The Insular

Maritime Co., G.R. No. L-21495. March 18, 1924; 45 Phil. 805

Facts:
The Government of the Philippine islands seeks by this action to recover
from the Insular Maritime Company the sum of P30,437.91 for repairs made
by the Bureau of Commerce and Industry on the motor ship Insular.
The Insular Maritime Company is the owner of one vessel only, the Insular,
valued at P150,000.00.
On October 29, 1919, The Insular Company asked the Bureau of Commerce
and Industry on the motor ship Insular.
The Government consented and terminated said repairs.
On April 15, 1920, the Insular suffered a total loss by fire.
The bill prepared by the chief accountant of the Bureau of Commerce and
Industry for work done on the motor ship Insular in the amount of
P30,437.91, was dated July 31, 1920. Collection of the claim was attempted
pursuant to formal demand made by the Acting Insular Auditor of date April
30, 1921.
Note: No steps were taken by the Government to secure payment for the
repairs until after the loss of the vessel Insular. The defense (Insular) and
trial judge took note of this defense.
Lower Court: As a legal conclusion, the loss of the vessel Insular
extinguished the obligation.

Issue:
Whether the obligation of Insular Maritime Company to pay the Bureau of
Commerce and Industry for the repairs done has extinguished.

Held:
No. The obligation to pay on the part of Insular Maritime Company still
exists.
The decision of the trial judge was predicated on his understanding of the
provisions of article 591 of the Code of Commerce in relation with other
articles of the same Code, and with the decision of this court in the case of
Philippine Shipping Co. vs Garcia Vergara.
As to the applicability of article 591 of the COC, there is nothing in the
language to denote that the liability of the owners of a vessel is wiped out by
the loss of that vessel.
As to the applicability of the decision in the case of Philippine Shipping Co.
vs. Garcia Vergara, supra, the facts are not the same. There, the owners and
agents of a vessel causing the loss of another vessel by collision were held
“not liable beyond the vessel itself causing the collision,” but were “not
required to pay such indemnification for the reason that the obligation thus
incurred has been extinguished on account of the loss of the thing bound for
the payment thereof.” Here, there is a contractual relation which remains
unaffected by the loss of the thing concerned in the contract and which is
governed principally by the provisions of the Civil Code.
The rights and liabilities of owners of ships are in many respects essentially
the same as in the case of another owners of things.
As a general rule, the owners of a vessel and the vessel itself are liable for
necessary repairs.
(“NO VESSEL, NO LIABILITY” expresses in a nutshell the limited
liability rule.) Naturally the total destruction of the vessel
extinguished a maritime lien, as there is no longer any res to which
it can attach. But the total destruction of the vessel does not affect
the liability of the owners for repairs on the vessel completed before
its loss.
The trial court was accordingly right in its exposition of the fact but not in its
application of the law.
Judgment must therefore be as it is hereby reversed, and in lieu of the
judgment appealed from, another shall be entered here in favor of the
plaintiff and against the defendant for the sum of P30,437.91 with legal
interest from July 20, 1921, when the complaint was presented, until
payment. Without special findings as to costs in either instance, it is so
ordered.

143. Abueg v. San Diego, G.R. No. L-773. Dec. 17, 1946; 77 Phil. 730

Facts:
The M/S San Diego II and the M/S Bartolome, while engaged in fishing
operations around Mindoro Island on Oct.1, 1941 were caught by a typhoon
as a consequence of which they were sunk and totally lost. Amado Nuñez,
Victoriano Salvacion and Francisco Oching while acting in their capacities
perished in the shipwreck.
Counsel for the appellant cite article 587 of the Code of Commerce which
provides that if the vessel together with all her tackle and freight money
earned during the voyage are abandoned, the agent's liability to third
persons for tortious acts of the captain in the care of the goods which the
ship carried is extinguished; article 837 of the same code which provides
that in cases of collision, the ship owners' liability is limited to the value of
the vessel with all her equipment and freight earned during the voyage
(Philippine Shipping company vs. Garcia, 6 Phil., 281), and article 643 of the
same Code which provides that if the vessel and freight are totally lost, the
agent's liability for wages of the crew is extinguished. From these premises
counsel draw the conclusion that appellant's liability, as owner of the two
motor ships lost or sunk as a result of the typhoon that lashed the island of
Mindoro on October 1, 1941, was extinguished.

Issue:
Whether the liability of the shipowner is extinguished by the total loss of the
ship.

Held:
No. 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. Itis not the liability for the damage or loss of the cargo or injury
to, or death of, a passenger by or through the misconduct of the captain or
master of the ship; nor the liability for the loss of the ship as result of
collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the performance of
their work or employment, or the heirs and dependents and laborers and
employees in the event of death caused by their employment. Such
compensation has nothing to do with the provisions of the Code of
Commerce regarding maritime commerce. It is an item in the cost of
production which must be included in the budget of any well-managed
industry.
It has been repeatedly stated that the Workmen's Compensation Act was
enacted to abrogate the common law and our Civil Code upon culpable acts
and omissions, and that the employer need not be guilty of neglect or fault,
in order that responsibility may attach to him and that shipowner was liable
to pay compensation provided for in the Workmen's Compensation Act,
notwithstanding the fact that the motorboat was totally lost.
Principles:
1. GR: Limited Liability Rule
Exception: Workmen’s Compensation Act
Reason: Such compensation has nothing to do with the provisions of the
Code of Commerce regarding maritime commerce.
2. Real and Hypothecary Nature
“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.”

144. Aboitiz Shipping Corp. v. General Accident Fire and Life

Assurance Corp., Ltd., G.R. No. 100446. Jan. 21, 1993; 217 SCRA 359
PRINCIPLE/S:
1) Real and hypothecary nature of maritime law meaning
The liability of the carrier in connection with losses related to maritime
contracts is confined to the vessel, which is hypothecated for such obligations
or which stands as guaranty for their settlement. Thus, the liability of the
vessel owner and agent arising from the operation of such vessel were
confined to the vessel itself, its equipment, freight, and insurance, if any,
which limitation served to induce capitalists into effectively wagering their
resources against the consideration of the large profits attainable in the trade.

2) Origins of real and hypothecary nature

It has its origin by reason of the conditions and risks attending maritime trade
in its earliest years when such trade was replete with innumerable and
unknown hazards since vessels had to go through largely uncharted waters to
ply their trade. It was designed to offset such adverse conditions and to
encourage people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding.

3) Rights of a vessel owner or agent under the Limited Liability Rule are akin
to those of the rights of shareholders to limited liability under our corporation
law. Both are privileges granted by statute, and while not absolute, must be
swept aside only in the established existence of the most compelling of
reasons

4) Rights of parties to claim against an agent or owner of a vessel may be

compared to those of creditors against an insolvent corporation whose assets
are not enough to satisfy the totality of claims against it.
• Each individual creditor may prove the actual amount of their respective
claims but this does not mean that they shall be allowed to recover fully.
• The claimants or creditors are limited in their recovery to the remaining
value of accessible assets.
o Insolvent corporation - residual assets of the corporation left over
from its operations
o Lost vessel - insurance proceeds and pending freightage for the
particular voyage
• No claimant can be given precedence over the others by the simple
expedience of having filed or completed its action than the rest.
• Execution of judgment must be stayed pending completion of all cases
occasioned by the subject sinking.
o Pro-rated share of each claim can only be found after all the cases
shall have been decided.

