INSURANCE COMPANY OF NORTH AMERICA VS. ASIAN TERMINALS, INC.

DOCTRINE:

The term “carriage of goods” in the Carriage of Goods by Sea Act (COGSA) covers the period from the
time the goods are loaded to the vessel to the time they are discharged therefrom.

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

FACTS:

• On November 9, 2002, Macro-Lito Corporation, through M/V “DIMI P” vessel, 185 packages of
electrolytic tin free steel, complete and in good condition.
• The goods are covered by a bill of lading, had a declared value of $169,850.35 and was insured with
the Insuracne Company of North America (Petitioner) against all risk.
• The carrying vessel arrived at the port of Manila on November 19, 2002, and when the shipment was
discharged therefrom, it was noted that 7 of the packages were damaged and in bad condition.
• On Novermber 21, 2002, the shipment was then turned over to the custody of Asian Terminals. Inc.
(Respondent) for storage and safekeeping pending its withrawal by the consignee.
• On November 29, 2002, prior to the withrawal of the shipment, a joint inspection of the said cargo
was conducted. The examination report showed that an additional 5 packages were found to be
damaged and in bad order.
• On January 6, 2003, the consignee, San Miguel Corporation filed separate claims against both the
Petioner and the Respondent for the damage caused to the packages.
• The Petitioner then paid San Miguel Corporation the amound of PhP 431,592.14 which is based on a
report of its independent adjuster.
• The Petitioner then formally demanded reparation against the Respondent for the amount it paid San
Miguel Corporation.
• For the failure of the Respondent to satisfy the demand of the Petitioner, the Petitioner filed for an
action for damages with the RTC of Makati.
• The trial court found that indeed, the shipment suffered additional damage under the custody of the
Respondent prior to the turn over of the said shipment to San Miguel.
• As to the extent of liability, Respondent invoked the Contract for Cargo Handling Services executed
between the Philippine Ports Authority and the Respondent. Under the contract, the Respondent’s
liability for damage to cargoes in its custody is limited to PhP5,000 for each package, unless the value of
the cargo shipment is otherwise specified or manifested in writing together with the declared Bill of
Lading. The trial Court found that the shipper and consignee with the said requirements.
• However, the trial court dismissed the complaint on the ground that the Petitioner’s claim was barred
by the statute of limitations. It held that the Carriage of Goods by Sea Act (COGSA), embodied in
Commonwealth Act No. 65 is applicable. The trial court held that under the said law, the shipper has the
right to bring a suit within one year after the delivery of the goods or the date when the goods should
have been delivered, in respect of loss or damage thereto.
• Petitioner then filed before the Supreme Court a petition for review on certiorari assailing the trial
court’s order of dismissal.

ISSUE/S:

1.) Whether or not the trial court committed an error in dismissing the complaint of the petitioner
based on the one-year prescriptive period for filing a suit under the COGSA to an arrastre operator? YES.

2.) Whether or not the Petitioner is entitled to recover actual damages against the Respondent? YES,
but only PhP164,428.76

HELD:

• The term “carriage of goods” covers the period from the time when the goods are loaded to the time
when they are discharged from the ship. Thus, it can be inferred that the period of time when the goods
have been discharged from the ship and given to the custody of the arrastre operator is not covered by
the COGSA.

• The Petitioner, who filed the present action for the 5 packages that were damaged while in the
custody of the respondent was not fortright in its claim, as it knew that the damages it sought, based on
the report of its adjuster covered 9 packages. Based on the report, only four of the nine packages were
damaged in the custody of the Respondent. The Petitioner can be granted only the amount of damages
that is due to it.
Puromines vs Court of Appeals

Facts:

Pursuant to a contract of sale executed between Puromines Inc (petitioner) and Philipp Brothers
Oceanic, Inc., (private respondent) as charterer of M/V Liliana Dimitrova, 3 Bills of Lading were executed
bound for the Iloilo and Manila of 15,000 metric tons of prilled urea.

However, upon reaching the port of Manila it was found out that the shipment (urea) were already
contaminated with rust and dirt.

This prompted petitioner to file an action for breach of contract of carriage against Maritime Factors, Inc
as ship agent here in the Philippines for the owners of M/V Liliana in the complaint moreover private
respondent Philipp Brothers Oceanic Inc., was impleaded as charterer of the said vessel.

Private respondent, Philipp Brothers, instead of filing its answer filed a motion to dismiss on the ground
of no cause of action. Private respondent also avers that Puromines Inc. should comply with the
arbitration clause provided for in the sales contract.

