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FIRST DIVISION Republic Flour Mills Corporation rejected the entire cargo

and formally demanded from North Front Shipping Services, Inc.,

[G.R. No. 119197. May 16, 1997] payment for the damages suffered by it. The demands however
were unheeded. The insurance companies were perforce obliged to
pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies
CO., LTD., petitioners, vs.NORTH FRONT SHIPPING
they were subrogated to the rights of Republic Flour Mills
Corporation. Thusly, they lodged a complaint for damages against
APPEALS, respondents. North Front Shipping Services, Inc., claiming that the loss was
exclusively attributable to the fault and negligence of the
DECISION carrier. The Marine Cargo Adjusters hired by the insurance
companies conducted a survey and found cracks in the bodega of
BELLOSILLO, J.: the barge and heavy concentration of molds on the tarpaulins and
wooden boards. They did not notice any seals in the hatches. The
tarpaulins were not brand new as there were patches on them,
TABACALERA INSURANCE CO., Prudential Guarantee &
contrary to the claim of North Front Shipping Services, Inc., thus
Assurance, Inc., and New Zealand Insurance Co., Ltd., in this
making it possible for water to seep in. They also discovered that
petition for review on certiorari, assail the 22 December 1994
the bulkhead of the barge was rusty.
decision of the Court of Appeals and its Resolution of 16 February
1995 which affirmed the 1 June 1993 decision of the Regional
Trial Court dismissing their complaint for damages against North North Front Shipping Services, Inc., averred in refutation
Front Shipping Services, Inc. that it could not be made culpable for the loss and deterioration of
the cargo as it was never negligent. Captain Solomon Villanueva,
master of the vessel, reiterated that the barge was inspected prior
On 2 August 1990, 20,234 sacks of corn grains valued
to the actual loading and was found adequate and seaworthy. In
at P3,500,640.00 were shipped on board North Front 777, a vessel
addition, they were issued a permit to sail by the Coast Guard.The
owned by North Front Shipping Services, Inc. The cargo
tarpaulins were doubled and brand new and the hatches were
wasconsigned to Republic Flour Mills Corporation in Manila under
properly sealed. They did not encounter big waves hence it was
Bill of Lading No. 001 [1]
and insured with the herein mentioned
not possible for water to seep in. He further averred that the corn
insurance companies. The vessel was inspected prior to actual
grains were farm wet and not properly dried when loaded.
loading by representatives of the shipper and was found fit to
carry the merchandise. The cargo was covered with tarpaulins
and wooden boards. The hatches were sealed and could only be The court below dismissed the complaint and ruled that the
opened by representatives of Republic Flour Mills Corporation. contract entered into between North Front Shipping Services, Inc.,
and Republic Flour Mills Corporation was a charter-party
agreement. As such, only ordinary diligence in the care of goods
The vessel left Cagayan de Oro City on 2 August 1990 and
was required of North Front Shipping Services, Inc. The inspection
arrived Manila on 16 August 1990. Republic Flour Mills
of the barge by the shipper and the representatives of the shipping
Corporation was advised of its arrival but it did not immediately
company before actual loading, coupled with the Permit to
commence the unloading operations. There were days when
Sail issued by the Coast Guard, sufficed to meet the degree of
unloading had to be stopped due to variable weather conditions
diligence required of the carrier.
and sometimes for no apparent reason at all. When the cargo was
eventually unloaded there was a shortage of 26.333 metric
tons. The remaining merchandise was already moldy, rancid and On the other hand, the Court of Appeals ruled that as a
deteriorating. The unloading operations were completed on 5 common carrier required to observe a higher degree of
September 1990 or twenty (20) days after the arrival of the barge diligence North Front 777 satisfactorily complied with all the
at the wharf of Republic Flour Mills Corporation in Pasig City. requirements hence was issued a Permit to Sail after proper
inspection. Consequently, the complaint was dismissed and the

Precision Analytical Services, Inc., was hired to examine the motion for reconsideration rejected.

corn grains and determine the cause of deterioration. A

Certificate of Analysis was issued indicating that the corn grains The charter-party agreement between North Front Shipping
had 18.56% moisture content and the wetting was due to contact Services, Inc., and Republic Flour Mills Corporation did not in any
with salt water. The mold growth was only incipient and not way convert the common carrier into a private carrier. We have
sufficient to make the corn grains toxic and unfit for already resolved this issue with finality in Planters Products, Inc. v.
consumption. In fact the mold growth could still be arrested by Court of Appeals[2] thus -
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; a contract of affreightment by x x x x Mere proof of delivery of the goods in good order to a
which the owner of a ship or other vessel lets the whole or a part common carrier, and of their arrival at the place of destination in
of her to a merchant or other person for the conveyance of goods, bad order, makes out prima facie case against the common carrier,
on a particular voyage, in consideration of the payment of freight x so that if no explanation is given as to how the loss, deterioration
x x x Contract of affreightment may either be time charter, or destruction of the goods occurred, the common carrier must be
wherein the vessel is leased to the charterer for a fixed period of held responsible. Otherwise stated, it is incumbent upon the
time, or voyage charter, wherein the ship is leased for a single common carrier to prove that the loss, deterioration or destruction
voyage. In both cases, the charter-party provides for the hire of the was due to accident or some other circumstances inconsistent
vessel only, either for a determinate period of time or for a single with its liability x x x x
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 The extraordinary diligence in the vigilance over the goods
expenses for the maintenance of the ship. tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
Upon the other hand, the term 'common or public carrier' is destruction of the goods entrusted to it for safe carriage and
defined in Art. 1732 of the Civil Code. The definition extends to delivery. It requires common carriers to render service with the
carriers either by land, air or water which hold themselves out as greatest skill and foresight and 'to use all reasonable means to
ready to engage in carrying goods or transporting passengers or ascertain the nature and characteristics of goods tendered for
both for compensation as a public employment and not as a shipment, and to exercise due care in the handling and stowage,
casual occupation x x x x including such methods as their nature requires' (underscoring
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a In fine, we find that the carrier failed to observe the
vessel by one or more persons, provided the charter is limited to required extraordinary diligence in the vigilance over the goods
the ship only, as in the case of a time-charter or voyage- placed in its
charter (underscoring supplied). care. The proofs presented by North Front ShippingServices, Inc.,
were insufficient to rebut the prima facie presumption of
North Front Shipping Services, Inc., is a corporation private respondent's negligence, more so if we consider the
engaged in the business of transporting cargo and offers its evidence adduced by petitioners.
services indiscriminately to the public. It is without doubt a
common carrier.As such it is required to observe extraordinary It is not denied by the insurance companies that the vessel
diligence in its vigilance over the goods it transports. [3]. When was indeed inspected before actual loading and that North Front
goods placed in its care are lost or damaged, the carrier is 777 was issued a Permit to Sail. They proved the fact of shipment
presumed to have been at fault or to have acted negligently. and its consequent loss or damage while in the actual possession
North Front Shipping Services, Inc., therefore has the burden of of the carrier. Notably, the carrier failed to volunteer any
proving that it observed extraordinary diligence in order to avoid explanation why there was spoilage and how it occurred. On the
responsibility for the lost cargo. other hand, it was shown during the trial that the vessel had
rusty bulkheads and the wooden boards and tarpaulins bore
North Front Shipping Services, Inc., proved that the vessel heavy concentration of molds. The tarpaulins used were not new,
was inspected prior to actual loading by representatives of the contrary to the claim of North Front Shipping Services, Inc., as
shipper and was found fit to take a load of corn grains. They were there were already several patches on them, hence, making it
also issued Permit to Sail by the Coast highly probable for water to enter.
Guard. The master of the vessel testified that the corn grains were
farm wet when loaded. However, this testimony was disproved by Laboratory analysis revealed that the corn grains were
the clean bill of lading issued by North Front Shipping Services, contaminated with salt water. North Front Shipping Services, Inc.,
Inc., which did not contain a notation that the corn grains were failed to rebut all these arguments. It did not even endeavor to
wet and improperly dried. Having been in the service since 1968, establish that the loss, destruction or deterioration of the goods
the master of the vessel would have known at the outset that corn was due to the following: (a) flood, storm, earthquake, lightning, or
grains that were farm wet and not properly dried would eventually other natural disaster or calamity; (b) act of the public enemy in
deteriorate when stored in sealed and hot compartments as in war, whether international or civil; (c) act or omission of the
hatches of a ship.Equipped with this knowledge, the master of the shipper or owner of the goods; (d) the character of the goods or
vessel and his crew should have undertaken precautionary defects in the packing or in the containers; (e) order or act of
measures to avoid or lessen the cargo's possible deterioration as competent public authority. [6] This is a closed list. If the cause of
they were presumed knowledgeable about the nature of such destruction, loss or deterioration is other than the enumerated
cargo. But none of such measures was taken. circumstances, then the carrier is rightly liable therefor.

In Compania Maritima v. Court of Appeals[5] we ruled - However, we cannot attribute the destruction, loss or
deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guilty of people and becomes, in effect, the owner pro hac vice, subject to
contributory negligence. It was seasonably notified of the arrival of liability to others for damages caused by negligence. To create a
the barge but did not immediately start the unloading demise the owner of a vessel must completely and exclusively
relinquish possession, anything short of such a complete transfer
operations. No explanation was proffered by the consignee as to
is a contract of affreightment (time or voyage charter party) or not
why there was a delay of six (6) days. Had the unloading been
a charter party at all.
commenced immediately the loss could have been completely
avoided or at least minimized. As testified to by the chemist who CONSTRUED. A contract of affreightment is in which the owner
analyzed the corn samples, the mold growth was only at its of the vessel leases part or all of its space to haul goods for others.
incipient stage and could still be arrested by drying. The corn It is a contract for a special service to be rendered by the owner of
grains were not yet toxic or unfit for consumption. For its the vessel and under such contract the general owner retains the
contributory negligence, Republic Flour Mills Corporation should possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for
share at least 40% of the loss.[7]
his payment of the charter hire. If the charter is a contract of
affreightment, which leaves the general owner in possession of the
WHEREFORE, the Decision of the Court of Appeals of 22 ship as owner for the voyage, the rights, responsibilities of
December 1994 and its Resolution of 16 February 1995 are ownership rest on the owner and the charterer is usually free from
REVERSED and SET ASIDE. Respondent North Front Shipping liability to third persons in respect of the ship.
Services, Inc., is ordered to pay petitioners Tabacalera Insurance 5. ID.; ID.; ID.; ID.; LIABILITY TO THIRD PERSONS FOR GOODS
SHIPPED ON BOARD A VESSEL. Responsibility to third
Co., Prudential Guarantee & Assurance, Inc., and New Zealand
persons for goods shipped on board a vessel follows the vessel's
Insurance Co. Ltd., P1,313,660.00 which is 60% of the amount
possession and employment; and if possession is transferred to
paid by the insurance companies to Republic Flour Mills the charterer by virtue of a demise, the charterer, and not the
Corporation, plus interest at the rate of 12% per annum from the owner, is liable as carrier on the contract of affreightment made
time this judgment becomes final until full payment. by himself or by the master with third persons, and is answerable
for loss, damage or non-delivery of goods received for
transportation. An owner who retains possession of the ship,
though the hold is the property of the charterer, remains liable as
carrier and must answer for any breach of duty as to the care,
Vitug, Kapunan, and Hermosisima, Jr., JJ., concur. loading or unloading of the cargo.
Padilla, J., (Chairman), on leave. THEREOF, CONSIDERED AND RESPECTED. Whether the
liability of respondent should be based on the same contract or
that of the bill of lading, the parties are nevertheless obligated to
respect the arbitration provisions on the sales contract and/or the
Republic of the Philippines bill of lading. Petitioner being a signatory and party to the sales
SUPREME COURT contract cannot escape from his obligation under the arbitration
Manila clause as stated therein. Arbitration has been held valid and
constitutional. Even before the enactment of Republic Act No. 876,
this Court has countenanced the settlement of disputes through
arbitration. The rule now is that unless the agreement is such as
absolutely to close the doors of the courts against the parties,
which agreement would be void, the courts will look with favor
G.R. No. 91228. March 22, 1993. upon such amicable arrangements and will only interfere with
PUROMINES, INC., petitioner, vs. COURT OF APPEAL and great reluctance to anticipate or nullify the action of the
PHILIPP BROTHERS OCEANIC, INC., respondents. arbitrator. As pointed out in the case of Mindanao Portland
Cement Corp. v. McDough Construction Company of Florida 18
wherein the plaintiff sued defendant for damages arising from a
1. CIVIL LAW; OBLIGATIONS OF VENDOR; DAMAGES ARISING contract, the Court said: "Since there obtains herein a written
FROM CARRIAGE AND DELIVERY. We agree with the court a provision for arbitration as well as failure on respondent's part to
quo that the sales contract is comprehensive enough to include comply therewith, the court a quo rightly ordered the parties to
claims for damages arising from carriage and delivery of the proceed to their arbitration in accordance with the terms of their
goods. As a general rule, the seller has the obligation to transmit agreement (Sec. 6 Republic Act 876). Respondent's arguments
the goods to the buyer, and concomitant thereto, the contracting touching upon the merits of the dispute are improperly raised
of a carrier to deliver the same. herein. They should be addressed to the arbitrators. This
2. COMMERCIAL LAW; MARITIME TRANSPORTATION; MARITIME proceeding is merely a summary remedy to enforce the agreement
COMMERCE; CHARTER PARTIES, CONSTRUED. American to arbitrate. The duty of the court in this case is not to resolve the
jurisprudence defines charter party as a contract by which an merits of the parties' claims but only to determine if they should
entire ship or some principal part thereof is let by the owner to proceed to arbitration or not. And although it has been ruled that
another person for a specified time or use. Charter or charter a privolous or patently baseless claim should not be ordered to
parties are of two kinds. Charter of demise or bareboat and arbitration it is also recognized that the mere fact that a defense
contracts of affreightment. exist against a claim does not make it frivolous or baseless."
Under the demise or bareboat charter of the vessel, the COMPLAINT; ANNEXES ATTACHED THEREOF, PART OF THE
charterer will generally be considered as owner for the voyage or RECORD. Petitioner contend that the arbitration provision in
service stipulated. The charterer mans the vessel with his own the bills of lading should not have been discussed as an issue in
the decision of the Court of Appeals since it was not raised as a arbitration agreement. On April 26, 1989, the trial court denied
special or affirmative defense. The three bills of lading were respondent's motion to dismiss in this wise:
attached to the complaint as Annexes "A," "B," and "C," and are "The sales contract in question states in part:
therefore parts thereof and may be considered as evidence 'Any disputes arising under this contract shall be settled by
although not introduced as such. Hence, it was then proper for arbitration . . .(emphasis supplied)
the court a quo to discuss the contents of the bills of lading,
"A perusal of the facts alleged in the complaint upon which the
having been made part of the record.
question of sufficiency of the cause of action of the complaint
DECISION arose from a breach of contract of carriage by the vessel chartered
NOCON, J p: by the defendant Philipp Brothers Oceanic, Inc. Thus, the
This is a special civil action for certiorari and prohibition to annul aforementioned arbitration clause cannot apply to the dispute in
and set aside the Decision of the respondent Court of Appeals the present action which concerns plaintiff's claim for cargo
dated November 16, 1989 1 reversing the order of the trial court loss/damage arising from breach of contract of carriage.
and dismissing petitioner's compliant in Civil Case No. 89-47403, "That the defendant is not the ship owner or common carrier and
entitled Puromines, Inc. v. Maritime Factors, Inc. and Philipp therefore plaintiff does not have legal right against it since every
Brothers Oceanic, Inc. action must be brought against the real party in interest has no
Culled from the records of this case, the facts show that merit either for by the allegations in the complaint the defendant
petitioner, Puromines, Inc. (Puromines for brevity) and Makati herein has been impleaded as charterer of the vessel, hence, a
Agro Trading, Inc. (not a party in this case) entered into a contract proper party." 7
with private respondents Philipp Brothers Oceanic, Inc. for the Elevating the matter to the Court of Appeals, petitioner's
sale of prilled Urea in bulk. The Sales Contract No. S151.8.01018 complaint was dismissed. The appellate court found that the
provided, among others an arbitration clause which states, thus: arbitration provision in the sales contract and/or the bills of
"9. Arbitration lading is applicable in the present case. Said the court:
"Any disputes arising under this contract shall be settled by "An examination of the sales contract No. S151.8.01018 shows
arbitration in London in accordance with the Arbitration Act 1950 that it is broad enough to include the claim for damages arising
and any statutory amendment or modification thereof. Each party from the carriage and delivery of the goods subject-matter thereof.
is to appoint an Arbitrator, and should they be unable to agree, "It is also noted that the bills of lading attached as Annexes 'A', 'B'
the decision of an Umpire appointed by them to be final. The and 'C' to the complaint state, in part, 'any dispute arising under
Arbitrators and Umpire are all to be commercial men and resident this Bill of Lading shall be referred to arbitration of the Maritime
in London. This submission may be made a rule of the High Court Arbitration Commission at the USSR Chamber of Commerce and
of Justice in England by either party." 2 Industry, 6 Kuibyshevskaia Str., Moscow, USSR, in accordance
On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" with the rules of procedure of said commission.'
loaded on board at Yuzhny, USSR a shipment of 15,500 metric Considering that the private respondent was one of the
tons prilled Urea in bulk complete and in good order and condition signatories to the sales contract . . . all parties are obliged o
for transport to Iloilo and Manila, to be delivered to petitioner. respect the terms and conditions of the said sales contract,
Three bills of lading were issued by the ship-agent in the including the provision thereof on 'arbitration.' "
Philippines, Maritime Factors Inc., namely: Bill of Lading No. Hence, this petition The issue raised is: Whether the phrase "any
dated May 12, 1988 covering 10,000 metric tons for discharge dispute arising under this contract" in the arbitration clause of
Manila; Bill of Lading No. 2 of even date covering 4,000 metric the sales contract covers a cargo claim against the vessel (owner
tons for unloading in Iloilo City; and Bill of Lading No. 3, also and/or charterers) for breach of contract of carriage.
dated May 12, 1988, covering 1,500 metric tons likewise for
Petitioner states in its complainants that Philipp Brothers "was
discharged in Manila
the charterer of the vessel MV 'Liliana Dimitrova' which
The shipment covered by Bill of Lading No. 2 was discharged in transported the shipment from Yuzhny USSR to Manila."
Iloilo City complete and in good order and condition. However, the Petitioner further alleged that the caking and hardening, wetting
shipments covered by Bill of Lading Nos. 1 and 3 were discharged and melting, and contamination by rust and dirt of the damaged
in Manila in bad order and condition, caked, hardened and lumpy, portions of the shipment were due to the improper ventilation and
discolored and contaminated with rust and dirt. Damages were inadequate storage facilities of the vessel; that the wetting of the
valued at P683, 056. 29 including additional discharging cargo was attributable to the failure of the crew to close the
expenses. hatches before and when it rained while the shipment was being
Consequently, petitioner filed a complaint 3 with the trial court 4 unloaded in the Port of Manila; and that as a direct and natural
for breach of contract of carriage against Maritime Factors Inc. consequence of the unseaworthiness and negligence of the vessel
(which was not included as respondent in this petition) as ship- (sic), petitioner suffered damages in the total amount of P683,
agent in the Philippines for the owners of the vessel MV "Liliana 056.29 Philippine currency." 8 (Emphasis supplied)
Dimitrova," while private respondent, Philipp Brothers Oceanic Moreover, in its Opposition to the Motion to Dismiss, petitioner
Inc., was impleaded as charterer of the said vessel and proper said that "[t]he cause of action of the complaint arose from breach
party to accord petitioner complete relief. Maritime Factors, Inc. of contract of carriage by the vessel that was chartered by
filed its Answer 5 to the complaint, while private respondent filed defendant Philipp Brothers." 9
a motion to dismiss, dated February 9, 1989, on the grounds that
In the present petition, petitioner argues that the sales contract
the complaint states no cause of action; that it was prematurely
does not include the contract of carriage which is a different
filed; and that petitioner should comply with the arbitration
contract entered into by the carrier with the cargo owners. That it
clause in the sales contract. 6
was an error for the respondent court to touch upon the
The motion to dismiss was opposed by petitioner contending the arbitration provision of the bills lading in its decision inasmuch as
inapplicability of the arbitration clause inasmuch as the cause of the same was not raised as an issue by private respondent who
action did not arise from a violation of the terms of the sales was not a party in the bills of lading (emphasis Ours). Petitioner
contract but rather for claims of cargo damages where there is no contradicts itself.
We agree with the court a quo that the sales contract is Under the demise or bareboat charter of the vessel, the charterer
comprehensive enough to include claims for damages arising from will generally be considered as owner for the voyage or service
carriage and delivery of the goods. As a general rule, the seller has stipulated. The charterer mans the vessel with his own people and
the obligation to transmit the goods to the buyer, and concomitant becomes, in effect, the owner pro hac vice, subject to liability to
thereto, the contracting of a carrier to deliver the same. Art. 1523 others for damages caused by negligence. 11 To create a demise
of the Civil Code provides: the owner of a vessel must completely and exclusively relinquish
"Art. 1523. Where in pursuance of a contract of sale, the seller in possession, anything short of such a complete transfer is a
authorized or required to send the goods to the buyer, delivery of contract of affreightment (time or voyage charter party) or not a
the goods to a carrier, whether named by the buyer or not, for the charter party at all.
purpose of transmission to the buyer is deemed to be a delivery of On the other hand, a contract of affreightment is in which the
the goods to the buyer, except in the cases provided for in article owner of the vessel leases part or all of its space to haul goods for
1503, first, second and third paragraphs, or unless a contrary others. It is a contract for a special service to be rendered by the
intent appear. owner of the vessel 12 and under such contract the general owner
"Unless otherwise authorized by the buyer, the seller must take retains the possession, command and navigation of the ship, the
such contract with the carrier on behalf of the buyer as may be charterer or freighter merely having use of the space in the vessel
reasonable, having regard to the nature of the goods and the other in return for his payment of the charter hire. 13 If the charter is a
circumstances of the case. If the seller omit so to do, and the contract of affreightment, which leaves the general owner in
goods are lost or damaged in course of transit, the buyer may possession of the ship as owner for the voyage, the rights,
decline to treat the delivery to the carrier as a delivery to himself,, responsibilities of ownership rest on the owner and the charterer
or may hold the seller responsible in damages." is usually free from liability to third persons in respect of the ship.
xxx xxx xxx
Responsibility to third persons for goods shipped on board a
The disputed sales contact provides for conditions relative to the
vessel follows the vessel's possession and employment; and if
delivery of goods, such as date of shipment, demurrage, weight as
possession is transferred to the charterer by virtue of a demise,
determined by the bill of lading at load port and more particularly
the charterer, and not the owner, is liable as carrier on the
the following provisions:
contract of affreightment made by himself or by the master with
"3. Intention is to ship in one bottom, approximately 5,000 metrics
third persons, and is answerable for loss, damage or non-delivery
tons to Puromines and approximately 15,000 metric tons to
of goods received for transportation. An owner who retains
Makati Agro. However, Sellers to have right to ship material as
possession of the ship, though the hold is the property of the
partial shipment or co-shipment in addition to above. In the event
charterer, remains liable as carrier and must answer for any
of co-shipment to a third party within Philippines same to be
breach of duty as to the care, loading or unloading of the cargo.
discussed with and acceptable to both Puromines and Makati
Assuming that in the present case, the charter party is a demise
"4. Sellers to appoint neutral survey for Seller's account to
or bareboat charter, then Philipp Brothers is liable to Puromines,
conduct initial draft survey at first discharge port and final survey
Inc., subject to the terms and conditions of the sales contract. On
at last discharge port. Surveyors results to be binding and final. In
the other hand, if the contract between respondent and the owner
the event draft survey results show a quantity less than the
of the vessel MV "Liliana Dimitrova" was merely that of
combined Bills of Lading quantity for both Puromines and Makati
affreightment, then it cannot be held liable for the damages
Agro, Sellers to refund the difference. In the event that draft
caused by the breach of contract of carriage, the evidence of which
survey results show a quantity in excess of combined Bills of
is the bills of lading
Lading of quantity of both Puromines and Makati Agro then
In any case, whether the liability of respondent should be based
Buyers to refund the difference.
on the same contract or that of the bill of lading, the parties are
"5. It is expressly and mutually agreed that neither Sellers nor
nevertheless obligated to respect the arbitration provisions on the
vessel's Owners have any liability to separate cargo or to deliver
sales contract and/or the bill of lading. Petitioner being a
cargo separately or to deliver minimum/maximum quantities
signatory and party to the sales contract cannot escape from his
stated on individual Bills of Lading. At each port vessel is to
obligation under the arbitration clause as stated therein.
discharge in accordance with Buyers local requirements and it is
Neither can petitioner contend that the arbitration provision in the
Buyer's responsibility to separate individual quantities required by
bills of lading should not have been discussed as an issue in the
each of them at each port during or after discharged."
decision of the Court of Appeals since it was not raised as a
As argued by respondent on its motion to dismiss, "the (petitioner)
special or affirmative defense. The three bills of lading were
derives his right to the cargo from the bill of lading which is the
attached to the complaint as Annexes "A," "B," and "C," and are
contract of affreightment together with the sales contract.
therefore parts thereof and may be considered as evidence
Consequently, the (petitioner) is bound by the provisions and
although not introduced as such. 16 Hence, it was then proper for
terms of said bill of lading and of the arbitration clause
the court a quo to discuss the contents of the bills of lading,
incorporated in the sales contract."
having been made part of the record.
Assuming arguendo that the liability of respondent is not based
Going back to the main subject of this case, arbitration has been
on the sales contract, but rather on the contract of carriage, being
held valid and constitutional. Even before the enactment of
the charterer of the vessel MV "Liliana Dimitrova," it would,
Republic Act No. 876, this Court has countenanced the settlement
therefore, be material to show what kind of charter party the
of disputes through arbitration. The rule now is that unless the
respondent had with the shipowner to determine respondent's
agreement is such as absolutely to close the doors of the courts
against the parties, which agreement would be void, the courts
American jurisprudence defines charter party as a contract by will look with favor upon such amicable arrangements and will
which an entire ship or some principal part thereof is let by the only interfere with great reluctance to anticipate or nullify the
owner to another person for a specified time or use. 10 Charter or action of the arbitrator. 17
charter parties are of two kinds. Charter of demise or bareboat
and contracts of affreightment.
As pointed out in the case of Mindanao Portland Cement Corp. v. Estratonico S. Anano for private respondent.
McDonough Construction Company of Florida 18 wherein the
plaintiff sued defendant for damages arising from a contract, the
Court said:
"Since there obtains herein a written provision for arbitration as
well as failure on respondent's part to comply therewith, the court FELICIANO, J.:
a quo rightly ordered the parties to proceed to their arbitration in
accordance with the terms of their agreement (Sec. 6 Republic Act
In this Petition for Certiorari, petitioner Litonjua Shipping
876). Respondent's arguments touching upon the merits of the
Company, Inc. ("Lintonjua") seeks to annul and set aside a
dispute are improperly raised herein. They should be addressed to
the arbitrators. This proceeding is merely a summary remedy to decision dated, 31 May 1979 of the National Seamen Board
enforce the agreement to arbitrate. The duty of the court in this ("NSB") in NSB Case No. 1331-77 affirming the decision dated 17
case is not to resolve the merits of the parties' claims but only to February 1977 of the NSB hearing officer which adjudged
determine if they should proceed to arbitration or not. And petitioner Litonjua liable to private respondent for violation of the
although it has been ruled that a frivolous or patently baseless latter's contract of employment and which ordered petitioner to
claim should not be ordered to arbitration it is also recognized
pay damages.
that the mere fact that a defense exist against a claim does not
make it frivolous or baseless." 19
In the case of Bengson v. Chan, 20 We upheld the provision of a Petitioner Litonjua is the duly appointed local crewing Managing
contract which required the parties to submit their disputes to Office of the Fairwind Shipping Corporation ('Fairwind). The
arbitration and We held as follows: M/V Dufton Bay is an ocean-going vessel of foreign registry owned
"The trial court sensibly said that 'all the causes of action alleged by the R.D. Mullion Ship Broking Agency Ltd. ("Mullion"). On 11
in the plaintiffs amended complaint are based upon the supposed September 1976, while the Dufton Bay was in the port of Cebu
violations committed by the defendants of the 'Contract of and while under charter by Fairwind, the vessel's master
Construction of a Building' and that 'the provisions of paragraph
contracted the services of, among others, private respondent
15 hereof leave a very little room for doubt that the said causes of
action are embraced within the phrase 'any and all questions, Gregorio Candongo to serve as Third Engineer for a period of
disputes or differences between the parties hereto relative to the twelve (12) months with a monthly wage of US$500.00. This
construction of the building,' which must be determined by agreement was executed before the Cebu Area Manning Unit of
arbitration of two persons and such determination by the the NSB. Thereafter, private respondent boarded the vessel. On 28
arbitrators shall be 'final, conclusive and binding upon both December 1976, before expiration of his contract, private
parties unless they to court, in which the case the determination
respondent was required to disembark at Port Kelang, Malaysia,
by arbitration is a condition precedent 'for taking any court
and was returned to the Philippines on 5 January 1977. The
cause of the discharge was described in his Seaman's Book as 'by
xxx xxx xxx
owner's arrange". 1
"We hold that the terms of paragraph 15 clearly express the
intention of the parties that all disputes between them should first
be arbitrated before court action can be taken by the aggrieved Shortly after returning to the Philippines, private respondent filed
party." 21 a complaint before public respondent NSB, which complaint was
Premises considered, We uphold the validity and applicability of docketed as NSB-1331-77, for violation of contract, against
the arbitration clause as stated in Sales Contract No. Mullion as the shipping company and petitioner Litonjua as agent
S151.8.01018 to the present dispute.
of the shipowner and of the charterer of the vessel.
WHEREFORE, petition is hereby DISMISSED and decision of the
court a quo is AFFIRMED.
At the initial hearing, the NSB hearing officer held a conference
with the parties, at which conference petitioner Litonjua was
Narvasa, C . J ., Padilla, Regalado and Campos, Jr., JJ., concur.
represented by one of its supercargos, Edmond Cruz. Edmond
Cruz asked, in writing, that the hearing be postponed for a month
Republic of the Philippines
upon the ground that the employee of Litonjua in charge of the
SUPREME COURT case was out of town. The hearing officer denied this request and
Manila then declared petitioner Litonjua in default. At the hearing,
private respondent testified that when he was recruited by the
THIRD DIVISION Captain of the Dufton Bay, the latter was accompanied to the NSB
Cebu Area Manning Unit by two (2) supercargos sent by petitioner
G.R. No. L-51910 August 10, 1989 Litonjua to Cebu, and that the two (2) supercargos Edmond Cruz
and Renato Litonjua assisted private respondent in the
LITONJUA SHIPPING COMPANY INC., petitioner procurement of his National Investigation and Security Agency

vs. (NISA) clearance. Messrs. Cruz and Litonjua were also present
during private respondent's interview by Captain Ho King Yiu of
the Dufton Bay.
CANDONGO respondents.

On 17 February 1977, the hearing officer of the NSB rendered a

Ferrer, Valte, Mariano, Sangalang & Villanueva for petitioner. 2
judgment by default, the dispositive portion of which read:
Wherefore, premises considered, judgment is persons of Edmund Cruz and Renato Litonjua,
hereby rendered ordering the respondents R.D. had knowledge thereof and in fact assisted in
Mullion Shipbrokers Co., Ltd., and Litonjua the interviews conducted by the Master of the
Shipping Co., Inc., jointly and solidarily to pay crew applicants as admitted by Renato Litonjua
the complainant the sum of four thousand six including the acts of facilitating the crew's NISA
hundred fifty seven dollars and sixty three clearances as testified to by complainant.
cents ($4,657.63) or its equivalent in the Phil. Moreover, the participation of the Litonjua
currency within 10 days from receipt of the Shipping Corporation in the recruitment of
copy of this Decision the payment of which to complainant, together with the other
be coursed through the then NSB. crewmembers, in Cebu in September 1976 can
be traced to the contents of the letter of April 5,
The above conclusion was rationalized in the following terms: 1976 by the Fairwind Shipping Limited, thru its
Director David H.L. Wu addressed to the
From the evidence on record it clearly appears National Seamen Board, copy of which is on file
that there was no sufficient or valid cause for with Contracts and Licensing Division, quote:
the respondents to terminate the services of
complainant prior to 17 September 1977, which This is to certify that Messrs. Litonjua
is the expiry date of the contract. For this Shipping, Inc. is duly appointed local crewing
reason the respondents have violated the Managing Office to attend on our Crew
conditions of the contract of employment which requirements as well as attend to our ship's
is a sufficient justification for this Board to requirements when in Philippine ports.
render award in favor of the complainant of the
unpaid salaries due the latter as damages We further authorized Litonjua Shipping Co.,
corresponding to the unexpired portion of the Inc. to act as local representative who can sue
contract including the accrued leave pay and be sued, and to bind and sign contracts for
computed on the basis of five [51 days pay for our behalf. 4

every month of service based at $500.00

monthly salary. Complainant's wages account The NSB then lifted the suspension of the hearing officer's 17
further show that he has an undrawn wage February 1977 decision.
amounting to US$13.19 to be paid by the
respondents Philippine agency together with his
Petitioner Litonjua once more moved for reconsideration. On 31
accrued leave pay. 5
May 1979, public respondent NSB rendered a decision which
affirmed its hearing offices decision of 17 February 1977 and
Petitioner Litonjua filed a motion for reconsideration of the which read in part as follows:
hearing officer's decision; the motion was denied. Petitioner next
filed an "Appeal and/or Motion for Reconsideration of the Default
It is clear that respondent Litonjua Shipping Co.,
Judgment dated 9 August 1977" with the central office of the
Inc. is the authorized Philippine agent of
NSB. NSB then suspended its hearing officer's decision and lifted
Fairwind Shipping Corporation, charterer of the
the order of default against petitioner Litonjua, thereby allowing
vessel 'Dufton Bay, wherein complainant, served
the latter to adduce evidence in its own behalf The NSB hearing
as 3rd Engineer from 17 September until
officer, on 26 April 1978, made the following findings:
disembarkation on December 28, 1976. It is
also clear from the complainant's wages
While it appears that in the preparation of the account bearing the heading 'Fairwind Shipping
employment papers of the complainant, what Corporation', signed by the Master of the vessel
was indicated therein was R.D. Mullion Co. (HK) that the Philippine agency referred to herein
Ltd. referring to Exhibit "B" (Standard Format of directed to pay the said withdrawn wages of
a Service Agreement) and Exhibit "C" (Affidavit $13.19 is no other than Litonjua Shipping
of Undertaking), as thecompany whom Captain Company, Inc.
Ho King Yiu, the Master of the vessel Dufton
Bay, was representing to be the shipowner, the
From this observation, it can be reasonably
fact remains that at the time of the recruitment
inferred that the master of the vessel acted for
of the complainant, as duly verified by the
and in behalf of Fairwind Shipping Corporation
National Seamen Board, Cebu Area Manning
who had the obligation to pay the salary of the
Unit, the Litonjua Shipping Company was the
complainant. It necessarily follows that
authorized agent of the vessel's charterer, the
Fairwind Shipping Corporation is the employer of
Fairwind Shipping Corporation, and that in the
said complainant. Moreover, it had been
recruitment process, the Litonjua Shipping
established by complainant that Litonjua
Company through its supercargos in the
Shipping Company, Inc., had knowledge of and should not have been held liable on the contract of employment of
participated, through its employee, in the private respondent.
recruitment of herein complainant.
We are not persuaded by petitioner's argument. We believe that
xxx xxx xxx there are two (2) grounds upon which petitioner Litonjua may be
held liable to the private respondent on the contract of
In view of the foregoing, and pursuant to Art. 3 employment.
of the New Labor Code of the Philippines, which
provides that, 'The state shall afford protection The first basis is the charter party which existed between Mullion,
to labor . . .' as well as the provisions of Art. 4 the shipowner, and Fairwind, the charterer. In modern maritime
thereof, that 'all doubts in the implementation law and usage, there are three (3) distinguishable types of charter
and interpretation of the provisions of the Code, parties: (a) the "bareboat" or "demise" charter; (b) the "time"
including its implementing rules and charter; and (c) the "voyage" or "trip" charter. A bareboat or demise
regulations, shall be resolved in favor of labor', charter is a demise of a vessel, much as a lease of an unfurnished
it is our conclusion, that the decision dated house is a demise of real property. The shipowner turns over
February 17, 1977, is based on evidence possession of his vessel to the charterer, who then undertakes to
formally offered and presented during the provide a crew and victuals and supplies and fuel for her during
hearing and that there was no grave abuse of the term of the charter. The shipowner is not normally required by
discretion committed by the hearing officer in the terms of a demise charter to provide a crew, and so the
finding respondent Litonjua Shipping Company, charterer gets the "bare boat", i.e., without a crew. Sometimes, of
Inc., liable to complainant. (Emphasis supplied) course, the demise charter might provide that the shipowner is to
furnish a master and crew to man the vessel under the charterer's
In the instant Petition for Certiorari, petitioner Litonjua assails the direction, such that the master and crew provided by the
decision of public respondent NSB declaring the charterer shipowner become the agents and servants or employees of the
Fairwind as employer of private respondent, and for whose liability charterer, and the charterer (and not the owner) through the
petitioner was made responsible, as constituting a grave abuse of agency of the master, has possession and control of the vessel
discretion amounting to lack of jurisdiction. The principal if not during the charter period. A time charter, upon the other hand,
the sole issue to be resolved here is whether or not the charterer like a demise charter, is a contract for the use of a vessel for a
Fairwind was properly regarded as the employer of private specified period of time or for the duration of one or more specified
respondent Candongo. voyages. In this case, however, the owner of a time-chartered
vessel (unlike the owner of a vessel under a demise or bare-boat
Petitioner Litonjua makes two (2) principal submissions in charter), retains possession and control through the master and
support of its contention, to wit: crew who remain his employees. What the time charterer acquires
is the right to utilize the carrying capacity and facilities of the
vessel and to designate her destinations during the term of the
1) As a general rule, admiralty law as embodied
charter. A voyage charter, or trip charter, is simply a contract of
in the Philippine Code of Commerce fastens
affreightment, that is, a contract for the carriage of goods, from
liability for payment of the crew's wages upon
one or more ports of loading to one or more ports of unloading, on
the ship owner, and not the charterer; and
one or on a series of voyages. In a voyage charter, master and crew
remain in the employ of the owner of the vessel.
2) The evidence of record is grossly inadequate
to shift such liability from the shipowner to the
It is well settled that in a demise or bare boat charter, the
petitioner. 6
charterer is treated as owner pro hac vice of the vessel, the
charterer assuming in large measure the customary rights and
Petitioner Litonjua contends that the shipowner, not the charterer,
liabilities of the shipowner in relation to third persons who have
was the employer of private respondent; and that liability for 10
dealt with him or with the vessel. In such case, the Master of
damages cannot be imposed upon petitioner which was a mere
the vessel is the agent of the charterer and not of the
agent of the charterer. It is insisted that private respondent's
shipowner. 11 The charterer or owner pro hac vice, and not the
contract of employment and affidavit of undertaking clearly
showed that the party with whom he had contracted was none general owner of the vessel, is held liable for the expenses of the

other than Mullion, the shipowner, represented by the ship's voyage including the wages of the seamen. 12
master. Petitioner also argues that its supercargos merely
assisted Captain Ho King Yiu of the Dufton Bay in being private It is important to note that petitioner Litonjua did not place into
respondent as Third Engineer. Petitioner also points to the the record of this case a copy of the charter party covering the
circumstance that the discharge and the repatriation of private M/V Dufton Bay. We must assume that petitioner Litonjua was
respondent was specified in his Seaman's Book as having been "by aware of the nature of a bareboat or demise charter and that if
owner's arrange." Petitioner Litonjua thus argues that being the petitioner did not see fit to include in the record a copy of the
agent of the charterer and not of the shipowner, it accordingly charter party, which had been entered into by its principal, it was
because the charter party and the provisions thereof were not in no position to enforce that lien. If only because the vessel, being
supportive of the position adopted by petitioner Litonjua in the one of foreign registry and not ordinarily doing business in the
present case, a position diametrically opposed to the legal Philippines or making regular calls on Philippine ports cannot be
consequence of a bareboat charter. 13 Treating Fairwind as owner effectively held to answer for such claims in a Philippine forum.
pro hac vice, petitioner Litonjua having failed to show that it was Upon the other hand, it seems quite clear that petitioner Litonjua,
not such, we believe and so hold that petitioner Litonjua, as should it be held liable to private respondent for the latter's
Philippine agent of the charterer, may be held liable on the claims, would be better placed to secure reimbursement from its
contract of employment between the ship captain and the private principal Fairwind. In turn, Fairwind would be in an indefinitely
respondent. better position (than private respondent) to seek and obtain
recourse from Mullion, the foreign shipowner, should Fairwind feel
There is a second and ethically more compelling basis for holding entitled to reimbursement of the amounts paid to private
petitioner Litonjua liable on the contract of employment of private respondent through petitioner Litonjua.
respondent. The charterer of the vessel, Fairwind, clearly
benefitted from the employment of private respondent as Third We conclude that private respondent was properly regarded as an
Engineer of the Dufton Bay, along with the ten (10) other Filipino employee of the charterer Fairwind and that petitioner Litonjua
crewmembers recruited by Captain Ho in Cebu at the same may be held to answer to private respondent for the latter's claims
occasion. 14
If private respondent had not agreed to serve as such as the agent in the Philippines of Fairwind. We think this result,
Third Engineer, the ship would not have been able to proceed with which public respondent reached, far from constituting a grave
its voyage. The equitable consequence of this benefit to the abuse of discretion, is compelled by equitable principles and by
charterer is, moreover, reinforced by convergence of other the demands of substantial justice. To hold otherwise would be to
circumstances of which the Court must take account. There is the leave private respondent (and others who may find themselves in
circumstance that only the charterer, through the petitioner, was his position) without any effective recourse for the unjust
present in the Philippines. Secondly, the scope of authority or the dismissal and for the breach of his contract of employment.
responsibility of petitioner Litonjua was not clearly delimited.
Petitioner as noted, took the position that its commission was WHEREFORE, the Petition for certiorari is DISMISSED and the
limited to taking care of vessels owned by Fairwind. But the Decision of the then National Seamen Board dated 31 May 1979 is
documentary authorization read into the record of this case does hereby AFFIRMED. No pronouncement as to costs.
not make that clear at all. The words "our ships" may well be read
to refer both to vessels registered in the name of Fairwind and SO ORDERED.
vessels owned by others but chartered by Fairwind. Indeed the
commercial, operating requirements of a vessel for crew members Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
and for supplies and provisions have no relationship to the
technical characterization of the vessel as owned by or as merely
Republic of the Philippines
chartered by Fairwind. In any case, it is not clear from the
authorization given by Fairwind to petitioner Litonjua that vessels
chartered by Fairwind (and owned by some other companies)
were not to be taken care of by petitioner Litonjua should such
vessels put into a Philippine port. The statement of account which SECOND DIVISION
the Dufton Bay's Master had signed and which pertained to the
salary of private respondent had referred to a Philippine agency G.R. No. 95529 August 22, 1991
which would take care of disbursing or paying such account.
'there is no question that Philippine agency was the Philippine MAGELLAN MANUFACTURING MARKETING CORPORATION,
agent of the charterer Fairwind. Moreover, there is also no * petitioner,
question that petitioner Litonjua did assist the Master of the vs.
vessel in locating and recruiting private respondent as Third
Engineer of the vessel as well as ten (10) other Filipino seamen as
and F.E. ZUELLIG, INC. respondents.
crew members. In so doing, petitioner Litonjua certainly in effect
represented that it was taking care of the crewing and other
requirements of a vessel chartered by its principal, Fairwind. 15

Last, but certainly not least, there is the circumstance that REGALADO, J.:p

extreme hardship would result for the private respondent if

petitioner Litonjua, as Philippine agent of the charterer, is not held Petitioner, via this petition for review on certiorari, seeks the
liable to private respondent upon the contract of employment. reversal of the judgment of respondent Court of Appeals in CA-
Clearly, the private respondent, and the other Filipino crew G.R. CV No. 18781, affirming in part the decision of the trial
members of the vessel, would be defenseless against a breach of court, the dispositive portion of which reads:
their respective contracts. While wages of crew members
constitute a maritime lien upon the vessel, private respondent is
Premises considered, the decision appealed Elaborating on the above findings of fact of respondent court and
from is affirmed insofar as it dismisses the without being disputed by herein private respondents, petitioner
complaint. On the counter-claim, however, additionally avers that:
appellant is ordered to pay appellees the
amount of P52,102.45 with legal interest from When petitioner informed private respondents
date of extra-judicial demand. The award of about what happened, the latter issued a
attorney's fees is deleted. certificate stating that its bill of lading it issued
is an on board bill of lading and that there was
The facts as found by respondent appellate court are as follows: no actual transhipment of the fans. According
to private respondents when the goods are
On May 20, 1980, plaintiff-appellant Magellan transferred from one vessel to another which
Manufacturers Marketing Corp. (MMMC) both belong to the same owner which was what
entered into a contract with Choju Co. of happened to the Anahaw fans, then there is (no)
Yokohama, Japan to export 136,000 anahaw transhipment. Petitioner sent this certification
fans for and in consideration of $23,220.00. As to Choju Co., Ltd., but the said company still
payment thereof, a letter of credit was issued to refused to accept the goods which arrived in
plaintiff MMMC by the buyer. Through its Japan on July 19, 1980.
president, James Cu, MMMC then contracted
F.E. Zuellig, a shipping agent, through its Private respondents billed petitioner in the
solicitor, one Mr. King, to ship the anahaw fans amount of P16,342.21 for such shipment and
through the other appellee, Orient Overseas P34,928.71 for demurrage in Japan from July
Container Lines, Inc., (OOCL) specifying that he 26 up to August 31, 1980 or a total of
needed an on-board bill of lading and that P51,271.02. In a letter dated March 20, 1981,
transhipment is not allowed under the letter of private respondents gave petitioner the option of
credit (Exh. B-1). On June 30, 1980, appellant paying the sum of P51,271.02 or to abandon
MMMC paid F.E. Zuellig the freight charges and the Anahaw fans to enable private respondents
secured a copy of the bill of lading which was to sell them at public auction to cover the cost
presented to Allied Bank. The bank then of shipment and demurrages. Petitioner opted
credited the amount of US$23,220.00 covered to abandon the goods. However, in a letter dated
by the letter of credit to appellant's account. June 22, 1981 private respondents demanded
However, when appellant's president James Cu, for payment of P298,150.93 from petitioner
went back to the bank later, he was informed which represents the freight charges from
that the payment was refused by the buyer Japan to Manila, demurrage incurred in Japan
allegedly because there was no on-board bill of and Manila from October 22, 1980 up to May
lading, and there was a transhipment of goods. 20, 1981; and charges for stripping the
As a result of the refusal of the buyer to accept, container van of the Anahaw fans on May 20,
upon appellant's request, the anahaw fans were 1981.
shipped back to Manila by appellees, for which
the latter demanded from appellant payment of On July 20, 1981 petitioner filed the complaint
P246,043.43. Appellant abandoned the whole in this case praying that private respondents be
cargo and asked appellees for damages. ordered to pay whatever petitioner was not able
to earn from Choju Co., Ltd., amounting to
In their Partial Stipulation of Facts, the parties P174,150.00 and other damages like attorney's
admitted that a shipment of 1,047 cartons of fees since private respondents are to blame for
136,000 pieces of Anahaw Fans contained in 1 the refusal of Choju Co., Ltd. to accept the
x 40 and 1 x 20 containers was loaded at Anahaw fans. In answer thereto the private
Manila on board the MV 'Pacific Despatcher' respondents alleged that the bill of lading
freight prepaid, and duly covered by Bill of clearly shows that there will be a transhipment
Lading No. MNYK201T dated June 27, 1980 and that petitioner was well aware that MV
issued by OOCL; that the shipment was (Pacific) Despatcher was only up to Hongkong
delivered at the port of discharge on July 19, where the subject cargo will be transferred to
1980, but was subsequently returned to Manila another vessel for Japan. Private respondents
after the consignee refused to accept/pay the also filed a counterclaim praying that petitioner
same. 4 be ordered to pay freight charges from Japan to
Manila and the demurrages in Japan and
Manila amounting to P298,150.93.
The lower court decided the case in favor of certification to the effect that while the Anahaw fans were
private respondents. It dismissed the complaint transferred from one vessel to another in Hong Kong, since the
on the ground that petitioner had given its two vessels belong to one and the same company then there was
consent to the contents of the bill of lading no transhipment. 8

where it is clearly indicated that there will be

transhipment. The lower court also said that Transhipment, in maritime law, is defined as "the act of taking
petitioner is liable to pay to private respondent cargo out of one ship and loading it in another," 9
or "the transfer
the freight charges from Japan to Manila and
of goods from the vessel stipulated in the contract of affreightment
demurrages since it was the former which
to another vessel before the place of destination named in the
ordered the reshipment of the cargo from Japan
contract has been reached," 10 or "the transfer for further
to Manila.
transportation from one ship or conveyance to another." 11 Clearly,
either in its ordinary or its strictly legal acceptation, there is
On appeal to the respondent court, the finding
transhipment whether or not the same person, firm or entity owns
of the lower (court) that petitioner agreed to a
the vessels. In other words, the fact of transhipment is not
transhipment of the goods was affirmed but the
dependent upon the ownership of the transporting ships or
finding that petitioner is liable for P298,150.93
conveyances or in the change of carriers, as the petitioner seems
was modified. It was reduced to P52,102.45
to suggest, but rather on the fact of actual physical transfer of
which represents the freight charges and
cargo from one vessel to another.
demurrages incurred in Japan but not for the
demurrages incurred in Marta. According to the
That there was transhipment within this contemplation is the
respondent (court) the petitioner can not be
inescapable conclusion, as there unmistakably appears on the
held liable for the demurrages incurred in
face of the bill of lading the entry "Hong Kong" in the blank space
Manila because Private respondents did not
labeled "Transhipment," which can only mean that transhipment
timely inform petitioner that the goods were 12
actually took place. This fact is further bolstered by the
already in Manila in addition to the fact that
private respondent had given petitioner the certification issued by private respondent F.E. Zuellig, Inc.

option of abandoning the goods in exchange for dated July 19, 1980, although it carefully used the term "transfer"
5 instead of transhipment. Nonetheless, no amount of semantic
the demurrages.
juggling can mask the fact that transhipment in truth occurred in
this case.
Petitioner, being dissatisfied with the decision of respondent court
and the motion for reconsideration thereof having been denied,
Petitioner insists that "(c)onsidering that there was no actual
invokes the Court's review powers for the resolution of the issues
transhipment of the Anahaw fans, then there is no occasion under
as to whether or not respondent court erred (1) in affirming the
which the petitioner can agree to the transhipment of the Anahaw
decision of the trial court which dismissed petitioner's complaint;
fans because there is nothing like that to agree to" and "(i)f there
and (2) in holding petitioner liable to private respondents in the
6 is no actual transhipment but there appears to be a transhipment
amount of P52,102.45.
in the bill of lading, then there can be no possible reason for it but
a mistake on the part of the private respondents.
I. Petitioner obstinately faults private respondents for the refusal
of its buyer, Choju Co., Ltd., to take delivery of the exported
Petitioner, in effect, is saying that since there was a mistake in
anahaw fans resulting in a loss of P174,150.00 representing the
documentation on the part of private respondents, such a mistake
purchase price of the said export items because of violation of the
militates against the conclusiveness of the bill of lading insofar as
terms and conditions of the letter of credit issued in favor of the
it reflects the terms of the contract between the parties, as an
former which specified the requirement for an on board bill of
exception to the parol evidence rule, and would therefore permit it
lading and the prohibition against transhipment of goods,
to explain or present evidence to vary or contradict the terms of
inasmuch as the bill of lading issued by the latter bore the
the written agreement, that is, the bill of lading involved herein.
notation "received for shipment" and contained an entry indicating
transhipment in Hongkong.
It is a long standing jurisprudential rule that a bill of lading
operates both as a receipt and as a contract. It is a receipt for the
We find no fault on the part of private respondents. On the matter
goods shipped and a contract to transport and deliver the same as
of transhipment, petitioner maintains that "... while the goods
therein stipulated. As a contract, it names the parties, which
were transferred in Hongkong from MV Pacific Despatcher, the
includes the consignee, fixes the route, destination, and freight
feeder vessel, to MV Oriental Researcher, a mother vessel, the
rates or charges, and stipulates the rights and obligations
same cannot be considered transhipment because both vessels
assumed by the parties. Being a contract, it is the law between
belong to the same shipping company, the private respondent
7 the parties who are bound by its terms and conditions provided
Orient Overseas Container Lines, Inc." Petitioner emphatically
that these are not contrary to law, morals, good customs, public
goes on to say: "To be sure, there was no actual transhipment of
order and public policy. A bill of lading usually becomes
the Anahaw fans. The private respondents have executed a
effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the absence of A I know. It's not transport,
fraud, concealment or improper conduct, known to the shipper, they relay, not trans... yes,
and he is generally bound by his acceptance whether he reads the that is why we have an
bill or not. 17
agreement if they should not
put a transhipment in
The holding in most jurisdictions has been that a shipper who Hongkong, that's why they
receives a bill of lading without objection after an opportunity to even stated in the
inspect it, and permits the carrier to act on it by proceeding with certification.
the shipment is presumed to have accepted it as correctly stating
the contract and to have assented to its terms. In other words, the xxx xxx xxx
acceptance of the bill without dissent raises the presumption that
all the terms therein were brought to the knowledge of the shipper Q In layman's language,
and agreed to by him and, in the absence of fraud or mistake, he would you agree with me that
is estopped from thereafter denying that he assented to such transhipment is the transfer
terms. This rule applies with particular force where a shipper of a cargo from one vessel to
accepts a bill of lading with full knowledge of its contents and the other?
acceptance under such circumstances makes it a binding
contract. A As a layman, yes.