5) GR: Once a decision becomes final and executory, it is the ministerial duty
of the court to order its execution

Exceptions:
a) Special and exceptional nature where it becomes the imperative in the
higher interest of justice to direct the suspension of its execution (Vecine v.
Geronimo, 59 OG 579);
b) Whenever it is necessary to accomplish the aims of justice (Pascual v Tan,
85 Phil. 164);
c) When certain facts and circumstances transpired after the judgment
became final which would render the execution of the judgment unjust
(Cabrias v. Adil, 135 SCRA 354). (at p. 201)
FACTS:

Petitioner is a corporation engaged in the business of maritime trade as a

carrier who owned and operated the M/V P/ ABOITIZ, a common carrier that
sank on a voyage. Private respondent General Accident Fire and Life Assurance
Corporation, Ltd. (GAFLAC) is a foreign insurance company pursuing its
remedy as a subrogee of several cargo consignees whose respective cargo
sank with the said vessel and for which it has priory paid. The sinking of vessel
gave rise to filling of suit to recover the lost cargo either by shippers, their
successors-ininterest, or the cargo insurers like GAFLAC as subrogees.

The sinking was initially investigated by the Board of Marine Inquiry, which
found that such sinking was due to fortuitous event. Notwithstanding such
finding, the trial court found against the carrier on the basis that the loss was
not due to force majeure. The attempted execution of the judgment award in
said case gave rise to this case. Aboitiz contends that the Limited Liability Rule
warrants immediate stay of execution of judgment to prevent impairment of
other creditor’s shares.

ISSUE:

WON the doctrine of limited liability is applicable to the case?

HELD:

YES. The provisions under the Code of Commerce provides that limited
liability rule covers only civil liabilities for injuries to third parties (Art. 587),
acts of the captain (Art. 590) and collisions If these circumstances are
attendant then the only time the Limited Liability Rule does not apply is
when there is an actual finding of negligence on the part of the vessel owner
or agent. In this case, there has been no actual finding of negligence on the
part of Aboitiz. The cause of the sinking of the vessel was because of
unseaworthiness due to the failure of the crew and the master to exercise
extraordinary diligence. There appears to have been no evidence presented
sufficient to form a conclusion that petitioner ship owner itself was negligent.

145. Rubiso v. Rivera, G.R. No. L-11407. Oct. 30, 1917; 37 Phil. 72

DOCTRINE:

The requisite of registration in the registry of the purchase of a vessel is

necessary and indispensable in orderer that the purchaser's rights may be
maintained against a claim 􏰇led by a third person; pursuant to article 573 of
the Code of Commerce in connection with section 2 of Act No. 1900, which
Act, amending said article, provides that such registration, instead of being
made in the commercial registry, shall be entered in the registry of the Insular
Collector of Customs, who, since May 18 1909, has been performing the duties
of commercial register.
FACTS:

1. On April 10, 1915, counsel for plaintiffs brought suit in the CFI and
alleged in the complaint that his clients were the owners of the pilot
boat named Valentina;

2. that the defendant Florentino E. Rivera took charge or possession of

said vessel without the knowledge or consent of the plaintiffs and
refused to deliver it to them, under claim that he was the owner thereof;

3. that such act on the defendant's part cause the plaintiffs to suffer
damages, not only because they could not proceed to repair the vessel,
but also because they were unable to derive profit from the voyages for
which said pilot boat was customarily used;

4. Facts by the Trial Court:

a. Bonifacio Gelito sold his share in the pilot boat Valentina, consisting
of a two-thirds interest therein, to the Chinaman Sy Qui, the co-
owner of the other one-third interest in said vessel;

b. the whole ownership in the vessel having been consolidated in behalf

of the Chinaman Sy Qui, this latter, in the use of his right as the sole
owner of the Valentina, sold this boat to Florentino E. Rivera by a
deed.

c. This document was registered in the Bureau of Customs on March

17th 1915.

d. After the sale of the boat to the defendant Rivera, a suit was filed
against the Chinaman Sy Qui to enforce payment of debt, the latter's
creditor Fausto Rubiso, the herein plaintiff, acquired said vessel at a
public auction sale.

e. The certificate of sale and adjudication of the boat in question was

issued by the sheriff on behalf of Fausto Rubiso, on January 27 of the
same year and was also entered in the commercial registry on the
March 4, 1915.

ISSUE:

Who has a better right between the parties? – RUBISO

RATIO:

• Article 573 of the Code of Commerce provides, in its first paragraph:

o "Merchant vessels constitute property which may be acquired an
transferred by any of the means recognized by law. The
acquisition of a vessel must be included in a written instrument,
which shall not produce any effect with regard to third persons if
not recorded in the commercial registry."
 • Inscription in the commercial registry was indispensable , in order that
said acquisition might affect, and produce consequences with respect to
third persons.

• The requisite of registration on the registry, of the purchase of a vessel,

is necessary and indispensable in order that the purchaser's rights may
be maintained against a claim 􏰇led by a third person. Such registration
is required both by the Code of Commerce and by Act No. 1900.

• It is undeniable that the defendant Florentino E. Rivera's rights cannot

prevail over those acquired by Fausto Rubiso in the ownership of the
pilot boat Valentina, inasmuch as, though the latter's acquisition of the
vessel at public auction, on January 23, 1915, was subsequent to its
purchase by the defendant Rivera, nevertheless said sale at public
auction was antecedently record in the o􏰇ce of the Collector of
Customs, on January 27, and entered in the commercial registry. — An
unnecessary proceeding-on March 4th; while the private and voluntary
purchase made by Rivera on a prior date was not recorded in the o􏰇ce
of the Collector of Customs until many days afterwards, that is, not until
March 17, 1915.

• The purchaser at public auction, Fausto Rubiso, who was careful to

record his acquisition, opportunely and on prior date, has, according to
the law, a better right than the defendant Rivera who subsequently
recorded his purchase. The latter is a third person, who was directly
affected by the registration which the plaintiff made of the acquisition.

For the foregoing considerations, whereby the errors assigned to the

judgment appealed from are deemed to have been refuted, it is our opinion
that said judgment should be, as it is hereby, affirmed, with the costs
against the appellant. So ordered.

147. Puromines, Inc. v. CA, G.R. No. 91228. March 22, 1993

Facts:

Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract with
private respondents Philipp Brothers Oceanic, Inc. for the sale of prilled Urea
in bulk. The Sales Contract provided, among others an arbitration clause which
states, thus:
"9. Arbitration - Any disputes arising under this contract shall be settled
by arbitration in London in accordance with the Arbitration Act 1950 and
any statutory amendment or modification thereof. XXXX"

The shipment covered by 3 bills of lading was loaded on MV Liliana Dimitrova

with Philipp Brothers as charterer of said vessel. When the shipment covered
by Bill of Lading 1 and 3 were discharged in Manila, it was found to be in bad
order and condition, caked, hardened and lumpy, discoloured and
contaminated with rust and dirt.
Puromines filed a complaint with the Trial Court for breach of contract of
carriage against Maritime, as ship-agent and Philipp Brothers, as charterer.
Philipp filed a motion to dismiss on the ground that Petitioner should comply
with the arbitration clause in the sales contract. Puromines opposed
contending that the sales contract does not include contract of carriage,
therefore, the latter is not covered by the agreement on arbitration.