Facts show that the sales contract executed between Puromines Inc., and Philipp Brothers Oceanic, Inc.,
provides for an arbitration clause wherein it states that:

“Any disputes arising under this contract shall be settled by arbitration in London in accordance
with the Arbitration Act 1950 and any statutory amendment or modification thereof. Each party is to
appoint an Arbitrator, and should they be unable to agree, the decision of an Umpire appointed by the
them be final. The Arbitrators and Umpire are all to be commercial men and resident in London. This
submission may be made a rule of the High Court of Justice in England by either party.”

Petitioner moved to oppose the said motion to dismiss alleging that the arbitration clause is not
applicable on the case because the complaint did not arise from the violation of the terms and
conditions of the sales contract but rather for claims of cargo agreement.

The trial court ruled in favor of the petitioner. On appeal, the CA reversed the decision of the trial court
and found that the arbitration clause is applicable.

Hence this petition.

Issue: whether petitioner is bound by the arbitration clause in the sales contract.

RATIO:

Yes, petitioner is bound by the arbitration clause provided for in the contract. Arbitration has been held
valid and constitutional. Even before the enactment of RA no. 876, the Supreme Court has countenanced
the settlement of disputes through arbitration. The rule now is that unless the agreement is such
absolutely close the doors of the courts against the parties, which agreement would be void, the courts
will look with favor upon such amicable arrangements and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator.

At the case at bar, the sales contract is comprehensive enough to include claims for damages arising
from carriage and delivery of the goods. Puromines, Inc derived his right to the cargo from the bill of
lading which is the contract of affreightment together with the sales contract. Consequently, Puromines
is bound by the provisions and terms of the bill of lading and of the arbitration clause.

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

As pointed out in the case of Mindanao Portland Cement Corp. vs Mc Donough Construction Company of
Florida the court ruled:

“With a written provision for arbitration as well as failure on respondent's part to comply, parties must
proceed to their arbitration in accordance with the terms of their agreement (Sec. 6, RA 876).
Proceeding in court is merely a summary remedy to enforce the agreement to arbitrate. The duty of the
court in this case is not to resolve the merits of the parties' claims but only to determine if they should
proceed to arbitration or not. And although it has been ruled that a frivolous or patently baseless claim
should not be ordered to arbitration it is also recognized that the mere fact that a defense exist against a
claim does not make it frivolous or baseless.

WHEREFORE, the decision of the CA is affirmed, petition is dismissed.

Planters Products vs. Court of Appeals

FACTS:
 June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A., 9,329.7069
M/T of Urea 46% fertilizer bought by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V
"Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to
Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading
 May 17 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform
General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,
in Tokyo, Japan
 Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by
the charterer's representative and found fit
 The hatches remained closed and tightly sealed throughout the entire voyage
 July 3, 1974: PPI unloaded the cargo from the holds into its steelbodied dump trucks which were
parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly
 hatches remained open throughout the duration of the discharge
 Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before
it was transported to the consignee's warehouse located some 50 meters from the wharf
 Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of the cargo.
 The port area was windy, certain portions of the route to the warehouse were sandy and
the weather was variable, raining occasionally while the discharge was in progress.
 Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain
spillages of the ferilizer
 It took 11 days for PPI to unload the cargo
 Cargo Superintendents Company Inc. (CSCI), private marine and cargo surveyor, was hired by PPI
to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and
after discharge
 shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt
 Certificate of Shortage/Damaged Cargo prepared by PPI
 short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted with sand, rust and dirt
 PPI sent a claim letter 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the
carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped
and the diminution in value of that portion said to have been contaminated with dirt
 SSA: what they received was just a request for shortlanded certificate and not a formal
claim, and that they "had nothing to do with the discharge of the shipment
 RTC: failure to destroy the presumption of negligence against them, SSA are liable
 CA: REVERSED - failed to prove the basis of its cause of action
ISSUE: W/N a time charter between a shipowner and a charterer transforms a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo

HELD: NO. petition is DISMISSED

 When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment
were under the employ of the shipowner and therefore continued to be under its direct supervision
 and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with
the duty of caring for his cargo when the charterer did not have any control of the means in doing so
 carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence. The hatches remained close and tightly sealed while the ship was in transit as the weight
of the steel covers made it impossible for a person to open without the use of the ship's boom.
 bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage.
More so, with a variable weather condition prevalent during its unloading
 This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has
sufficiently proved the inherent character of the goods which makes it highly vulnerable to
deterioration; as well as the inadequacy of its packaging which further contributed to the loss.
 On the other hand, no proof was adduced by the petitioner showing that the carrier was
remise in the exercise of due diligence in order to minimize the loss or damage to the goods it
carried.
Lintojua Shipping Company Inc VS National Seaman Board and Gregorio P. Candongo

FACTS

Petitioner is the duly appointed local crewing managing office of the Fairwind Shipping Corporation.
On September 11, 1976 M/V Dufton Bay an ocean-going vessel of foreign registry owned by the R.D.
Mullion ship broking agency under charter by Fairwind, while in the port of Cebu contracted the services
(among others) of Gregorio Candongo as Third Engineer for 12 months with a monthly wage of
US$500.00. The agreement was executed before the Cebu Area Manning Unit of the NSB, after which
respondent boarded the vessel.

