Transporation Law Cases on Bill of Lading and Maritime Law

Bill of Lading

a) HE Heacock Company vs. Macondray, G.R. No. L-16598 Oct. 3, 1921;

Facts:

Plaintiff caused to be delivered on board of steamshipBolton Castle, four cases of merchandise

one of which contained twelve (12) 8-day Edmond clocks properly boxed and marked for
transportation to Manila, and paid freight on said clocks from New York to Manila in advance.
The said steampship arrived in the port of Manila on or about the 10th day of September, 1919,
consigned to defendant. Neither the master of said vessel nor the defendant herein, as its
agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although demand
was made upon them for their delivery.

The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and
the market value of the same in the City of Manila at the time when they should have been
delivered to the plaintiff was P420. The bill of lading issued and delivered to the plaintiff by the
master of the said steamship Bolton Castle contained, among others, the following clauses:

1. It is mutually agreed that the value of the goods receipted for above does not exceed
$500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated
herein and ad valorem freight paid thereon.

9. Also, that in the event of claims for short delivery of, or damage to, cargo being
made, the carrier shall not be liable for more than the net invoice price plus freight and insurance
less all charges saved, and any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis.

The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the
freight ton value thereof was $1,480, U. S. currency.No greater value than $500, U. S. currency,
per freight ton was declared by the plaintiff on the aforesaid clocks, and no ad valorem freight
was paid thereon. The lower court, in accordance with clause 9 of the bill of lading above
quoted, rendered judgment in favor of the plaintiff against the defendant for the sum of P226.02.

The plaintiff-appellant insists that it is entitled to recover from the defendant the market value
of the clocks in question, to wit: the sum of P420. The defendant-appellant, on the other hand,
contends that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover
only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the
plaintiff is based upon the argument that the two clause in the bill of lading above quoted,
limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The
defendant, on the other hand, contends that both of said clauses are valid, and the clause 1
should have been applied by the lower court instead of clause.
Issue:
Whether or not a common carrier, by stipulations inserted in the bill of lading, limit its liability for
the loss of or damage to the cargo to an agreed valuation.

Ruling:

Yes. Three kinds of stipulations have often been made in a bill of lading. The first is one
exempting the carrier from any and all liability for loss or damage occasioned by its own
negligence. The second is one providing for an unqualified limitation of such liability to an
agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation
unless the shipper declares a higher value and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and enforceable.

A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that
the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting
the liability of the carrier to a certain amount unless the shipper declares a higher value and
pays a higher rate of freight, is valid and enforceable.

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading
here in question are not contrary to public order. Article 1255 of the Civil Code provides
that "the contracting parties may establish any agreements, terms and conditions they
may deem advisable, provided they are not contrary to law, morals or public order." Said
clauses of the bill of lading are, therefore, valid and binding upon the parties thereto.

Other issue related to the case (as to interpretation of BOL):

It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle
in case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains
an express undertaking to settle on the basis of the net invoice price plus freight and insurance
less all charges saved. "Any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is
an irreconcilable conflict between the two clauses with regard to the measure of defendant's
liability. It is difficult to reconcile them without doing violence to the language used and reading
exceptions and conditions into the undertaking contained in clause 9 that are not there. This
being the case, the bill of lading in question should be interpreted against the defendant
carrier, which drew said contract. "A written contract should, in case of doubt, be
interpreted against the party who has drawn the contract." It is a well-known principle of
construction that ambiguity or uncertainty in an agreement must be construed most strongly
against the party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained
in bills of lading. "In construing a bill of lading given by the carrier for the safe
transportation and delivery of goods shipped by a consignor, the contract will be
construed most strongly against the carrier, and favorably to the consignor, in case of
doubt in any matter of construction."
b) MOF vs. Shin, G.R. NO. 172822 : December18, 2009

Summary: Facts:

 Halla shipped to Manila secondhand cars and other articles on board the vessel Hanjin
Busan.
 The bill of lading was prepared by the carrier Hanjin where Shin Yang was named as the
consignee and indicated that payment was on a "Freight Collect" basis (meaning the
consignee/receiver of the goods would be the one to pay for the freight and other
charges).
 When the shipment arrived in Manila MOF, Hanjin’s exclusive general agent in the
Philippines, demanded the payment from Shin Yang.
 Shin Yang refused to pay the freight and other charges. Shin Yang is saying that it is not
the ultimate consignee but merely the consolidator/forwarder.
 Shin Yang contends that the fact that its name was mentioned as the consignee of the
cargoes did not make it automatically liable for the freightage because it never benefited
from the shipment.
 It never claimed or accepted the goods, it was not the shipper’s agent, it was not aware
of its designation as consignee and the original bill of lading was never endorsed to it.

Issues:

1. Whether a consignee, who is not a signatory to the bill of lading, is bound by the stipulations
thereof? - Yes

2. Whether Shin Yang, who was not an agent of the shipper and who did not make any demand
for the fulfillment of the stipulations of the bill of lading drawn in its favor, is liable to pay the
corresponding freight and handling charges? - No

Ruling:

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the goods
shipped; second, it is a contract by which three parties, namely, the shipper, the carrier and the
consignee who undertake specific responsibilities and assume stipulated obligations.

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill of
lading when a) there is a relation of agency between the shipper or consignor and the consignee
or b) when the consignee demands fulfillment of the stipulation of the bill of lading which was
drawn up in its favor.

In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of agency
between the consignee and the shipper/ consignor; b) the unequivocal acceptance of the bill of
lading delivered to the consignee, with full knowledge of its contents or c) availment of the
stipulation pour autrui, i.e., when the consignee, a third person, demands before the carrier the
fulfillment of the stipulation made by the consignor/shipper in the consignee’s favor, specifically
the delivery of the goods/cargoes shipped.

In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla
Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading covering the
shipment or that it demanded the release of the cargo. Basic is the rule in evidence that the
burden of proof lies upon him who asserts it, not upon him who denies, since, by the nature of
things, he who denies a fact cannot produce any proof of it. Thus, MOF has the burden to
controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee
and the one that caused the shipment of the goods to the Philippines.

In civil cases, the party having the burden of proof must establish his case by preponderance
of evidence, which means evidence which is of greater weight, or more convincing than that
which is offered in opposition to it. Here, MOF failed to meet the required quantum of proof.
Other than presenting the bill of lading, which, at most, proves that the carrier acknowledged
receipt of the subject cargo from the shipper and that the consignee named is to shoulder the
freightage, MOF has not adduced any other credible evidence to strengthen its cause of action.
It did not even present any witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that Shin Yang consented to shoulder
the shipment costs. There is also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act that would bind it as a named
consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its
cause against respondent

c) Malayan vs. Jardine, G.R. NO. 181300 : September 18, 2009

Please bear with me. I made this on the spot because “no digest found”. LMAO.
Facts:

On July 23, 1994, Petrosul International (Petrosul) shipped on board the vessel "MV Hoegh
Merchant" (MV Hoegh) from Vancouver, Canada yellow crude sulphur "said to
weigh 6,599.23 metric tons as per draft survey" for transportation to Manila, consigned to LMG
Chemicals Corporation (LMG).1

Upon arrival of the MV Hoegh in Manila on September 5, 1994, the stevedores of respondent
Asian Terminals, Inc. (ATI) undertook discharging operations of the shipment or cargo from the
vessel directly onto the steel barges of Creed Customs Brokerage, Inc. (CCBI), which barges
were later towed upriver and arrived at the consignee LMG’s storage area in Pasig, Manila.

The consignee’s hired workers thereupon received and unloaded the cargo with the use of an
overhead crane and clamshell grab.

During the discharge of the cargo "ex vessel" onto CCBI’s barges, SMS Average Surveyors
and Adjusters, Inc. (SMS), LMG’s appointed surveyors, reported the Outturn Quantity/Weight
of the cargo at 6,247.199 Metric Tons (MT),2 hence, given that as indicated in the Bill of Lading
the weight was 6,599.23 MT, there was a shortage of 352.031 MT.

Once on board the barges, the weight of the cargo was again taken and recorded at 6,122.023
MT,3 thus reflecting a shortage of 477.207 MT.

The weight of the cargo, taken a third time upon discharge at LMG’s storage area, was recorded
at 6,206.748 MT4 to thus reflect a shortage of 392.482 MT.

The cargo having been insured, LMG filed a claim for the value of shortage of cargo with its
insurer Malayan Insurance Co., Inc., (petitioner) which paid LMG the sum of ₱1,144,108.43 in
February 19955 and was accordingly subrogated to the rights of LMG.

For failing to heed demands to pay for the value of the cargo loss and on the basis of Marine
Risk Note RN-0001-175516 and Marine Insurance Policy No. 001-0343,7 petitioner as
subrogee8 filed on September 5, 1995 a Complaint9 against herein respondents ATI and
Jardine Davies Transport Services, Inc. (Jardine Davies), as alleged shipagent of MV Hoegh,
together with CCBI and the "Unknown Owner and Unknown Shipagent" of the MV Hoegh,
before the Regional Trial Court (RTC) of Manila, for recovery of the amount it paid to LMG. As
the identities and addresses of CCBI and the "Unknown Owner and Unknown Shipagent" could
not be ascertained, only Jardine Davies and ATI were served with summons. 10

ATI filed its Answer with Compulsory Counterclaim and Crossclaim11 denying any liability for
the value of the loss of part of the cargo, claiming that it had exercised due care and diligence
in the discharge of the cargo from the vessel onto CCBI’s barges; that its participation was
limited to supplying the stevedores who undertook the discharging operations from the vessel
to the barges; and that any loss to the cargo was sustained either prior to its discharge from
the vessel or due to the negligence of CCBI.

Jardine Davies likewise filed its Answer with Compulsory Counterclaim and
Crossclaim12 claiming that it was not the shipagent of the MV Hoegh but a mere commercial
agent; that any loss sustained by the cargo was due to the inherent vice or defect of the goods
and unrecovered spillages, among other things; and that the complaint failed to state a cause
of action as there was no valid subrogation.

RTC Ruling: The judgment is in favor of the plaintiff ordering the defendants Jardine Davies
Transport Services, Inc. and Asian Terminals, Inc. to pay in solidum the former.

Discussing in two paragraphs the basis for holding herein respondents Jardine Davies and ATI
solidarily liable for the loss, the trial court stated:

It must be emphasized that the loss occurred while the cargo was in the possession, custody
and control of the defendants. Absent any proof of exercise of due diligence required by law in
the vigilance over the cargo, defendants are presumed to be at fault or to have acted
negligently. Such presumption, the defendants failed to overturn to the satisfaction of this court.

Moreover, defendants cannot escape liability by raising as a defense any defect in the contract
of insurance as they are not privies thereto. Besides, whatever defect found therein is deemed
to have been waived by the subsequent payment made by the plaintiff of consignee’s claim
(Compania Maritima v. Insurance Co. of North America, 12 SCRA 213).

CA Ruling: On respondents’ appeal, the Court of Appeals, by Decision of January 14,

2008,15 vacated the trial court’s decision and dismissed the complaint. It, however, upheld the
dropping from the complaint of CCBI and the "Unknown Owner and Unknown Shipagent" of
M/V Hoegh.

In sustaining respondents’ appeal, the appellate court held that petitioner failed to establish the
fact of shortage in the cargo, doubts having arisen from the disparity in quantity as stated the
bill of lading (6,559.23 MT) and the shipment invoice17 (6,477.81 MT), as well as the
discrepancy in quantity as reflected in SMS’s Report of Survey18 and the Comparison of
Outturns19 incorporated therein; that the same Report shows that inaccuracies or errors in the
manner of/or equipment used in measuring the weight of the cargo might have resulted in
variances in the outturn quantity; and that the testimonies of petitioner’s witnesses, Eutiquiano
Patiag20 and Emmanuel Gotladera,21 relative to the contents of the bill of lading may not be
credited since they were not present at the actual weighing and loading of the cargo

In fine, the appellate court held that the presumption accorded to a bill of lading - as prima facie
evidence of the goods described therein, had been sufficiently rebutted.

The appellate court thus concluded that liability could not be imputed to Jardine Davies, its
principal PCL not being the carrier of the cargo and no privity of contract existed between it
(Jardine Davies) and Petrosul.

Respecting ATI, the appellate court held that no evidence that any shortage occurred since
neither LMG nor its surveyors lodged any protest on the manner by which ATI’s stevedores
carried out the discharging operations.25

Issue:
Whether or not the Court of Appeals gravely erred in holding that (the) presumption accorded
on the Bill of Lading has been rebutted.

Ruling:

No. Petitioner argues, in the main, that the appellate court erred in failing to consider the bill of
lading as a binding contract between the carrier and shipper or consignee insofar as the
accuracy of the weight of the cargo is concerned. It insists:

x x x [T]here is no need to confirm the correctness of its contents by other evidence outside the
Bill of Lading as it is already conclusive upon the parties. To argue otherwise would be to allow
an anomalous situation since defendant carrier can opt not to honor the terms and conditions
of the bill of lading which they themselves [sic] prepared by simply questioning the disparity of
the quantity between the bill of lading and the invoice. x x x30
The presumption that the bill of lading, which petitioner relies upon to support its claim for
restitution, constitutes prima facie evidence of the goods therein described was correctly
deemed by the appellate court to have been rebutted in light of abundant evidence casting
doubts on its veracity.

That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of yellow crude
sulphur on a "said to weigh" basis is not disputed. Under such clause, the shipper is solely
responsible for the loading of the cargo while the carrier is oblivious of the contents of the
shipment.31 Nobody really knows the actual weight of the cargo inasmuch as what is written on
the bill of lading, as well as on the manifest, is based solely on the shipper’s declaration.32

The bill of lading carried an added clause – the shipment’s weight, measure, quantity, quality,
condition, contents and value unknown." Evidently, the weight of the cargo could not be gauged
from the bill of lading.

As observed by the Court of Appeals, there were also significant differences in shipment
quantity at various stages of transit. These disparities in the quantity at various stages of the
cargo’s transfer.

In the absence of clear, convincing and competent evidence to prove that the cargo indeed
weighed, albeit the Bill of Lading qualified it by the phrase "said to weigh," 6,599.23 MT at the
port of origin when it was loaded onto the MV Hoegh, the fact of loss or shortage in the cargo
upon its arrival in Manila cannot be definitively established. The legal basis for attributing liability
to either of the respondents is thus sorely wanting.

d) Edgar Cokaliong Shipping Lines vs. UCPB General Insurance Company, G.R. No.
146018. June 25, 2003

Facts:
 December 11, 1991: Nestor Angelia (shipper and consignee) delivered to the petitioner
Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), a cargo consisting
of one (1) carton of Christmas decor and two (2) sacks of plastic toys, to be transported
on board the M/V Tandag from Cebu City for Tandag, Surigao del Sur. This cargo is
under Bill of Lading No. 58, in the amount of P6,500.00.

 Zosimo Mercado (another shipper and consignee) likewise delivered cargo to petitioner
consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat
and one (1) bundle of various or assorted goods. This is under Bill of Lading No. 59,
valued in the amount of P14,000.00

 Feliciana Legaspi (owner of the goods) insured the cargo, covered by BOL Nos. 59 and
No. 58, with the UCPB General Insurance Co., Inc., [respondent]. No. 59 was insured for
P100,000 while No. 58 for P50,000. [*Note that both amounts are far from the actual and
declared value in the BOLs issued by Cokaliong]
  After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine
room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed
and destroyed the entire vessel resulting in the loss of the vessel and the cargoes
therein.