Issue:

Whether or not the arbitration clause in the sales contract covers claims for
violations of contract of carriage.

Held:

Yes. The sales contract is comprehensive enough to include claims for

damages arising from carriage and delivery of the goods. Puromines derives
its right to the cargo from the bill of lading which is the contract of
affreightment together with the sales contract. Consequently, it is bound by
the provisions and terms of the said bill of lading and of the arbitration clause
incorporated in the sales contract.

Responsibility to third persons for goods shipped on board a vessel follows the
vessel's possession and employment. Assuming the cause of action is based
on contract of carriage, it must be first determined what kind of charter party
had with the ship owner to determine liability. If it is a contract of
affreightment, the charterer is not liable as possession is still with owner. If it
is a charter of demise or bareboat, then the charterer is liable as it is
considered the owner and therefore would be liable for damage or loss.

In any case, whether the liability of respondent should be based on the same
contract or that of the bill of lading, the parties are nevertheless obligated to
respect the arbitration provisions on the sales contract and/or the bill of
lading. Petitioner being a signatory and party to the sales contract cannot
escape from his obligation under the arbitration clause as stated therein.

Arbitration has been held valid and constitutional. The rule now is that unless
the agreement is such as absolutely to close the doors of the courts against
the parties, which agreement would be void, the courts will look with favor
upon such amicable arrangements and will only interfere with great reluctance
to anticipate or nullify the action of the arbitrator.

WHEREFORE, petition is hereby DISMISSED and decision of the court a quo

is AFFIRMED.

148. Litonjua Shipping Company Inc. v. National Seamen Board, G.R.

No. L-51910. Aug. 10, 1989

FACTS:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the
Fairwind Shipping Corporation. The M/V Dufton Bay is an ocean-going vessel
of foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd. While
the Dufton Bay was under charter by Fairwind, the vessel's master contracted
the services of private respondent Gregorio Candongo to serve as Third
Engineer for a period of twelve (12) months. This agreement was executed
before the Cebu Area Manning Unit of the NSB. Thereafter, private respondent
boarded the vessel. Before expiration of his contract, private respondent was
required to disembark at Port Kelang, Malaysia, and was returned to the
Philippines. The cause of the discharge was described in his Seaman's Book
as 'by owner's arrange".
Shortly after returning to the Philippines, private respondent filed a complaint
before public respondent NSB, for violation of contract, against Mullion as the
shipping company and petitioner Litonjua as agent of the shipowner and of
the charterer of the vessel.
The hearing officer of the NSB rendered a judgment by default, thereby
ordering R.D. Mullion Shipbrokers Co., Ltd., and Litonjua Shipping Co., Inc.,
jointly and solidarily to pay Gregorio Candongo.
Petitioner Litonjua contends that the shipowner, not 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. It is insisted
that private respondent's contract of employment and affidavit of undertaking
clearly showed that the party with whom he had contracted was Mullion, the
shipowner, represented by the ship's master. Petitioner Litonjua thus argues
that being the agent of the charterer and not of the shipowner, it accordingly
should not have been held liable on the contract of employment of private
respondent.

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

RULING:
YES. There are two (2) grounds upon which petitioner Litonjua may be held
liable to the private respondent on the contract of employment.
FIRST BASIS:
The first basis is the charter party which existed between Mullion, the ship
owner, and Fairwind, the charterer. Their agreement is under a bareboat or
demise charter. 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, the Court believes 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.

SECOND BASIS:
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. There is also no
question that petitioner Litonjua did assist the Master of the vessel in locating
and recruiting private respondent as Third Engineer of the vessel as well as
ten (10) other Filipino seamen as crew members. 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.
Therefore, private respondent was properly regarded as an employee of the
charterer Fairwind and that petitioner Litonjua may be held to answer to
private respondent for the latter's claims as the agent in the Philippines of
Fairwind.

ADDITIONAL:
There are three (3) distinguishable types of charter parties: (a) the "bareboat"
or "demise" charter; (b) the "time" charter; and (c) the "voyage" or "trip"
charter.
A bareboat or demise charter is a demise of a vessel, much as a lease of
an unfurnished house is a demise of real property. The shipowner turns over
possession of his vessel to the charterer, who then undertakes to provide a
crew and victuals and supplies and fuel for her during the term of the charter.
The shipowner is not normally required by the terms of a demise charter to
provide a crew, and so the charterer gets the "bare boat", i.e., without a
crew. Sometimes, of course, the demise charter might provide that the
shipowner is to furnish a master and crew to man the vessel under the
charterer's direction, such that the master and crew provided by the
shipowner become the agents and servants or employees of the charterer,
and the charterer (and not the owner) through the agency of the master, has
possession and control of the vessel during the charter period.
A time charter, upon the other hand, like a demise charter, is a contract for
the use of a vessel for a specified period of time or for the duration of one or
more specified voyages. In this case, however, the owner of a time-chartered
vessel (unlike the owner of a vessel under a demise or bare-boat charter),
retains possession and control through the master and crew who remain his
employees. What the time charterer acquires is the right to utilize the carrying
capacity and facilities of the vessel and to designate her destinations during
the term of the charter.
A voyage charter, or trip charter, is simply a contract of affreightment, that
is, a contract for the carriage of goods, from one or more ports of loading to
one or more ports of unloading, on one or on a series of voyages. In a voyage
charter, master and crew remain in the employ of the owner of the vessel.

150. Dio v. Japor, G.R. No. 154129. July 8, 2005; 463 SCRA 170
FACTS:

Herein respondents Spouses Virgilio Japor and Luz Roces Japor were the
owners of an 845.5 square-meter residential lot including its improvements,
situated in Barangay Ibabang Mayao, Lucena City, as shown by TCT No. T-
39514. Adjacent to the Japor’s lot is another lot owned by respondent Marta
Japor, which consisted of 325.5 square meters and titled under TCT No. T-
15018.

On August 23, 1982, the respondents obtained a loan of ₱90,000 from the
Quezon Development Bank (QDB), and as security therefor, they mortgaged
the lots covered by TCT Nos. T-39514 and T-15018 to QDB, as evidenced by
a Deed of Real Estate Mortgage duly executed by and between the
respondents and QDB.

On December 6, 1983, respondents and QDB amended the Deed of Real Estate
Mortgage increasing respondents’ loan to ₱128,000.

The respondents failed to pay their aforesaid loans. However, before the bank
could foreclose on the mortgage, respondents, thru their broker, one Lucia G.
Orian, offered to mortgage their properties to petitioner Teresita Dio.
Petitioner prepared a Deed of Real Estate Mortgage, whereby respondents
mortgaged anew the two properties already mortgaged with QDB to secure
the timely payment of a ₱350,000 loan that respondents had from petitioner
Dio. The Deed of Real Estate Mortgage, though dated January 1989, was
actually executed on February 13, 1989 and notarized on February 17, 1989.

