A compilation of Case Case Digests for
MARITIME LAW
Submitted to:
Transportation Law Mondays 5:45 p.m. – 6:45 p.m. Fridays 7:45 p.m. – 8:45 p.m.
Submitted by:
October 6, 2017 II. CONCEPT OF MARITIME LAW 1)
STANDARD OIL COMPANY v. MANUEL LOPEZ CASTELO G.R. No. L-13695 October 18, 1921 47 Phil 256
Facts:
Manuel Castelo, owner of the Batangueno vessel, entered into a Contract of Character with Jose Chumbuque for conveying of Cargo within the Ports of the Philippine Islands. In the said Contract, it was stated that the Officers and crew of the Batangueno should be supplied by the Owner, and the Charterer should have no other Control over the same, except to specify the voyages they should make and report to the owner unnecessary performances of the personnel of the vessel. The vessel then was used by the Charterer to deliver a quantity of petroleum owned by the Standard Oil Company to the Port of Sorsogon, while the vessel was on her way to the port of Sorsogon, a violent typhoon struck them causing the Captain to jettison the petroleum which were were placed upon the deck of of the vessel. After the storm, they recovered only 13 cases out of 200 cases of petroleum that caused the Standard Company (the Plaintiff in this case) to file a case against the Owner of the said vessel in the Court of First Instance of Manila. However, the judgment was rendered in favor favor of the Plaintiff. Issue:
Whether or not, the Shipowner is liable for the loss of the cargoes? Ruling:
Under 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. safety. In the case before us, the Captain of the vessel did not take those steps; and the failure f ailure of the Captain to take those steps gave rise to a liability for which the owner of the ship must answer. In view thereof, the Owner of the Ship/vessel is a person to whom the Plaintiff may immediately look for reimbursement to the value of the Cargo pursuance to the provisions of the Code of Commerce applicable to this case. It is also universally recognized, that the Captain is primarily the Representative of the owner, thus the Owner of the vessel is civilly liable for the act of the captain. The Plaintiff therefore is entitled to recover the amount lost. 2)
Facts:
YU CON v. IPIL (Master), LAURON (Owner), and SOLAMO (Supercargo) G.R. No. L-10195 December 29, 1916 41 Phil 770
On October 17, 1911, the Plaintiff Yu Con chartered the banca from the defendant Lauron for the delivery of money and transportation of various me rchandise belonging to the Plaintiff from the port of Cebu to the town of Catmon of the Province of Cebu, at the price of P45 for the round trip. However, on October 18, 1911, the money disappeared from the said banca, and was not afterward found. The plaintiff alleged that the disappearance of his money was due to the abandonment and negligence on the part of the defendants. As such, an action to recover the said sum was filed.
Issues:
Are the the defendants liable for the loss of the plaintiff? Is Lauron, liable liable for the the negligence of his crew and captain?
Ruling:
Yes, the evidence showed that Mr. Yu Con had several times chartered from the defendant Lauron, a banca belonging to the latter, of whom Ipil was a master and Salamo supercargo, for the transportation of certain merchandise and money to Catmon and from the port of Cebu. 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. Also, Article 618 of the same Code provides, the captain shall be civilly liable to the agent and the latter to the third persons who may have made contracts with the former: For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part, xxxx. For all the thefts committed by the crew, reserving his right of action against the guilty parties. 3)
Facts:
YANGCO v. LASERNA G.R. No. L-47447 to 47449
October 29, 1941
73 Phil 330
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 2 hours 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 f or 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.
4)
Facts:
CHUA YEK HONG v. IAC G.R. No. 74811 September 30, 1988
166 SCRA 183
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 the defendants, 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. The Supreme Court affirmed the judgment sought to be reviewed; without costs. 5)
Facts:
CHUA YEK HONG v. IAC G.R. No. L-74811 December 14, 1988
Petitioner filed a Motion for Reconsideration of the Supreme Court’s Decision dated 30 September 1988 affirming the judgment of the Court of Appeals dismissing the complaint against private respondents and absolving them from any and all liability arising from the loss of 1000 sacks of copra shipped by petitioner aboard private respondents' vessel. Private respondents filed an opposition thereto. Petitioner argues that the Supreme Court failed to consider the Trial Court's finding that the loss of the vessel with its cargo was due to the fault of the ship owner or to the concurring negligence of the ship owner and the captain, invoking Articles 1733 and 1735 of the Civil Code, and that the ruling laid down in Eastern Shipping Lines vs. IAC, et al . (150 SCRA 464 [1987]) should be made to apply in the instant case.
Issue: Whether or not petitioner’s Motion for Reconsideration is meritorious.
Ruling:
No. The Appellate Court Decision, however, mentions only the ship captain as having been negligent in the performance of his duties. For the exception to the limited liability rule (Article 587, Code of Commerce) to apply, the loss must be due to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain. As we held, there is nothing in the records showing such negligence. The invocation by petitioners of Articles 1733 & 1735 of the Civil Code is misplaced. As was stated in the Decision sought to be reconsidered, while the primary law governing the instant case is the Civil Code, in all matters not regulated by said Code, the Code of Commerce and other special laws shall govern. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, particularly Article 587, that governs. Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs. IAC, et al . should be made to apply in the instant case. That case, however, involved foreign maritime trade while the present case involves local inter-island shipping.