On December 28, 1976 before the expiration of contract, respondent was required to disembark at Port
Kilang, Malaysia. Describe in his seaman’s handbook is the reason “by owner’s arrange.”

Condongo filed a complaint against Mullion (Shipping company) for violation of contract and against
Litonjua as agent of shipowner.

On February 1977, NSB rendered a judgment by default for failure of petitioners to appear during the
initial hearing, rendering the same to pay Candongo because there was no sufficient or valid cause for
the respondents to terminate the service of the complainant.

Litonjua’s defense:
Contends that the shipowner, nor the charterer, was the employer of private respondent; and that
liability for damages cannot be imposed upon petitioner which was a mere agent of the charterer.

ISSUE

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

HELD

YES.

The first basis is the charter party which existed between Mullion, the shipowner, and Fairwind, the
charterer.

It is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of
the vessel, the charterer assuming in large measure the customary rights and liabilities of the shipowner
in relation to third persons who have dealt with him or with the vessel. In such case, the Master of the
vessel is the agent of the charterer and not of the shipowner. The charterer or owner pro hac vice, and
not the general owner of the vessel, is held liable for the expenses of the voyage including the wages of
the seamen
Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it was not such,
we believe and so hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable
on the contract of employment between the ship captain and the private respondent.

There is a second and ethically more compelling basis for holding petitioner Litonjua liable on the
contract of employment of private respondent. The charterer of the vessel, Fairwind, clearly benefitted
from the employment of private respondent as Third Engineer of the Dufton Bay, along with the ten (10)
other Filipino crewmembers recruited by Captain Ho in Cebu at the same occasion.

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.

Last, but certainly not least, there is the circumstance that extreme hardship would result for the private
respondent if petitioner Litonjua, as Philippine agent of the charterer, is not held liable to private
respondent upon the contract of employment.
Abueg vs. San Diego Case Digest

Facts: The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around Mindoro
Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they were sunk and totally
lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while acting in their capacities perished in
the shipwreck.

Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the vessel
together with all her tackle and freight money earned during the voyage are abandoned, the agent's
liability to third persons for tortious acts of the captain in the care of the goods which the ship carried is
extinguished; article 837 of the same code which provides that in cases of collision, the ship owners'
liability is limited to the value of the vessel with all her equipment and freight earned during the voyage
(Philippine Shipping company vs. Garcia, 6 Phil., 281), and article 643 of the same Code which provides
that if the vessel and freight are totally lost, the agent's liability for wages of the crew is extinguished.
From these premises counsel draw the conclusion that appellant's liability, as owner of the two motor
ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on October 1, 1941, was
extinguished.

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

Held: The provisions of the Code of Commerce invoked by appellant have no room in the application of
the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury to,
or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the
liability for the loss of the ship as result of collision; nor the responsibility for wages of the crew, but a
liability created by a statute to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or the heirs and
dependents and laborers and employees in the event of death caused by their employment. Such
compensation has nothing to do with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be included in the budget of any well-
managed industry.

It has been repeatedly stated that the Workmen's Compensation Act was enacted to abrogate the
common law and our Civil Code upon culpable acts and omissions, and that the employer need not be
guilty of neglect or fault, in order that responsibility may attach to him and that shipowner was liable to
pay compensation provided for in the Workmen's Compensation Act, notwithstanding the fact that the
motorboat was totally lost.
Vasquez vs. Court of Appeals

Facts: MV Pioneer Cebu left the port of Manila and bounded for Cebu. Its officers were aware of the
upcoming typhoon Klaring that is already building up somewhere in Mindanao. There being no typhoon
signals on their route, they proceeded with their voyage. When they reached the island of Romblon, the
captain decided not to seek shelter since the weather was still good. They continued their journey until
the vessel reached the island of Tanguingui, while passing through the island the weather suddenly
changed and heavy rains fell. Fearing that they might hit Chocolate island due to zero visibility, the
captain ordered to reverse course the vessel so that they could weather out the typhoon by facing the
strong winds and waves. Unfortunately, the vessel struck a reef near Malapascua Island, it sustained a
leak and eventually sunk.

The parents of the passengers who were lost due to that incident filed an action against Filipinas Pioneer
Lines for damages. The defendant pleaded force majeure but the Trial Court ruled in favor of the plaintiff.
On appeal to the Court of Appeals, it reversed the decision of the lower stating that the incident was a
force majeure and absolved the defendants from liability.