Under the terms of the deed, respondents agreed to pay the petitioner interest
at the rate of five percent (5%) a month, within a period of two months or
until April 14, 1989. In the event of default, an additional interest equivalent
to five percent (5%) of the amount then due, for every month of delay, would
be charged on them.

The respondents failed to settle their obligation to petitioner on April 14, 1989,
the agreed deadline for settlement.

On August 27, 1991, petitioner made written demands upon the respondents
to pay their debt.

Despite repeated demands, respondents did not pay, hence petitioner applied
for extrajudicial foreclosure of the mortgage. The auction of the unredeemed
properties was set for February 26, 1992.

The trial court issued an Order enjoining the auction sale of the
aforementioned mortgaged properties.
On June 15, 1992, the Japors filed a Motion to Admit Amended
Complaint with an attached copy of their Amended Complaint praying that
the Deed of Real Estate Mortgage dated February 13, 1989 be declared null
and void, but reiterating the plea that the trial court fix the contractual
obligations of the Japors with Dio. The trial court denied the motion.

The trial court denied the motion.

On September 27, 1994, respondents filed with the appellate court, a petition
for certiorari but it was also denied.

ISSUE/S:
Did the Court of Appeals err when it held that the stipulations on interest and
penalty in the Deed of Real Estate Mortgage is contrary to morals, if not illegal?
Corollarily, were respondents entitled to any "surplus" on the auction sale
price?

RULING:

On the main issue, petitioner contends that The Usury Law has been rendered
ineffective by Central Bank Circular No. 905, series of 1982 and accordingly,
usury has become legally non-existent in this jurisdiction, thus, interest rates
may accordingly be pegged at such levels or rates as the lender and the
borrower may agree upon. Petitioner avers she has not violated any law
considering she is not engaged in the business of money-lending. Moreover,
she claims she has suffered inconveniences and incurred expenses for some
13 years now as a result of respondents’ failure to pay her. Petitioner further
points out that the 5% interest rate was proposed by the respondents and
have only themselves to blame if the interests and penalties ballooned to its
present amount due to their willful delay and default in payment. The appellate
court thus erred, petitioner now insists, in applying Sps. Almeda v. Court of
Appeals and Medel v. Court of Appeals to reduce the interest rate to 12% per
annum and the penalty to 1% per month.

Respondents admit they owe petitioner ₱350,000 and do not question any
lawful interest on their loan but they maintain that the Deed of Real Estate
Mortgage is null and void since it did not state the true intent of the parties,
which limited the 5% interest rate to only two (2) months from the date of
the loan and which did not provide for penalties and other charges in the event
of default or delay. Respondents vehemently contend that they never
consented to the said stipulations and hence, should not be bound by them.

On the first issue, we are constrained to rule against the petitioner’s

contentions.

Central Bank Circular No. 905, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity. However, nothing in said Circular
grants lenders carte blanche authority to impose interest rates which would
result in the enslavement of their borrowers or to the hemorrhaging of their
assets. While a stipulated rate of interest may not technically and necessarily
be usurious under Circular No. 905, usury now being legally non-existent in
our jurisdiction, nonetheless, said rate may be equitably reduced should the
same be found to be iniquitous, unconscionable, and exorbitant, and hence,
contrary to morals (contra bonos mores), if not against the law.15 What is
iniquitous, unconscionable, and exorbitant shall depend upon the factual
circumstances of each case.

In the instant case, the Court of Appeals found that the 5% interest rate per
month and 5% penalty rate per month for every month of default or delay is
in reality interest rate at 120% per annum. This Court has held that a
stipulated interest rate of 5.5% per month or 66% per annum is void for being
iniquitous or unconscionable. We have likewise ruled that an interest rate of
6% per month or 72% per annum is outrageous and
inordinate.17 Conformably to these precedent cases, a combined interest and
penalty rate at 10% per month or 120% per annum, should be deemed
iniquitous, unconscionable, and inordinate. Hence, we sustain the appellate
court when it found the interest and penalty rates in the Deed of Real Estate
Mortgage in the present case excessive, hence legally impermissible.
Reduction is legally called for now in rates of interest and penalty stated in
the mortgage contract.

What then should the interest and penalty rates be?

The evidence shows that it was indeed the respondents who proposed the 5%
interest rate per month for two (2) months. Having agreed to said rate, the
parties are now estopped from claiming otherwise. For the succeeding period
after the two months, however, the Court of Appeals correctly reduced the
interest rate to 12% per annum and the penalty rate to 1% per month, in
accordance with Article 2227of the Civil Code.

But were respondents entitled to the "surplus" of ₱2,247,326as a result of the

"overpricing" in the auction?

We note that the "surplus" was the result of the computation by the Court of
Appeals of respondents’ outstanding liability based on a reduced interest rate
of 12% per annum and the reduced penalty rate of 1% per month. The court a
quo then proceeded to apply our ruling in Sulit v. Court of Appeals, to the
effect that in case of surplus in the purchase price, the mortgagee is liable for
such surplus as actually comes into his hands, but where he sells on credit
instead of cash, he must still account for the proceeds as if the price were paid
in cash, for such surplus stands in the place of the land itself with respect to
liens thereon or vested rights therein particularly those of the mortgagor or
his assigns.

In the instant case, however, there is no "surplus" to speak of. In adjusting

the interest and penalty rates to equitable and conscionable levels, what the
Court did was merely to reflect the true price of the land in the foreclosure
sale. The amount of the petitioner’s bid merely represented the true amount
of the mortgage debt. No surplus in the purchase price was thus created to
which the respondents as the mortgagors have a vested right.

151. Almeda v. CA, G.R. No. 113412. April 17, 1996; 256 SCRA 292
FACTS:
On various dates in 1981, the Philippine National Bank granted to herein
petitioners, the spouses Ponciano L. Almeda and Eufemia P. Almeda several
loan/credit accommodations totaling P18.0 Million pesos payable in a period
of six years at an interest rate of 21% per annum. To secure the loan, the
spouses Almeda executed a Real Estate Mortgage Contract covering a 3,500
square meter parcel of land, together with the building erected thereon (the
Marvin Plaza) located at Pasong Tamo, Makati, Metro Manila. Between 1981
and 1984, petitioners made several partial payments on the loan totaling
P7,735,004.66, a substantial portion of which was applied to accrued interest.
On March 31, 1984, respondent bank, over petitioners' protestations, raised
the interest rate to 28%, allegedly pursuant to Section III-c (1) of its credit
agreement. Said interest rate thereupon increased from an initial 21% to a
high of 68% between March of 1984 to September, 1986. Petitioner protested
the increase in interest rates, to no avail. Before the loan was to mature in
March, 1988, the spouses filed on February 6, 1988 a petition for declaratory
relief with prayer for a writ of preliminary injunction and temporary restraining
order with the Regional Trial Court of Makati.