6)
Facts:
HEIRS OF AMPARO DE LOS SANTOS v. CA G.R. No. L-51165 June 21, 1990 186 SCRA 649
The ship M/V Mindoro owned by Maritima Company aboard by Amparo de los Santos, and Children of Mauricio de los Santos bound for Aklan met the Typhoon Welming and due to the strong waves it sank causing the drowning of many passengers including the wife and children of Mauricio de Los SANTOS (herein petitioner). The petitioners filed a case against Maritima but the lower court ruled against them on the grounds that the death of some passengers was due to force majeure because of the strong typhoon welming. And the Court of Appeal ruled that Maritima cannot be held liable in damages based on the principle of limited liability of the shipowner or ship agent under Article 587 of the Code of Commerce. Hence, this petition in the Supreme Court.
Issue:
Whether or not, the limited liability rule shall apply in this case.
Ruling: It was held by the Supreme Court that Martima’s lack of extraordinary diligence
coupled with the negligence of the captain were the proximate cause of the sinking of M/V Mindoro pursuant to Articles 1733 of the New Civil Code which states that “Common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers”
And Article 1755 of the same code, also provides that Common carriers are bound to carry the passengers safety as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all circumstances. Thus, the doctrine of limited liability rule shall not apply in this case.
7)
Facts:
ABOITIZ SHIPPING v. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION (GAFLAC) G.R. No. 100446 January 21, 1993 217 SCRA 359
Aboitiz Shipping is the owner of M/V P. ABOITIZ, a vessel that sank on a voyage from Hong Kong to the Philippines. This sinking of the vessel gave rise to the filing of several suits for recovery of the lost cargo either by the shippers, their successors-in-interest, or the cargo insurers like General Accident (GAFLAC). Board of Marine Inquiry (BMI), on its initial investigation found that such sinking was due to force majeure and that subject vessel, at the time of the sinking was seaworthy. The trial court rules against the carrier on the ground that the loss did not occur as a result of force majeure. This was affirmed by the CA and ordered the immediate execution of the full judgment award. However, other cases have resulted in the finding that vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure. Due to these different rulings, Aboitiz seeks a pronouncement as to the appl icability of the doctrine of limited liability on the totality of the claims vis a vis the losses brought about by the sinking, as based on the real and hypothecary nature of maritime law. Aboitiz argued that the Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares. Issues:
1. Whether the limited liability rule arising out of the real and hypothecary nature of maritime law should apply in this and related cases. 2. Whether there is a finding of such negligence on the part of the owner in this case. Ruling:
1. The SC ruled in the affirmative. The real and hypothecary nature of maritime law simply means that 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 the guaranty for their settlement. 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. 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. 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. 2. SC ruled in the negative. Decisions in other cases affirmed the factual findings of the trial court, adding that the cause of the sinking of the vessel was because of its unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. Indeed, there appears to have been no evidence presented sufficient to form a conclusion that Aboitiz, the ship owner, itself was negligent, and no
tribunal, including this Court will add or subtract to such evidence to justif y a conclusion to the contrary. The findings of the trial court and the CA, whose finding of “unseaworthiness” clearly did not pertain to the structural condition of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of the sinking, which condition was a result of the acts of the captain and the crew .
The 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. In the absence of such reasons, this Court chooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to do so, such incursion is definitely punitive in nature and must never be taken lightly. More to the point, the 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 as against it. While each individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who come later. In such an instance, such creditors too would not also be able to gain access to the assets of the individual shareholders, but must limit their recovery to what is left in the name of the corporation. In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of the corporation left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the particular voyage. In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the others by the simple expedience of having filed or completed its action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims.
8)
Facts:
ABOITIZ SHIPPING v. NEW INDIA ASSURANCE COMPANY G.R. No. 156978 May 2, 2006
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Francisco- Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company. While in Honkong, the Cargo was transferred to M/V P. Aboitiz for transhipment to Manila. Before departing, the vessel was advised that it was safe to travel to its destination. But, while at the sea, the vessel received a report of a typhoon moving within its general path. Thus to avoid the typhoon, the vessel changed its course. However, the vessel was still encountered the typhoon causing the vessel to sink, but the captain and his crew were saved.
Issue:
Whether or not, the limited liability rule can be invoked
Ruling:
It was held by the Supreme Court that the limited liability rule cannot be invoked because the owner of the ship failed to overcome the presumption of negligence. The petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on board in order to invoke the limited liability doctrine. To limit its liability, petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its negligence. Considering the evidence presented in this case, the Court finds that petitioner failed to discharge this burden. In this case, both the Lower court and CA found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the weather was moderate when the vessel sank. The doctrine of real and hypothecary nature of maritime law is not applicable in the present case because petitioner was found to have been negligent. Hence, petitioner should be held liable for the total value of the lost cargo.
9)
PHIL –NIPPON KYOEI, CORP. v. GUDELOSAO et. al. G.R. No. 181375 July 13, 2016
Facts:
Nippon, a domestic shipping corporation, purchased a “RoRo” passengers/cargo vessel “MV Mahlia in Japan. For the vessel’s one month conduction voyage from
Japan to the Philippines, the Petitioner through the local manning agency hired Edwin Gudelosao and other crewmembers of the vessel. Petitioner secured a Marine Insurance Policy over the vessel against loss, damage, and third party liability expense arising from the occurrence of the perils of the sea for the voyage of the vessel from Japan to Batangas, Philippines. This marine insurance policy included Personal Accident Policies for the crewmembers in case of accidental death or injury. While still within Japanese waters, the vessel sank due to extreme bad weather condition. Only the Chief Engineer survived the incident while the rest of the crewmembers, including Gudelosao perished. Thus, actions were filed for death benefits and other damages against Nippon before the Arbitration Branch of the National Labor Relations Commission (NLRC)
Issue:
Whether or not, the principle of Limited Liability applies in favor of Nippon. Ruling:
The SC held that the provisions of the Code of Commerce invoked by the appellant have no room in the application of the Workmen’s Compensation Act.