 Feliciana Legaspi filed a claim, with [respondent], for the value of the cargos insured. The
latter approved the claim. For Bill of Lading No. 59, Legaspi received from UCPB
P99,000.00 while for No. 58, P60,338.00.

 UCPB as subrogee of Legaspi, filed a complaint anchored on torts against petitioner,

with the RTC of Makati City, for the collection of the total principal amount
of P148,500.00. Respondent alleged that the loss of the cargo was due to the negligence
of the petitioner

 Petitioner alleged that: (a) It was cleared by the Board of Marine Inquiry of any negligence
in the burning of the vessel; and (b) it cannot be held liable for the loss of the cargo
beyond the value thereof declared in the Bill of Lading.

Issue:
1. Is petitioner liable for the loss of the goods? YES
2. If it is liable, what is the extent of its liability? According to what was reflected in the Bill
of Lading

Ruling:
(1) Petitioner’s argument: the cause of the loss of the goods, subject of this case, was force
majeure. It adds that its exercise of due diligence was adequately proven by the findings of
the Philippine Coast Guard.

SC: We are not convinced. The uncontroverted findings of the Philippine Coast Guard show
that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine
fuel oil service tank. The crack was located on the side of the fuel oil tank, which had a mere
two-inch gap from the engine room walling, thus precluding constant inspection and care
by the crew

Having originated from an unchecked crack in the fuel oil service tank, the fire could not
have been caused by force majeure. Broadly speaking, force majeure generally applies to
a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public
enemy.

Hence, fire is not considered a natural disaster or calamity. It does not fall within the
category of an act of God unless caused by lighting or by other natural disaster or
calamity. It may even be caused by the actual fault or privity of the carrier.
 Peril of fire is not comprehended within the exceptions in Article 1734; Article 1735 applies
(please see provision)

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship
frequently so as to discover the existence of cracked parts, that loss cannot be attributed to
force majeure, but to the negligence of those officials.

Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance.
Petitioner did not present sufficient evidence showing what measures or acts it had
undertaken to ensure the seaworthiness of the vessel.

It failed to show when the last inspection and care of the auxiliary engine fuel oil service
tank was made, or some other evidence to establish that it had exercised extraordinary
diligence.

It merely stated that constant inspection and care were not possible, and that the last time
the vessel was dry-docked was in November 1990.

(2) Respondent’s contention: petitioner’s liability should be based on the actual insured value
of the goods, subject of this case.
Petitioner’s: its liability should be limited to the value declared by the shipper/consignee in
the Bill of Lading.

SC: Petitioner should not be held liable for more than what was declared by the
shippers/consignees as the value of the goods in the bills of lading.

Ratio: The records show that the Bills of Lading covering the lost goods contain the
stipulation that in case of claim for loss or for damage to the shipped merchandise or
property, [t]he liability of the common carrier x x x shall not exceed the value of the goods
as appearing in the bill of lading.

A stipulation that limits liability is valid as long as it is not against public policy. Following
provisions apply in the present case:

Art. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is
binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carrier’s liability for loss must be reasonable and just under the circumstances,
and has been freely and fairly agreed upon.

In the present case, the stipulation limiting petitioner’s liability is not contrary to public
policy.
 The shippers/consignees may recover the full value of the goods by the simple expedient
of declaring the true value of the shipment in the Bill of Lading. Other than the payment of
a higher freight, there was nothing to stop them (Legaspi, et.al) from placing the actual value
of the goods therein.

In fact, they committed fraud against the common carrier by deliberately undervaluing the
goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.

Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the
common carrier. Such stipulation obliges the shipper/consignee to notify the common
carrier of the amount that the latter may be liable for in case of loss of the goods. The
common carrier can then take appropriate measures -- getting insurance, if needed, to
cover or protect itself. This precaution on the part of the carrier is reasonable and prudent.

e) Cebu vs. Phil Homes, G.R. No. 150403 January 25, 2007

Doctrine: The idea proposed by petitioner is not only preposterous, it is also dangerous. It says
that a carrier that enters into a contract of carriage is not liable to the charterer or shipper if it
does not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists
that MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier
to escape its responsibility for the goods it agreed to transport (by the expedient of alleging
non-ownership of the vessel it employed) would radically derogate from the carrier's duty of
extraordinary diligence. It would also open the door to collusion between the carrier and the
supposed owner and to the possible shifting of liability from the carrier to one without any
financial capability to answer for the resulting damages.

Facts:
Petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc.
[MCCII] (as charterer) entered into a voyage charter wherein petitioner was to load 800 to 1,100
metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon, Negros Occidental
for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils.,
Inc.
Pursuant to the contract, petitioner received and loaded 1,100 metric tons of silica quartz on
board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. The shipment never
reached its destination, however, because the M/T Espiritu Santo sank in the afternoon of
December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the
cargo.
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation. Respondent paid the claim in the amount of P211,500 and was
subrogated to the rights of MCCII. Thereafter, it filed a case in the RTC against petitioner for
reimbursement of the amount it paid MCCII.
RTC rendered judgment in favor of respondent. CA affirmed.

Issues:
1. Whether the carrier can be held liable for the loss of cargo resulting from the sinking of a ship
it does not own (YES)

Ruling:
Based on the agreement signed by the parties and the testimony of petitioner’s operations
manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively
negotiated and solicited MCCII’s account, offered its services to ship the silica quartz and
proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as
previously agreed upon in the voyage charter) since these vessels had broken down.
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it
was engaged in the business of carrying and transporting goods by water, for compensation,
and offered its services to the public.
From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport according to the circumstances
of each case. In the event of loss of the goods, common carriers are responsible, unless they
can prove that this was brought about by the causes specified in Article 1734 of the Civil Code.
In all other cases, common carriers are presumed to be at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence.
Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control
over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a
common carrier. The fact that it did not own the vessel it decided to use to consummate the
contract of carriage did not negate its character and duties as a common carrier. The MCCII
(respondent’s subrogor) could not be reasonably expected to inquire about the ownership of
the vessels which petitioner carrier offered to utilize. As a practical matter, it is very difficult and
often impossible for the general public to enforce its rights of action under a contract of carriage
if it should be required to know who the actual owner of the vessel is. In fact, in this case, the
voyage charter itself denominated petitioner as the "owner/operator" of the vessel.
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and
ALS as evidenced by the bill of lading ALS issued.
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had
been received for transportation. It was not signed by MCCII, as in fact it was simply signed by
the supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with
ALS. While it is true that a bill of lading may serve as the contract of carriage between the
parties, it cannot prevail over the express provision of the voyage charter that MCCII and
petitioner executed: [I]n cases where a Bill of Lading has been issued by a carrier covering
goods shipped aboard a vessel under a charter party, and the charterer is also the holder of
the bill of lading, "the bill of lading operates as the receipt for the goods, and as document of
title passing the property of the goods, but not as varying the contract between the charterer
and the shipowner." The Bill of Lading becomes, therefore, only a receipt and not the contract
of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that these are not
contrary to law, morals, good customs, public order and public policy.
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage
charter stipulated that cargo insurance was for the charterer’s account. This deserves scant
consideration. This simply meant that the charterer would take care of having the goods
insured. It could not exculpate the carrier from liability for the breach of its contract of carriage.
The law, in fact, prohibits it and condemns it as unjust and contrary to public policy.
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on
board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove
that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty
or force majeure. The voyage charter here being a contract of affreightment, the carrier was
answerable for the loss of the goods received for transportation.
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a
carrier that enters into a contract of carriage is not liable to the charterer or shipper if it does
not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that
MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to
escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-
ownership of the vessel it employed) would radically derogate from the carrier's duty of
extraordinary diligence. It would also open the door to collusion between the carrier and the
supposed owner and to the possible shifting of liability from the carrier to one without any
financial capability to answer for the resulting damages.
While it is true that a bill of lading may serve as the contract of carriage between the parties, it
cannot prevail over the express provision of the voyage charter that MCCII and petitioner
executed.
The Bill of Lading becomes, therefore, only a receipt and not the contract of carriage in a charter
of the entire vessel, for the contract is the Charter Party, and is the law between the parties
who are bound by its terms and condition provided that these are not contrary to law, morals,
good customs, public order and public policy.

f) Aboitiz vs. Court of Appeals, G..R. No. 156978 May 2, 2006

Facts:

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France
on board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General
Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While
in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.4

Before departing, the vessel was advised by the Japanese Meteorological Center that it was
safe to travel to its destination.5 But while at sea, the vessel received a report of a typhoon
moving within its general path. To avoid the typhoon, the vessel changed its course. However,
it was still at the fringe of the typhoon when its hull leaked. On October 31, 1980, the vessel
sank, but the captain and his crew were saved.

On November 3, 1980, the captain of M/V P. Aboitiz filed his "Marine Protest", stating that the
wind force was at 10 to 15 knots at the time the ship foundered and described the weather as
"moderate breeze, small waves, becoming longer, fairly frequent white horses." 6

Thereafter, petitioner notified7 the consignee, General Textile, of the total loss of the vessel and
all of its cargoes. General Textile, lodged a claim with respondent for the amount of its loss.
Respondent paid General Textile and was subrogated to the rights of the latter.8

Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause of the
sinking. In its report,9 the surveyor concluded that the cause was the flooding of the holds
brought about by the vessel’s questionable seaworthiness. Consequently, respondent filed a
complaint for damages against petitioner Aboitiz, Franco-Belgian Services and the latter’s local
agent, F.E. Zuellig, Inc. (Zuellig). Respondent alleged that the proximate cause of the loss of
the shipment was the fault or negligence of the master and crew of the vessel, its
unseaworthiness, and the failure of defendants therein to exercise extraordinary diligence in
the transport of the goods. Hence, respondent added, defendants therein breached their
contract of carriage.

Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary
diligence in handling the shipment while it was in their possession; its vessel was seaworthy;
and the proximate cause of the loss of cargo was a fortuitous event. They also filed a cross-
claim against petitioner alleging that the loss occurred during the transshipment with petitioner
and so liability should rest with petitioner.

For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that
the sinking of M/V P. Aboitiz was due to an unforeseen event and without fault or negligence
on its part. It also alleged that in accordance with the real and hypothecary nature of maritime
law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11

Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine
whether the captain and crew were administratively liable. However, petitioner neither informed
respondent nor the trial court of the investigation. The BMI exonerated the captain and crew of
any administrative liability; and declared the vessel seaworthy and concluded that the sinking
was due to the vessel’s exposure to the approaching typhoon.
RTC Ruling: On November 20, 1989, the trial court, citing the Court of Appeals decision
in General Accident Fire and Life Assurance Corporation v. Aboitiz Shipping
Corporation12 involving the same incident, ruled in favor of respondent. It held petitioner liable
for the total value of the lost cargo plus legal interest.
CA Ruling: Petitioner elevated the case to the Court of Appeals and presented the findings of
the BMI. However, on August 29, 2002, the appellate court affirmed in toto the trial court’s
decision. It held that the proceedings before the BMI was only for the administrative liability of
the captain and crew, and was unilateral in nature, hence not binding on the courts.
Issue:
Whether the limited liability doctrine, which limits respondent’s award of damages to its pro-rata
share in the insurance proceeds, applies in this case.

Ruling:

Yes. It bears stressing that this Court has variedly applied the doctrine of limited liability to the
same incident – the sinking of M/V P. Aboitiz on October 31, 1980. Monarch, the latest ruling,
tried to settle the conflicting pronouncements of this Court relative to the sinking of M/V P.
Aboitiz. In Monarch, we said that the sinking of the vessel was not due to force majeure, but to
its unseaworthy condition.16 Therein, we found petitioner concurrently negligent with the captain
and crew.17 But the Court stressed that the circumstances therein still made the doctrine of
limited liability applicable.18

The ruling in Monarch may appear inconsistent with the exception of the limited liability
doctrine, as explicitly stated in the earlier part of the Monarch decision. An exception to the
limited liability doctrine is when the damage is due to the fault of the shipowner or to the
concurrent negligence of the shipowner and the captain. In which case, the shipowner shall be
liable to the full-extent of the damage.The Court thus finds it necessary to clarify now the
applicability here of the decision in Monarch.

From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport according to all the
circumstances of each case. In the event of loss, destruction or deterioration of the insured
goods, common carriers are responsible, unless they can prove that the loss, destruction or
deterioration was brought about by the causes specified in Article 1734 of the Civil Code. 21 In
all other cases, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence. 22 Moreover, where
the vessel is found unseaworthy, the shipowner is also presumed to be negligent since it is
tasked with the maintenance of its vessel. Though this duty can be delegated, still, the
shipowner must exercise close supervision over its men.

In the present case, 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. Differently put, to limit its liability to the amount of the insurance proceeds, petitioner
has the burden of proving that the unseaworthiness of its vessel was not due to its fault or
negligence. Considering the evidence presented and the circumstances obtaining in this case,
the Court finds that petitioner failed to discharge this burden. It initially attributed the sinking to
the typhoon and relied on the BMI findings that it was not at fault. However, both the trial and
the appellate courts, in this case, 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. These factual findings of the Court of Appeals, affirming those of the trial court are not to
be disturbed on appeal, but must be accorded great weight. These findings are conclusive not
only on the parties but on this Court as well.

In contrast, the findings of the BMI are not deemed always binding on the courts. Besides,
exoneration of the vessel’s officers and crew by the BMI merely concerns their respective
administrative liabilities. It does not in any way operate to absolve the common carrier from its
civil liabilities arising from its failure to exercise extraordinary diligence, the determination of
which properly belongs to the courts.

Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited
liability cannot be applied. Therefore, we agree with the appellate court in sustaining the trial
court’s ruling that petitioner is liable for the total value of the lost cargo.

WHEREFORE, the petition is DENIED for lack of merit.

g) Eastern Shipping Lines vs. BPI, GR. No. 182864, January 12, 2015

Facts:

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo

Insurance Company Limited (Mitsui) filed a Complaint3 before the RTC of Makati City against
ESLI and ATI to recover actual damages amounting to US$17,560.48 with legal interest,
attorney’s fees and costs of suit.

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama, Japan,
Sumitomo Corporation shipped on board ESLI’s vessel M/V "Eastern Venus 22" 22 coils of
various Steel Sheet weighing 159,534 kilograms in good order and condition for transportation
to and delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center,
Inc. (Calamba Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading
with Nos. ESLIYMA001. The declared value of the shipment was US$83,857.59 as shown by
an Invoice with Nos. KJGE-03-1228-NT/KE3. The shipment was insured with the respondents
BPI/MS and Mitsui against all risks under Marine Policy No. 103-GG03448834.

On 11 February 2004, the complaint alleged that the shipment arrived at the port of Manila in
an unknown condition and was turned over to ATI for safekeeping. Upon withdrawal of the
shipment by the Calamba Steel’s representative, it was found out that part of the shipment was
damaged and was in bad order condition such that there was a Request for Bad Order Survey.
It was found out that the damage amounted to US$4,598.85 prompting Calamba Steel to reject
the damaged shipment for being unfit for the intended purpose.

On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board ESLI’s
vessel M/V "Eastern Venus 25" 50 coils in various Steel Sheet weighing 383,532 kilograms in
good order and condition for transportation to and delivery at the port of Manila, Philippines in
favor of the same consignee Calamba Steel asevidenced by a Bill of Lading with Nos.
ESLIKSMA002. The declared value of the shipment was US$221,455.58 as evidenced by
Invoice Nos. KJGE-04-1327-NT/KE2. The shipment was insured with the respondents BPI/MS
and Mitsui against all risks under Marine Policy No. 104-GG04457785.