In the light of the series of events that transpired in the case at Q So, you know for a fact that
bar, there can be no logical conclusion other than that the your shipment is going to be
petitioner had full knowledge of, and actually consented to, the unloaded in Hongkong from
terms and conditions of the bill of lading thereby making the same M. V. Dispatcher (sic) and then
conclusive as to it, and it cannot now be heard to deny having transfer (sic) to another vessel
assented thereto. As borne out by the records, James Cu himself, which was the Oriental
in his capacity as president of MMMC, personally received and Dispatcher, (sic) you know
signed the bill of lading. On practical considerations, there is no that for a fact?
better way to signify consent than by voluntarry signing the
document which embodies the agreement. As found by the Court A Yes, sir. (Emphasis
of Appeals 20

Contrary to appellant's allegation that it did not 21

Under the parol evidence rule, the terms of a contract are
agree to the transhipment, it could be gleaned
rendered conclusive upon the parties, and evidence aliundeis not
from the record that the appellant actually
admissible to vary or contradict a complete and enforceable
consented to the transhipment when it received
agreement embodied in a document, subject to well defined
the bill of lading personally at appellee's (F.E.
exceptions which do not obtain in this case. The parol evidence
Zuellig's) office. There clearly appears on the
rule is based on the consideration that when the parties have
face of the bill of lading under column "PORT
reduced their agreement on a particular matter into writing, all
their previous and contemporaneous agreements on the matter
(Exhibits'G-l'). Despite said entries he still
are merged therein. Accordingly, evidence of a prior or
delivered his voucher (Exh. F) and the
contemporaneous verbal agreement is generally not admissible to
corresponding check in payment of the freight
vary, contradict or defeat the operation of a valid
(Exhibit D), implying that he consented to the 22
19 instrument. The mistake contemplated as an exception to the
transhipment (Decision, p. 6, Rollo).
parol evidence rule is one which is a mistake of fact mutual to the
parties. Furthermore, the rules on evidence, as amended,
Furthermore and particularly on the matter of whether or not
require that in order that parol evidence may be admitted, said
there was transhipment, James Cu, in his testimony on
mistake must be put in issue by the pleadings, such that if not
crossexamination, categorically stated that he knew for a fact that
raised inceptively in the complaint or in the answer, as the case
the shipment was to be unloaded in Hong Kong from the MV
may be, a party can not later on be permitted to introduce parol
Pacific Despatcher to be transferred to a mother vessel, the MV 24
evidence thereon. Needless to say, the mistake adverted to by
Oriental Researcher in this wise:
herein petitioner, and by its own admission, was supposedly
committed by private respondents only and was raised by the
Q Mr. Cu, are you not aware
former rather belatedly only in this instant petition. Clearly then,
of the fact that your shipment
and for failure to comply even only with the procedural
is to be transferred or
requirements thereon, we cannot admit evidence to prove or
transhipped at the port of
explain the alleged mistake in documentation imputed to private
respondents by petitioner.
Petitioner further argues that assuming that there was cross-examination, it was likewise established that petitioner,
transhipment, it cannot be deemed to have agreed thereto even if through its aforesaid president, was aware of this fact, thus:
it signed the bill of lading containing such entry because it had
made known to private respondents from the start that Q If the container van, the
transhipment was prohibited under the letter of credit and that, loaded container van, was
therefore, it had no intention to allow transhipment of the subject transported back to South
cargo. In support of its stand, petitioner relies on the second Harbor on June 27, 1980,
paragraph of Article 1370 of the Civil Code which states that "(i)f would you tell us, Mr. Cu,
the words appear to be contrary to the evident intention of the when the Bill of Lading was
parties, the latter shall prevail over the former," as wen as the received by you?
supposed ruling in Caltex Phil., Inc. vs. Intermediate Appellate
Court, et al. that "where the literal interpretation of a contract is A I received on June 30,
contrary to the evident intention of the parties, the latter shall 1980. I received at the same
prevail." time so then I gave the check.

As between such stilted thesis of petitioner and the contents of the xxx xxx xxx
bill of lading evidencing the intention of the parties, it is
irremissible that the latter must prevail. Petitioner conveniently Q So that in exchange of the
overlooks the first paragraph of the very article that he cites which Bill of Lading you issued your
provides that "(i)f the terms of the contract are clear and leave no check also dated June 30,
doubt upon the intention of the contracting parties, the literal 1980?
meaning of the stipulations shall control." In addition, Article
1371 of the same Code provides that "(i)n order to judge the
A Yes, sir.
intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered."
Q And June 27, 1980 was
the date of the Bill of Lading,
The terms of the contract as embodied in the bill of lading are
did you notice that the Bill of
clear and thus obviates the need for any interpretation. The
Lading states: 'Received for
intention of the parties which is the carriage of the cargo under
shipment'only? .
the terms specified thereunder and the wordings of the bill of
lading do not contradict each other. The terms of the contract
A Yes, sir.
being conclusive upon the parties and judging from the
contemporaneous and subsequent actuations of petitioner, to wit,
personally receiving and signing the bill of lading and paying the Q What did you say?
freight charges, there is no doubt that petitioner must necessarily
be charged with full knowledge and unqualified acceptance of the A I requested to issue me on
terms of the bill of lading and that it intended to be bound board bill of lading.
Q When?
Moreover, it is a well-known commercial usage that transhipment
of freight without legal excuse, however competent and safe the A In the same date of June
vessel into which the transfer is made, is a violation of the 30.
contract and an infringement of the right of the shipper, and
subjects the carrier to liability if the freight is lost even by a cause Q What did they say?
otherwise excepted.26 It is highly improbable to suppose that
private respondents, having been engaged in the shipping A They said, they cannot.
business for so long, would be unaware of such a custom of the
trade as to have undertaken such transhipment without xxx xxx xxx
petitioner's consent and unnecessarily expose themselves to a
possible liability. Verily, they could only have undertaken
Q Do you know the difference
transhipment with the shipper's permission, as evidenced by the
between a "received for
signature of James Cu.
shipment bill of lading" and
"on board bill of lading"?
Another ground for the refusal of acceptance of the cargo of
anahaw fans by Choju Co., Ltd. was that the bill of lading that
A Yes, sir.
was issued was not an on board bill of lading, in clear violation of
the terms of the letter of credit issued in favor of petitioner. On
Q What's the difference?
A Received for shipment, you have insisted on such a stipulation on a pure whim or caprice, but
can receive the cargo even rather because of its reliance on the safeguards to the cargo that
you don't ship on board, that having an on board bill of lading ensured. Herein petitioner cannot
is placed in the warehouse; feign ignorance of the distinction between an "on board" and a
while on-board bill of lading "received for shipment" bill of lading, as manifested by James Cu's
means that is loaded on the testimony. It is only to be expected that those long engaged in the
vessel, the goods. export industry should be familiar with business usages and
xxx xxx xxx
In its petition, MMMC avers that "when petitioner teamed of what
Q In other words, it was not happened, it saw private respondent F.E. Zuellig which, in turn,
yet on board the vessel? issued a certification that as of June 30, 1980, the Anahaw fans
were already on board MV Pacific Despatcher (which means that
A During that time, not yet. the bill of lading is an on- board-bill of lading or 'shipped' bill of
lading as distinguished from a 'received for shipment'bill of lading
as governed by Sec. 3, par. 7, Carriage of Goods by Sea
xxx xxx xxx
Act) ...." What the petitioner would suggest is that said
certification issued by F.E. Zuellig, Inc., dated July 19, 1980, had
Q Do you know, Mr. Cu, that
the effect of converting the original "received for shipment only"
under the law, if your
bill of lading into an "on board" bill of lading as required by the
shipment is received on
buyer and was, therefore, by substantial compliance, not violative
board a vessel you can
of the contract.
demand an on-board bill of
lading not only a received for
An on board bill of lading is one in which it is stated that the
shipment bill of lading.?
goods have been received on board the vessel which is to carry the
goods, whereas a received for shipment bill of lading is one in
A Yes sir.
which it is stated that the goods have been received for shipment
with or without specifying the vessel by which the goods are to be
Q And did you demand from
shipped. Received for shipment bills of lading are issued whenever
F.E. Zuellig the substitution
conditions are not normal and there is insufficiency of shipping
of that received for shipment 29
space. An on board bill of lading is issued when the goods have
bill of lading with an on-
been actually placed aboard the ship with every reasonable
board bill of lading? 30
expectation that the shipment is as good as on its way. It is,
therefore, understandable that a party to a maritime contract
A Of course, instead they
would require an on board bill of lading because of its apparent
issue me a certification.
guaranty of certainty of shipping as well as the seaworthiness of
the vessel which is to carry the goods.
Q They give you a ... ?

It cannot plausibly be said that the aforestated certification of F.E.

A ... a certification that it was Zuellig, Inc. can qualify the bill of lading, as originally issued, into
loaded on board on June 30. an on board bill of lading as required by the terms of the letter of
credit issued in favor of petitioner. For one, the certification was
xxx xxx xxx issued only on July 19, 1980, way beyond the expiry date of June
30, 1980 specified in the letter of credit for the presentation of an
Q Mr. Cu, are you aware of on board bill of lading. Thus, even assuming that by a liberal
the conditions of the Letter of treatment of the certification it could have the effect of converting
Credit to the effect that there the received for shipment bill of lading into an on board of bill of
should be no transhipment lading, as petitioner would have us believe, such an effect may be
and that it should also get an achieved only as of the date of its issuance, that is, on July 19,
on board bill of lading.? 1980 and onwards.

A Yes sir. The fact remains, though, that on the crucial date of June 30,
1980 no on board bill of lading was presented by petitioner in
Undoubtedly, at the outset, petitioner knew that its buyer, Choju compliance with the terms of the letter of credit and this default
Co., Ltd., particularly required that there be an on board bill of consequently negates its entitlement to the proceeds thereof. Said
lading, obviously due to the guaranty afforded by such a bill of certification, if allowed to operate retroactively, would render
lading over any other kind of bill of lading. The buyer could not illusory the guaranty afforded by an on board bill of lading, that
is, reasonable certainty of shipping the loaded cargo aboard the charges during the time that the goods were in Japan and for its
vessel specified, not to mention that it would indubitably be reshipment to Manila, P831.43 for charges paid to the Manila
stretching the concept of substantial compliance too far. International Port Terminal, and P246,043.43 for demurrage in
Manila from October 22, 1980 to June 18, 1981. On appeal, the
Neither can petitioner escape hability by adverting to the bill of Court of Appeals limited petitioner's liability to P52,102.45 when it
lading as a contract of adhesion, thus warranting a more liberal ruled:
consideration in its favor to the extent of interpreting ambiguities
against private respondents as allegedly being the parties who As regards the amount of P51,271.02, which
gave rise thereto. The bill of lading is clear on its face. There is no represents the freight charges for the return
occasion to speak of ambiguities or obscurities whatsoever. All of shipment to Manila and the demurrage charges
its terms and conditions are plainly worded and commonly in Japan, the same is supported by appellant's
understood by those in the business. own letter request (Exh. 2) for the return of the
shipment to Manila at its (appellant's) expense,
It will be recalled that petitioner entered into the contract with and hence, it should be held liable therefor. The
Choju Co., Ltd. way back on May 20,1980 or over a month before amount of P831.43 was paid to the Manila
the expiry date of the letter of credit on June 30, 1980, thus International Port Terminal upon arrival of the
giving it more than ample time to find a carrier that could comply shipment in Manila for appellant's account. It
with the requirements of shipment under the letter of credit. It is should properly be charged to said appellant.
conceded that bills of lading constitute a class of contracts of
adhesion. However, as ruled in the earlier case of Ong Yiu vs. However, respondent court modified the trial court's decision by
Court of Appeals, et al. and reiterated in Servando, et al. vs. excluding the award for P246,043.43 for demurrage in Manila
Philippine Steam Navigation Co., 32
plane tickets as well as bills of from October 22, 1980 to June 18, 1981.
lading are contracts not entirely prohibited. The one who adheres
to the contract is in reality free to reject it entirely; if he adheres, Demurrage, in its strict sense, is the compensation provided for in
he gives his consent. The respondent court correctly observed in the contract of affreightment for the detention of the vessel beyond
the present case that "when the appellant received the bill of the time agreed on for loading and unloading. Essentially,
lading, it was tantamount to appellant's adherence to the terms demurrage is the claim for damages for failure to accept delivery.
and conditions as embodied therein. In a broad sense, every improper detention of a vessel may be
considered a demurrage. Liability for demurrage, using the word
In sum, petitioner had full knowledge that the bill issued to it in its strictly technical sense, exists only when expressly
contained terms and conditions clearly violative of the stipulated in the contract. Using the term in its broader sense,
requirements of the letter of credit. Nonetheless, perhaps in its damages in the nature of demurrage are recoverable for a breach
eagerness to conclude the transaction with its Japanese buyer of the implied obligation to load or unload the cargo with
and in a race to beat the expiry date of the letter of credit, reasonable dispatch, but only by the party to whom the duty is
petitioner took the risk of accepting the bill of lading even if it did owed and only against one who is a party to the shipping
not conform with the indicated specifications, possibly contract. Notice of arrival of vessels or conveyances, or of their
entertaining a glimmer of hope and imbued with a touch of daring placement for purposes of unloading is often a condition
that such violations may be overlooked, if not disregarded, so long precedent to the right to collect demurrage charges.
as the cargo is delivered on time. Unfortunately, the risk did not
pull through as hoped for. Any violation of the terms and Private respondents, admittedly, have adopted the common
conditions of the letter of credit as would defeat its right to collect practice of requiring prior notice of arrival of the goods shipped
the proceeds thereof was, therefore, entirely of the petitioner's before the shipper can be held liable for demurrage, as declared by
making for which it must bear the consequences. As finally Wilfredo Hans, head of the accounting department of F.E. Zuellig,
averred by private respondents, and with which we agree, "... the Inc., on cross-examination as a witness for private respondents:
questions of whether or not there was a violation of the terms and
conditions of the letter of credit, or whether or not such violation Q ... you will agree with me
was the cause or motive for the rejection by petitioner's Japanese that before one could be
buyer should not affect private respondents therein since they charged with demurrage the
were not privies to the terms and conditions of petitioner's letter of shipper should be notified of
credit and cannot therefore be held liable for any violation thereof the arrival of the shipment?
by any of the parties thereto."
A Yes sir.
II. Petitioner contends that respondent court erred in holding it
liable to private respondents for P52,102.45 despite its exercise of Q Without such notification,
its option to abandon the cargo. It will be recalled that the trial there is no way by which the
court originally found petitioner liable for P298,150.93, which shipper would know (of) such
amount consists of P51,271.02 for freight, demurrage and other arrival?
A Yes. memorandum that the abandonment of goods by petitioner was
too late and made in bad faith.
Q And no charges of
demurrage before the arrival On this point, we agree with petitioner. Ordinarily, the shipper is
of the cargo? liable for freightage due to the fact that the shipment was made
for its benefit or under its direction and, correspondingly, the
A Yes sir. 37
carrier is entitled to collect charges for its shipping services. This
is particularly true in this case where the reshipment of the goods
Accordingly, on this score, respondent court ruled: was made at the instance of petitioner in its letter of August 29,

However, insofar as the demurrage charges of

P246,043.43 from October up to May 1980, However, in a letter dated March 20, 1981, private respondents
arriv(al) in Manila, are concerned, We are of the belatedly informed petitioner of the arrival of its goods from Japan
view that appellant should not be made to and that if it wished to take delivery of the cargo it would have to
shoulder the same, as it was not at fault nor pay P51,271.02, but with the last paragraph thereof stating as
was it responsible for said demurrage charges. follows:
Appellee's own witness (Mabazza) testified that
while the goods arrived in Manila in October Please can you advise within 15 days of receipt
1980, appellant was notified of said arrival only of this letter whether you intend to take delivery
in March 1981. No explanation was given for of this shipment, as alternatively we will have to
the delay in notifying appellant. We agree with take legal proceedings in order to have the cargo
appellant that before it could be charged for auctioned to recover the costs involved, as well
demurrage charges it should have been notified as free the container which are (sic) urgently
of the arrival of the goods first. Without such required for export cargoes.
notification it could not- be so charged because
there was no way by which it would know that Clearly, therefore, private respondents unequivocally offered
the goods had already arrived for it to take petitioner the option of paying the shipping and demurrage
custody of them. Considering that it was only in charges in order to take delivery of the goods or of abandoning the
March 1981 (Exh. K) that appellant was notified same so that private respondents could sell them at public
of the arrival of the goods, although the goods auction and thereafter apply the proceeds in payment of the
had actually arrived in October 1980 (tsn, Aug. shipping and other charges.
14, 1986, pp. 10-14), appellant cannot be
charged for demurrage from October 1980 to
Responding thereto, in a letter dated April 3, 1981, petitioner
March 1981. ... seasonably communicated its decision to abandon to the goods in
favor of private respondents with the specific instruction that any
While being satisfied with the exclusion of demurrage charges in excess of the proceeds over the legal costs and charges be turned
Manila for the period from October 22,1980 to June 18,1981, over to petitioner. Receipt of said letter was acknowledged by
petitioner nevertheless assails the Court of Appeals' award of private respondents, as revealed by the testimony of Edwin
P52,102.43 in favor of private respondents, consisting of Mabazza, a claim officer of F.E. Zuellig, Inc., on cross-
P51,271.01 as freight and demurrage charges in Japan and examination. 42
P831.43 for charges paid at the Manila International Port
Despite petitioner's exercise of the option to abandon the cargo,
however, private respondents sent a demand letter on June 22,
Petitioner asserts that by virtue of the exercise of its option to 1981 43
insisting that petitioner should pay the entire amount of
abandon the goods so as to allow private respondents to sell the 44
P298,150.93 and, in another letter dated Apiril 30, 1981, they
same at a public auction and to apply the proceeds thereof as
stated that they win not accept the abandonment of the goods and
payment for the shipping and demurrage charges, it was released
demanded that the outstanding account be settled. The testimony
from liability for the sum of P52,102.43 since such amount 45
of said Edwin Mabazza definitely admits and bears this out.
represents the shipping and demurrage charges from which it is
considered to have been released due to the abandonment of
Now, there is no dispute that private respondents expressly and
goods. It further argues that the shipping and demurrage charges
on their own volition granted petitioner an option with respect to
from which it was released by the exercise of the option to
the satisfaction of freightage and demurrage charges. Having given
abandon the goods in favor of private respondents could not have
such option, especially since it was accepted by petitioner, private
referred to the demurrage charges in Manila because respondent
respondents are estopped from reneging thereon. Petitioner, on its
court ruled that the same were not chargeable to petitioner.
part, was well within its right to exercise said option. Private
Private respondents would rebut this contention by saying in their
respondents, in giving the option, and petitioner, in exercising that
option, are concluded by their respective actions. To allow either of
them to unilaterally back out on the offer and on the exercise of petitioners whereby the former would load and carry on board its
the option would be to countenance abuse of rights as an order of barge Mable 10 about 422.18 cubic meters of logs from
the day, doing violence to the long entrenched principle of Malampaya Sound, Palawan to North Harbor, Manila. The
mutuality of contracts. petitioners insured the logs against loss for P100,000.00 with
respondent Pioneer Insurance and Surety Corporation (Pioneer).
It will be remembered that in overland transportation, an
unreasonable delay in the delivery of transported goods is On February 29, 1972, the petitioners loaded on the barge, 811
sufficient ground for the abandonment of goods. By analogy, this pieces of logs at Malampaya Sound, Palawan for carriage and
can also apply to maritime transportation. Further, with much delivery to North Harbor, Port of Manila, but the shipment never
more reason can petitioner in the instant case properly abandon reached its destination because Mable 10 sank with the 811
the goods, not only because of the unreasonable delay in its pieces of logs somewhere off Cabuli Point in Palawan on its way to
delivery but because of the option which was categorically granted Manila. As alleged by the petitioners in their complaint and as
to and exercised by it as a means of settling its liability for the cost found by both the trial and appellate courts, the barge where the
and expenses of reshipment. And, said choice having been duly logs were loaded was not seaworthy such that it developed a leak.
communicated, the same is binding upon the parties on legal and The appellate court further found that one of the hatches was left
equitable considerations of estoppel. open causing water to enter the barge and because the barge was
not provided with the necessary cover or tarpaulin, the ordinary
WHEREFORE, the judgment of respondent Court of Appeals is splash of sea waves brought more water inside the barge.
AFFIRMED with the MODIFICATION that petitioner is likewise
absolved of any hability and the award of P52,102.45 with legal On March 8, 1972, the petitioners wrote a letter to Manila Bay
interest granted by respondent court on private respondents' demanding payment of P150,000.00 for the loss of the shipment
counterclaim is SET ASIDE, said counterclaim being hereby plus P100,000.00 as unrealized profits but the latter ignored the
DISMISSED, without pronouncement as to costs. demand. Another letter was sent to respondent Pioneer claiming
the full amount of P100,000.00 under the insurance policy but
SO ORDERED. respondent refused to pay on the ground that its hability
depended upon the "Total loss by Total Loss of Vessel only". Hence,
Melencio-Herrera (Chairperson), Paras and Padilla, JJ., concur. petitioners commenced Civil Case No. 86599 against Manila Bay
and respondent Pioneer.

Republic of the Philippines

After hearing, the trial court found in favor of the petitioners. The
dispositive portion of the decision reads:

FOR ALL THE FOREGOING, the Court hereby

rendered judgment as follows:

G.R. No. L-66935 November 11, 1985

(a) Condemning defendants Manila Bay
Lighterage Corporation and Pioneer Insurance
ISABELA ROQUE, doing busines under the name and style of and Surety Corporation to pay plaintiffs, jointly
Isabela Roque Timber Enterprises and ONG and severally, the sum of P100,000.00;
CHIONG, petitioners,
vs. (b) Sentencing defendant Manila Bay Lighterage
HON. INTERMEDIATE APPELATE COURT and PIONEER Corporation to pay plaintiff, in addition, the
INSURANCE AND SURETY CORPORATION,respondent. sum of P50,000.00, plus P12,500.00, that the
latter advanced to the former as down payment
for transporting the logs in question;

(c) Ordering the counterclaim of defendant

Insurance against plaintiffs, dismissed, for lack
of merit, but as to its cross-claim against its co-
This petition for certiorari asks for the review of the decision of the
defendant Manila Bay Lighterage Corporation,
Intermediate Appellate Court which absolved the respondent
the latter is ordered to reimburse the former for
insurance company from liability on the grounds that the vessel
whatever amount it may pay the plaintiffs as
carrying the insured cargo was unseaworthy and the loss of said
such surety;
cargo was caused not by the perils of the sea but by the perils of
the ship.
(d) Ordering the counterclaim of defendant
Lighterage against plaintiffs, dismissed for lack
On February 19, 1972, the Manila Bay Lighterage Corporation
of merit;
(Manila Bay), a common carrier, entered into a contract with the
(e) Plaintiffs' claim of not less than P100,000.00 COURT AS SALVAGE VALUE OF THE LOGS
and P75,000.00 as exemplary damages are THAT WERE RECOVERED.
ordered dismissed, for lack of merits; plaintiffs'
claim for attorney's fees in the sum of In their first assignment of error, the petitioners contend that the
P10,000.00 is hereby granted, against both implied warranty of seaworthiness provided for in the Insurance
defendants, who are, moreover ordered to pay Code refers only to the responsibility of the shipowner who must
the costs; and see to it that his ship is reasonably fit to make in safety the
contemplated voyage.
(f) The sum of P150,000.00 award to plaintiffs,
shall bear interest of six per cent (6%) from The petitioners state that a mere shipper of cargo, having no
March 25, 1975, until amount is fully paid. control over the ship, has nothing to do with its seaworthiness.
They argue that a cargo owner has no control over the structure of
Respondent Pioneer appealed to the Intermediate Appellate Court. the ship, its cables, anchors, fuel and provisions, the manner of
Manila Bay did not appeal. According to the petitioners, the loading his cargo and the cargo of other shippers, and the hiring
transportation company is no longer doing business and is of a sufficient number of competent officers and seamen. The
without funds. petitioners' arguments have no merit.

During the initial stages of the hearing, Manila Bay informed the There is no dispute over the liability of the common carrier Manila
trial court that it had salvaged part of the logs. The court ordered Bay. In fact, it did not bother to appeal the questioned decision.
them to be sold to the highest bidder with the funds to be However, the petitioners state that Manila Bay has ceased
deposited in a bank in the name of Civil Case No. 86599. operating as a firm and nothing may be recovered from it. They
are, therefore, trying to recover their losses from the insurer.
On January 30, 1984, the appellate court modified the trial
court's decision and absolved Pioneer from liability after finding The liability of the insurance company is governed by law. Section
that there was a breach of implied warranty of seaworthiness on 113 of the Insurance Code provides:
the part of the petitioners and that the loss of the insured cargo
was caused by the "perils of the ship" and not by the "perils of the In every marine insurance upon a ship or
sea". It ruled that the loss is not covered by the marine insurance freight, or freightage, or upon any thing which
policy. is the subject of marine insurance, a warranty
is implied that the ship is seaworthy.
After the appellate court denied their motion for reconsideration,
the petitioners filed this petition with the following assignments of Section 99 of the same Code also provides in part.
Marine insurance includes:
(1) Insurance against loss of or damage to:
ERRED IN HOLDING THAT IN CASES OF (a) Vessels, craft, aircraft, vehicles, goods,
MARINE CARGO INSURANCE, THERE IS A freights, cargoes, merchandise, ...
From the above-quoted provisions, there can be no mistaking the
fact that the term "cargo" can be the subject of marine insurance
II and that once it is so made, the implied warranty of
seaworthiness immediately attaches to whoever is insuring the
THE INTERMEDIATE APPELLATE COURT cargo whether he be the shipowner or not.
CARGO IN THIS CASE WAS CAUSED BY As we have ruled in the case of Go Tiaoco y Hermanos v. Union
"PERILS OF THE SHIP" AND NOT BY "PERILS Insurance Society of Canton (40 Phil. 40):

The same conclusion must be reached if the

III question be discussed with reference to the
seaworthiness of the ship. It is universally
THE INTERMEDIATE APPELLATE COURT accepted that in every contract of insurance
ERRED IN NOT ORDERING THE RETURN TO upon anything which is the subject of marine
PETITIONER OF THE AMOUNT OF P8,000.00 insurance, a warranty is implied that the ship
WHICH WAS DEPOSITED IN THE TRIAL shall be seaworthy at the time of the inception
of the voyage. This rule is accepted in our own distinguished from the ordinary wear and tear
Insurance Law (Act No. 2427, sec. 106). ... of the voyage, and distinct from injuries suffered
by the vessel in consequence of her not being
Moreover, the fact that the unseaworthiness of the ship was seaworthy at the outset of her voyage (as in this
unknown to the insured is immaterial in ordinary marine case). It is also the general rule that everything
insurance and may not be used by him as a defense in order to which happens thru the inherent vice of the
recover on the marine insurance policy. thing, or by the act of the owners, master or
shipper, shall not be reputed a peril, if not
As was held in Richelieu and Ontario Nav. Co. v. Boston Marine, otherwise borne in the policy. (14 RCL on
Inc., Co. (136 U.S. 406): Insurance, Sec. 384, pp. 1203- 1204; Cia. de
Navegacion v. Firemen's Fund Ins. Co., 277 US
66, 72 L. ed. 787, 48 S. Ct. 459).
There was no look-out, and both that and the
rate of speed were contrary to the Canadian
Statute. The exception of losses occasioned by With regard to the second assignment of error, petitioners
unseaworthiness was in effect a warranty that a maintain, that the loss of the cargo was caused by the perils of
loss should not be so occasioned, and whether the sea, not by the perils of the ship because as found by the trial
the fact of unseaworthiness were known or court, the barge was turned loose from the tugboat east of Cabuli
unknown would be immaterial. Point "where it was buffeted by storm and waves." Moreover,
petitioners also maintain that barratry, against which the cargo
was also insured, existed when the personnel of the tugboat and
Since the law provides for an implied warranty of seaworthiness in
the barge committed a mistake by turning loose the barge from
every contract of ordinary marine insurance, it becomes the
the tugboat east of Cabuli Point. The trial court also found that
obligation of a cargo owner to look for a reliable common carrier
the stranding and foundering of Mable 10 was due to improper
which keeps its vessels in seaworthy condition. The shipper of
loading of the logs as well as to a leak in the barge which
cargo may have no control over the vessel but he has full control
constituted negligence.
in the choice of the common carrier that will transport his goods.
Or the cargo owner may enter into a contract of insurance which
specifically provides that the insurer answers not only for the On the contention of the petitioners that the trial court found that
perils of the sea but also provides for coverage of perils of the ship. the loss was occasioned by the perils of the sea characterized by
the "storm and waves" which buffeted the vessel, the records show
that the court ruled otherwise. It stated:
We are constrained to apply Section 113 of the Insurance Code to
the facts of this case. As stated by the private respondents:
xxx xxx xxx

In marine cases, the risks insured against are

"perils of the sea" (Chute v. North River Ins. Co., ... The other affirmative defense of defendant
Minn214 NW 472, 55 ALR 933). The purpose Lighterage, 'That the supposed loss of the logs
of such insurance is protection against was occasioned by force majeure... "was not
contingencies and against possible damages supported by the evidence. At the time Mable
and such a policy does not cover a loss or injury 10 sank, there was no typhoon but ordinary
which must inevitably take place in the strong wind and waves, a condition which is
ordinary course of things. There is no doubt natural and normal in the open sea. The
that the term 'perils of the sea' extends only to evidence shows that the sinking of Mable 10
losses caused by sea damage, or by the violence was due to improper loading of the logs on one
of the elements, and does not embrace all losses side so that the barge was tilting on one side
happening at sea. They insure against losses and for that it did not navigate on even keel;
from extraordinary occurrences only, such as that it was no longer seaworthy that was why it

stress of weather, winds and waves, lightning, developed leak; that the personnel of the

tempests, rocks and the like. These are tugboat and the barge committed a mistake

understood to be the "perils of the sea" referred when it turned loose the barge from the tugboat

in the policy, and not those ordinary perils east of Cabuli point where it was buffeted by

which every vessel must encounter. "Perils of storm and waves, while the tugboat proceeded

the sea" has been said to include only such to west of Cabuli point where it was protected

losses as are of extraordinarynature, or arise by the mountain side from the storm and waves

from some overwhelming power, which cannot coming from the east direction. ..."

be guarded against by the ordinary exertion of

human skill and prudence. Damage done to a In fact, in the petitioners' complaint, it is alleged that "the barge
vessel by perils of the sea includes every species Mable 10 of defendant carrier developed a leak which allowed
of damages done to a vessel at sea, as water to come in and that one of the hatches of said barge was
negligently left open by the person in charge thereof causing more intends to give protection. As applied to the
water to come in and that "the loss of said plaintiffs' cargo was present case it results that the owners of the
due to the fault, negligence, and/or lack of skill of defendant damaged rice must look to the shipowner for
carrier and/or defendant carrier's representatives on barge Mable redress and not to the insurer.
Neither can petitioners allege barratry on the basis of the findings
It is quite unmistakable that the loss of the cargo was due to the showing negligence on the part of the vessel's crew.
perils of the ship rather than the perils of the sea. The facts
clearly negate the petitioners' claim under the insurance policy. In Barratry as defined in American Insurance Law is "any willful
the case of Go Tiaoco y Hermanos v. Union Ins. Society of Canton, misconduct on the part of master or crew in pursuance of some
supra, we had occasion to elaborate on the term "perils of the unlawful or fraudulent purpose without the consent of the
ship." We ruled: owners, and to the prejudice of the owner's interest." (Sec. 171,
U.S. Insurance Law, quoted in Vance, Handbook on Law of
It must be considered to be settled, Insurance, 1951, p. 929.)
furthermore, that a loss which, in the ordinary
course of events, results from the natural and Barratry necessarily requires a willful and intentional act in its
inevitable action of the sea, from the ordinary commission. No honest error of judgment or mere negligence,
wear and tear of the ship, or from the negligent unless criminally gross, can be barratry. (See Vance on Law of
failure of the ship's owner to provide the vessel Insurance, p. 929 and cases cited therein.)
with proper equipment to convey the cargo
under ordinary conditions, is not a peril of the In the case at bar, there is no finding that the loss was occasioned
sea. Such a loss is rather due to what has been by the willful or fraudulent acts of the vessel's crew. There was
aptly called the "peril of the ship." The insurer only simple negligence or lack of skill. Hence, the second
undertakes to insure against perils of the sea assignment of error must likewise be dismissed.
and similar perils, not against perils of the ship.
As was well said by Lord Herschell in Wilson,
Anent the third assignment of error, we agree with the petitioners
Sons & Co. v. Owners of Cargo per the
that the amount of P8,000.00 representing the amount of the
Xantho ([1887], 12 A. C., 503, 509), there must,
salvaged logs should have been awarded to them. However, this
in order to make the insurer liable, be some
should be deducted from the amounts which have been
casualty, something which could not be
adjudicated against Manila Bay Lighterage Corporation by the trial
foreseen as one of the necessary incidents of
the adventure. The purpose of the policy is to
secure an indemnity against accidents which
WHEREFORE, the decision appealed from is AFFIRMED with the
may happen, not against events which must
modification that the amount of P8,000.00 representing the value
of the salvaged logs which was ordered to be deposited in the
Manila Banking Corporation in the name of Civil Case No. 86599
In the present case the entrance of the sea
is hereby awarded and ordered paid to the petitioners. The liability
water into the ship's hold through the defective
adjudged against Manila Bay Lighterage Corporation in the
pipe already described was not due to any
decision of the trial court is accordingly reduced by the same
accident which happened during the voyage,
but to the failure of the ship's owner properly to
repair a defect of the existence of which he was
apprised. The loss was therefore more
analogous to that which directly results from
Teehankee (Chairman), Melencio-Herrera, Plana, De la Fuente and
simple unseaworthiness than to that which
Patajo, JJ., concur.
result from the perils of the sea.

Relova, J., is on leave.

xxx xxx xxx

Suffice it to say that upon the authority of Republic of the Philippines

those cases there is no room to doubt the SUPREME COURT
liability of the shipowner for such a loss as Manila

occurred in this case. By parity of reasoning the EN BANC

insurer is not liable; for generally speaking, the G.R. No. L-6393 January 31, 1955
shipowner excepts the perils of the sea from his A. MAGSAYSAY INC., plaintiff-appellee,
engagement under the bill of lading, while this vs.
is the very perils against which the insurer ANASTACIO AGAN, defendant-appellant.
Custodio A. Villava for appellant. enumerated in article 811. No. 6 of this article does mention
Quijano, Alidio and Azores for appellee. "expenses caused in order to float a vessel," but it specifically
REYES, A. J.: refers to "a vessel intentionally stranded for the purpose of saving
it" and would have no application where, as in the present case,
The S S "San Antonio", vessel owned and operated by plaintiff, left
the stranding was not intentional.
Manila on October 6, 1949, bound for Basco, Batanes, vis Aparri,
Cagayan, with general cargo belonging to different shippers, Let us now see whether the expenses here in question could come
among them the defendant. The vessel reached Aparri on the 10th within the legal concept of the general average. Tolentino, in his
of that month, and after a day's stopover in that port, weighed commentaries on the Code of Commerce, gives the following
anchor to proceed to Basco. But while still in port, it ran aground requisites for general average:
at the mouth of the Cagayan river, and, attempts to refloat it First, there must be a common danger. This means, that
under its own power having failed, plaintiff have it refloated by the both the ship and the cargo, after has been loaded, are
Luzon Stevedoring Co. at an agreed compensation. Once afloat the subject to the same danger, whether during the voyage,
vessel returned to Manila to refuel and then proceeded to Basco, or in the port of loading or unloading; that the danger
the port of destination. There the cargoes were delivered to their arises from the accidents of the sea, dispositions of the
respective owners or consignees, who, with the exception of authority, or faults of men, provided that the
defendant, made a deposit or signed a bond to answer for their circumstances producing the peril should be ascertained
contribution to the average. and imminent or may rationally be said to be certain and
On the theory that the expenses incurred in floating the vessel imminent. This last requirement exclude measures
constitute general average to which both ship and cargo should undertaken against a distant peril.
contribute, plaintiff brought the present action in the Court of Second, that for the common safety part of the vessel or
First Instance of Manila to make defendant pay his contribution, of the cargo or both is sacrificed deliberately.
which, as determined by the average adjuster, amounts to Third, that from the expenses or damages caused follows
P841.40. Defendant, in his answer, denies liability to his amount, the successful saving of the vessel and cargo.
alleging, among other things, that the stranding of the vessel was Fourth, that the expenses or damages should have been
due to the fault, negligence and lack of skill of its master, that the incurred or inflicted after taking proper legal steps and
expenses incurred in putting it afloat did not constitute general authority. (Vol. 1, 7th ed., p. 155.)
average, and that the liquidation of the average was not made in
With respect to the first requisite, the evidence does not disclose
accordance with law. After trial, the lower court found for plaintiff
that the expenses sought to be recovered from defendant were
and rendered judgment against the defendant for the amount of
incurred to save vessel and cargo from a common danger. The
the claim, with legal interests. From this judgment defendant had
vessel ran aground in fine weather inside the port at the mouth of
appealed directly to this Court.
a river, a place described as "very shallow". It would thus appear
Although appellant assigns various errors, under our view of the that vessel and cargo were at the time in no imminent danger or a
case only the following need be considered: danger which might "rationally be sought to be certain and
The trial court erred in allowing the general average for imminent." It is, of course, conceivable that, if left indefinitely at
floating a vessel unintentionally stranded inside a port the mercy of the elements, they would run the risk of being
and at the mouth of a river during a fine weather. destroyed. But as stated at the above quotation, "this last
For the purposes of this assignment of error we may well accept requirement excludes measures undertaken against a distant
the finding below that the stranding of plaintiff's vessel was due to peril." It is the deliverance from an immediate, impending peril, by
the sudden shifting of the sandbars at the mouth of the river a common sacrifice, that constitutes the essence of general
which the port pilot did not anticipate. The standing may, average. (The Columbian Insurance Company of Alexandria vs.
therefore, be regarded as accidental, and the question is whether Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the
the expenses incurred in floating a vessel so stranded should be present case there is no proof that the vessel had to be put afloat
considered general average and shared by the cargo owners. to save it from imminent danger. What does appear from the
The law on averages is contained in the Code of Commerce. Under testimony of plaintiff's manager is that the vessel had to be
that law, averages are classified into simple or particular and salvaged in order to enable it "to proceed to its port of
general or gross. Generally speaking, simple or particular averages destination." But as was said in the case just cited it is the safety
include all expenses and damages caused to the vessel or cargo of the property, and not of the voyage, which constitutes the true
which have not inured to the common benefit (Art. 809), and are, foundation of the general average.
therefore, to be borne only by the owner of the property gave rise As to the second requisite, we need only repeat that the expenses
to same (Art. 810); while general or gross averages include "all the in question were not incurred for the common safety of vessel and
damages and expenses which are deliberately caused in order to cargo, since they, or at least the cargo, were not in imminent peril.
save the vessel, its cargo, or both at the same time, from a real The cargo could, without need of expensive salvage operation,
and known risk" (Art. 811). Being for the common benefit, gross have been unloaded by the owners if they had been required to do
averages are to be borne by the owners of the articles saved (Art. so.
812). With respect to the third requisite, the salvage operation, it is
In classifying averages into simple o particular and general or true, was a success. But as the sacrifice was for the benefit of the
gross and defining each class, the Code (Art. 809 and 811) at the vessel to enable it to proceed to destination and not for the
same time enumerates certain specific cases as coming specially purpose of saving the cargo, the cargo owners are not in law
under one or the other denomination. Going over the specific bound to contribute to the expenses.
cases enumerated we find that, while the expenses incurred in The final requisite has not been proved, for it does not appear that
putting plaintiff's vessel afloat may well come under number 2 of the expenses here in question were incurred after following the
article 809-which refers to expenses suffered by the vessel "by procedure laid down in article 813 et seq.
reason of an accident of the sea of the force majuere" and In conclusion we found that plaintiff not made out a case for
should therefore be classified as particular average, the said general average, with the result that its claim for contribution
expenses do not fit into any of the specific cases of general average against the defendant cannot be granted.
Wherefore, the decision appealed from is reversed and plaintiff's To recover the value of the petroleum thus jettisoned but not
complaint ordered dismissed with costs. recovered, the present action was instituted by the Standard Oil
Paras, C.J., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, Company against the owner of the ship in the Court of First
and Reyes, J.B.L., JJ., concur. Instance of Manila, where judgment was rendered in favor of the
plaintiff. From this judgment the defendant appealed.
The Lawphil Project - Arellano Law Foundation

No question is made upon the point that the captain exercised

Republic of the Philippines proper discretion in casting this petroleum overboard, as a step
SUPREME COURT necessary to the salvation of the ship; and in fact it appears that
Manila even after the vessel was thus eased, she was with difficulty
prevented from capsizing, so great was the intensity of the storm.
The first question for discussion is whether the loss of this
G.R. No. L-13695 October 18, 1921 petroleum was a general average loss or a particular less to be
borne solely by the owner of the cargo. Upon this point it will be
STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee, observed that the cargo was carried upon deck; and it is a general

vs. rule, both under the Spanish Commercial Code and under the
doctrines prevailing in the courts of admiralty of England
MANUEL LOPEZ CASTELO, defendant-appellant.
America, as well as in other countries, that ordinarily the loss of
cargo carried on deck shall not be considered a general average
Gabriel La O for appellant.
loss. This is clearly expressed in Rule I of the York-Antwerp Rules,
Lawrence and Ross for appellee.
as follows: "No jettison of deck cargo shall be made good as
general average." The reason for this rule is found in the fact that
deck cargo is in an extra-hazardous position and, if on a sailing
vessel, its presence is likely to obstruct the free action of the crew
STREET, J.: in managing the ship. Moreover, especially in the case of small
vessels, it renders the boat top-heavy and thus may have to be
By contract of character dated February 8, 1915, Manuel Lopez cast overboard sooner than would be necessary if it were in the
Castelo, as owner, let the small interisland hold; and naturally it is always the first cargo to go over in case of
steamer Batangueo for the term of one year to Jose Lim emergency. Indeed, in subsection 1 of article 815 of the Code of
Chumbuque for use in the conveying of cargo between certain Commerce, it is expressly declared that deck cargo shall be cast
ports of the Philippine Islands. In this contract it was stipulated overboard before cargo stowed in the hold.
that the officers and crew of the Batangueoshould be supplied by
the owner, and that the charterer should have no other control But this rule, denying deck cargo the right to contribution by way
over the captain, pilot, and engineers than to specify the voyages of general average in case of jettison, was first mad in the days of
that they should make and to require the owner to discipline or sailing vessels; and with the advent of the steamship as the
relieve them as soon as possible in case they should fail to principal conveyer of cargo by sea, it has been felt that the reason
perform the duties respectively assigned to them. for the rule has become less weighty, especially with reference to
coastwise trade; and it is now generally held that jettisoned goods
While the boat was being thus used by the charterer in the carried on deck, according to the custom of trade, by steam
interisland trade, the standard Oil Company delivered to the agent vessels navigating coastwise and inland waters, are entitled to
of the boat in Manila a quantity of petroleum to be conveyed to the contribution as a general average loss (24 R. C. L., 1419).
port of Casiguran, in the Province of Sorsogon. For this
consignment a bill of lading of the usual form was delivered, with Recognition is given to this idea in two different articles in the
the stipulation that freight should be paid at the destination. Said Spanish Code of Commerce. In the first it is in effect declared
bill of lading contained no provision with respect to the storage of that, if the marine ordinances allow cargo to the laden on deck in
the petroleum, but it was in fact placed upon the deck of the ship coastwise navigation, the damages suffered by such merchandise
and not in the hold. shall not be dealt with as particular average (art. 809 [3], Comm.
Code); and in the other it is stated that merchandise laden on the
While the boat was on her way to the port mentioned, and off the upper deck of the vessel shall contribute in the general average if
western coast of Sorsogon, a violent typhoon passed over that it should be saved; but that there shall be no right to indemnity if
region, and while the storm was at its height the captain was it should be lost by reason of being jettisoned for the general
compelled for the safety of all to jettison the entire consignment of safety, except when the marine ordinances allow its shipment in
petroleum consisting of two hundred cases. When the storm this manner in coastwise navigation (art. 855, Comm. Code).
abated the ship made port, and thirteen cases of the petroleum
were recovered, but the remainder was wholly lost. The Marine Regulations now in force in these Islands contain
provisions recognizing the right of vessels engaged in the
interisland trade to carry deck cargo; and express provision is freight that he may have earned on the voyage (arts. 587, 588,
made as to the manner in which it shall be bestowed and Code of Comm.).
protected from the elements (Phil. Mar. Reg. [1913], par 23).
Indeed, there is one commodity, namely, gasoline, which from its Now, by article 852 of the Code of Commerce the captain is
inflammable nature is not permitted to be carried in the hold of required to initiate the proceedings for the adjustment,
any passenger vessel, though it may be carried on the deck if liquidation, and distribution of any gross average to which the
certain precautions are taken. There is no express provision circumstances of the voyage may have given origin; and it is
declaring that petroleum shall be carried on deck in any case; but therefore his duty to take the proper steps to protect any shipper
having regard to its inflammable nature and the known practices whose goods may have been jettisoned for the general safety. In
of the interisland boats, it cannot be denied that this commodity ordinary practice this, we supposed, would be primarily
also, as well as gasoline, may be lawfully carried on deck in our accomplished by requiring the consignees of other cargo, as a
coatwise trade. condition precedent to the delivery of their goods to them, to give
a sufficient bond to respond for their proportion of the general
The reason for adopting a more liberal rule with respect to deck average. But it is not necessary here to inquire into details. It is
cargo on vessels used in the coastwise trade than upon those sufficient to say that the captain is required to take the necessary
used for ordinary ocean borne traffic is to be found of course in steps to effect the adjustment, liquidation, and distribution of the
the circumstance that in the coastwise trade the boats are small general average. In the case before us the captain of the vessel did
and voyages are short, with the result that the coasting vessel can not take those steps; and we are of the opinion that the failure of
use more circumspection about the condition of the weather at the captain to take those steps gave rise to a liability for which the
the time of departure; and if threatening weather arises, she can owner of the ship must answer.
often reach a port of safety before disaster overtakes her. Another
consideration is that the coastwise trade must as a matter of But it is said and the entire defense seems to be planted upon
public policy be encouraged, and domestic traffic must be this proposition that the liquidation of the general average is,
permitted under such conditions as are practically possible, even under article 852 and related provisions, a condition precedent to
if not altogether ideal. the liability of the defendant, and that at any rate the defendant,
as owner of the ship, should only be held liable for his proportion
From what has been said it is evident that the loss of this of the general average. It is also suggested that if the plaintiff has
petroleum is a general and not a special average, with the result any right of action at all upon the state of facts here presented, it
that the plaintiff is entitled to recover in some way and from is against the captain, who has been delinquent in performing the
somebody an amount bearing such proportion to its total loss as duty which the law imposes on him.
the value of both the ship and the saved cargo bears to the value
of the ship and entire cargo before the jettison was effected. Who This argument involves, we think, a misconception of the true
is the person, or persons, who are liable to make good this loss, import of the provisions relating to the adjustment and liquidation
and what are the conditions under which the action can be of general average. Clearly, for one thing, those provisions are
maintained? intended to supply the shipowner, acting of cause in the person of
the captain, with a means whereby he may escape bearing the
That the owner of the ship is a person to whom the plaintiff in entire burden of the loss and may distribute it among all the
this case may immediately look for reimbursement to the extent persons who ought to participate in sharing it; but the making of
above stated is deducible not only from the general doctrines of the liquidation is not a condition precedent to the liability of the
admiralty jurisprudence but from the provisions of the Code of shipowner of the shipper whose property has been jettisoned.
Commerce applicable to the case. It is universally recognized that
the captain is primarily the representative of the owner; and It is true that if the captain does not comply with the article
article 586 of the Code of Commerce expressly declares that both relating to the adjustment, liquidation, and distribution of the
the owner of the vessel and the naviero, or charterer, shall be civil general average, the next article (852) gives to those concerned
liable for the acts of the master. In this connection, it may be whether shipowner (naviero) or shipper the right to maintain an
noted that there is a discrepancy between the meaning of naviero, action against the captain for indemnification for the loss; but the
in articles 586 of the Code of Commerce, where the word is used recognition of this right of action does not by any means involve
in contradistinction to the term "owner of the vessel" ( propietario), the suppression of the right of action which is elsewhere
and in article 587 where it is used alone, and apparently in a recognized in the shipper against the ship's owner. The shipper
sense broad enough to include the owner. Fundamentally the may in our opinion go at once upon the owner and the latter, if so
word "naviero" must be understood to refer to the person minded, may have his recourse for indemnization against his
undertaking the voyage, who in one case may be the owner and in captain.
another the charterer. But this is not vital to the present
discussion. The real point to which we direct attention is that, by In considering the question now before us it is important to
the express provision of the Code, the owner of the vessel is civilly remember that the owner of the ship ordinarily has vastly more
liable for the acts of the captain; and he can only escape from this capital embarked upon a voyage than has any individual shipper
civil liability by abandoning his property in the ship and any of cargo. Moreover, the owner of the ship, in the person of the
captain, has complete and exclusive control of the crew and of the Article 811 defines gross or general averages as damages and
navigation of the ship, as well as of the disposition of the cargo at expenses which are deliberately caused in order to save the vessel,
the end of the voyage. It is therefore proper that any person whose her cargo, or both at the same time, from a real and known risk,
property may have been cast overboard by order of the captain and particularly, such as goods jettisoned to lighten the vessel,
should have a right of action directly against the ship's owner for whether they belong to the vessel, to the cargo, or to the crew, and
the breach of any duty which the law may have imposed on the the damage suffered through said act by the goods or board; the
captain with respect to such cargo. To adopt the interpretation of damage caused to the vessel by scuttling or entering her hold in
the law for which the appellant contends would place the order to save the cargo; and the expenses of the liquidation of the
shipowner in a position to escape all responsibility for a general average. Article 812 provides that in order to satisfy the amount of
average of this character by means of the delinquency of his own the gross or general average, all persons having an interests in the
captain. This cannot be permitted. The evident intention of the vessel and cargo at the time of the occurrence of the average shall
Code, taken in all of its provisions, is to place the primary liability contribute. Article 846 provides that the persons interested in the
upon the person who has actual control over the conduct of the proof and liquidation of averages may mutually agree and bind
voyage and who has most capital embarked in the venture, themselves at any time with regard to the liability, liquidation and
namely, the owner of the ship, leaving him to obtain recourse, as payment thereof, and that, in the absence of agreements, the
it is very easy to do, from other individuals who have been drawn proof of the average shall take place in the port where the repairs
into the venture as shippers. are made, should any be necessary, or in the port of unloading;
that the liquidation shall take place in the port of unloading
It results that the plaintiff is entitled to recover in this action; and should it be a Spanish port (now Filipino); that should the average
the only additional point to be inquired into is the amount that have occurred outside of the jurisdictional waters of the
should be awarded. In this connection it appears that the total Philippines or should the cargo have been sold in a foreign port by
value of the jettisoned cargo, belonging partly to the plaintiff to reason of the arrival of the vessel under stress in said port,
another shipper, was P880.35, of which P719.95 represented the liquidation shall be made in the port of arrival; and, finally, if the
value of the plaintiff's petroleum. Upon the apportionment of this average should have occurred near the port of destination, and
total loss among the different interests involved, to wit, value of that port is made, the proceedings for the proof and liquidation
ship, value of cargo, and the earned but lost freight, it appears above-mentioned shall he had there.
that the amount of the loss apportionable to the plaintiff is
P11.28. Deducting this from the value of the petroleum, we have Article 847 provides that when the liquidation of the averages is
as a result, the amount of P708.67, which is the amount for which made privately by virtue of agreement, as well as when a judicial
judgment should be given. authority takes part therein at the request of any of the parties
interested who do not agree thereto, all of them shall be cited and
Accordingly, modifying the judgment appealed from to this extent, heard, should they not have renounced this right; that should
we affirm the same, with costs. So ordered. they not be present or not have a legitimate representative, the
liquidation shall be made by the consul in said port, and where
Johnson and Villamor, JJ., concur. there is none, by the judge or court of competent jurisdiction,
Mapa, C.J., concurs in the result. accordance to the laws of the country, and for the account of the
proper person; and, finally, desiring to furnish all possible means
to effect the liquidation, legislator provides in the last part of said
article that, when the representative is a person well-known in the
place where the liquidation takes place, his intervention shall be
admitted and will produce legal effect, even though he be
authorized only by a letter of the shipowner, freighter, or
Separate Opinions underwriter; and as to general or gross averages, he lays down
concrete and conclusive rules in articles 853, 854, and 858, with
respect to the form and mode in which the experts appointed by
the interested parties or by the court shall fulfill their duties, as to
ARAULLO, J., dissenting: the examination of the vessel, the repairs and the appraisement of
their cost, as well as to the appraisement of the goods which are
to contribute to the gross average and those which constitute the
As the loss of the petroleum shipped by the plaintiff company on
average, likewise providing in article 857 that, after the
board the vessel Batangueo, which belongs to the defendant,
appraisement by the experts of the goods saved, lost, and those
constitutes gross average and, as the latter, being, according to
which constitute the gross average, and after the repairs have
the law, an agent, all of which is admitted in the foregoing
been made to the vessel, should any be necessary, and in such
decision, the provisions applicable to the case and which should
case, after the approval of the accounts by the persons interested
be taken into consideration in deciding the appeal before this
or by the court, the entire record shall be turned over to the
court are those of various articles in sections 1 of title 4 and
liquidator appointed, in order that he may proceed with the pro
sections 1, 2, and 3, of title 5, of Book 3 of the Code of Commerce.
rata distribution of the average among the contributing values,
after fixing the amount mentioned in said article of the
contributing capital: (1) By the value of the cargo, according to the should fail to pay the amount of the quota by the third day after
rules established in article 854; (2) by the value of the vessel in having been required to do so, and before delivering to them the
her actual condition, according to a statement of experts; (3) by 50 goods saved. the captain having the right, upon failure to give
per cent of the amount of the freight, deducting the remaining 50 the bond, to delay the delivery of the goods until the shippers pay
per cent for wages and maintenance of the crew. 1awph!l.net their part of the gross average corresponding to each of them
and not before proceeding with the liquidation, for the simple
Lastly, in relation to said provisions, article 851 authorizes the reason that the amount of the bond may only be fixed after the
captain to proceed privately, upon the agreement of the parties determination of the amount which each of the shippers may be
interested, in the adjustment, liquidation, and distribution of the obliged to contribute to the payment of the average, and this is so
gross average, and for this purpose, it is his duty to call, within clear and evident that in article 867 the captain is authorized to
forty hours following the arrival of the vessel at the port, the attach the goods saved until the shippers should pay the amount,
persons interested in order that they may decide whether the if they should fail to do so by the third day after demand upon
adjustment or liquidation of the gross average is to be made by them. And since the captain may require bond, he may delay the
experts and liquidators appointed by themselves, in which case delivery of the goods saved to the shippers until they make the
this shall be done should the persons interested agree, and said payment. In the case at bar, no step having as yet been taken for
article also provides that should an agreement not be possible, the the adjustment and liquidation of the gross average in question,
captain shall apply to the judge or court of competent jurisdiction, the fact that the captain of the Batangueo delivered the
who shall be the one of the port where the proceedings are to be respective cargoes of the other shippers without previously
held in accordance with the provisions of the Code of Commerce, requiring a bond, can not constitute the basis for making the
to the consul of Spain (now of the United States), should there be captain responsible, much less the owner of the vessel, as the trial
one, or otherwise to the local authority when the proceedings are court has erroneously held in the judgment appealed from and as
to be held in a foreign port. And finally, the next article, 852, says: this court is given to understand in referring to said filing of the
"If the captain should not comply with the provisions contained in bond as a prerequisite to the delivery of the cargo. This is because
the foregoing article, the shipowner or agent or the freighters shall the time was not opportune when the captain should and could
demand the liquidation, without prejudice to the action they may exact the bond and the law neither requires such bond to be filed
bring to demand indemnity from him." before proceeding with the liquidation, inasmuch as the
shipowner or agent, as well as the shippers, being interested in
It is therefore beyond question that the action of the plaintiff to proceeding with the liquidation, the Code authorizes them, first,
recover indemnity for the damage which it claims to have suffered to demand it from the captain and later to institute the action
by reason of the failure of the captain of the vessel Batangueo to corresponding to them against him to recover indemnity if he
proceed with the liquidation and distribution of the gross average should not comply with the provisions upon the subject, that is, if
in which it was a contributor, and by reason of his act in he should fail to effect the liquidation, or if, in lieu thereof, he
delivering to the other shippers their respective goods, without should deliver the respective cargoes to the shippers or permit
first requiring them to give bond, should have been brought not them to dispose of the same, in which case the responsibility may
against the shipowner or agent, who is the defendant in this case, be fixed upon the captain and not upon the agent upon this
but against the captain himself of the vesselBatangueo. ground, and for not requiring the shippers to give said bond.