Such
compensation has nothing to do with the provisions of the Code of Commerce regarding maritime commerce. The liability of the ship-owner or agent under the POEA-SEC has likewise nothing to do with the provisions of the Code of Commerce regarding maritime commerce. The death benefits granted the POEA-SEC is not due to the death of a passenger by or through the misconduct of the captain or master of the ship; nor is it the liability for the loss of the ship as a result of collision; nor the liability for wages of the crew.
9(i) Facts:
DELA TORRE v. CA G.R. No. 160088 July 13, 2011
Respondent Crisostomo Concepcion owned LCT Josephine, a vessel registered with the Philippine Coast Guard, entered into an Agreement with Roland de la Torre for the dry-docking and repairs of the said vessel as well as for its charter afterwards, subject to the terms and conditions stipulated in the Contract. Subsequently, Mr. Roland de la Torre sub-chartered LCT Josephine to Trigon Shipping Lines, owned by his father. His father, sub-chartered LCT Josephine to Ramon Larrazabal for the transport of cargo consisting of sand and gravel to Leyte. The sand and gravel was unloaded using a payloader owned by Larrazabal, while the payloader was on the deck of the vessel scooping a load of the cargo, the vessel’s
ramp started to move downward, the vessel tilted and sea water rushed in. Thereafter, the vessel sank. Refloating of the vessel was conducted but the same was not materialized. For this reason, Concepcion filed a complaint for Sum of Money and Damages against PTSC and Roland before the RTC. The lower court rendered decision in favor of Concepcion. Agustin, PTSC, and Roland went to CA. The CA, however, affirmed the RTC’s decision. Hence, this petition in the SC.
Issue:
Whether or not limited liability rule can be invoked as a defense by petitioners?
Ruling:
The Supreme Court held that the petitioners cannot invoke limited liability Rule as their defense against the shipowner because the said rule is designed to encourage people and entities to venture into maritime commerce. In view thereof, Concepcion, as the Real owner is the one who is supposed to be supported and encouraged to pursue maritime commerce. Thus, it would be improper to apply LLR against the owner who, in the first place, should be the one benefiting from the said rule. The petitioners (charterers) cannot represent the ownership of the vessel, nor could they, in their own name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce.
III. VESSELS 1(i)
LOPEZ v. DURUELO G.R. No. 29166 October 22, 1928
52 Phil 229
Facts:
On February 10, 1927, plaintiff Augusto Lopez was desirous of embarking upon the interisland steamer San Jacinto in order to go to Cebu, the plaintiff embarked at the landing in the motorboat Jison which was engaged in conveying passengers and luggage back and forth from the landing to the boats at anchor. As the motorboat approached San Jacinto in a perfectly quiet sea, it came too near to the stern of the ship, and as the propeller of the ship had not yet ceased to turn, the blades of the propeller strucked the motorboat and sank it at once. As it sank, the plaintiff was thrown into the water against the propeller, and the revolving blades inflicted various injuries upon him. The plaintiff was hospitalized. He filed a complaint seeking to recover damages from the defendant. The defendant however alleged that the complaint does not have a right of action, a demurrer was submitted directed to the fact that the complaint does not allege that the protest had been presented by the plaintiff, within twenty-four hours after the occurrence to the competent authority at the port where the accident occurred as provided for Article 835 of the Code of Commerce. Issue:
Whether the motorboat Jison is a vessel provided for by Article 835 of the Code of Commerce? Ruling:
The word vessel as used in the third section of tile IV, Book III of the Code of Commerce, dealing with collisions, does not include all ships, craft or floating structures of any kind without limitation. The said section does not apply to minor craft engaged in a river and bay traffic. Therefore, a passenger on boat like the Jison, is not required to make protest as a condition precedent to his right of action for the injury suffered by him in the collision described in the complaint. Article 835 of the Code of Commerce does not apply.
1(ii)
RUBISO v. RIVERA G.R. No. L-11407 October 30, 1917
37 PHIL 72
Facts:
The counsel of plaintiff brought a suit alleging that his clients were the owners of the pilot boat named Valentine, which has been in bad condition and on the date of the complaint, was stranded in the place called Tingly, of the municipality of Battings. The defendant Rivera took charge or took possession of the said boat without the knowledge or consent of the plaintiff and refused to deliver it to them, under the claim that he was the owner thereof. The refusal on the part of the defendant has caused the plaintiff damages because they were unable to derive profit from the voyages for which the said pilot boat was customarily used. The defendant, on the other hand, alleged that they purchased the subject pilot boat. The plaintiff alleged that the sale on behalf of the defendant Rivera was prior to that made at public auction to Rubio, but the registration of this latter sale was prior to the sale made to the defendant. Issue:
Whether or not, the plaintiff still has the better right over the subject vessel? Ruling:
The Code of Commerce, Art 573 provides: “Merchant vessels constitute property that may be acquired and 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.”