On 21 May 2004, ESLI’s vessel withthe second shipment arrived at the port of Manila partly
damaged and in bad order. The coils sustained further damage during the discharge from
vessel to shore until its turnover to ATI’s custody for safekeeping.

Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the damage
amounted to US$12,961.63. As it did before, Calamba Steel rejected the damaged shipment
for being unfit for the intended purpose.

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as the
arrastre operator in charge of the handling and discharge of the coils and filed a claim against
them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim for the total
amount of the cargo against BPI/MS and Mitsuias cargo insurers. As a result, BPI/MS and
Mitsui became subrogated in place of and with all the rights and defenses accorded by law in
favor of Calamba Steel.

Opposing the complaint, ATI, in its Answer, denied the allegations and insisted that the coils in
two shipments were already damaged upon receipt from ESLI’s vessels. It likewise insisted that
it exercised due diligence in the handling of the shipments and invoked that in case of adverse
decision, its liability should not exceed ₱5,000.00 pursuant to Section 7.01, Article VII4 of the
Contract for Cargo Handling Services between Philippine Ports Authority (PPA) and ATI. 5 A
cross-claim was also filed against ESLI.

On its part, ESLI denied the allegations of the complainants and averred that the damage to
both shipments was incurred while the same were in the possession and custody of ATI and/or
of the consignee or its representatives. It also filed a cross-claim against ATI for indemnification
in case of liability.

To expedite settlement, the case was referred to mediation but it was returned to the trial court
for further proceedings due tothe parties’ failure to resolve the legal issues as noted inthe
Mediator’s Report dated 28 June 2005.

On 10 January 2006, the court issued a Pre-Trial Order. The parties agreed that the procedural
issue was whether there was a valid subrogation in favor of BPI/MS and Mitsui; and that the
substantive issues were, whether the shipments suffered damages, the cause of damage, and
the entity liable for reparation of the damages caused. Due to the limited factual matter sof the
case, the parties were required to present their evidence through affidavits and documents.
Upon submission of these evidence, the case was submitted for resolution.10

RTC Ruling: On 17 September 2006, RTC Makati City rendered a decision finding both the
ESLI and ATI liable for the damages sustained by the two shipments.

CA Ruling: In its Decision,40 the Court of Appeals absolved ATI from liability thereby modifying
the decision of the trial court.
Issue:

Whether or not ESLI is liable through the bill of lading. [YES]

Ruling:

ESLI bases of its non-liability onthe survey reports prepared by BPI/MS and Mitsui’s witness
Manuel which found that the cause of damage was the rough handling on the shipment by the
stevedores of ATI during the discharging operations.48 However, Manuel does not absolve ESLI
of liability. The witness in fact includes ESLI in the findings of negligence. During the aforesaid
operations, the employees and forklift operators of [ESLI] and [ATI] were very negligent in the
handling of the subject cargoes. ESLI cannot invoke its non-liability solely on the manner the
cargo was discharged and unloaded. The actual condition of the cargoes upon arrival prior to
discharge is equally important and cannot be disregarded. Proof is needed that the cargo
arrived at the port of Manila in good order condition and remained as such prior to its handling
by ATI.

Common carriers, from the nature of their business and on public policy considerations, are
bound to observe extra ordinary diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them.

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt

and symbol of the goods covered by it. If it has no notation of any defect ordamage in the goods,
it is considered as a "clean bill of lading." A clean bill of lading constitutes prima facie evidence
of the receipt by the carrier of the goods as therein described.

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of
coils from shipper Sumitomo Corporation in good condition at the ports of Yokohama and
Kashima, Japan. However, upon arrival at the port of Manila, some coils from the two shipments
were partly dented and crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes
No. 67982 dated 13 February 200454 and Turn Over Survey of Bad Order Cargoes Nos.
6836355 and 6836556 both dated 24 May 2004 signed by ESLI’s representatives, a certain
Tabanao and Rodrigo together with ATI’s representative Garcia. According toTurn Over Survey
of Bad Order Cargoes No. 67982, four coils and one skid were partly dented and crumpled prior
to turnover by ESLI to ATI’s possession while a total of eleven coils were partly dented and
crumpled prior to turnover based on Turn Over Survey Bad Order Cargoes Nos. 68363 and
68365.

Calamba Steel requested for a re-examination of the damages sustained by the two shipments.
Based on the Requests for Bad Order Survey Nos. 5826757 and 5825458 covering the first
shipment dated 13 and 17 February 2004, four coils were damaged prior to turnover. The
second Request for Bad Order Survey No. 5865859 dated 25 May 2004 also affirmed the earlier
findings that elevencoils on the second shipment were damaged prior to turnover.
Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima faciecase of fault or negligence against the carrier.
If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.61 From the foregoing, the fault is
attributable to ESLI. While no longer an issue, it may be nonetheless state that ATI was correctly
absolved of liability for the damage.

The bills of lading represent the formal expression of the parties’ rights, duties and obligations.
It is the best evidence of the intention of the parties which is to be deciphered from the language
used in the contract, not from the unilateral post facto assertions of one of the parties, or of third
parties who are strangers to the contract.Thus, when the terms of an agreement have been
reduced to writing, it is deemed to contain all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such terms other than the contents
of the written agreement.

WHEREFORE, we DENY the Petition for Review on Certiorari.

h) Designer Baskets vs. Air Sea Transport, GR. No. 184513, March 9, 2016

Doctrine: The general rule is that upon receipt of the goods, the consignee surrenders the bill
of lading to the carrier and their respective obligations are considered canceled. Article 353 of
the Code of Commerce, however, provides two exceptions where the goods may be released
without the surrender of the bill of lading because the consignee can no longer return it. These
exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee
must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce
the same effect as the surrender of the bill of lading.
Here, the buyer could not produce the bill of lading covering the shipment not because it was
lost, but for another cause: the bill of lading was retained by the seller pending buyer's full
payment of the shipment. Buyer and carrier then entered into an Indemnity Agreement, wherein
the former asked the latter to release the shipment even without the surrender of the bill of
lading. The execution of this Agreement, and the undisputed fact that the shipment was
released to seller pursuant to it, operates as a receipt in substantial compliance with the last
paragraph of Article 353 of the Code of Commerce.
Facts:
DBI is a domestic corporation engaged in the production of housewares and handicraft items
for export. Sometime in October 1995, Ambiente, a foreign-based company, ordered from DBI
223 cartons of assorted wooden items (the “Shipment”). The Shipment was worth
US$12,590.87 and payable through telegraphic transfer. Ambiente designated ACCLI as the
forwarding agent that will ship out its order from the Philippines to the United States (US).
ACCLI is a domestic corporation acting as agent of ASTI, a US based corporation engaged in
carrier transport business, in the Philippines.
On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila and
delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California. To
acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to DBI triplicate
copies of the Bill of Lading. DBI retained possession of the originals of the bills of lading pending
the payment of the goods by Ambiente. ASTI released the Shipment to Ambiente on the
strength of an Indemnity Agreement executed in its favor.
DBI then made several demands to Ambiente for the payment of the shipment, but to no avail.
Thus, on October 7, 1996, DBI filed the Original Complaint against Ambiente, ACCLI and ASTI
for the payment of the value of the Shipment, damages and legal fees.
ASTI, ACCLI and its directors and incorporators filed a motion to dismiss. They argued that: (a)
they are not the real parties-in-interest in the action because the cargo was delivered and
accepted by Ambiente. The case, therefore, was a simple case of non- payment of the buyer;
(b) relative to the incorporators-stockholders of ACCLI, piercing the corporate veil is misplaced;
(c) contrary to the allegation of DBI, the bill of lading covering the shipment does not contain a
proviso exposing ASTI to liability in case the shipment is released without the surrender of the
bill of lading; and (d) the Original Complaint did not attach a certificate of non-forum shopping.
DBI opposed the said motion, asserting that ASTI and ACCLI failed to exercise the required
extraordinary diligence when they allowed the cargoes to be withdrawn by the consignee
without the surrender of the original bill of lading. ASTI, ACCLI, and ACCLI’s incorporators-
stockholders countered that it is DBI who failed to exercise extraordinary diligence in protecting
its own interest.
They averred that whether or not the buyer-consignee pays the seller is already outside of their
concern. Before the case was resolved by the lower court, DBI impleaded Ambiente as
additional party defendant. The RTC found ASTI, ACCLI and its incorporators solidarily liable
with Ambiente. The incorporators were, however, absolved from liability. The CA affirmed that
Ambiente is liable but absolved ASTI and ACCLI. According to the CA, there is nothing in the
applicable laws that require the surrender of bills of lading before the goods may be released
to the buyer/consignee. The CA stressed that DBI failed to present evidence to prove its
assertion that the surrender of the bill of lading upon delivery of the goods is a common
mercantile practice.
As for ASTI, the CA explained that its only obligation as a common carrier was to deliver the
shipment in good condition. It did not include looking beyond the details of the transaction
between the seller and the consignee, or more particularly, ascertaining the payment of the
goods by the buyer Ambiente.

Issue:
Whether ASTI/ACCLI may be held liable for releasing the Shipment without first demanding for
the surrender of the Bill of Lading.
Ruling:
A common carrier may release the goods to the consignee even without the surrender of the
bill of lading. Under Article 350 of the Code of Commerce, “the shipper as well as the carrier of
the merchandise or goods may mutually demand that a bill of lading be made.” A bill of lading,
when issued by the carrier to the shipper, is the legal evidence of the contract of carriage
between the former and the latter. It defines the rights and liabilities of the parties in reference
to the contract of carriage. The stipulations in the bill of lading are valid and binding unless they
are contrary to law, morals, customs, public order or public policy.
Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of
lading governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill of
Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI are “to release
and deliver the cargo/shipment to the consignee, x x x, only after the original copy or copies of
the said Bill of Lading is or are surrendered to them; otherwise they become liable to [DBI] for
the value of the shipment. Quite tellingly, however, DBI does not point or refer to any specific
clause or provision on the bill of lading supporting this claim. The language of the bill of lading
shows no such requirement. There is no obligation, therefore, on the part of ASTI and ACCLI
to release the goods only upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee even without the
latter’s surrender of the bill of lading. The third paragraph of Article 353 of the Code of
Commerce is enlightening:
Article 353. The legal evidence of the contract between the shipper and the carrier shall be the
bills of lading, by the contents of which the disputes which may arise regarding their execution
and performance shall be decided, no exceptions being admissible other than those of falsity
and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall
be returned to him, and by virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered cancelled, unless in the same act the
claim which the parties may wish to reserve be reduced to writing, with the exception of that
provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by
the carrier, because of its loss or any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of the bill of lading
The general rule is that upon receipt of the goods, the consignee surrenders the bill of lading
to the carrier and their respective obligations are considered canceled. The law, however,
provides two exceptions where the goods may be released without the surrender of the bill of
lading because the consignee can no longer return it. These exceptions are when the bill of
lading gets lost or for other cause. In either case, the consignee must issue a receipt to the
carrier upon the release of the goods. Such receipt shall produce the same effect as the
surrender of the bill of lading. The nonsurrender of the original bill of lading does not violate the
carrier’s duty of extraordinary diligence over the goods. The surrender of the original bill of
lading is not a condition precedent for a common carrier to be discharged of its contractual
obligation.
Maritime Law

1. Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation, G.R. No. 100446 January 21, 1993;

Doctrine: The real and hypothecary nature of maritime law simple 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.
Summary: Petitioner is a corporation engaged in the business of maritime trade as a carrier.
As such, it owned and operated the M/V P/ ABOITIZ, a common carrier that sank on voyage
from Hong Kong to Manila.
Private respondent 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-in-interest, 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.
Facts:
Petitioner is a domestic corporation engaged in the business of maritime trade as a carrier. As
such, it owned and operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a
voyage from Hongkong to the Philippines on October 31, 1980.
Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on
the other hand, is a foreign insurance company pursuing its remedies as a subrogee of several
cargo consignees whose respective cargo sank with the said vessel and for which it has priorly
paid.
The sinking was initially investigated by the Board of Marine Inquiry, which found that such
sinking was due to force majeure and that subject vessel, at the time of the sinking was
seaworthy.
This administrative finding notwithstanding, the trial court found against the carrier on the basis
that the loss subject matter therein did not occur as a result of force majeure. Thus, in said
case, plaintiff GAFLAC was allowed to prove, and. was later awarded, its claim. This decision
in favor of GAFLAC was elevated all the way up to this Court. The attempted execution of the
judgment award in said case in the amount of P1,072,611.20 plus legal interest has given rise
to the instant petition.
Hence, this instant petition seeking a pronouncement as to the applicability of the doctrine of
limited liability on the totality of the claims vis a vis the losses brought about by the sinking of
the vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of maritime law.
Issue:
Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime
law should apply in this and related cases.

Ruling:
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 Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce,
particularly in Articles 587, 590, and 837, hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it may have earned
during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before
a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel
with all its appurtenances and freightage served during the voyage.
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.
ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case.
RULING 2: The SC ruled in the negative.
In its Decision, the trial court merely held that:
. . . Considering the foregoing reasons, the Court holds that the vessel M/V
"Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.
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 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 shipowner itself was negligent, and no
tribunal, including this Court will add or subtract to such evidence to justify a conclusion to the
contrary.
The findings of the trial court and the Court of Appeals, 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.

2. Aboitiz Shipping vs. Court of Appeals, GR. No. 121833, October 17, 2008

Facts:
Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate actions against
several defendants for the collection of the amounts of the cargoes allegedly paid by Malayan
under various marine cargo policiesissued to the insurance claimants.

The defendants were Malayan International Shipping Corporation, a foreign corporation based
in Malaysia, its local ship agent, Litonjua Merchant Shipping Agency (Litonjua), and Aboitiz.
Aboitiz, CMCR, and Zuellig were the defendants.

The shipments were supported by their respective bills of lading and insured separately by
Malayan against the risk of loss or damage.

Aboitiz raised the defenses of lack of jurisdiction, lack of cause of action and prescription. It
also claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence and
that the loss was caused by a fortuitous event.

However, RTC ruled that Aboitiz be held liable for money claims and ordered to pay the plaintiff
in this case.

Aboitiz, CMCR and Zuellig appealed the RTC decision to the Court of Appeals. Court of Appeals
promulgated the decision in the 1993 GAFLAC case.

In said case, this Court affirmed the Court of Appeals’ finding that the sinking of M/V P.
Aboitiz was caused by the negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this Court in connection with the
sinking of M/V P. Aboitiz. The liability should be based on the declared value of the shipment
in consonance with the exceptional rule under Section 4(5) 5 of the Carriage of Goods by Sea
Act.

Aboitiz moved for reconsideration6 to no avail. Hence, a petition for review on certiorari was
then filed. However, the Court denied the petition. Aboitiz filed a Motion for Reconsideration on
the ground that the limited liability doctrine enunciated in the 1993 GAFLAC case should be
applied in the computation of its liability. The Court granted the motion and ordered the
reinstatement of the petition.

Issue:

1. Whether or not there is negligence on the part of the ship owner or his agent.

2. Whether or not the doctrine of real and hypothecary nature of maritime law (also known as
the "limited liability rule") applies.

Ruling:

Yes, Aboitiz was negligent and therefore the real and hypothecary nature of maritime
law or limited liability rule will not apply. The liability is due to its negligence in ensuring
the seaworthiness of the vessel.
These consolidated petitions similarly posit that Aboitiz’s liability to respondents should be
limited to the value of the insurance proceeds of the lost vessel plus pending freightage and
not correspond to the full insurable value of the cargoes paid by respondents, based on the
Court’s ruling in the 1993 GAFLAC case.