ISSUE/S:

1) Whether or not respondent bank was authorized to raise its interest rates
from 21% to as high as 68% under the credit agreement; and
2) Whether or not respondent bank is granted the authority to foreclose the
Marvin Plaza under the mandatory foreclosure provisions of P.D. 385.

HELD:
1) No. Petitioners never agreed in writing to pay the increased interest rates
demanded by respondent bank in contravention to the tenor of their credit
agreement. In fact, the manner of agreement is itself explicitly stipulated by
the Civil Code when it provides, in Article 1956 that "No interest shall be due
unless it has been expressly stipulated in writing." What has been "stipulated
in writing" from a perusal of interest rate provision of the credit agreement
signed between the parties is that petitioners were bound merely to pay 21%
interest, subject to a possible escalation or de-escalation, when 1) the
circumstances warrant such escalation or de-escalation; 2) within the limits
allowed by law; and 3) upon agreement. The interest rate which appears to
have been agreed upon by the parties to the contract in this case was the
21% rate stipulated in the interest provision.
2) No. In the first place, because of the dispute regarding the interest rate
increases, an issue which was never settled on merit in the courts below, the
exact amount of petitioner's obligations could not be determined. Thus, the
foreclosure provisions of P.D. 385 could be validly invoked by respondent
only after settlement of the question involving the interest rate on the loan,
and only after the spouses refused to meet their obligations following such
determination.

152. Roque v. IAC, G.R. No. L-66935. Nov. 11, 1985

FACTS:
On February 19, 1972, the Manila Bay Lighterage Corporation (Manila Bay), a
common carrier, entered into a contract with the petitioners whereby the
former would load and carry on board its barge Mable 10 about 422.18 cubic
meters of logs from Malampaya Sound, Palawan to North Harbor, Manila. The
petitioners insured the logs against loss for P100,000.00 with respondent
Pioneer Insurance and Surety Corporation (Pioneer).
On February 29, 1972, the petitioners loaded on the barge, 811 pieces of logs
at Malampaya Sound, Palawan for carriage and delivery to North Harbor, Port
of Manila, but the shipment never reached its destination because Mable 10
sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its
way to Manila.
Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and
respondent Pioneer

DECISION OF LOWER COURTS:

(1) Trial Court: found in favor of petitioners.
(2) Intermediate Appellate Court: absolved the respondent insurance
company from liability on the grounds that the vessel carrying the insured
cargo was unseaworthy and the loss of said cargo was caused not by the perils
of the sea but by the perils of the ship

ISSUES:
I. THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT IN CASES
OF MARINE CARGO INSURANCE, THERE IS A WARRANTY OF
SEAWORTHINESS BY THE CARGO OWNER.
II. THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE
LOSS OF THE CARGO IN THIS CASE WAS CAUSED BY "PERILS OF THE SHIP"
AND NOT BY "PERILS OF THE SEA.”

RULING:
I. No. The IAC is correct.
The liability of the insurance company is governed by law. Section 113 of the
Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon any
thing that is the subject of marine insurance, a warranty is implied that the
ship is seaworthy.
Section 99 of the same Code also provides in part. Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise,

From the above-quoted provisions, there can be no mistaking the fact that the
term "cargo" can be the subject of marine insurance and that once it is so
made, the implied warranty of seaworthiness immediately attaches to
whoever is insuring the cargo whether he be the shipowner or not.
Since the law provides for an implied warranty of seaworthiness in every
contract of ordinary marine insurance, it becomes the obligation of a cargo
owner to look for a reliable common carrier which keeps its vessels in
seaworthy condition. The shipper of cargo may have no control over the vessel
but he has full control in the choice of the common carrier that will transport
his goods. Or the cargo owner may enter into a contract of insurance which
specifically provides that the insurer answers not only for the perils of the sea
but also provides for coverage of perils of the ship.

II. No, the IAC is correct.

In marine cases, the risks insured against are "perils of the sea"
A policy does not cover a loss or injury that must inevitably take place in the
ordinary course of things. There is no doubt that the term 'perils of the sea'
extends only to losses caused by sea damage, or by the violence of the
elements, and does not embrace all losses happening at sea. They insure
against losses from extraordinary occurrences only, such as stress of weather,
winds and waves, lightning, tempests, rocks and the like. These are
understood to be the "perils of the sea" referred in the policy, and not those
ordinary perils which every vessel must encounter. "Perils of the sea" has been
said to include only such losses as are of extraordinary nature, encounter.
"Perils of the sea" has been said to include only such losses as are
of extraordinary nature, or arise from some overwhelming power, which
cannot be guarded against by the ordinary exertion of human skill and
prudence. Damage done to a vessel by perils of the sea includes every species
of damages done to a vessel at sea, as distinguished from the ordinary wear
and tear of the voyage, and distinct from injuries suffered by the vessel in
consequence of her not being seaworthy at the outset of her voyage (as in
this case). It is also the general rule that everything which happens thru the
inherent vice of the thing, or by the act of the owners, master or shipper, shall
not be reputed a peril, if not otherwise borne in the policy.
It is quite unmistakable that the loss of the cargo was due to the perils of the
ship rather than the perils of the sea. The facts clearly negate the petitioners'
claim under the insurance policy.
In the present case the entrance of the sea water into the ship's hold
through the defective pipe already described was not due to any accident
which happened during the voyage, but to the failure of the ship's owner
properly to repair a defect of the existence of which he was apprised. The
loss was therefore more analogous to that which directly results from simple
unseaworthiness than to that which result from the perils of the sea.

153. Magsaysay, Inc. v. Agan, G.R. No. L-6393. Jan. 31, 1955

FACTS:

The S S "San Antonio", vessel owned and operated by plaintiff, left Manila on
October 6, 1949, bound for Basco, Batanes, vis Aparri, Cagayan, with general
cargo belonging to different shippers, among them the defendant. The vessel
reached Aparri on the 10th of that month, and after a day's stopover in that
port, weighed anchor to proceed to Basco. But while still in port, it ran aground
at the mouth of the Cagayan river, and, attempts to refloat it under its own
power having failed, plaintiff have it refloated by the Luzon Stevedoring Co.
at an agreed compensation. Once afloat the vessel returned to Manila to refuel
and then proceeded to Basco, the port of destination. There the cargoes were
delivered to their respective owners or consignees, who, with the exception of
defendant, made a deposit or signed a bond to answer for their contribution
to the average.
On the theory that the expenses incurred in floating the vessel constitute
general average to which both ship and cargo should contribute, plaintiff
brought the present action in the Court of First Instance of Manila to make
defendant pay his contribution, which, as determined by the average adjuster,
amounts to P841.40. Defendant, in his answer, denies liability to his amount,
alleging, among other things, that the stranding of the vessel was due to the
fault, negligence and lack of skill of its master, that the expenses incurred in
putting it afloat did not constitute general average, and that the liquidation of
the average was not made in accordance with law. After trial, the lower court
found for plaintiff and rendered judgment against the defendant for the
amount of the claim, with legal interests. From this judgment defendant had
appealed directly to this Court.