Issue: Whether or not Filipinas Pioneer Lines is liable for damages and presumed to be at fault for the
death of its passenger?

Held: The Supreme Court held the Filipinas Pioneer Lines failed to observe that extraordinary diligence
required of them by law for the safety of the passengers transported by them with due regard for all
necessary circumstance and unnecessarily exposed the vessel to tragic mishap. Despite knowledge
of the fact that there was a typhoon, they still proceeded with their voyage relying only on the forecast
that the typhoon would weaken upon crossing the island of Samar. The defense of caso fortuito is
untenable. To constitute caso fortuito to exempt a person from liability it necessary that the event
must be independent from human will, the occurrence must render it impossible for the debtor to fulfil l
his obligation in a normal manner, the obligor must be free from any participation or aggravation to the
injury of the creditor. Filipina Pioneer Lines failed to overcome that presumption of fault or negligence
that arises in cases of death or injuries to passengers.
Negros Navigation Co., Inc. v. Court of Appeals

FACTS:

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four
special cabin tickets for his wife, daughter, son and niece who were going to Bacolod City to attend a
family reunion. The tickets were for Voyage of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22,
1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro,
with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the
PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of
her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought
to shore, but the four members of private respondents’ families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34,
against the Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC Shipping and
Transport Corporation (PNOC/STC), seeking damages for the death of the four family members that were
never found. Petitioner, however, denied that the four relatives of private respondents actually boarded
the vessel as shown by the fact that their bodies were never recovered. Petitioner further averred that
the Don Juan was seaworthy and manned by a full and competent crew, and that the collision was
entirely due to the fault of the crew of the M/T Tacloban City. The RTC ruled in favor of the complainants
and ordered petitioner to pay for the damages. The CA affirmed the said decision.

ISSUE:

Whether petitioner is liable for damages to the full extent

RULING:

Prior to this case, a previous case was brought for the death of other passengers. Said case is entitled
Mecenas v. Intermediate Appellate Court .In that case it was found that although the proximate cause of
the mishap was the negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was
equally negligent as it found that the latter’s master, Capt. Rogelio Santisteban, was playing mahjong at
the time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed
to call the attention of Santisteban to the imminent danger facing them. This Court found that Capt.
Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least
delay the sinking of the ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the
ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan
seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban
City .

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

Facts: Alejandro Arada doing business under the name and style South Negros Enterprises is engaged in
the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different
corporations and companies with 5 vessels it was operating. It entered into a contract with San Miguel
Corporation to transport, as a common carrier, cargoes of the latter from San Carlos City Negros
Occidental to Mandaue City using one of its vessels M/L Maya. The cargoes of San Mig Corp valued at
176, 824. 80.The master crew applied for clearance to sail which was denied by the Phil Coast Guard due
to a typhoon.

However, the next day, it was granted clearance as there was no storm and the sea was calm. So, ML
Maya left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and said vessel
sank with whatever was left if its cargoes. The crew was rescued. The Board of Marine Inquiry
exonerated Arada and his crew from administrative liability.

Meanwhile, San Miguel Corporation filed with the RTC for the recovery of the value of its cargoes
anchored on breach of contract of carriage.

The RTC rendered its decision dismissing the claim of San Miguel for recovery of the value of its cargoes.
On appeal, the CA reversed the decision of the RTC. Hence, this petition.

Issue: WON Arada is liable for the loss of the cargo of San Miguel Corporation.

Held: Yes. South Negros Enterprises was exercising its function as a common carrier when it entered into
a contract with San Miguel Corp to carry and transport the latter’s cargoes. A common carrier both from
the nature of its business and for insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for
the goods transported by it. The loss, or deterioration or destruction of goods turned over to the
common carrier for the conveyance to a designated destination raises instantly a presumption of fault or
negligence on the part of the carrier, save only in cases where such loss, destruction or deterioration
arises from extreme circumstances such as a natural disaster or calamity. In order that a common carrier
may be exempted from responsibility, the natural disaster must have been the proximate cause of the
loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before,
during and after the occurrence of the flood, storm or other natural disaster in order that the common
carrier may be exempted from liability from the destruction or deterioration of the goods. In the case at
bar, Southern Negros failed to observe extraordinary diligence over the cargo in question was negligent
previous to the sinking of the carrying vessel. The master crew knew that there was a typhoon
coming before his departure but did not check where it was. He should have verified first where the
typhoon was before departing. The master crew did not ascertain where the typhoon was headed by the
use of his vessel’s barometer and radio. Neither did the captain of the vessel monitor and record the
weather conditions as required under Art.612 of the Code of Commerce. A common carrier is obliged to
observed extraordinary diligence and the failure of the master crew to ascertain the direction of the
storm and the weather condition of the path they would be traversing, constitute lack of foresight and
minimum vigilance over its cargoes taking into account the surrounding circumstances of the case.

CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT

FACTS:

Petitioner contracted with the herein private respondent to deliver 1,000 sacks of copra, valued at
P101,227.40, on board the vessel M/V Luzviminda I owned by the latter. However it did not reach its
destination, the vessel capsized and sank with all its cargo.

Petitioner instituted a complaint against private respondent for breach of contract incurring damages.

Private respondent’s defense is that even assuming that the alleged cargo was truly loaded aboard their
vessel, their liability had been extinguished by reason of the total loss of said vessel.

RTC rendered judgment in favor of Chua Yek Hong however CA reversed the decision by applying Article
587 of the Code of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that
private respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their
interest in the vessel such that a total loss thereof results in its extinction.

ISSUE:

Whether or not respondent Appellate Court erred in applying the doctrine of limited liability under
Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.

HELD:

As this Court held:

If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers
arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction. (Yangco vs.
Laserna, et al., supra).

The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner
and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and
(3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the
records to show that the loss of the cargo was due to the fault of the private respondent as shipowners,
or to their concurrent negligence with the captain of the vessel. The judgment sought to be reviewed is
hereby AFFIRMED
Yangco vs. Laserna

Facts: On the afternoon of May 26, 1927, the steamer SS Negros left the port of Romblon on its return
trip to Manila. Typhoon signal no. 2 was then up and in fact, the passengers duly advised the captain
before sailing. The boat was overloaded. After 2 hours of sailing, the boat encountered strong winds and
rough seas between the islands of Banton and Simara. While in the act of maneuvering, the vessel was
caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died on the
mishap. Civil actions were instituted in the CFI of Capiz, the petitioner sought to abandon the vessel to
the plaintiffs in three cases.

Issue: Whether the shipowner or agent is liable for damages for the consequent death of its passengers
notwithstanding the total loss of the vessel?

Held: The petitioner is absolved from all complaints.

Under Article 587 – “the ship agent shall also be civilly liable for indemnities in favor of third persons
which arise from the conduct of the captain in the vigilance over the goods which the vessels carried;
BUT he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight
he may have earned during the voyage.”

Whether the abandonment of the vessel sought by the petitioner in the case was in accordance with the
law or not, is immaterial. The vessel having totally perished, any act of abandonment would be idle
ceremony.

“NO VESSEL, NO LIABILITY.”

Standard Oil Co. of New York vs. Lopez Castelo

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

ISSUE: WON the loss of this petroleum was a general average loss or a particular loss to be borne solely
by the owner of the cargo

HELD: GENERAL AVERAGE LOSS

It is a general rule… (xxx) that ordinarily the loss of cargo carried on deck
shall not be considered a general average loss. The reason for this rule is found in the fact that deck
cargo is in an extra-hazardous position and, if on a sailing vessel, its presence is likely to obstruct the free
action of the crew in managing the ship. Moreover, especially in the case of small vessels, it renders the
boat top-heavy and thus may have to be cast overboard sooner than would be necessary if it were in the
hold; and naturally it is always the first cargo to go over in case of emergency. Indeed, in Art 815 of Code
of Commerce, it is expressly declared that deck cargo shall be cast overboard before cargo stowed in the
hold. However, with the advent of the steamship as the principal conveyer of cargo by sea, it has been
felt that the reason for the rule has become less weighty, especially with reference to coastwise trade;
and it is now generally held that jettisoned goods carried on deck, according to the custom of trade, by
steam vessels navigating coastwise and inland waters, are entitled to contribution as a general average loss.
Hence, plaintiffis entitled to recover in some way and from somebody an amount bearing such proportion to
its total loss as the value of both the ship and the saved cargo bears to the value of the ship and entire
cargo before the jettison was effected.

ISSUE: Who is the person, or persons, who are liable to make good this loss, and what are the conditions
under which the action can be maintained?

HELD: The shipper may, in the court’s opinion, go at once upon the owner and the latter, if so minded, may
have his recourse for indemnization against his captain. Primary liability is placed upon the person who
has actual control over the conduct of the voyage and who has most capital embarked in the venture,
namely , the owner of the ship, leaving him to obtain recourse**, as it is very easy to do, from other
individuals who have been drawn into the venture as shippers**Recourse against his captain. By article
852 of the Code of Commerce the captain is required to initiate the proceedings for the adjustment,
liquidation, and distribution of any gross average to which the circumstances of the voyage may have
given origin; and it is therefore his duty to take the proper steps to protect any shipper whose goods may
have been jettisoned for the general safety.

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

Facts: Insa Abdulhaman together with his wife and five children boarded M/L Consuelo V in Zamboanga
City. The said ship was bound for Siokon under the command of Faustino Macrohon. On that same night,
M/S Bowline Knot was navigating from Marijoboc towards Zamboanga.