The requisite of registration in 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 filed by third person. It is undeniable that Rivera’s right cannot prevail over those acquired by Rubiso in the owner ship of the pilot boat, though the latter’s acquisition of
the vessel at public auction was subsequent to its purchase by the defendant, Rivera.
IV. SHIP MORTGAGE AND MARITIME LIENS
(i)
PHILIPPINE NATIONAL BANK v. CA G.R. No. 128661 August 8, 2000
Facts:
To finance the acquisition of 7 shipping vessels, the Philippine International Shipping Corporation (PISC) applied for and was granted by National Investment Development Corporation (NIDC) guaranty accommodations. As security for these guaranty accommodations, PISC executed chattel mortgages on the vessels to be acquired by it. Meanwhile, PISC entered into a contract with Hong Kong United Dockyards, Ltd. for the repair and conversion of one of the vessels, M/V Asean Liberty. The Central Bank of the Philippines authorized PISC to open with China Banking Corporation (CBC) a standby letter of credit for US$545,000 in favor of Citibank, N.A. 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 US$545,000 with CBC in favor of Citibank. CBC then issued its Irrevocable Standby Letter of Credit for US$545,000 in favor of Citibank for the account of PISC. PISC executed a promissory note for US$545,000 in favor of Citibank pursuant to the Loan Agreement between PISC and Citibank. Upon failure of PISC to fulfill its obligations, Citibank sent CBC a letter drawing on the Letter of Credit. CBC then instructed its correspondent Irving Trust Co. to pay to Citibank the amount of US$242,225. Subsequently, for failure of PISC to settle its obligations under the guaranty accommodations, the Philippine National Bank (PNB) conducted an auction sale of the mortgaged vessels. NIDC emerged as the highest bidder in these auctions. PISC, claiming that the foreclosure sale of its mortgaged vessels was illegal and irregular, instituted a civil case for the annulment of the foreclosure and auction sale. CBC filed a complaint in intervention for recovery upon a maritime lien against the proceeds of the sale of the foreclosed vessels. Issues: 1. Whether or not CBC’s claim as evidenced by its Irrevocable Letter of Credit is in the
nature of a maritime lien under the provisions of P.D. No. 1521; and 2. Whether or not said maritime lien is preferred over the mortgage lien of PNB/NIDC on the foreclosed vessel M/V Asean Liberty. Ruling:
1. Under the provisions of P.D. No. 1521, any person furnishing repairs, supplies, or other necessities to a vessel on credit will have a maritime lien. Such maritime lien, if it arose prior to the recording of a preferred mortgage lien, shall have priority over the said mortgage lien. In this case, it was Hong Kong 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. CBC, however, stands as guarantor of the loan extended by Citibank to PISC. It was Citibank which advanced the money to PISC. It was only upon the failure of PISC to fulfill its obligations under its promissory note to Citibank that CBC was called upon by Citibank to exercise its duties under the Standby Letter of Credit.
2. The applicable law, which is the Shipping Mortgage Decree (1978), was patterned closely after U.S. Ship Mortgage Act of 1920. Being of foreign origin, its provisions may thus be construed with the aid of foreign jurisprudence. Under American jurisprudence, “furnishing money to a master in good faith to obtain repairs or supplies or
to remove liens, in order to forward the voyage of the vessel, raises a lien just as though the things for which money was obtained to pay for had been furnished by the lender”.
This is in accord with Article1302 (NCC) which provides that there is legal subrogation “when a third person, not interested in the fulfillment of the obligation, pays with the express or tacit approval of the debtor”. In this case, the amount for the
repair of vessel M/V Asean Liberty was advanced by Citibank and was used for the purpose of paying off the original maritime lienor, Hong Kong United Dockyards, Ltd. As a person not interested in the fulfillment of the obligation between PISC and Hong Kong United Dockyards, Ltd., Citibank was subrogated to the rights of Hong Kong United Dockyards, Ltd. as maritime lienor over the vessel. CBC, as guarantor, was itself subrogated to all the rights of Citibank as against PISC, the latter’s debtor. Article 2067 of the Civil Code provides that “the guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.” W hen
CBC honored its contract of guaranty with Citibank on March 30, 1983, it also acquired by subrogation the maritime lien over the vessel which attached to it on March 12, 1979 in favor of Hong Kong United Drydocks, Ltd. The maritime lien of CBC thus arose prior to the recording of PNB/NIDC’s mortgage on September 25, 1979. As such, the
said maritime lien has priority over the said mortgage lien.
(ii)
CRESCENT PETROLEUM, LTD. v.
M/V “LOK MAHESHWARI”
G.R. No. 155014
November 11, 2005
Facts:
M/V Lok Maheshwari operated as an oceangoing vessel, owned by respondent Shipping Corporation of India. The said vessel was sub-chartered to Porserv. To continue its operation, Porserv requested Crescent for the supply and delivery of marine fuels to the vessel which was granted by the latter. As security for payment of the fuels and other related services, Crescent received two (2) checks from Porserv. Crescent then contracted Marine Petrobulk Limited for the said purpose. The Ship owner, charterer, and sub-charterers were foreign nationals. Marine fuels were delivered to the vessel and the Chief Engineer Officer of the vessel duly acknowledged and received the delivery receipt Marine P etrobulk issued invoice to Crescent contained the worth of the fuels. Crescent issued a check for the same amount in favor of Marine Petrobulk. Having paid Marine Petrobulk, Crescent issued a revised invoice to Porserv with instruction to remit the amount on or before December 1, 1995. However, the period lapsed and several demands were made but no payment was received. Also, the checks received from Porserv as a security were dishonored for insufficiency of funds. As a result, Crescent instituted an action for a sum of money with prayer for temporary restraining order and writ of preliminary attachment against respondents Vessel and Shipping Corporation of India, Porserv and/or Transmar in the RTC of Cebu City.