Although in the preceding decision it is clearly recognized that the In the second place, although it is true that the captain is, as

captain should have begun the proceedings for the adjustment, stated in the decision, primarily the representative of the

liquidation, and distribution of the gross average in question, and shipowner or agent, it cannot in all cases, as the decision gives us

that it was his duty to take the proper steps to protect any ship to understand, be deduced that the shipowner must be civilly

whose goods may have been jettisoned for the common security, it responsible for all the acts of the captain.

is also stated that in ordinary practice this is supposed to be

complied with by requiring the consignees of the other cargoes, as The Code of Commerce clearly and positively specifies the cases in
a condition precedent to the delivery thereof, to give a sufficient which such responsibility in demandable from the agent or
bond to answer proportionally for the gross average, and, lastly, shipowner, and the cases in which he is not responsible, the
that the failure of the captain to take the necessary steps to effect responsible attaching only to the captain. These cases can not be
the adjustment, liquidation, and distribution of said average gave confused in view of the clear and positive provisions of said Code,
rise to the responsibility which should be enforced against the in relation to the method adopted in the exposition thereof and
defendant shipowner, against whom the shipper may immediately following the order of the subjects contained in this law.
institute his action, the former having in turn, if he so desires, the
right to bring suit against the captain. The majority opinion Articles 586, 587, and 588, invoked in the decision in question in
attempts to support the last proposition and invokes articles 586, order to maintain that theory, are found in title 2 of Book 3 of said
587, and 588. Code which treats of the persons who intervene in maritime
commerce, that is, as may be seen in sections 1, 2, and 3 thereof,
First of all, according to articles 866, 867, and 888 of the same the shipowners and agents, the captains and masters of vessels
Code, a bond should be required of the shippers by the captain and the officers and crew thereof, respectively. Articles 806 to 818
after the liquidation is already approved, if the contributors and 846 to 849, and consequently, article 852, invoked in said
decision and which refer to the gross or general average and to the said vessel had not fulfilled his duty with respect to the care of the
simple or particular average, are found in titles 4 and 5 of the cargo, but because he did not proceed in accordance with the
same Book 3 which, respectively, deal with the risks, damages, provision of article 851 already cited, in the adjustment,
and accidents of maritime commerce and with the proof and liquidation, and distribution of the gross average caused by that
liquidation of the averages; and they contain all the provisions of accident. and did not, as he should have done, according to article
the law relative to said subjects and to the rights and obligations 852, require the liquidation either of the agent or the shippers.
which arise from the averages. Therefore to them alone, including the plaintiff, and not to the
conduct of the captain in the custody of the cargo, is the fact
There is no relation whatever between said articles 586, 587, and attributable that the shippers were able to carry away the dispose
588, invoked in the decision, and those which treat of averages. of the cargo saved upon the arrival of the vessel at port.
The first of said articles establishes the civil responsibility of the
shipowner and agent for the acts of the captain and the The third or said articles, that is, 588, cited also in the same
obligations incurred by the latter for the repair, equipment, and decision, far from making the shipowner or the agent responsible
provisioning of the vessel. The second, that is, article 587, for the obligations incurred by the captain, exempts them from all
establishes the same responsibility of the agent for indemnities, in responsibility, if the captain should have exceeded the powers and
favor of third persons, which may arise from the conduct of the privileges which are his by reason of his position or have been
captain in the care of the goods which the vessel may carry, from conferred upon him by the former, excepting the case, which bears
which he may exempt himself by abandoning the vessel with all no relation whatever to that in question, in which the amounts
her equipment and the freight he may have earned during the claimed were made use of for the benefit of the vessel.
voyage. In the present case it is not the conduct of the captain in
the care of the goods which has given rise to the right to exact the Lastly, although this point has not been touched at all in the
corresponding civil responsibility, but, according to article 862, decision now under discussion, according to article 618. No. 5,
the failure of the captain to comply with the provisions of article the captain shall be civilly liable to the agent, and the latter to
851, with respect to the adjustment, liquidation, and distribution third persons with whom he may have contracted, for the damages
of the gross average and the failure to attend to the claims which arising from an undue use of his powers and the nonfulfillment of
the agent or the shippers may or should have made, inasmuch as his obligations, but it adds that such liability shall be "in
said article 852 clearly so declares, in referring to the agent or the accordance with articles 610 and 612." These articles, as may be
shippers in the following words: "Without prejudice to the action seen, refer to the powers and obligations inherent in the position
they may bring to demand indemnity from him." The care of the of captain with respect to the appointment, contract, and
goods to which article 857 refers consists in the placing of the command of the crew, direction of the vessel to the port of
goods in the proper and adequate place for their transportation destination, the imposition of punishments for crimes committed
and due preservation during the voyage, in such manner that they on board, contracts for the charter of the vessel, its preservation
may not suffer damages or deterioration nor be taken away, for, and repair, the supplying of books of navigation, and others,
according to article 618, which bears some relation to said article which are mentioned in said last article, the equipping of the
587, the captain is civilly responsible to the agent and the latter to vessel and the receiving of the cargo, etc., among which
third persons, who may have occurred to the vessel and the obligations there is none which bears the slightest relation to
cargoes due to lack of skill or to negligence on his part and for the those which the same Code imposes upon the captain with
subtraction of theft committed by the crew, reserving this right to respect to the adjustment, liquidation, and distribution of the
proceed against the guilty parties; and, according to article 619, gross average.
he shall be liable for the cargo from the time it is turned over to
him at the deck or afloat alongside the vessel at the port of On the other hand, in the various sections of title 4 of Book 3, and
loading until he delivers it on the shore or on the discharging in section 1 of title 5, the Code, in treating of the risks, damages,
wharp of the port of unloading, unless the contrary has been and accidents of maritime commerce, specifically indicates the
expressly agreed upon; and, finally, according to No. 5 of the same cases in which the responsibility of the captain is enforcible, those
article 618, he shall be liable for those damages arising from an in which that of the agent or shipowner is demandable and those
undue use of the powers and nonfulfillment of the obligations in which that responsibility is joint among them, as well as those
which are his in accordance with the articles 610 and 612, one of cases in which no responsibility may be demanded of the agent or
which, the fifth mentioned in the last article, is to remain shipowner but only of the captain.
constantly on board the vessel during the time the freight is taken
on board and carefully watch the stowage thereof, which acts, as
In effect, article 841 of section 3 of said title 4 provides that if the
is well-known, constitute the means for the effective custody of
wreck or stranding should arise through the malice, or lack or
the goods which may be shipped on board.
skill of the captain, or because the vessel put to sea insufficiently
repaired and prepared, the captain shall be responsible for the
In the present case, if the consignees or owners of the cargo on indemnification of damages caused to the vessel or the cargo by
board the vessel Batangueo took away with them their respective the accident, which liability may be demanded by the agent or the
cargoes or disposed of them upon arriving at port, after part shippers; but there is in said section no provision whatever by
thereof, which included the petroleum boxes belonging to the which the agent or shipowner is made responsible.
plaintiff, had been jettisoned, it was not because the captain of
In article 826 of section 3 of the same title, which deals with the captain the liquidation and may exercise against him the
collisions, it is provided that the agent of the vessel at fault shall action to recover the proper indemnity, a provision which excludes
indemnify the losses and damages suffered, after an expert in such case all responsibility of the agent or owner of the vessel,
appraisal, if a vessel should collide with another through the fault, for the reason that, the latter being, according to the same article,
negligence, or lack of skill of the captain, sailing mate, or any one of those who, jointly with the shippers, may ask the captain
other member of the complement, and, according to article 831, if for the liquidation and institute against him the corresponding
a vessel should be forced to collide with another by a third vessel, action for indemnification, it would be absurb to pretend and
the agent of the third vessel shall indemnify for the losses and maintain that the shippers may also institute the same action
damages caused, the captain being civilly liable to said agent, this against the agent or owner of the vessel, in this manner converting
liability being understood to be limited to the value of the vessel him from plaintiff into defendant.
with all equipment and freight earned.
But, as if it is still possible to put under discussion and interpret
In treating of arrivals under stress, section 2 of the same title, in so clear and positive a provision as that of said article 852, and
article 821, declares that when such arrival is not legitimate, the those related to it which, as has already been mentioned, are also
agent and the captain shall be jointly liable for the expense of the same character, it is argued in the decision of this court
incurred. that as "the owner of the ship ordinarily has vastly more capital
embarked upon a voyage than has any individual shipper of cargo,
In treating averages, article 809, No. 8, in section 1 of the same and moreover, as the owner of the ship, in the person of the
title, which includes, in simple averages, the damage suffered by captain, has complete and exclusive control of the crew and of the
the vessel or cargo by reason of an impact or collision with navigation of the ship, as well as of the disposition of the cargo at
another, declares that if the accident occurred through the fault the end of the voyage, the evident intention of the Code, taken in
or negligence of the captain, he shall be responsible for all the all of its provisions, is to place the primary liability upon . . . the
damages caused, and in No. 9 of the same article, that the owner owner of the ship, leaving him to obtain recourse, as it is very
of the cargo who is injured as a result of the fault, negligence, or easy to do, from other individuals who have been drawn into the
barratry of the captain or the crew may demand indemnity from venture as shippers, for, to adopt another interpretation of the law
the captain or the crew may demand indemnity from the captain, would place the shipowner in a position to escape all
the vessel and freight, a rule which is based upon No. 1 of article responsibility for a general average of this character by means of
618 , already mentioned, according to which the captain shall be the delinquency of his own captain. And it is therefore proper that
civilly responsible to the agent and the latter to the third persons, any person whose property may have been cast overboard by order
for all damages suffered by the vessel and its cargo by reason of of the captain should have a right of action directly against the
the want of skill or negligence on his part, a provision which, as is ship's owner for the breach of any duty which the law may have
well known, cannot refer to the case in which the owners of the imposed on the captain with respect to such cargo."
cargo, having the right to demand the adjustment, liquidation,
and distribution of the gross average, upon the arrival of the Such reasoning, however, is not convincing. In the first place, it is
vessel at port, should dispose of the cargo saved. Such case, as not true that the average in question was occasioned by the fault
already stated, is the subject of the express and positive of the captain of the vessel Batangueo, for on this point there is
provisions of articles 851 and 852, in relation to articles 866, 867, no evidence in the record, but because of the necessity of
and 868, included in section 2 of the same title, as is shown by throwing overboard part of the cargo of said vessel to save it from
the fact that the first of said articles declares that the captain is the danger then threatening it; secondly, the purpose of the
responsible to the owners of the goods averaged for the losses they adjustment and liquidation of the gross average is to secure
may have suffered through his delay or negligence in collecting the contribution from the parties interested in the vessel and cargo
amount of the contribution after the liquidation is approved, and existing at the time of the occurrence thereof in order to pay the
by the fact that the last of said articles, that is, 868, declares that amount of such average (art. 812, Code of Commerce), for which
the captain may exact from the shippers a bond sufficient to purpose article 858 defines the procedure for the distribution of
answer for the amount of corresponding to the gross average for the value of the average, stating that there must be taken into
the purpose of delaying the delivery to them of the goods saved consideration, as already stated by us, when we were discussing
until they pay said amount. this article, the contributing capital determined by the value of
the cargo, that of the vessel in her actual condition and the
It is by these special provisions and not by the general provisions percentage of the amount of the freight reduced by 50 per cent for
contained in sections 1, 2, and 3, of title 2, of Book 3 of said Code, wages and maintenance of the crew, and further declaring that
that we must be governed when dealing with the risks, damages, after the determination of the amount of the average, it shall be
and accidents the maritime commerce; and gross average being distributed pro rata among the contributing values and then paid
among them, then, for the failure of the captain of the to the proper parties, after the persons interested therein, that is,
vessel Batangueo to comply with the provisions relating to the the agent or owner of the vessel and the shippers have consented
adjustment, liquidation, and distribution, the defendant owner of thereto, or in default thereof, after the liquidation is duly
the vessel can not and should not be made liable, but only the approved; and, lastly, as repeatedly stated by us, accordingly to
captain, for article 852, already cited, is clear and positive to the the same articles, the owner of the vessel, or the agent, is also one
effect that in said case the agent or the shippers shall demand of of the interested parties and coparticipants in the adjudication of
the average and its pro rata distribution among the contributing provisions, which intentionally are extensively mentioned in this
values. From what has just been said it results that no purpose is opinion, do not have that object, for the reason that the shipowner
served by considering whether or not he has put in the voyage or is not the person who should suffer all the loss in case of gross
undertaking a capital greater than that of any individual shipper average, but it should be partitioned and distributed between the
for the purpose of making him principally liable, that is shipowner or agent and the shippers, in proportion to their
compelling him to pay to the shippers what each of the latter as interests and the respective value of the cargo and vessel, which
well as he himself has the right to be paid for in proportion to the should be fixed according to article 850 and the rules for their
amount of the respective capital fixed according to the rules assessment, stated in article 854 previously cited, after the
already stated in the distribution of the average. This is because, liquidation and approval thereof, and after hearing the interested
however great the value of the vessel may be, there cannot be parties or their representatives; and all of these proceedings would
conceded to the shippers in the adjudication a greater value than surely be useless and unnecessary if the shipowner or the agent
that corresponding to them in the adjudication and distribution of should have to suffer all loss but may afterwards distribute it
the average, according to the capital determined by the value of among those participants therein, or, what is the same thing, if he
the cargo at each, in conformity with the rules established in should be compelled by law to pay the total value of the average
article 854 for the assessment of the same cargo and of the goods and then partition it among the shippers or owners of the cargo,
which have to contribute to said average, nor can there be as is maintained in said decision. And there is no doubt that this
conceded to the owner of the vessel a value greater than that is what is maintained in the decision, as the basis of the
which may correspond to him in said adjudication and pronouncements made therein, because, as already stated, in the
distribution, based upon the value of the vessel in its actual paragraph now under discussion, it is clearly stated that the
condition, according to a statement of experts and the rules for liquidation is not a condition precedent to the enforcement of the
assessment thereof found in Nos. 6 and 7 of said article 854, from liability of the shipowner to the shipper, whose goods may have
which it is necessarily inferred that it is notoriously unjust, been jettisoned. And this is not what the law says just as it does
because the law does not authorize it and it would be a violation not say that the shipowner shall be liable to the shipper or owner
of its positive provisions to compel the owner of the vessel, by of the goods, but that, on the contrary, it says that the shipowner
the mere fact of having put a greater capital in the undertaking, to or agent as well as the shippers may demand liquidation from the
pay to the shippers the quota which corresponds to each of them captain and institute against him the corresponding action to
which, in this case, according to the majority opinion, is that recover indemnity, that is, that he has the same right as the
which should correspond, without a previous liquidation, to the shippers to demand liquidation from the captain and, in default
plaintiff, Standard Oil Company, saving to him, however, the right thereof, to recover indemnification, from which it is clearly inferred
afterwards to bring action or proceed against the other shippers, that the liquidation is a condition precedent, not to the liability of
as expressed in the same decision. In short, it would amount to the shipowner to the shipper whose goods may have been
absolutely ignoring the provisions of the law, which are so clear, jettisoned, as stated in the decision in question, but to the
express, and positive with respect not only to the adjustment, partition which must be made between the agent or shipowner
liquidation, and distribution of the gross average, but also to the and the shippers of the respective amount of the average. This
procedure for effecting the same and the rights and obligations of partition, and not that the shipowner should suffer all loss but
those who should contribute to the average. And it is very clear may afterwards evade and distribute it among all persons who
that error has been committed, because in the same decision, two should share in the average, is the real interpretation of the
paragraphs before that in which the theory already discussed is provisions to which reference is made in the same decision.
made, it is stated that there has been "a misconception of the true
import of the provisions relating to the adjustment and liquidation Neither is it true that, as stated in said decision, the shipowner
of general average," in arguing that the right of action should be has, through the captain, the complete and exclusive control of
"against the captain, who has been delinquent in performing the the crew and the sailing of the vessels, as well as of the
duty which the law imposes on him," for "clearly," says the same destination of the cargo at the end of the voyage, and that, for this
decision, "those provisions are intended to supply the shipowner, reason, the principal liability for the payment of the gross average
acting to court in the person of the captain, with a means whereby must fall upon the shipowner.
he may escape bearing the entire burden of the loss and may
distribute it among all the persons who ought to participate in That he does not have the complete and exclusive control of the
sharing it; but the making of the liquidation is not a condition crew is shown, among other provisions of the same Code of
precedent to the liability of the shipowner to the shipper whose Commerce, by the following articles: First, article 610, according
property has been jettisoned." to which, among others, it is an inherent power in the captain to
appoint or make contracts with the crew in the absence of the
As is clearly seen, what has just been stated gives us to agent and to propose said crew if said agent be present, but
understand that the owner of the vessel must suffer all the loss in without any right on the part of the latter to employ any individual
case of gross average, and that the provisions relating to the against the captain's express refusal. This provision necessarily
adjustment, liquidation, and distribution thereof are for the implies the absolute power of the captain to take on the contract
purpose of furnishing him the means for evading and enabling the crew, and article 634 confirms it, according to which the
himself to distribute it between the persons who should captain may make up his crew with the number he may consider
participate in the average. This is erroneous, because these advisable, taking on resident foreigners, in the absence of
nationals, their number not to exceed one-fifth of the total crew, positive text of said article, for the delivery of the cargo to the
and may even, with the consent of the consul or marine consignees and, of the vessel, rigging, and freight, to the agent or
authorities, complete his crew with foreigners in foreign ports if he shipowner, it is clear that the latter does not have complete and
should not find sufficient number of nationals, the captain being exclusive control of the destination of the cargo at the end of the
obliged to execute the contract with said members of the crew and voyage, because the obligation to deliver is a personal obligation of
others who compose the complement of the vessel; and finally, the captain, and the agent or shipowner, just as any of the
article 637 which empowers the captain, for sufficient cause, to consignees, may demand said liability with respect to the vessel,
discharge a sailor during the time of his contract and to refuse, rigging, and freight from the captain. And that responsibility of
before setting out on a voyage without giving any reason whatever, the captain cannot be confused with the provision contained in
to permit a sailor he may have engaged from going on board, in article 618 of the same Code in favor of the agent, and that of the
which case he will be obliged to pay him his wages as if he had latter in favor of third persons who may have contracted with him,
rendered services, this indemnity to be paid from the funds of the because in said article 618 are specifically mentioned the cases of
vessel only if the captain had acted for reasons of prudence and in responsibility to which the same article refers, and the
the interests of safety and good service of the vessel; but, should responsibility of the captain from the moment the cargo is
this not be the case, says said article, it shall be paid by the delivered to him until its unloading is specially declared in article
captain personally. And, if in all that has just been stated the 619 and even more particularly in article 625 which says that said
captain may act independently, it is obvious that the owner of the responsibility is a personal responsibility of the captain.
vessel or the agent does not have, through the captain, complete
and exclusive control of the crew. In short, the captain directly It cannot, therefore, be inferred from all the provisions of the
exercises exclusively personal powers with respect to the crew Code, that the evident intention thereof is to impose the principal
and, for this reason, he is personally and particularly responsible responsibility upon the shipowner, as stated in the decision of the
for his acts, except in the only case already mentioned, in which majority; and, if the law is to be complied with, it is useless effort
he may have acted for the benefit of the vessel. to show its truth, by invoking the general provisions of the Code of
Commerce, which govern the relations between the captain and
Another power inherent in the position of captain, according to the shipowner or the agent and those of one or the other or both
article 610, is that of directing the vessel to the port of its with third persons who may have contracted with either of them,
destination, according to the instructions he may have received or by invoking those which deal with gross averages, as one of the
from the agent, but from this is cannot be inferred that the damages and accidents and maritime commerce, because, in the
shipowner or agent has, through the captain, complete and first, there is no declaration expressly made upon the subject,
exclusive control of the navigation of the vessel, for the simple and, in the second, what is established and declared is precisely
reason that the captain may not obey said instructions and may the contrary, for the shipowner or agent has, just as the shippers,
act freely adjusting his decisions according to the circumstances the right of action against the captain to enforce his responsibility
of each case, as would occur in the case of risks, damages, and and to be indemnified by him for the damages occasioned to them
accidents which we have previously discussed, cases in which the by reason of the failure of the captain to comply with the
law imposes upon the captain the obligations to which titles 4 and obligations imposed upon him by law with respect to the
5 of Book 3 refers and indicates those cases which we have adjustment, liquidation, and distribution of the average, and with
heretofore minutely discussed, in some of which he is personally respect to the disposition and delivery of the goods saved to the
responsible, in orders the agent or shipowner, or the latter jointly shippers, before the payment by the latter of their aliquot part in
with the captain, and still in others, in which the agent is not the partition of the average, or without their having filed a
responsible but only the captain. sufficient bond to answer for the cargo, for the reason that,
according to article 619, he is responsible for the cargo from the
Nor is it true that the shipowner, through the captain, has the moment he takes charge thereof at the port of loading until its
complete and exclusive control of the destination of the cargo at delivery at the port of unloading and, according to article 625, he
the end of the voyage, for article 619 says textually that the is, under his personal liability, obliged to deliver the cargo,
captain shall be liable for the cargo from the time it is turned over without defalcation, to the consignees or shippers and, in the
to him at the dock, or afloat alongside the ship, at the port of proper case, the vessel, rigging, and freight to the agent upon the
loading, until he delivers it on the shore or on the discharging arrival at the port of destination. This shows, in relation to the
wharf, of the port of unloading, unless the contrary has been provisions of articles 866 and 868, already cited, that the captain
expressly agreed upon, and that, according to article 620, he is of the vessel should be personally liable to the owners of the goods
not liable for the damages caused to the vessel or to the cargo by averaged for the damages which were incurred by them, by reason
reason of force majeure, and article 625 adds that the captain, of his delay or negligence in requiring a goods of the shippers
under his personal liability, as soon as he arrives at the port of before delivery to them of the goods saved, this supposing that
destination, upon obtaining the necessary permission from the they are obliged to do so, instead of proceeding to the
health and customs officers and fulfilling the other formalities adjustment, liquidation, and distribution of the gross average,
required by the regulations of the administration, shall turn over inasmuch as the purpose of the law is to exact said personal
the cargo, without any defalcation, to the consignees and, in a responsibility for the due delivery to the consignees or shippers of
proper case, the vessel, rigging, and freights to the agent. And if the cargo.
the captain is personally responsible, according to the clear and
The plaintiff, therefore, should have brought said action, if he had This action was brought by the owners of the steamship against
any, for the recovery of the amount claimed in the complaint, not the owner of the sail vessel, to recover the value of the destroyed
against the defendant, owner of the vessel Batangueo, but steamer and the damages caused by reason of its destruction,
against the captain thereof, and said defendant cannot and should alleging as a basis therefor the negligence of the said vessel. The
not be sentenced to pay to the plaintiff the sum stated in the defendant denied the material allegations of the complaint and set
decision of this court which, with some modification as to the up a counterclaim for damages, alleging as grounds therefor that
amount thereof, affirms the judgment of the trial court; and there the injuries sustained by the said vessel were due to the gross
is more reason for this assertion because that sum is, according negligence of those handling plaintiff's steamer.
to said decision, what the plaintiff should receive in the partition
and distribution of the gross average in question and, yet, it does Before the action was tried, M. Garza made an application to
not appear that the corresponding liquidation, and, consequently, intervene under the provisions of section 121 of the Code of Civil
the division and distribution of said average, has already been Procedure, he alleging in support of his application that the
made, as required by the provisions of the Code of Commerce in steamer was carrying for him at the time several thousand pesos'
the articles mentioned at the beginning. worth of merchandise as freight, which was lost as a result of the
collision. He was permitted to intervene and accordingly filed a
Regretting that I have to dissent from the respectable opinion of complaint setting up the loss of this merchandise and the value
the majority, I am of the opinion, for the reasons above stated, thereof and alleging, as the basis for his right to recover, the
that the judgment appealed from should be reversed and the negligence of one or the other of the vessels, without specifying
defendant should be absolved from the complaint. which, and praying that the court award him damages against the
vessel the negligence of which, upon the trial, was shown to have
Avancea, J., concurs. caused his loss.

The case turns upon the question which of the vessels was
Republic of the Philippines
negligent in failing to conform to the International Rules for the
Prevention of Collissions at Sea. The learned trials court found
that those managing the steamer were guilty of gross negligence
and that for that reason the plaintiff could recover nothing.

An examination of the record leave no doubt that the finding of

G.R. No. L-7675 March 25, 1913
the trial court that the steamer was handled in a grossly negligent
manner is clearly and fully supported by the evidence. No other
G. URRUTIA & CO., plaintiff-appellee, finding could be sustained.
BACO RIVER PLANTATION CO., defendant-appellee. Relative to the alleged negligence of the sail vessel the learned trial
M. GARZA, intervener-appellant. court said:

Antonio Sanz, for plaintiff. I am satisfied beyond any reasonable doubt that the
Hartford Beaumont, for defendant. steamer Ntra. Sra. del Pilar was sailing erratically, that it
Recaredo M.a Calvo, for intervener. did not have a proper watch on board, and that it
therefore contributed neglect to the collision.
I am thoroughly satisfied that the sailing
This action spring from a collision between the steamship Nuestra vessel Mangyan had its lights properly on it long before
Seora del Pilar, owned by the plaintiff, and the the time the collision occurred, and that the lights were
schooner Mangyan owned by the defendant, which occurred in the so arranged upon the rigging of the vessel as to comply
early morning of the 8th of April, 1910, in Verde Island North with the rules, and that they were visible and were seen
Passage. The sail vessel was sailing with a fresh breeze dead by the crew of the steamer Elcano and could have been
astern, her sails wing and wing. The steamer was seen by those on seen by the wathcman or the chief officer of the
board the sailing vessel some time before the actual collision, steamer Ntra. Sra. del Pilar, if they had been on the
sailing erratically. The sail vessel kept her course steadily until lookout for them;
just before the actual contact when her helmsman threw her hard
to port in an effort to avoid the collision. The movement, however, That the steamer Ntra. Sra. del Pilar, being bound to keep
was unsuccessful and the sail vessel rammed the steamer on the out of the course of the sailing vessel and suddenly
starboard quarter well aft. The steamer sank and eight lives were seeing the sailing vessel very close, went over hard to
lost. The sail vessel was considerably injured. port and crossed the course of the sailing vessel.
I also find that the sailing vessel, notwithstanding the conservatively stated in volume 25 of the American and English
erratic movements of the steamer, proceeded directly on Encyclopedia of Law, page 926:
its course regardless of consequences when with all the
searoom there was it could easily have maneuvered so as Subject to the general rules of evidence in collision cases
to very well avoid the collision, and thereby having as to the burden of proof, in the case of a collision
contributed neglect to the collision, neither is entitled to between a steam vessel and a sail vessel, the
recover from the other any damages which may have presumption is against the steam vessel, and she must
occurred. show that she took the proper measures to avoid a
These facts and circumstances clearly appear in the record and
fully sustain the conclusions reached. Hughes on Admiralty, page 242, declares the law thus:

We are of the opinion that under the facts stated in the decision of A steamer must keep out of the way of a sail vessel. In
the trial court the defendant was entitled to recover upon its doing so she must allow the said vessel a wide berth. . . .
A steamer may take her own method of passing a sail
It being clear from, the evidence that the gross negligence of those vessel. The mere approach of the two vessels does not
managing the steamer brought it into such close proximity to the bring about risk of collision. The steamer may assume
sail vessel that a collision was apparently inevitable, the question that the sail vessel will do her duty and do nothing to
is whether or not the sail vessel was negligent in continuing its embarrass her. Hence the steamer may shape her course
course without variation up to the moment that it found itself in so as to avoid the sail vessel. . . .
This rule that vessels may each assume that the other
Article 20 of the International Rules for the Prevention of will obey the law is one of the most important in the law
Collission at Sea is as follows: "If two ships, one of which is a of collision. Were it otherwise and were vessels required
sailing ship and the other a steam ship, are proceeding in such to take all sorts of measures to keep out the way, when
directions as to involve risk of collision, the steam ship shall keep they are not in each other's way, navigation would be
out of the way, of the sailing ship." impossible. . . . There is, however, one important
qualification which must be borne in mind. It is that a
Article 21 is as follows: "where by any of these rules one of two steamer must not approach so near a sailing vessel, and
vessels is to keep out of the way, the other shall keep her course on such a course as to alarm a man of ordinary skill and
and speed." prudence. If the man on the sailing vessel makes an
improper manuever, he is not responsible. It is what is
Generally speaking, in collisions between vessels there exist three called an "error in extremis." . . . The leading case on the
divisions of time, or zones; The first division covers all the time up subject is The Lucille (15 Wallace, 676). In that case a
to the moment when the risk of collision may be said to have steamer and schooner were approaching on converging
begun. Within this zone no rule is applicable because none is course only half a point apart, so that they would have
necessary. Each vessel is free to direct its course as it deems best come within thirty yards of each other, and that in
without reference to the movements of the other vessel. The Chesapeake Bay. The court held that this was too close
second division covers the time between the moment when the and condemned the steamer."
risk of collision begins and the moment when it has become a
practical certainty. The third division covers the time between the On page 245 the same author says:
moment when collision has become a practical certainty and the
moment of actual contact. Article 21 . . . renders it obligatory on the vessel which
has the right of way to pursue her course. . . . She must
It was during the time when the sail vessel was passing through rely on the other vessel to avoid the collision and not
the third zone that it changed its course to port in order to avoid, embarrass her by any maneuver. All she need do is to do
if possible, the collision. This act may be said to have been done in nothing. Then the other vessel knows to expect and
extremis, and, even if wrong, the sailing vessel is not responsible navigates accordingly. . . .
for the result.
In collisions between steam and sail vessels the steamer's
The question before us, as presented by the finding of the trial defense is almost invariably that the sail vessel changed
court, arises wholly over the action of the schooner in keeping her her course.
course through the second zone, that is, during the period when
there was a risk of collision. In resolving this question we have to On page 255 of the same work appears the following:
note the well-established presumption which favors the sail vessel
in cases of this character. The rule relative to this presumption is
In The Clara Davidson (24 Fed. 763), the court said: "But In the American and English Encyclopedia of law (vol. 25. p. 925)
I do not find my self at liberty to ignore the inquiry the rules is stated as follows:
whether a statutory rule of navigation was violated by
the schooner. These rules are the law of laws in cases of But it must be a strong case which puts the sail vessels
collision. They admit of no option or choice. No navigator in the wrong for obeying the rule to hold her course, for
is at liberty to set up his discretion against them. If these the court must clearly see, not only that a deviation from
rules were subject to the caprice or election of masters the rule for would have prevented the collision, but that
and pilots, they would be not only useless, but worse the officer in charge of the sail vessel was guilty of
than useless. These rules are imperative. They yield to negligence or a culpable want of seamanship in not
necessity, indeed, but only to actual and obvious perceiving the necessity for a departure from the rule
necessity. It is not stating the principles too strongly to and acting accordingly. The sail vessel is justified in
say that nothing but imperious necessity or some holding her course to the last minute possible for the
overpowering his major will excuse a sail vessel in steamship to avoid her by making the necessary
changing her course when in the presence of a steamer maneuver.
in motion."
In the case of St. John vs. Paine (10 How., 557), the collision was
Spencer on Marine Collisions, page 154, says: between a schooner and a steamer. The schooner had no lights
visible; the night was starlight and clear. The court reviewed the
The duties imposed upon vessels are of a mutual rules governing the management of sail vessel at some length,
character; and where the statute directs one to give way explained the rules applicable to the management of steam
to the other, it imposes an equal duty upon the latter to vessels, and gave the reasons why the rules which govern travelers
continue on its course, and a change of course on its on the highways of the sea should be strictly enforced. After
part is as unlawful as it would be for the other refuse to showing the greater facility of manuevering which a steamer has
yield the right of way. . . . over a sail vessel and, therefore, the greater ability to avoid
collisions, the court said:
It is one of the conditions of the duty to keep out of the
way," that the other vessel shall act intelligently, and As a general rule, therefore, when meeting a sailing
afford reasonable evidence of her intention; while it is vessel, whether close hauled or with the wind free, the
doubtful what the other will do, the former should hold latter has a right to keep her course, and it is the duty of
her course. Like all other rules for the prevention of the steamer to adopt precautions as will avoid her. (Cites
collisions at sea, there may be special circumstance cases.)
which would warrant a ship in departing from her
course, where collision appears inevitable by pursuing it; By an adherence to this rule on the part of the sailing
indeed, it is her duty to do so; but until it plainly appears vessel the steamer with a proper lookout will be enabled,
that there is no other alternative, a vessel should hold when approaching in an opposite direction, to adopt the
her course when in a position required to do so by the necessary measures to avoid the danger, and she will
statute." have a right to assume that the sailing vessel will keep
her course. If the latter fails to do this, the fault will be
On page 181 the same author says: attributable to her, and the master of the steamer will be
responsible only for a fair exertion of the power of his
The duty of one vessel to keep her course is not intended vessel to avoid the collision under the unexpected change
by the rules as a privilege conferred, but as an obligation of the course of the other vessel, and the circumstances
imposed, in order to enable the other vessel with of the case.
certainty to keep out of the way. In order to warrant a
vessel to either change her course or speed, there must A similar case is that of The Genesee Chief vs. Fitzhugh (12 How.,
be reasonable certainty that the other is not doing her 443). This pertains also to a collision between a steamer, The
duty, and that the situation imperatively demands a Genesee Chief , and a sail vessel. The two watched each other for
departure from the rules. It is the duty of the vessel some time before the collision. The sailing vessel kept her course
required to keep out of the way to give an early and until in extremis when she made a wrong maneuver. The court
intelligible expression of her intentions to do so; and said:
while there is any doubt as to what her actions will be,
the vessel required to hold her course may presume that The collision took place in the open lake. It was a
the other will act intelligently and lawfully, and she starlight night, and although there was a haze near the
should hold her course until the contrary appears. it is surface of the lake, it was not sufficient to conceal the
no excuse for a vessel taking a course forbidden by law Cuba from those on board of the propeller. . . .
that the unlawful course was the best one.
The lake was smooth. The steamboat had the entire The principles of law applicable to the case are well
command of her course and a wide water, by which she settled. They are not disputed by either party. In the case
might have passed the Cuba on either side, and at a safe of The Carrol (8 Wall., 302), it is thus laid down, "Nautical
distance. She was going at the rate of eight miles an rules require that where a steamship and sailing vessel
hour. And if proper care had been taken on board the are approaching each other from opposite directions, or
Genesee Chief , after the schooner was first seen, it on intersecting lines, the steamship from the moment
would seem to be almost impossible that a collision could the sailing vessel is seen, shall watch with the highest
have happened with a vessel moving so slowly and diligence her course and movements so as to be able to
sluggishly through the water even if she was carelessly or adopt such timely means of precaution as will
injudiciously managed. There was no necessity for necessarily prevent the two boats from coming in
passing so near her as to create the hazard. The contact. Fault on the part of the sailing vessel at the
steamboat could choose it own distance. . . . moment preceeding a collision does not absolve a
steamer which has suffered herself and a sailing vessel
And the captain and crew of the Cuba appear to have to get in such dangerous proximity as to cause inevitable
been watchful and attentive from the time the propeller alarm and confusion and collusion as a consequence.
was discovered. Nor do we deem it material to inquire The steamer, as having committed a far greater fault in
whether the order of the captain at the moment of allowing such proximity to be brought about, is
collision was judicious or not. He saw the steamboat chargeable with all the damages resulting from a
coming directly upon him; her speed not diminished; nor collision."
any measures taken to avoid a collision., And if, in the
excitement and alarm of the moment, a different order The rule laid down in the case of The Fannie (11 Wal.,
might have been more fortunate, it was the fault of the 238( is still more applicable to the case before us. It was
propeller to have placed him in a situation where there held that a schooner meeting a steamer approaching her
was no time for thought; and she is responsible for the on a parallel line, with the difference of half a point in
consequences. She had the power to have passed at a the course of the two, ought to have kept in her course;
safer distance, and had no right to place the schooner in that a steamer approaching a sailing vessel is bound to
such jeopardy, that the error of a moment might cause keep out of her way, and allow her a free and
her destruction, and endanger the lives of those on unobsructed passage. Whatever is necessary for this it is
board. And if an error was committed under such her duty to do, and to avoid whatever obstructs or
circumstances it was not a fault. endangers the sailing vessel in her course. It, therefore,
the sailing vessel does not change her course so as to
In the case of The Ottawa (3 Wall., 269), the court said: embarrass the steamer, and render it difficult for her to
avoid a collision, the steamer alone is answerable for the

Rules of navigation are obligatory from the time the damage of a collision, if there is one.

necessity for precaution begins, and continue to be

applicable as the vessels advance, so long as the means In the case of The Sea Gull (23 Wall., 165) the court said:
and opportunity to avoid the danger remain; but they do
not apply to a vessel required to keep her course after the Steamers approaching a sail ship in such a direction as
approach is so near that the collision is inevitable, and to involve risk of collision are required to keep out of the
are equally inapplicable to vessels of every description way of the sail ship; but the sail ship is required to keep
while they are yet so distant from each other that her course unless the circumstances are such as to
measures of precaution have not become necessary. render a departure from the rule necessary in order to
avoid immediate danger.
This case exemplifies the three zone theory already referred to. In
the first zone no rules apply. In the second the burden is on the Vessels with sails being required to keep their course, the
vessel required to keep away and avoid the danger. The third zone duty of adopting the necessary measures of precaution to
covers the period in which errors in extremis occur; and the rule is keep out the way is devolved upon the steamer subject
that the vessel which has forced the privileged vessel into danger only to the condition that the sail ship shall keep her
is responsible even if the privileged vessel has committed an error course and do not act to embarrass the steamer in her
within that zone. efforts to perform her duty. Doubtless the steamer may
go to the right or left if she can keep out of the way, but if
The duty of the sailing vessel to keep her course is well exemplified not and the approach is such as to involve risk of
in the leading case of The Lucille vs. Respass (15 Wall., 676), collision she is required to slacken her speed, or, if
which was a collision between a schooner and a steamer. Both necessary, stop and reverse, and if she fails to perform
vessels saw each other in time to have avoided the collision. The her duty as required by the rules of navigation she is
court said: responsible for the consequences if the sail vessel is
without fault. . . .
Attempts is made in argument to show that the schooner 4. If, when a collision had become imminent by reason of
also was in fault and that the case falls within the rule the fault of the steamship, any error was committedin
which requires that the damages shall be divided. extremis by those in charge of the schooner, the schooner
is not responsible therefor.
Support to that charge is attempted to be drawn from the
assumed fact that the schooner changed her course in 5. The steamship had no right, under the circumstances
violation of the rule of navigation which requires the sail stated, needlessly to place herself in such close proximity
ship to keep her course, as a correlative duty to that of to the schooner that the error or a moment would bring
the steamer whenever the latter is required to keep out of destruction.
the way. . . .
6. The collision was occasioned by the fault of the
Two answers are made by the libelants to that defense, steamship, and the steamship should be condemned
either of which, if found to be true, is sufficient to therefor.
exonerate the schooner: . . . (2) That the schooner made
no change in her course until the collision was In the case of The Badger State (8 Fed. Rep., 526), the court said:
inevitable, nor until it became indispensably necessary
in order to avoid immediate danger caused by the fault of Where a sailing level and one propelled by steam are
the steamer. . . . approaching each other bow, on the steamer must give
away, In case of a collision between such vessels, the
Rules of navigation continue to be applicable as long as steamer is prima facie in fault.
the means and opportunity remain to avoid the danger,
but they do not apply to a vessel required to keep her In the case of The Gate City (90 Fed. Rep., 314), the court held,
course after the wrongful approach of the opposite vessel
according to the syllabus:
is so near that a collision is inevitable. . . .

The rule requiring a sailing vessel meeting a steamer to

Nor will an error committed by the sail vessel under such
hold her course is a broad and general one intended to
circumstances of peril, if she otherwise without fault,
put the burden of avoiding a collision upon the steamer;
impair the right of the sail vessel to recover for the
and, if the sailing vessel departs from the injunction the
injuries occasioned by the collision, for the plain reason
burden is on her to show some reasonable excuse
that those who produced the peril and put the sail vessel
in that situation are chargeable with the error and must
answer for the consequences. (Steamship
A disregard of the rule not demanded by a clearly
Co. vs. Rumball, 21 How., 383.)
existing exigency should not be excused.

Subject to that exceptions the sail vessel must keep her

Therefore, she will not be held in fault for adhering to her
course, although the steamer seems to be manuevering
in an uncertain and dangerous way.
In the case of The Benefactor (102 U. S. 214), the court laid down
the following conclusions.:
We are satisfied from the authorities that, under the facts stated
in the opinion of the trial court, the defendant is entitled to
1. Upon the steamship and schooner discovering each recover such damages as reasonably and naturally flowed from
other proceeding in such directions as to involve risk of the collision. There is sufficient evidence in the record to fix such
collision, as stated in the foregoing findings of fact, it was damages with reasonable accuracy. It was proved upon the trial
the right and duty of the schooner to keep her course, that it would require an expenditure of P3,525 to put the sail
and the duty of the steamship to keep out of the way of vessel in the condition in which it was before the injury; that it
the schooner, and the steamship was in fault in failing to cost 245 to get the vessel to Manila after the injury; that the value
perform that duty. of the supplies lost was P240.99. The evidence relative to the loss
of earnings is not sufficient to permit the court to formulate any
2. It was also the duty of the steamship under the conclusion in relation thereto, even if it be considered a proper
circumstances stated, to pursue a course which should item of damage.
not needlessly put the schooner in imminent peril; and
the steamship was in fault in failing to perform that duty. We think the judgment of the trial court was correct in dismissing
the complaint of intervention. The intervener had no "legal interest
3. It was the duty of the steamship before the time when in the matter in litigation, or in the success of either of the
she did so, to slacken her speed or stop, and the parties, or an interest against both." Their action was personal,
steamship was in fault in failing to perform that duty. involved no rights in property which extended beyond their
immediate selves, and touched no third party in any of the EN BANC
ramifications of those rights.

The judgment of the court below, in so far as it finds against the

plaintiff and the intervener, is hereby affirmed. As to that portion G.R. No. 130068 October 1, 1998
which dismisses the counterclaim of the defendant, the Baco River
Plantation Company, the judgment is reversed and the cause
remanded, with instructions to the trial court to enter judgment
in favor of the defendant, The Baco River Plantation Company, and
against the plaintiff, G. Urrutia & Company, for the sum of
AUTHORITY, respondents.
P4,010.99 and costs. No costs on this appeal.

While it was held in the case of Philippine Shipping G.R. No. 130150 October, 1998
Co. vs. Vergara (6 Phil. Rep., 281), that, in accordance with
articles 837 and 826 of the Code of Commerce, the defendant in MANILA PILOTS ASSOCIATION, petitioner,
an action such as the one at bar cannot be held responsible in vs.
damages when the ship causing the injury was wholly lost by PHILIPPINE PORTS AUTHORITY and FAR EASTERN SHIPPING
reason of the accident, we do not apply it in this case for the COMPANY, respondents.
reason that the vessel lost was insured and that the defendant
collected the insurance. That being the case, the insurance money
substitutes the vessel and must be used, so far as necessary, to
pay the judgment rendered in this case.

In coming to this conclusion we have not lost sight of the case of

These consolidated petitions for review on certiorari seek in unison
Place vs. Norwich and N. Y. Trans. Co. (118 U. S., 468), in which it
to annul and set aside the decision 1 of respondent Court of
was held that, under the provision of the Act of Congress relative
thereto, insurance money obtained by reason of the loss of a Appeals of November 15, 1996 and its resolution dated July 31,

vessel causing damages, as in the case at bar, was not subject to 1997 in CA-G.R. CV No. 24072, entitled "Philippine Ports
the payment of the damages sustained by the negligence of the Authority, Plaintiff-Appellee vs. Far Eastern Shipping Company,
vessel lost by reason of the accident in which the damages Senen C. Gavino and Manila Pilots' Association, Defendants-
occurred. We do not follow that case because we are met in this Appellants," which affirmed with modification the judgment of the
jurisdiction with article 1186 of the Civil Code, which provides trial court holding the defendants-appellants therein solidarily
that "after the obligation is extinguished by the loss of the thing, liable for damages in favor of herein private respondent.
all the actions which the debtor may have against third persons,
by reason thereof, shall pertain to the creditor," and with article 2 There is no dispute about the facts as found by the appellate
of the Code of Commerce, which provides that where the Code of court,
Commerce is silent to the law relating to the matters of which it thus
treats, those matters shall be governed by the provisions of the
Civil Code. . . . On June 20, 1980, the M/V PAVLODAR,
flying under the flagship of the USSR, owned
That said article 1186 is, under the Spanish jurisprudence, and operated by the Far Eastern Shipping
applicable to money obtained from the insurance of the thing lost Company (FESC for brevity's sake), arrived at
or destroyed, there can be no doubt. (Manresa, vol. 8, 353.) the Port of Manila from Vancouver, British
Columbia at about 7:00 o'clock in the morning.
The judgment in this case is, therefore, collectible, but the The vessel was assigned Berth 4 of the Manila
amount collected cannot exceed the amount of insurance money International Port, as its berthing space.
actually received. Captain Roberto Abellana was tasked by the
Philippine Port Authority to supervise the
berthing of the vessel. Appellant Senen Gavino
The writer of this opinion had doubts of the applicability of article
was assigned by the Appellant Manila Pilots'
1186, referred to; but has yielded to the learning of the majority
Association (MPA for brevity's sake) to conduct
relative to the Roman and Spanish jurisprudence on this point.
docking maneuvers for the safe berthing of the
vessel to Berth No. 4.
Arellano, C.J., Torres and Trent, JJ., concur.