In the 1993 GAFLAC case, Aboitiz argued that the real and hypothecary doctrine warranted
the immediate stay of execution of judgment to prevent the impairment of the other creditors’
shares. Invoking the rule on the law of the case, private respondent therein countered that the
1990 GAFLAC case had already settled the extent of Aboitiz’s liability.

The Court declared in the 1993 GAFLAC case that claims against Aboitiz arising from the
sinking of M/V P. Aboitizshould be limited only to the extent of the value of the vessel. The
Court applied the limited liability rule in favor of Aboitiz based on the trial court’s finding therein
that Aboitiz was not negligent. So,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
effect, the liability of the shipwobe=ner and agent’s is merely co-extensive with the interest in
the vessel such that a total loss thereof results in its extinction. "No vessel, no liability"
expresses in a nutshell the limited liability rule.

In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book
III of the Code of Commerce, thus:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in the care of the goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
equipment and the freight it may have earned during the voyage.

Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in
the common fund for the results of the acts of the captain referred to in Art. 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of
the part of the vessel belonging to him.

Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage.

Thus, when the vessel is totally lost in which case there is no vessel to abandon, abandonment
is not required. Because of such total loss the liability of the shipowner or agent for damages is
extinguished. However, despite the total loss of the vessel, its insurance answers for the
damages for which a shipowner or agent may be held liable.

Nonetheless, there are exceptional circumstances wherein the ship agent could still be held
answerable despite the abandonment of the vessel, as where the loss or injury was due to the
fault of the shipowner and the captain,or for injuries to passengers notwithstanding the
exclusively real and hypothecary nature of maritime law if fault can be attributed to the
shipowner.
In all these three cases, there is a finding that Aboitiz was negligent. It failed to take necessary
course of action to prevent the vessel from sailing into the typhoon. Also, it failed to show that
it had exercised the required extraordinary diligence in steering the vessel before, during and
after the storm. Thus, the sinking of the vessel was due to the negligence of Aboitiz.

As to its liability, Aboitiz is not entitled to the limited liability rule and is, therefore, liable for the
value of the lost cargoes as so duly alleged and proven during trial.

In a related case, Aboitiz Shipping Corporation v. New India Assurance Company, Ltd. (New
India), it stated the well-settled principle that the exception to the limited liability doctrine
applies when the damage is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain. Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited liability cannot be applied. In New
India, the Court clarified that the earlier pronouncement in Monarch Insurance was not an
abandonment of the doctrine of limited liability and that the circumstances therein still made the
doctrine applicable.

Aboitiz failed to discharge its 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. Thus, the
Court rejected Aboitiz’s argument that the award of damages to respondent therein should be
limited to its pro rata share in the insurance proceeds from the sinking of M/V P. Aboitiz.

Thus, as a general rule, a ship owner’s liability is merely co-extensive with his interest
in the vessel, except where actual fault is attributable to the shipowner. Thus, as an
exception to the limited liability doctrine, a shipowner or ship agent may be held liable
for damages when the sinking of the vessel is attributable to the actual fault or
negligence of the shipowner or its failure to ensure the seaworthiness of the vessel.

In this case, Aboitiz and the crew failed to ensure the seaworthiness of M/V P. Aboitiz.

3. Chua Yek Hong vs. IAC, G.R. No. 74811. December 14, 1988

Doctrine: If the ship owner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total
loss thereof results in its extinction.
Facts:
Petitioner contracted with the herein private respondent to deliver 1,000 sacks of copra, valued
at P101,227.40, on board the vessel M/V Luzviminda I owned by the latter. However it did not
reach its destination, the vessel capsized and sank with all its cargo.
Petitioner instituted a complaint against private respondent for breach of contract incurring
damages.
Private respondent’s defense is that even assuming that the alleged cargo was truly loaded
aboard their vessel, their liability had been extinguished by reason of the total loss of said
vessel.
RTC rendered judgment in favor of Chua Yek Hong however CA reversed the decision by
applying Article 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema (73 Phil.
330 [1941]) and held that private respondents' liability, as ship owners, for the loss of the cargo
is merely co-extensive with their interest in the vessel such that a total loss thereof results in its
extinction.

Issue:
Whether or not respondent Appellate Court erred in applying the doctrine of limited liability
under Article 587 of the Code of Commerce.
Ruling:
NO. Respondent Appellate Court did not err in applying the doctrine of limited liability under
Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of
passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results
in its extinction. (Yangco vs. Laserna, et al., supra).
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or
death to a passenger is due either to the fault of the ship owner, or to the concurring negligence
of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2)
where the vessel is insured; and (3) in workmen's compensation claims (Abueg vs. San Diego,
supra).

4. Monarch Insurance vs. CA, G.R. No. 92735, G.R. No. 94867, G.R. No. 95578 June 8,
2000

Facts:
These are three consolidated cases. All cases arose from the loss of cargoes of various
shippers when the M/V P. Aboitiz, a common carrier owned and operated by Aboitiz, sank
on her voyage from Hong Kong to Manila on October 31, 1980. The claims numbered one
hundred and ten (110) for the total amount of P41,230,115.00 which is almost thrice the amount
of the insurance proceeds of P14,500,000.00 plus earned freight of 500,000.00 according to
Aboitiz.
Facts: The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October
29, 1980 after securing a departure clearance from the Hong Kong Port Authority. The
departure was delayed for two hours because he (Capt. Racines) was observing the direction
of the storm that crossed the Bicol Region. He proceeded with the voyage only after being
informed that the storm had abated. The M/V P. Aboitiz sank at about 7:00 p.m. of October 31,
1980.
Justo Iglesias, meteorologist of PAGASA, testified in both cases that during the inclusive dates
of October 28-31, 1980, a stormy weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to Manila, because of tropical
depression "Yoning."
Petitioners Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were
lost due to force majeure, relying mainly on the marine protest filed by Capt. Racines under
scale No. 4 that describes the sea condition as "moderate breeze," and "small waves
becoming longer, fairly frequent white horses."
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers
and were consequently subrogated to their rights, interests and actions against Aboitiz.
Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz. In its
answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground that the
sinking of its cargo vessel was due to force majeure or an act of God.
Aboitiz had repeatedly failed to appear in court, it then allowed Monarch and Tabacalera to
present evidence ex-parte. The survey established that on her voyage to Manila from Hong
Kong, the vessel did not encounter weather so inclement that Aboitiz would be
exculpated from liability for losses. The survey added that the seaworthiness of the vessel
was in question especially because the breaches of the hull and the serious flooding of two
(2) cargo holds occurred simultaneously in "seasonal weather."
In due course, the trial court rendered judgment against Aboitiz. It was appealed to the Court
of Appeals but the appeal was dismissed for its failure to file appellant's brief.
Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court
granted the motion and issued separate writs of execution. However, Aboitiz, invoking the real
and hypothecary nature of liability in maritime law, filed an urgent motion to quash the writs
of execution.
According to Aboitiz, since its liability is limited to the value of the vessel which was
insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify Monarch
and Tabacalera ahead of the other claimants would be prejudicial to the latter.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order, the same was granted by the court.
Issue:
Whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is
entitled to the benefit of the limited liability rule.
Ruling:
NO. (PAUL: The discussion in this case about the limited liability rule is basically the same as
what’s in the book of Aquino, the cases cited in the case at bar were the same cases cited in
the book)
Rule on Limited Liability
The petitioners assert in common that the vessel M/V P. Aboitiz did not sink by reason of force
majeure but because of its unseaworthiness and the concurrent fault and/or negligence of
Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit of the limited
liability rule.
In Yangco v. Laserna, this Court elucidated on the import of Art. 587 as follows:
The provision accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon-"the
vessel with all her equipments and the freight it may have earned during the voyage." It is
true that the article appears to deal only with the limited liability of the shipowners or agents
for damages arising from the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no way indicates the true
extent of such liability. The consensus of authorities is to the effect that notwithstanding
the language of the aforequoted provision, the benefit of limited liability therein provided
for, applies in all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain.

"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's
or agent's liability is merely co-extensive with his interest in the vessel such that a total loss
thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens
because there is no longer any res to which it can attach.

In cases where the ship owner is likewise to be blamed, Article 587 does not apply. Such a
situation will be covered by the provisions of the Civil Code on common carriers.

A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would
absolve Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which
provides in part that common carriers are responsible for the loss, destruction, or deterioration
of the goods they carry, unless the same is due to flood, storm, earthquake, lightning, or other
natural disaster or calamity. On the other hand, a finding that the M/V P. Aboitiz sank by reason
of fault and/or negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would
render inapplicable the rule on limited liability. These issues are therefore ultimately questions
of fact which have been subject of conflicting determinations by the trial courts, the Court of
Appeals and even this Court.

The Court of Appeals brushed aside the issue of Aboitiz' negligence and/or fault and proceeded
to allow the application of the limited liability rule "to accomplish the aims of justice." It
elaborated thus: "To execute the judgment in this case would prejudice the substantial
right of other claimants who have filed suits to claim their cargoes that was lost in the
vessel that sank and also against the petitioner to be ordered to pay more than what the
law requires."
After reviewing the records of the instant cases, we categorically state that by the facts on
record, the M/V P. Aboitiz did not go under water because of the storm "Yoning." Captain
Racines also testified in open court that the ill-fated M/V P. Aboitiz was two hundred (200) miles
away from storm "Yoning" when it sank.

On the matter of Aboitiz' negligence, we adhere to our ruling in Aboitiz Shipping Corporation v.
Court of Appeals, that found Aboitiz, and the captain and crew of the M/V P. Aboitiz to
have been concurrently negligent. The said survey established that the cause of the sinking
of the vessel was the leakage of water into the M/V P. Aboitiz.
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the face of the foregoing expert testimony constrains
us to hold that Aboitiz was concurrently at fault and/or negligent with the ship captain
and crew of the M/V P. Aboitiz. This is in accordance with the rule that in cases involving the
limited liability of shipowners, the initial burden of proof of negligence or unseaworthiness
rests on the claimants. However, once the vessel owner or any party asserts the right to
limit its liability, the burden of proof as to lack of privity or knowledge on its part with
respect to the matter of negligence or unseaworthiness is shifted to it. This burden,
Aboitiz had unfortunately failed to discharge. That Aboitiz failed to discharge the burden of
proving that the unseaworthiness of its vessel was not due to its fault and/or negligence should
not however mean that the limited liability rule will not be applied to the present cases. The
peculiar circumstances here demand that there should be no strict adherence to
procedural rules on evidence lest the just claims of shippers/insurers be frustrated. The
rule on limited liability should be applied in accordance with the latest ruling in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., promulgated on
January 21, 1993, that claimants be treated as "creditors in an insolvent corporation whose
assets are not enough to satisfy the totality of claims against it."

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 completed its action earlier than the rest. In fairness to the claimants and as a matter of
equity, the total proceeds of the insurance and pending freightage should now be deposited in
trust.

5. Negros Navigations vs. Court of Appeals, GR. No. 110398, November 7, 1997
Facts:
Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four
special cabin tickets. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving
Manila and going to Bacolod.

Subsequently, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban
City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC
Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several
of her passengers perished in the sea tragedy. The bodies of some of the victims were found
and brought to shore, but the four members of private respondents’ families were never found.

Private respondents filed a complaint against the Negros Navigation, the Philippine National
Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC),
seeking damages for the death. Petitioner, however, denied that the four relatives of private
respondents actually boarded the vessel as shown by the fact that their bodies were never
recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full
and competent crew, and that the collision was entirely due to the fault of the crew of the M/T
Tacloban City.

In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence
required of it in the carriage of passengers, both the trial court and the appellate court relied on
the findings of this Court in Mecenas v. Intermediate Appellate Court, which case was brought
for the death of other passengers. In Mecenas, SC found petitioner guilty of negligence in (1)
allowing or tolerating the ship captain and crew members in playing mahjong during the voyage,
(2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more
passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for damages to
the full extent.

Petitioner criticizes the lower court’s reliance on the Mecenas case, arguing that, although this
case arose out of the same incident as that involved in Mecenas, the parties are different and
trial was conducted separately. Petitioner contends that the decision in this case should be
based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the
record of this case.

Issue:
1. Whether the ruling in Mecenas v. Court of Appeals, finding the crew members of petitioner
to be grossly negligent in the performance of their duties, is binding in this case;

2. Whether the award for damages in Mecenas v. Court of Appeals is applicable in this case.

Ruling:
1. No. The contention is without merit.

Prior to this case, a previous case was brought for the death of other passengers. Said case is
entitledMecenas v. Intermediate Appellate Court .In that case it was found that although the
proximate cause ofthe mishap was the negligence of the crew of the M/TTacloban City, the
crew of theDon Juanwas equallynegligent as it found that the latter’s master, Capt. Rogelio
Santisteban, was playing mahjong at the timeof collision, and the officer on watch, Senior Third
Mate Rogelio De Vera, admitted that he failed to call theattention of Santisteban to the imminent
danger facing them. This Court found that Capt. Santisteban and the crew of the M/VDon Juan
failed to take steps to preventthe collision or at least delay the sinking of theship and supervise
the abandoning of the ship. Petitioner Negros Navigation was found equally negligent in
tolerating the playing of mahjong by the shipcaptain and other crew members while on board
the ship and failing to keep the M/VDon Juan seaworthyso much so that the ship sank within
10 to 15 minutes of its impact with the M/TTacloban City. In addition, the Court found that the
Don Juan was overloaded.

On the Doctrine of stare decisis: Adherence to the Mecenas case is dictated by this Courts
policy of maintaining stability in jurisprudence in accordance with the legal maxim stare decisis
et non quieta movere (Follow past precedents and do not disturb what has been settled.)
Where, as in this case, the same questions relating to the same event have been put forward
by parties similarly situated as in a previous case litigated and decided by a competent court,
the rule of stare decisis is a bar to any attempt to re litigate the same issue.

Adherence to the Mecenas case is dictated by this Court’s policy of maintaining stability in
jurisprudence. Where, as in this case, the same questions relating to the same event have been
put forward by parties similarly situated as in a previous case litigated and decided by a
competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.

2. No, it is not applicable.

Petitioner contends that, assuming that the Mecenas case applies, private respondents should
be allowed to claim only P43,857.14 each as moral damages because in the Mecenascase,
the amount of P307,500.00 was awarded to the seven children of the Mecenas couple. Here is
where the principle of stare decisis does not apply in view of differences in the personal
circumstances of the victims. For that matter, differentiation would be justified even if private
respondents had joined the private respondents in the Mecenas case.

The doctrine of stare decisis works as a bar only against issues litigated in a previous case.
Where the issue involved was not raised nor presented to the court and not passed upon by
the court in the previous case, the decision in the previous case is not stare decisis of the
question presently presented.

The Mecenas case cannot be made the basis for determining the award for attorney’s fees.
The award would naturally vary or differ in each case.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
petitioner is ORDERED to pay private respondents damages.