Issue:
Is petitioner Crescent entitled to a maritime lien under Philippine laws?
Ruling:
Yes. Maritime lien shall apply to both domestic and foreign vessels, as well as domestic and foreign suppliers of necessaries pursuance to Section 21 of PD No. 1521, also known as the Ship Mortgage Decree of 1978. The same section of the same Decree contends that the use of the term any person implies that the law is not restricted to domestic suppliers but also includes all persons who supply provisions and necessaries to a vessel, whether foreign or domestic. It points out further that the law does not indicate that the supplies or necessaries must be furnished in the Philippines in order to give petitioner the right to seek enforcement of the lien with a Philippine court.
(iii)
POLIAND INDUSTRIAL LTD. v. NATIONAL DEVELOPMENT COMPANY
G.R. No. 143866
August 22, 2005
Facts:
Poliand is an assignee of the of the rights of Asian Hardwood over the outstanding obligation of National Development Corporation (NDC), the latter being the owner of Galleon which previously secured credit accommodations from Asian Hardwood for its expenses on provisions, oil, repair, among others. Galleon also obtained loans from Japanese lenders to finance acquisition of vessels which was guaranteed by DBP in consideration of a promise by Galleon to secure a first mortgage on the vessels. DBP later transferred ownership of the vessel to NDC. A collection suit was filed after repeated demands of Poliand for the satisfaction of the obligation from Galleon, NDC and DBP went unheeded. Issue:
Whether POLIAND has a maritime lien enforceable against NDC or DBP or both. Ruling: Yes, Poliand has a maritime lien which is more superior than DBP’s mortgage lien. “Before POLIAND’s claim may be classified as superior to the mortgage constituted
on the vessel, it must be shown to be one of the enumerated claims which Section 17, P.D. No. 1521 declares as having preferential status in the event of the sale of the vessel. One of such claims enumerated under Section 17, P.D. No. 1521 which is considered to be superior to the preferred mortgage lien is a maritime lien arising prior in time to the recording of the preferred mortgage. Such maritime lien is described under Section 21, P.D. No. 1521, which reads: SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. — Any person furnishing repairs, supplies, towage, use of dry dock or mar ine railway, or other necessaries to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by 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 the aforequoted provision, the expense must be incurred upon the order of the owner of the vessel or its authorized person and prior to the recording of the ship mortgage. Under the law, it must be established that the credit was extended to the vessel itself. The trial court found that GALLEON’s advances obtained from Asian Hardwood were
used to cover for the payment of bunker oil/fuel, unused stores and oil, bonded stores,
provisions, and repair and docking of the GALLEON vessels. These expenses clearly fall under Section 21, P.D. No. 1521. The trial court also found that the advances from Asian Hardwood were spent for ship modification cost and the crew’s salary and wages. DBP contends that a ship
modification cost is omitted under Section 17, P.D. No. 1521, hence, it does not have a status superior to DBP’s preferred mortgage lien.
As stated in Section 21, P.D. No. 1521, a maritime lien may consist in “other necessaries spent for the vessel.” The ship modification cost may properly be
classified under this broad category because it was a necessary expenses for the vessel’s navigation. As long as an expense on the vessel is i ndispensable to the maintenance and navigation of the vessel, it may properly be treated as a maritime lien for necessaries under Section 21, P.D. No. 1521." However, Only NDC is liable on the maritime lien stated as follows: x x x [O]nly NDC is liable for the payment of the maritime lien. A maritime lien is akin to a mortgage lien in that in spite of the transfer of ownership, the lien is not extinguished. The maritime lien is inseparable from the vessel and until discharged, it follows the vessel. Hence, the enforcement of a maritime lien is in the nature and character of a proceeding quasi in rem. The expression “action in rem” is, in its narrow
application, used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based. Considering that DBP subsequently transferred ownership of the vessels to NDC, the Court holds the latter liable on t he maritime lien. Notwithstanding the subsequent transfer of the vessels to NDC, the maritime lien subsists.