Gavino boarded the vessel at the quarantine

Republic of the Philippines anchorage and stationed himself in the bridge,
SUPREME COURT with the master of the vessel, Victor Kavankov,
Manila beside him. After a briefing of Gavino by
Kavankov of the particulars of the vessel and its court ordered the defendants therein jointly and severally to pay
cargo, the vessel lifted anchor from the the PPA the amount of P1,053,300.00 representing actual
quarantine anchorage and proceeded to the damages and the costs of suit. 5
Manila International Port. The sea was calm
and the wind was ideal for docking maneuvers. The defendants appealed to the Court of Appeals and raised the
following issues: (1) Is the pilot of a commercial vessel, under
When the vessel reached the landmark (the big compulsory pilotage, solely liable for the damage caused by the
church by the Tondo North Harbor) one-half vessel to the pier, at the port of destination, for his negligence?
mile from the pier, Gavino ordered the engine and (2) Would the owner of the vessel be liable likewise if the
stopped. When the vessel was already about damage is caused by the concurrent negligence of the master of
2,000 feet from the pier, Gavino ordered the the vessel and the pilot under a compulsory pilotage?
anchor dropped. Kavankov relayed the orders to
the crew of the vessel on the bow. The left As stated at the outset, respondent appellate court affirmed the
anchor, with two (2) shackles, were dropped. findings of the court a quo except that if found no employer-
However, the anchor did not take hold as employee relationship existing between herein private respondents
expected. The speed of the vessel did not Manila Pilots' Association (MPA, for short) and Capt. Gavino. 6 This
slacken. A commotion ensued between the crew
being so, it ruled instead that the liability of MPA is anchored, not
members. A brief conference ensued between
on Article 2180 of the Civil Code, but on the provisions of
Kavankov and the crew members. When Gavino 7
Customs Administrative Order No. 15-65, and accordingly
inquired what was all the commotion about,
modified said decision of the trial court by holding MPA, along
Kavankov assured Gavino that there was
with its co-defendants therein, still solidarily liable to PPA but
nothing to it.
entitled MPA to reimbursement from Capt. Gavino for such
amount of the adjudged pecuniary liability in excess of the
After Gavino noticed that the anchor did not amount equivalent to seventy-five percent (75%) of its prescribed
take hold, he ordered the engines half-astern. reserve
Abellana, who was then on the pier apron, 8
noticed that the vessel was approaching the
pier fast. Kavankov likewise noticed that the
Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was
anchor did not take hold. Gavino thereafter gave
happy with the decision of the Court of Appeals and both of them
the "full-astern" code. Before the right anchor
elevated their respective plaints to us via separate petitions for
and additional shackles could be dropped, the
review on certiorari.
bow of the vessel rammed into the apron of the
pier causing considerable damage to the pier.
The vessel sustained damage too, (Exhibit "7-Far In G. R. No. 130068, which was assigned to the Second Division of

Eastern Shipping). Kavankov filed his sea this Court, FESC imputed that the Court of Appeals seriously
protest (Exhibit "1-Vessel"). Gavino submitted
his report to the Chief Pilot (Exhibit "1-Pilot")
who referred the report to the Philippine Ports 1. in not holding Senen C. Gavino and the
Authority (Exhibit 2-Pilot"). Abellana likewise Manila Pilots' Association as the parties solely
submitted his report of the incident (Exhibit responsible for the resulting damages sustained
"B"). by the pier deliberately ignoring the established
jurisprudence on the matter;

Per contract and supplemental contract of the

Philippine Ports Authority and the contractor 2. in holding that the master had not exercised
for the rehabilitation of the damaged pier, the the required diligence demanded from him by
same cost the Philippine Ports Authority the the circumstances at the time the incident
amount of P1,126,132.25 (Exhibits "D" and happened;
3. in affirming the amount of damages
sustained by the respondent Philippine Ports
On January 10, 1983, the Philippine Ports Authority (PPA, for
Authority despite a strong and convincing
brevity), through the Solicitor General, filed before the Regional
evidence that the amount is clearly exorbitant
Trial Court of Manila, Branch 39, a complaint for a sum of money
and unreasonable;
against Far Eastern Shipping Co., Capt. Senen C. Gavino and the
Manila Pilots' Association, docketed as Civil Case No. 83-
14958, 4 praying that the defendants therein be held jointly and 4. in not awarding any amount of counterclaim

severally liable to pay the plaintiff actual and exemplary damages prayed for by the petitioner in its answer; and

plus costs of suit. In a decision dated August 1, 1985, the trial

5. in not granting herein petitioner's claim professional organization or an administrative order which bears
against pilot Senen C. Gavino and Manila Pilots' no provision classifying the nature of the liability of MPA for the
Association in the event that it be held negligence its member pilots. 13

As for Capt. Gavino, counsel for MPA states that the former had
Petitioner asserts that since the MV PAVLODAR was under retired from active pilotage services since July 28, 1994 and has
compulsory pilotage at the time of the incident, it was the ceased to be a member of petitioner pilots' association. He is not
compulsory pilot, Capt. Gavino, who was in command and had joined as a petitioner in this case since his whereabouts are
complete control in the navigation and docking of the vessel. It is unknown. 14

the pilot who supersedes the master for the time being in the
command and navigation of a ship and his orders must be obeyed FESC's comment thereto relied on the competence of the Court of
in all respects connected with her navigation. Consequently, he Appeals in construing provisions of law or administrative orders
was solely responsible for the damage caused upon the pier apron, as bases for ascertaining the liability of MPA, and expressed full
and not the owners of the vessel. It claims that the master of the accord with the appellate court's holding of solidary liability
boat did not commit any act of negligence when he failed to among itself, MPA and Capt. Gavino. It further avers that the
countermand or overrule the orders of the pilot because he did disputed provisions of Customs Administrative Order No. 15-65
not see any justifiable reason to do so. In other words, the master clearly established MPA's solidary liability. 15

cannot be faulted for relying absolutely on the competence of the

compulsory pilot. If the master does not observe that a
On the other hand, public respondent PPA, likewise through
compulsory pilot is incompetent or physically incapacitated, the
representations by the Solicitor General, assumes the same
master is justified in relying on the pilot.
supportive stance it took in G.R. No. 130068 in declaring its total
accord with the ruling of the Court of Appeals that MPA is
Respondent PPA, in its comment, predictably in full agreement solidarily liable with Capt. Gavino and FESC for damages, and in
with the ruling of respondent court on the solidary liability of its application to the fullest extent of the provisions of Customs
FESC, MPA and Capt. Gavino, stresses the concurrent negligence Administrative Order No. 15-65 in relation to MPA's constitution
of Capt. Gavino, the harbor pilot, and Capt. Viktor and by-laws which spell out the conditions of and govern their
Kabankov, * shipmaster of MV Pavlodar, as the basis of their respective liabilities. These provisions are clear and unambiguous
solidary liability for damages sustained by PPA. It posits that the as regards MPA's liability without need for interpretation or
vessel was being piloted by Capt. Gavino with Capt. Kabankov construction. Although Customs Administrative Order No. 15-65
beside him all the while on the bridge of the vessel, as the former is a mere regulation issued by an administrative agency pursuant
took over the helm of MV Pavlodar when it rammed and damaged to delegated legislative authority to fix details to implement the
the apron of the pier of Berth No. 4 of the Manila International law, it is legally binding and has the same statutory force as any
Port. Their concurrent negligence was the immediate and valid statute. 16

proximate cause of the collision between the vessel and the pier
Capt. Gavino, for his negligence in the conduct of docking 17
Upon motion by FESC dated April 24, 1998 in G.R. No. 130150,
maneuvers for the safe berthing of the vessel; and Capt. 18
said case was consolidated with G.R. No. 130068.
Kabankov, for failing to countermand the orders of the harbor
pilot and to take over and steer the vessel himself in the face of
imminent danger, as well as for merely relying on Capt. Gavino Prefatorily, on matters of compliance with procedural
11 requirements, it must be mentioned that the conduct of the
during the berthing procedure.
respective counsel for FESC and PPA leaves much to be desired, to
the displeasure and disappointment of this Court.
On the other hand, in G.R. No. 130150, originally assigned to the
Court's First Division and later transferred to the Third Division.
Sec. 2, Rule 42 of the 1997 Rules of Civil
MPA, now as petitioner in this case, avers that respondent court's
errors consisted in disregarding and misinterpreting Customs Procedure incorporates the former Circular No. 28-91 which

Administrative Order No. 15-65 which limits the liability of MPA. provided for what has come to be known as the certification
Said pilots' association asseverates that it should not be held against forum shopping as an additional requisite for petitions
solidarily liable with Capt. Gavino who, as held by respondent filed with the Supreme Court and the Court of Appeals, aside from
court is only a member, not an employee, thereof. There being no the other requirements contained in pertinent provisions of the
employer-employee relationship, neither can MPA be held liable for Rules of Court therefor, with the end in view of preventing the
any vicarious liability for the respective exercise of profession by filing of multiple complaints involving the same issues in the
its members nor be considered a joint tortfeasor as to be held Supreme Court, Court of Appeals or different divisions thereof or
12 any other tribunal or agency.
jointly and severally liable. It further argues that there was
erroneous reliance on Customs Administrative Order No. 15-65
and the constitution and by-laws of MPA, instead of the provisions More particularly, the second paragraph of Section 2, Rule 42
of the Civil Code on damages which, being a substantive law, is provides:
higher in category than the aforesaid constitution and by-laws of a
xxx xxx xxx This motion having been granted, FESC subsequently
filed its petition on September 26, 1997, this time
The petitioner shall also submit together with bearing a "verification and certification against forum-
the petition a certification under oath that he shopping" executed by one Teodoro P. Lopez on
has not theretofore commenced any other September 24, 1997, to wit:
action involving the same issues in the
Supreme Court, the Court of Appeals or VERIFICATION AND CERTIFICATION
different divisions thereof, or any other tribunal
or agency; if there is such other action or AGAINST FORUM SHOPPING
proceeding, he must state the status of the same;
and if he should thereafter learn that a similar
in compliance with Section 4(e), Rule 45 in
action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals
or different divisions thereof, or any other
to Section 2, Rule 42 of the Revised Rules of Civil
tribunal or agency, he undertakes to promptly
inform the aforesaid courts and other tribunal or
agency thereof within five (5) days therefrom.
I, Teodoro P. Lopez, of legal age, after being duly
(Emphasis ours.)
sworn, depose and state:

For petitions for review filed before the Supreme Court,

1. That I am the Manager, Claims Department
Section 4(e), Rule 45 specifically requires that such
of Filsov Shipping Company, the local agent of
petition shall contain a sworn certification against forum
petitioner in this case.
shopping as provided in the last paragraph of Section 2,
Rule 42.
2. That I have caused the preparation of this
Petition for Review on Certiorari.
The records show that the law firm of Del Rosario and Del Rosario
through its associate, Atty. Herbert A. Tria, is the counsel of
record for FESC in both G.R. No. 130068 and G.R. No. 130150. 3. That I have read the same and the allegations
therein contained are true and correct based on
the records of this case.
G.R. No. 130068, which is assigned to the Court's Second
Division, commenced with the filing by FESC through counsel on
August 22, 1997 of a verified motion for extension of time to file its 4. That I certify that petitioner has not
petition for thirty (30) days from August 28, 1997 or until commenced any other action or proceeding

September 27, 1997. 20

Said motion contained the following involving the same issues in the Supreme Court
21 or Court of Appeals, or any other tribunal or
certification against forum shopping signed by Atty. Herbert A.
agency, that to the best of my own knowledge, no
Tria as affiant:
such action or proceeding is pending in the
Supreme Court, the Court of Appeals or any
other tribunal or agency, that if I should
thereafter learn that a similar action or
proceeding has been filed or is pending before
the Supreme Court, the Court of Appeals, or any
I/we hereby certify that I/we have not other tribunal or agency, I undertake to report
commenced any other action or proceeding the fact within five (5) days therefrom to this
involving the same issues in the Supreme Honorable Court. (Italics supplied for emphasis.)
Court, the Court of Appeals, or any other
tribunal or agency; that to the best of my own
Reviewing the records, we find that the petition filed by MPA in
knowledge, no such action or proceeding is
G.R. No. 130150 then pending with the Third Division was duly
pending in the Supreme Court, the Court of
filed on August 29, 1997 with a copy thereof furnished on the
Appeals, or any other tribunal or agency; that if 23
same date by registered mail to counsel for FESC. Counsel of
I/we should thereafter learn that a similar
record for MPA. Atty. Jesus P. Amparo, in his verification
action or proceeding has been filed or is
accompanying said petition dutifully revealed to the Court that
pending before the Supreme Court, the Court of
Appeals, or any other tribunal or agency, I/we
xxx xxx xxx
undertake to report that fact within five (5) days
therefrom to this Honorable Court.
3. Petitioner has not commenced any other
action or proceeding involving the same issues
in this Honorable Court, the Court of Appeals entitled to expect only complete honesty from lawyers appearing
or different Divisions thereof, or any other and pleading before them. 28
Candor in all dealings is the very
tribunal or agency,but to the best of his essence of honorable membership in the legal profession. 29
knowledge, there is an action or proceeding specifically, a lawyer is obliged to observe the rules of procedure
pending in this Honorable Court, entitled Far and not to misuse them to defeat the ends of justice. 30
It behooves
Eastern Shipping Co., Petitioner, vs. Philippine a lawyer, therefore, to exert every effort and consider it his duty to
Ports Authority and Court of Appeals with a assist in the speedy and efficient administration of
Motion for Extension of time to file Petition For justice. 31
Being an officer of the court, a lawyer has a
Review by Certiorari filed sometime on August responsibility in the proper administration of justice. Like the
18, 1987. If undersigned counsel will come to court itself, he is an instrument to advance its ends the speedy,
know of any other pending action or claim filed efficient, impartial, correct and inexpensive adjudication of cases
or pending he undertakes to report such fact and the prompt satisfaction of final judgments. A lawyer should
within five (5) days to this Honorable not only help attain these objectives but should likewise avoid any
Court. 24 (Emphasis supplied.) unethical or improper practices that impede, obstruct or prevent
their realization, charged as he is with the primary task of
Inasmuch as MPA's petition in G.R. No. 130150 was posted by assisting in the speedy and efficient administration of justice. 32
registered mail on August 29, 1997 and taking judicial notice of
the average period of time it takes local mail to reach its Sad to say, the members of said law firm sorely failed to observe
destination, by reasonable estimation it would be fair to conclude their duties as responsible members of the Bar. Their actuations
that when FESC filed its petition in G.R. No. 130068 on are indicative of their predisposition to take lightly the avowed
September 26, 1997, it would already have received a copy of the duties of officers of the Court to promote respect for law and for
former and would then have knowledge of the pendency of the 33
legal processes. We cannot allow this state of things to pass
other petition initially filed with the First Division. It was therefore
judicial muster.
incumbent upon FESC to inform the Court of that fact through its
certification against forum shopping. For failure to make such
In view of the fact that at around the time these petitions were
disclosure, it would appear that the aforequoted certification
commenced, the 1997 Rules of Civil Procedure had just taken
accompanying the petition in G.R. No. 130068 is defective and
effect, the Court treated infractions of the new Rules then with
could have been a ground for dismissal thereof.
relative liberality in evaluating full compliance therewith.
Nevertheless, it would do well to remind all concerned that the
Even assuming that FESC had not yet received its copy of MPA's
penal provisions of Circular No. 28-91 which remain operative
petition at the time it filed its own petition and executed said
provides, inter alia:
certification, its signatory did state "that if I should thereafter
learn that a similar action or proceeding has been filed or is
3. Penalties.
pending before the Supreme Court, the Court of Appeals or any
other tribunal or agency, I undertake to report the fact within five
25 xxx xxx xxx
(5) days therefrom to this Honorable Court." Scouring the
records page by page in this case, we find that no manifestation
concordant with such undertaking was then or at any other time (c) The submission of a false certification under
thereafter ever filed by FESC nor was there any attempt to bring Par. 2 of the Circular shall likewise constitute
such matter to the attention of the Court. Moreover, it cannot contempt of court, without prejudice to the
feign non-knowledge of the existence of such other petition filing of criminal action against the guilty party.
because FESC itself filed the motion for consolidation in G.R. No. The lawyer may also be subjected to disciplinary
130150 of these two cases on April 24, 1998. proceedings.

It is disturbing to note that counsel for FESC, the law firm of Del It must be stressed that the certification against forum shopping
Rosario and Del Rosario, displays an unprofessional tendency of ordained under the Rules is to be executed by thepetitioner, and
taking the Rules for granted, in this instance exemplified by not by counsel. Obviously it is the petitioner, and not always the
its pro forma compliance therewith but apparently without full counsel whose professional services have been retained for a
comprehension of and with less than faithful commitment to its particular case, who is in the best position to know whether he or
undertakings to this Court in the interest of just, speedy and it actually filed or caused the filing of a petition in that case.
orderly administration of court proceedings. Hence, a certification against forum shopping by counsel is a
defective certification. It is clearly equivalent to non-compliance
with the requirement under Section 2, Rule 42 in relation to
As between the lawyer and the courts, a lawyer owes candor,
26 Section 4, Rule 45, and constitutes a valid cause for dismissal of
fairness and good faith to the court. He is an officer of the court
the petition.
exercising a privilege which is indispensable in the administration
of justice. Candidness, especially towards the courts, is
Hence, the initial certification appended to the motion for
essential for the expeditious administration of justice. Courts are
extension of time to file petition in G.R. No. 130068 executed in
behalf of FESC by Atty. Tria is procedurally deficient. But Another thing that baffles the Court is why the OSG did not take
considering that it was a superfluity at that stage of the the inititive of filing a motion for consolidation in either G.R. No.
proceeding, it being unnecessary to file such a certification with a 130068 or G.R. No. 130150, considering its familiarity with the
mere motion for extension, we shall disregard such error. Besides, background of the case and if only to make its job easier by having
the certification subsequently executed by Teodoro P. Lopez in to prepare and file only one comment. It could not have been
behalf of FESC cures that defect to a certain extent, despite the unaware of the pendency of one or the other petition because,
inaccuracies earlier pointed out. In the same vein, we shall being counsel for respondent in both cases, petitioner is required
consider the verification signed in behalf of MPA by its counsel, to furnish it with a copy of the petition under pain of dismissal of
Atty. Amparo, in G.R. No. 130150 as substantial compliance the petition for failure otherwise. 40

inasmuch as it served the purpose of the Rules of informing the

Court of the pendency of another action or proceeding involving Besides, in G.R. 130068, it prefaces its discussions thus
the same issues.

Incidentally, the Manila Pilots' Association

It bears stressing that procedural rules are instruments in the (MPA), one of the defendants-appellants in the
speedy and efficient administration of justice. They should be case before the respondent Court of Appeals,
used to achieve such end and not to derail it. has taken a separate appeal from the said
decision to this Honorable Court, which was
Counsel for PPA did not make matters any better. Despite the fact docketed as G.R. No. 130150 and entitled
that, save for the Solicitor General at the time, the same legal "Manila Pilots' Association, Petitioner, versus
team of the Office of the Solicitor General (OSG, for short) Philippine Ports Authority and Far Eastern
composed of Assistant Solicitor General Roman G. Del Rosario Shipping Co., Respondents." 41

and Solicitor Luis F. Simon, with the addition of Assistant

Solicitor General Pio C. Guerrero very much later in the Similarly, in G.R. No. 130150, it states
proceedings, represented PPA throughout the appellate
proceedings in both G.R. No. 130068 and G.R. No. 130150 and
Incidentally, respondent Far Eastern Shipping
was presumably fully acquainted with the facts and issues of the
Co. (FESC) had also taken an appeal from the
case, it took the OSG an inordinately and almost unreasonably
said decision to this Honorable Court, docketed
long period of time to file its comment, thus unduly delaying the
as G.R. No. 130068, entitled "Far Eastern
resolution of these cases. It took several changes of leadership in
Shipping Co. vs. Court of Appeals and
the OSG from Silvestre H. Bello III to Romeo C. dela Cruz and, 42
Philippine Ports Authority."
finally, Ricardo P. Galvez before the comment in behalf of PPA
was finally filed.
We find here a lackadaisical attitude and complacency on the part
of the OSG in the handling of its cases and an almost reflexive
In G.R. No. 130068, it took eight (8) motions for extension of time
propensity to move for countless extensions, as if to test the
totaling 210 days, a warning that no further extensions shall be
patience of the Court, before favoring it with the timely
granted, and personal service on the Solicitor General himself of
submission of required pleadings.
the resolution requiring the filing of such comment before the
OSG indulged the Court with the long required comment on July
35 It must be emphasized that the Court can resolve cases only as
10, 1998. This, despite the fact that said office was required to
fast as the respective parties in a case file the necessary
file its comment way back on November 12, 1997. A closer
pleadings. The OSG, by needlessly extending the pendency of
scrutiny of the records likewise indicates that petitoner FESC was
these cases through its numerous motions for extension, came
not even furnished a copy of said comment as required by Section
very close to exhausting this Court's forbearance and has
5, Rule 42. Instead, a copy thereof was inadvertently furnished to
regrettably fallen short of its duties as the People's Tribune.
MPA which, from the point of view of G.R. No. 130068, was a non-
party. The OSG fared slightly better in G.R. No. 130150 in that
The OSG is reminded that just like other members of the Bar, the
it took only six (6) extensions, or a total of 180 days, before the
canons under the Code of Professional Responsibility apply with
comment was finally filed. And while it properly furnished
equal force on lawyers in government service in the discharge of
petitioner MPA with a copy of its comment, it would have been 43
their official tasks. These ethical duties are rendered even more
more desirable and expedient in this case to have furnished its
exacting as to them because, as government counsel, they have
therein co-respondent FESC with a copy thereof, if only as a
the added duty to abide by the policy of the State to promote a
matter of professional courtesy. 44
high standard of ethics in public service. Furthermore, it is
incumbent upon the OSG, as part of the government bureaucracy,
This undeniably dilatory disinclination of the OSG to seasonably
to perform and discharge its duties with the highest degree of
file required pleadings constitutes deplorable disservice to the tax- 45
professionalism, intelligence and skill and to extend prompt,
paying public and can only be categorized as censurable 46
courteous and adequate service to the public.
inefficiency on the part of the government law office. This is most
certainly professionally unbecoming of the OSG.
Now, on the merits of the case. After a judicious examination of Sec. 32. Duties and responsibilities of the Pilot
the records of this case, the pleadings filed, and the evidence or Pilots' Association. The duties and
presented by the parties in the two petitions, we find no cogent responsibilities of the Harbor Pilot shall be as
reason to reverse and set aside the questioned decision. While not follows:
entirely a case of first impression, we shall discuss the
issues seriatim and, correlatively by way of a judicial once-over, xxx xxx xxx
inasmuch as the matters raised in both petitions beg for validation
and updating of well-worn maritime jurisprudence. Thereby, we f) a pilot shall be held responsible for the
shall write finis to the endless finger-pointing in this shipping direction of a vessel from the time he assumes
mishap which has been stretched beyond the limits of judicial his work as a pilot thereof until he leaves it
tolerance. anchored or berthed safely; Provided, however,
that his responsibility shall cease at the
The Port of Manila is within the Manila Pilotage District which is moment the Master neglects or refuses to carry
under compulsory pilotage pursuant to Section 8, Article III of out hisorder.
Philippine Ports Authority Administrative Order No. 03-
85, which provides that: Customs Administrative Order No. 15-65 issued twenty years
earlier likewise provided in Chapter I thereof for the
Sec. 8. Compulsor Pilotage Service. For responsibilities of pilots:
entering a harbor and anchoring thereat, or
passing through rivers or straits within a Par. XXXIX. A Pilot shall be held responsible
pilotage district, as well as docking and for the direction of a vessel from the time he
undocking at any pier/wharf, or shifting from assumes control thereof until he leaves it
one berth or another, every vessel engaged in anchored free from shoal: Provided, That his
coastwise and foreign trade shall be under responsibility shall cease at the moment the
compulsory pilotage. . . . master neglects or refuses to carry out his
In case of compulsory pilotage, the respective duties and
responsibilities of the compulsory pilot and the master have been xxx xxx xxx
specified by the same regulation in this wise:

Par. XLIV. Pilots shall properly and safely

Sec. 11. Control of vessels and liability for secure or anchor vessels under their control
damage. On compulsory pilotage grounds, when requested to do so by the master of such
the Harbor Pilot providing the service to a vessel vessels.
shall be responsible for the damage caused to a
vessel or to life and property at ports due to his I. G.R. No. 130068
negligence or fault. He can only be absolved
from liability if the accident is caused by
Petitioner FESC faults the respondent court with serious error in
force majeure or natural calamities provided he
not holding MPA and Capt. Gavino solely responsible for the
has exercised prudence and extra diligence to
damages cause to the pier. It avers that since the vessel was under
prevent or minimize damage.
compulsory pilotage at the time with Capt. Gavino in command
and having exclusive control of the vessel during the docking
The Master shall retain overall command of the maneuvers, then the latter should be responsible for damages
vessel even on pilotage grounds whereby he can 48
caused to the pier. It likewise holds the appellate court in error
countermand or overrule the order or command
for holding that the master of the ship, Capt. Kabankov, did not
of the Harbor Pilot on beard. In such event, any
exercise the required diligence demanded by the circumstances. 49
damage caused to a vessel or to life and
property at ports by reason of the fault or
We start our discussion of the successive issues bearing in mind
negligence of the Master shall be the
the evidentiary rule in American jurisprudence that there is a
responsibility and liability of the registered
presumption of fault against a moving vessel that strikes a
owner of the vessel concerned without prejudice
stationary object such as a dock or navigational aid. In admiralty,
to recourse against said Master.
this presumption does more than merely require the ship to go
forward and produce some evidence on the presumptive matter.
Such liability of the owner or Master of the
The moving vessel must show that it was without fault or that the
vessel or its pilots shall be determined by
collision was occasioned by the fault of the stationary object or
competent authority in appropriate proceedings
was the result of inevitable accident. It has been held that such
in the light of the facts and circumstances of
vessel must exhaust every reasonable possibility which the
each particular case.
circumstances admit and show that in each, they did all that
reasonable care required. 50
In the absence of sufficient proof in In line with such established doctrines, Chapter II of Customs
rebuttal, the presumption of fault attaches to a moving vessel Administrative Order No. 15-65 prescribes the rules for
which collides with a fixed object and makes a prima facie case of compulsory pilotage in the covered pilotage districts, among which
fault against the vessel. 51
Logic and experience support this is the Manila Pilotage District,
presumption: viz.

The common sense behind the rule makes the PARAGRAPH I. Pilotage for entering a harbor
burden a heavy one. Such accidents simply do and anchoring thereat, as well as docking and
not occur in the ordinary course of things undocking in any pier or shifting from one
unless the vessel has been mismanaged in berth to another shall be compulsory, except
some way. It is nor sufficient for the respondent Government vessels and vessels of foreign
to produce witnesses who testify that as soon as governments entitled to courtesy, and other
the danger became apparent everything vessels engaged solely in river or harbor work,
possible was done to avoid an accident. The or in a daily ferry service between ports which
question remains, How then did the collision shall be exempt from compulsory pilotage
occur? The answer must be either that, in spite provisions of these regulations: provided,
of the testimony of the witnesses, what was however, that compulsory pilotage shall not
done was too little or too late or, if not, then the apply in pilotage districts whose optional
vessel was at fault for being in a position in pilotage is allowed under these regulations.
which an unavoidable collision would occur.
Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar
The task, therefore, in these cases is to pinpoint who was into Berth 4 of the Manila International Port. Upon assuming
negligent the master of the ship, the harbor pilot or such office as compulsory pilot, Capt. Gavino is held to the
both. universally accepted high standards of care and diligence required
of a pilot, whereby he assumes to have skill and knowledge in
respect to navigation in the particular waters over which his
A pilot, in maritime law, is a person duly qualified, and licensed,
license extends superior to and more to be trusted than that of
to conduct a vessel into or out of ports, or in certain waters. In a
the master. A pilot 57 should have a thorough knowledge of
broad sense, the term "pilot" includes both (1) those whose duty it
is to guide vessels into or out of ports, or in particular waters and general and local regulations and physical conditions affecting the

(2) those entrusted with the navigation of vessels on the high vessel in his charge and the waters for which he is licensed, such
53 as a particular harbor or river.
seas. However, the term "pilot" is more generally understood as a
person taken on board at a particular place for the purpose of
conducting a ship through a river, road or channel, or from a He is not held to the highest possible degree of skill and care, but
54 must have and exercise the ordinary skill and care demanded by
the circumstances, and usually shown by an expert in his
profession. Under extraordinary circumstancesm, a pilot must
Under English and American authorities, generally speaking, the 58
exercise extraordinary care.
pilot supersedes the master for the time being in the command
and navigation of the ship, and his orders must be obeyed in all
matters connected with her navigation. He becomes the In Atlee vs. The Northwesrern Union Packet Company. Mr. Justice
master pro hac vice and should give all directions as to speed, Miller spelled out in great detail the duties of a pilot:
course, stopping and reversing anchoring, towing and the like.
And when a licensed pilot is employed in a place where pilotage is . . . (T)he pilot of a river steamer, like the harbor
compulsory, it is his duty to insist on having effective control of pilot, is selected for his personal knowledge of
the vessel, or to decline to act as pilot. Under certain systems of the topography through which he steers his
foreign law, the pilot does not take entire charge of the vessel, but vessel. In the long course of a thousand miles
is deemed merely the adviser of the master, who retains command in one of these rivers, he must be familiar with
and control of the navigation even in localities where pilotage is the appearance of the shore on each side of the
compulsory. 55 river as he goes along. Its banks, towns, its
landings, its houses and trees, are all

It is quite common for states and localities to provide for landmarks by which he steers his vessel. The

compulsory pilotage, and safety laws have been enacted requiring compass is of little use to him. He must know

vessels approaching their ports, with certain exceptions, to take where the navigable channel is, in its relation to

on board pilots duly licensed under local law. The purpose of all these external objects, especially in the

these laws is to create a body of seamen thoroughly acquainted night. He must also be familiar with all dangers

with the harbor, to pilot vessels seeking to enter or depart, and that are permanently located in the course of
56 the river, as sand-bars, snags, sunken rocks or
thus protect life and property from the dangers of navigation.
trees or abandoned vessels orbarges. All this he
must know and remember and avoid. To do was in Russian, so I
this, he must be constantly informed of the presumed the anchor was not
changes in the current of the river, of the sand- dropped on time.
bars newly made,of logs or snags, or other
objects newly presented, against which his Q So, you are not sure
vessel might be injured. whether it was really dropped
on time or not?
xxx xxx xxx
A I am not sure, your Honor.
It may be said that this is exacting a very high
order of ability in a pilot. But when we consider xxx xxx xxx
the value of the lives and property committed to
their control, for in this they are absolute Q You are not even sure what
masters, the high compensation they receive, could have caused the
the care which Congress has taken to secure by incident. What factor could
rigid and frequent examinations and renewal of have caused the incident?
licenses, this very class of skill, we do not think
we fix the standard too high.
A Well, in this case now,
because either the anchor
Tested thereby, we affirm respondent court's finding that Capt. was not dropped on time or
Gavino failed to measure up to such strict standard of care and the anchor did not hold, that
diligence required of pilots in the performance of their duties. was the cause of the incident,
Witness this testimony of Capt. Gavino: 60
your Honor.

Court: You have testified

It is disconcertingly riddled with too much incertitude and
before that the reason why
manifests a seeming indifference for the possibly injurious
the vessel bumped the pier
consequences his commands as pilot may have. Prudence
was because the anchor was
required that he, as pilot, should have made sure that his
not released immediately or
directions were promptly and strictly followed. As correctly noted
as soon as you have given the
by the trial court
order. Do you remember
having srated that?
Moreover, assuming that he did indeed give the
command to drop the anchor on time, as pilot
A Yes, your Honor.
he should have seen to it that the order was
carried out, and he could have done this in a
Q And you gave this order to number of ways, one of which was to inspect
the captain of the vessel? the bow of the vessel where the anchor
mechanism was installed. Of course, Captain
A Yes, your Honor. Gavino makes reference to a commotion among
the crew members which supposedly caused
Q By that testimony, you are the delay in the execution of the command. This
leading the Court to account was reflected in the pilot's report
understand that if that prepared four hours later, but Capt. Kavankov,
anchor was released while not admitting whether or not such a
immediately at the time you commotion occurred, maintained that the
gave the order, the incident command to drop anchor was followed
would not have happened. Is "immediately and precisely." Hence, the Court
that correct? cannot give much weight or consideration to
this portion of Gavino's testimony."
A Yes, sir, but actually it was
only a presumption on my An act may be negligent if it is done without the competence that
part because there was a a reasonable person in the position of the actor would recognize
commotion between the as necessary to prevent it from creating an unreasonable risk of
officers who are in charge of harm to another. 62
Those who undertake any work calling for
the dropping of the anchor special skills are required not only to exercise reasonable care in
and the captain. I could not what they do but also possess a standard minimum of special
understand their language, it knowledge and ability. 63
Every man who offers his services to another, and is employed, measures to arrest fully the momentum of the
assumes to exercise in the employment such skills he possesses, vessel after the anchor failed to claw to the
with a reasonable degree of diligence. In all these employments seabed. When he reacted, the same was even
where peculiar skill is requisite, if one offers his services he is (haphazard). Gavino failed to reckon the bulk of
understood as holding himself out to the public as possessing the the vessel, its size and its cargo. He erroneously
degree of skill commonly possessed by others in the same believed that only one (1) anchor would suffice
employment, and if his pretensions are unfounded he commits a and even when the anchor failed to claw into
species of fraud on every man who employs him in reliance on his the seabed or against a hard object in the
public profession. 64
seabed, Gavino failed to order the other anchor
dropped immediately. His claim that the anchor
Furthermore, there is an obligation on all persons to take the care was dropped when the vessel was only 1,000
which, under ordinary circumstances of the case, a reasonable feet from the pier is but a belated attempt to
and prudent man would take, and the omission of that care extricate himself from the quagmire of his own

constitutes negligence. 65
Generally, the degree of care required is insouciance and negligence. In sum, then,
Appellants' claim that the incident was caused
graduated according to the danger a person or property attendant
by "force majeure" is barren of factual basis.
upon the activity which the actor pursues or the instrumentality
which he uses. The greater the danger the greater the degree of
care required. What is ordinary under extraordinary of conditions xxx xxx xxx
is dictated by those conditions; extraordinary risk demands
extraordinary care. Similarly, the more imminent the danger, the The harbor pilots are especially trained for this
higher the degree of care. 66
job. In the Philippines, one may not be a harbor
pilot unless he passed the required examination

We give our imprimatur to the bases for the conclusion of the and training conducted then by the Bureau of

Court of Appeals that Capt. Gavino was indeed negligent in the Custom, under Customs Administrative Order

performance of his duties: No. 15-65, now under the Philippine Ports
Authority under PPA Administrative Order 63-
85, Paragraph XXXIX of the Customs
xxx xxx xxx
Administrative Order No. 15-65 provides that
"the pilot shall be held responsible for the
. . . As can be gleaned from the logbook, Gavino
direction of the vessel from the time he assumes
ordered the left anchor and two (2) shackles
control thereof, until he leaves it anchored free
dropped at 8:30 o'clock in the morning. He
from shoal: Provided, that his responsibility
ordered the engines of the vessel stopped at
shall cease at the.moment the master neglects
8:31 o'clock. By then,Gavino must have realized
or refuse(s) to carry out his instructions." The
that the anchor did not hit a hard object and
overall direction regarding the procedure for
was not clawed so as to reduce the momentum
docking and undocking the vessel emanates
of the vessel. In point of fact, the vessel
from the harbor pilot. In the present recourse,
continued travelling towards the pier at the
Gavino failed to live up to his responsibilities
same speed. Gavino failed to react, At 8:32
and exercise reasonable care or that degree of
o'clock, the two (2) tugboats began to push the
care required by the exigencies of the occasion.
stern part of the vessel from the port side bur
Failure on his part to exercise the degree of care
the momentum of the vessel was not contained.
demanded by the circumstances is negligence
Still, Gavino did not react. He did not even order
(Reese versus Philadelphia & RR Co. 239 US
the other anchor and two (2) more shackles 67
363, 60 L ed. 384, 57 Am Jur, 2d page 418).
dropped to arrest the momentum of the vessel.
Neither did he order full-astern. It was only at
This affirms the findings of the trial court regarding Capt.
8:34 o'clock, or four (4) minutes, after the anchor
Gavino's negligence:
was dropped that Gavino reacted. But his
reaction was even (haphazard) because instead
of arresting fully the momentum of the vessel This discussion should not however, divert the
with the help of the tugboats, Gavino ordered court from the fact that negligence in
merely "half-astern". It took Gavino another manuevering the vessel must be attributed to
minute to order a "full-astern". By then, it was Capt. Senen Gavino. He was an experienced
too late. The vessel's momentum could no pilot and by this time should have long
longer be arrested and, barely a minute familiarized himself with the depth of the port
thereafter, the bow of the vessel hit the apron of and the distance he could keep between the
the pier. Patently, Gavino miscalculated. He vessel and port in order to berth safely.
failed to react and undertake adequate
The negligence on the part of Capt. Gavino is evident; but Capt. Q Up to the time it was
Kabancov is no less responsible for the allision. His unconcerned actually docked at the pier, is
lethargy as master of the ship in the face of troublous exigence that correct?
constitutes negligence.
A No sir, I did not intervene
While it is indubitable that in exercising his functions a pilot is in up to the very moment when
sole command of the ship 69
and supersedes the master for the the vessel was docked.
time being in the command and navigation of a ship and that he
becomes master pro hac vice of a vessel piloted by him, there is xxx xxx xxx
overwhelming authority to the effect that the master does not
surrender his vessel to the pilot and the pilot is not the master. Atty. Del Rosario (to the
The master is still in command of the vessel notwithstanding the witness)
presence of a pilot. There are occasions when the master may and
should interfere and even displace the pilot, as when the pilot is Q Mr. Witness, what
obviously incompetent or intoxicated and the circumstances may happened, if any, or was
require the master to displace a compulsory pilot because of there anything unusual that
incompetency or physical incapacity. If, however, the master does happened during the
nor observe that a compulsory pilot is incompetent or physically docking?
incapacitated, the master is justified in relying on the pilot, but
not blindly. A Yes sir, our ship touched
ihe pier and the pier was
The master is not wholly absolved from his duties while a pilot is damaged.
on board his vessel, and may advise with or offer suggestions to
him. He is still in command of the vessel, except so far as her Court (to the witness)
navigation is concerned, and must cause the ordinary work of the
vessel to be properly carried on and the usual precaution taken.
Q When you said touched the
Thus, in particular, he is bound to see that there is sufficient
pier, are you leading the
watch on deck, and that the men are attentive to their duties, also
court to understand that
that engines are stopped, towlines cast off, and the anchors clear
your ship bumped the pier?
and ready to go at the pilot's order.

A I believe that my vessel

A perusal of Capt. Kabankov's testimony makes it apparent that only touched the pier but the
he was remiss in the discharge of his duties as master of the ship, impact was very weak.
leaving the entire docking procedure up to the pilot, instead of
maintaining watchful vigilance over this risky maneuver:
Q Do you know whether the
pier was damaged as a result
Q Will you please tell us of that slight or weak impact?
whether you have the right to
intervene in docking of your
A Yes sir, after the pier was
ship in the harbor?

A No sir, I have no right to

xxx xxx xxx
intervene in time of docking,
only in case there is
Q Being most concerned with
imminent danger to the
the safety of your vessel, in
vessel and to the pier.
the maneuvering of your
vessel to the port, did you
Q Did you ever intervene
observe anything irregular in
during the time that your
the maneuvering by Capt.
ship was being docked by
Gavino at the time he was
Capt. Gavino?
trying to cause the vessel to
be docked at the pier?
A No sir, I did not intervene
at the time when the pilot
A You mean the action of
was docking my ship.
Capt. Gavino or his
Court: Q Alright, Capt. Kavankov,
did you come to know later
Q Not the actuation that whether the anchor held its
conform to the safety ground so much so that the
maneuver of the ship to the vessel could not travel?
A It is difficult for me to say
A No sir, it was a usual definitely. I believe that the
docking. anchor did not hold the ship.

Q By that statement of yours, Q You mean you don't know

you are leading the court to whether the anchor blades
understand that there was stuck to the ground to stop
nothing irregular in the the ship from further
docking of the ship? moving?

A Yes sir, during the initial A Yes sir, it is possible.

period of the docking, there
was nothing unusual that Q What is possible?
A I think, the 2 shackles were
Q What about in the last not enough to hold the
portion of the docking of the vessel.
ship, was there anything
unusual or abnormal that Q Did you know that the 2
happened? shackles were dropped?

A None Your Honor, I believe A Yes sir, I knew that.

that Capt. Gavino thought
that the anchor could keep or Q If you knew that the
hold the vessel. shackles were not enough to
hold the ship, did you not
Q You want us to make any protest to the pilot?
understand, Mr. Witness,
that the dropping of the A No sir, after the incident,
anchor of the vessel was nor that was my assumption.

Q Did you come to know later

A I don't know the depth of whether that presumption is
this port but I think, if the correct?
anchor was dropped earlier
and with more shackles,
A I still don't know the
there could not have been an
ground in the harbor or the

Q So you could not precisely

Q So from the beginning, you
tell the court that the
were not competent whether
dropping of the anchor was
the 2 shackles were also
timery because you are not
dropped to hold the ship?
well aware of the seabed, is
that correct?
A No sir, at the beginning, I
did not doubt it because I
A Yes sir, that is right.
believe Capt. Gavino to be an
experienced pilot and he
xxx xxx xxx should be more aware as to
the depths of the harbor and
the ground and I was you did not intervene with
confident in his actions. the duties of the pilot and
that, in your opinion, you can
xxx xxx xxx only intervene if the ship is
placed in imminent danger, is
Solicitor Abad (to the witness) that correct?

Q Now, you were standing A That is right, I did say that.

with the pilot on the bridge of
the vessel before the inicident Q In your observation before
happened, were you not? the incident actually
happened, did you observe
A Yes sir, all the time, I was whether or not the ship,
standing with the pilot. before the actual incident,
the ship was placed in
imminent danger?
Q And so whatever the pilot
saw, you could also see from
that point of view? A No sir, I did not observe.

A That is right. Q By that answer, are you

leading the court to
understand that because you
Q Whatever the piler can
did not intervene and
read from the panel of the
because you believed that it
bridge, you also could read,
was your duty to intervene
is that correct?
when the vessel is placed in
imminent danger to which
A What is the meaning of
you did not observe any
imminent danger thereof, you
have not intervened in any
Q All indications necessary manner to the command of
for men on the bridge to be the pilot?
informed of the movements of
the ship?
A That is right, sir.

A That is right.
xxx xxx xxx

Q And whatever sound the

Q Assuminp that you
captain . . . Capt. Gavino
disagreed with the pilot
would hear from the bridge,
regarding the step being
you could also hear?
taken by the pilot in
maneuvering the vessel,
A That is right. whose command will prevail,
in case of imminent danger to
Q Now, you said that when the vessel?
the command to lower the
anchor was given, it was A I did nor consider the
obeyed, is that right? situation as having an
imminent danger. I believed
A This command was that the vessel will dock
executed by the third mate alongside the pier.
and boatswain.

Q You want us to understand

Court (to the witness) that you did not see an
imminent danger to your
Q Mr. Witness, earlier in ship, is that what you mean?
today's hearing, you said that
A Yes sir, up to the very last A Yes sir.
moment, I believed that there
was no imminent danger. Q Because, otherwise, you
would have issued order that
Q Because of that, did you would supersede his own
ever intervene in the order?
command of the pilot?
A In that case, I should t,ke
A Yes sir, I did not intervene him away from his command
because I believed that the or remove the command from
command of the pilot to be him.
Court (to the witness)
Solicitor Abad (to the witness)
Q You were in full accord
Q As a captain of M/V with the steps being taken by
Pavlodar, you consider Capt. Gavino because you
docking maneuvers a serious relied on his knowledge, on
matter, is it not? his familiarity of the seabed
and shoals and other
A Yes sir, that is right. surroundings or conditions
under the sea, is that
Q Since it affects not only the correct?
safety of the port or pier, but
also the safety of the vessel A Yes sir, that is right.
and the cargo, is it not?
xxx xxx xxx
A That is right.
Solicitor Abad (to the witness)
Q So that, I assume that you
were watching Capt. Gavino Q And so after the anchors
very closely at the time he were ordered dropped and
was making his commands? they did not take hold of the
seabed, you were alerted that
A I was close to him, I was there was danger already on
hearing his command and hand?
being executed.
A No sir, there was no
Q And that you were also imminent danger to the
alert for any possible vessel.
mistakes he might commit in
the maneuvering of the Q Do you mean to tell us that
vessel? even if the anchor was
supposed to take hold of the
A Yes sir, that is right. bottom and it did not, there
was no danger to the ship?
Q But at no time during the
maneuver did you issue order A Yes sir, because the anchor
contrary to the orders Capt. dragged on the ground later.
Gavino made?
Q And after a few moments
A No sir. when the anchor should have
taken hold the seabed bur
Q So that you were in full not done (sic), as you
accord with all of Capt. expected, you already were
Gavino's orders?
alerted that there was danger A That is right, it bumped the
to the ship, is that correct? pier.

A Yes sir, I was alerted but Q For the main reason that
there was no danger. the anchor of the vessel did
not hold the ground as
Q And you were alerted that expected?
somebody was wrong?
A Yes sir, that is my
A Yes sir, I was alerted. opinion.

Q And this alert vou Further, on redirect examination, Capt. Kabankov fortified his
assumed was the ordinary apathetic assessment of the situation:
alertness that you have for
normal docking? Q Now, after the anchor was
dropped, was there any point
A Yes sir, I mean that it was in time that you felt that the
usual condition of any man vessel was in imminent
in time of docking to be alert. danger.

Q And that is the same A No, at that time, the vessel

alertness when the anchor was not in imminent, danger,
did not hold onto the ground, sir.
is that correct?
This cavalier appraisal of the event by Capt. Kabankov is
A Yes sir, me and Capt. disturbingly antipodal to Capt. Gavino's anxious assessment of
Gavino (thought) that the the situation:
anchor will hold the ground.
Q When a pilot is on board a
Q Since, as you said that you vessel, it is the piler's
agreed all the while with the command which should be
orders of Capt. Gavino, you followed at that moment until
also therefore agreed with the vessel is, or goes to port
him in his failure to take or reaches port?
necessary precaution against
the eventuality that the A Yes, your Honor, but it does
anchor will not hold as not take away from the
expected? Captain his prerogative to
countermand the pilot.
Atty. Del Rosario:
Q In what way?
May I ask that the
question . . . A In any case, which he
thinks the pilot is not
Solicitor Abad: maneuvering correctly, the
Captain always has the
Never mind, I will reform the prerogative to countermand
question. the pilot's order.

xxx xxx xxx Q But insofar as competence,

efficiency and functional
Solicitor Abad (to the witness) knowledee of the seabed
which are vital or decisive in
the safety (sic) bringing of a
Q Is it not a fact that the
vessel to the port, he is not
vessel bumped the pier?
A Yes, your Honor. That is was in imminent danger of
why they hire a pilot in an bumping the pier?
advisory capacity, but still,
the safety of the vessel rest(s) A When we were about more
upon the Captain, the Master than one thousand meters
of the vessel. from the pier, I think, the
anchor was not holding, so I
Q In this case, there was not immediately ordered to push
a disagreement between you the bow at a fourth quarter,
and the Captain of the vessel at the back of the vessel in
in the bringing of the vessel order to swing the bow away
to port? from the pier and at the same
time, I ordered for a full
A No, your Honor. astern of the engine.75

Court: These conflicting reactions can only imply, at the very

least, unmindful disregard or, worse, neglectful
May proceed. relinquishment of duty by the shipmaster, tantamount to

Atty. Catris:
The findings of the trial court on this aspect is noteworthy:

In fact, the Master of the

vessel testified here that he For, while the pilot Gavino may indeed have
was all along in conformity been charged with the task of docking the
with the orders you, gave to vessel in the berthing space, it is undisputed
him, and, as matter of fact, that the master of the vessel had the
as he said, he obeyed all your corresponding duty to countermand any of the
orders. Can you tell, if in the orders made by the pilot, and even maneuver
course of giving such normal the vessel himself, in case of imminent danger
orders for the saf(e) docking to the vessel and the port.
of the MV Pavlodar, do you
remember of any instance In fact, in his testimony, Capt. Kavankov
that the Master of the vessel admitted that all throughour the man(eu)vering
did not obey your command procedures he did not notice anything was
for the safety docking of the going wrong, and even observed that the order
MV Pavlodar? given to drop the anchor was done at the proper
time. He even ventured the opinion that the
Atty. del Rosario: accident occurred because the anchor failed to
take hold but that this did not alarm him

Already answered, he already because.there was still time to drop a second

said yes sir. anchor.

Court: Under normal circumstances, the

abovementioned facts would have caused the
master of a vessel to take charge of the situation
Yes, he has just answered yes
and see to the man(eu)vering of the vessel
sir to the Court that there
himself. Instead, Capt. Kavankov chose to rely
was no disagreement insofar
blindly upon his pilot, who by this time was
as the bringing of the vessel
proven ill-equipped to cope with the situation.
safely to the port.

xxx xxx xxx

Atty. Catris:

It is apparent that Gavino was negligent but Far

But in this instance of
Eastern's employee Capt. Kavankov was no
docking of the MV Pavlodar,
lesss responsible for as master of the vessel he
do you remember of a time
stood by the pilot during the man(eu)vering
during the course of the
procedures and was privy to every move the
docking that the MV Pavlodar
latter made, as well as the vessel's response to The stark incompetence of Kavankov is
each of the commands. His choice to rely competent evidence to prove the
blindly upon the pilot's skills, to the point that unseaworthiness of the vessel. It has been held
despite being appraised of a notice of alert he that the incompetence of the navigator, the
continued to relinquish control of the vessel to master of the vessel or its crew makes the vessel
Gavino, shows indubitably that he was not unseaworthy (Tug Ocean Prince versus United
performing his duties with the diligence States of America, 584 F. 2nd, page 1151).
required of him and therefore may be charged Hence, the Appellant FESC is likewise liable for
76 77
with negligence along with defend;int Gavino. the damage sustained by the Appellee.