6. Macondray vs. Provident Insurance Corporation, GR No. 154305, December 9, 2004

Doctrine: Article 586 of the Code of Commerce states that a ship agent is "the person entrusted
with provisioning or representing the vessel in the port in which it may be found." Hence,
whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will
be considered as the ship agent and may be held liable as such, as long as the latter is the one
that provisions or represents the vessel.
Facts:
On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES
LIMITED INC., of Saskatoon, Saskatchewan, (hereinafter the SHIPPER), shipped and loaded
on board the vessel M/V 'Trade Carrier', 5000 metric tons of Standard Grade Muriate of Potash
in bulk for transportation to and delivery at the port of Sangi, Toledo City, Cebu, in favor of
ATLAS FERTILIZER CORPORATION, (hereinafter CONSIGNEE). Subject shipments were
insured with [respondent] against all risks under and by virtue of an Open Marine Policy.
When the shipment arrived, CONSIGNEE discovered that the shipment sustained
losses/shortage of 476.140 metric tons valued at P1,657,700.95. Provident paid losses. Formal
claims was then filed with Trade & Transport and Macondray but the same refused and failed
to settle the same.
Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute
relation with defendant TRADE AND TRANSPORT, the alleged operator of the vessel who
transported the subject shipment; that accordingly, MACONDRAY is the local representative of
the SHIPPER; the charterer of M/V TRADE CARRIER and not party to this case; that it has no
control over the acts of the captain and crew of the Carrier and cannot be held responsible for
any damage arising from the fault or negligence of said captain and crew; that upon arrival at
the port of Sangi, Toledo City, Cebu, the M/V Trade Carrier discharged the full amount of
shipment, as shown by the draft survey with a total quantity of 5,033.59 metric tons discharged
from the vessel and delivered to the CONSIGNEE.

Issue:
Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by
any party from the vessel owned by defendant Trade and Transport.
Ruling:
Indeed, although it is not an agent of Trade and Transport, petitioner can still be the ship agent
of the vessel M/V Trade Carrier.
Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with
provisioning or representing the vessel in the port in which it may be found."
Hence, whether acting as agent of the owner of the vessel or as agent of the charterer,
petitioner will be considered as the ship agent and may be held liable as such, as long as the
latter is the one that provisions or represents the vessel.
The trial court found that petitioner "was appointed as local agent of the vessel, which duty
includes arrangement for the entrance and clearance of the vessel." Further, the CA found and
the evidence shows that petitioner represented the vessel. The latter prepared the Notice of
Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's
Clearance. Petitioner's employees were present at Sangi, Toledo City, one day before the
arrival of the vessel, where they stayed until it departed. They were also present during the
actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also
prepared for the needs of the vessel, like money, provision, water and fuel.
These acts all point to the conclusion that it was the entity that represented the vessel in the
Port of Manila and was the ship agent within the meaning and context of Article 586 of the Code
of Commerce.
As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:
Article 586. The shipowner and the 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 the creditor proves that the amount claimed was invested for the benefit of the same."
Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in the care of the goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight it may have earned during the voyage.
Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140
metric tons of standard-grade Muriate of Potash valued at P1,657,700.95. Hence, the Court
finds no reason to delve further into the matter or to disturb the finding of the CA holding
petitioner, as ship agent, liable to respondent for the losses sustained by the subject shipment.

7. Haverton Shipping vs. NLRC, G.R. No. 65442 April 15, 1985
Facts:

The records show that on March 12, 1982, Alfredo BENITEZ was hired by OFSI Services, the
local manning agent of Haverton Shipping, as a boatswain on the M.V. Gold c Alisa, owned
and operated by the latter, for a period of one year with a monthly salary of US $485.00. On
May 24, 1982, while the vessel was berthed at the port of Durban, South Africa, a fight occurred
between BENITEZ and his shipmates, Arnel Candelaria and Maximo Espiritu, as a result of
which the latter suffered injury on the fingers of his left hand. An investigation of the incident
was conducted by the Master who made a written report of his findings and decision in the
ship's "log book". BENITEZ was found to have breached the disciplinary code of merchant
service on several counts among which was "assault with a knife on a member of the ship's
crews," which behavior "seriously detract(ed) from the safe and efficient working of the ship."
He was then repatriated to the Philippines after serving only two and a half months of his
contract.chanroblesvirtu

BENITEZ'S VERSION:

On May 24, 1982, or thereabout, the ship M.V. Gold Alisa was in port at Durban, South Africa,
I asked permission from my officer for shore leave and was granted. Espiritu and Candelaria
went also on shore leave but they arrived ahead of me. At that time I arrived late for my duty
and upon arrival I changed on my working clothes to assume my work. I saw Espiritu in the
mess hall with Candelaria and I noticed they were drunk. Espiritu asked me why I did not work
on my duty, though he has no business to question me he being my immediate subordinate,
but I answered him that he better go to sleep because he was drunk. Espiritu did not like my
comment that he was drunk, he even called me some nasty words, then he went to the pantry,
got a knife and attacked me. Candelaria tried to pacify him and separate us, in the process he
was able to hit me at the right eyelid and on my right hand, these (2) injuries leaving scars on
my hand and right eyelid. When Espiritu saw I was bleeding he ran away and locked himself in
his cabin. After the incident the 1st officer and 2nd officer came and asked me about the incident
and I told them everything what had happened. The following morning I told the Captain of the
ship of the incident. I told the Captain that Espiritu and Candelaria were drunk, it was Espiritu
who provoked me to a fight, it was Espiritu who got a knife and attacked me, I told him I did not
have any knife with me during the incident and I was not able to inflict any injury on Espiritu as
he was the one with a knife, and he and Candelaria were grappling with the knife as Candelaria
was trying to get the knife from him. If ever Espiritu was injured, the same must have been
caused by the knife he was holding when Candelaria tried to get it from him.

PETITIONER’S VERSION:

It was reported to the Duty Officer, Mr. T.A. Andrews, that the bosun had returned and that
there were problems'. Mr. Andrews proceeded to the crew messroom where he heard the bosun
shouting loudly, and in an obviously highly excitable state, at A/B's Maximo Espiritu and Arnel
Candelaria. The second officer noticed blood on the bosun's shirt. The bosun was quietened
and led to his cabin. The second officer applied first aid to two cuts on the fingers of Maximo
Espiritu's left hand. (Later required two stitches each.) It was stated by Espiritu that the bosun
had attacked him with a knife and that he had grabbed the knife, causing the cuts on his fingers.
Candelaria had then pulled the bosun away from Espiritu. The master found the injuries
consistent with this allegation.

After a thorough and careful investigation of all the events, the master found that the Disciplinary
Code of the British Merchant Service, and of the Filipino National Seaman's Board, to which
Alfredo Benitez had agreed when he signed the Crew Agreement and his Company Contract,
had been breached on the following counts:chanrobles virtual law library

i) Absent from duty.

ii) Assault with an offensive weapon (knife) on a member of the ships crew.
iii) Intimidation, and interference with the work of a member of the ship's
crew.chanroblesvirtualawlibrarychanrobles virtual law library
iv) Behaviour which seriously detracts from the safe and efficient working of the
ship.
v) Behaviour which seriously detracts from the social well-being of any other
person on board. (Maximo Espiritu. The bosun had threatened 'to kill him'.
Afterwards, Espiritu was too frightened to sleep in his own cabin and had spent
the night in the cabin of a shipmate.)chanrobles virtual law library

The master then asked Alfredo Benitez if he had anything to say. Benitez replied that he
admitted all the charges and that he was guilty of wielding a knife towards Espiritu and that the
attack had been thwarted by Candelaria pulling him away. In mitigation he stated that he had
on the previous day received a letter from home which had contained bad news; and this had
placed him in a depressed state of mind. Benitez stated that he regreted the incident. The
master said that, while he was aware that the initial argument was not solely caused by the
bosun, Ws assault on Espiritu had nevertheless been no way to settle the dispute. The master
found the bosun guilty of all the charges and bearing in mind possible problems between
Benitez and the crew, especially during the long sea voyage to Singapore, the master had no
alternative but to dismiss Benitez immediately from his service with the ship.

Benitez' Account of Wages was drawn up and the sum of United States Dollars 719.60 (Seven
Hundred and Nineteen Dollars 60 cents,) the total payable under the account was paid to
Benitez in cash. Arrangements were made with the company's agents, Polaris Shipping, to
receive Benitez and arrange for his repatriation to Manila. Benitez was then signed off the Crew
Agreement.

On June 7, 1982, BENITEZ filed with the NSB a complaint for illegal dismissal and unlawful
termination of contract. On the basis of the parties' position papers, decision was rendered
adopting BENITEZ's version and ruling that the copy of the Official Entry in the Ship's Log Book
was "purely hearsay and could not legally be binding." 4 The NLRC also rejected the Affidavits
of able seamen Candelaria and Espiritu for the reason that they were presented only when the
case was already on appeal before it.

Issue:
Whether or not private respondent BENITEZ was terminated for just cause even before the
expiration of his employment contractchanrobles virt....ual law library
Ruling:

In declaring that copy of the Official Entry in the Ship's Log Book was not legally binding for
being hearsay, public respondents overlooked the fact that under our laws the ship's captain is
obligated to keep a "log book" where, among others, he records the decisions he has adopted.
Even according to the law of the vessel's registry, that book is also "required by law" as
disclosed by the entry itself. There is no controversy as to the genuineness of the said entry.
The vessel's log book is an official record and entries made by a person in the performance of
a duty required by law are prima facie evidence of the facts stated therein.

That an investigation was conducted on the incident is admitted by BENITEZ. The reason, as
stated in the entry, as to why BENITEZ was not given a copy before he disembarked from the
vessel was that the vessel had sailed for Singapore on the same day and it was not possible in
the short time available to provide BENITEZ with a copy of the entry.

The two cut wounds sustained by Espiritu in his fingers, which required two stitches each,
conforms to his narration that BENITEZ lunged at him and tried to stab him with the knife and
that in protecting himself he held the blade of the knife with his left hand and injured
himself. 12 As stated in the entry, "(T)he master found the injuries consistent with this
allegation". 13 Candelaria's Affidavit 14 corroborates Espiritu's narrative of the incident.

It is true that the Affidavits of Candelaria and Espiritu, dated April 4 & 11, 1983, were submitted
only when the case was on appeal to the NLRC. Still, that should not have precluded the NLRC
from taking them into account. There was plausible reason for the delay in the submittal of their
Affidavits in that the affiants were out of the country plying back and forth between the ports of
the Far East and South and West Africa during the period from March 12, 1982 to March 16,
1983. It was only after the expiration of their contract of employment that they returned to the
Philippines and executed their sworn statements before the Labor Arbiter. 15 As the Labor Code
specifically provides, rules of evidence prevailing in Courts of law shall not be controlling and
every and all reasonable means to ascertain the facts in each case shall be used without regard
to technicalities.

On the other hand, BENITEZ's claim that "(I)f ever Espiritu was injured, the same must have
been caused by the knife he was holding when Candelaria tried to get it from him," stands
uncorroborated.

Reliance was placed by the NSB on the Master's rating of BENITEZ upon his discharge that
his ability and conduct was "very good," and that he was a good professional man. 17 This rating
was considered as offsetting the Master's entries in the log book. The Master, J.B. Cullen of
M.V. Gold Alisa, explained this, however, in a transmittal letter dated June 10,1982 to OFSI
Services, thus: "Benitez in himself was not all that bad a person. But he had had a few drinks
ashore, and chose to settle his differences with a knife, which action is absolutely unacceptable
aboard. ... Because I did not want to make Benitez bear the consequences of this incident for
the rest of Ms sea career, I did not make any specific remark in his Seaman's Book - however,
it goes without saying that he should not under any circumstances be appointed to a Haverton
vessel again."

In the light of all the foregoing, the inevitable conclusion is that public respondents had
misappreciated the significance of the entry in the vessel's official log book regarding the
incident. The probative value of the facts stated therein has not been overcome by BENITEZ's
submittals.

We are constrained to hold, therefore, that BENITEZ's actuations were tantamount to serious
misconduct in connection with his work and is a just cause for termination of employment. 19 As
a consequence, he is not entitled to any salary for the unexpired portion of his employment
contract.

8. Philam Insurance vs. Heung A. Shipping, G.R. No. 187701 July 23, 2014
Doctrine: In a contract of affreightment, the voyage remains under the responsibility of the
carrier and it is answerable for the loss of goods received for transportation. The charterer is
free from liability to third persons in respect of the ship.
Facts:
Novartis Consumer Health Philippines Inc. (NOVARTIS) imported from Jinsuk Trading Co. Ltd.
(JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated plastic
packaging material. In order to ship, JINSUK engaged the services of Protop Shipping
Corporation (PROTOP), a freight forwarder. PROTOP shipped the cargo through DONGNAMA
Shipping Co. Ltd. (DONGNAMA) which in turn loaded the same on M/V Heung-A Bangkok V-
019, owned and operated by Heung-A Shipping Corporation (HEUNG-A), pursuant to a ‘slot
charter arrangement’ whereby a space in the latter’s vessel was reserved for the exclusive use
of the former.
NOVARTIS insured the shipment with Philam Insurance Company Inc. (PHILAM). The
shipment reached NOVARTIS, and upon inspection, the boxes of the shipment were wet and
damp. The shipment is entirely damaged and was found out that the damage was caused by
salt water. NOVARTIS rejected the shipment and filed an insurance claim with PHILAM and
the latter was subrogated to all the rights and claims of NOVARTIS. PHILAM filed a complaint
for damages against the parties to the shipment. HEUNG- A denied liability by arguing that he
is not the carrier in so far as NOVARTIS is concerned and asserted that its only obligation was
to provide DONGNAMA a space on board his ship.
The trial court ruled declaring HEUNG-A as the common carrier and held it liable. The ruling
was affirmed by the appellate court.
Issue:
Whether or not HEUNG-A is the common carrier that should be liable to the damage sustained
by the package while on transit.
Ruling:
YES, HEUNG-A is the common carrier. HEUNG-A’s slot charter arrangement with
DONGNAMA is a charter party arrangement.
A charter party is a contract whereby an entire ship or some principal part thereof, is let by the
owner to another person for a specified time or use. It has two types. First it could be a contract
of affreightment whereby the use of shipping space on vessels were leased in part or as a
whole, to carry goods for others. The charter-party provides for the hire of vessel only, either
for a definite period of time (time charter) of for a single or consecutive voyage (voyage charter).
The shipowner supplies the ship’s stores, pay for the wages of the master and the crew, and
defray the expenses for the maintenance of the ship. The voyage remains under the
responsibility of the carrier and it is answerable for the loss of goods received for transportation.
The charterer is free from liability to third persons in respect to the ship.
Second, charter by demise or bareboat charter under which the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control
over its navigation, including the master and the crew, who are his servants. The charterer
mans the vessel with his own people and becomes, in effect, the owner for the voyage or
service stipulated and hence liable for damages or loss sustained by the goods transported.
Clearly, the ‘slot charter arrangement’ between HEUNG-A and DONGNAMA, where the latter
is reserved a space in the vessel is a contract of affreightment. The arrangement did not divest
HEUNG-A its character as the common carrier nor relieve it of any accountability for the
shipment.
As a common carrier, it is presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed, unless they prove that they exercise
extraordinary diligence in transporting the same. HEUNG-A failed to rebut this prima facie
presumption; hence, it is answerable for the damages incurred by the goods received for
transportation.
WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the Court
of Appeals in CA-G.R. CV No. 89482 is hereby AFFIRMED with MODIFICATION in that the
interest rate on the award of US$8,500.00 shall be six percent (6%) per annum from the date
of finality of this judgment until fully paid.