(iv)
NEGROS NAVIGATION v. CA G.R. No. 163156 December 10, 2008
Facts:
NNC is a shipping company that is primarily engaged in the business of transporting through shipping vessels, passengers and cargoes at various ports of call in the country. Tsuneishi Heavy Industries (Cebu), Inc (THI), on the other hand, is engaged in the business of shipbuilding and repair. NNC engaged the services of THI for the repair of its vessels. On February 9, 2004, THI filed a case for sum of money and damages with prayer for issuance of writ of attachment against NNC before the Regional Trial Court of Cebu (Cebu RTC). The action is based on the unpaid services for the repair of NNC's vessels, otherwise known as repairman's lien. On March 5, 2004, the Cebu RTC issued an Order granting the issuance of a writ of preliminary attachment against the properties of NNC. It reasoned that based on the affidavit in support of the application for the writ, NNC committed fraud in contracting the debt or in incurring the obligation upon which the action was brought, justifying the issuance of the writ as mandated by Section 1(d) of Rule 57. It added that the repairman's lien of THI constituted a superior maritime lien that is enforceable by suit in rem, as decreed by Presidential Decree No. 1521 (PD 1521). On March 12, 2004, by virtue of the writ of preliminary attachment, Sheriff Rogelio T. Pinar levied on one of the vessels of NNC, the M/V St. Peter the Apostle. On March 29, 2004, NNC filed a Petition for Corporate Rehabilitation with Prayer for Suspension of Payments with the RTC of Manila (Manila RTC). The latter granted the NNC's petition and issued a Stay Order on April 1, 2004. Issue:
Whether or not the maritime liens of THI against the vessels of NNC were impaired by the issuance of the stay order. Ruling:
No. It is undisputed that THI holds a preferred maritime lien over NNC's assets by virtue of THI's unpaid services. The issuance of the stay order by the rehabilitation court does not impair or in any way diminish THI's preferred status as a creditor of NNC. The enforcement of its claim through court action was merely suspended to give way to the speedy and effective rehabilitation of the distressed shipping company. Upon termination of the rehabilitation proceedings or in the event of the bankruptcy and consequent dissolution of the company, THI can still enforce its preferred claim upon NNC.
V. PERSONS WHO TAKE PART IN MARITIME COMMERCE
(i)
INTER ORIENT MARITIME ENTERPRISES v. NLRC G.R. No. 115947 September 16, 1996 235 SCRA 268
Facts:
Captain Tayong was hired by Trenda World Shipping and Sea Horse Ship Management (Sea Horse). through Inter-Orient Maritime Enterprises for a period of 1 year. He took command of Inter-Orients vessel in Hong Kong. He was instructed to replenish bunker and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120, 000 metric tons of coal. Since a storm would hit Hong Kong, precautionary measures were taken to secure the vessel’s safety considering that the turbocharger
was leaking and the vessel was 14 years old. Captain Tayong followed-up the requisition by the former Captain for supplies of oxygen and acetylene, necessary for the welding-repair of the turbocharger and economizer. The vessel sailed to Singapore. On its way, the vessel stopped in the middle of the ocean for 6 hours and 45 minutes due to a leaking economizer. He was instructed to shut down the economizer and use the auxiliary boiler instead. When the vessel arrived in Singapore, the Chief Engineer reminded Captain Tayong that the oxygen and acetylene supplies had not been delivered. Upon inquiry, the Captain was informed that the supplies could only be delivered on Aug. 1 as the stores had closed. Captain Tayong called Sea Horse and informed them that the departure of the vessel for South Africa may be affected because of the delay in the delivery of the supplies. He was advised to contact Mr. Clark, the Technical Director. According to Mr. Clark, after being informed that the ship cannot travel without the supplies, Captain Tayong agreed with him when he said by shutting off the water to the turbochargers and using the auxiliary boilers, there should be no further problem. According to Captain Tayong, he was informed by Sea Horse to wait for the supplies. Captain Tayong immediately sailed for South Africa upon the delivery of the supplies. Upon reaching South Africa, Captain Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to the Philippines. He was not informed of the charges against him. He then instated a complaint for illegal dismissal.
Issue:
1. Whether or not Captain Tayong was a confidential and managerial employee. 2. Whether or not Captain Tayong was illegally dismissed? Ruling:
1. Yes. The captain of a vessel is a confidential and managerial employee. A captain commonly performs three distinct roles: (1) he is a general agent of the ship owner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. The most important is the role performed by the captain as the commander of the vessel. Such a role analogous to that of “Chief Executive Officer” of a present -day corporate enterprise.
The captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. 2. Yes. Confidential and managerial employees cannot be arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate investigation. They are also entitled to security of tenure, fair standards of employment and the protection of labor laws. A ship’s captain must be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible for such safety. It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge. It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straight jacket. The master is entitled to delay for such a period as may be reasonable under the circumstances. Captain Tayong had reasonable grounds to believe that the safety of the vessel and crew required him to wait for the delivery of the supplies needed. The vessel had stopped mid-ocean for 6 hours and 45 minutes on its way to Singapore because of its leaking economizer. Captain Tayong did not maliciously and arbitrarily delay the voyage to South Africa. The decision of Captain Tayong did not constitute a legal basis for his summary dismissal.
(ii)
MACONDRAY & CO. v. PROVIDENT INSURANCE CORP. G.R. No. 154305 December 9, 2004
Facts:
Canpotex Shipping Services Limited Inc (Shipper) at Vancouver Canada, shipped and loaded aboard M.V Trade Carrier cargoes to be delivered at Toledo Cebu City in favour of Atlas Fertilizers Corporation (Consignee). Shipment was insured with respondent against all risks by virtue of an Open Marine Policy issued with a Certificate of Insurance. When the shipment arrived, Consignee discovered that shipment had sustained losses/shortage. A formal claim was then filed against Trade and Transport and Macondray but the same refused and failed to settle the same. Summons was unserved to Trade and Transport on the grounds that the same is no longer connected with Macondray & Co. Inc. Macondray on the other hand, denied liability over the losses having no absolute relation with defendant Trade and Transport, the alleged operator of the vessel. They alleged that Macondray is the local representative of Trade and Transport, the charterer of M/V Trade Carrier, and cannot be held responsible for any losses for they don’t have any control over the crew and cap tain thereof and that upon arrival to Toledo Cebu, the latter discharged the full amount of the shipment as shown in the draft survey.