As correctly affirmed by the Court of Appeals We find strong and well-reasoned support in time-tested American
maritime jurisprudence, on which much of our laws and
We are in full accord with the findings and jurisprudence on the matter are based, for the conclusions of the
disquisitions of the Court a quo. Court of Appeals adjudging both Capt. Gavino and Capt.
Kabankov negligent.
In the present recourse, Captain Viktor
Kavankov had been a mariner for thirty-two As early as 1869, the U.S. Supreme Court declared, through Mr.
years before the incident. When Gavino was (in) Justice Swayne, in The Steamship China vs. Walsh, that it is the
the command of the vessel, Kavankov was duty of the master to interfere in cases of the pilot's intoxication or
beside Gavino, relaying the commands or orders manifest incapacity, in cases of danger which he does not foresee,
of Gavino to the crewmembers-officers of the and in all cases of great necessity. The master has the same power
vessel concerned. He was thus fully aware of to displace the pilot that he has to remove any subordinate officer
the docking maneuvers and procedure Gavino of the vessel, at his discretion.
undertook to dock the vessel. Irrefragably,
Kavankov was fully aware of the bulk and size In 1895, the U.S. Supreme Court, this time through Mr. Justice
of the vessel and its cargo as well as the weight Brown, emphatically ruled that:
of the vessel. Kavankov categorically admitted
that, when the anchor and two (2) shackles Nor are rye satisfied with the conduct of the
were dropped to the sea floor, the claws of the master in leaving the pilot in sole charge of the
anchor did not hitch on to any hard object in vessel. While the pilot doubtless supersedes the
the seabed. The momentum of the vessel was master for the time being in the command and
not arrested. The use of the two (2) tugboats navigation of the ship, and his orders must be
was insufficient. The momentum of the vessel, obeyed in all matters connected with her
although a little bit arrested, continued (sic) the navigation, the master is not wholly absolved
vessel going straightforward with its bow from his duties while the pilot is on board, and
towards the port (Exhibit "A-1 ). There was thus may advise with him, and even displace him in
a need for the vessel to move "full-astern" and to case he is intoxicated or manifestly
drop the other anchor with another shackle or incompetent. He is still in command of the
two (2), for the vessel to avoid hitting the pier. vessel, except so far as her navigation is
Kavankov refused to act even as Gavino failed to concerned, and bound to see that there is a
act. Even as Gavino gave mere "half-astern" sufficient watch on deck, and that the men are
order, Kavankov supinely stood by. The vessel attentive to their duties.
was already about twenty (20) meters away from
the pier when Gavino gave the "full-astern"
. . . (N)orwithstanding the pilot has charge, it is
order. Even then, Kavankov did nothing to
the duty of the master to prevent accident, and
prevent the vessel from hitting the pier simply
not to abandon the vessel entirely to the pilot;
because he relied on the competence and plan
but that there are certain duties he has to
of Gavino. While the "full-astern'' maneuver
discharge (notwithstanding there is a pilot on
momentarily arrested the momentum of the
board) for the benefit of the owners. . . . that in
vessel, it was, by then, too late. All along,
well conducted ships the master does not regard
Kavankov stood supinely beside Gavino, doing
the presence of a duly licensed pilot in
nothing but relay the commands of Gavino.
compulsory pilot waters as freeing him from
Inscrutably, then, Kavankov was negligent.
every, obligation to attend to the safety of the
vessel; but that, while the master sees that his
xxx xxx xxx
officers and crew duly attend to the pilot's
orders, he himself is bound to keep a vigilant eye
on the navigation of the vessel, and, when
exceptional circumstances exist, not only to urge regulations. His failure amounted to negligence and renders the
upon the pilot to use every precaution, but to respondent liable." 81
(Emphasis supplied.) Though a compulsory
insist upon such being taken. (Italics for pilot might be regarded as an independent contractor, he is at all
emphasis.) times subject to the ultimate control of the ship's master. 82

In Jure vs. United Fruit Co., which, like the present petitions, In sum, where a compulsory pilot is in charge of a ship, the
involved compulsory pilotage, with a similar scenario where at and master being required to permit him to navigate it, if the master
prior to the time of injury, the vessel was in the charge of a pilot observes that the pilot is incompetent or physically incapable,
with the master on the bridge of the vessel beside said pilot, the then it is the dury of the master to refuse to permit the pilot to
court therein ruled: act. But if no such reasons are present, then the master is
justified in relying upon the pilot, but not blindly. Under the
The authority of the master of a vessel is not in circumstances of this case, if a situation arose where the master,
complete abeyance while a pilot, who is required exercising that reasonable vigilance which the master of a ship
by law to be accepted, is in discharge of his should exercise, observed, or should have observed, that the pilot
functions. . . . It is the duty of the master to was so navigating the vessel that she was going, or was likely to
interfere in cases of the pilot's intoxication or go, into danger, and there was in the exercise of reasonable care
manifest incapacity, in cases of danger which he and vigilance an opportunity for the master to intervene so as to
does not foresee, and in all cases of great save the ship from danger, the master should have acted
necessity. The master has the same power to accordingly. The master of a vessel must exercise a degree of
displace the pilot that he has to remove any vigilance commensurate with the circumstances. 84

subordinate officer of the vessel. He may

exercise it, or not, according to his discretion. Inasmuch as the matter of negligence is a question of fact, 85
There was evidence to support findings that defer to the findings of the trial court, especially as this is
piaintiff's injury was due to the negligent 86
affirmed by the Court of Appeals. But even beyond that, our
operation of the Atenas, and that the master of
own evaluation is that Capt. Kabankov's shared liability is due
that vessel was negligent in failing to take
mainly to the fact that he failed to act when the perilous situation
action to avoid endangering a vessel situated as
should have spurred him into quick and decisive action as master
the City of Canton was and persons or property
of the ship. In the face of imminent or actual danger, he did not
have to wait for the happenstance to occur before countermanding
or overruling the pilot. By his own admission, Capt. Kabankov
A phase of the evidence furnished support for concurred with Capt. Gavino's decisions, and this is precisely the
the inferences . . . that he negligently failed to reason why he decided not to countermand any of the latter's
suggest to the pilot the danger which was orders. Inasmuch as both lower courts found Capt. Gavino
disclosed, and means of avoiding such danger; negligent, by expressing full agreement therewith Capt. Kabankov
and that the master's negligence in failing to was just as negligent as Capt. Gavino.
give timelt admonition to the pilot proximately
contributed to the injury complained of. We are
In general, a pilot is personally liable for damages caused by his
of opinion that the evidence mentioned tended
own negligence or default to the owners of the vessel, and to third
to prove conduct of the pilot, known to the
parties for damages sustained in a collision. Such negligence of
master, giving rise to a case of danger or great
the pilot in the performance of duty constitutes a maritime
necessity, calling for the intervention of the 87
tort. At common law, a shipowner is not liable for injuries
master. A master of a vessel is not without fault
inflicted exclusively by the negligence of a pilot accepted by a
in acquiescing in canduct of a pilot which 88
vessel compulsorily. The exemption from liability for such
involves apparent and avoidable danger,
negligence shall apply if the pilot is actually in charge and solely
whether such danger is to the vessel upon
in fault. Since, a pilot is responsible only for his own personal
which the pilot is, or to another vessel, or
negligence, he cannot be held accountable for damages
persons or property thereon or on shore. 89
proximately caused by the default of others, or, if there be
(Emphasis ours.)
anything which concurred with the fault of the pilot in producing
the accident, the vessel master and owners are liable.
Still in another case involving a nearly identical setting, the
captain of a vessel alongside the compulsory pilot was deemed to
Since the colliding vessel is prima facie responsible, the burden of
be negligent, since, in the words of the court, "he was in a position
proof is upon the party claiming benefit of the exemption from
to exercise his superior authority if he had deemed the speed
liability. It must be shown affirmatively that the pilot was at fault,
excessive on the occasion in question. I think it was clearly
and that there was no fault on the part of the officers or crew,
negligent of him not to have recognized the danger to any craft
which might have been conducive to the damage. The fact that the
moored at Gravell Dock and that he should have directed the pilot
law compelled the master to take the pilot does not exonerate the
to reduce his speed as required by the local governmental
vessel from liability. The parties who suffer are entitled to have
their remedy against the vessel that occasioned the damage, and been the proximate cause of the damages, he is
are not under necessity to look to the pilot from whom redress is liable for such damages as usually and
not always had for compensation. The owners of the vessel are naturally flow therefrom. . . .
responsible to the injured party for the acts of the pilot, and they
must be left to recover the amount as well as they can against . . . (T)he defendant should have known of the
him. It cannot be maintained that the circumstance of having a existence and location of the rock upon which
pilot on board, and acting in conformity to his directions operate the vessel struck while under his control and
as a discharge of responsibility of the owners. Except insofar as management. . . . .
their liability is limited or exempted by statute, the vessel or her
owner are liable for all damages caused by the negligence or other Consistent with the pronouncements in these two earlier cases,
wrongs of the owners or those in charge of the vessel. Where the but on a slightly different tack, the Court in Yap Tico & Co.
pilot of a vessel is not a compulsory one in the sense that the exonerated the pilot from liability for the accident where the
owner or master of the vessel are bound to accept him, but is orders of the pilot in the handling of the ship were disregarded by
employed voluntarily, the owners of the vessel are, all the more, the officers and crew of the ship. According to the Court, a pilot is
liable for his negligent act. ". . . responsible for a full knowledge of the channel and the
navigation only so far as he can accomplish it through the officers
In the United States, the owners of a vessel are not personally and crew of the ship, and I don't see chat he can be held
liable for the negligent acts of a compulsory pilot, but by admiralty responsible for damage when the evidence shows, as it does in
law, the fault or negligence of a compulsory pilot is imputable to this case, that the officers and crew of the ship failed to obey his
the vessel and it may be held liable therefor in rem. Where, orders." Nonetheless, it is possible for a compulsory pilot and the
however, by the provisions of the statute the pilot is compulsory master of the vessel to be concurrently negligent and thus share
only in the sense that his fee must be paid, and is not in the blame for the resulting damage as joint tortfeasors, but only
compulsory charge of the vessel, there is no exemption from under the circumstances obtaining in and demonstrated by the
liability. Even though the pilot is compulsory, if his negligence was instant petitions.
not the sole cause of the injury, but the negligence of the master or
crew contributed thereto, the owners are liable. But the liability It may be said, as a general rule, that negligence in order to
of the ship in rem does not release the pilot from the consequences render a person liable need not be the sole cause of an injury. It is
of his own negligence. The rationale for this rule is that the sufficient that his negligence, concurring with one or more
master is not entirely absolved of responsibility with respect to efficient causes other than piaintiff's, is the proximate cause of
navigation when a compulsory pilot is in charge. 94
the injury. Accordingly, where several causes combine to produce
injuries, a person is not relieved from liability because he is
By way of validation and in light of the aforecited guidepost responsible for only one of them, it being sufficient that the
rulings in American maritime cases, we declare that our rulings negligence of the person charged with injury is an efficient cause
during the early years of this century in City of Manila vs. without which the injury would not have resulted to as great an
95 96 extent, and that such cause is not attributable to the person
Gambe, China Navigation Co., Ltd. vs. Vidal, and Yap Tica &
97 injured. It is no defense to one of the concurrent tortfeasors that
Co. vs. Anderson, et al. have withstood the proverbial test of time
the injury would not have resulted from his negligence alone,
and remain good and relevant case law to this day.
without the negligence or wrongful acts of the other concurrent
rortfeasor. Where several causes producing an injury are
City of Manila stands for the doctrine that the pilot who was in
concurrent and each is an efficient cause without which the
command and complete control of a vessel, and not the owners,
injury would not have happened, the injury may be attributed to
must be held responsible for an accident which was solely the
all or any of the causes and recovery may be had against any or
result of the mistake of the pilot in not giving proper orders, and
all of the responsible persons although under the circumstances
which did not result from the failure of the owners to equip the
of the case, it may appear that one of them was more culpable,
vessel with the most modern and improved machinery. In China
and that the duty owed by them to the injured person was not the
Navigation Co., the pilot deviated from the ordinary and safe
same. No actor's negligence ceases to be a proximate cause merely
course, without heeding the warnings of the ship captain. It was
because it does not exceed the negligence of other actors. Each
this careless deviation that caused the vessel to collide with a
wrongdoer is responsible for the entire result and is liable as
pinnacle rock which, though uncharted, was known to pilots and 100
though his acts were the sole cause of the injury.
local navigators. Obviously, the captain was blameless. It was the
negligence of the pilot alone which was the proximate cause of the
collision. The Court could not but then rule that There is no contribution between joint tortfeasors whose liability is
solidary since both of them are liable for the total damage. Where
the concurrent or successive negligent acts or omissions of two or
The pilot in the case at bar having deviated
more persons, although acting independently, are in combination
from the usual and ordinary course followed by
the direct and proximate cause of a single injury to a third person,
navigators in passing through the strait in
it is impossible to determine in what proportion each contributed
question, without a substantial reason, was
to the injury and either of them is responsible for the whole
guilty of negligence, and that negligence having
injury. Where their concurring negligence resulted in injury or Q Now, the damage was
damage to a third party, they become joint tortfeasors and are somewhere in 1980. It took
solidarily liable for the resulting damage under Article 2194 101
of place in 1980 and you
the Civil Code. 102 started the repair and
reconstruction in 1982, that
took almost two years?
As for the amount of damages awarded by the trial court, we find
the same to be reasonable. The testimony of Mr. Pascual Barral,
witness for PPA, on cross and redirect examination, appears to be A Yes sir.
grounded on practical considerations:
Q May it not happen that by
Q So that the cost of the two natural factors, the existing
additional piles as well as the damage in 1980 was
(two) square meters is already aggravated for the 2 year
included in this period that the damage
P1,300,999.77. portion was not repaired?

A Yes sir, everything. It is A I don't think so because

(the) final cost already. that area was at once marked
and no vehicles can park, it
was closed.
Q For the eight piles.

Q Even if or even natural

A Including the reduced
elements cannot affect the
areas and other reductions.

Q (A)nd the two square

A Cannot, sir.

xxx xxx xxx

A Yes sir.

Q You said in the cross-

Q In other words, this
examination that there were
P1,300,999.77 does not
six piles damaged by the
represent only for the six
accident, but that in the
piles that was damaged as
reconstruction of the pier,
well as the corresponding two
PPA drove and constructed 8
piles. Will you explain to us
why there was change in the
A The area was
number of piles from the
corresponding, was increased
original number?
by almost two in the actual
payment. That was why the
A In piers where the piles are
contract was decreased, the
withdrawn or pulled out, you
real amount was
cannot re-drive or drive piles
P1,124,627.40 and the final
at the same point. You have
one is P1,300,999.77.
to redesign the driving of the
piles. We cannot drive the
Q Yes, but that
piles at the same point where
P1,300,999.77 included the
the piles are broken or
additional two new posts.
damaged or pulled out. We
have to redesign, and you will
A It was increased.
note that in the
reconstruction, we
Q Why was it increased? redesigned such that it
necessitated 8 plies.
A The original was 48 and
the actual was 46.
Q Why not, why could you proximate damages caused to persons or property by reason of her
not drive the same number of negligent management or navigation. 106

piles and on the same spot?

FESC's imputation of PPA's failure to provide a safe and reliable
A The original location was berthing place is obtuse, not only because it appears to be a mere
already disturbed. We cannot afterthought, being tardily raised only in this petition, but also
get required bearing capacity. because there is no allegation or evidence on record about Berth
The area is already disturbed. No. 4 being unsafe and unreliable, although perhaps it is a
modest pier by international standards. There was, therefore, no
Q Nonetheless, if you drove error on the part of the Court of Appeals in dismissing FESC's
the original number of piles, counterclaim.
six, on different places,
would not that have II. G.R. No. 130150
sustained the same load?
This consolidated case treats on whether the Court of Appeals
A It will not suffice, sir. erred in holding MPA jointly and solidarily liable with its member
pilot. Capt. Gavino, in the absence of employer-employee
We quote the findings of the lower court with approval. relationship and in applying Customs Administrative Order No.
15-65, as basis for the adjudged solidary liability of MPA and
With regards to the amount of damages that is Capt. Gavino.
to be awarded to plaintiff, the Court finds that
the amount of P1,053,300.00 is justified. The pertinent provisions in Chapter I of Customs Administrative
Firstly, the doctrine of res ipsa loquitur best Order No. 15-65 are:
expounded upon in the landmark case
of Republic vs. Luzon Stevedoring Corp. (21 PAR. XXVII. In all pilotage districts where
SCRA 279) establishes the presumption that in pilotage is compulsory, there shall be created
the ordinary course of events the ramming of and maintained by the pilots or pilots'
the dock would not have occurred if proper care association, in the manner hereinafter
was used. prescribed, a reserve fund equal to P1,000.00
for each pilot thereof for the purpose of paying
Secondly, the various estimates and plans claims for damages to vessels or property
justify the cost of the port construction price. caused through acts or omissions of its
The new structure constructed not only members while rendered in compulsory pilotage
replaced the damaged one but was built of service. In Manila, the reserve fund shall be
stronger materials to forestall the possibility of P2,000.00 for each pilot.
any similar accidents in the future.
PAR. XXVIII. A pilots' association shall not be
The Court inevitably finds that the plaintiff is liable under these regulations for damage to any
entitled to an award of P1,053,300.00 which vessel, or other property, resulting from acts of
represents actual damages caused by the a member of an association in the actual
damage to Berth 4 of the Manila International performance of his duty for a greater amount
Port. Co-defendants Far Eastern Shipping, than seventy-five per centum (75%) of its
Capt. Senen Gavino and Manila Pilots prescribed reserve fund; it being understood
Association are solidariiy liable to pay this that if the association is held liable for an
amount to plaintiff. 104 amount greater than the amount above-stated,
the excess shall be paid by the personal funds
of the member concerned.
The Solicitor General rightly commented that the
adjudicated amount of damages represents the
proportional cost of repair and rehabilitation of the PAR. XXXI. If a payment is made from the

damaged section of the pier. 105 reserve fund of an association on account of

damages caused by a member thereof, and he
shall have been found at fault, such member
Except insofar as their liability is limited or exempted by statute,
shall reimburse the association in the amount
the vessel or her owners are liable for all damages caused by the
so paid as soon as practicable; and for this
negligence or other wrongs of the owners or those in charge of the
purpose, not less than twenty-five per centum
vessel. As a general rule, the owners or those in possession and
of his dividends shall be retained each month
control of a vessel and the vessel are liable for all natural and
until the full amount has been returned to the and/or
reserve fund. injury to
persons or
PAR. XXXIV. Nothing in these regulations death
shall relieve any pilots' association or members which any
thereof, individually or collectively, from civil member
responsibility for damages to life or property may have
resulting from the acts of members in the caused in
performance of their duties. the course
of his
Correlatively, the relevant provisions of PPA Administrative Order performan
No. 03-85, which timery amended this applicable maritime ce of
regulation, state: pilotage
duties. . . .
Art. IV

b) The
Sec. 17. Pilots' Association The Pilots in a
Pilotage District shall organize themselves into
a Pilots' Association or firm, the members of
which shall promulgate their own By-Laws not
likewise set
in conflict with the rules and regulations
up and
promulgated by the Authority. These By-Laws
maintain a
shall be submitted not later than one (1) month
after the organization of the Pilots' Association
fund which
for approval by the General Manager of the
Authority. Subsequent amendments thereto
answer for
shall likewise be submitted for approval.
any part of
the liability
Sec. 25. Indemnity Insurance and Reserve
referred to
in the
a) Each y preceding
Pilots' paragraph
Association which is
shall left
collectively unsatisfied
insure its by the
membershi insurance
p at the proceeds,
rate of in the
P50,000.00 following
each manner:
member to
cover in
whole or in
part any
pilot in
from any
resulting in
damage to
and other
t an
amoun perfor
t of mance
P4,000 of
.00 pilots'
(P6,00 duties
0.00 in and
the the
Manila excess
Pilotag shall
e be paid
District from
) to the the
reserve person
fund. al
This funds
fund of the
shall membe
not be r
consid concer
ered ned.
part of
the xxx xxx xxx
of the 5) If
Associ payme
ation nt is
nor made
charge from
d as an the
expens reserve
e fund of
thereof an
. Associ
2) on
Sevent accoun
y-five t of
percent damag
(75 %) e
of the caused
reserve by a
fund membe
shall r
be set thereof
aside who is
for use found
in the at
payme fault,
nt of he
damag shall
es reimbu
referre rse the
d to Associ
above ation
incurre in the
d in amoun
the t so
actual paid as
soon ng
as paragr
practic aph,
able; the ten
and for percent
this um
purpos (10%)
e, not and
less the
than interes
twenty- t
five withhel
percent d from
um (25 the
%) of shares
his of the
dividen other
d shall pilots
be in
retaine accord
d each ance
month with
until paragr
the full aph (4)
amoun hereof
t has shall
been be
returne returne
d to d to
the them.
fund. c) Liability
Therea of Pilots'
fter, Association
the Nothing
pilot in these
involve regulations
d shall shall
be relieve any
entitle Pilots'
d to Association
his full or
dividen members
d. thereof,
6) y or
When collectively,
the from any
reimbu civil,
rsemen administra
t has tive and/or
been criminal
comple responsibil
ted as ity for
prescri damages to
bed in life or
the property
precedi resulting
from the employer of their members and exercise no
individual control over them once they take the helm of
acts of its the vessel. They are also not partnerships
members because the members do not function as agents
as well as for the association or for each other. Pilots'
those of associations are also not liable for negligently
the assuring the competence of their members
Association because as professional associations they made
's no guarantee of the professional conduct of
employees their members to the general public. 109

and crew
in the Where under local statutes and regulations, pilot associations lack
performan the necessary legal incidents of responsibility, they have been held
ce of their not liable for damages caused by the default of a member
duties. pilot. 110
Whether or not the members of a pilots' association are in
legal effect a copartnership depends wholly on the powers and
The Court of Appeals, while affirming the trial court's finding of duties of the members in relation to one another under the
solidary liability on the part of FESC, MPA and Capt. Gavino, provisions of the governing statutes and regulations. The relation
correctly based MPA' s liability not on the concept of employer- of a pilot to his association is not that of a servant to the master,
employee relationship between Capt. Gavino and itself, but on the but of an associate assisting and participating in a common
provisions of Customs Administrative Order No. 15-65: purpose. Ultimately, the rights and liabilities between a pilots'
association and an individual member depend largely upon the
The Appellant MPA avers that, contrary to the constitution, articles or by-laws of the association, subject to
findings and disquisitions of the Court a quo, appropriate government regulations. 111

the Appellant Gavino was not and has never

been an employee of the MPA but was only a No reliance can be placed by MPA on the cited American rulings
member thereof. The Court a quo, it is as to immunity from liability of a pilots' association in ljght of
noteworthy, did not state the factual basis on existing positive regulation under Philippine law. The Court of
which it anchored its finding that Gavino was Appeals properly applied the clear and unequivocal provisions of
the employee of MPA. We are in accord with Customs Administrative Order No. 15-65. In doing so, it was just
MPA's pose. Case law teaches Us that, for an being consistent with its finding of the non-existence of employer-
employer-employee relationship to exist, the employee relationship between MPA and Capt. Gavino which
confluence of the following elements must be precludes the application of Article 2180 of the Civil Code.
established: (1) selection and engagement of
employees; (2) the payment of wages; (3) the
True. Customs Administrative Order No. 15-65 does not
power of dismissal; (4) the employer's power to
categorically characterize or label MPA's liability as solidary in
control the employees with respect to the means
nature. Nevertheless, a careful reading and proper analysis of the
and method by which the work is to be
correlated provisions lead to the conclusion that MPA is solidarily
performed (Ruga versus NLRC, 181 SCRA 266).
liable for the negligence of its member pilots, without prejudice to
subsequent reimbursement from the pilot at fault.
xxx xxx xxx

Art. 1207 of the Civil Code provides that there is solidary liability
The liability of MPA for damages is not anchored only when the obligation expressly so states, or when the law or
on Article 2180 of the New Civil Code as the nature of the obligation requires solidarity. Plainly, Customs
erroneously found and declared by the Court a Administrative Order No. 15-65, which as an implementing rule
quo but under the provisions of Customs has the force and effect of law, can validly provide for solidary
Administrative Order No. 15-65, supra, in liability.We note the Solicitor General's comment hereon, to wit:
tandem with the by-laws of the MPA.

. . . Customs Administrative Order No. 15-65

There being no employer-employee relationship, clearly Article may be a mere rule and regulation issued by an
2180 of the Civil Code is inapplicable since there is no administrative agency pursuant to a delegated
vicarious liability of an employer to speak of. It is so stated in authority to fix "the details" in the execution or
American law, as follows: enforcement of a policy set out in the law itself.
Nonetheless, said administrative order, which
The well established rule is that pilot adds to the procedural or enforcing provisions
associations are immune to vicarious liability of substantive law, is legally binding and
for the tort of their members. They are not the receives the same statutory force upon going
into effect. In that sense, it has equal, not lower, Let copies of this decision be spread upon the personal records of
statutory force and effect as a regular statute the lawyers named herein in the Office of the Bar Confidant.
passed by the legislature.
MPA's prayer for modification of the appellate court's decision
under review by exculpating petitioner MPA "from liability beyond Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
seventy-five percent (75 %) of Reserve Fund" is unnecessary Panganiban, Martinez, Quisumbing and Purisima, JJ., concur.
because the liability of MPA under Par. XXVIII of Customs
Administrative Order No. 15-65 is in fact limited to seventy-five
percent (75 %) of its prescribed reserve fund, any amount of
liability beyond that being for the personal account of the erring
Republic of the Philippines
pilot and subject to reimbursement in case of a finding of fault by
the member concerned. This is clarified by the Solicitor General:

Moreover, contrary to petitioner's pretensions,

the provisions of Customs Administrative Order
No. 15-65 do not limit the liability of petitioner
as a pilots' association to an absurdly small G.R. No. L-21749 September 29, 1967

amount of seventy-five per centum (75 %) of the

member pilots' contribution of P2,000.00 to the REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
reserve fund. The law speaks of the entire vs.
reserve fund required to be maintained by the LUZON STEVEDORING CORPORATION, defendant-appellant.
pilots' association to answer (for) whatever
liability arising from the tortious act of its Office of the Solicitor General for plaintiff-appellee.
members. And even if the association is held H. San Luis and L.V. Simbulan for defendant-appellant.
liable for an amount greater than the reserve
fund, the association may not resist the liability
by claiming to be liable only up to seventy-five
per centum (75 %) of the reserve fund because
in such instance it has the right to be
reimbursed by the offending member pilot for
113 REYES, J.B.L., J.:
the excess.

The present case comes by direct appeal from a decision of the

WHEREFORE, in view of all of the foregoing, the consolidated
Court of First Instance of Manila (Case No. 44572) adjudging the
petitions for review are DENIED and the assailed decision of the
defendant-appellant, Luzon Stevedoring Corporation, liable in
Court of Appeals is AFFIRMED in toto.
damages to the plaintiff-appellee Republic of the Philippines.

Counsel for FESC, the law firm of Del Rosario and Del Rosario,
In the early afternoon of August 17, 1960, barge L-1892, owned
specifically its associate, Atty. Herbert A. Tria, is REPRIMANDED
by the Luzon Stevedoring Corporation was being towed down the
and WARNED that a repetition of the same or similar acts of
Pasig river by tugboats "Bangus" and "Barbero" 1 also belonging to
heedless disregard of its undertakings under the Rules shall be
the same corporation, when the barge rammed against one of the
dealt with more severely.
wooden piles of the Nagtahan bailey bridge, smashing the posts
and causing the bridge to list. The river, at the time, was swollen
The original members of the legal team of the Office of the
and the current swift, on account of the heavy downpour of
Solicitor General assigned to this case, namely, Assistant Solicitor
Manila and the surrounding provinces on August 15 and 16,
General Roman G. Del Rosario and Solicitor Luis F. Simon, are
ADMONISHED and WARNED that a repetition of the same or
similar acts of unduly delaying proceedings due to delayed filing of
Sued by the Republic of the Philippines for actual and
required pleadings shall also be dealt with more stringently.
consequential damage caused by its employees, amounting to
P200,000 (Civil Case No. 44562, CFI of Manila), defendant Luzon
The Solicitor Genral is DIRECTED to look into the circumstances
Stevedoring Corporation disclaimed liability therefor, on the
of this case and to adopt provident measures to avoid a repetition
grounds that it had exercised due diligence in the selection and
of this incident and which would ensure prompt compliance with
supervision of its employees; that the damages to the bridge were
orders of this Court regarding the timely filing of requisite
caused by force majeure; that plaintiff has no capacity to sue; and
pleadings, in the interest of just, speedy and orderly
that the Nagtahan bailey bridge is an obstruction to navigation.
administration of justice.
After due trial, the court rendered judgment on June 11, 1963, 1) Whether or not the collision of appellant's barge with
holding the defendant liable for the damage caused by its the supports or piers of the Nagtahan bridge was in law
employees and ordering it to pay to plaintiff the actual cost of the caused by fortuitous event or force majeure, and
repair of the Nagtahan bailey bridge which amounted to
P192,561.72, with legal interest thereon from the date of the filing 2) Whether or not it was error for the Court to have
of the complaint. permitted the plaintiff-appellee to introduce additional
evidence of damages after said party had rested its case.
Defendant appealed directly to this Court assigning the following
errors allegedly committed by the court a quo, to wit: As to the first question, considering that the Nagtahan bridge was
an immovable and stationary object and uncontrovertedly
I The lower court erred in not holding that the herein provided with adequate openings for the passage of water craft,
defendant-appellant had exercised the diligence required including barges like of appellant's, it is undeniable that the
of it in the selection and supervision of its personnel to unusual event that the barge, exclusively controlled by appellant,
prevent damage or injury to others.1awphl.nt rammed the bridge supports raises a presumption of negligence
on the part of appellant or its employees manning the barge or the
II The lower court erred in not holding that the tugs that towed it. For in the ordinary course of events, such a
ramming of the Nagtahan bailey bridge by barge L-1892 thing does not happen if proper care is used. In Anglo American
was caused by force majeure. Jurisprudence, the inference arises by what is known as the "res
ipsa loquitur" rule (Scott vs. London Docks Co., 2 H & C 596; San
III The lower court erred in not holding that the Juan Light & Transit Co. vs. Requena, 224 U.S. 89, 56 L. Ed.,
Nagtahan bailey bridge is an obstruction, if not a 680; Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs.
menace, to navigation in the Pasig river. Great Atlantic & Pacific Tea Co., 269 Mass. 130; 168 N.E. 540;
Gribsby vs. Smith, 146 S.W. 2d 719).

IV The lower court erred in not blaming the damage

sustained by the Nagtahan bailey bridge to the improper The appellant strongly stresses the precautions taken by it on the
placement of the dolphins. day in question: that it assigned two of its most powerful tugboats
to tow down river its barge L-1892; that it assigned to the task the
more competent and experienced among its patrons, had the
V The lower court erred in granting plaintiff's motion
towlines, engines and equipment double-checked and inspected;
to adduce further evidence in chief after it has rested its
that it instructed its patrons to take extra precautions; and
concludes that it had done all it was called to do, and that the
accident, therefore, should be held due to force majeure or
VI The lower court erred in finding the plaintiff
fortuitous event.
entitled to the amount of P192,561.72 for damages
which is clearly exorbitant and without any factual basis.
These very precautions, however, completely destroy the
appellant's defense. For caso fortuito or force majeure(which in law
However, it must be recalled that the established rule in this
are identical in so far as they exempt an obligor from liability) 2 by
jurisdiction is that when a party appeals directly to the Supreme
definition, are extraordinary events not foreseeable or avoidable,
Court, and submits his case there for decision, he is deemed to
"events that could not be foreseen, or which, though foreseen, were
have waived the right to dispute any finding of fact made by the
inevitable" (Art. 1174, Civ. Code of the Philippines). It is, therefore,
trial Court. The only questions that may be raised are those of law
not enough that the event should not have been foreseen or
(Savellano vs. Diaz, L-17441, July 31, 1963; Aballe vs. Santiago,
anticipated, as is commonly believed, but it must be one
L-16307, April 30, 1963; G.S.I.S. vs. Cloribel, L-22236, June 22,
impossible to foresee or to avoid. The mere difficulty to foresee the
1965). A converso, a party who resorts to the Court of Appeals,
happening is not impossibility to foresee the same: "un hecho no
and submits his case for decision there, is barred from contending
constituye caso fortuito por la sola circunstancia de que su
later that his claim was beyond the jurisdiction of the aforesaid
existencia haga mas dificil o mas onerosa la accion diligente del
Court. The reason is that a contrary rule would encourage the
presento ofensor" (Peirano Facio, Responsibilidad Extra-
undesirable practice of appellants' submitting their cases for
contractual, p. 465; Mazeaud Trait de la Responsibilite Civil, Vol. 2,
decision to either court in expectation of favorable judgment, but
sec. 1569). The very measures adopted by appellant prove that the
with intent of attacking its jurisdiction should the decision be
possibility of danger was not only foreseeable, but actually
unfavorable (Tyson Tan, et al. vs. Filipinas Compaia de Seguros)
foreseen, and was not caso fortuito.
et al., L-10096, Res. on Motion to Reconsider, March 23, 1966).
Consequently, we are limited in this appeal to the issues of law
raised in the appellant's brief. Otherwise stated, the appellant, Luzon Stevedoring Corporation,
knowing and appreciating the perils posed by the swollen stream
and its swift current, voluntarily entered into a situation involving
Taking the aforesaid rules into account, it can be seen that the
obvious danger; it therefore assured the risk, and can not shed
only reviewable issues in this appeal are reduced to two:
responsibility merely because the precautions it adopted turned
out to be insufficient. Hence, the lower Court committed no error Knot on May 4, 1948, a few kilometers distant from San Ramon
in holding it negligent in not suspending operations and in Beach, Zamboanga City.
holding it liable for the damages caused. On appeal, the Court of Appeals found the following facts to have
been established:chanroblesvirtuallawlibrary
From 7:chanroblesvirtuallawlibrary00 to
It avails the appellant naught to argue that the dolphins, like the
8:chanroblesvirtuallawlibrary00 oclock in the evening of May 4,
bridge, were improperly located. Even if true, these circumstances
1948, the M/L Consuelo V, laden with cargoes and passengers
would merely emphasize the need of even higher degree of care on left the port of Zamboanga City bound for Siokon under the
appellant's part in the situation involved in the present case. The command of Faustino Macrohon. She was then towing a kumpit,
appellant, whose barges and tugs travel up and down the river named Sta. Maria Bay. The weather was good and fair. Among
everyday, could not safely ignore the danger posed by these her passengers were the Plaintiff Insa Abdulhaman, his wife
allegedly improper constructions that had been erected, and in Carimla Mora and their five children already mentioned.
The Plaintiff and his wife paid their fare before the voyage started.
place, for years.
On that same night the M/S Bowline Knot was navigating from
Maribojoc towards Zamboanga.
On the second point: appellant charges the lower court with
Between 9:chanroblesvirtuallawlibrary30 to
having abused its discretion in the admission of plaintiff's 10:chanroblesvirtuallawlibrary00 in the evening the dark clouds
additional evidence after the latter had rested its case. There is an bloated with rain began to fall and the gushing strong wind began
insinuation that the delay was deliberate to enable the to blow steadily harder, lashing the waves into a choppy and
manipulation of evidence to prejudice defendant-appellant. roaring sea. Such weather lasted for about an hour and then it
became fair although it was showering and the visibility was good
We find no merit in the contention. Whether or not further
When some of the passengers of the M/L Consuelo V were then
evidence will be allowed after a party offering the evidence has
sleeping and some were lying down awake, all of a sudden they felt
rested his case, lies within the sound discretion of the trial Judge, the shocking collision of the M/L Consuelo V and a big
and this discretion will not be reviewed except in clear case of motorship, which later on was identified as the M/V Bowline
abuse.3 Knot.
Because the M/L Consuelo V capsized, her crew and
In the present case, no abuse of that discretion is shown. What passengers, before realizing what had happened, found
themselves swimming and floating on the crest of the waves and
was allowed to be introduced, after plaintiff had rested its
as a result of which nine (9) passengers were dead and missing
evidence in chief, were vouchers and papers to support an item of
and all the cargoes carried on said boat, including those of
P1,558.00 allegedly spent for the reinforcement of the panel of the the Plaintiff as appear in the list, Exhibit A, were also lost.
bailey bridge, and which item already appeared in Exhibit GG. Among the dead passengers found were Maria, Amlasa, Bidoaya
Appellant, in fact, has no reason to charge the trial court of being and Bidalla, all surnamed Inasa, while the body of the child
unfair, because it was also able to secure, upon written motion, a Abdula Inasa of 6 years of age was never recovered. Before the
similar order dated November 24, 1962, allowing reception of collision, none of the passengers were warned or informed of the
additional evidence for the said defendant-appellant. 4 impending danger as the collision was so sudden and unexpected.
All those rescued at sea were brought by the M/V Bowline Knot
to Zamboanga City. (Decision of C. A., pp. 5-6).
WHEREFORE, finding no error in the decision of the lower Court
As the cause of the collision, the Court of Appeals affirmed the
appealed from, the same is hereby affirmed. Costs against the findings of the Board of Marine Inquiry, that the commanding
defendant-appellant. officer of the colliding vessels had both been negligent in operating
their respective vessels. Wherefore, the Court held the owners of
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, both vessels solidarily liable to Plaintiff for the damages caused to
him by the collision, under Article 827 of the Code of
Angeles and Fernando, JJ., concur.
Commerce; chan roblesvirtualawlibrarybut
Bengzon, J.P. J., on leave, took no part.
exempted Defendant Lim Hong To from liability by reason of the
sinking and total loss of his vessel, the M/L Consuelo V, while
EN BANC the other Defendant, the Manila Steamship Co., owner of the M/S
Bowline Knot, was ordered to pay all of Plaintiffs damages in the
[G.R. No. L-9534. September 29, 1956.]
amount of P20,784.00 plus one-half of the costs. It is from this
MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA judgment thatDefendant Manila Steamship Co. had appealed to
ABDULHAMAN (MORO) and LIM HONG TO,Respondents. this Court.
Petitioner Manila Steamship Co. pleads that it is exempt from any
DECISION liability to Plaintiff under Article 1903 of the Civil Code because it
had exercised the diligence of a good father of a family in the
REYES, J. B. L., J.:
selection of its employees, particularly Third Mate Simplicio
This case was begun in the Court of First Instance of Zamboanga Ilagan, the officer in command of its vessels, the M/S Bowline
(Civil Case No. 170) by Insa Abdulhaman against the Manila Knot, at the time of the collision. This defense is untenable. While
Steamship Co., owner of the M/S Bowline Knot, and Lim Hong it is true that Plaintiffs action against Petitioner is based on a tort
To, owner of the M/L Consuelo V, to recover damages for the or quasi-delict, the tort in question is not a civil tort under the
death of his (Plaintiffs) five children and loss of personal Civil Code but a maritime tort resulting in a collision at sea,
properties on board the M/L Consuelo V as a result of a governed by Articles 826-939 of the Code of Commerce. Under
maritime collision between said vessel and the M/S Bowline Article 827 of the Code of Commerce, in case of collision between
two vessels imputable to both of them, each vessel shall suffer her V due to absence of negligence on its parts in the selection and
own damage and both shall be solidarily liable for the damages supervision of the officers and crew of the M/S Bowline Knot.
occasioned to their cargoes. The characteristic language of the law The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber
in making the vessels solidarily liable for the damages due to the Co., 55 Phil. 517, invoked byPetitioner, is not the point. Said case
maritime collision emphasizes the direct nature of the treated of a civil tort, in that the vessel of the Defendant, allegedly
responsibilities on account of the collision incurred by the negligently managed by its captain in the course of its maneuvers
shipowner under maritime law, as distinguished from the civil law to moor atPlaintiffs wharf, struck the same and partially
and mercantile law in general. This direct responsibility is demolished it, causing damage to Plaintiff. Because the tort
recognized in Article 618 of the Code of Commerce under which allegedly committed was civil, the provisions of Article 1903 of the
the captain shall be civilly liable to the ship agent, and the latter Civil Code were correctly applied. The present case, on the other
is the one liable to third persons, as pointed out in the collision hand, involves tortious conduct resulting in a maritime
case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co., collision; chan roblesvirtualawlibrarywherefore, the liability of the
12 Phil. 747, 753:chanroblesvirtuallawlibrary shipowner is, as already stated, governed by the provisions of the
The responsibility involved in the present action is that derived Code of Commerce and not by the Civil Code.
from the management of the vessel, which was defective on We agree, however, with Petitioner-Appellant, that the Court of
account of lack of skill, negligence, or fault, either of the captain Appeals was in error in declaring the Respondent Lim Hong To,
or of the crew, for which the captain is responsible to the agent, owner of the M/L Consuelo V, exempt from liability to the
who in his turn is responsible to the third party prejudiced or original Plaintiff, Abdulhaman, in view of the total loss of his own
damaged. (Article 618, Code of Commerce). vessel, that sank as a result of the collision. It is to be noted that
In fact, it is a general principle, well established maritime law and both the master and the engineer of the motor launch Consuelo
custom, that shipowners and ship agents are civilly liable for the V were not duly licensed as such (Exh. 2). In applying for
acts of the captain (Code of Commerce, Article 586) and for the permission to operate, despite the lack of properly trained and
indemnities due the third persons (Article 587); chan experienced, crew, Respondent Lim Hong To gave as a reason
roblesvirtualawlibraryso that injured parties may immediately that the income derived from the vessel is insufficient to pay
look for reimbursement to the owner of the ship, it being licensed officers who demand high salaries,
universally recognized that the ship master or captain is primarily
and expressly declared:chanroblesvirtuallawlibrary
the representative of the owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256, 260). This direct liability, moderated and That in case of any accident, damage or loss, I shall assume full
limited by the owners right of abandonment of the vessel and risk and responsibility for all the consequences thereof. (Exhibit
earned freight (Article 587), has been declared to exist, not only in 2).
case of breached contracts, but also in cases of tortious negligence His permit to operate, in fact, stipulated
(Yu Biao Sontua vs. Osorio, 43 Phil. 511, that in case of any accident, damage or loss, the registered owner
515):chanroblesvirtuallawlibrary thereof shall assume full risk and responsibility for all the
In the second assignment of error, the Appellant contends that consequences thereof, and that said vessel shall be held
the Defendant ought not to be held liable for the negligence of his answerable for any negligence, disregard or violation of any of the
agents and employees. conditions herein imposed and for any consequence arising from
It is proven that the agents and employees, through whose such negligence, disregard or violations. (Exhibit 3.)
negligence the explosion and fire in question occurred, were The Court of Appeals held that neither the letter (Exhibit 2) nor
agents, employees and mandatories of the Defendant. Where the the permit (Exhibit 3) contained any waiver of the right
vessel is one of freight, a public concern or public utility, its owner of Respondent Lim Hong To to limit his liability to the value of his
or agents is liable for the tortious acts of his agents (Articles 587, motor launch and that he did not lose the statutory right to limit
613, and 618 Code of Commerce; chan roblesvirtualawlibraryand his liability by abandonment of the vessel, as conferred by Article
Article 1902, 1903, 1908, Civil Code). This principle has been 587 of the Code of Commerce.
repeatedly upheld in various decisions of this court. We find the ruling untenable. Disregarding the question whether
The doctrines cited by the Appellant in support of his theory have mere inability to meet the salary demands of duly licensed
reference to the relations between principal and agent in general, masters and engineers constitutes non-availability thereof that
but not to the relations between ship agent and his agents and would excuse noncompliance with the law and authorize
employees; chan roblesvirtualawlibraryfor this reason they cannot operation without licensed officers under Act 3553, the fact
be applied in the present case. remains that by operating with an unlicensed master, Lim Hong
To deliberately increased the risk to which the passengers and
It is easy to see that to admit the defense of due diligence of a
shippers of cargo aboard the Consuelo V would be subjected. In
bonus paterfamilias (in the selection and vigilance of the officers
his desire to reap greater benefits in the maritime trade, Lim Hong
and crew) as exempting the shipowner from any liability for their
To willfully augmented the dangers and hazards to his vessels
faults, would render nugatory the solidary liability established by
unwarry passengers, who would normally assume that the launch
Article 827 of the Code of Commerce for the greater protection of
officers possessed the necessary skill and experience to evade the
injured parties. Shipowners would be able to escape liability in
practically every case, considering that the qualifications and perils of the sea. Hence, the liability of said Respondent cannot be
licensing of ship masters and officers are determined by the State, the identical to that of a shipowner who bears in mind the safety
and that vigilance is practically impossible to exercise over officers of the passengers and cargo by employing duly licensed officers.
and crew of vessels at sea. To compel the parties prejudiced to To hold, as the Court of Appeals has done, that Lim Hong To may
look to the crew for indemnity and redress would be an illusory limit his liability to the value of his vessels, is to erase all
remedy for almost always its members are, from captains down, difference between compliance with law and the deliberate
mere wage earners. disregard thereof. To such proposition we cannot assent.

We, therefore, find no reversible error in the refusal of the Court of The international rule is to the effect that the right of
Appeals to consider the defense of the Manila Steamship Co., that abandonment of vessels, as a legal limitation of a shipowners
it is exempt from liability for the collision with the M/L Consuelo liability, does not apply to cases where the injury or the average is
due to shipowners own fault. Faria (Derecho Comercial
Maritimo, Vol. I, pp. 122-123), on the authority of judicial MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,
precedents from various nations, sets the rule to be as vs.
Esta generalmente admitido que el propietario del buque no tiene
CUSTOMS, defendants-appellees.
derecho a la limitacion legal de responsibilidad si los daos o
averias que dan origen a la limitacion provienen de sus propias
culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien Alejandro Basin, Jr. and Associates for plaintiff-appellant.
invalida la limitacion en el caso de culpa personal en los Felipe T. Cuison for defendants-appellees.
accidentes o averas sobrevenidos (Art. 2).
To the same effect, a noted French author
La limitacion de la responsabilidad maritima ha sido admitida
para proteger a los armadores contra los actos abusivos de sus Four cases of rotary drill parts were shipped from abroad on S.S.
encargados y no dejar su patrimonio entero a la discrecion del "Leoville" sometime in November of 1962, consigned to Mobil
personal de sus buques, porque este personal cumple sus Philippines Exploration, Inc., Manila. The shipment arrived at the
obligaciones en condiciones especiales; chan Port of Manila on April 10, 1963, and was discharged to the
roblesvirtualawlibrarypero los armadores no tienen por sobre los
custody of the Customs Arrastre Service, the unit of the Bureau of
demas derecho a ser amparados contra ellos mismos ni a ser
Customs then handling arrastre operations therein. The Customs
protegidos contra sus propios actos.
Arrastre Service later delivered to the broker of the consignee
(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
three cases only of the shipment.
That Lim Hong To understood that he would incur greater liability
than that normally borne by shipowners, is clear from his
assumption of full risk and responsibility for all the On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in
consequences of the operation of the M/L Consuelo V; chan the Court of First Instance of Manila against the Customs Arrastre
roblesvirtualawlibrarya responsibility expressly assumed in his Service and the Bureau of Customs to recover the value of the
letter Exhibit 2, and imposed in his special permit, in addition to
undelivered case in the amount of P18,493.37 plus other
the vessel itself being held answerable. This express assumption of
full risk and responsibility would be meaningless unless
intended to broaden the liability of Respondent Lim Hong To
beyond the value of his vessel. On April 20, 1964 the defendants filed a motion to dismiss the
In resume, we hold:chanroblesvirtuallawlibrary complaint on the ground that not being persons under the law,
(1) That the Manila Steamship Co., owner of the M/S Bowline defendants cannot be sued.
Knot, is directly and primarily responsible in tort for the injuries
caused to the Plaintiff by the collision of said vessel with the
After plaintiff opposed the motion, the court, on April 25, 1964,
launch Consuelo V, through the negligence of the crews of both
dismissed the complaint on the ground that neither the Customs
vessels, and it may not escape liability on the ground that it
exercised due diligence in the selection and supervision of the Arrastre Service nor the Bureau of Customs is suable. Plaintiff
officers and crew of the Bowline Knot; appealed to Us from the order of dismissal.
(2) That Lim Hong To, as owner of the motor launch Consuelo V,
having caused the same to sail without licensed officers, is liable Raised, therefore, in this appeal is the purely legal question of the
for the injuries caused by the collision over and beyond the value defendants' suability under the facts stated.
of said launch;
(3) That both vessels being at fault, the liability of Lim Hong To
Appellant contends that not all government entities are immune
and Manila Steamship Co. to the Plaintiff herein is in solidum, as
prescribed by Article 827 of the Code of Commerce. from suit; that defendant Bureau of Customs as operator of the
In view of the foregoing, the decision of the Court of Appeals is arrastre service at the Port of Manila, is discharging proprietary
modified, and that of the Court of First Instance affirmed, in the functions and as such, can be sued by private individuals.
sense of declaring both original Defendants solidarily liable
to Plaintiff Insa Abdulhaman in the sum of P20,784.00 and the The Rules of Court, in Section 1, Rule 3, provide:
cost of the litigation, without prejudice to the right of the one who
should pay the judgment in full to demand contribution from his
co-Defendant. SECTION 1. Who may be parties.Only natural or
juridical persons or entities authorized by law may be
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador,
Concepcion, Endencia and Felix,JJ., concur. parties in a civil action.