Around 9:30 to 10:00 in the evening of May 4, 1948, while some of the passengers of the M/L Consuelo
V were then sleeping and some lying down awake, a shocking collision suddenly occurred. The ship that
collided was later on identified as the M/V Bowline Knot. M/L Consuelo V capsized that resulted to the
death of 9 passengers and the loss of the cargoes on board.

The Court held the owners of both vessels solidarily liable to plaintiff for damages caused to the latter
under Article 827 of the Code of Commerce but exempted defendant Lim Hong To from liability due to
the sinking and total loss of his vessel. While Manila steamship, owner of the Bowline Knot was ordered
to pay all of plaintiff’s damages.

Petitioner Manila Steamship Co. pleads that it is exempt from any liability under Article 1903 of the Civil
Code because it had exercised the diligence of a good father of a family in the selection of its employees,
particularly the officer in command of the M/S Bowline Knot.

Issue: Whether or not petitioner Manila Steamship Co. is exempt from any liability under Art. 1903 of
the Civil Code?

Held: NO. Petitioner is not exempted from liabilities. While it is true that plaintiff’s action against
petitioner is based on a tort or quasi delict, the tort in question is not a civil tort under the Civil Code but
a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce.
Under Art. 827 of the Code of Commerce, in case of collision between two vessels imputable to both of
them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages
occasioned to their cargoes. The shipowner is directly and primarily responsible in tort resulting in a
collision at sea, and it may not escape liability on the ground that exercised due diligence in the selection
and supervision of the vessel’s officers and crew.
Aboitiz Shipping Corp. vs. New India Assurance Co., Ltd

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

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

Both the trial and the appellate courts found that the sinking was not due to the typhoon but to its
unseaworthiness.

ISSUE:
Whether the limited liability doctrine, which limits respondent’s award of damages to its pro-rata share
in the insurance proceeds, applies in this case.

HELD:
No. x x x An exception to the limited liability doctrine is when the damage is due to the fault of the
shipowner or to the concurrent negligence of the shipowner and the captain. In which case, the
shipowner shall be liable to the full-extent of the damage.

xxx

In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke the limited liability doctrine. Differently put, to
limit its liability to the amount of the insurance proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or negligence. Considering the evidence presented
and the circumstances obtaining in this case, we find that
petitioner failed to discharge this burden. It initially attributed the sinking to the typhoon and relied on
the BMI findings that it was not at fault. However, both the trial and the appellate courts, in this case,
found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record
showed that the weather was moderate when the vessel sank. These factual findings of the Court of
Appeals, affirming those of the trial court are not to be disturbed on appeal, but must be accorded great
weight. These findings are conclusive not only on the parties but on this Court as well.

Magsaysay Inc. v. Anastacio Agan

Facts: The S S “San Antonio” vessel (plaintiff) with general cargo for different ship owners left Manila and
was bound for Basco, Batanes, vis Aparri, Cagayan. It reached Aparri, had a stopover, and as it would
proceed to Basco but still in port, it accidentally ran aground at the mouth of the Cagayan River. Plaintiff
have it refloated by the Luzon Stevedoring Co.. The vessel returned to Manila to refuel and then
proceeded to Basco, where the cargoes were delivered to their respective owners or consignees, who,
with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the
average. Thus, the plaintiff brought an action to make defendant pay his contribution. Defendant denies
liability. The lower court decided against the defendant, thus the appeal.
Issue: Whether the expenses incurred in floating a vessel so stranded should be considered general
average and shared by the cargo owners.
Held: The expenses should not be considered as general average.

The said expenses do not fit into any of the specific cases of general average enumerated in article 811.
No. 6 of this article does mention “expenses caused in order to float a vessel,” but it specifically refers to
“a vessel intentionally stranded for the purpose of saving it.” In the present case, the stranding was not
intentional.

The expenses also lack the requisites of general average. First, the expenses sought to be recovered from
defendant were not incurred to save vessel and cargo from a common danger. The vessel ran aground in
fine weather inside the port at the mouth of a river, a place described as “very shallow”. There was no
imminent danger. It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they
would run the risk of being destroyed. But as stated at the above quotation, “this last requirement
excludes measures undertaken against a distant peril.” What does appear from the testimony of
plaintiff’s manager is that the vessel had to be salvaged in order to enable it “to proceed to its port of
destination.” But as was said in the case just cited it is the safety of the property, and not of the voyage,
which constitutes the true foundation of the general average. Second, the cargo could, without need of
expensive salvage operation, have been unloaded by the owners if they had been required to do so.
Third, the sacrifice was for the benefit of the vessel and not for the purpose of saving the cargo, the
cargo owners are not in law bound to contribute to the expenses. And fourth, the procedure was not
followed.
URRUTIA vs. BACO RIVER PLANTATION

FACTS.