Issue:
Whether or not Macondray and Co., as an agent, is responsible for any loss sustained by any party from the vessel owned by defendant Trade and Transport. Ruling:
Yes. Article 586 of the Code of Commerce states that ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Evidences show that Macondray was the entity that represented the vessel and was the ship agent within th purview of Article 586. As ship agent, it may be held liable: Article 586: The ship owner and ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided that the creditor proves that the amount claimed was invested for the benefit of the same. Therefore, the decision of the CA is affirmed and petition is denied. Petitioner Macondray, as agent of Trade and Transport, is jointly liable for the losses.
(iii)
ACE NAVIGATION v. FGU INSURANCE CORP., PIONEER INSURANCE, CORP., & SURETY CORP. G.R. No. 171591 June 25, 2012
Facts:
A vessel M/V Pakarti Tiga was owned by PT Pakarti was chartered to Shinwa. Shinwa then entered into a Charter party contract with SKY International, Inc., an agent of Kee Yeh Maritime Co., the vessel then was further chartered to Regency Express Lines, Inc, and Regency directly transacted with Consignee Heindrich for the delivery of 165, 200 bags of Portland cement from the port of Shanghai China to the port of Manila. The said Cargo was insured with respondents FGU Insurance Corporation, Pioneer Insurance Corporation and Surety Corporation. When the vessel arrived at the Port of Manila, the shipment was discharged. However, Upon inspection of Heindrich and Ace Nagivation –agent of Cardia. It was found out that the 43,905 bags of cement were in bad order and condition. The Consignee Heindrich claimed for the reimbursement of the damaged incurred from the Insurance Company, the insurance company paid for the damaged and became subrogated with all the rights and causes of actions accruing to Heindrich. The FGU Insurance Corporation, Pioneer Insurance and Surety Corporation filed a case against ACE NAVIGATION. Issue:
Whether or not ACE NAVIGATION is liable to the respondents.
Ruling:
No. The SC ruled that Ace Navigation cannot be made responsible or held accountable for the damage supposedly caused by its principal because Article 1897 of the Code of Commerce provides that an agent is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.
VII. ACCIDENTS: Averages (i)
PHILIPPINE HOME ASSURANCE CORPORATION v. CA G.R. No. 106999 June 20, 1996
Facts:
Eastern Shipping Lines (ESLI) loaded on board SS Eastern Explorer in Kobe Japan, shipments for carriage to Manila and Cebu. The cargoes are insured by Philippine Home Assurance Corporation (PHAC). While the ship was off Okinawa Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room. The crew tried to extinguish the fire but it exploded, causing several deaths and injuries among the passengers. The captain and crew had to abandon the ship. It was later towed by a tugboat to the port of Naha, Japan. The cargoes that were saved were sent to their original port of destination and ESLI charged the consignees several amounts corresponding to additional freight and salvage charges. PHAC paid ESLI under protest. Subrogated to the rights of the consignees, PHAC filed a complaint before the RTC of Manila against ESLI, on the grounds that the damages resulted from the fault, negligence, illegal and/or breach of contract of ESLI. ESLI contended that the fire is an unforeseen event and pursuant to the bill of lading, charges are proper and demandable under Act No. 2616 (Salvage Law). The trial court decided the case in favor of ESLI, stating that, based on evidence, ESLI complied with the required safety measures and standards and that the ship has been shown to be seaworthy. Further, the crew did what was necessary to prevent the explosion. Applying Section 1 of Act No. 2616, salvage charges may be assessed on the cargoes saved from the vessel. The court also agreed that the loss thereof is subject to general average loss, therefore, a charge may be assessed against the consignees based on the value of the vessel and of the cargoes (in proportion to their respective values). The Court of Appeals affirmed the decision of the Regional Trial Court. Issue:
1. Whether or not the fire is a result of, or is equivalent to a natural calamity; and 2. Whether or not the defendant exercised extraordinary diligence. Ruling: 1 & 2. While it is a well settled rule that only questions of law may be admitted in a
petition for review, an exception may apply as necessary when certain conditions are present. If there is a showing that the findings complained of are totally devoid of support in the records, or that they are glaringly erroneous as to constitute grave abuse of discretion, the same may be properly reviewed and evaluated. Jurisprudence show that fire may not be considered a natural calamity since it almost always arises from some acts of man or by human means. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency. It is evident that the fire was caused by the acetylene cylinder and it was placed in an area which increases the risk of danger towards other passengers. Further, it was in store in close proximity with the engine room. In contrary to the findings of the lower court, negligence is present in this case.