9. Caltex Phils. vs. Sulpicio Lines, Inc.,G.R. No. 131166 September 30, 1999;
Facts:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute
to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. MT
Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation,
engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and
crude oil. During that particular voyage, the MT Vector carried on board gasoline and other oil
products owned by Caltex by virtue of a charter contract between them. On December 20,
1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban headed
for Manila with a complement of 59 crew members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Guard Clearance. The MV Doña Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of
Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a
week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the
vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV
Doña Paz died, while the two survivors from MT Vector claimed that they were sleeping at the
time of the incident. The MV Doña Paz carried an estimated 4,000 passengers; many indeed,
were not in the passenger manifest. Only 24 survived the tragedy after having been rescued
from the burning waters by vessels that responded to distress calls. Among those who perished
were public school teacher Sebastian Cañezal (47 years old) and his daughter Corazon
Cañezal (11 years old), both unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after investigation
found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual
operator Vector Shipping Corporation, were at fault and responsible for its collision with MV
Doña Paz.
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and
mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for
“Damages Arising from Breach of Contract of Carriage” against Sulpicio Lines, Inc. (hereafter
Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector
Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT
Vector with gross and evident bad faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed
against MV Doña Paz in the open sea setting MT Vector’s highly flammable cargo ablaze.
Issue:
Whether or not the charterer/shipper is liable for breach of warranty of seaworthiness.

Ruling:
NO. A charter party is a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; a contract of affreightment is one
by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight.
A contract of affreightment may be either time charter, wherein the leased vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to supply the
ship’s store, pay for the wages of the master of the crew, and defray the expenses for the
maintenance of the ship.
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his
own people and becomes, in effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence. prLL
If the charter is a contract of affreightment, which leaves the general owner in possession of
the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the
owner. The charterer is free from liability to third persons in respect of the ship.
Second: MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3)
voyage charter. Does a charter party agreement turn the common carrier into a private one?
We need to answer this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of the vessel as
a common carrier.
Under the Carriage of Goods by Sea Act:
SECTION 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to —
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel
to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.
The provisions owed their conception to the nature of the business of common carriers. This
business is impressed with a special public duty. The public must of necessity rely on the care
and skill of common carriers in the vigilance over the goods and safety of the passengers,
especially because with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. For these reasons, a
passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and
its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two
years before the tragic incident occurred in 1987. Past services rendered showed no reason
for Caltex to observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All
things considered, we find no legal basis to hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals’ decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals’ ruling insofar
as Vector is concerned.

10. Planters Products vs. CA, G.R. No. 101503 September 15, 1993;

Doctrine:
A “charter-party” is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; 20 a contract of affreightment
by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a whole, to
carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which
the whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the crew, who
are his servants. Contract of affreightment may either be time charter, wherein the vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased
for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel only,
either for a determinate period of time or for a single or consecutive voyage, the shipowner to
supply the ship’s stores, pay for the wages of the master and the crew, and defray the expenses
for the maintenance of the ship.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to
the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control
of the ship, although her holds may, for the moment, be the property of the charterer.
Summary: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V “Sun Plum” owned by
private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by
the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V “Sun Plum”
pursuant to the Uniform General Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-
party starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1,
2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.
Facts:
 Planters Products - purchased from Mitsubishi Inter’l Corp. 9.3K metric tons of Urea (fertilizer),
46% of which the latter shipped in bulk aboard the cargo vessel M/V “Sun Plum” owned by
Kyosei Kisen Kabushiki Kaisha (KKKK)
 time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was
entered into between Mitsubishi as shipper/charterer and KKKK as ship-owner
 before loading the fertilizer aboard the vessel they were inspected by the charterer’s
representative and found fit
 After the Urea fertilizer was loaded in bulk by stevedores (somebody whose job is to load and
unload ships) hired by and under the supervision of the shipper, the steel hatches were closed
with heavy iron lids, covered with 3 layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage.
 port area was windy, certain portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the discharge was in progress
 survey report revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea
fertilizer approximating 18 M/T was contaminated with sand, rust and dirt
 Planters Products sent a claim letter to Soriamont Steamship Agencies, the resident agent of
the carrier, for damages

Issues:
1. Whether a common carrier becomes a private carrier by reason of a charter-party.
2. In the negative, WON the shipowner was able to prove that he had exercised that degree of
diligence required of him under the law

Ruling:

1. YES.
 charter-party – contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; contract of affreightment by which the
owner of a ship or other vessel lets the whole or a part of her to a merchant or other person
for the conveyance of goods, on a particular voyage, in consideration of the payment of freight
 2 types of charter-party:
 a. contract of affreightment – involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; may either be: i) time charter - vessel
is leased to the charterer for a fixed period of time; or ii) voyage charter - ship is leased for a
single voyage
 b. charter by demise or bareboat charter – whole vessel is let to the charterer with a transfer
to him of its entire command and possession and consequent control over its navigation,
including the master and the crew, who are his servants
 In both types, the charter-party provides for the hire of vessel only, either for a determinate
period of time or for a single or consecutive voyage, the shipowner to supply the ship’s stores,
pay for the wages of the master and the crew, and defray the expenses for the maintenance
of the ship.
 common or public carrier – see Art. 1732; extends to carriers either by land, air or water
which hold themselves out as ready to engage in carrying goods or transporting passengers
or both for compensation as a public employment and not as a casual occupation
 distinction between a “common or public carrier” and a “private or special carrier” lies in the
character of the business, such that if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for a fee, the person
or corporation offering such service is a private carrier
 common carrier - should observe extraordinary diligence in the vigilance over the goods they
carry; in case of loss, destruction or deterioration of the goods, it is presumed to be at fault or
to have acted negligently, and the burden of proving otherwise rests on it
 private carrier - exercise of ordinary diligence in the carriage of goods will suffice; no such
presumption applies to private carriers
 only when the charter includes both the vessel and its crew, as in a bareboat or demise that
a common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned
 when Planters Products chartered the vessel M/V “Sun Plum”, the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued to be under
its direct supervision and control. As stranger to the crew and to the ship, Planters Products
did not have the duty of caring for its cargo as it did not have control of the means in doing
so.

2. YES.
 Before the fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and
fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of
serviceable tarpaulins which were tied with steel bonds. The hatches remained close and
tightly sealed while the ship was in transit as the weight of the steel covers made it impossible
for a person to open without the use of the ship’s boom.
 the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo
into the sea or seepage of water inside the hull of the vessel
 stevedores unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis
 Urea also contains 46% nitrogen and is highly soluble in water. However, during storage,
nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed 80 degrees centigrade.
 dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an
extremely high temperature in its place of storage, or when it comes in contact with water
 probability of the cargo being damaged or getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was transported in “bulk,” thereby exposing it
to the inimical effects of the elements and the grimy condition of the various pieces of
equipment used in transporting and hauling it  risk the shipper or the owner of the goods
has to face

11. Asian Terminals vs. Philam Insurance, G.R. No. 181163, July 24, 2013

Doctrine: (1)Payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have against the third party whose negligence
or wrongful act caused the loss. (2)Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance of goods
transported. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them. (3)The prescriptive period for filing
an action for the loss or damage of the goods under the COGSA is found in paragraph (6),
Section 3.
Facts:
On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2 model,
without engine, tires and batteries, on board the vessel S/S “Calayan Iris” from Japan to Manila.
The shipment was insured with Philam against all risks under Marine Policy No. 708-8006717-
4. The carrying vessel arrived at the port of Manila on April 20, 1995, and when the shipment
was unloaded by the staff of ATI, it was found that the package marked as 03-245-42K/1 was
in bad order being dented and broken.
The shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the authorized broker
of Universal Motors, and delivered to the latter’s warehouse in Mandaluyong City. Upon the
request of Universal Motors, a bad order survey was conducted on the cargoes and it was
found that one Frame Axle Sub without LWR was deeply dented while six Frame Assembly
with Bush were deformed and misaligned. Universal Motors declared them a total loss.
Universal Motors filed a formal claim for damages in the amount of P643,963.84 against
Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. The demands remained unheeded
hence it sought reparation from and was compensated in the sum of P633,957.15 by Philam.
Accordingly, Universal Motors issued a Subrogation Receipt in favor of Philam. Philam, as
subrogee filed a Complaint for damages against Westwind, ATI and R.F. Revilla Customs
Brokerage, Inc. before the RTC. The RTC rendered judgment in favor of Philam and ordered
Westwind and ATI to pay Philam, jointly and severally, the sum of P633,957.15 with interest.
On appeal, the CA affirmed with modification the ruling of the RTC. The appellate court directed
Westwind and ATI to pay Philam, jointly and severally, the amount of P190,684.48 with interest.
The amount was limited only to (1) unit of Frame Axle Sub.

Issues:
(1) Who between Westwind and ATI should be held liable for the damaged cargoes;
(2) What is the extent of their liability? ; and
(3) Has Philam’s action for damages prescribed?

Ruling:
Westwind and ATI are both liable to Philam, the subrogee of Universal Motors.
As to Westwind's liability, the Court agreed with ATI's contention that Steel Case No. 03- 245-
42K/1 was partly torn and crumpled on one side while it was being unloaded from the carrying
vessel. Clearly the contents were damaged while in the custody of Westwind. Further it was
proven that Westwind’s duty officer exercised full supervision and control over the entire
process of unloading.
This is a clear violation of the extraordinary diligence required for common carriers in the
vigilance of goods transported by them. It must be noted that the extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession
of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them.
As to ATI's liability the Court held it solidarily liable with Westwind. Being the custodian of the
goods discharged from a vessel, an arrastre operator’s duty is to take good care of the goods
and to turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator’s principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody. While it is true that an arrastre operator and a carrier
may not be held solidarily liable at all times, the facts of these cases show that apart from ATI’s
stevedores being directly in charge of the physical unloading of the cargo, its foreman picked
the cable sling that was used to hoist the packages for transfer to the dock. Moreover, the fact
that 218 of the 219 packages were unloaded with the same sling unharmed is telling of the
inadequate care with which ATI’s stevedore handled and discharged the goods. The Court also
agreed with the CA that the liability should be confined to the value of the one piece Frame Axle
Sub without Lower since there is nothing in the records to show conclusively that the six Frame
Assembly with Bush were likewise contained in and damaged inside. Lastly, the Court held that
petitioner Philam has adequately established the basis of its claim against petitioners ATI and
Westwind. Philam, as insurer, was subrogated to the rights of the consignee, Universal Motors
Corporation, pursuant to the Subrogation Receipt executed by the latter in favor of the former.
Philam's action has not prescribed. Moreover, paragraph (6), Section 3 of the COGSA clearly
states that failure to comply with the notice requirement shall not affect or prejudice the right of
the shipper to bring suit within one year after delivery of the goods. Petitioner Philam, as
subrogee of Universal Motors, filed the Complaint for damages on January 18, 1996, just eight
months after all the packages were delivered to its possession on May 17, 1995. Evidently,
petitioner Philam’s action against petitioners Westwind and ATI was seasonably filed.

12. Benjamin Cua vs. Wallem Shipping, GR. No. 74125, July 31, 1990
Facts:
SEVALCO Limited, owned and operated by the petitioner, shipped from Rotterdam
Netherlands, to Bangkok, Thailand, aboard its M/V "TAIWAN", 2 cargoes of 50 palletized
cartons. They were respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm
Retreads,Ltd. Both shipments were insured with the private respondent, Alliance Assurance
Company, Ltd., a foreign insurance company domiciled in London, England.

Despite the arrival of the vessel at Bangkok, the cargo covered by Bill of Lading No. RB-15 was
not unloaded nor delivered to the consignee, S. Lersen Company, Ltd. The shipment under Bill
of Lading No. RB-16 was delivered to Muang Ngarm Retreads, Ltd. with a shortage in weight
because the cargoes had been either totally or partially dissolved in saltwater which flooded
the vessel where they had been stored.

Upon arrival in Manila, Arturo C. Saavedra, master of M/V "TAIWAN" filed a marine protest
stating that the source of the water could not be definitely ascertained where it comes from. He
was suspecting of some leakage of suction pipes and that hold No. 2 cannot be inspected on
account of the full cargoes inside the hold, rendering it to be inaccessible.

The consignees filed their respective formal claims for loss and damage to their cargoes. The
insurer paid both claims in the amounts of £I2,180 and £2,547.18 for the loss and damage to
their cargoes.

Private respondent, as insurer-subrogee, filed an action in the Court of First Instance of Manila
to recover from the petitioner and its Manila agent, Carlos Go Thong & Company, what it paid
the consignees of the cargo.
Issues:
1. Whether or not petitioner liable for the damage/loss suffered by the subject shipments
2. Whether or not private respondent has capacity to sue in this jurisdiction
3. Whether or not in private respondent's cause of action has not yet prescribed

Ruling:
1. No. It was incumbent upon the defendants to prove that the losses and damages were due
to causes other than the negligence or fault of their employees. Said defendants have not
adduced proof on this point. It having been shown that the losses and damages were incurred
while the shipments were in the custody of the M/V' Taiwan' the liability of its owner/operator
and shipping agent is clear-they must pay for the losses and damages sustained by the
consignees as a consequence of the breach of contract of water transportation.

2. Yes, The private respondent may sue in Philippine courts upon the marine insurance policies
issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even
if it has no license to do business in this country, for it is not the lack of the prescribed license
(to do business in the Philippines) but doing business without such license, which bars a foreign
corporation from access to our courts.

3. No. Section 3(6), Title I, of the Carriage of Goods by Sea Act (Commonwealth Act No. 65)
which provides that:

... the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods
should have been delivered. ...

This provision of the law admits of an xception: if the one-year period is suspended by express
agreement of the parties for in such a case, their agreement becomes the law for them.

The exchange of correspondence between the parties and/or their associates/representatives

shows that the parties had mutually agreed to extend the time within which the plaintiff or its
predecessors-in-interest may file suit until December 27,1976. When the complaint was filed
on June 25, 1976, that deadline had not yet expired.

13. Wallem Shipping vs. S.R Farms, GR. No. 161849, July 9, 2010
Doctrine: Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within
three days of delivery. Admittedly, respondent did not comply with this provision. Under the
same provision, however, a failure to file a notice of claim within three days will not bar recovery
if a suit is nonetheless filed within one year from delivery of the goods or from the date when
the goods should have been delivered.

Facts:
Continental Enterprises, Ltd. loaded on board the vessel M/V "Hui Yang," at Bedi Bunder, India,
a shipment of Indian Soya Bean Meal, for transportation and delivery to Manila, with plaintiff
[herein respondent] as consignee/notify party. The said shipment is said to weigh 1,100 metric
tons and covered by Bill of Lading. The vessel is owned and operated by defendant Conti-Feed,
with defendant [herein petitioner] Wallem as its ship agent.
On April 11, 1992, the said vessel, M/V "Hui Yang" arrived at the port of Manila, Pier 7 South
Harbor. Thereafter, the shipment was discharged and transferred into the custody of the
receiving barges, the NorthFront-333 and NorthFront-444. The offloading of the shipment went
on until April 15, 1992 and was handled by [Ocean Terminal Services, Inc.] OTSI using its own
manpower and equipment and without the participation of the crew members of the vessel. All
throughout the entire period of unloading operation, good and fair weather condition prevailed.
At the instance of the plaintiff, a cargo check of the subject shipment was made by one Lorenzo
Bituin of Erne Maritime and Allied Services, Co. Inc., who noted a shortage in the shipment
which was placed at 80.467 metric tons based on draft survey made on the NorthFront-33 and
NorthFront-444 showing that the quantity of cargo unloaded from the vessel was only 1019.53
metric tons. Thus, per the bill of lading, there was an estimated shortage of 80.467.
Upon discovery thereof, the vessel chief officer was immediately notified of the said short
shipment by the cargo surveyor, who accordingly issued the corresponding Certificate of
Discharge dated April 15, 1992. The survey conducted and the resultant findings thereon are
embodied in the Report of Superintendence and in the Barge Survey Report both submitted by
Lorenzo Bituin.
Petitioner then filed a Complaint for damages against Conti-Feed & Maritime Pvt. Ltd., a foreign
corporation doing business in the Philippines and the owner of M/V "Hui Yang"; RCS Shipping
Agencies, Inc., the ship agent of Conti-Feed; Ocean Terminal Services, Inc. (OTSI), the arrastre
operator at Anchorage No. 7, South Harbor, Manila; and Cargo Trade, the customs broker.
On June 7, 1993, respondent filed an Amended Complaint impleading herein petitioner as
defendant alleging that the latter, and not RCS, was the one which, in fact, acted as Conti-
Feed's ship agent.
Meanwhile, defendant OTSI filed its Answer with Counterclaim and Crossclaim denying the
material allegations of the Complaint and alleging that it exercised due care and diligence in
the handling of the shipment from the carrying vessel unto the lighters; no damage or loss
whatsoever was sustained by the cargo in question while being discharged by OTSI; petitioner's
claim had been waived, abandoned or barred by laches or estoppels; liability, if any, is
attributable to its codefendants.
Issue:
Whether or not there is waiver when the written notice of loss was not given within three (3)
days from discharge of the subject shipment as provided in Section 3 (6) of the COGSA.