 Steamship Nuestra Señora del Pilar, owned by Urrutia, and the schooner Mangyan owned by Baco
River collided. The sail vessel (schooner) was sailing with a fresh breeze dead astern, her sails wing
and wing. The steamer was seen by those on board the sailing vessel some time before the actual
collision, sailing erratically.

 Despite this fact, the sailing ship kept its course steady until just before the actual contact. (It was
during the time when the sail vessel was passing through the third zone that it changed its course to
port in order to avoid, if possible, the collision.)

 As such, the sailing ship rammed the steamer, wherein the steamer sank and 8 died. An action was
filed by the owner of the steamship against the owner of the sail vessel, to recover the value of the
destroyed steamer and the damages caused by reason of its destruction, alleging that the sailing
ship was negligent.

 Note that the steamer was insured in this case.

Marine Trading vs Govt of the Phil. Islands

Act No. 2630 empowered the Marine Trading Company (Inc.) to bring action in the Court of First Instance
for the city of Manila to determine the responsibility and liability for a collision between its
launch Active and a scow towed by the Government launch bohol, and to fix the damages, if any, to
which the Marine Trading Company (Inc.) is entitled on account of the collision. Acting under this
authority, the Marine Trading Company (Inc.) began action to recover as damages from the Government
of the Philippine Islands the sum of P9,677, with interest and costs, because of the reckless and
negligent acts of the defendant's agent and employee. The Attorney-General interposed a general denial.
Judgment was rendered by the Honorable George R. Harvey, judge of first instance, for the amount
prayed for by plaintiff, with legal interest from September 25, 1916, the date of filing the complaint, and
costs of suit.chanroblesvirtualawlibrary chanrobles virtual law library

On August 10, 1915, plaintiff owned a launch named Active and defendant owned a launch
named bohol. Both launches were in use upon the Pasig River in the city of Manila. About 8 o'clock in
the morning of this date, in the Pasig River, below and near the bridge of Spain, the launch bohol was
towing up the river two rudderless scows or lighters, one behind the other. The scow nearest the launch
was about 5 meters behind, was empty, and was high in the water. The second lighter was tied to the
rear of the fist one, with a distance of about 2 meters intervening, was loaded, and was lower in the
water. The second lighter was tied to the rear of the first one, with a distance of about 2 meters
intervening, was loaded, and was lower in the water. The Activewas coming down the river from
Pandacan toward Manila Bay. Thepatron of the Active blew one blast of his whistle, which indicated that
the Active had a clear way and should pass to starboard. When under the bridge of Spain,
the Active passed the bohol and the first scow towed by it. But when the Active was about to pass the
second scow, the latter swerved to the left, and its forward left end corner struck the Active on the port
side between the cabin and the bow with such force and impact that the launch sank
immediately.chanroblesvirtualawlibrary chanrobles virtual law library

The Active was in good condition and state of operation before the collision occurred. The launch was so
seriously damaged by the collision and the sinking that it took the sum of P9,677 to repair
it.chanroblesvirtualawlibrary chanrobles virtual law library

The applicable provisions of law are found in articles 826, 827, 828, and 830 of the Code of Commerce,
and in the Philippine Marine Regulations issued by the Insular Collector of Customs. These provisions of
law and these regulations, in relation to the facts, present the issue of whether or not the accident
occurred through the negligence of the bohol only, or whether both launches can be blamed for the
collision. If the first be the holding, then, under the law, plaintiff can recover. If the second be the result,
plaintiff cannot recover.chanroblesvirtualawlibrary chanrobles virtual law library

The trial court was clearly of the opinion that there was negligence on the part of the patron of
the bohol in operating his launch and the scow in such a way as to endanger the Active and its
occupants. The court was further of the opinion that there was no negligence on the part of
the patron of the Active. With this view of the trial court, we are in
accord.chanroblesvirtualawlibrary chanrobles virtual law library

Negligence on the part of the bohol is demonstrated by the following:

(1) The patron of the bohol gave the whistle which indicated that the Active had a clear way and should
pass to the starboard, and did not give four blasts of the whistle in quick succession in order to denote
danger.chanroblesvirtualawlibrarychanrobles virtual law library

(2) The two scows in tow by the bohol were apparently not properly fastened together, as required by
section 197 of the Philippine Marine Regulations.chanroblesvirtualawlibrary chanrobles virtual law
library

(3) The two launches passed each other under the bridge of Spain, and the bohol, instead of steering so
as to avoid danger of a collision between the Active and its scows, kept its course and crowded
the Active most against a buoy. While, in accordance with paragraph 163 of the Philippine Marine
Regulations, steam vessels towing have the right of way over steam vessels not towing this does not
mean that the vessel with a tow can usurp the entire river so as to force another vessel into the bank. In
conformity with the doctrine cited by appellant, that the preferred steamer will not be held in fault for
maintaining her course and speed, this is only true so long as it is possible for the other vessel to avoid
her by the proper maneuver. ( The Delaware [1895], 161 U.S., 459.)