ISSUE/S:
Whether or not he trial court erred in allowing the general average for floating
a vessel unintentionally stranded inside a port and at the mouth of a river
during a fine weather.

RULING:

For the purposes of this assignment of error we may well accept the finding
below that the stranding of plaintiff's vessel was due to the sudden shifting of
the sandbars at the mouth of the river which the port pilot did not anticipate.
The standing may, therefore, be regarded as accidental, and the question is
whether the expenses incurred in floating a vessel so stranded should be
considered general average and shared by the cargo owners.

The law on averages is contained in the Code of Commerce. Under that law,
averages are classified into simple or particular and general or gross.
Generally speaking, simple or particular averages include all expenses and
damages caused to the vessel or cargo which have not inured to the common
benefit (Art. 809), and are, therefore, to be borne only by the owner of the
property gave rise to same (Art. 810); while general or gross averages include
"all the damages and expenses which are deliberately caused in order to save
the vessel, its cargo, or both at the same time, from a real and known risk"
(Art. 811). Being for the common benefit, gross averages are to be borne by
the owners of the articles saved (Art. 812).

In classifying averages into simple o particular and general or gross and

defining each class, the Code (Art. 809 and 811) at the same time enumerates
certain specific cases as coming specially under one or the other
denomination. Going over the specific cases enumerated we find that, while
the expenses incurred in putting plaintiff's vessel afloat may well come under
number 2 of article 809-which refers to expenses suffered by the vessel "by
reason of an accident of the sea of the force majuere" — and should therefore
be classified as particular average, the said expenses do not fit into any of the
specific cases of general average enumerated in article 811. No. 6 of this
article does mention "expenses caused in order to float a vessel," but it
specifically refers to "a vessel intentionally stranded for the purpose of saving
it" and would have no application where, as in the present case, the stranding
was not intentional.
Let us now see whether the expenses here in question could come within the
legal concept of the general average. Tolentino, in his commentaries on the
Code of Commerce, gives the following requisites for general average:

First, there must be a common danger. This means, that both the ship and
the cargo, after has been loaded, are subject to the same danger, whether
during the voyage, or in the port of loading or unloading; that the danger
arises from the accidents of the sea, dispositions of the authority, or faults of
men, provided that the circumstances producing the peril should be
ascertained and imminent or may rationally be said to be certain and
imminent. This last requirement exclude measures undertaken against a
distant peril.

Second, that for the common safety part of the vessel or of the cargo or both
is sacrificed deliberately.

Third, that from the expenses or damages caused follows the successful saving
of the vessel and cargo.

Fourth, that the expenses or damages should have been incurred or inflicted
after taking proper legal steps and authority.

With respect to the first requisite, the evidence does not disclose that the
expenses sought to be recovered from defendant were incurred to save vessel
and cargo from a common danger. The vessel ran aground in fine weather
inside the port at the mouth of a river, a place described as "very shallow". It
would thus appear that vessel and cargo were at the time in no imminent
danger or a danger which might "rationally be sought to be certain and
imminent." It is, of course, conceivable that, if left indefinitely at the mercy of
the elements, they would run the risk of being destroyed. But as stated at the
above quotation, "this last requirement excludes measures undertaken
against a distant peril." It is the deliverance from an immediate, impending
peril, by a common sacrifice, that constitutes the essence of general average.
In the present case there is no proof that the vessel had to be put afloat to
save it from imminent danger. What does appear from the testimony of
plaintiff's manager is that the vessel had to be salvaged in order to enable it
"to proceed to its port of destination." But as was said in the case just cited it
is the safety of the property, and not of the voyage, which constitutes the true
foundation of the general average.

As to the second requisite, we need only repeat that the expenses in question
were not incurred for the common safety of vessel and cargo, since they, or
at least the cargo, were not in imminent peril. The cargo could, without need
of expensive salvage operation, have been unloaded by the owners if they had
been required to do so.

With respect to the third requisite, the salvage operation, it is true, was a
success. But as the sacrifice was for the benefit of the vessel — to enable it to
proceed to destination — and not for the purpose of saving the cargo, the
cargo owners are not in law bound to contribute to the expenses.

The final requisite has not been proved, for it does not appear that the
expenses here in question were incurred after following the procedure laid
down in article 813 et seq.
In conclusion we found that plaintiff not made out a case for general average,
with the result that its claim for contribution against the defendant cannot be
granted.
Wherefore, the decision appealed from is reversed and plaintiff's complaint
ordered dismissed with costs.

154. Standard Oil Company of New York v. Castelo, G.R. No. L-

13695. Oct. 18, 1921
Facts:
By contract of charter, Castelo, as owner, let the small interisland steamer
Batangueño for the term of 1 year to Chumbuque for use in the conveying of
cargo between certain ports of the Philippine Islands. In this contract it was
stipulated that the officers and crew of the Batangueño should be supplied by
the owner, and that the charterer should have no other control over the
captain, pilot, and engineers than to specify the voyages that they should
make and to require the owner to discipline or relieve them as soon as possible
in case they should fail to perform the duties respectively assigned to them.
While the boat was being thus used by the charterer in the interisland trade,
the Standard Oil Company delivered to the agent of the boat in Manila a
quantity of petroleum to be conveyed to the port of Casiguran, in the Province
of Sorsogon. For this consignment a bill of lading of the usual form was
delivered, with the stipulation that freight should be paid at the destination.
Said bill of lading contained no provision with respect to the storage of the
petroleum, but it was in fact placed upon the deck of the ship and not in the
hold. While the boat was on her way to the port mentioned, and off the
western coast of Sorsogon, a violent typhoon passed over that region, and
while the storm was at its height the captain was compelled for the safety of
all to jettison the entire consignment of petroleum consisting of 200 cases.
When the storm abated the ship made port, and 13 cases of the petroleum
were recovered, but the remainder was wholly lost. To recover the value of
the petroleum thus jettisoned but not recovered, an action was instituted by
the Standard Oil Company against the owner of the ship in the CFI Manila.

ISSUE:
WON the loss of this petroleum was a general average loss or a particular loss
to be borne solely by the owner of the cargo
HELD:
GENERAL AVERAGE LOSS It is a general rule… (xxx) that ordinarily the loss
of cargo carried on deck shall not be considered a general average loss. The
reason for this rule is found in the fact that deck cargo is in an extra-
hazardous position and, if on a sailing vessel, its presence is likely to
obstruct the free action of the crew in managing the ship. Moreover,
especially in the case of small vessels, it renders the boat top-heavy and
thus may have to be cast overboard sooner than would be necessary if it
were in the hold; and naturally it is always the first cargo to go over in case
of emergency. Indeed, in Art 815 of Code of Commerce, it is expressly
declared that deck cargo shall be cast overboard before cargo stowed in the
hold. However, with the advent of the steamship as the principal conveyer of
cargo by sea, it has been felt that the reason for the rule has become less
weighty, especially with reference to coastwise trade; and it is now generally
held that jettisoned goods carried on deck, according to the custom of trade,
by steam vessels navigating coastwise and inland waters, are entitled to
contribution as a general average loss. Hence, plaintiff is entitled to recover
in some way and from somebody an amount bearing such proportion to its
total loss as the value of both the ship and the saved cargo bears to the
value of the ship and entire cargo before the jettison was effected. ISSUE:
Who is the person, or persons, who are liable to make good this loss, and
what are the conditions under which the action can be maintained? HELD:
The shipper may, in the court’s opinion, go at once upon the owner and the
latter, if so minded, may have his recourse for indemnization against his
captain.