Accordingly, a defendant in a civil suit must be (1) a natural

Republic of the Philippines
person; (2) a juridical person or (3) an entity authorized by law to
be sued. Neither the Bureau of Customs nor (a fortiori) its function
unit, the Customs Arrastre Service, is a person. They are merely
parts of the machinery of Government. The Bureau of Customs is
a bureau under the Department of Finance (Sec. 81, Revised
Administrative Code); and as stated, the Customs Arrastre Service
G.R. No. L-23139 December 17, 1966 is a unit of the Bureau of Custom, set up under Customs
Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Thus, the ruling therein was that the Court of Industrial Relations
Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that had jurisdiction over the subject matter of the case, but not that
the defendants herein cannot he sued under the first two the Bureau of Customs can be sued. Said issue of suability was
abovementioned categories of natural or juridical persons. not resolved, the resolution stating only that "the issue on the
personality or lack of personality of the Bureau of Customs to be
Nonetheless it is urged that by authorizing the Bureau of Customs sued does not affect the jurisdiction of the lower court over the
to engage in arrastre service, the law therebyimpliedly authorizes subject matter of the case, aside from the fact that amendment
it to be sued as arrastre operator, for the reason that the nature of may be made in the pleadings by the inclusion as respondents of
this function (arrastre service) is proprietary, not governmental. the public officers deemed responsible, for the unfair labor
Thus, insofar as arrastre operation is concerned, appellant would practice acts charged by petitioning Unions".
put defendants under the third category of "entities authorized by
law" to be sued. Stated differently, it is argued that while there is Now, the fact that a non-corporate government entity performs a
no law expressly authorizing the Bureau of Customs to sue or be function proprietary in nature does not necessarily result in its
sued, still its capacity to be sued is implied from its very power to being suable. If said non-governmental function is undertaken as
render arrastre service at the Port of Manila, which it is alleged, an incident to its governmental function, there is no waiver
amounts to the transaction of a private business. thereby of the sovereign immunity from suit extended to such
government entity. This is the doctrine recognized in Bureau of
The statutory provision on arrastre service is found in Section Printing, et al. vs. Bureau of Printing Employees Association, et
1213 of Republic Act 1937 (Tariff and Customs Code, effective al., L-15751, January 28, 1961:
June 1, 1957), and it states:
The Bureau of Printing is an office of the Government
SEC. 1213. Receiving, Handling, Custody and Delivery of created by the Administrative Code of 1916 (Act No.
Articles.The Bureau of Customs shall have exclusive 2657). As such instrumentality of the Government, it
supervision and control over the receiving, handling, operates under the direct supervision of the Executive
custody and delivery of articles on the wharves and piers Secretary, Office of the President, and is "charged with
at all ports of entry and in the exercise of its functions it the execution of all printing and binding, including work
is hereby authorized to acquire, take over, operate and incidental to those processes, required by the National
superintend such plants and facilities as may be Government and such other work of the same character
necessary for the receiving, handling, custody and as said Bureau may, by law or by order of the (Secretary
delivery of articles, and the convenience and comfort of of Finance) Executive Secretary, be authorized to
passengers and the handling of baggage; as well as to undertake . . . ." (Sec. 1644, Rev. Adm. Code.) It has no
acquire fire protection equipment for use in the corporate existence, and its appropriations are provided
piers: Provided, That whenever in his judgment the for in the General Appropriations Act. Designed to meet
receiving, handling, custody and delivery of articles can the printing needs of the Government, it is primarily a
be carried on by private parties with greater efficiency, service bureau and, obviously, not engaged in business
the Commissioner may, after public bidding and subject or occupation for pecuniary profit.
to the approval of the department head, contract with
any private party for the service of receiving, handling, xxx xxx xxx
custody and delivery of articles, and in such event, the
contract may include the sale or lease of government- . . . Clearly, while the Bureau of Printing is allowed to
owned equipment and facilities used in such service. undertake private printing jobs, it cannot be pretended
that it is thereby an industrial or business concern. The
In Associated Workers Union, et al. vs. Bureau of Customs, et al., L- additional work it executes for private parties is merely
21397, resolution of August 6, 1963, this Court indeed held "that incidental to its function, and although such work may
the foregoing statutory provisions authorizing the grant by be deemed proprietary in character, there is no showing
contract to any private party of the right to render said arrastre that the employees performing said proprietary function
services necessarily imply that the same is deemed by Congress to are separate and distinct from those emoloyed in its
be proprietary or non-governmental function." The issue in said general governmental functions.
case, however, was whether laborers engaged in arrastre service
fall under the concept of employees in the Government employed xxx xxx xxx
in governmental functions for purposes of the prohibition in
Section 11, Republic Act 875 to the effect that "employees in the Indeed, as an office of the Government, without any
Government . . . shall not strike," but "may belong to any labor corporate or juridical personality, the Bureau of Printing
organization which does not impose the obligation to strike or to cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit,
join in strike," which prohibition "shall apply only to employees action or proceeding against it, if it were to produce any
employed in governmental functions of the Government . . . . effect, would actually be a suit, action or proceeding
against the Government itself, and the rule is settled that
the Government cannot be sued without its consent, corporate it was created, like the National Airports
much less over its objection. (See Metran vs. Paredes, 45 Corporation, not to maintain a necessary function of
Off. Gaz. 2835; Angat River Irrigation System, et al. vs. government, but to run what is essentially a business,
Angat River Workers Union, et al., G.R. Nos. L-10943-44, even if revenues be not its prime objective but rather the
December 28, 1957.) promotion of travel and the convenience of the travelling
public. . . .
The situation here is not materially different. The Bureau of
Customs, to repeat, is part of the Department of Finance (Sec. 81, Regardless of the merits of the claim against it, the State, for
Rev. Adm. Code), with no personality of its own apart from that of obvious reasons of public policy, cannot be sued without its
the national government. Its primary function is governmental, consent. Plaintiff should have filed its present claim to the
that of assessing and collecting lawful revenues from imported General Auditing Office, it being for money under the provisions of
articles and all other tariff and customs duties, fees, charges, Commonwealth Act 327, which state the conditions under which
fines and penalties (Sec. 602, R.A. 1937). To this function, money claims against the Government may be filed.
arrastre service is a necessary incident. For practical reasons said
revenues and customs duties can not be assessed and collected by It must be remembered that statutory provisions waiving State
simply receiving the importer's or ship agent's or consignee's immunity from suit are strictly construed and that waiver of
declaration of merchandise being imported and imposing the duty immunity, being in derogation of sovereignty, will not be lightly
provided in the Tariff law. Customs authorities and officers must inferred. (49 Am. Jur., States, Territories and Dependencies, Sec.
see to it that the declaration tallies with the merchandise actually 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S.
landed. And this checking up requires that the landed 275, 3 L. Ed. 804, 79 S. Ct. 785). From the provision authorizing
merchandise be hauled from the ship's side to a suitable place in the Bureau of Customs to lease arrastre operations to private
the customs premises to enable said customs officers to make it, parties, We see no authority to sue the said Bureau in the
that is, it requires arrastre operations.1 instances where it undertakes to conduct said operation itself.
The Bureau of Customs, acting as part of the machinery of the
Clearly, therefore, although said arrastre function may be deemed national government in the operation of the arrastre service,
proprietary, it is a necessary incident of the primary and pursuant to express legislative mandate and as a necessary
governmental function of the Bureau of Customs, so that engaging incident of its prime governmental function, is immune from suit,
in the same does not necessarily render said Bureau liable to suit. there being no statute to the contrary.
For otherwise, it could not perform its governmental function
without necessarily exposing itself to suit. Sovereign immunity, WHEREFORE, the order of dismissal appealed from is hereby
granted as to the end, should not be denied as to the necessary affirmed, with costs against appellant. So ordered.
means to that end.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Zaldivar
And herein lies the distinction between the present case and that and Sanchez, JJ., concur.
of National Airports Corporation vs. Teodoro, 91 Phil. 203, on which
appellant would rely. For there, the Civil Aeronautics Makalintal, J., concurs in the result.
Administration was found have for its prime reason for existence
not a governmental but a proprietary function, so that to it the
Castro, J., reserves his vote.
latter was not a mere incidental function:

Among the general powers of the Civil Aeronautics
Administration are, under Section 3, to execute contracts
of any kind, to purchase property, and to grant [G.R. No. 84680. February 5, 1996]
concessions rights, and under Section 4, to charge
landing fees, royalties on sales to aircraft of aviation SUMMA INSURANCE CORPORATION, petitioner, vs. COURT OF
gasoline, accessories and supplies, and rentals for the APPEALS and METRO PORT SERVICE,
use of any property under its management. INC., respondents.

These provisions confer upon the Civil Aeronautics

Administration, in our opinion, the power to sue and be
sued. The power to sue and be sued is implied from the
power to transact private business. . . .

Is an arrastre operator legally liable for the loss of a

xxx xxx xxx
shipment in its custody? If so, what is the extent of its
liability? These are the two questions that this Court faced in this
The Civil Aeronautics Administration comes under the
petition for review on certiorari of the Decision [1] of the Court of
category of a private entity. Although not a body
Appeals[2] in CA-G.R. No. CV 04964 promulgated on April 27,
1988, which affirmed with modification the decision of the Court The complaint as against defendant National Galleon Shipping
of First Instance of Manila in Civil Case No. 82-13988, ordering Corporation and the counterclaim interposed by said defendant
petitioner to pay private respondent a sum of money, with legal are hereby dismissed. (Rollo, p. 32).
interest, attorneys fees and the costs of the suit.
In resolving the issue as to who had custody of the shipment
The Facts when it was lost, the trial court relied more on the good-order
cargo receipts issued by NGSC than on the short-landed
On November 22, 1981, the S/S Galleon Sapphire, a vessel certificate issued by private respondent. The trial court held:
owned by the National Galleon Shipping Corporation (NGSC),
arrived at Pier 3, South Harbor, Manila, carrying a shipment As between the aforementioned two documentary exhibits, the
consigned to the order of Caterpillar Far East Ltd. with Semirara Court is more inclined to give credence to the cargo receipts. Said
Coal Corporation (Semirara) as notify party. The shipment, cargo receipts were signed by a checker of defendant NGSC and a
including a bundle of PC 8 U blades, was covered by marine representative of Metro Port. It is safe to presume that the cargo
insurance under Certificate No. 82/012-FEZ issued by petitioner receipts accurately describe the quantity and condition of the
and Bill of Lading No. SF/MLA 1014. The shipment shipment when it was discharged from the vessel. Metro Ports
was discharged from the vessel to the custody of private representative would not have signed the cargo receipts if only
respondent, formerly known as E. Razon, Inc., the exclusive four (4) packages were discharged from the vessel and given to the
arrastre operator at the South Harbor. Accordingly, three good- possession and custody of the arrastre operator. Having been
order cargo receipts were issued by NGSC, duly signed by the signed by its representative, the Metro Port is bound by the
ships checker and a representative of private respondent. contents of the cargo receipts.

On February 24, 1982, the forwarder, Sterling International On the other hand, the Metro Ports shortlanded certificate could
Brokerage Corporation, withdrew the shipment from the pier and not be given much weight considering that, as correctly argued by
loaded it on the barge Semirara 8104. The barge arrived at its port counsel for defendant NGSC, it was issued by Metro Port alone
of destination, Semirara Island, on March 9, 1982. When and was not countersigned by the representatives of the shipping
Semirara inspected the shipment at its warehouse, it discovered company and the consignee. Besides, the certificate was prepared
that the bundle of PC8U blades was missing. by Atty. Servillano V. Dolina, Second Deputy General Manager of
Metro Port, and there is no proof on record that he was present at
On March 15, 1982, private respondent issued a the time the subject shipment was unloaded from the vessel and
shortlanded certificate stating that the bundle of PC8U blades was received by the arrastre operator. Moreover, the shortlanded
already missing when it received the shipment from the NGSC certificate bears the date of March 15, 1982, more than three
vessel. Semirara then filed with petitioner, private respondent and months after the discharge of the cargo from the carrying vessel.
NGSC its claim for P280,969.68, the alleged value of the lost
bundle. Neither could the Court give probative value to the marine report
(Exhibit J, also Exhibit 1-Razon). The attending surveyor who
On September 29, 1982, petitioner paid Semirara the invoice attended the unloading of the shipment did not take the witness
value of the lost shipment. Semirara thereafter executed a release stand to testify on said report.Although Transnational Adjustment
of claim and subrogation receipt. Consequently, petitioner filed its Co.s general manager, Mariano C. Remorin, was presented as a
claims with NGSC and private respondent but it was witness, his testimony is not competent because he was not
unsuccessful. present at the time of the discharge of the cargo.

Petitioner then filed a complaint (Civil Case No. 82-13988) Under the foregoing considerations, the Court finds that the one
with the Regional Trial Court, Branch XXIV, Manila, against NGSC (1) bundle of PC8U blade in question was not lost while the cargo
and private respondent for collection of a sum of money, damages was in the custody of the carrying vessel. Considering that the
and attorneys fees. missing bundle was discharged from the vessel unto the custody
of defendant arrastre operator and considering further that the
consignee did not receive this cargo from the arrastre operator, it
On August 2, 1984, the trial court rendered a decision
is safe to conclude from these facts that said missing cargo was
absolving NGSC from any liability but finding private respondent
lost while same was in the possession and control of defendant
liable to petitioner. The dispositive portion of the decision reads as
Metro Port. Defendant Metro Port has not introduced competent
evidence to prove that the loss was not due to its fault or
negligence.Consequently, only the Metro Port must answer for the
PREMISES CONSIDERED, judgment is hereby rendered ordering
value of the missing cargo. Defendant NGSC is absolved of any
defendant Metro Port Service, Inc. to pay plaintiff Summa
liability for such loss.
Insurance Corporation the sum of P280,969.68 with legal interest
from November 22, 1982, the date of the filing of the complaint,
until full payment, and attorneys fees in the sum of P20,000.00,
with costs of suit.
On appeal, the Court of Appeals modified the decision of the incorporated in the gate pass and delivery receipt which must be
trial court and reduced private respondents liability to P3,500.00 presented by the consignee before delivery can be effected to it.
as follows[3]: [5]
The insurer, as successor-in-interest of the consignee, is
likewise bound by the management contract. [6] Indeed, upon
WHEREFORE, the judgment appealed from is MODIFIED in that taking delivery of the cargo, a consignee (and necessarily its
defendant Metro Port Service, Inc., is ordered to pay plaintiff successor-in- interest) tacitly accepts the provisions of the
Summa Insurance Corporation: management contract, including those which are intended to limit
the liability of one of the contracting parties, the arrastre operator.
(1) the sum of P3,500.00, with legal interest from November 22,
1982, until fully paid; and
However, a consignee who does not avail of the services of
(2) the sum of P7,000.00, as and for attorneys fees. the arrastre operator is not bound by the management contract.
Such an exception to the rule does not obtain here as the
consignee did in fact accept delivery of the cargo from the arrastre
Costs against defendant Metro Port Service, Inc.

Petitioner moved for reconsideration of the said decision but

Section 1, Article VI of the Management Contract between
the Court of Appeals denied the same. Hence, the instant petition.
private respondent and the Bureau of Customs[9] provides:

The Issues
1. Responsibility and Liability for Losses and Damages - The
CONTRACTOR shall, at its own expense handle all merchandise in
The issues brought by the parties could be stated as follows:
the piers and other designated places and at its own expense
perform all work undertaken by it hereunder diligently and in a
(1) Is the private respondent legally liable for the loss of the skillful workmanlike and efficient manner; that the CONTRACTOR
shipment in question? shall be solely responsible as an independent CONTRACTOR, and
hereby agrees to accept liability and to promptly pay to the
(2) If so, what is the extent of its liability? steamship company, consignee, consignor or other interested
party or parties for the loss, damage, or non-delivery of cargoes to
The First Issue: Liability for Loss of Shipment the extent of the actual invoice value of each package which in no
case shall be more than Three Thousand Five Hundred Pesos
Petitioner was subrogated to the rights of the consignee. The (P3,500.00) for each package unless the value of the importation is
relationship therefore between the consignee and the arrastre otherwise specified or manifested or communicated in writing
operator must be examined. This relationship is much akin to that together with the invoice value and supported by a certified packing
existing between the consignee or owner of shipped goods and the list to the CONTRACTOR by the interested party or parties before
common carrier, or that between a depositor and a the discharge of the goods, as well as all damage that may be
warehouseman. [4]
In the performance of its obligations, an arrastre suffered on account of loss, damage, or destruction of
operator should observe the same degree of diligence as that any merchandise while in custody or under the control of the
required of a common carrier and a warehouseman as enunciated CONTRACTOR in any pier, shed, warehouse, facility or other
under Article 1733 of the Civil Code and Section 3(b) of the designated place under the supervision of the BUREAU, x x x
Warehouse Receipts Law, respectively. Being the custodian of the (Italics supplied).
goods discharged from a vessel, an arrastre operators duty is to
take good care of the goods and to turn them over to the party Interpreting a similar provision in the management contract
entitled to their possession. between private respondents predecessor, E. Razon, Inc. and the
Bureau of Customs, the Court said in E. Razon Inc. vs. Court of
In this case, it has been established that the shipment was Appeals:[10]
lost while in the custody of private respondent. We find private
respondent liable for the loss. This is an issue of fact determined Indeed, the provision in the management contract regarding the
by the trial court and respondent Court, which is not reviewable declaration of the actual invoice value before the arrival of the
in a petition under Rule 45 of the Rules of Court. goods must be understood to mean a declaration before the arrival
of the goods in the custody of the arrastre operator, whether it be
The Second Issue: Extent of Liability done long before the landing of the shipment at port, or
immediately before turn-over thereof to the arrastre operators
custody. What is essential is knowledge beforehand of the extent
In the performance of its job, an arrastre operator is bound
of the risk to be undertaken by the arrastre operator, as
by the management contract it had executed with the Bureau of
determined by the value of the property committed to its care that
Customs. However, a management contract, which is a sort of a
it may define its responsibility for loss or damage to such cargo
stipulation pour autrui within the meaning of Article 1311 of the
Civil Code, is also binding on a consignee because it is
and to ascertain compensation commensurate to such risk In civil cases, the burden of proof is on the party who would
assumed x x x. be defeated if no evidence is given on either side. Said party must
establish his case by a preponderance of evidence, which means
In the same case, the Court added that the advance notice of that the evidence as a whole adduced by one side is superior to
the actual invoice of the goods entrusted to the arrastre operator that of the other.[14] Petitioner having asserted the affirmative of
is for the purpose of determining its liability, that it may obtain the issue in this case, it should have presented evidence required
compensation commensurable to the risk it assumes, (and) not for to obtain a favorable judgment.
the purpose of determining the degree of care or diligence it must
exercise as a depository or warehouseman [11] since the arrastre On the other hand, on top of its denial that it had received
operator should not discriminate between cargoes of substantial the invoice value and the packing list before the discharge of the
and small values, nor exercise care and caution only for the shipment, private respondent was able to prove that it was
handling of goods announced to it beforehand to be of sizeable apprised of the value of the cargo only after its discharge from the
value, for that would be spurning the public service nature of its vessel, ironically through petitioners claim for the lost package to
business. which were attached the invoice and packing list. All told,
petitioner failed to convince the Court that the requirement of the
On the same provision limiting the arrastre operators management contract had been complied with to entitle it to
liability, the Court held in Northern Motors, Inc. v. Prince Line [12]
: recover the actual invoice value of the lost shipment.

Appellant claims that the above quoted provision is null and void, Anent the attorneys fees, we find the award to be proper
as it limits the liability of appellee for the loss, destruction or considering that the acts and omissions of private respondent
damage of any merchandise, to P500.00 per package, contending have compelled petitioner to litigate or incur expenses to protect
that to sustain the validity of the limitation would be to encourage its rights.[15] However, as to the amount of the award, we find no
acts of conversion and unjust enrichment on the part of the reason to re-examine the appellate courts determination thereon
arrastre operator. Appellant, however, overlooks the fact that the in view of the amount of the principal obligation. Otherwise, we
limitation of appellees liability under said provision, is not would be disregarding the doctrine that discretion, when well
absolute or unqualified, for if the value of the merchandise is exercised, should not be disturbed.
specified or manifested by the consignee, and the corresponding
arrastre charges are paid on the basis of the declared value, the WHEREFORE, the petition for review on certiorari is
limitation does not apply.Consequently, the questioned provision DENIED and the decision of the Court of Appeals is
is neither unfair nor abitrary, as contended, because the AFFIRMED. Costs against petitioner.
consignee has it in his hands to hold, if he so wishes, the arrastre
operator responsible for the full value of his merchandise by SO ORDERED.
merely specifying it in any of the various documents required of
him, in clearing the merchandise from the customs. For then, the
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco,
appellee arrastre operator, by reasons of the payment to it of a
JJ., concur.
commensurate charge based on the higher declared value of the
merchandise, could and should take extraordinary care of the
special or valuable cargo. In this manner, there would be Republic of the Philippines
mutuality. What would, indeed, be unfair and arbitrary is to hold SUPREME COURT
the arrastre operator liable for the full value of the merchandise Manila
after the consignee has paid the arrastre charges only (on) a basis
much lower than the true value of the goods. THIRD DIVISION

In this case, no evidence was offered by petitioner proving G.R. No. 83613 February 21, 1990
the amount of arrastre fees paid to private respondent so as to put
the latter on notice of the value of the cargo. While petitioner FIREMAN'S FUND INSURANCE CO., petitioner,
alleged that prior to the loss of the package, its value had been
relayed to private respondent through the documents the latter
METRO PORT SERVICE, INC., (Formerly E. Razon,
had processed, petitioner does not categorically state that among
Inc.), respondent.
the submitted documents were the pro forma invoice value and the
certified packing list. Neither does petitioner pretend that these
Dollete, Blanco, Ejercito & Associates for petitioner.
two documents were prerequisites to the issuance of a permit to
deliver or were attachments thereto. Even the permit to deliver,
upon which petitioner anchors its arguments, may not be Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent.
considered by the Court because it was not identified and formally
offered in evidence.[13]
GUTIERREZ, JR., J.: E. Razon, Inc., for the recovery of the amount it paid the assured
under the covering insurance policy. On October 26, 1980, the
This is a petition for review of the decision and resolution denying trial court rendered judgment, the decretal portion of which reads
reconsideration of the Court of Appeals in CA-G.R. CV No. 00673 as follows:
entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compaia
General de Tabacos de Filipinas and E. Razon, Inc." xxx xxx xxx

The facts are as follows: WHEREFORE, judgment is hereby rendered in

favor of the plaintiff and against the defendants
Vulcan Industrial and Mining Corporation imported from the by ordering the latter to pay, jointly and
United States several machineries and equipment which were severally, the plaintiff the sum of P187,500.00,
loaded on board the SIS Albert Maersk at the port of Philadelphia, with legal interest thereon from August 29,
U.S.A., and transhipped for Manila through the vessel S/S Maersk 1980 until full payment thereof.
Defendants are also ordered to pay, in solidum,
The cargo which was covered by a clean bill of lading issued by the sum of P10,000.00 as attorney's fees to the
Maersk Line and Compania General de Tabacos de Filipinas plaintiff, and to pay the costs of this suit.
(referred to as the CARRIER) consisted of the following:
There shall be no award for exemplary damages
xxx xxx xxx in favor of the plaintiff, for the reason that
defendants are probably acting in good faith in
resisting the complaint. (Rollo, pp. 45-46)
1 piece truck mounted core drill

All the defendants appealed to the Court of Appeals. Eventually,

1 piece trailer mounted core drill
Maersk Line and Compania General de Tabacos negotiated with
the petitioner for the settlement of the latter's claim and no longer
1 (40') container of 321 pieces steel tubings
pursued their appeal.

1 (40') container of 170 pieces steel tubings

On the appeal of the ARRASTRE, the Court of Appeals rendered a
decision with the following dispositive portion:
1 (40') container of 13 cases, 3 crates, 2 pallets
and 26 mining machinery parts. (Rollo, p. 4)
WHEREFORE, foregoing premises considered,
the decision of the court a quo insofar as herein
The shipment arrived at the port of Manila on June 3, 1979 and
defendant-appellant is concerned is REVERSED
was turned over complete and in good order condition to the
It is hereby ordered that the complaint against
arrastre operator E. Razon Inc. (now Metro Port Service Inc. and
herein defendant-appellant be dismissed. No
referred to as the ARRASTRE).
costs. (Rollo, p. 50)

At about 10:20 in the morning of June 8, 1979, a tractor operator,

Reconsideration of the decision was denied in a resolution dated
named Danilo Librando and employed by the ARRASTRE, was
May 23, 1988.
ordered to transfer the shipment to the Equipment Yard at Pier 3.
While Librando was maneuvering the tractor (owned and provided
Hence, the present recourse.
by Maersk Line) to the left, the cargo fell from the chassis and hit
one of the container vans of American President Lines. It was
The petitioner raises this lone assignment of error:
discovered that there were no twist lock at the rear end of the
chassis where the cargo was loaded.
There was heavy damage to the cargo as the parts of the
machineries were broken, denied, cracked and no longer useful for
their purposes.
The value of the damage was estimated at P187,500.00 which
amount was paid by the petitioner insurance company to the
consignee, Vulcan Industrial and Mining Corporation.
There is merit in this petition.

The petitioner, under its subrogation rights, then filed a suit

against Maersk Line, Compania General de Tabacos (as agent) and
This Court has held in a number of cases that findings of fact of The legal relationship between the consignee and the arrastre
the Court of Appeals are, in general, conclusive on the Supreme operator is akin to that of a depositor and warehouseman (Lua
Court when supported by the evidence on record. The rule is not Kian v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship
absolute, however, and allows exceptions, which we find present in between the consignee and the common carrier is similar to that
the case at bar. The respondent court's findings of facts are of the consignee and the arrastre operator (Northern Motors, Inc.
contrary to those of the trial court and appear to be contradicted v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of
by the evidence on record thus calling for our review. (Metro Port the ARRASTRE to take good care of the goods that are in its
Service, Inc. v. Court of Appeals, 131 SCRA 365 [1984]). custody and to deliver them in good condition to the consignee,
such responsibility also devolves upon the CARRIER. Both the
In absolving the ARRASTRE, the respondent Court ruled that ARRASTRE and the CARRIER are therefore charged with and
although Librando was an employee of the ARRASTRE, since he obligated to deliver the goods in good condition to the consignee.
was included in its payroll, he was technically and strictly an
employee of Maersk Line in this particular instance when he drove In general, the nature of the work of an arrastre operator covers
the tractor admittedly owned by the foreign shipping line. The the handling of cargoes at piers and wharves (Visayan Cebu
Court ruled that he received instructions not from Metro Port but Terminal Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA
from Maersk Line relative to this job. He was performing a duty 357 [1965]). This is embodied in the Management Contract drawn
that properly pertained to Maersk Line which, for lack of a tractor between the Bureau of Customs and E. Razon Inc., as the
operator, had to get or hire from the ARRASTRE as per their Arrastre Operator. The latter agreed to bind itself, to wit:
management contract. Nevertheless, Librando was not remiss in
his duty as tractor-driver considering that the proximate and CLAIMS AND LIABILITY FOR LOSSES AND
direct cause of the damage was the absence of twist locks in the DAMAGES
rear end of the chassis which Maersk Line failed to provide. The
respondent court thereby placed the entire burden of liability on 1. Responsibility and Liability
the owner of the Chassis which in this case was the foreign for Losses and Damages;
shipping company, Maersk Line.

Claims. The CONTRACTOR shall, at its own

The foregoing conclusion disregarded the pertinent findings of expense handle all merchandise in the piers
facts made by the lower court which are supported by the and other designated places and at its own
evidence on record, to wit: expense perform all work undertaken by it
hereunder diligently and in skillful workmanlike
1. The accident occurred while the cargoes were and efficient manner; That the CONTRACTOR
in the custody of the arrastre operator. shall be solely responsible as an independent
CONTRACTOR, and hereby agrees to accept
2. The tractor operator was an employee of the liability and to promptly pay to the s hip
arrastre operator. company, consignee, consignor or other
interested party or parties for the loss, damage,
xxx xxx xxx or non-delivery of cargoes to the extent of the
actual invoice value of each package which in
4. By the management contract inasmuch as no case shall be more than Three Thousand
the foreign shipping company has no tractor Five Hundred Pesos (P3,500.00) for each
operator in its employ, the arrastre provided the package unless the value of the importation is
operator. otherwise specified or manifested or
communicated in writing together with the
invoice value and supported by a certified
xxx xxx xxx
packing list to the CONTRACTOR by the
interested party or parties before the discharge
8. It was likewise the responsibility of the
of the goods, as well as all damage that may be
tractor operator, an employee of the arrastre
suffered on account of loss, damage, or
operator to inspect the chassis and tractor
destruction of any merchandise while in
before driving the same, but which obligation
custody or under the control of the
the operator failed to do.
CONTRACTOR in any pier, shed, warehouse,
facility; or other designated place under the
9. It was also the responsibility of the supervision of the BUREAU, but said
supervisor in the employ of the arrastre CONTRACTOR shall not be responsible for the
operator to see that their men complied with condition of the contents of any package
their respective tasks, which included the received nor for the weight, nor for any loss,
examination if the chassis has twist lock. (Rollo, injury or damage to the said cargo before or
pp. 44-45) while the goods are being received or remained
on the piers, sheds, warehouse or facility if the Q My question is in your
loss, injury or damage is caused by force investigation report including
majeure, or other cause beyond the enclosures, the principal
CONTRACTORS control or capacity to prevent reason was that the chassis
or remedy; ... has no rear twist lock?

xxx xxx xxx A Yes, sir.

The CONTRACTOR shall be solely responsible Q Did you investigate

for any and all injury or damage that may arise whether the driver Librando
on account of the negligence or carelessness of inspected the the truck
the CONTRACTOR, its agent or employees in before he operated the same
the performance of the undertaking by it to be whether there was rear twist
performed under the terms of the contract, and lock or not?
the CONTRACTOR hereby agree to and hold the
BUREAU at all times harmless therefrom and A I have asked him about
whole or any part thereof. (Original Records, pp. that question whether he had
110-112; Emphasis supplied) inspected the has any rear
twist lock and the answer he
To carry out its duties, the ARRASTRE is required to provide cargo did not inspect, sir.
handling equipment which includes among others trailers, chassis
for containers. In some cases, however, the shipping line has its Q As a operator, do you agree
own cargo handling equipment. with me that it is the duty
also of Librando to see to it
In this particular instance, the records reveal that Maersk Line that the truck is in good
provided the chassis and the tractor which carried the carried the condition and fit to travel, is
subject shipment. It merely requested the ARRASTRE to dispatch that correct?
a tractor operator to drive the tractor inasmuch as the foreign
shipping line did not have any truck operator in its employ. Such A Yes, sir.
arrangement is allowed between the ARRASTRE and the CARRIER
pursuant to the Management Contract. It was clearly one of the Q And as a tractor operator it
services offered by the ARRASTRE. We agree with the petitioner is his duty to see to it that
that it is the ARRASTRE which had the sole discretion and the van mounted on top of
prerogative to hire and assign Librando to operate the tractor. It the tractor was properly is
was also the ARRASTRE's sole decision to detail and deploy that correct?
Librando for the particular task from among its pool of tractor
operators or drivers. It is, therefore, inacurrate to state that
A Yes, sir. (At pp. 18-20,
Librando should be considered an employee of Maersk Line on
T.S.N., February 17, 1982)
that specific occasion.

Again Danilo Librando also admitted that it was usually his

Handling cargo is mainly the s principal work so its
practice to inspect not only the tractor but the chassis as well but
driver/operators, "cargadors", or employees should observe the
failed to do so in this particular instance.
stand" and indispensable measures necessary to prevent losses
and damage to shipments under its custody. Since the ARRASTRE
xxx xxx xxx
offered its drivers for the operation of tractors in the handling of
cargo and equipment, then the ARRASTRE should see to it that
the drivers under its employ must exercise due diligence in the Q You mentioned of the

performance of their work. From the testimonies of witnesses absence of a twist lock. Will

presented, we gather that driver/operator Librando was remiss in you tell us where is this twist

his duty. Benildez Cepeda, an arrastre-investigator of Metro Port lock supposed to be located?

admitted that Librando as tractor-operator should first have

inspected the chassis and made sure that the cargo was securely A At the rear end of the
loaded on the chassis. He testified: chassis.

xxx xxx xxx Q Before you operated the

tractor which carried the
mounted cord drill truck and
trailer did you examine if the Q But if you closely examine
chasiss had any twist locks? this chassis which has a load
of container van. You can see
A No, sir, because I presumed whether a twist lock is
that it had twist locks and I present or not?
was confident that it had
twist locks. A Yes, sir. A twist lock is
Q As a matter of procedure
and according to you, you Q In other words, if the driver
examined the tractor, do you of this tractor closely
not make it a practice to examined this van, he could
examine whether the chassis have detected whether or not
had any twist locks? a twist lock is present?

A I used to do that but in A Yes, sir. (pp. 33-35, T.S.N.,

that particular instance I March 23, 1982; Emphasis
thought it had already its supplied)
twist locks. (p. 8, T.S.N.,
October 5, 1981) Whether or not the twist lock can be seen by the naked eye when
the cargo has been loaded on the chassis, an efficient and diligent
It is true that Maersk Line is also at fault for not providing twist tractor operator must nevertheless check if the cargo is securely
locks on the chassis. However, we find the testimony of Manuel loaded on the chassis.
Heraldez who is the Motor Pool General Superintendent of Metro
Port rather significant. On cross-examination, he stated that: We, therefore, find Metro Port Service Inc., solidarily liable in the
instant case for the negligence of its employee. With respect to the
Q In your experience, Mr. limited liability of the ARRASTRE, the records disclose that the
witness, do you know which value of the importation was relayed to the arrastre operator and
is ahead of the placing of the in fact processed by its chief claims examiner based on the
container van or the placing documents submitted.
of the twist lock on the
chassis? WHEREFORE, the appealed judgment of respondent Court of
Appeals is hereby REVERSED and SET ASIDE and that of the
A The twist lock is already Court of First Instance of Manila, 6th Judicial District, Branch II
permanently attached on the is REINSTATED. No costs.
chassis, sir.
Q Earlier, you mentioned that
you cannot see the twist lock Fernan, C.J. (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
if the chassis is loaded,
Republic of the Philippines
A Yes, sir.

Q Do you what to impress

upon the Honorable Court
that, by mere looking at a
loaded chassis, the twist lock G.R. No. L-23033 January 5, 1967
cannot be seen by the naked
eye? Because the van LUA KIAN, plaintiff and appellee,
contained a hole in which the vs.
twist lock thus entered inside MANILA RAILROAD COMPANY and MANILA PORT
the hold and locked itself. It SERVICE, defendants and appellants.
is already loaded. So. you
cannot no longer see it.
D. F. Macaranas and S. V. Pampolina Jr. for defendants and 8. The 1,913 cases of Carnation mentioned in paragraph
appellants. 5 hereof were taken by the broker at Pier 13, Shed 3,
San Juan, Laig and Associates for plaintiff and appellee. sometime in February, 1960, where at the time, there
were stored therein, aside from the shipment involved
BENGZON, J. P., J.: herein, 1000 cases of Carnation Milk bearing the same
marks and also consigned to plaintiff Lua Kian but had
been discharged from SS `STEEL ADVOCATE' and
The present suit was filed by Lua Kian against the Manila Railroad
covered by Bill of Lading No. 11;
Co. and Manila Port Service for the recovery of the invoice value of
imported evaporated "Carnation" milk alleged to have been
undelivered. The following stipulation of facts was made: 9. Of the shipment of 1000 cases of Carnation Milk
which also came from the Carnation Company, San
Francisco, California, U.S.A. and bearing the same
1. They admit each other's legal personality, and that
marks as the shipment herein but had been discharged
during the time material to this action, defendant Manila
from S/S "STEEL ADVOCATE" and covered by Bill of
Port Service as a subsidiary of defendant Manila
Lading No. 11, Lua Kian as consignee thereof filed a
Railroad Company operated the arrastre service at the
claim for short-delivery against defendant Manila Port
Port of Manila under and pursuant to the Management
Service, and said defendant Manila Port Service paid Lua
Contract entered into by and between the Bureau of
Kian plaintiff herein, P750.00 in settlement of its claim;
Customs and defendant Manila Port Service on February
29, 1956;
10. They reserve the right to submit documentary
2. On December 31, 1959, plaintiff Lua Kian imported
2,000 cases of Carnation Milk from the Carnation
Company of San Francisco, California, and shipped on 11. They submit the matter of attorney's fees and costs
Board SS "GOLDEN BEAR" per Bill of Lading No. 17; to the sound discretion of the Court.

3. Out of the aforesaid shipment of 2,000 cases of On these facts and documentary evidence subsequently
Carnation Milk per Bill of Lading No. 17, only 1,829 presented, the Court of First Instance of Manila ruled that 1,829
cases marked `LUA KIAN 1458' were discharged from the cases marked Lua Kian (171 cases less than the 2,000 cases
vessel SS `GOLDEN BEAR' and received by defendant indicated in the bill of lading and 3,171 cases marked "Cebu
Manila Port Service per pertinent tally sheets issued by United" (171 cases over the 3,000 cases in the bill of lading were
the said carrying vessel, on January 24, 1960; discharged to the Manila Port Service. Considering that Lua Kian
and Cebu United Enterprises were the only consignees of the
shipment of 5,000 cases of "Carnation" milk, it found that of the
4. Discharged from the same vessel on the same date
3,171 cases marked "Cebu United", 171 should have been
unto the custody of defendant Manila Port Service were
delivered to Lua Kian. Inasmuch as the defendant Manila Port
3,171 cases of Carnation Milk marked "CEBU UNITED
Service actually delivered 1,913 cases to plaintiff, 1which is only 87
4860-PH-MANILA" consigned to Cebu United
cases short of 2,000 cases as per bill of lading the former was
Enterprises, per Bill of Lading No. 18, and on this
ordered to pay Lua Kian the sum of P1,183.11 representing such
shipment, Cebu United Enterprises has a pending claim
shortage of 87 cases, with legal interest from the date of the suit,
for short-delivery against defendant Manila Port Service;
plus P500 as attorney's fees.

5. Defendant Manila Port Service delivered to the plaintiff

Defendants appealed to Us and contend that they should not be
thru its broker, Ildefonso Tionloc, Inc. 1,913 cases of
made to answer for the undelivered cases of milk, insisting that
Carnation Milk marked "LUA KIAN 1458" per pertinent
Manila Port Service was bound to deliver only 1,829 cases to Lua
gate passes and broker's delivery receipts;
Kian and that it had there before in fact over-delivered to the
6. A provisional claim was filed by the consignee's broker
for and in behalf of the plaintiff on January 19, 1960,
The bill of lading in favor of Cebu United Enterprises indicated
with defendant Manila Port Service;
that only 3,000 cases were due to said consignee, although 3,171
cases were marked in its favor. Accordingly, the excess 171 cases
7. The invoice value of the 87 cases of Carnation Milk
marked "Cebu United" placed the defendant arrastre operator in a
claimed by the plaintiff to have been short-delivered by
dilemma, for should it deliver them to Lua Kian the goods could
defendant Manila Port Service is P1,183.11 while the
be claimed by the consignee Cebu United Enterprises whose
invoice value of the 87 cases of Carnation Milk claimed
markings they bore, and should it deliver according to markings,
by the defendant Manila Port Service to have been over-
to Cebu United Enterprises, it might be sued by the consignee,
delivered by it to plaintiff is P1,130.65;
Lua Kian whose bill of lading indicated that it should receive 171
cases more. The dilemma itself, however, offered the solution. The
legal relationship between an arrastre operator and the consignee
is akin to that of a depositor and warehouseman.2 As custodian of
the goods discharged from the vessel, it was defendant arrastre 1. ARRASTRE SERVICE; LIMITATION OF ARRASTRE
operator's duty, like that of any ordinary depositary, to take good OPERATORS LIABILITY; VALIDITY OF PARAGRAPH 15 OF
care of the goods and to turn them over to the party entitled to MANAGEMENT CONTRACT BETWEEN ARRASTRE OPERATOR
their possession.3 Under this particular set of circumstances, said AND BUREAU OF CUSTOMS. The limitation of the arrastre
operators liability under Paragraph 15 of the Management
defendant should have withheld delivery because of the
Contract entered into between it and the Bureau of Customs is not
discrepancy between the bill of lading and the markings and absolute or unqualified, for under the said contract, if the value of
conducted its own investigation, not unlike that under Section 18 the merchandise is specified or manifested by the consignee, and
of the Warehouse Receipts Law, or called upon the parties, to the corresponding arrastre charges are paid on the basis of the
interplead, such as in a case under Section 17 of the same law, in declared value, the limitation does not apply. Consequently, the
order to determine the rightful owner of the goods. provision is neither unfair nor arbitrary, because the consignee
has it in his hands to hold the arrastre operator responsible for
the full value of his merchandise by merely specifying it in any of
It is true that Section 12 of the Management Contract exempts the the various documents required of him in claiming the
arrastre operator from responsibility for misdelivery or non- merchandise from the customs.
delivery due to improper or insufficient marking. We cannot
however excuse the aforestated defendant from liability in this 2. ID.; ID.; ID.; RELATIONSHIP BETWEEN CONSIGNEE AND
case before Us now because the bill of lading showed that only COMMON CARRIER SIMILAR TO THAT OF CONSIGNEE AND
ARRASTRE OPERATOR. The legal relationship created between
3,000 cases were consigned to Cebu United Enterprises. The fact
the consignee or owner of the imported goods who withdraws
that the excess of 171 cases were marked for Cebu United
them from the customhouse and the arrastre operator whose
Enterprises and that the consignment to Lua Kian was 171 cases services are utilized for the purpose, is akin to that existing
less than the 2,000 in the bill of lading, should have been between the consignee or owner of shipped goods and the
sufficient reason for the defendant Manila Port Service to withhold common carrier or that between a depositor and the
the goods pending determination of their rightful ownership. warehouseman, and it has been held that a provision in the bill of
lading limiting the carriers liability to a specific amount, unless
the shipper expressly declares a higher valuation and pays the
We therefore find the defendants liable, without prejudice to their corresponding rate thereon, is valid and binding. (H.E. Heacock
taking whatever proper legal steps they may consider worthwhile Company v. Macondray & Company, Inc. 42 Phil., 205; Freixas
to recover the excess delivered to Cebu United Enterprises. and Company v. Pacific Mail Steamship Co., 42 Phil., 199;
McCarthy v. Barber Steamship Lines, Inc. 45 Phil., 488)
With respect to the attorney's fees awarded below, this Court
notices that the same is about 50 per cent of the litigated amount
of P1,183.11. We therefore deem it reasonable to decrease the THERETO. Paragraph 15 of the Management Contract entered
attorney's fees to P300.00. into between the arrastre operator and the Bureau of Customs
contains provision which are in the nature of stipulations pour
Wherefore, with the aforesaid reservation, and with the autrui, that is, for the benefit or in favor of a third party, the
consignee or importer. By virtue thereof, the arrastre operator is
modification that the attorney's fee is reduced to P300.00, the
expected to render service, not to the Bureau of Customs, but to
judgment appealed from is affirmed, with costs against appellants. the importer or consignee of the cargoes. Upon compliance with
So ordered. certain conditions, the importer or consignee is entitled to certain
conditions, the importer or consignee is entitled to receive< and
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, the arrastre contractor is obliged to discharge and deliver< the
cargoes or merchandise described in the delivery permit. In case
Sanchez and Castro, JJ., concur.
at bar, the consignee obtained the delivery permit and gate pass
subject to the terms and conditions of the Management Contract
SECOND DIVISION and took delivery of its cargo from the arrastre operator. Although
it was not a signatory to the said contract, it therefore legally
[G.R. No. L-13884. February 29, 1960.] became a party thereto.


NORTHERN MOTORS, INC., plaintiff and appellant, v. PRINCE
No question will be considered by the appellate court which has
LINE, ROOSEVELT STEAMSHIP AGENCY INC., COLUMBIAN not been raised in the court below. (Toribio v. Decasa, 55 Phil.,
ROPE COMPANY OF THE PHILIPPINES, INC., and/or 461; San Agustin v. Barrios, 68 Phil., 475.) When a party
DELGADO BROTHERS, INC., defendants and appellees. deliberately adopts a certain theory, and the case is tried and
decided upon that theory in the court below, he will not be
Ozaeta, Gibbs & Ozaeta for Appellant. permitted to change his theory on appeal because, to permit him
to do so, would be unfair to the adverse party. (Molina v. Somes 24
Ross, Selph, Carrascoso & Janda for Appellees. Phil., 49; Agoncillo v. Javier, 38 Phil., 424.)

present appeal was interposed.

The two legal issues to be determined in this appeal are (1)

whether the provisions of Paragraph 15 of the Management
Contract between appellee Delgado Brothers, Inc. and the Bureau
of Customs are valid, and (2) in the affirmative, whether plaintiff-
This is an appeal interposed directly with this Court by plaintiff appellant is bound by said provisions.
Northern Motors Inc., as owner of certain imported articles, from
the decision of the Court of First Instance of Manila (in Civil Case Anent the first issue, Paragraph 15 of the Management Contract,
No. 29098) ordering defendant Delgado Brothers, Inc., as the where pertinent, provides:jgc:chanrobles.com.ph
Arrastre Contractor in the Port of Manila, to pay said plaintiff the
amount of P500.00 and costs, instead of P3,117.53 as demanded "15. It is further understood and strictly agreed that the
by it in its complaint. The facts as found and considered by the CONTRACTOR (appellee) shall at its own expenses handle all
trial court must, therefore, control the resolution of this appeal. merchandise upon or over said piers, wharves and other
designated places, and at its own expense perform all work
Plaintiff-appellant is the owner, by transfer from Liddel & Co., undertaken by it hereunder diligently and in a skillful
Inc., of a consignment of merchandise, consisting of 33 cases of workmanlike and efficient manner; and the CONTRACTOR
auto spare parts and accessories, covered by Bill of Lading No. 19, (appellee) shall be solely responsible as an independent contractor
discharged in Manila into the custody of defendant Delgado for, and promptly pay to the steamship company, consignee,
Brothers, Inc., and later cleared and taken delivery of by Luzon consignor, or other interested party or parties the invoice value of
Brokerage Co., Inc., as agents of the consignee, upon presentation each package but which in no case shall be more than five
of the corresponding release papers from the Bureau of Customs. hundred pesos (P500.00) for each package, unless the value is
However, instead of 33 cases, only 32 were delivered to plaintiffs otherwise specified or manifested, and the corresponding arrastre
broker. Plaintiff, thereupon, demanded payment of the reasonable charges had been paid, including all damages that may be
value (P3,117.53) of the missing case from defendant Delgado suffered on account of loss, destruction, or damage of any
Brothers, Inc., but later offered to refund only P500.00, claiming merchandise while in the custody or under the control of the
that under paragraph 15 of its Management Contract, its liability CONTRACTOR (appellee) upon any pier, wharf or other designated
is limited only to P500.00 unless the value of the merchandise is place under the supervision of the BUREAU , . . ." (Italics supplied)
otherwise specified or manifested. Such was the issue presented
by the pleadings, after the case was taken to court. After a short Appellant claims that the above quoted provision is null and void,
trial consisting in admissions and stipulations, the court rendered as it limits the liability of appellee for the loss, destruction or
a decision which, in part, reads:jgc:chanrobles.com.ph damage of any merchandise, to P500.00 per package, contending
that to sustain the validity of the limitation would be to encourage
"It appearing that defendant Delgado Brothers, Inc. admitted acts of conversion and unjust enrichment on the part of the
having received the 33 cases in good order condition from the arrastre operator. Appellant, however, overlooks the fact that the
shipper and that it delivered only 32 cases to the consignee, the limitation of appellees liability under said provision, is not
other defendants are now exempt from any liability. The only absolutely or unqualified, for if the value of the merchandise is
question for us to resolve is, as to whether or not paragraph 15 of specified or manifested by the consignee, and the corresponding
the management contract limiting the liability of the arrastre arrastre charges are paid on the basis of the declared value, the
contractor to P500.00 may be invoked by the Delgado Brothers, limitation does not apply. Consequently, the questioned provision
Inc. Plaintiff contends that the management contract in question is neither unfair nor arbitrary, as contended, because the
is not binding upon it for the reason that it was not a party consignee has it in his hands to hold, if he so wishes, the arrastre
thereto. operator responsible for the full value of his merchandise by
merely specifying it in any of the various documents required by
"We have had occasion to resolve a similar question in the case of him, 1 in clearing the merchandise form the customs. For then,
Jose Bernabe and co. v. Delgado Brothers, Inc., Civil Case No. the appellee arrastre operator, by reason of the payment to it of a
306150, Court of First Instance, Manila. We advanced the opinion commensurate charge based on the higher declared value of the
in that case, that paragraph 15 of the management contract is merchandise, could and should take extraordinary care of the
binding upon the importer or consignee. In that case we special or valuable cargo. In this manner, there would be
said:chanrob1es virtual 1aw library mutuality. What would, indeed, be unfair and arbitrary is to hold
the arrastre operator liable for the full value of the merchandise
The Court is of the opinion that the plaintiff is bound by the after the consignee has paid the arrastre charges only a basis
provisions of the management contract. As a matter of fact, it much lower than the true value of the goods.
complied with such provisions as were necessary for it to take
delivery of the cargo. Plaintiff should not take advantage of the This Court has held as valid and binding a similar provision in a
management contract when it suits him to do so, and reject its bill of lading limiting the carriers liability to a specific amount,
provisions when it thinks otherwise. unless the shipper expressly declares a higher valuation and pays
the corresponding rate thereon. (H.E. Heacock Company v.
"We have no reason to change our opinion. We believe that in the Macondray & Company, Inc., 42 Phil., 205; Freixas and Company
instant case, as in the case we have mentioned above, plaintiff is v. Pacific Mail Steamship Co., 42 Phil., 199. )2 In the H.E.
bound by the provisions of the management contract. The general Heacock Company case, we stated that -
rule that only parties to the contract are bound to its provisions is
not absolute. (Mendoza v. PAL, Inc., G.R. No. L-3673 promulgated "Three kinds of stipulation have often been made in the bill of
on February 29, 1952 and Krauffman v. PNB, 42 Phil., lading. The first is one exempting the carrier from any and all
182)."cralaw virtua1aw library liability for loss or damage occasioned by its own negligence. The
second is one providing for an unqualified limitation of such
Plaintiffs motion for reconsideration having been denied, the liability to an agreed valuation. And the third is one limiting the
liability of the carrier to an agreed valuation unless the shipper "If a contact should contain some stipulation in favor of a third
declares a higher value and pays a higher rate of freight. person, he may demand its fulfillment provided he communicated
According to an almost uniform weight of authority, the first and his acceptance to the obligor before its revocation. A mere
second kinds of stipulations are invalid as being contrary to incidental benefit or interest of a person is not sufficient. The
public policy, but the third is valid and enforceable." (Italics contracting parties must have clearly and deliberately conferred a
supplied.) favor upon a third person."cralaw virtua1aw library

The principle above enunciated was finally incorporated as law in Tested in the light of the above legal provision, Paragraph 15 of the
Article 1749 of the new Civil Code, which Management Contract in question, it is believed, contains
reads:jgc:chanrobles.com.ph provisions which are in the nature of stipulations pour autrui,
that is, for the benefit or in favor of a third party, the appellant in
"ART. 1749. A stipulation that the common carriers liability is the case at bar. By virtue thereof, appellee is expected to render
limited to the value of the goods appearing in the bill of lading, service, not to the Bureau of Customs, but specifically and
unless the shipper or owner declares a greater value, is principally to the importers or consignees of the cargoes. Upon the
binding."cralaw virtua1aw library importers or consignees compliance with certain conditions,
namely, presentation of approved delivery permits, payment of
The same is true in the warehousing business where limitation on arrastre fees, etc., he is entitled to receive, and the appellee
the warehousemans liability is universally recognized and upheld. arrastre contractor is obliged to discharge and deliver, the cargoes
Thus - or merchandise corresponding to those described in the delivery
permit of said importer or consignee. There can scarcely be any
"However, in the absence of prohibitory statute, the validity of a doubt that by said provision in the contract, appellee and the
limitation of the amount of liability is generally upheld, where Bureau of Customs deliberately and purposely conferred benefit
with a view to obtaining a compensation commensurate to the risk upon appellant, because it is to the latter the merchandise was to
assumed, the warehouseman stipulates that unless the valuation be delivered in good order and payment made, in the event of
of the property committed to his care is disclosed, his damage, destruction, or loss thereof while in appellees control or
responsibility for loss or damage shall not exceed a certain custody.
amount or that in case of loss or damages the valuation fixed in
the receipt shall be controlling." (Am. Jur., Vol. 56, p. 419, citing Having arrived at the conclusion that said contract contains
Taussig v. Bode, 134 Cal. 260, 66 P. 159, 54 LRA 772, 86 Am. St. provisions which clearly and deliberately confer a favor upon a
Rep. 250; Central Storage Whse. Co. v. Pickering, 114 Ohio St. 76, third person (using the language of the article aforecited), the next
151 NE 29, 141 ALR 768). inquiry is whether the beneficiary, herein appellant, has accepted
said favor and communicated his acceptance to the obligor, herein
The legal relationship created between the consignee or owner of appellee.
the imported goods who withdraws them from the customshouse
and the arrastre operator whose services are utilized for the In the pleadings filed by the parties, as well as in the decision of
purpose, is sufficiently akin to that existing between the the court a quo, we find ample evidence of appellants acceptance
consignee or owner of shipped goods and the common carrier or of said favor in its communication thereof to appellee.
that between a depositor and the warehouseman, to warrant, in
our opinion, the application of the same or similar principle. Paragraph III of appellants complaint 3 contains the following
Consequently, we hold that the provisions of Paragraph 15 of the allegation:jgc:chanrobles.com.ph
Management Contract in question are valid and legal.
"Delgado Brothers had been the operator of the arrastre service at
In the case of Caltex (Philippines), Inc., Et. Al. v. Delgado the Port of Manila up to February 29, 1956 and was authorized as
Brothers, Inc., Et Al., (96 Phil. 368), this Court, speaking through such to deliver cargoes discharged by carrying vessels into its
the Chief Justice, characterized this same Management Contract custody on presentation of release papers from the Bureau of
between appellee and the Bureau of Customs as "Not an ordinary Customs and the steamship carrier and/or its agents."cralaw
agreement involving merely the parties therein as the same affect virtua1aw library
the public in general, particularly as to the rates of an exemptions
from the arrastre charges." In fact, the contract is awarded only Stipulation Nos. 1 and 2 4 read:jgc:chanrobles.com.ph
after a public bidding in which the conditions thereof are made
public for consideration by prospective bidders. "1. That the Delgado Brothers received 33 cases from the carrier.