Ruling:
NO. There is no waiver although the written notice of loss was not given within three (3) days
from discharge of the subject shipment as provided in Section 3 (6) of the COGSA.
Nonetheless, the complaint of respondent against petitioner was not timely filed.
With respect to the prescriptive period involving claims arising from shortage, loss of or damage
to cargoes sustained during transit, the law that governs the instant case is the Carriage of
Goods by Sea Act (COGSA), Section 3 (6) of which provides:
Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge or at the time of the removal of the
goods into the custody of the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier of the goods as
described in the bill of lading. If the loss or damage is not apparent, the notice must be given
within three days of delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt
been the subject of joint survey or inspection.
In any event, the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered; Provided, That, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that fact shall not affect or
prejudice the right of the shipper to bring suit within one year after the delivery of the goods or
the date when the goods should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give
all reasonable facilities to each other for inspecting and tallying the goods.
Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within three days
of delivery. Admittedly, respondent did not comply with this provision.
Under the same provision, however, a failure to file a notice of claim within three days will not
bar recovery if a suit is nonetheless filed within one year from delivery of the goods or from the
date when the goods should have been delivered.
In Loadstar Shipping Co., Inc. v. Court of Appeals, the Court ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed.
In the instant case, the Court is not persuaded by respondent's claim that the complaint against
petitioner was timely filed. Respondent argues that the suit for damages was filed on March 11,
1993, which is within one year from the time the vessel carrying the subject cargo arrived at the
Port of Manila on April 11, 1993, or from the time the shipment was completely discharged from
the vessel on April 15, 1992.
There is no dispute that the vessel carrying the shipment arrived at the Port of Manila on April
11, 1992 and that the cargo was completely discharged therefrom on April 15, 1992. However,
respondent erred in arguing that the complaint for damages, insofar as the petitioner is
concerned, was filed on March 11, 1993.
As the records would show, petitioner was not impleaded as a defendant in the original
complaint filed on March 11, 1993. It was only on June 7, 1993 that the Amended Complaint,
impleading petitioner as defendant, was filed.
Respondent cannot argue that the filing of the Amended Complaint against petitioner should
retroact to the date of the filing of the original complaint.
The settled rule is that the filing of an amended pleading does not retroact to the date of the
filing of the original; hence, the statute of limitation runs until the submission of the amendment.
It is true that, as an exception, this Court has held that an amendment which merely
supplements and amplifies facts originally alleged in the complaint relates back to the date of
the commencement of the action and is not barred by the statute of limitations which expired
after the service of the original complaint. The exception, however, would not apply to the party
impleaded for the first time in the amended complaint.

14. New World vs. Sea Born Insurance, GR. 174241

Doctrine: The carrier and the ship shall be discharged from all liability in case of loss or damage
unless the suit is brought within one year after delivery of the goods or the date when the goods
should have been delivered.
Facts:
New World International Development (Phils.), Inc. (New World) bought from DMT Corporation
(DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator sets.
DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit
International, Inc. (LEP Profit) in Chicago, Illinois.
From there, the shipment went by train to Oakland, California, where it was loaded on S/S
California Luna V59, owned and operated by NYK Fil-Japan Shipping Corporation (NYK) for
delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received
the goods in good condition. NYK unloaded the shipment in Hong Kong and transshipped it to
S/S ACX Ruby V/72 that it also owned and operated.
On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain
filed a sea protest on arrival at the Manila South Harbor on October 5, 1993 respecting the loss
and damage that the goods on board his vessel suffered. Marina Port Services, Inc. (Marina),
the Manila South Harbor arrastre or cargo-handling operator, received the shipment on October
7, 1993. Upon inspection of the three container vans separately carrying the generator sets,
two vans bore signs of external damage while the third van appeared unscathed. The shipment
remained at Pier 3s Container Yard under Marinas care pending clearance from the Bureau of
Customs.
Eventually, on October 20, 1993 customs authorities allowed petitioners customs broker,
Serbros Carrier Corporation (Serbros), to withdraw the shipment and deliver the same to
petitioner New Worlds job site in Makati City. An examination of the three generator sets in the
presence of New World’s representatives and surveyors of New World’s insurer, Seaboard
Eastern Insurance Company (Seaboard), revealed that all three sets suffered extensive
damage and could no longer be repaired.
For these reasons, New World demanded recompense for its loss from respondents NYK,
DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros.
While LEP and NYK acknowledged receipt of the demand, both denied liability for the loss.
Since Seaboard covered the goods with a marine insurance policy, New World sent it a formal
claim. Replying, Seaboard required New World to submit to it an itemized list of the damaged
units, parts, and accessories, with corresponding values, for the processing of the claim.
However, New World did not submit what was required of it, insisting that the insurance policy
did not include the submission of such a list in connection with an insurance claim. Reacting to
this, Seaboard refused to process the claim.
New World filed an action for specific performance and damages against all the respondents
before the RTC of Makati City which rendered a decision absolving the various respondents
from liability with the exception of NYK. On appeal, the Court of Appeals (CA) held that the
submission of the itemized listing was a reasonable requirement that Seaboard asked of New
World. Further, the CA held that the one-year prescriptive period for maritime claims applied to
Seaboard, as insurer and subrogee of New World’s right against the vessel owner. New World’s
failure to comply promptly with what was required of it prejudiced such right.

Issue:
Whether New World can still recover from Seabord.

Ruling:
YES. The record shows that petitioner New World complied with the documentary requirements
evidencing damage to its generator sets.
The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy
insured against all causes of conceivable loss or damage except when otherwise excluded or
when the loss or damage was due to fraud or intentional misconduct committed by the insured.
The policy covered all losses during the voyage whether or not arising from a marine peril.
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay
in voyage, or vessels unseaworthiness, among others. But Seaboard had been unable to show
that petitioner New World’s loss or damage fell within some or one of the enumerated
exceptions.
What is more, Seaboard had been unable to explain how it could not verify the damage that
New Worlds goods suffered going by the documents that it already submitted. Seaboard cannot
pretend that the above documents are inadequate since they were precisely the documents
listed in its insurance policy. Being a contract of adhesion, an insurance policy is construed
strongly against the insurer who prepared it.
Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the
ship shall be discharged from all liability in case of loss or damage unless the suit is brought
within one year after delivery of the goods or the date when the goods should have been
delivered. The last day for filing such a suit fell on October 7, 1994. The record shows that
petitioner New World filed its formal claim for its loss with Seaboard, its insurer, a remedy it had
the right to take, as early as November 16, 1993 or about 11 months before the suit against
NYK would have fallen due.
In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard
would have been subrogated to petitioner New Worlds right to recover from NYK. And it could
have then filed the suit as a subrogee. But, as discussed above, Seaboard made an
unreasonable demand on February 14, 1994 for an itemized list of the damaged units, parts,
and accessories, with corresponding values when it appeared settled that New World’s loss
was total and when the insurance policy did not require the production of such a list in the event
of a claim.

15. Insurance Company vs. Asian Terminals, GR. No. 180784, February 15, 2012

Doctrine: The COGSA does not mention that an arrastre operator may invoke the prescriptive
period of one year; hence, it does not cover the arrastre operator. Prescinding from Section 6
of the COGSA, only the carrier and the ship may put up the defense of prescription if the action
for damages is not brought within one year after the delivery of the goods or the date when the
goods should have been delivered. It has been held that not only the shipper. Additionally, the
consignee or legal holder of the bill may invoke the prescriptive period.

Facts:
On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel Corporation,
through M/V "DIMI P" vessel, one hundred eighty-five (185) packages (231,000 sheets) of
electrolytic tin free steel, complete and in good order condition and covered by a Bill of Lading.
The shipment had a declared value of US$169,850.35 and was insured with petitioner
Insurance Company of North America against all risks.

The carrying vessel arrived at the port of Manila on November 19, 2002, and when the shipment
was discharged therefrom, it was noted that seven (7) packages thereof were damaged and in
bad order. The shipment was then turned over to the custody of respondent Asian Terminals,
Inc. (ATI) on November 21, 2002 for storage and safekeeping pending its withdrawal by the
consignee's authorized customs broker.
The subject shipment was withdrawn by Marzan from the custody of respondent. Prior to the
last withdrawal of the shipment, a joint inspection of the said cargo was conducted which
showed that an additional five (5) packages were found to be damaged and in bad order. On
January 6, 2003, the consignee, San Miguel Corporation, filed separate claims against
respondent and petitioner for the damage to 11,200 sheets of electrolytic tin free steel.
Petitioner engaged the services of an independent adjuster/surveyor. The adjuster noted that
out of the reported twelve (12) damaged skids, nine (9) of them were rejected and three (3)
skids were accepted by the consignee’s representative as good order. The total loss was
computed to be P431,592.14.
The petitioner, as insurer of the said cargo, paid the consignee the amount of P431,592.14 for
the damage caused to the shipment, as evidenced by the Subrogation Receipt Thereafter,
petitioner, formally demanded reparation against respondent. As respondent failed to satisfy its
demand, petitioner filed an action for damages with the RTC of Makati City.
Although the trial court found the subrogation proper, the trial court dismissed the complaint on
the ground that the petitioner’s claim was already barred by the statute of limitations. It held
that COGSA, embodied in Commonwealth Act (CA) No. 65, applies to this case, since the
goods were shipped from a foreign port to the Philippines. The trial court stated that under the
said law, particularly paragraph 4, Section 3 (6) thereof, the shipper has the right to bring a suit
within one year after the delivery of the goods or the date when the goods should have been
delivered, in respect of loss or damage thereto. According to the trial court, the petitioner waited
for three (3) years within which to pay the claim of San Miguel.
Petitioner directly filed a petition for review before the Supreme Court.

Issues:
1. Whether or not the one-year prescriptive period for filing a suit under the COGSA applies to
respondent arrastre operator.
2. Whether or not petitioner is entitled to recover actual damages in the amount of P431,592.14
from respondent.

Ruling:
1. No. The COGSA does not mention that an arrastre operator may invoke the prescriptive
period of one year; hence, it does not cover the arrastre operator. Prescinding from Section 6
of the COGSA, only the carrier and the ship may put up the defense of prescription if the action
for damages is not brought within one year after the delivery of the goods or the date when the
goods should have been delivered. It has been held that not only the shipper. Additionally, the
consignee or legal holder of the bill may invoke the prescriptive period.
The COGSA was accepted to be made applicable to all contracts for the carriage of goods by
sea to and from the Philippine ports in foreign trade by virtue of CA 65. The term “carriage of
goods” covers the period from the time when the goods are loaded to the time when they are
discharged from the ship; thus, it can be inferred that the period of time when the goods have
been discharged from the ship and given to the custody of the arrastre operator is not covered
by the COGSA.
The prescriptive period for filing an action for the loss or damage of the goods under the COGSA
is found in paragraph 6, Section 3. It states that “in any event, the carrier and the ship shall
be discharged from all liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods should have been
delivered. Provided, that if a notice of loss or damage, either apparent or concealed, is
not given as provided for in this section, that fact shall not affect or prejudice the right
of the shipper to bring suit within one year after the delivery of the goods or the date
when the goods should have been delivered.”
However, the COGSA does not mention that an arrastre operator may invoke the prescriptive
period of 1 year; hence, it does not cover the arrastre operator.
In fact, respondent arrastre operator’s responsibility and liability for losses and damages are
set forth in Section 7.01 of the Contract for Cargo Handling Services executed between
the Philippine Ports Authority and Marina Ports Services, Inc. (now Asian Terminals, Inc.),
which explicitly provides that the consignee has a period of thirty (30) days from the date of
delivery of the package to the consignee within which to request a certificate of loss from the
arrastre operator. From the date of the request for a certificate of loss, the arrastre operator has
a period of fifteen (15) days within which to issue a certificate of non-delivery/loss either actually
or constructively. Moreover, from the date of issuance of a certificate of non-delivery/loss, the
consignee has fifteen (15) days within which to file a formal claim covering the loss, injury,
damage or non-delivery of such goods with all accompanying documentation against the
arrastre operator.

Here, the verification and ascertainment of liability by respondent ATI had been
accomplished within thirty (30) days from the date of delivery of the package to the
consignee and within fifteen (15) days from the date of issuance by the Contractor
(respondent ATI) of the examination report on the request for bad order survey. Although
the formal claim was filed beyond the 15-day period from the issuance of the examination report
on the request for bad order survey, the purpose of the time limitations for the filing of claims
had already been fully satisfied by the request of the consignees broker for a bad order survey
and by the examination report of the arrastre operator on the result thereof, as the arrastre
operator had become aware of and had verified the facts giving rise to its liability. Hence, the
arrastre operator suffered no prejudice by the lack of strict compliance with the 15-day limitation
to file the formal complaint.

2. YES. Petitioner is entitled to actual damages in the amount of P164,428.76 for the four (4)
skids damaged while in the custody of respondent.

It should be noted that the petitioner, who filed this action for damages for the five (5) skids that
were damaged while in the custody of respondent, was not forthright in its claim, as it knew that
the damages it sought in the amount of P431,592.14, which was based on the Evaluation Report
of its adjuster/surveyor covered nine (9) skids. Based on the same Evaluation Report, only
four of the nine skids were damaged in the custody of respondent. Petitioner should have
been straightforward about its exact claim, which is borne out by the evidence on record, as
petitioner can be granted only the amount of damages that is due to it.