CFI Manila – in favor of Standard Oil

Primary liability is placed upon the person who has actual control over the
conduct of the voyage and who has most capital embarked in the venture,
namely, the owner of the ship, leaving him to obtain recourse**, as it is
very easy to do, from other individuals who have been drawn into the
venture as shippers

SC – AFFIRMED with modifications

**Recourse against his captain.

By article 852 of the Code of Commerce the captain is required to initiate the
proceedings for the adjustment, liquidation, and distribution of any gross
average to which the circumstances of the voyage may have given origin;
and it is therefore his duty to take the proper steps to protect any shipper
whose goods may have been jettisoned for the general safety

In the case before us the captain of the vessel did not take those steps; and
the court is of the opinion that the failure of the captain to take those steps
gave rise to a liability for which the owner of the ship must answer.

155. Urrutia & Co. v. Baco River Plantation Co., G.R. No. L-7675.
March 25, 1913
FACTS.
• Steamship Nuestra Señora del Pilar, owned by Urrutia, and the schooner
Mangyan owned by Baco River collided. The sail vessel (schooner) was
sailing with a fresh breeze dead astern, her sails wing and wing. The
steamer was seen by those on board the sailing vessel some time before
the actual collision, sailing erratically.

• Despite this fact, the sailing ship kept its course steady until just before
the actual contact. (It was during the time when the sail vessel was passing
through the third zone that it changed its course to port in order to avoid,
if possible, the collision.)
• As such, the sailing ship rammed the steamer, wherein the steamer sank
and 8 died. An action was filed by the owner of the steamship against the
owner of the sail vessel, to recover the value of the destroyed steamer and
the damages caused by reason of its destruction, alleging that the sailing
ship was negligent.

• Note that the steamer was insured in this case.

ISSUES & RATIO.

1. WON the sailing ship Mangyan should be held liable in continuing
its course without variation up to the moment that it found itself
in extremis? – NO.

In case of collision between a steamship and a sailing ship the

steamship is prima facie in fault. Article 20 of the International Rules
for the Prevention of Collision at Sea states: "If two ships, one of which
is a sailing ship and the other a steam ship, are proceeding in such directions
as to involve risk of collision, the steam ship shall keep out of the way, of the
sailing ship." Article 21 states: "where by any of these rules one of two
vessels is to keep out of the way, the other shall keep her course and speed."

Generally speaking, in collisions between vessels there exist three divisions of

time, or zones:
1. The first division covers all the time up to the moment when the
risk of collision may be said to have begun. Within this zone no rule
is applicable because none is necessary. Each vessel is free to direct
its course as it deems best without reference to the movements of
the other vessel.
2. The second division covers the time between the moment when
the risk of collision begins and the moment when it has become a
practical certainty.
3. The third division covers the time between the moment when
collision has become a practical certainty and the moment of actual
contact.

The rule is that vessels may each assume that the other will obey the law is
one of the most important in the law of collision. Were it otherwise and were
vessels required to take all sorts of measures to keep out the way, when they
are not in each other's way, navigation would be impossible. PROVIDED that
a steamer must not approach so near a sailing vessel, and on such a course
as to alarm a man of ordinary skill and prudence. If the man on the sailing
vessel makes an improper maneuver, he is not responsible.

It is what is called an "error in extremis." Article 21 renders it obligatory on

the vessel, which has the right of way to pursue her course, she must rely on
the other vessel to avoid the collision and not embarrass her by any maneuver.
All she needs do is to do nothing. Then the other vessel knows to expect and
navigates accordingly.

As a general rule, therefore, when meeting a sailing vessel, whether close

hauled or with the wind free, the latter has a right to keep her course, and it
is the duty of the steamer to adopt precautions as will avoid her.

This way, the steamer can adopt the necessary measures to avoid the danger,
and it will have a right to assume that the sailing vessel will keep its course.
If the latter fails to do this, the fault will be attributable to it, and the master
of the steamer will be responsible only for a fair exertion of the power of his
vessel to avoid the collision under the unexpected change of the course of the
other vessel, and the circumstances of the case.

Rules of navigation are obligatory from the time the necessity for precaution
begins, and continue to be applicable as the vessels advance, so long as the
means and opportunity to avoid the danger remain; but they do not apply to
a vessel required to keep her course after the approach is so near that the
collision is inevitable, and are equally inapplicable to vessels of every
description while they are yet so distant from each other that measures of
precaution have not become necessary.

Accordingly, in the first zone no rules apply. In the second the burden is on
the vessel required to keep away and avoid the danger. The third zone covers
the period in which errors in extremis occur; and the rule is that the vessel
which has forced the privileged vessel into danger is responsible even if the
privileged vessel has committed an error within that zone.

"Nautical rules require that where a steamship and sailing vessel are
approaching each other from opposite directions, or on intersecting lines, the
steamship from the moment the sailing vessel is seen, shall watch with the
highest diligence her course and movements so as to be able to adopt such
timely means of precaution as will necessarily prevent the two boats from
coming in contact.

Fault on the part of the sailing vessel at the moment preceding a collision does
not absolve a steamer which has suffered herself and a sailing vessel to get
in such dangerous proximity as to cause inevitable alarm and confusion and
collusion as a consequence. The steamer, as having committed a far greater
fault in allowing such proximity to be brought about, is chargeable with all the
damages resulting from a collision."

NOTES: Summary of nautical rules between steamer and schooner:

 1. Upon the steamship and schooner discovering each other proceeding in
such directions as to involve risk of collision, as stated in the foregoing
findings of fact, it was the right and duty of the schooner to keep her
course, and the duty of the steamship to keep out of the way of the
schooner, and the steamship was in fault in failing to perform that duty.

2. It was also the duty of the steamship under the circumstances stated,
to pursue a course which should not needlessly put the schooner in
imminent peril; and the steamship was in fault in failing to perform that
duty.

3. It was the duty of the steamship before the time when she did so, to
slacken her speed or stop, and the steamship was in fault in failing to
perform that duty.

4. If, when a collision had become imminent by reason of the fault of the
steamship, any error was committed in extremis by those in charge of
the schooner, the schooner is not responsible therefor.

5. The steamship had no right, under the circumstances stated, needlessly

to place herself in such close proximity to the schooner that the error or
a moment would bring destruction.

6. The collision was occasioned by the fault of the steamship, and the
steamship should be condemned therefor.

Where a sailing level and one propelled by steam are approaching each other
bow, on the steamer must give away, In case of a collision between such
vessels, the steamer is prima facie in fault.

DECISION.
Petition granted by the SC.