We come now to the determination of the second issue of whether "2. That Delgado Brothers only delivered 32 cases to Luzon
appellant was bound by the provisions of said Paragraph 15 of the Brokerage Company, Inc." (Appellants agent)."cralaw virtua1aw
Management Contract. Appellant contends that since it was not a library
party to the said contract, it was not bound by its provisions. The
facts of this case and the law applicable thereto do not support We quote from the decision. 5
this view.
". . . The parties agreed.
Article 1311 of the new Civil Code, states:jgc:chanrobles.com.ph
"(1) That defendant Delgado Brothers, Inc. received from the
"ART. 1311. Contracts take effect only between the parties, their carrier, goods covered by bill of lading NO. 19;" (2) That in the said
assigns and heirs, except in case where the rights and obligations bill of lading, 33 cases of auto space parts and accessories were
arising from the contract are not transmissible by their nature, or included;" (3) That Delgado Brothers, Inc. in its capacity as
by stipulation or by provision of law. The heir is not liable beyond arrastre contractor received the 33 cases in apparent good order
the value of the property he received from the decedent. and condition as per corresponding tally sheets;" (4) That Delgado
Brothers, Inc. only delivered to the consignee 32 cases out of the
33 cases;" (5) That paragraph 15 of the management contract virtue of the latters obligations as the arrastre contractor under
entered into by the Delgado Brothers, Inc. and the Bureau of the same Management Contract, for the purpose of recovering the
Customs limits to only P500.00 the liability of the arrastre reasonable value of the missing case of auto spare parts and
contractor for undeclared value of goods received.." . . As a matter accessories. Under the circumstances, as the trial court aptly
of fact it (appellant) complied with such provisions (of the observed: "Plaintiff should not take advantage of the Management
Management Contract) as were necessary for it to take delivery of Contract when it suits him to do so and reject its provisions when
the cargo. . . ."cralaw virtua1aw library it thinks otherwise." The principle is the same or similar to that
involved in the case of Mendoza v. Philippine Air Lines, Inc. (90
It is undisputed, therefore, that appellant took delivery of its cargo Phil., 836), wherein it was held that -
from appellee, as arrastre operator under the Management
Contract, and after the presentation and signing by it, through its ". . . even if the LVN Pictures, Inc. as a consignor of its own
duly authorized broker, of the pertinent documents covering the initiative, and acting independently of Mendoza for the time being,
release of said cargoes. made Mendoza as consignee, a stranger to the contract, if that is
possible, nevertheless, when he, Mendoza, appeared at the Pili Air
According to the law, 6 before delivery of the cargo could be made, Port armed with the copy of the Air way Bill (Exh. 1) demanding
the consignee or owner, or his representative must first clear them the delivery of the shipment to him, he thereby made himself a
from the Bureau of Customs and obtain therefrom a Delivery party to the contract of . transportation. . . . His demand for the
Permit and a Gate Pass. Among the conditions imposed by law for delivery of the can of film to him at the Pili Air Port may be
this purpose is for the owner or consignee to submit to the regarded as a notice of his acceptance of the stipulation of the
Collector of Customs a written declaration containing, inter alia, a delivery in his favor contained in the contract of carriage and
"just and faithful account of the actual cost of said merchandise, delivery. In this case, he also made himself a party to the contract,
including and specifying the value of all containers or coverings, or at least has come to court to enforce it. His cause of action
and that nothing has been omitted therefrom or concealed must necessarily be founded on its breach." (Italics supplied.)
whereby the Government of the Republic of the Philippines might
be defrauded of any part of the duties lawfully due on the We do not find it necessary to pass, in detail, upon appellants
merchandise." In the delivery permit thus obtained, the following claim (which we find without merit) that the limited liability
"Important Notice" is stamped or printed:jgc:chanrobles.com.ph provision in Paragraph 15 of the Management Contract in
question has not statutory basis under Act No. 3002, as amended,
"IMPORTANT NOTICE inasmuch as the question was never raised by appellant in the
court a quo. The rule is well-settled that no question will be
"All cargo covered by this permit are delivered to and received by considered by the appellate court which has not been raised in the
Consignees and importers representative subject to all the terms court below. (Toribio v. Decasa, 55 Phil., 461; Sanagustin v.
and conditions of the Management Contract between the Bureau Barrios, 68 Phil. 475.) When a party deliberately adopts a certain
of Customs and Delgado Brothers, Inc. (appellee), (or whoever may theory, and the case is tried and decided upon the theory in the
be the arrastre contractor) dated October 21, 1950, and all court below, he will not be permitted to change his theory on
amendments thereto or alterations thereof, particularly but not appeal because, to permit him to do so, would be unfair to the
limited to Paragraph 15 thereof limiting the company liability to adverse party. (Molina v. Somes, 24 Phil., 49; Agoncillo v. Javier,
P500.00 per package, unless the value of the goods is otherwise 38 Phil., 424.)
specified or manifested and the corresponding arrastre charges
have been paid . . . (Italics supplied.) Wherefore, finding no reversible error in the decision appealed
from, the same is hereby affirmed, with costs against the plaintiff-
In the Gate pass which covers the receipt and release of the cargo appellant. So ordered.
duly signed by the importers or consignees representative, the
following annotation also appears:jgc:chanrobles.com.ph Bengzon, Montemayor, Bautista Angelo, Labrador, Reyes, J.B.L.,
and Endencia, JJ., concur.
"The undersigned, duly authorized to respectively represent the
Bureau of Customs, the above named consignee, and the arrastre
service operator, hereby certify to the correctness of the above THIRD DIVISION
description of the goods covered by this Gate Pass. Issuance of
this Gate Pass constitutes delivery to, and receipt by CONSIGNEE ASIAN TERMINALS, INC., G.R. N
of the goods as described herein, subject to all the terms and
conditions contained in the Management Contract between the
Bureau of Customs and Delgado Brothers, Inc. (appellee) (or Presen
whoever may be the arrastre contractor) dated October 21, 1950,
and all amendments thereto or alterations thereon, particularly CARPIO
but not limited to Paragraph 15 thereof limiting the company
liability to P500.00 per package, unless the value of the goods is
- versus - Chairp
otherwise specified or manifested . . ." (Italics supplied.)
Even, therefore, if appellant was not a signatory to said NACHU
Management Contract, it legally became a party thereto when it PERAL
(through its broker, the Luzon Brokerage Co. Inc.) obtained the
delivery permit and gate pass in the above manner prescribed by
law and, making use of them, demanded from appellee the
delivery of the 33 cases, pursuant to appellees undertaking in Respondent.
virtue of the very same Management Contract. Again, it became Februa
bound when it brought court action against appellee, also by
Dongnama and Uni-ship filed a Motion to Dismiss [16] on
x------------------------------------------------------------------------------------x the grounds that Daehan lacked legal capacity to sue and that the
complaint stated no cause of action. The trial court, however,
denied the motion in an Order dated August 31, 2001.[17]

Thereafter, Dongnama and Uni-ship filed their Answer
with Counterclaim and Cross-Claim Ad Cautelam denying any
NACHURA, J.: liability for the damages/losses sustained by the shipment,
pointing out that it was on a Full Container Load, Said to
Contain, and Shippers Load and Count bases, under which they
had no means of verifying the contents of the containers. They
also alleged that the container van was properly discharged from
This is a petition for review on certiorari under Rule 45 of the the vessel with seals intact and no exceptions noted. Moreover,
Rules of Court, assailing the Court of Appeals (CA) September 14, they claimed that the losses occurred while the subject shipment
2005 Decision[1] and December 20, 2005 Resolution [2] in CA-G.R. was in the custody, possession or control of the shipper, its
CV No. 83647. The assailed Decision reversed and set aside the trucker, the arrastre operator, or their representatives, or due to
Regional Trial Court (RTC)[3] August 4, 2004 Decision[4] in Civil the consignees own negligence. They further questioned the
Case No. 01-101309, while the assailed resolution denied absence of notice of loss within the three (3)-day period provided
petitioner Asian Terminals, Inc.s motion for reconsideration. under the Carriage of Goods by Sea Act. Finally, they averred that
their liability, if there be any, should only be limited to US$500.00
per package or customary freight unit. [18]
The case stemmed from the following facts:

For its part, petitioner denied liability, claiming that it

On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six
exercised due diligence in handling and storing the subject
(26) boxes of printed aluminum sheets on board the vessel Heung-
container van. It, likewise, assailed the timeliness of the
A Dragon owned by Dongnama Shipping Co., Ltd. (Dongnama).
complaint, having been filed beyond the fifteen (15)-day period
The shipment was covered by Bill of Lading No.
under its Contract for Cargo Handling Services with the Philippine
DNALHMBUMN010010[6] and consigned to Access International,
Ports Authority (PPA). If at all, petitioner added, its liability should
with address at No. 9 Parada St., San Juan, Metro Manila. Doosan
only be limited to P5,000.00.[19]
insured the subject shipment with respondent Daehan Fire and
Marine Insurance Co., Ltd. under an all-risk marine cargo
insurance policy,[7]payable to its settling agent in the Philippines, In her Answer, V. Reyes Lazo questioned respondents
the Smith Bell & Co., Inc. (Smith Bell). capacity to sue in Philippine courts. She accused respondent of
engaging in a fishing expedition since the latter could not
determine with clarity the party at fault.[20]
On July 12, 2000, the vessel arrived in Manila and the
containerized van was discharged and unloaded in apparent good
condition, as no survey and exceptions were noted in the On December 2, 2002, in their Joint Motion to Dismiss,
Equipment Interchange Receipt (EIR) issued by petitioner. [8] The respondent, on one hand, and Dongnama and Uni-ship, on the

container van was stored in the Container Yard of the Port. On other, prayed that the complaint be dismissed against the latter,
July 18, 2000, Access International requested [9]from petitioner and alleging that they could not be held liable based on the EIR. The
the licensed Customs Broker, Victoria Reyes Lazo (V. Reyes Lazo), motion was granted on December 9, 2002. [22] Consequently, the
a joint survey of the shipment at the place of storage in the case proceeded as against petitioner and V. Reyes Lazo.
Container Yard, but no such inspection was conducted.
As no amicable settlement was reached during the
On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, pretrial, trial on the merits ensued.
the shipment and delivered it to Access Internationals warehouse
in Binondo, Manila.[10] While the shipment was at Access On August 4, 2004, the RTC dismissed the complaint for
Internationals warehouse, the latter, together with its surveyor, insufficiency of evidence.[23] It found the complaint fatally flawed,
Lloyds Agency, conducted an inspection and noted that only having been signed by a person who had no authority from
twelve (12) boxes were accounted for, while fourteen (14) boxes complainant (respondent herein) corporation to act for and on
were missing.[11] Access International thus filed a claim against behalf of the latter.[24] The RTC, likewise, held that respondent
petitioner and V. Reyes Lazo for the missing shipment amounting failed to prove that the loss/damage of the subject cargoes was
to $34,993.28.[12]For failure to collect its claim, Access due to the fault or negligence of petitioner or V. Reyes Lazo. It
International sought indemnification from respondent in the added that the cargoes were damaged when they were already in
amount of $45,742.81.[13] On November 8, 2000, respondent paid Access Internationals possession, considering that an inspection
the amount of the claim and Access International accordingly was conducted in the latters warehouse.[25]
executed a Subrogation Receipt in favor of the former. [14]

On appeal, the CA reversed and set aside the RTC

On July 10, 2001, respondent, represented by Smith Bell, decision. The dispositive portion of the CA decision reads:
instituted the present case against Dongnama, Uni-ship, Inc. (Uni-
ship), petitioner, and V. Reyes Lazo before the RTC. [15] Respondent
alleged that the losses, shortages and short deliveries sustained WHEREFORE, premises considered,
by the shipment were caused by the joint fault and negligence of the present appeal is hereby GRANTED. The
Dongnama, petitioner and V. Reyes Lazo. appealed Decision dated August 4, 2004 of the
Regional Trial Court of Manila, Branch 21 in
Civil Case No. 01-101309 is hereby REVERSED
and SET ASIDE. A new judgment is hereby petitioner insists that it be limited to P5,000.00 per package, as
entered ordering the defendants-appellees Asian provided for in its Management Contract with the PPA. [33]
Terminals, Inc. and V. Reyes Lazo to pay, jointly
and severally, the plaintiff-appellant Daehan We do not agree with petitioner.
Fire & Marine Insurance Co., Ltd. the sums
of P2,295,374.20 with interest at the legal rate
(6% per annum) from the date of the filing of Respondent, as insurer, was subrogated to the rights of
the complaint and P229,537.42 by way of the consignee, pursuant to the subrogation receipt executed by
attorneys fees. the latter in favor of the former. The relationship, therefore,
between the consignee and the arrastre operator must be
examined. This relationship is akin to that existing between the
No pronouncement as to costs. consignee and/or the owner of the shipped goods and the
common carrier, or that between a depositor and a
SO ORDERED.[26] warehouseman.[34] In the performance of its obligations, an
arrastre operator should observe the same degree of diligence as
that required of a common carrier and a warehouseman. Being
the custodian of the goods discharged from a vessel, an arrastre
operators duty is to take good care of the goods and to turn them
over to the party entitled to their possession. [35]

Applying the principle of substantial compliance, the CA The loss of 14 out of 26 boxes of printed aluminum
recognized the validity of respondents complaint after the sheets is undisputed. It is, likewise, settled that Dongnama (the
submission, albeit late, of the board resolution, indicating the shipping company) and Uni-ship were absolved from liability
authority of the signatory to represent the corporation. because respondent realized that they had no liability based on
Pursuant to the Management Contract between petitioner and the EIR issued by Dongnama. This resulted in the withdrawal of
the PPA, the former may not disclaim responsibility for the the complaint against them. What remained was the complaint
shortage of the subject cargoes while the container van remained against petitioner as the arrastre operator and V. Reyes Lazo as
in its custody for seven (7) days, despite the withdrawal of the the customs broker. Records show that the subject shipment was
subject shipment by the brokers representative without any discharged from the vessel and placed under the custody of
complaint. Applying E. Razon, Inc. v. Court of Appeals, [28] the CA petitioner for a period of seven (7) days. Thereafter, the same was
refused to impose the P5,000.00 limitation, considering that withdrawn from the container yard by the customs broker, then
petitioner was aware of the value of the subject goods shown in delivered to the consignee. It was after such delivery that the loss
the pertinent shipping documents.[29] The CA added that petitioner of 14 boxes was discovered. Hence, the complaint against both the
could not disclaim any liability, having refused or ignored Access arrastre operator and the customs broker.
Internationals request for a joint survey at the time when the
In a claim for loss filed by the consignee (or the insurer),
goods were still in the possession and custody of the former.
the burden of proof to show compliance with the obligation to
Lastly, V. Reyes Lazo was also made liable jointly and severally
deliver the goods to the appropriate party devolves upon the
with petitioner in negligently withdrawing the container van from
arrastre operator. Since the safekeeping of the goods is its
the premises of the pier, notwithstanding Access Internationals
responsibility, it must prove that the losses were not due to its
request for a joint survey.[31]
negligence or to that of its employees. [36] To prove the exercise of
diligence in handling the subject cargoes, petitioner must do more
Aggrieved, petitioner comes before us in this petition for review than merely show the possibility that some other party could be
on certiorari, raising the following issues: responsible for the loss or the damage. It must prove that it
exercised due care in the handling thereof. [37] Petitioner failed to do
1. WHETHER OR NOT PETITIONER ATI IS this. Instead, it insists that it be exonerated from liability, because
LIABLE FOR THE LOSS TO THE SUBJECT the customs brokers representative received the subject shipment
SHIPMENT NOTWITHSTANDING THE in good order and condition without exception. The appellate
ACKNOWLEDGMENT BY THE CONSIGNEES courts conclusion on this matter is instructive:
EQUIPMENT INTERCHANGE RECEIPT THAT ATI may not disclaim responsibility for the
THE SHIPMENT WAS RECEIVED IN GOOD shortage/pilferage of fourteen (14) boxes of
ORDER AND WITHOUT EXCEPTION. printed aluminum sheet while the container
van remained in its custody for seven (7) days
2. WHAT IS THE EXTENT OF PETITIONER ATIS (at the Container Yard) simply because the
LIABILITY, IF ANY?[32] alleged representative of the customs broker
had withdrawn the shipment from its premises
Simply put, we are tasked to determine the propriety of
and signed the EIR without any complaint. The
making petitioner, as arrastre operator, liable for the loss of the
signature of the person/broker representative
subject shipment, and if so, the extent of its liability.
merely signifies that said person thereby frees
the ATI from any liability for loss or damage to
Petitioner denies liability for the loss of the subject the cargo so withdrawn while the same was in
shipment, considering that the consignees representative signified the custody of such representative to whom the
receipt of the goods in good order without exception. This being cargo was released. It does not foreclose any
the case, respondent, as subrogee, is bound by such remedy or right of the consignee to prove that
acknowledgment. As to the extent of its liability, if there be any, any loss or damage to the subject shipment
occurred while the same was under the
custody, control and possession of the arrastre
operator.[38] However, his request was denied averring that
stripping of FCL Van Containers are not allowed
inside the Customs Zone. As all efforts exerted
proved futile, he instead bought new padlock
Clearly, petitioner cannot be excused from culpability simply
and secured same to the Van. He then informed
because another person could be responsible for the loss. This is
the Consignee about the incident upon delivery
especially true in the instant case because, while the subject
of the Container at the Consignees designated
shipment was in petitioners custody, Access International
warehouse, who immediately requested for
requested[39] that a joint survey be conducted at the place of
storage. And as correctly observed by the CA:
Considering that both petitioner and V. Reyes Lazo were
negligent in the performance of their duties in the handling,
There is no dispute that it was the customs
storage and delivery of the subject shipment to the consignee,
broker who in behalf of the consignee took
resulting in the loss of 14 boxes of printed aluminum sheets, both
delivery of the subject shipment from the
shall be solidarily liable for such loss.
arrastre operator. However, the trial court
apparently disregarded documentary evidence
showing that the consignee made a written As to the extent of petitioners liability, we cannot sustain
request on both the appellees ATI and V. Reyes its contention that it be limited to P5,000.00 per
Lazo for a joint survey of the container van package. Petitioners responsibility and liability for losses and
on July 18, 2000 while the same was still in the damages are set forth in Section 7.01 of the Management Contract
possession, control and custody of the arrastre drawn between the PPA and the Marina Port Services, Inc.,
operator at the Container Yard of the pier. Both petitioners predecessor-in-interest, to wit:
ATI and Lazo merely denied being aware of the
letters (Exhibits M and N). The fact remains CLAIMS AND LIABILITY FOR LOSSES AND
that the consignee complained of short-delivery DAMAGES
and while inspection of the cargo was made
only at its warehouse after delivery by the
Section 7.01. Responsibility and Liability for
customs broker, the arrastre ATI together with
Losses and Damages; Exceptions. The
said broker both refused or ignored the written
CONTRACTOR shall, at its own expense, handle
request for a joint survey at the premises of the
all merchandise in all work undertaken by it,
arrastre. Instead of complying with the
hereunder, diligently and in a skillful,
consignees demand, the broker withdrew and
workman-like and efficient manner. The
the arrastre released the shipment the very
CONTRACTOR shall be solely responsible as an
next day,July 19, 2000 without even acting
independent contractor, and hereby agrees to
upon the consignees request for a joint survey.
[40] accept liability and to pay to the shipping
company, consignees, consignors or other
interested party or parties for the loss, damage
or non-delivery of cargoes in its custody and
Moreover, it was shown in the Survey Report prepared by control to the extent of the actual invoice value
Access Internationals surveyor that petitioner was remiss in its of each package which in no case shall be more
obligations to handle the goods with due care and to ensure that than FIVE THOUSAND PESOS (P5,000.00)
they reach the proper party in good order as to quality and each, unless the value of the cargo shipment is
quantity. Specifically, the Survey Report states: otherwise specified or manifested or
communicated in writing together with the
declared Bill of Lading value and supported by
a certified packing list to the CONTRACTOR by
the interested party or parties before the
discharge or loading unto vessel of the
DELIVERY goods. This amount of Five Thousand Pesos
(P5,000.00) per package may be reviewed and
On July 19, 2000, V. Reyes-Lazo (Licensed adjusted by the AUTHORITY from time to
Customs Broker) effected delivery of the 1 x 20 time. The CONTRACTOR shall not be
Van Container from the Container Yard of said responsible for the condition or the contents of
port to the Consignees designated warehouse at any package received, nor for the weight nor for
No. 622 Asuncion Street, Binondo, Manila. any loss, injury or damage to the said cargo
before or while the goods are being received or
remains in the piers, sheds, warehouses or
Prior to withdrawal from the said port, the facility, if the loss, injury or damage is caused
Brokers representative noticed that the padlock by force majeure or other causes beyond the
secured to the doors of the Van Container was CONTRACTORS control or capacity to prevent
forcibly pulled-out resulting to its breakage. He or remedy; PROVIDED that a formal claim
then immediately informed the Arrastre together with the necessary copies of Bill of
Contractors (ATI) and requested that Van Lading, Invoice, Certified Packing List and
Container be opened and inventory of its Computation arrived at covering the loss, injury
contents be made as he suspected the contents or damage or non-delivery of such goods shall
might have been pilfered.
have been filed with the CONTRACTOR within The stipulation requiring the consignee to inform the arrastre
fifteen (15) days from day of issuance by the operator and to give advance notice of the actual invoice value of
CONTRACTOR of a certificate of non-delivery; the goods to be put in its custody is adopted for the purpose of
PROVIDED, however, that if said CONTRACTOR determining its liability, that it may obtain compensation
fails to issue such certification within fifteen commensurate to the risk it assumes, not for the purpose of
(15) days from receipt of a written request by determining the degree of care or diligence it must exercise as a
the shipper/consignee or his duly authorized depositary or warehouseman.[47]
representative or any interested party, said
certification shall be deemed to have been
WHEREFORE, premises considered, the petition is
issued, and thereafter, the fifteen (15) day
hereby DENIED for lack of merit. The Court of Appeals September
period within which to file the claim
14, 2005 Decision and December 20, 2005 Resolution in CA-G.R.
commences; PROVIDED, finally, that the
CV No. 83647 are AFFIRMED.
request for certification of loss shall be made
within thirty (30) days from the date of delivery SO ORDERED.
of the package to the consignee.
Republic of the Philippines
The CONTRACTOR shall be solely
responsible for any and all injury or damage
that may arise on account of the negligence or
carelessness of the CONTRACTOR, its agent or
employees in the performance of the G.R. No. L-48686 October 4, 1989
undertaking under the Contract. Further, the
CONTRACTOR hereby agrees to hold free the
AUTHORITY, at all times, from any claim that NEW ZEALAND INSURANCE COMPANY, LTD., petitioner,
may be instituted by its employee by reason of vs.
the provisions of the Labor Code, as amended. HONORABLE MIGUEL R. NAVARRO and E. RAZON,
INC., respondents.

As clearly stated above, such limitation does not apply if the value
of the cargo shipment is communicated to the arrastre operator
before the discharge of the cargoes. FELICIANO, J.:

The instant Petition seeks review of the Decision dated 14
It is undisputed that Access International, upon arrival January 1978 rendered by Branch 31 of the then Court of First
of the shipment, declared the same for taxation purposes, as well Instance of Manila, Sixth Judicial District, in Civil Case No. 97581
as for the assessment of arrastre charges and other fees. For the (entitled "New Zealand Insurance Co. Ltd., plaintiff, versus
purpose, the invoice, packing list and other shipping documents
Maritime Company of the Philippines, E. Razon Inc., E.B. Marcha
were presented to the Bureau of Customs as well as to petitioner
Transport Co., Inc. and Executive Brokerage Corp., defendants").
for the proper assessment of the arrastre charges and other
fees. Such manifestation satisfies the condition of declaration of
the actual invoices of the value of the goods before their arrival, to The background facts are stated in the decision of the trial court:
overcome the limitation on the liability of the arrastre operator.
Then, the arrastre operator, by reason of the payment to it of a
The New Zealand Insurance Co., Ltd. ["New
commensurate charge based on the higher declared value of the
merchandise, could and should take extraordinary care of the Zealand," petitioner herein] instituted this
special or valuable cargo. [44] What would, indeed, be unfair and action to recover from defendants Maritime
arbitrary is to hold the arrastre operator liable for the full value of Company of the Philippines and E. Razon Inc.
the merchandise after the consignee has paid the arrastre charges ["Razon," respondent herein], the sum of
only on a basis much lower than the true value of the goods. [45] P19,644.05 it paid to the consignee for the loss
by spillage and contamination of imported
What is essential is knowledge beforehand of the extent of the risk soybean meal, and from either E. Razon, Inc. or
to be undertaken by the arrastre operator, as determined by the Executive Brokerage Corporation and E.B
value of the property committed to its care. This defines its
Marcha Transport Co., Inc. the value of the
responsibility for loss of or damage to such cargo and ascertains
undelivered 30 bags of soybean meal, with
the compensation commensurate to such risk assumed. Having
been duly informed of the actual invoice value of the merchandise interest, plus costs of suit.
under its custody and having received payment of arrastre charges
based thereon, petitioner cannot therefore insist on a limitation of Upon plaintiff's motions and on the ground of
its liability under the contract to less than the value of each lost
payments in settlement of its claims against
defendants E.B. Marcha Transport Co., Inc.,
Executive Brokerage Corporation and Maritime Responsibility and Liability for Losses and
Co., the case was dismissed as respect them. Damages, Claims. The CONTRACTOR
[respondent Razon] shall... be solely responsible
The facts, as gathered from the documented as an independent CONTRACTOR, and hereby
evidence, are not disputed. Defendant Maritime agrees to accept liability, and to promptly pay to
Company of the Philippines [on May 1, 1974] the steamship company, consignee, consignor
loaded 5,974 bags of soybean meal, with a or other interested party or parties for the loss,
gross weight of 100 lbs. per bag and a total damage or non-delivery of cargoes... as well as
invoice value (C & F/Manila) of $83,374.30 on all damage that may be suffered on account of
board its M/S "Zamboanga" in New Orleans, loss, damage or destruction of any merchandise
U.S.A., for shipment to Monterey Farms while in custody or under control of the
Corporation at Manila (Exhs. A, B, 32-B & 32- CONTRACTOR... ; PROVIDED, that a formal
A). 2 Upon discharge [on June 28,1974] of the claim together with the necessary copies of the
cargo from the vessel into the custody of Bill of Lading, invoice, certified packing list,
defendant arrastre operator, E. Razon Inc., 173 bank certificate showing the rate of exchange at
bags of soybean meal were found to be in bad the time of the purchase or opening of letter of
order condition from spillage. The spillage credit, and computation arrived at covering the
amounted to 3,895 lbs. (Exhs. C, H & 2- loss, injury or. damage or non-delivery of such
Razon). 3 goods shall have been filed with the
CONTRACTOR within fifteen (15) days from the
date of issuance by the CONTRACTOR of a
When the shipment was delivered by defendant
certificate of loss, damage or injury or certificate
E. Razon, Inc. to the consignee, a total of 284
of non-delivery, provided further, that if said
bags of soybean meal, weighing 9,953 lbs. was
CONTRACTOR fails to issue such certification
in bad condition (Exhs. D-1, D-2, 30-Razon &
4 within fifteen (15) days from the receipt of
31 -Razon).
written request by the importer or his
authorized representative or any interested
Under date of August 9, 1974, the consignee
party said certificate shall be deemed to have
wrote defendant E. Razon Inc., laying its formal
been issued, and thereafter, the fifteen day
claim for spillage/damage sustained by the
period within which to file the claim shall
shipment (Exhs. D and 32). commence. Provided, finally, that the request
for certificate of loss shall be made within thirty
Having paid the consignee the sum of P (30) days from the date of delivery of last
19,644.05 under the insurance coverage of the package to the consignee, broker or importer.
shipment, the New Zealand Insurance Co., (Emphasis supplied)
Ltd., subrogee, instituted this action, which,
as aforestated, is now directed against E. Judgment was rendered in this case on 14 January 1978. In its
Razon, Inc., the arrastre operator, for disputed Decision, the trial court, although it found that
spillage/loss, weighing 6,058 lbs., sustained by respondent Razon "admits, spillage/loss while the cargo was in its
the additional 111 damaged bags of soybean custody," nevertheless, ordered the dismissal of the complaint
meal, in the amount of US$ 845.091 or with costs against petitioner New Zealand (plaintiff below), upon
P5,746.61 (its equivalent in Philippine pesos at the ground that "the claim for spillage/loss was filed with
the then exchange rate of P6.80 to US $1.00). defendant arrastre operator, E. Razon, Inc., beyond fifteen (15)
days from the issuance of the certificate of loss, damage, injury or
In its Answer 8
to the complaint, respondent Razon (defendant delivery."
below) denied responsibility and liability for the additional loss of
111 bags of soybean meal, alleging that "the questioned shipment The trial court explained its ruling in the following terms:
was delivered to the consignee in exactly the same order, condition
and quantity it was received from the carrying vessel." Respondent The examination report of the Bad Order
Razon alleged further that the claim for indemnity filed with it by Inspector of arrastre operator E. Razon, Inc.,
the consignee, Monterey Farms Corporation, "did not comply with which attests to the spillage/loss from the
the prescribed period within which to file a claim as provided additional damaged bags of soybeans, bears the
under the Management Contract." date of July 9,1974. It was rendered upon
request of consignee's broker. And the
Article VI, Section 1 of the Management Contract then in force examination was conducted in the presence of
between respondent Razon and the Bureau of Customs was thus the consignee's representative. Obviously, this
specifically put in issue. That provision read, in pertinent part: examination report is the certificate of loss,
damage, or injury referred to in Article VI, No.
1, of the Management Contract. And it transaction and documents are still
appearing that the formal claim for the available.... 14
spillage/damage was filed with defendant E.
Razon, Inc. on August 9,1974 (not August 21, We took special note of the above pronouncement six (6) years
1974 as asserted by defendant E. Razon, Inc. in later in Fireman's Fund Insurance Co. v. Manila Port Service Co., et
its Memorandum), the same was filed beyond al. 15 There, fifteen (15) cases of nylon merchandise had been
the 15-day period prescribed by the contract. discharged from the carrying vessel and received by defendant
Manila Port Service Co., the arrastre operator, on 7 July 1961.
In the Petition for Review now before this Court, petitioner New Out of those fifteen (15) cases, however, only twelve (12) had been
Zealand assigned three (3) errors, to wit: delivered to the consignee in good condition. Consequently, on 20
July 1961, the consignee's broker requested a bad order
I examination of the shipment, which was later certified by
defendant's own inspector to be short of three (3) cases. On 15
The respondent judge erred in holding that the August 1961, a formal claim for indemnity was then filed by the
request for, and the result of, the bad order consignee, who was later replaced in the action by plaintiff
examination, Exhibits "D-1" and "D-2" did not Fireman's Fund Insurance Co., the insurer of the goods.
serve the purpose of a claim, contrary to the Defendant, however, refused to honor the claim, arguing that the
doctrine laid down in Firemen's Fund Ins. Co. same had not been filed within fifteen (15) days from the date of
vs. Manila Port Service Co., et al., 16 SCRA 796- discharge of the shipment from the carrying vessel, as required
798. under the arrastre Management Contract then in force between
itself and the Bureau of Customs. The trial court upheld this
argument and hence dismissed the complaint. On appeal by the
consignee, this Court, speaking through Mr. Justice J.B.L. Reyes,
reversed the trial court and found the defendant arrastre operator
The respondent judge erred in holding that the
liable for the value of the lost cargo, explaining as follows:
claim for spillage/ loss was filed beyond the
fifteen (15) day period.
However, the trial court has overlooked the
significance of the request for, and the result of,
the bad order examination, which were filed and
done within fifteen days from the haulage of the
The respondent judge erred in dismissing the
goods from the vessel. Said request and result, in
complaint with costs against the plaintiff.
effect, served the purpose of a claim, which is-

11 12
In both the Comment on the Petition and the Brief it filed
to afford the carrier or
with this Court, respondent Razon no longer raised as an issue
depositary reasonable
the matter regarding its responsibility for the loss of 111 bags of
opportunity and facilities to
soybean meal, the value of which petitioner New Zealand now
cheek the validity of the
seeks to collect in this suit. Respondent Razon, however,
claims while facts are still
maintained its refusal of liability for such loss, solely on the basis
fresh in the minds of the
of petitioner's alleged failure to file a formal claim within fifteen
persons who took part in the
(15) days from the date of last delivery of the soybean meal to the
transaction and documents
consignee's warehouse, in accordance with Article VI, Section 1
are still available. (Consunji
(supra) of the, Management Contract.
vs. Manila Port Service, L-
15551, 29 November 1960)
In Consunji v. Manila Port Service and Manila Railroad Co., this
Court in 1960 stated: Indeed, the examination undertaken by the
defendant's own inspector not only gave the
... Carriers or depositaries sometimes require defendant an opportunity to check the goods but
presentation of claims within a short time after is itself a verification of its own liability ... . 16
deliveryas a condition precedent to their
liability for losses. Such requirement is not
In other words, what the Court considered as the crucial factor in
empty formalism. It has a definite purpose,
declaring the defendant arrastre operator liable for the loss
i.e., to afford the carrier or depositary
occasioned, in the Fireman's Fund case, was the fact that
reasonable opportunity and facilities to check the
defendant, by virtue of the consignee's request for a bad order
validity of the claims while facts are still fresh in
examination, had been able formally to verify the existence and
the minds of the persons who took part in the
extent of its liability within fifteen (15) days from the date of
discharge of the shipment from the carrying vessel i.e., within the
same period stipulated under the Management Contract for the order examination, or certificate of loss,
consignee to file a formal claim. That a formal claim had been filed damage, injury or non- delivery, for that
by the consignee beyond the stipulated period of fifteen (15) days matter.
neither relieved defendant of liability nor excused payment
thereof, the purpose of a formal claim, as contemplated There appears no dispute that the certificate of loss referred to in
in Consunji, having already been fully served and satisfied by the the Management Contract here involved is very similar to if not
consignee's timely request for, and the eventual result of, the bad Identical with the report issued as a result of a bad order
order examination of the nylon merchandise shipped. examination. We think that the trial court took an unreasonably
restrictive view of the applicable provisions of the Management
Relating the doctrine of Fireman's Fund to the case at bar, the Contract (quoted earlier). Under the Management Contract, the
record shows that delivery to the warehouse of consignee consignee had a period of thirty (30) days from the last delivery of
Monterey Farms Corporation of the 5,974 bags of soybean meal, the goods within which to request a certificate of loss from the
had been completed by respondent Razon (arrastre operator) on 9 arrastre operator. From the date of such request for a certificate of
July 1974. On that same day, a bad order examination of the loss, the arrastre operator had a period of fifteen (15) days within
goods delivered was requested by the consignee and was, in fact, which to issue a certificate of loss either actually or constructively.
conducted by respondent Razon's own inspector, in the presence And from such date of issuance of a certificate of loss, the
of representatives of both the Bureau of Customs and the consignee had fifteen (15) days within which to file a formal claim
consignee. The ensuing bad order examination report what the with all accompanying documentation against the arrastre
trial court considered a "certificate of loss-confirmed that out of operator. In other words, the consignee had a period ranging
the 5,974 bags of soybean meal loaded on board the M/S from 45 to 60 days from the date of last delivery of the goodswithin
"Zamboanga" and shipped to Manila, 173 bags had been which to submit a formal claim to the arrastre operator. In the
damaged in transitu while an additional 111 bags had been case at bar, as already pointed out, the request for a bad order
damaged after the entire shipment had been discharged from the examination and the issuance of a report flowing from such bad
vessel and placed in the custody of respondent Razon. Hence, as order examination, both occurred on the very date of last delivery
early as 9 July 1974 (the date of last delivery to the consignee's of the goods to the consignee, i.e., 9 July 1974. The formal
warehouse), respondent Razon had been able to verify and documented claim of the consignee was filed just thirty-one (31)
ascertain for itself not only the existence of its liability to the days after final delivery of the goods to the consignee and after
consignee but, more significantly, the exact amount thereof i.e. verification and ascertainment by the arrastre operator of its own
P5,746.61, representing the value of 111 bags of soybean meal. liability for misdelivery or delivery in bad order of the 1l1 bags of
We note further that such verification and ascertainment of soybean meal. Thus, the consignee literally complied with the
liability on the part of respondent Razon, had been accomplished second proviso of Article VI, Section 1 of the Management
"within thirty (30) days from the date of delivery of last package to Contract that:
the consignee, broker or importer" as well as "within fifteen (15)
days from the date of issuance by the Contractor [respondent The request for certificate of loss shall be made
Razon] of a certificate of loss, damage or injury or certificate of within thirty (30) days from the date of delivery
non-delivery" the periods prescribed under Article VI, Section 1 of last package to the consignee, broker or
of the Management Contract here involved, within which a request importer.
for certificate of loss and a formal claim, respectively, must be filed
by the consignee or his agent. Evidently, therefore, the rule laid
Of course, the consignee had not literally complied with the other
down by the Court in Fireman's Fund finds appropriate
proviso of Article VI, Section 1 of the Management Contract which,
application in the case at bar.
in addition, required the formal claim to be filed with the
contractor "within fifteen (15) days from date of issuance by the
In its questioned decision, however, the trial court held: contractor of a certificate of loss, damage or injury or certificate of
non-delivery." But the whole purpose of time limitations for the
The Fireman's Fund Insurance Co. case is not filing of claims and this is the thrust of Fireman's Fund had
authoritative in the case at bar. The request for, already been fully satisfied by the demand of the consignee for a
and the result of, the bad order examination bad order examination and by the report of the arrastre operator
cannot be considered as a claim within the on the results thereof. the operator had become aware of and had
contemplation of Article VI, No. 1, of the verified the facts giving rise to its liability. The arrastre operator
Management Contract (Exhibit 34), for being, in thus suffered no prejudice at all by the lack of literal compliance
effect, a certificate of loss, damage, injury or with the fifteen (15) day limitation.
non-delivery, the said result, precisely tolls the
commencement of the 15 days within which the Under these circumstances, the Court is compelled to hold that
formal claim should be filed. It, therefore, the consignee had substantially complied with the second time
cannot serve a claim. Otherwise, it would have requirement of Article VI, Section 1 of the Management Contract
been an empty formalism for the contract to and that to release the arrastre operator from liability the reality
require that a formal claim be filed from the and substantive legitimacy of which he does not, and indeed
issuance of said result of a request for bad
cannot, dispute, is intolerable to the conscience of the Court. In 1. The loading and unloading of cargoes to and from the ships
fact, the reasonableness and hence the enforceability of the holds is done by the laborers under the Cebu Arrastre Service
second (15-day) time limitation appears open to serious question, Co., Inc.
when conjoined with the first (30-day) prescriptive period; but this 2. The supervision of the ships officers in the work is confined
only to the proper handling of the cargoes according to their
it is not absolutely necessary to determine.
nature and to the proper placing of the cargoes inside the ships
The Court must stress that respondent E. Razon, being an 3. As to the laborers actuations outside of the handling and
arrastre operator, is a public utility, discharging functions which placing of cargoes inside the ships holds the officers of the ship
are heavily invested with public interest. Provisions limiting the have no supervision.
liability of a public utility operator through the imposition of xxx xxx xxx
multiple prescriptive periods for the filing of claims by members of 6. The Cebu Arrastre Service Co., Inc. is not engaged in the
the general public who must deal with the public utility operator, transportation of the cargoes from the wharf to the bodegas of the
must be carefully scrutinized and reasonably construed so as to shippers. The shippers have their own trucks or provide for the
protect the legitimate interest of the public which the utility must transportation of their cargoes from the wharf to their bodegas.

serve. 7. The laborers of the Cebu Arrastre Service Co., Inc. help only
in the loading of the cargoes from the wharf to the shippers
trucks, for the shippers trucks are provided with their own
WHEREFORE, the Court Resolved to GRANT the Petition for journales.
Review and to SET ASIDE the trial court's Decision in Civil Case On the basis of said report the Collector denied the petition,
No. 97581. Private respondent E. Razon, Inc. is hereby ORDERED holding that inasmuch as the Cebu Arrastre was engaged in the
to pay petitioner New Zealand Insurance Co., Ltd. the amount of loading and unloading of vessels in port, it may be considered a
P5,746.61 in satisfaction of petitioner's claim for indemnity. Costs stevedore within the meaning of section 191 of the Tax Code. In
against private respondent. this connection, it may be stated that section 191 of the Tax Code
imposes a tax equivalent to 3 per cent of the gross receipts on
certain businesses and business entities, among them stevedores.
In his brief counsel for Petitioner-Appellant bitterly assails the
proceedings had in this case, saying that it has been most
Fernan, C.J., Bidin and Cortes, JJ., concur. inquisitorial, reminiscent of the ancient and antiquated method of
administering justice by which the Defendant was condemned
without benefit of confrontation. The guarantee and protection
[G.R. No. L-7444. May 30, 1956.]
jealousy safeguarded by our Constitution has been completely
CEBU ARRASTRE SERVICE, Petitioner-Appellant, vs. disregarded. The report of the BIR Agent was a mere unilateral
COLLECTOR OF INTERNAL REVENUE,Respondent-Appellee. affair and its findings were arrived at without the Petitioner-
Appellants having had the slightest opportunity to be confronted
and his side heard. We have examined the record of the
proceedings and find this attack unfounded. Although the Board
MONTEMAYOR, J.: of Tax Appeals as an appellate board usually considers only the
This is an appeal from the decision of the Board of Tax Appeals evidence that comes with the appeal, nevertheless, in this case a
affirming the decision of the Collector of Internal Revenue (later hearing was had before it, and the very same counsel Atty. Jose
referred to as COLLECTOR), denying exemption to thePetitioner- Muaa testified on behalf of the Cebu Arrastre, his client and of
Appellant Cebu Arrastre Service (later referred to as CEBU which he was the president, but he failed to present any evidence
ARRASTRE) from the percentage tax under section 191 of the or give any testimony in support of his present contention that the
National Internal Revenue Code, and for refund of the amount of Cebu Arrastre is not engaged in the work of loading cargoes into
P2,867.02 already paid. the holds of the boat or unloading the same from it. But in his
In 1952 the Cebu Arrastre, an association of persons engaged in memorandum filed with the Tax Board, he made statements which
the handling of cargoes carried by coastwise vessels stopping at the Tax Board liberally considered as evidence but which the
the port of Cebu, thru its counsel Atty. Jose Muaa petitioned the Board regarded as insufficient and not entirely credible. We
Collector of Internal Revenue for the exemption and the refund reproduce a portion of the decision of the Tax Board on this
based on the following grounds:chanroblesvirtuallawlibrary point:chanroblesvirtuallawlibrary
(1) That they were a group of laborers who had recently In its memorandum filed with us in support of its petition for
organized themselves into an arrastre service association merely review of the case, Petitioners counsel makes some additional
for the purpose of centralizing the collection of handling charges statements of facts wherein he avers that, Their work (that of the
and making direct payment to the men in order to insure the companys laborers) was simply the handling of cargoes at the
compliance of the Minimum Wage Law requirement. wharf almost mechanically under the control and supervision of
(2) That the work of the men of the said arrastre group is under the shipping companies. In cases where boats had booms their
the direct supervision and control of the officers of the ships. work was simply to load on the wharf at the ships tackle by
placing the cargoes in the sling and hooking unto the tackle, and
(3) That the Cebu Arrastre Service is engaged solely in the
unloading by unhooking the sling from the tackle and discharging
loading and unloading of cargoes to and from the boats and is not
the cargoes on the wharf. In rare cases where the boats have no
engaged in the transportation business.
booms, these men carry the cargoes up to the deck for the
Acting upon the petition, the Collector referred the matter to his stevedores on board to store in the hold, in the case of loading,
agent in Cebu for investigation. Mr. Ignacio Quijano, the Assistant and carry cargoes from the deck which have been unloaded from
Agent, conducted the investigation and filed his report, the the hold by the stevedores to the wharf.
pertinent portions of which are as
We have here three descriptions of the kind of work performed by Stevedores are class of laborers at the ports whose business it is
the laborers of Petitionercorporation, of which one is widely to load and unload vessels. (The Senator, 21 F. 191).
different from the other two:chanroblesvirtuallawlibrary one is Stevedore is defined as one whose occupation is to load and
from the investigator of the Bureau of Internal Revenue who says unload vessels in port; chan roblesvirtualawlibraryin other
that the laborers in question carry cargoes to and from the pier to words, a contractor or a jobber for special business ready to be
the hold of ships, which agrees with the description appearing on employed by anybody at his line of work (Rankin vs. Merchants
the original request to the Collector by the President and and Miners Transp. Co., 73 Ga. 239, 54 Am. Rep. 874).
Counselor of the Corporation, the other being the contention of Stevedore and longshoreman, are synonymous terms when
the same official of the Arrastre Service who, in his memorandum interpreted in the light of the work they perform, namely loading
on appeal, would have us believe that its workingmen merely place and unloading of vessels (Zampiere vs. Willian Spencer and Son
the cargoes in the slings and then leave the ships tackle to lift and Corporation, 18b N.Y.S. 639, 640, 194 App. Div. 576).
drop them into the holds or dump them on decks, there to be
Under the above definitions the Cebu Arrastre admittedly engaged
stowed by another set of workingmen, presumably not connected
in the work of loading and unloading coastwise vessels calling at
at all with the Arrastre Service Corporation. When ships are not
the port of Cebu, should be regarded as a stevedore and therefore
provided with booms, cargoes are carried by the Arrastre Service
subject to the percentage tax under section 191 of the Tax Code.
laborers over planks or ladders to be dumped into the deck or into
But even if we applied the narrower and more specific concept of
the hold, there to be stowed by another set of stevedores not
stevedore used by the Tax Board, namely, that a stevedore is one
related to the Corporation.
who places cargoes in the holds of ships in such a way that the
xxx xxx xxx boat would maintain an even keel, and that even with the
The question, then revolves around the facts and around the movement of the boat, especially in rough weather, the cargoes
credibility of the description depicting the exact nature of the work would not be displaced from their original position, still, under the
of the laborers working under the contracts entered into by the finding of fact made by the Tax Board that the Cebu Arrastre is
Cebu Arrastre Co. Inc. with Cebu shipowners. We just determine engaged in this work of towing cargo either in the hold or even on
therefore, which of the two conflicting versions comes nearer the the deck, Appellant would be subject to the tax. We also agree
reality of the situation. with the Tax Board that the purpose for which the Petitioner-
We may say at the outset that the preponderance of evidence is in Appellant was organized, and the supervision exercised by the
favor of the version of the Assistant Agent of the Bureau of ships officers over its work in loading and unloading vessels
Internal Revenue of Cebu. According to him the loading and including the towing of cargo, has nothing to do with the tax
unloading of cargoes to and from the ships holds is done by the liability of the Petitioner-Appellant.
laborers under the Cebu Arrastre Service Co., Inc. and the ships In view of the foregoing, the decision appealed from is hereby
officers supervision is limited to the proper placing of the same affirmed, with costs in both instances.
inside the ships hold, the inference being that said proper placing
Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo,
(stowing) is being done by the corporation laborers. This is not
Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,
contradicted by the version of the Petitioneras given in its original
petition wherein it says:chanroblesvirtuallawlibrary The men concur.
working under the Cebu Arrastre Service are same men of
Katubusanan sa Mamumuo who have been handling the loading Republic of the Philippines
of the boats of the Aboitiz & Co. and of the Philippine Navigation
Co. since 1947 up to the present. It says also, further
on:chanroblesvirtuallawlibrary The Cebu Arrastre Service is Manila
dedicated itself solely to the loading and unloading of cargoes on
the boats .. It is true that the President and Counsel corrected EN BANC
this description in the memorandum on appeal to the effect that
laborers of the corporation do not, except on rare occasions,
engage in loading or unloading the boat but limit their work on G.R. No. L-21835 August 19, 1967
loading or unloading pele-mele the slings of the boats under
contract with the Arrastre Service, but in the opinion of the Board THE CHIEF OF STAFF, ARMED FORCES OF THE
this amendment is not nearer to the truth than the original
PHILIPPINES, plaintiff-appellee,
version which was corroborated by the official who investigated
the case by order of the Collector of Internal Revenue. vs.

It is noteworthy that in the agreement entered into by the COLLECTOR OF INTERNAL REVENUE, ET AL., defendants-
shipowners and the corporation mention is twice made of the appellees.
arrastre service on the vessels (but never on the piers) to be done MADRIGAL SHIPPING CO., INC., and CESARIO
by the laborers of the Cebu Arrastre Service Inc. Another SIPACO, defendants-appellants.
circumstance which may help in obtaining a clear picture of the
situation is that nowhere in these papers is it contended that the
stevedores actually performing the stowing work belong to an Bausa, Ampril and Suarez for defendant-appellant Madrigal
organization not related to the Petitioner. Shipping Co., Inc.
We quote the following definitions of stevedores, Cesar R. Canonizado for defendant-appellant C. Sipaco.
viz:chanroblesvirtuallawlibrary Office of the Solicitor General Arturo A. Alafriz, Solicitor A. B.
Stevedores is one who works at, or one who is responsible for, the Afurong and V. M. Pangilinan for plaintiff-appellee.
unloading and loading of a vessel in port. (Websters New
International Dictionary, Second Edition (unabridged), p. 2473).
A stevedore is a person employed in loading and unloading a
vessel. (The Owego, D. C. Wash., 292 F. 505, 507).
C.Y. George Khoong and K.H. Powel Khoong, father and son, and Madrigal Shipping Co., Inc. and Cesario Sipaco appealed to this
business partners, organized the Leyte Supply Corporation which Court on purely legal issues which are:
acquired from the U.S. Foreign Liquidation Commission surplus
war materials worth P160,000.00. In June 1948 the Khoongs 1. With respect to the preference of credits among the claimants,
purchased from said corporation the same war materials. should the Spanish Civil Code of 1889 or the New Civil Code of
Subsequently, they hired Cesario Sipaco to possess, keep and the Philippines (Republic Act 386) be applied?
administer said surplus materials while the same were stored in
Tacloban City. Next, they chartered the steamship Lepus of the 2. Under the proper law, who among the claimants enjoys
Madrigal Shipping Co., Inc. to transport the surplus materials to preference?

All the claims against the goods in question matured and became
SS "Lepus" arrived in Tacloban and the Visayan Workers' Union demandable prior to the effectivity of the Civil Code of the
loaded the war materials on board, after which it sailed for Philippines. Consequently, the law prevailing at the time, that is,
Hongkong via the Port of Manila. While docked in Manila its cargo the Spanish Civil Code of 1889, should govern the preference of
of surplus war materials were seized by the Government pursuant credits.1
to Executive Order No. 339 dated August 7, 1950. Whereupon, the
cargo was unloaded at Pier 11 and later on stored in Hangar 801
It is contended that the claim of the Collector of Internal Revenue
in Nichols Air Base.
for sales taxes on the goods in question is not preferred because
(1) the Khoongs were not the persons liable for the sales taxes
Upon prior authority of their owners, the Armed Forces of the thereon for they were not the importer of said goods, 2 not to
Philippines used some of the confiscated cargo for which it agreed mention that the tax lien does not follow the goods into the hands
to pay the price fixed of P24,292.00. This amount, however, could of a third party who has no knowledge of the outstanding tax
not immediately be paid direct to the owners inasmuch as the liability;3 and (2) a surety bond has been posted to answer for the
Armed Forces received several claims on the cargo which far tax liability.1wph1.t
exceeded the agreed price of P24,292.00.

The theory of non-liability of the Khoongs for the sales taxes on

On January 21, 1953 the Chief of Staff of the Armed Forces of the the surplus goods in question for the reason that they were not
Philippines filed a complaint in interpleader with the Court of the importer thereof will not hold, considering that the Khoongs
First Instance of Manila against the several claimants. assumed liability for said taxes. 4This assumption of liability on the
part of the Khoongs is understandable and must have been made
Meanwhile, with leave of court, the remaining surplus goods were with good reason. The Khoongs are the 90% owner of Leyte Supply
sold at public auction. The proceeds thereof plus the sum of Corporation, the original importer. As a matter of fact, they have
P24,292.00 paid by the Armed Forces, amounting to P29,948.50, considered themselves as the original purchasers of the surplus
were deposited with the clerk of the trial court. goods from the U.S. Foreign Liquidation Commission as can be
seen from their statements, to wit:
On March 23, 1963 the lower court rendered the following
judgment: WHEREAS, we have rights, title and interests over the
following properties which we through the Leyte
WHEREFORE, judgment is hereby rendered declaring Supply Corporation bought from the Foreign Liquidation
the claim of the Bureau of Internal Revenue in the Commission. * * *5
amount of P10,100.00, the claim of Madrigal Shipping
Co., Inc. in the amount of P37,250.00, the claim of the * * * and over all the surplus goods we purchased under
Philippine Port Terminal, Inc. in the amount of VSD Contract P.O. 489, Invoice No. 527-RP, from the
P5,000.00 and the claim of the Visayan Workers' Union Foreign Liquidation Commission, U.S.A., loaded at
in the amount of P5,073.00 preferred credits with Tacloban, Leyte in the S/S LEPUS and later unloaded at
respect to the amount of P29,948.50 now in the the port of Manila, * * * *6
possession of the Clerk of this Court, pursuant to the
provisions of Article 2241 of the Civil Code. The claim of As to the argument of non-existence of the tax lien, it is observed
the Bureau of Internal Revenue, in the amount of that Article 1922 of the Spanish Civil Code of 1889 does not
P10,100.00 shall first be satisfied and the claims of the provide for taxes as preferred credits or liens. Sec. 315 of the
Madrigal Shipping Co., Inc., the Philippine Port Terminal, National Internal Revenue Code however states:
Inc., and the Visayan Workers' Union shall be
satisfied pro rata from the balance after the payment of
Sec. 315. Nature and extent of tax lien.Every internal-
the costs of this action, pursuant to the provisions of
revenue tax on property or on any business or
Article 2249 of the Civil Code.
occupation, and every tax on resources and receipts, and
any increment to any of them incident to delinquency,
shall constitute a lien superior to all other charges or
liens not only on the property itself upon which such tax We now come to the claim of defendant-appellant Cesario Sipaco
may be imposed but also upon the property used in any whose credit was not recognized by the trial court as preferred. On
business or occupation upon which the tax is imposed September 2, 1948 the Khoongs sent Cesario Sipaco a letter-
and upon all property rights therein. appointment 9 worded as follows:

Accordingly, the lien for sales taxes on the surplus goods has Effective as of September 1, 1948 you are appointed as
attached from the moment they were due and shall continue to an administrator of our company (Leyte Supply
exist in accordance with law. 7 Section 315 of the Tax Code, the Enterprise) with a compensation of ONE HUNDRED
pertinent law, limits to five years the duration of the lien for estate SEVENTY-FIVE PESOS (P175.00) a week. Your travel
and gift taxes, but remains silent with respect to all other internal expense outside of Tacloban on official business will be
revenue taxes. Consequently, the lien as to all those other taxes borne by the company.
continues until there is payment or the lapse of the period within
which the Commissioner of Internal Revenue may assess and Subsequently, the Khoongs executed a power of attorney dated
collect them pursuant to Sections 331 to 333 of the Tax Code, April 8, 1949 in favor of Cesario Sipaco and We quote: 10

whichever comes earlier. The alleged dissolution of the lien by

reason of the filing of a surety bond to answer for the payment of KNOW ALL MEN BY THESE PRESENTS:
taxes due, finds no support in the law.