WHEREFORE, the petition is GRANTED

16. Federal Phonenix vs. Fortune Sea, GR. No. 188118, November 23, 2015

Facts:
On March 9, 1994, Fortune Sea agreed to lease its vessel M/V Ricky Rey to Northern Mindanao
Transport Co., Inc. (Northern Transport). The Time Charter Party agreement executed by the
parties provides that the vessel shall be leased to Northern Transport for 90 days to carry bags
of cement to different ports of destination. Later on, the parties extended the period of lease for
another 90 days.
Sometime in June 1994, Northern Transport ordered 2,069 bales of abaca fibers to be shipped
on board M/V Ricky Rey by shipper Manila Hemp Trading Corporation, for delivery to consignee
Newtech Pulp Inc. (Newtech) in Iligan City. The shipment was covered by Bill of Lading No. 1
and was insured by petitioner Federal Phoenix Assurance Co.,. Ltd. (Federal Phoenix)
Upon arrival of M/V Ricky Rey at the Iligan City port on June 16, 1994, the stevedores started
to discharge the abaca shipment the following clay. At about 3:00 p.m., however, on June 18,
1994, the stevedores noticed smoke coming out of the cargo haul where the bales of abaca
where located. Immediately, the lire was put off" by the Iligan City Fire Department. Upon
investigation, it was discovered that 60 bales of abaca were damaged.
As a result of the losses, Newtech filed an insurance claim with Federal Phoenix. After
evaluation, Federal Phoenix paid Newtech for the losses it incurred due to the damaged and
undelivered bales of abaca. Upon payment. Federal Phoenix was subrogated to the rights of
Newtech and pursued its claim against Fortune Sea. Despite several demands to Fortune Sea,
however. Federal Phoenix's claims were not settled. As a result, Federal Phoenix filed a
Complaint9 for Sum of Money against Fortune Sea before the RTC of Makati.
For its defense, Fortune Sea insisted that it was acting as a private carrier at the time the
incident occurred. It alleged that the Time Charter Party agreement executed by the parties
expressly provided that M/V Ricky Rey shall be under the orders and complete control of
Northern Transport.

Issue:
Whether or not the CA erred in declaring that Fortune Sea was converted into a private carrier
by virtue of the charter party agreement it entered into with Northern Transport.

Ruling:
This Court rules in the affirmative.
Time and again, this Court have ruled that "[i]n determining the nature of a contract, courts are
not bound by the title or name given by the parties. The decisive factor in evaluating an
agreement is the intention of the parties, as shown, not necessarily by the terminology used in
the contract but by their conduct, words, actions and deeds prior to, during and immediately
alter executing the agreement."
As correctly observed by the CA, the Time Charter Party agreement executed by Fortune Sea
and Northern Transport clearly shows that the charter includes both the vessel and its crew
thereby making Northern Transport the owner pro hac vice of M/V Ricky Rey during the whole
period of the voyage, to wit:
A perspicacious scrutiny of the Time Charter Party disclosed the following provisions evincing
that Northern Transport became the owner pro hac vice of M/V Ricky Rey during the whole
period of the voyage-—
"VI. OTHER TERMS AND CONDITIONS:

F. Upon delivery of the vessel(s) and during the period of the charter, SECOND PARTY
(Northern Transport) assumes operational control for the dispatch and direction of voyage of
the vessel(s).
H. The Master to prosecute all voyages with the utmost despatch and to render
customary assistance with the vessel(s) crew. The Master to be under the orders of the
SECOND PARTY (Northern Transport) as regards employment of the other
arrangements.

N. The SECOND PARTY (Northern Transport) to furnish MASTER with all instructions
and sailing directions and the Master and Engineer to keep full and correct logs
accessible to the SECOND PARTY (Northern Transport) or their Supercargo.
To Our mind, the Time Charier Part[y] unequivocally established that appellant Fortune Sea
had completely and exclusively relinquished possession, command and navigation of M/V
Ricky Rey to Northern Transport.15 (Citation omitted)
Conformably, M/V Ricky Rey was converted into a private carrier notwithstanding the existence
of the Time Charter Party agreement with Northern Transport since the said agreement was
not limited to the ship only but extends even to the control of its crew. Despite the denomination
as Time Charter by the parties, their agreement undoubtedly reflected that their intention was
to enter into a Bareboat Charter Agreement.

Moreover, the CA likewise correctly ruled that the testimony of Captain Alfredo Canon (Capt.
Canon) of M/V Ricky Rey confirmed that when the whole vessel was leased to Northern
Transport, the entire command and control over its navigation was likewise transferred to it.
The testimonies of Capt. Canon undoubtedly show that Northern Transport eflectively subjected
not only the ship but including its crew under its own exclusive control.

Moreover, although the master and crew of the vessel were those of the shipowner, records
show that at the time of the execution of the charter party, Fortune Sea had completely
relinquished possession, command, and navigation of M/V Ricky Rey to Northern Transport.
As such, the master and all the crew of the ship were all made subject to the direct control and
supervision of the charterer. In fact, the instructions on the voyage and other relative directions
or orders were handed out by Northern Transport. Thus, the CA correctly ruled that the nature
of the vessel's charter is one of bareboat or demise charter.

17. Lorenzo Shipping Corporation vs. Napocor, GR. No. 181683, October 7, 2015.

Summary: MV Vessel Lorcon Luzon, owned by Lorenzo Shipping, rammed into NPC’s Power
Barge 104 when the latter was berthed and stationed at Makar Wharf in GenSan. At the time
of the collision, the Lorcon was under the mandatory pilotage of Captain Yape, while Captain
Villarias, as master of the vessel, stayed beside Yape to repeat the latter’s orders. The collision
took place when upon reaching precariously close to the barge, Yape’s orders to move the
vessel backwards were not heeded. NPC filed a complaint for damages. Lorenzo Shipping
argued that it should not be made liable since operational control of the vessel was yielded to
the pilot. RTC absolved Lorenzo Shipping. CA reversed and awarded P878,286.00 as actual
damages. Upon MR of Lorenzo Shipping, CA amended its decision and deleted the award of
actual damages, and instead awarded P300K temperate damages. Lorenzo Shipping assail
the award and argued that temperate damages are only awarded when pecuniary loss is
unascertainable because of the nature of the injury, and NOT in cases where there may be
proof adduced to determine the amount but was not done so. NPC also assailed the amended
decision and maintained that they are entitled to actual damages for having been able to prove
its amount through competent evidence.
SC held that Lorenzo Shipping is liable for damages despite the mandatory pilotage of Yape
because the Master of the vessel does not lose control and command of the vessel just because
of such pilotage. Villarias was ultimately remiss of his duties when he did nothing even after the
orders of Yape became unheeded. Hence, Lorenzo Shipping, as Villarias’ employer, is liable
for damages. The award of temperate damages is proper since NPC was not able to prove the
actual amount of loss, which is necessary before actual damages may be awarded. Further,
SC debunked Lorenzo Shipping’s argument that temperate is only available in cases where
loss is unascertainable even through evidence. Temperate damages will be awarded so long
as the loss is not ascertained, regardless of whether proof could be adduced to determine the
actual amount of loss.
Facts:
This is a consolidation of both petitions for review of CA’s decision of Lorenzo Shipping Corp &
NPC. So technically they’re both petitioners and respondents of each other. GR181683:
Lorenzo Shipping’s petition; GR184568: NPC’s petition.
1. Power Barge 104 (owned by National Power Corp) was berthed and stationed at Makar
Wharf in General Santos City when MV Lorcon Luzon (owned & operated by Lorenzo Shipping)
hit it.
2. At the time of the incident, MV Lorcon Luzon’s Master was Captain Villarias & it was under
the pilotage of Captain Yape. (it’s mandatory to yield navigational control to a Harbor Pilot while
docking)
a) As MV Lorcon Luzon was docking, Yape ordered the vessel to proceed “slow ahead”
(speed of about 1 knot). As it moved closer to the dock, he gave the order “dead slow
ahead” (making the vessel move even slower). He then ordered the engine to be
stopped.
b) As the vessel was moving “precariously close” to the wharf, Yape ordered the vessel to
go “slow astern” (astern = backwards) and subsequently “full astern.” Despite his orders,
the engine failed to timely respond. Thus, Yape ordered the dropping of the anchor.
However, MV Lorcon still rammed into Power Barge 104.
c) Villarias testified that despite Yape’s pilotage, he remained beside him at all times as he
had to repeat Yape’s orders. Also, he stated that 6 minutes had passed before he realized
that there was an engine failure when he observed that Yape’s orders to move astern
were not heeded.

3. Both Nelson Homena (Plant Manager of the Power Barge) and Villarias filed their separate
Marine Protests before the Board of Marine Inquiry. Yape filed a Marine Accident Report. Board
of Marine Inquiry conducted joint hearings.
4. To forestall prescription, NPC filed a complaint for damages before RTC QC alleging that the
damage was due to the ramming of MV Lorcon to Power Barge and that in addition to the
physical damage incurred by the barge, NPC suffered generation losses as a result of the
tripping of the line and the failure of the Power Barge to generate electricity immediately after
the accident.
 a) Lorenzo Shipping filed a motion to dismiss for lack of jurisdiction. They alleged that it
should be heard and settled by the Board of Marine Inquiry/PH Coast Guard instead.
RTC denied motion.
b) Lorenzo Shipping filed its answer and claimed that:
i) the vessel was commandeered by official harbor pilot Yape to whom it was “mandatory
to yield operational control” thus any liability should be attributed to the pilot and NOT to
the company.
ii) Makar Wharf is a berthing place only for self-propelled vessel & the power barge in NOT
self-propelled, hence, it assumed the risk of such ramming because of its improper
presence.
iii) NPC’s action was barred by laches as 4 years had already lapsed before it filed the
complaint.

5. RTC ABSOLVED LORENZO SHIPPING OF LIABILITY. It held that no malfunctioning was

recorded and that Lorenzo Shipping was sued in its capacity as employer, hence, any liability
it would have incurred is merely subsidiary. Nevertheless, Lorenzo Shipping exercised due
diligence in its selection and supervision of Villarias.
6. CA REVERSED. It ordered Lorenzo Shipping to pay P878,286.00 as actual damages and
P50,000.00 as attorney’s fees and expenses of litigation. It held that Villarias was remiss in his
duties as he did nothing when Yape’s orders to go astern appeared to not have been heeded.
a) Upon MR of Lorenzo Shipping, CA amended its decision and noted that the amount of
actual damages was NOT proven by NPC, hence, it awarded P300,000 temperate
damages in lieu of the actual damages.

7. Both Lorenzo Shipping and NPC filed their own petitions for review on certiorari with SC, and
the court consolidated them.
a. LORENZO SHIPPING: reiterated its position (fact 4.b) and assailed the award of temperate
damages arguing that it may only be awarded in cases where the amount of pecuniary loss
because of its nature cannot be ascertained. Here, NPC is well in a position to adduce proof of
the exact amount of damage but merely failed to do so.
b. NPC: It maintained that it was able to show by “competent testimonial and documentary
evidence” that it must be compensated for actual damages of P878,286.00 in view of the
testimony of Nelson Homena and NPC disbursement voucher (these pieces of evidence will be
discussed in detail sa holding)

Issues:
1. Whether or not Lorenzo shipping is liable.
2. If liable, what type of damages must be awarded to NPC? Regarding Lorenzo Shipping’s
liability, refer to second issue.
Ruling:
NPC failed to establish the precise amount of pecuniary loss it suffered. Hence, it is entitled
only to temperate damages.
○ ART 2199. “Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages.”
To prove the amount of loss, NPC presented Nelson Homena’s testimony, Total Incidental Cost
for Drydock and Repair prepared by PHILSECO (PH Shipyard & Engineering Corp), and NPC
Disbursement Voucher for proof of payment to PHILSECO for repairs.
○ Nelson Homena’s testimony: all he indicated was how he and a certain Mr. Neri estimated
the cost of damage to be about P1M
○ Disbursement Voucher: attests to the expenses paid to PHILSECO, but it was silent on exact
cost paid for the repair of Power Barge 104.
○ Total Incidental Cost of PHILSECO: RTC rendered it inadmissible for not having been
identified nor authenticated by any witness. (SC held that it was a private document kasi so it
must first be authenticated, otherwise, it cannot be admitted as evidence pursuant to Rules of
Court so since they failed to authenticate it RTC held it inadmissible THUS, it cannot be used
as basis for computing the amount of loss, sayang i think it would have been good proof)
 [DOCTRINE] Amount of loss must not only be capable of proof but must actually be
proven with a reasonable degree of certainty, premised upon competent proof or best
evidence. The claimant is duty-bound to point out specific facts that afford basis for
measuring whatever compensatory damages are borne. Court cannot rely merely on
speculations, conjectures, or hearsay or uncorroborated testimony.
 ART 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary
loss has been suffered but its amount can not, from the nature of the case, be provided
with certainty.

○ Lorenzo Shipping relied on the phrase “from the nature of the case” when it maintained its
position. HOWEVER, SC held that such construction is erroneous and unduly restrictive.
Previous jurisprudence has already settled that ART 2224 is clear that temperate damages may
be awarded even in instances where pecuniary loss could theoretically have been proved with
certainty.
○ So basically temperate damages will be awarded so long as the loss is not provided with
certainty regardless of whether plaintiff could have provided proof to determine actual amount
or not. So Lorenzo Shipping is WRONG in saying that only in cases when the plaintiff cannot
prove amount of loss even with evidence will temperate damages be awarded.
W/N Lorenzo Shipping is liable for damages?
YES. ON THE MANDATORY PILOTAGE
● A Master’s designation as commander of a vessel is long-settled. He performs 3 distinct roles:
(1) general agent of shipowner, (2) commander and technical director of the vessel, and (3) he
is a representative of the country under whose flag he navigates. He is committed with the
governance, care, and management of the vessel.
● Notwithstanding this, there are recognized instances when control of a vessel is yielded to a
pilot:
1. Sec. 8 of PPA Administrative Order 03-85: For docking and undocking at any pier/wharf,
every vessel engaged in coastwise and foreign trade shall be under compulsory pilotage.
However, Ship Captains may pilot their vessels xxx provided they meet/comply with the
following minimum classifications: (1) properly licensed as a harbor pilot, (2) have been a
master of an inter island vessel for at least 3 years, and (3) certified by a government physician
to be physically and mentally fit.
2. Sec. 11, PPA Admin Order: Harbor Pilots are responsible for damage caused to the vessel
or to life and property at ports due to his negligence or fault. BUT the Master shall retain overall
command of the vessel even on pilotage grounds whereby he can countermand or overrule the
order or command of the Harbor Pilot on board.
● Hence, if the master observes that the pilot is incompetent or physically incapable, then it is
his duty to refuse to permit the pilot to act. If no such reasons exist, master is justified in relying
upon the pilot but NOT blindly. Master must exercise a degree of vigilance commensurate with
the circumstances.
● IN THE CASE AT BAR, Villarias was remiss in his duties. He testified that he only realized
that there was an engine failure after the lapse of 6 minutes. Lorenzo Shipping tried to justify
this by saying that the captain did not have enough time to deliberate and examine the
circumstances for him to make a judgment that the pilot had given a wrong command.
○ 6 minutes cannot be characterized as so quick and fleeting that it deprived Villarias the time
needed to arrest the momentum of the vessel. An entire song could have played in Villarias’
head within those 6 minutes (lol)
○ It was only reasonable for Villarias to remain vigilant and support Yape’s orders and take
evasive and counter measures should Yape’s attempts be ineffectual. Even just a minute
without any response from the concerned department (department that was supposed to
execute Yape’s orders) could have alarmed him
○ For 6 minutes, he simply did nothing when he should have been on his toes, keen, and ready
to make decisions. ○ HENCE, since Villarias is negligent. Lorenzo Shipping, as his employer,
is liable for damages.
ON BARGE’S PRESENCE IN THE WHARF
● Lorenzo Shipping did not have any basis for arguing that Power Barge’s presence in the
wharf was improper for not being self-propelled. No evidence whatsoever was presented to
support the contention that only self-propelled vessels are allowed in the wharf.
● Further, there is a presumption of fault against a moving vessel that strikes a stationary object.
The moving vessel must show that it was without fault or that the collision was occasioned by
the fault of the stationary object or was the result of inevitable accident. Ruling: Consolidated
petitions are DENIED. CA is affirmed.