158. Verzosa v. Lim, G.R. No. 20145. Nov. 15, 1923

FACTS:
Petitioners instituted an action in the CFI-Manila against the respondents to
recover a sum of money alleged to be the damages resulting to the plaintiffs
from a collision between Perla and Ban Yek. ∙ Allegation: said collision was
due to the experience, carelessness and lack of skill on the part of the captain
of the Ban Yek and to his failure to observe the rules of navigation appropriate
to the case. Respondents filed a counterclaim saying that collision was due
exclusively to the inexperience and carelessness of the captain and officers of
the steamship Perla. CFI: Absolved defendants, but no damages was awarded
to the petitioners. Incident: Destination of Ban Yek: Naga (through Bicol River)
to Manila In Bicol River, while the boats were yet more than a kilometer apart,
Ban Yek gave 2 blasts with her whistle, thus indicating an intention to pass on
the left, or to her own port side. In reply to this signal the Perla gave a single
blast, thereby indicating that she disagreed with the signal given by the Ban
Yek and would maintain her position on the right, that is, would keep to the
starboard. Ban Yek made no reply to this signal. As Perla was navigating with
the current, then running in from the sea, this vessel, under paragraph 163
of Customs Marine Circular No. 53, had the right of way over Ban Yek, and
the officers of the Perla interpreted the action of the Ban Yek in not replying
to the Perla's signal as an indication of acquiescence of the officers of the Ban
Yek in the determination of the Perla to keep to the starboard. When the
danger of collision became imminent, Capt. Garrido of Perla, seeing that he
was shut off by the Ban Yek from passing to the right, put his vessel to port,
intending to avoid collision or minimize its impact by getting farther out into
the stream. An additional reason for this maneuver, as stated by Captain
Carrido, is that the captain of the Ban Yek waived his hand to Garrido,
indicating that the latter should turn his vessel towards the middle of the
stream. At about the same time that Perla was thus deflected from her course
the engine on the Ban Yek was reversed and three blasts were given by this
vessel to indicate that she was backing. Now, it appears that when the engine
is reversed, a vessel swings to the right or left in accordance with the direction
in which the blades of the propeller are set; and as Ban Yek began to back,
her bow was thrown out into the stream, a movement which was assisted by
the current of the river. By this means Ban Yek was brought to occupy an
oblique position across the stream at the moment Perla was passing; and the
bow of Ban Yek crashed into the starboard bumpers of the Perla, carrying
away external parts of the ship and inflicting material damage on the hull.
ISSUE:
1. Who is responsible for the collision?
2. Who must respond for the damages, if any?***
SC:
1. Captain and pilot in charge of Ban Yek. Upon the point of responsibility for
the collision we have no hesitancy in finding that the fault is to be attributed
exclusively to the negligence and inattention of the captain and pilot in charge
of the Ban Yek. The Perla undoubtedly had the right of way, since this vessel
was navigating with the current, and the officers in charge of the Perla were
correct in assuming, from the failure of the Ban Yek to respond to the single
blast of the Perla, that the officers in charge of the Ban Yek recognized that
the Perla had a right of way and acquiesced in her resolution to keep to the
right. Excuse urged by Ban Yek: 1. its vessel is somewhat larger than the Perla
and that it was desirable for the Ban Yek to keep on the side of the long arc
of the curve of the river; and in this connection it is suggested that the river
is deeper on the outer edge of the bend than on the inner edge.
2. on a certain previous occasion the Ban Yek on coming out from this port
had gotten stuck in the mud in this bend by keeping too far to the right 3.
the practice of ships in navigating this stream to keep nearer the outside
than to the inside of the bend.

Such excuses and suggestions of Ban Yek are by no means convincing. It

appears in evidence that the river bottom here is composed of mud and silt,
and as the tide at the time of this incident was nearly at its flood, there was
ample depth of water to have accommodated the Ban Yek if she had kept to
that part of the stream which it was proper for her to occupy. Court further
observe that the disparity in the size of the vessels was not such as to
dominate the situation and deprive the Perla of the right of way under the
conditions stated. No fault can be attributed to the officers navigating the
Perla either in maintaining the course which had been determined upon for
that vessel in conformity with the marine regulations applicable to the case
or in deflecting the vessel towards the middle of the stream after the danger
of collision became imminent. The trial judge suggests in his opinion that
when Capt. Garrido saw that the Ban Yek was holding her course to the left,
he (Garrido) should have changed the course of the Perla to port more
promptly. ∙ The validity of this criticism cannot be admitted. Among rules
applicable to navigation, none is better founded on reason and experience
than that which requires the navigating officers of any vessel to assume that
an approaching vessel will observe the regulations prescribed for navigation.
Any other rule would introduce guesswork into the control of ships and
produce uncertainty in the operation of the regulations. The sum of P17,827
represents the limit of the plaintiffs' right of recovery. In the original
complaint recovery is sought for an additional amount of P18K, most of
which consists of damages supposed to have been incurred from the inability
of the Perla to maintain her regular schedule while laid up in the dock
undergoing repairs. The damages thus claimed, in addition to being
somewhat of a speculative nature, are in court’s opinion not sufficiently
proved to warrant the court in allowing the same. 2. Silvino Lim, as the
owner, and Siy Cong Bieng & Co, as agent. Upon this point we note that
Silvino Lim is impleaded as owner; and Siy Cong Bieng & Co. is impleaded as
the shipping agent (casa naviera), or person in responsible control of the
Ban Yek at the time of the accident. In Art. 826 of the Code of Commerce, it
is declared that the owner of any vessel shall be liable for the indemnity due
to any other vessel injured by the fault, negligence, or lack of skill of the
captain of the first. ∙ The author of the article which appears under the word
naviero in the Enciclopedia Juridica Española tells us that in Spanish it may
mean either owner, outfitter, charterer, or agent, though he says that the
fundamental and correct meaning of the word is that of "owner." That
naviero, as used in the Spanish text of article 826, means owner is further to
be inferred from article 837, which limits the civil liability expressed in article
826 to the value of the vessel with all her appurtenances and all the freight
earned during the voyage. There would have been no propriety in limiting
liability to the value of the vessel unless the owner were understood to be
the person liable. ∙ It is therefore clear that by special provision of the Code
of Commerce the owner is made responsible for the damage caused by an
accident of the kind under consideration in this case; and in more than one
case this court has held the owner liable, when sued alone. But while it is
thus demonstrated that Silvino Lim is liable for these damages in the
character of owner, it does not necessarily follows that Siy Cong Bieng &
Co., as character or agent (casa naviera), is exempt from liability; and we
are of the opinion that both the owner and agent can be held responsible
where both are impleaded together. The liability of the naviero, in the sense
of charterer or agent, if not expressed in article 826 of the Code of
Commerce, is clearly deducible from the general doctrine of jurisprudence
stated in article 1902 of the Civil Code, and it is also recognized, but more
especially as regards contractual obligations, in article 586 of the Code of
Commerce. Moreover, we are of the opinion that both the owner and agent
(naviero) should be declared to be jointly and severally liable, since the
obligation which is the subject of this action had its origin in a tortious act
and did not arise from contract . Article 1137 of the Civil Code, declaring
that joint obligations shall be apportionable unless otherwise provided, has
no application to obligation arising from tort.