Madrigal Shipping Co., Inc. maintains further that the claim of KHOONG, both of legal age, married and residents of 601
the Visayan Workers Union in the amount of P5,073.00 Columbia Road, Shanghai, the latter being represented
representing stevedoring wages in loading the surplus goods in in this act by the former, have named and constituted
question aboard SS "Lepus" is not preferred under Article 1922 of and by these presents name and constitute C. R.
the Spanish Civil Code of 1889 nor under Article 2241 of the Civil SIPACO, of legal age, married and resident of Tacloban,
Code of the Philippines; and that claims for laborers' wages Leyte, to be their true and lawful attorney-in-fact for
mentioned in paragraph (6) of Article 2241 of the Civil Code of the them and in their name, place and stead and for their
Philippines refer to labor in productive industrial entities and not use and benefit, to do and perform all or any of the
to stevedoring. following acts and things, namely:

As aforestated, the Civil Code of the Philippines does not apply 1. To demand and receive from CECIL L. MARQUIS any
herein and so We shall confine the inquiry to the Spanish Civil and all of the properties and commodities, including the
Code. books of accounts and other records, which belong to C.
Y. George Khoong and K. H. Powell Khoong by virtue of
Article 1922 of the Spanish Civil Code fails to mention claims for their purchase of the same from the Leyte Supply
laborers' wages as among those given preference. Apparently, the Corporation which properties consist of:
proposition that stevedoring wages are not preferred has merit.
However, paragraph 4 of said article gives preference to credits for aircraft spare parts and accessories,
transportation of goods and expenditures for the carriage and communications and signal equipment, radio
preservation thereof, under which the stevedoring wages can be spare parts and accessories, radio testing and
classified. aircraft testing equipment with an approximate
tonnage of 5,700 measurement tons, at present
Stevedoring refers to the carriage of goods from the warehouse or located among others at
pier to the holds of the vessel. 8 It is a necessary operation in the
transportation of goods by sea. Accordingly, the expenses incurred Cebu City 165 F. Gonzales St., down and
therefor in the form of wages are necessary expenditures in the upstairs
carriage of the goods.

Tacloban, Leyte Veteranos St.

With respect to the claim of the Philippine Ports Terminal for
arrastre and storage fees which the lower court declared as
and to issue proper receipt therefor;
preferred, We are convinced that it constitutes a credit
contemplated in paragraph 4 of Article 1922 of the Civil Code of
2. To possess, keep and administer the foregoing
1889, it being an expense for the preservation of the goods. The
properties located in Tacloban, Leyte, with power to
arrastre and storage service was rendered by the Philippine Ports
dispose of so much of said properties from time to time
Terminal after the surplus goods were unloaded at Pier 11 of the
as he shall think fit;
Port of Manila preliminary to their transfer to Nichols Air Base.
Without the services of the Philippine Port Terminal, said goods
3. To ship and transport the foregoing properties to
would have been left on the pier exposed to the elements and
Shanghai or to any other port designated by any or either
of the above-named Khoongs;
4. To demand, institute legal proceedings for, and receive 1. Credits for the construction, repair, preservation, or
from Cecil L. Marquis the properties as aforestated and purchase price of personal property in the possession of
from any and all persons such payments for the sale of the debtor, to the extent of the value of the same;
the properties he is herein authorized to dispose of (emphasis supplied).
with power and authority to execute and deliver full
receipts for all payments made to him; as an expense for the preservation of the surplus goods. It is not
disputed that Sipaco was hired, and that he rendered service
5. To make, sign, seal, execute and deliver contracts, primarily to keep and preserve the goods in question. The stay of
documents, agreements and other writings of whatever the surplus goods in Tacloban was more or less temporary, for
nature or kind with any and all third persons, concerns, their owners intended them to be shipped to Hongkong. Really
or entities upon such terms and conditions as he shall there was nothing more for him to do but preserve the goods in
think fit; good condition while awaiting shipment.

6. To open accounts in any bank in the Philippines, to Wherefore, the judgment appeared from is modified, the claims of
deposit money and to withdraw the same by check, the Collector of Internal Revenue in the amount of P10,100.00,
receipt, draft or any other written instrument in the Madrigal Shipping Co., Inc. in the amount of P37,250.00,
name of C. Y. George Khoong and/or Leyte Supply Philippine Ports Terminal, Inc. in the amount of P5,000.00,
Enterprise; to sign, indorse, draw, accept, make, execute, Visayan Workers Union in the amount of P5,073.00 and Cesario
deliver, and cash treasury warrants, checks, drafts, bills Sipaco in the amount of P9,050.00 are declared preferred credits.
of exchange, promissory notes, and all other kinds of The claim of the Collector of Internal Revenue shall first be
negotiable instruments and commercial papers; satisfied, after which the claims of Madrigal Shipping Co., Inc.,
Philippine Ports Terminal, Inc., Visayan Workers Union and
7. In general, to do all other acts, deeds, matters and Cesario Sipaco shall be satisfied pro rata in accordance with
things whatsoever in or about our estate, property, and Article 1926 of the Civil Code of 1889. No costs.
affairs as fully and effectually to all intents and purposes
as we could do in our own proper persons if personally So ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles and
HEREBY GIVING AND GRANTING unto our said Fernando, JJ., concur.
attorney-in-fact full power and authority whatsoever Concepcion, C.J., and Dizon, J., are on leave.
requisite and necessary or proper to be done in and
about the premises, as fully to all intents and purposes
Republic of the Philippines
as we might do or could lawfully do if personally present, SUPREME COURT
and hereby ratifying and confirming all that our said Manila
attorney-in-fact shall do or cause to be done under and EN BANC
by virtue of these presents.
G.R. No. L-54958 September 2, 1983
presents to be signed on this 8th day of April, 1949 in PAZ PORT SERVICE, INC., MANILA STEVEDORING
By virtue of the two documents mentioned above, Sipaco rendered ARRASTRE SERVICES, INC., and LUVIMIN
service for the Khoongs and allegedly made advances in the sum STEVEDORING/ARRASTRE & DEVELOPMENT
of P2,300.00 for the safekeeping and preservation of the surplus CORPORATION, petitioners,
materials involved in this case. His advances and salaries which vs.
HON. ALFREDO LAZARO, in his capacity as Presiding Judge of
have remained unpaid totalled P9,050.00. In 1951 he obtained
Branch XXV, of the Court of First Instance of Manila,
from the Court of First Instance of Manila a judgment (based on
compromise) for said amount of P9,050.00 against the Khoongs,
who thereafter assigned to him their right to collect from the
SERVICES, INC., respondents.
Armed Forces of the Philippines up to said amount plus costs and
G.R. No. L-54966
Sipaco's claim of preference comes within the purview of
paragraph 1 of Article 1922 of the Civil Code of 1889, which
of First Instance of Manila, Branch XXV, PHILIPPINE PORTS
PRIMITIVO S. SOLIS, JR., and OCEAN TERMINAL SERVICES, the integrated of the stevedoring operations in Manila South
INC., respondents. Harbor and emphasizing the need for such integration as well as
the strengthening of the PPA in order to remedy the problems
therein. In compliance therewith, PPA made a study evaluation of
These two petitioners foe certiorari seek to annul the order of the the arrastre and stevedoring industry in the ports where
Court of First Instance of Manila issued ex-parte, lifting the integration had not yet been achieved. A special committee was
restraining orders it had previously issued. The setting aside of created on April 25, 1980 to make a final evaluation of existing
the restraining orders enabled the implementation of the operators in the South Harbor and to select the most qualified
Management Contract executed by and between respondents, among them.
providing for respondent Ocean Terminal Services, Inc. as the
On April 28, 1980, the committee submitted its report
exclusive stevedoring contractor at the South Harbor, Port of
recommending the award of an exclusive contract for stevedoring
services in the South Harbor to respondent Ocean Terminal
Involved in these two petitions is the operation of stevedoring work Services, Inc. (OTSI) after finding it the best qualified among the
in the South Harbor of the Port of Manila. Stevedoring, as the existing contractors. The committee report and recommendation
term is understood in the port business, consists of the handling were indorsed by respondent Primitivo Solis, Jr., Port Manager of
of cargo from the hold of the ship to the dock, in case of pier-side Manila, to respondent Baclig on April 30, 1980. On May 14, 1980,
unloading, or to a barge, in case of unloading at sea. The loading the latter approved the recommendation.
on the ship of outgoing cargo is also part of stevedoring work.
In accordance with the Presidents memorandum dated April 18,
Stevedoring charges at rates approved by the Government are
1980, PPA submitted the committee report to him. On May 24,
assessed and collected for the services.
1980, the President approved the recommendation to award an
The Philippines Ports Authority (PPA), the government agency exclusive management contract to OTSI.
charged with the management and control of all ports, was
On June 27, 1980, PPA and OTSI entered into a management
created by Presidential Decree No. 505, promulgated on July 11,
contract which provided, among others, for a five-year exclusive
1974, later superseded by Presidential Decree No. 857 dated
operation by OTSI of stevedoring services in the South Harbor,
December 23, 1975. The PPAs function is to carry out an
renewable for another five (5) years. The contract set the
integrated program for the planning, development, financing, and
commencement of the exclusive operation by OTSI upon proper
operation of ports and port districts throughout the country.
determination by PPA which shall not be earlier that two (2)
Among other things, the powers, duties, and jurisdiction of the
months from the approval of the contract by the Board of
Bureau of Customs concerning arrastre operations were
Directors of the PPA. The latter gave its approval on June 27,
transferred to and vested in the PPA.
The Philippine Integrated Port Services, Inc., (PIPSI), petitioner in
On July 23, 1980, petitioner PIPSI instituted an action against
G.R. No. 54966, is a stevedoring operator at the Manila South
PPA and OTSI for the nullification of the contract between the two,
Harbor. Anglo-Fil Trading Corporation, Aduana Stevedoring
the annulment of the 10% of gross stevedoring revenue being
Corporation, Anda Stevedoring Corporation, Ben Paz Port Service,
collected by PPA, and injunction with preliminary injunction. The
Inc., Manila Stevedoring and Arrastre Services, Inc., (Anglo-Fil, et
case was docketed as Civil Case No. 133477 in the Court of First
al.,) petitioners in G.R. No. 54958, are stevedoring and arrastre
Instance of Manila, provided over by respondent Judge Alfredo
operators and contractors, likewise at Manila South Harbor, Port
Lazaro. On July 29, 1980, the respondent court issued a
of Manila. Anglo-Fil, et al., are members of the Philippine
restraining order ex-parte, enjoining respondents PPA and OTSI
Association of Stevedoring Operators and Contractors, Inc.
from implementing the exclusive contract of stevedoring between
Prior to the present controversy which arose as a result of the
On August 21, 1980, with leave of court, petitioners, Anglo-Fil, et
actions of the PPA, twenty-three (23) contractors competed at the
al., filed their complaint in intervention. The motion was granted
South Harbor for the performance of stevedoring work. The
and on August 22, 1980, respondent court issued another ex-
licenses of these contractors had long expired when the PPA took
parte restraining order in the case to include the petitioners
over the control and management of ports but they continued to
Anglo-Fil et al., under the benefits of such order.
operate afterwards on the strength of temporary permits and
hold-over authorities issued by PPA. On August 30, 1980, PPA filed an urgent motion to lift the
restraining orders "in view of their long delay in the resolution of
On May 4, 1976, the Board of Directors of PPA passed Resolution
the injunction incident and the countervailing public interest
No. 10, approving and adopting and adopting a set of policies on
involved." On September 1, 1980, respondent Judge issued an
Port Administration, Management and Operation. The PPA
order, which reads:
adopted as its own the own the Bureau of Customs policy of
placing on only one organization the responsibility for the "AS PRAYED FOR, the restraining orders issued by the this Court
operation of arrastre and stevedoring services in one port. on July 29, 1980 and August 20, 1980, are hereby dissolved,
lifted, and set aside without prejudice to the Courts resolution on
On April 11, 1980, Presidential Ferdinand E. Marcos issued Letter
the propriety of issuing the writ of preliminary injunction prayed
of Instruction No. 1005-A which among other things, directed PPA;
for by the petitioners."
To expeditiously evaluate all recognized cargo-handling
On September 5, 1980, PPA sent a letter to the General Manager
contractors and port-related service operators doing
of PIPSI informing him that due to the lifting of the temporary
business in all Port Districts in the country under such
restraining order, it was withdrawing PIPSIs hold-over authority to
criteria as PPA may set and to determine the qualified
operate or provide stevedoring services at South Harbor effective
contractor or operator under said criteria in order to
September 7, 1980.
ensure effective utilization of port facilities, prevent
pilferage and/or pinpoint responsibility for its and Petitioners Anglo-Fil, et al., and PIPSI, therefore, filed the present
provide optimum services to major ports vital to the petitions for certiorari with preliminary injunction alleging that
countrys trade and economy. the lifting of the retraining orders ex-parte by respondent Judge
was clearly affected with grave abuse of discretion amounting to
This was followed by the Presidents memorandum to respondent
Bacling dated April 18, 1980, directing submission of a report on
lack of jurisdiction. They also applied for the issuance in the restraining order of the Supreme Court dated October 21, 1980, to
meantime of a restraining order. wit:
On September 9, 1980, we ordered the consolidation of the two xxx xxx xxx
cases and on August 12, 1980, heard the petitioners motions for a (1.) The Office of the Harbor Master shall determine
restraining order. which union has serviced a particular vessel for the
On September 15, 1980, the respondent court issued an order in period from January 1, 1980 to June 26, 1980. The
Civil Case No. 133477 denying the application of petitioners for a number of services performed by a particular union for a
writ of preliminary injunction and affirming its order of September given vessel shall be quantified for the said period after
1, 1980 lifting the temporary restraining orders issued in the case. which each union shall be identified whether they are
On the same day, the Katipunan ng mga Manggagawa sa Daungan affiliated with PWUP or KAMADA.
(KAMADA), a labor federation and its thirteen (13) member labor (2.) The most number of times that a union has serviced
organizations filed a petition to intervene in the consolidated a particular vessel with its affiliation properly considered
cases. According to KAMADA, its members would lose their jobs if shall continue to service said vessel for its incoming calls
the contract was implemented. It also alleged that the collective or arrivals.
bargaining contract between OTSI and PWUP would be prejudicial (3.) If there is a tie in the number of services performed
to workers because KAMADA members received greater benefits by both PWUP and KAMADA affiliated unions, the last
from the ousted contractors; union that serviced said vessel shall be allowed to
On September 29, 1980, PIPSI filed a supplemental petition to continue servicing the same on all its incoming calls or
annul the order of the respondent judge denying the application arrivals.
for preliminary injunction and affirming the orders issued on July (4.) Once the union has been properly identified during
29 and August 22, 1980.1wphi1 the berthing meeting, the Harbor Master shall inform
On October 14, 1980, PPA filed its comment with opposition to Ocean Terminal Services, Inc. accordingly and shall be
preliminary injunction stating that the lifting of the restraining authorized to negotiate with the union or the gang leader
orders by respondent judge was intended to preserve the status concerned on the number of gangs as may be required by
quo pending resolution of the preliminary injunction; that said the vessel or its agent.
orders were issued without hearing or bond, therefore, the (5.) All unions in this order shall refer only to South
dissolution was proper considering that it had been in force for Harbor stevedoring union.
one month and an early resolution of the motion for injunction (6.) KAMADA shall have the duty and responsibility to
was not in sight, and that in dissolving an injunction already certify that the stevedores deployed in any given vessel
issued, the court cannot be considered as having acted without allowed for their work are bona fide members of their
jurisdiction or in excess thereof even if dissolution had been made group and that they were the same stevedores who
without previous notice to the adverse party and without a serviced assigned vessel prior to the stevedoring services
hearing. Furthermore, it argued that when the purpose of an integration.
administrative determination is to decide whether a right or
On November 7 and 10, 1980 OTSI and PPA filed their separate
privilege which an applicant does not possess shall be granted to
answers to KAMADAs petition in intervention. They assured this
him or withheld in the exercise of a discretion vested by statute,
Court that none of the legitimate stevedores who had joined the
notice and hearing are not necessary. It also added that the policy
KAMADA would be displaced from work provided he joined PWUP.
of integration in the award by PPA to OTSI is impressed with
Written guarantees of this assurance were separately submitted to
public interest while what is involved as far as petitioners were
this Court by both OTSI and PWUP. OTSI further alleged in its
concerned was merely their alleged right to operate stevedoring
answer that, contrary to the claim of KAMADA, the CBA signed by
services, a property right the denial of which could easily be
OTSI with PWUP represented the best of employment ever offered
restored in the event the respondent court decided that petitioners
to the stevedores in the South Harbor.
are entitled to it.
On November 13, 1980, Anglo-Fil, et al., filed an urgent motion to
In their consolidated reply, Anglo-Fil, et al., argued that the
cite PPA and OTSI in contempt on the following grounds: 1)
temporary order in their favor was not issued ex-parte for the
issuance of PPA-POM Memorandum No. 23, series of 1980; 2)
following reasons: a) it was issued when PIPSI and PPA were
letter of October 29, 1980 of PPA to Anglo-Fil, et al., denying
already conducting hearings on the petition for preliminary
a "non-existing" request for permission to operate by the latter; and
injunction; b) it was announced in open court; and c) PPA did not
3) refusal of PPA authorities to issue gate passes to KAMADA-
object to such issuance. Likewise, they argued that although a
affiliated stevedores to be used and employed by Anglo-Fil, et al.,
permit to operate is a privilege, its withdrawal must comply with
in their resumption of work, pursuant to the Supreme Court order
due process of law just like the practice of law, medicine, or
of October 21, 1980.
accountancy, and that not only property rights are involved but
their very livelihood, their right to live. On November 20, 1980, PPA filed a motion to lift the temporary
mandatory restraining order but the same was denied by this
On October 21, 1980, we issued a resolution granting the
temporary mandatory restraining order "effective immediately
ordering respondents to allow the workers represented by said On November 26, 1980, an urgent motion for clarification of the
petitioner-intervenors to render the stevedoring services performed resolution of October 21, 1980 was filed by KAMADA seeking
by them on foreign vessels in the Manila South Harbor before the clarification as to which company its workers should work for,
execution of the exclusive stevedoring contract of June 27, 1980 alleging that after Antranco Stevedores Union (Antranco) a
until further orders of the Court, the order of respondent Judge, KAMADA member, had received a letter from OTSI to supply the
dated September 1 and 15, 1980 as well as the implementing necessary stevedores gang to service the S/S "Success", Anglo-Fil
letter of Philippine Ports Authority of September 5, 1980 to the Trading Corporation prohibited its employees who are members of
contrary notwithstanding." Antranco from working for OTSI in the light of the resolution of
this Court and the existing collective bargaining agreement
On October 24, 1980, PPA issued Memorandum Order No. 23
between said union and Anglo-FilTrading Corporation. As a
providing for guidelines in implementing the temporary mandatory
consequence, the union was allegedly unable to service S/S
"Success" and from October 21, 1980 up to the present, OTSI shipping line the greatest number of times as appearing in the
failed to allow members of KAMADA to service several vessels. PPA records for the six-month period immediately preceding the
A joint manifestation was filed by respondents PPA and OTSI execution of the stevedoring contract of OTSI. 2. The above
alleging compliance with the above resolution to the effect that notwithstanding, whenever a vessel destined to or proceeding from
KAMADA workers have been and are being employed on the the Port of Manila has been chartered for a particular voyage by a
vessels they used to serve prior to June 27, 1980, and justifying consignee or any person having interest in the goods carried
issuance of PPA-POM Memorandum No. 23, as a means to avert therein, such vessel shall be assigned for stevedoring work to the
possible conflict among the competing union groups (PWUP and union that served the charterer the greater number of times as
KAMADA) involved, to provide a reasonable and fair system for appearing in the PPA records for six-month period immediately
determining which group had previously worked on a vessel and preceding the execution of the stevedoring contract of OTSI. In
should work on its subsequent calls, and to insure that only the case there are two or more charterer who pays the highest freight
bonafide stevedores contemplated by the order of this Court are charges shall be the determining fact in the assignment. 3. Vessels
allowed to work. of new shipping lines calling at the Port of Manila for the first time
as well as vessels contracted by new charterers shall be assigned
On December 2, 1980, another motion for clarification was filed by
to the union of choice of the new shipping line or charterer as the
KAMADA regarding the phrase "foreign vessels" which it stated to
case may be."
be inaccurate as KAMADA members also work on vessels of
Philippine registry like those operated by Sweet Lines and Lorenzo The main issue in these petitions is whether or not the respondent
Shipping Lines whose vessels also dock at the Manila South judge acted with grave abuse of discretion when he lifted ex-parte
Harbor. It suggested that the basis should not be the foreign the temporary restraining order he had earlier issued also ex-
vessels but the shipping agents or charterers and consignees and parte.
that the basis for determining and quantifying the vessels given to From the viewpoint of procedure, we see no grave abuse of
PWUP or KAMADA should be from January 1, 1978 to September discretion or want of jurisdiction. Subsequent to the issuance to
7, 1980. the questioned order, the respondent court heard the parties on
This Court in a resolution dated December 9, 1980, granted the the petitioners application for a writ of preliminary injunction
motion of KAMADA to wit: and, after hearing the parties evidence and arguments, denied
the application for the writ. We also agree the with the
xxx xxx xxx
respondents that it is not grave abuse of discretion when a court
x x x (3) GRANT the motion for clarification by petitioners-
dissolves ex-parte abuse of discretion when a court dissolves ex-
intervenors issuing a resolution previously released, the pertinent
parte a restraining order also issued ex-parte. (Calaya v. Ramos,
portion of which reads, for while the order of October 21, 1980 is
79 Phil, 640; Clarke v. Philippine Ready Mix Concrete Co., 88 Phil.
on its face quite definite as to what it purports to require, this
460; Larap Labor Union v. Victoriano, 97 Phil. 435.)
resolution may remove any doubt as to its purpose and intent,
The restraining orders dated July 29, 1980 and August 22, 1980
thus assuring the utmost fidelity in its compliance. The order
respectively provide:
requires and mandates that all workers represented by said
petitioners-invtervenors can continue rendering stevedoring xxx xxx xxx
services performed by them on foreign vessels, in Manila South "Finding the allegations in the complaint to be sufficient in form
Harbor before the execution of the exclusive stevedoring contract and in substance, a temporary restraining order is hereby issued
of June 27, 1980, until further orders of the Court, without any x x x.
reference to any particular vessel, the decisive factor being xxx xxx xxx
shipping lines involved and the fact that they were at that time "and to maintain the status quo until further orders from this court.
rendering stevedoring services, irrespective of the labor unions to
x x x.
which they are affiliated. xxx."
xxx xxx xxx
Inspite of our clarificatory order, various problems in its
implementation appear to have beset the parties. Repeated "It appearing that on July 29, 1980, this Court issued an order
motions and manifestations and countermotions and granting the prayer of the original plaintiff for a temporary
countermanifestations were filed with unbroken regularity, restraining order, the same order is hereby reiterated and to
swelling the records of these petitions to unusual proportions. include Anglo-Fil Trading Corporation. x x x.
After requiring the parties to submit their respective positions, we xxx xxx xxx
issued on January 6, 1983, a resolution which modified our "plaintiffs-intervenors herein and for the parties to serve the
earlier orders as follows: status quo until further orders from this Court." (Italics supplied)
"G.R. No. 54958 (Anglo-Fil Trading Corporation, et al. vs. A restraining order is an order to maintain the subject of
Hon.Alfredo Lazaro, et al.); and G.R. No. 54966 (Philippine controversy in status quo until the hearing of an application for a
Integrated Port Services, Inc. vs. Hon. Alfredo Lazaro, et al.). temporary injunction. Unless extended by the court, a restraining
Considering the urgent motion and manifestation of petitioners- order ceases to be operative at the expiration of the time fixed by
intervenors filed on March 20, 1982, the comment of respondent its terms. In cases where it has been granted ex-parte, it may be
Ocean Terminal Services, Inc., filed on June 7, 1982, the dissolved upon motion before answer. (See the Revised Rules of
comment of respondent Philippine Ports Authority filed on June 8, Court, Francisco, pp. 184-186, citing 43 CJS, 28 Am. Jur)
1982, the reply of petitioners-intervenors filed on June 28, 1982, From the aforequoted dispositive portions, it is beyond doubt that
the rejoinder of respondent Ocean Terminal Services, Inc., filed on the duration of the restraining orders was "until further orders
July 27, 1982, the rejoinder of respondent Philippine Ports from the court." In lifting said restraining orders on September 1,
Authority filed on August 6, 1982 and the supplemental motion 1980, respondent judge merely exercised the prerogative he earlier
and manifestation filed by petitioners-intervenors on September reposed upon himself to terminate such orders when
15, 1982, the Court Resolved to direct the parties concerned to circumstances so warranted. Considering again that the previous
observe the following guidelines in the allocation of stevedoring grants of the restraining orders in favor of petitioners were made
assignments: 1. Any vessel belonging to a shipping line shall be ex-parte and without bond, the need for a notice and hearing in
assigned for stevedoring work to the union that had served that regard to such lifting was not necessary, much less mandatory.
The petitioners contention that the lifting of the restraining order and viewpoints. All these, indeed, militate against an early
had rendered moot and academic the injunction case in the trial resolution of the application for a writ of preliminary injunction.
court is likewise untenable. A restraining order is distinguished xxx xxx xxx
from an injunction in that it is intended as a restraint on the The above statement are sufficient bases for the lifting of the
defendant until the propriety of granting an injunction pendente order. It is clear that not only did the respondent judge base the
lite can be determined, and it goes no further than to preserve the lifting on consideration of public interest but also on the fact that
status quo until such determination. Therefore, the grant, denial, the restraining orders were issued ex-parte without bond and that
or lifting of a restraining order does not in anyway pre-empt the the resolution of the motion for preliminary injunction was still far
courts power to decide the issue in the main action which in the from being decided.
case at bar, is the injunction suit. In fact, the records will show
The statement of the respondent judge that "it cannot sit in
that the trial court proceeded with the main suit for injunction
judgment, without prejudice to public interest, on the truth and
after the lifting of the restraining orders.
wisdom of the allegation in support of the Urgent Motion" should
Petitioner PIPSI also maintains that there were no considerations not be interpreted to mean that courts cannot pass upon the
of public interest which supported the lifting. On the contrary, the greater issue of whether or not public interest is served or is
lifting allegedly permitted a situation palpably against public prejudiced. The determination by PPA that the measure sought to
interest, that is, confiscation of petitioners business and those be enforced is justified by public interest and the PPA manner of
similarly situated. This, again, is untenable. implementing a Presidential Decree and Letters of Instruction are
The streamlining of the stevedoring activities in the various ports subject to judicial review.
of the Philippines was undertaken by PPA to implement LOI No. The Constitution defines the powers of government. Who is to
1005-A. The public interest, public welfare, and public policy determine the nature, scope, and extent of such powers? The
sought to be subserved by said LOI are clearly set forth in its Constitution has provided for the instrumentality of the judiciary
whereas clauses. They areas follows: as the rational way. In determining whether or not the exercise of
xxx xxx xxx powers vested by the Constitution truly serves the general welfare
"WHEREAS, it is a declared national policy to support and or is affected by public interest, the judiciary does not assert any
accelerate the development of government port facilities as well as superiority over the other departments but only fulfills the solemn
vital port development projects and services; and sacred obligation assigned to it by the Constitutions to
xxx xxx xxx determine conflicting claims of authority and to establish for the
parties in an actual controversy the rights which that instrument
"WHEREAS, it is a prime concern of government to protect the
secures and guarantees to them. This is in truth all that is
interests of legitimate port workers and port users in the country;
involved in what is termed "judicial supremacy" which properly is
xxx xxx xxx
the power of judicial review under the Constitutions. (See Angara
"WHEREAS, there is need to rationalize and integrate cargo- vs. Electoral Commission, 63 Phil. 139) This is why questions of
handling and other port-related services as may have been expropriation of private lands, we have upheld the courts
contracted out or authorized by the PPA in the various ports of authority to make inquiry on whether or not lands were private
the country; and whether the purpose was in fact, public. (City of Manila v.
"WHEREAS, the procedures of voluntary merger, consolidation Chinese Community of Manila, 40 Phil. 340). Similarly, in the
and/or bidding for the awarding or contracting of cargo-handling present cases, the question of whether or not the lifting of the
and other port-related services have heretofore proven ineffective restraining orders will prejudice public interest and will run
and resulted in prolonged and unproductive wrangling, all to the counter to the protection to labor provision of the Constitution is
detriment of efficient port operations and development; and determinable by the judiciary under the power of judicial review.
"WHEREAS, it now become necessary to revitalize and streamline From the records of these petitions, it is evident that the writ of
the PPA to carry out its functions and duties as a vital link in the certiorari cannot be granted. The respondent judges action was
governmental machinery and the thrust for national economic not tainted by any capricious or whimsical exercise of judgment
development;" amounting to lack of jurisdiction.
xxx xxx xxx It is settled to the point of being elementary that the only question
Clearly, there is a reasonable relation between the undeniable involved in certiorari is jurisdiction, either want of jurisdiction or
existence of an undesirable situation and the statutory attempt to excess thereof, and abuse of discretion shall warrant the issuance
avoid it. "Public welfare, then, lies at the bottom of the enactment of the extra-ordinary remedy of certiorari only when the same is
of said law, and the state in order to promote the general welfare grave as when the power is exercised in an arbitrary or despotic
may interfere with personal liberty, with property, and with manner. . . . (FS. Divinagracia Agro Commercial, Inc. v. Court of
business and occupations." (See Alalayan v. National Power Appeals, 104 SCRA 180; Abig v. Constantino, 3 SCRA 299; Abad
Corporation, 24 SCRA 172; Ermita-Malate Hotel and Motel Santos v. Province of Tarlac, 67 Phil. 480; Alafriz v. Nable, 72 Phil.
Owners Association v. City Mayor, 20 SCRA 849) These 278; Travers Luna, Inc. v. Nable, 72 Phil. 278; and Villa Rey
considerations were considered by the respondent judge when he Transit, Inc. v. Bello, 75 SCRA 735).
issued his questioned order dated September 1, 1980. He stated: It is not sufficient, however, to resolve these petitions on whether
xxx xxx xxx or not there was grave abuse of discretion tantamount to lack or
"While in the main this Court is not insensitive to the plight of the exercise of jurisdiction.
petitioners, the overriding considerations of public interest, as The larger issue remains. Behind the maneuvering and
impressed by the Office of the Solicitor General, must be given skirmishing of the parties lies a question of power. Does the PPA
greater weight and important. This is compounded by the way and have the power and authority to award an exclusive stevedoring
manner by which the parties are now fashioning and shaping contract in favor of respondent OTSI? Is the PPA-OTSI
their respective positions. The proceedings, to say the least, have Management Contract executed pursuant to P.D. No. 857 and LOI
become accented with a myriad of contentious facts and No. 1005-A, valid?
intercalated with complex legal issues. For the matter is not a
simple determination of right and wrong but a collision of ideas
The facts bearing on this issue are not in dispute and are worth approval of the resolution of the board regarding contracts entered
reiterating. They are summarized by the respondent court as into in connection therewith. This memorandum was dictated by
follows: heavy losses suffered by shippers as well as the smuggling of
xxx xxx xxx textiles in the South Harbor.
"Before the advent of Presidential Decree No. 505, as amended by "Pursuant to and in compliance with the Letter of Instruction of
Presidential Decree No. 857, the administration and management April 11, 1980 and the Memorandum of the President dated April
of the South Harbor, Port of Manila, was under the Bureau of 18, 1980, the PPA created a Special Evaluation Committee
Customs. It appears that the plaintiffs, among others, were composed of Atty. David R. Simon, member of the Legal
engaged in and allowed to operate stevedoring services on the Department of PPA and concurrently Assistant to the Port of
basis of special permits granted by the Bureau of Customs Manila, as Chairman; Mr. Leonardo Mejia, Chief of the
(Exhibit A). Commercial Development Division, Port of Manila; and, Capt.
Jovito G. Tamayo, Harbor Master and Chief of the Harbor
"It further developed that the number of stevedoring operators or
Operations Division of the Port of Manila, as members. The
contractors made it difficult for the Bureau of Customs to
respective and individual duties of the members of the Committee
maintain order and discipline among them to the detriment of
taken in their integral entirely could easily sum up to an almost
efficiency and the desired performance at the South Harbor. This
complete overview of the functions of stevedoring contractors and
appears to be true with other ports. Thus, an in-depth study and
place them in a vantage position as to provide proper evaluation
analysis of the problems attendant to arrastre and stevedoring
and determination of the individual performance, qualification,
operations was initiated. The only solution appeared to be the
and compliance of PPA requirements by each stevedoring operator.
integration of contractors engaged in stevedoring services with the
ultimate objective of having only one stevedoring contractor to "The Committee took into account certain factors with their
engage in cargo-handling service in a given port. Accordingly, on corresponding percentage weights in its determination, who
May 8, 1975, the Bureau of Customs issued Customs among the existing operators, is most qualified for an award of an
Memorandum Order No. 28-75 providing guidelines for the merger exclusive contract. In connection therewith, OCEAN was rated
of the multi-operators in the same ports (Exhibit 1). 95% topping all the rest by a wide margin.
"On December 23, 1975, Presidential Decree No. 857 was "On April 28, 1980, the Evaluation Committee submitted its report
promulgated superseding Presidential Decree No. 505 whereby the recommending the conclusion of a management contract with
jurisdiction of the Bureau of Customs concerning arrastre OCEAN being the most qualified (Exhibit 8) which
operations, among others, were transferred and vested in the PPA. recommendation was adopted by the PPA.
"On May 4, 1976, the PPA, pursuant to its avowed objectives, "On June 27, 1980, a management contract was executed by and
approved the PPA policies on port administration, management between PPA and OCEAN (Exhibit 11).
and operation, adopting as a policy the horizontal and vertical "On August 19, 1980, the President approved the exclusive
integration of existing operators at each port (Exhibit 2 and 3). management contract between PPA and OCEAN (Exhibit 10).
"On January 19, 1977, a memorandum order was issued whereby "In the meantime, in letters dated July 13, 1980 (Exhibit N) and
the different port operators or contractors who have existing July 14, 1980 (Exhibit F), PIPSI and INTERVENORS were
permits, licenses, contracts, and other kinds of memorandum informed of the management contract with OCEAN as exclusive
agreement issued by the Bureau of Customs were Temporarily operator at the South harbor, Port of Manila, beginning August
allowed the continuance of their services on a hold-over 27, 1980."
capacity until such time when the PPA implements its own xxx xxx xxx
pertinent policy guidelines on the matter (Exhibits 5 and 6). The petitioners are on extremely shaky grounds when they invoke
On May 27, 1977, PPA Memorandum Order No. 21, series of 1977, the non-impairment clause to sustain their charge of invalidity.
was passed reiterating the implementation of the policy on According to the petitioners, contracts entered into with local and
integration to insure efficiency and economic in cargo-handling foreign clients or customers would be impaired.
operation and provide better service to port users and to amply Even in the United States during the heyday of the laissez faire
protect the interest of labor and the government as well. It is the philosophy, we are informed that the American Supreme Courts
declared policy that there should only be one stevedoring interpretations have never allowed the contract clause to be an
contractor to engage in cargo-handling services in a given port. inflexible barrier to public regulation. According to Gerald
"On April 11, 1980, the Presidential issued Letter of Instruction Gunther, Professor of Constitutional Law at Stanford University,
No. 1005-A (Exhibit 7) which directed the PPA to accelerate the historians have probably exaggerated the impact of the early
rationalization of all cargo-handling services and to expeditiously contract clause decisions on American economic and legal
evaluate all recognized cargo-handling contractors and port developments, that the protected position of corporations in the
related service operators under such criteria as the PPA may set 19th century was due less to any shield supplied by the U.S.
and to determine the qualified contractor or operator in order to Supreme Court than to legislative unwillingness to impose
insure effective utilization of port facilities, prevent pilferage restraints-an unwillingness reflecting the laissez faire philosophy
and/or pinpoint responsibility for it and provide services major of the day. After analyzing the leading cases on the contract clause
ports vital to the countrys trade and economy. This Letter of from 1810 (Fletcher v. Peck, 6 Cranch 87) to 1880 (Stone v.
Instruction was dictated by experience where the procedures of Mississippi, 101 U.S. 814) he cites the 1914 decision in Atlantic
voluntary mergers, consolidation and/or bidding for the awarding Coast Line R. Co. v. Goldsboro (232 U.S. 548) where the U.S. Court
or contracting of cargo-handling and other port related services ruled "It is settled that neither the contract clause nor the due
have heretofore proven ineffective and resulted in prolonged and process clause has the effect of overriding the power of the State
unproductive wrangling, all to the detriment of efficient port to establish all regulations that are reasonably necessary to
operations and development. secure the health, safety, good order, comfort, or general welfare of
"On April 18, 1980, the President issued a memorandum to the the community; that this power can neither be abdicated nor
PPA (Annex B of the Answer and Opposition of OCEAN) to submit bargained away, and is inalienable even by express grant; and that
its report on the integration and rationalization of the stevedoring all contract and property rights are held subject to its fair
operation in Manila South Harbor and the submission for his exercise" and Manigault v. Springs (199 U.S. 473) where the same
Court stated that "parties by entering itno contract may not stop different port operators or contractors, you may temporarily allow
the legislature from enacting laws intended for the public good." the continuance of their services on a hold-over capacity until
(See Gunther, Cases and Materials On Constitutional Law, 1980 such time when the PPA implements its own pertinent policy
Edition, pp. 554-570). guidelines on the matter.
In the Philippines, the subservience of the contract clause to the xxx xxx xxx
police power enacting public regulations intended for the general Clearly, all hold-over permits were by nature temporary and
welfare of the community is even more clearcut. subject to subsequent policy guidelines as may be implemented by
As pointed out by then Senior Associate, now Chief Justice PPA. Such should have served as sufficient notice to petitioners
Enrique M. Fernando, the laissez faire or let alone philosophy has that, at any time, their authorities may be terminated.
no place in our scheme of things, not even under the 1935 Petitioners PIPISI would also impress upon this Court that the
Constitution. (See Fernando, The Constitution of the certification issued to it and its fellow contractors by PPA, dated
Philippines, Second Edition, pp. 111-114) In his concurring August 30, 1979, showed that they were not only kept in the dark
opinion in Agricultural Credit and Cooperative Financing as to PPAs subsequent move to award OTSI an exclusive contract,
Administration v. Confederation of Unions (30 SCRA 649, 682-683) but that they were actually lulled into believing that their
Chief Justice Fernando stated: temporary permits were being given pending issuance of their PTO
"xxx With the decision reached by us today, the Government is or Permit to Operate.
freed from the compulsion exerted by the Bacani doctrine of the We do not believe so. The second paragraph of the certification
constituent-ministrant test as a criterion for the type of activity in states that the hold-over permit was still subject to the
which it may engage. Its constricting effect is consigned to memorandum quoted above. The certification provided that: "In
oblivion. No doubts or misgivings need assail us that accordance with PPA Memo Circular No. I, dated January 9, 1977,
governmental efforts to promote the public weal, whether through the said firm is allowed to continue operating at the South Harbor,
regulatory legislation of vast scope and amplitude or through the Port manila." (italics supplied.)
undertaking of business activities, would have to face a searching Whether or not the petitioners would be issued a PTO depended
and rigorous scrutiny. It is clear that their legitimacy cannot be on the sound discretion of PPA and on the policies, rules and
challenged on the ground alone of their being offensive to the regulations that the latter may implement in accordance with the
implications of the laissez-faire concept. Unless there be a statutory grant of power. Petitioners, therefore, cannot be said to
repugnancy then to the limitations expressly set forth in the have been deprived of property without due process because, in
Constitution to protect individual rights, the government enjoys a this respect, what was given them was not a property right but a
much wider latitude of action as to the means it chooses to cope mere privilege and they should have taken cognizance in the
with grave social and economic problems that urgently press for South Harbor, their permits can be withdrawn anytime the public
solution. xxx" welfare deems it best to do so.
The Manila South Harbor is public property owned by the State. The absence of arbitrariness or bad faith is manifest in the
The operations of this premiere port of the country, including selection procedure adopted. The award in fabvor of OTSI was the
stevedoring work, are affected with public interest. Stevedoring result of an evaluation of performance of existing contractors
services are subject to regulation and control for the public good made by a special committee created by the PPA. The respondent
and in the interest of general welfare. court found from the evidence that the members of that
Not only does the PPA, as an agency of the State enjoy the committee were "in a vantage position as to provide proper
presumption of validity in favor of its official acts implementing its evaluation and determination of the individual performance,
statutory charter, it has more than adequately proved that the qualification, and compliance of the PPA requirements by each
integration of port services-is far from arbitrary and is related to stevedoring operator." The committee rated OTSI with the highest
the stated governmental objective. grade of 95% in its evaluation.
A single contractor furnishing the stevedoring requirements of a And significantly, since no less than the President of the
port has in its favor the economy of scale and the maximum Philippines approved the award of the management contract to
utilization of equipment and manpower. In turn, effective OTSI presumptively after through consideration of all factors
supervision and control as well as collection and accounting of the relevant to efficient stevedoring services, it is difficult for this
government share of revenues are rendered easier for PPA than Court to find a violation of due process in the selection procedure.
where there are 23 contractors for it to oversee. As respondent In the language of the Chief Justice in Lim v. Secretary (34 SCRA
court found from the evidence, the multiple-contractor system has 751) if the task of overturning a decision of a department head is
bred cut-throat competitions in the port. Understandably, most attended with difficulty, the burden of persuasion becomes much
contractors had been unable to acquire sufficient modern heavier when the challenged action is encased in the armor of an
facilities, observe labor standards for their workers, maintain explicit presidential approval. In the case at bar, there is nothing
efficiency in services, and pay PPA dues. The questioned program in the record remotely assailing the motives of the President in
would accelerate the rationalization and integration of all cargo- giving his imprimatur to the award.
handling activities and port-related services in major ports and In seeking the nullification of the management contract, the
the development of vital port facilities, projects, and services. petitioners also invoke the constitutional provision on monopolies
The contention of petitioners Anglo-Fil, et al., that due process and combination. Section 2, Article XIV of the Constitution
was violated resulting to a confiscatory effect on private property provides:
is likewise without merit. The state shall regulate or prohibit private monopolies when the
In the first place, the petitioners were operating merely on "hold- public interest so requires.1wphi1 No combinations in restraint
over" permits. These permits which were based on PPA of trade or unfair competition shall be allowed.
memorandum Order No. 1, dated January 19, 1977 provided: Private monopolies are not necessarily prohibited by the
xxx xxx xxx Constitution. They may be allowed to exist but under State
"In view thereof and pending proper evaluation by this Office of all regulation. A determination must first be made whether public
existing permits, licenses, contracts, and other kinds of interest requires that the State should regulate or prohibit private
memorandum agreements issued by the Bureau of Customs to the monopolies. A distinction prevails as regards combinations in
restraint of trade and unfair competition which are prohibited join PWUP. Which union a worker or various workers should join
outright by the Constitution. cannot be ordained by this Court in these petitions where the
By their very nature, certain public services or public utilities basic issue is the validity of the exclusive stevedoring contract
such those which supply water, electricity, transportation, given to one operator for one port. This matter will have to be
telephone, telegraph, etc. must me given exclusive franchises if eventually threshed out by the workers themselves and the
public interest is to be served. Such exclusive franchises are not Ministry of Labor and Employment before it may be elevated to us,
violative of the law against monopolies. (58 Corpus Juris if ever. However, we reiterate the guidelines earlier issued that no
Segundum 958-964). bona fide stevedore or worker should be deprived of employment
he used to enjoy simply because of the execution and
Neither is the management contract violative of the Anti-Graft
implementation of the disputed Management Contract. This
Law. It is a contract executed in pursuance to law and the
absorption of bona fide workers is an act of social justice. When a
instructions of the President to carry out government objectives to
person has no property, his job may possibly be his only
promote public interest. The act did not cause "undue injury" to
possession or means of livelihood. Therefore, he should be
the petitioners who as explained earlier had no vested property
protected against any arbitrary and unjust deprivation of his job.
rights entitled to protection. There is no undue injury to the
(See Bondoc v. Peoples Bank and Trust Company, 103 SCRA 599)
government nor any unwarranted benefit to OTSI consideration
for PPA which is the payment by OTSI of ten percent (10%) of its As to the contempt charges, we note that the Order of this Court
gross income, something which petitioner PIPSI is loathe to pay. dated October 21, 1980 allowed "petitioners-intervenors" meaning
The rationalization and effective utilization of port facilities is to KAMADA workers to work at the South Harbor pending resolution
the advantage of the Government. Furthermore, the discretion in of this case, "the order of respondent judge xxx as well as the
choosing the stevedoring contractor for the south Harbor, Port implementing letter of Philippine Ports Authority xxx to the
Manila, belongs by law to PPA. As long as standards are set in contrary notwithstanding." It is not clear from said orders that the
determining the contractor and such standards are reasonable petitioners who are stevedoring operators and contactors were also
and related to the purpose for which they are used, the courts specifically included. There was no mention of them being
should not inquire into the wisdom of PPAs choice. The criterion included and allowed with KAMADA workers to resume operations
used by PPA namely, the identification of a contractor with the at the South Harbor. The petitioners read into the order
highest potential for operating an exclusive service, appears something which was not there. The only clear import of the Order
reasonable. The factors which were taken into account in was that KAMADA workers must be allowed to work
determining the exclusive contractor are indicia of notwithstanding any contrary provisions in the Management
reasonableness. They are: Contract, a situation brought about by the lifting of the
restraining orders, the denial of the petition for preliminary
Productivity. 25% injunction, and the implementing letter of PPA. It is a settled rule
that a party cannot be punished for contempt unless the act
Equipment Requirement which is forbidden or required to be done is clearly and exactly
Capability 25% defined, so that there can be no reasonable doubt or uncertainty
as to what specific act or thing is forbidden or required. (Lee Yick
Financial Capability 15%
Hon v. Collector of Customs, 41 Phil. 548, citing U.S. v. Achi-son,
etc. R. Co., 146 Fed. 176, 183; 13 CJ 15)
Promptness in Paying
WHEREFORE, the petitions in G.R. No. 54958 and G.R. No.
Government share 25% 54966 are hereby DISMISSED for lack of merit. The respondents
are, however, directed to comply with the guidelines in the above
Compliance with other decision on the absorption of bonafide stevedores and as thus
PPA Requirements... 20% modifies, the temporary restraining order dated October 21, 1980
is made PERMANENT. No costs.
It is settled rule that unless the case justifies it, the judiciary will Concepcion, Jr., Guerrero, Abad Santos, Melencio-Herrera, Plana,
not interfere in purely administrative matters. (Monark Escolin and Relova, JJ., concur.
International, Inc. v. Noriel, 83 SCRA 114) Such discretionary Fernando, C.J., concurs and adds a brief statement on the rights
power vested in the proper administrative body, in the absence of of labor entitled to full respect.
arbitrariness and grave abuse so as to go beyond the statutory Teehankee, J., files a brief dissent.
authority, is not subject to the contrary judgment or control of Makasiar and Aquino, JJ., in the result.
others. (See Meralco Securities Corporation v. Savellano, 117 De Castro, J., on leave.
SCRA 804). In general, courts have no supervisory power over the Vasquez, J., took no part.
proceedings and actions of the administrative departments of the
G.R. No. L-73490
government. This is particularly true with respect to acts involving
the exercise of judgment or discretion, and to findings of fact. (Pajo UNITED STATES LINES, INC., petitioner ,
v. Ago and Ortiz, 108 Phil.905) vs.
In view of the foregoing, we find the PPA-OTSI Management COMMISSIONER OF CUSTOMS. respondent.
Contract executed on June 27, 1980, valid and devoid of any
constitutional or legal infirmity. The respondents, however, should
maintain the policy of absorption of bona-fide displaced port
workers in the integration scheme as mandated not only by LOI
This is a petition for review of the decision of the Court of Tax
No. 1005-A but by the policy of the State to assure the rights of
Appeals dated September 27, 1985, which affirmed the decision of
workers to security of tenure. (sec. 9, Art. II, Constitution) We note
respondent Commissioner of Customs dated April 5, 1984,
that both PPA and OTSI have given assurance in their answers
imposing an administrative fine of P 10,000.00 against petitioner's
that none of the legitimate stevedores would be displaced from
vessel, MV "American Venture," for violation of Sec. 1005 of the
work although they added that their bonafide stevedores should
Tariff and Customs Code as amended, in relation to Sec. 2521 of discoverable by the carrier until after examination by
the same Code. . Customs of the importation. .
On October 15, 1976, the vessel "American Venture" arrived in 3. Whether or not appellant had violated Sec. 1005 of the
Manila from Hongkong. Among the shipments on board were Tariff and Customs Code notwithstanding that the total
cargoes consigned by the same shipper and from the same loading content of the two-container shipment in question (78
port consisting of two (2) containers which were described in the bales is exactly the same quantity (78 bales of the
respective bills of lading BL No. 38 and BL No. 39 as follows: . merchandise described in the bills of lading and the
"Shipper's Load and Count" . Inward Foreign Manifest. .
1 Container (Part) Cont. 2020984 Seal 601-04725 38 cases 100% Sec. 1124 of Customs Administrative Order No. 8-75 reads as
Cotton brushed denim broken twill. follows: .
1 Container Cont. 2101730 Seal 601-04707 40 Cases 100% Shipper's 'Load and Count' a container packed with cargo by one
Cotton Sulphur Dyed denim . shipper where the quantity, description and conditions of the
cargo is the sole responsibility of the shipper. (emphasis supplied);
Total: One Container Only "Shipper's Load and Count" .
The aforestated information as furnished by the Shipper, was
and quoted hereunder are the relevant provisions of the Tariff and
copied or entered into the vessel's Inward Foreign Manifest. Upon
Customs Code: .
opening of the containers by the Bureau of
SEC. 1005. Every vessel from a foreign port must have on board a
Customs, it was discovered that a) Container No. USLU-2020984
complete manifest of all her cargo. .
contained 34 cases of cotton denim instead of 38 cases and b)
Container No. USLU-2101730 contained 44 cases of cotton denim xxx xxx xxx
instead of 40 cases. The total number of cases in the two Each manifest shall include the port of departure and the port of
containers was the same, however, to wit, 78 cases. Having been delivery with the marks, numbers, quantity and description of the
informed of the differences herein petitioner had the Manifest packages and the names of the consignee thereof. .