(ii)
NATIONAL DEVELOPMENT v. CA G.R. No. L-49407 August 19, 1988
Facts:
In accordance with a memorandum agreement entered into between National Development Corporation (NDC) and Maritime Corporation of the Philippines Inc. (MCP) on 13 September 1962, NDC as the first preferred mortgagee of three ocean going vessels including one with the name ‘Doña Nati’ appointed MCP as its agent to
manage and operate said vessel for and in its behalf and account. Thus, on 28 February 1964 the E. Philipp Corporation of New York loaded on board the vessel ‘Doña Nati’ at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation and the People’s Bank and Trust
Company acting for and in behalf of the Pan Asiatic Commercial Co., Inc., who represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Doña Nati figured in a collision at 6:04 a.m. on 15 April 1964 at Ise Bay, Japan with a Japanese vessel ‘SS Yasushima Maru’ as a result of which 550 bales of aforesaid cargo of American raw cotton were lost or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Y 6,045,500 and 15 bales were not landed and deemed lost. The damaged and lost cargoes was worth P 344,977.86 which amount, the Development Insurance and Surety Corporation (DISC) as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P 19,938.00 which DISC as insurer paid to Guilcon as holder of the duly endorsed bill of lading. Thus, DISC had paid as insurer the total amount of P 364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes. On 22 April 1965, DISC filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney’s fees of P10,000.00 against
NDC and MCP. On 12 November 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering MCP and NDC to pay jointly and solidarily to DISC the sum of P 364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on 22 April 1965, until fully paid and attorney’s fees of P 10,000.00. Likewise, in said decision, the trial court granted MCP’s
cross-claim against NDC. MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on 17 February 1970 after its motion to set aside the decision was denied by the trial court in its order dated 13 February 1970. On 17 November 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence, the appeals by certiorari. On 25 July 1979, the Supreme Court ordered the consolidation of the above cases.
Issue:
Whether or not the law on averages (Articles 806-818 Code of Commerce) will apply. Ruling:
No. The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90) “cannot limit its liability for injury to a less of goods where such injury or loss was caused by its own negligence.” Negligence of the captains of the co lliding vessel being
the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages. VII. ACCIDENTS: Collision (vi)
NATIONAL DEVELOPMENT v. CA G.R. No. L-49407 August 19, 1988
Facts: (See above) Issue:
Which laws govern the loss and destruction of goods due to collision of vessels outside Philippine waters? Ruling:
In Eastern Shipping Lines Inc. v. IAC where it was held under similar circumstances that “the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration”
(Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code. Herein, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply. It is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. The collision, however, falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in the lower court’s application to the present case of Articles 826 to 839, Code of Commerce, which deal exclusively with collision of vessels.
(vii)
MECENAS v. CA G.R. No. 88052
December 14, 1989
Facts:
On April 22, 1980, two vessels, “Tacloban City” and “Don Juan” collided at the Talbas Strait within the vicinity of Mindoro. M/V Don Juan sank and hundreds of passengers died. Among them were petitioners’ parents, whose bodies were never recovered.
Petitioners filed a complaint seeking damages against Negros Navigation. The trial court awarded P 400,000, but the Court of Appeals reduced the award to P 100,000. Issue:
Whether the reduction of the award was properly ruled upon by the Court of Appeals Ruling:
In an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or wilful act of the carrier's employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, which liability may include liability for moral damages. It follows that petitioners would be entitled to moral damages so long as the collision with the "Tacloban City" and the sinking of the "Don Juan" were caused or attended by negligence on the part of private respondents. Whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private respondents acted recklessly, that is, with gross negligence. We believe that the behaviour of the captain of the "Don Juan" in this instance — playing mahjong "before and up to the time of collision" — constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence. We find no necessity for passing upon the degree of negligence or culpability properly att ributable to PNOC and PNOC Shipping or the master of the "Tacloban City," since they were never impleaded here. Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. Both the demands of substantial justice and the imperious requirements of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages was erroneously deleted and must be restored and augmented and brought more nearly to the level required by public policy and substantial justice.
VIII. SALVAGE LAW (Act No. 2616) (i)
PHILIPPINE HOME ASSURANCE CORPORATION v. CA G.R. No. 106999 June 20, 1996
Facts:
Eastern Shipping Lines (ESLI) loaded on board SS Eastern Explorer in Kobe Japan, shipments for carriage to Manila and Cebu. The cargoes are insured by Philippine Home Assurance Corporation (PHAC). While the ship was off Okinawa Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room. The crew tried to extinguish the fire but it exploded, causing several deaths and injuries among the passengers. The captain and crew had to abandon the ship. It was later towed by a tugboat to the port of Naha, Japan. The cargoes that were saved were sent to their original port of destination and ESLI charged the consignees several amounts corresponding to additional freight and salvage charges. PHAC paid ESLI under protest. Subrogated to the rights of the consignees, PHAC filed a complaint before the RTC of Manila against ESLI, on the grounds that the damages resulted from the fault, negligence, illegal and/or breach of contract of ESLI. ESLI contended that the fire is an unforeseen event and pursuant to the bill of lading, charges are proper and demandable under Act No. 2616 (Salvage Law). The trial court decided the case in favor of ESLI, stating that, based on evidence, ESLI complied with the required safety measures and standards and that the ship has been shown to be seaworthy. Further, the crew did what was necessary to prevent the explosion. Applying Section 1 of Act No. 2616, salvage charges may be assessed on the cargoes saved from the vessel. The court also agreed that the loss thereof is subject to general average loss, therefore, a charge may be assessed against the consignees based on the value of the vessel and of the cargoes (in proportion to their respective values). The Court of Appeals affirmed the decision of the Regional Trial Court. Issue:
Whether or not petitioner is liable for additional freight and salvage charges. Ruling:
Yes. The expenses involved in saving the cargo are considered general average s correct. As a rule, general or gross average include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from real and known risk. However, the formalities prescribed in Articles 813 and 814 of the Code of Commerce were not complied with. Respondent ESL’s claim for contribution from the consignees turns to naught.