As opposed to the foregoing, we find that the plaintiff's agent was in no way to blame for the
collision.chanroblesvirtualawlibrary chanrobles virtual law library

This disposes of the three assignments of error and the principal issue in the case. It is to be noted,
however, that the judgment was for legal interest and costs. Is this right?chanrobles virtual law library

It is the undoubted law that the State (in this jurisdiction, the Government of the Philippine Islands)
never pays interest unless it expressly engages to do so. This is especially true in case the claim is an
unliquidated one. Among other authorities, we find Angarica vs. Bayard ([1888], 127 U.S., 251), in which
Justice Blatchford said:

The case, therefore, falls within the well-settled principle, that the United States are not liable to pay
interest on claims against them, in the absence of express statutory provision to that effect. I has been
established, as a general rule, in the practice of the government, that interest is not allowed on claims
against it, whether such claims originate in contract or in tort, and whether they arise in the ordinary
business of administration or under private acts of relief, passed by Congress on special application. The
only recognized exceptions are where the government stipulates to pay interest and where interest is
given expressly by an Act of Congress, either by the name of interest or by that of damages.
The rule is equally well established that the State is not liable for costs unless the statute expressly
makes it so.chanroblesvirtualawlibrary chanrobles virtual law library

Here, Act No. 2630 only authorized the court to fix the damages if any, and to enter judgment
accordingly. Unless damages can be interpreted to include interest and costs, plaintiff cannot recover the
same. This appearing to be a strained interpretation, we believe we should hold to the view that since
the government has not stipulated to pay interest or costs, the courts should not include these items in
the judgment. (See generally, 11 Encyclopedia of U.S. Supreme Court Reports, pp. 775-777;
Marine vs. Lyon [1894], 62 Fed., 153; McMaster vs. State, [1888] 108 N.Y., 542; Annotated Cases [1914A],
p. 361; Hongkong and Shanghai Banking Corporation vs. Rafferty [1918], p. 145, post.)chanrobles virtual
law library

With the elimination of so much of the judgment as provides for interest and costs, judgment is
affirmed, without special finding as to costs in this instance. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library
Smith Bell and Company Phils. v. CA

Facts:

M/V “Don Carlos,” an inter-island vessel owned and operated by private respondent Go Thong was
sailing south bound for Cebu, when it collided with M/S “Yotai Maru,” a merchant vessel of Japanese
registry which was approaching the port of Manila coming in from Kobe, Japan. The bow of the “Don
Carlos” rammed the left side of the “Yotai Maru” inflicting a gaping hole through which seawater rushed
in and flooded the hatch, damaging all the cargo stowed therein. The consignees of the damaged cargo
having been paid by their insurance companies, the latter in turn commenced actions against private
respondent Go Thong for damages sustained by the various shipments. 2 cases were filed before the
RTC. The first case (Smith Bell and Sumitomo Insurance v. Go Thong) reached the SC which ruled in
finality that negligence was with the officers and crew of “Don Carlos.” On the contrary, the second case
(Smith Bell and Tokyo Insurance v. Go Thong) was decided by the CA holding the officers and crew of
“Yotai Maru” at fault in the collision. Hence the present petition.
Issue:

Whether or not inscrutable fault is present in said collision.

Ruling: NO.
The Court believes that there are three (3) principal factors which are constitutive of negligence on the
part of the “Don Carlos,” which negligence was the proximate cause of the collision.
(1) The first of these factors was the failure of the “Don Carlos” to comply with the requirements of Rule
18 (a) of the International Rules of the Road which provides as follows: (a) When two power-driven
vessels are meeting end on, or nearly end on, so as to involve risk of collision, each shall alter her course
to starboard, so that each may pass on the port side of the other. The evidence on this factor state that
“Don Carlos” altered its course by five degrees to the left instead of to the right which maneuver was the
error that caused the collision in question. Why it did so is because “Don Carlos” was overtaking another
vessel, the “Don Francisco”, and was then at the right side of the aforesaid vessel. It was in the process of
overtaking “Don Francisco” that “Don Carlos” was finally brought into a situation where he was meeting
end-on or nearly end-on “Yotai Maru, thus involving risk of collision.

(2) The second circumstance constitutive of negligence on the part of the “Don Carlos” was its failure to
have on board that night a “proper look-out” as required by Rule I (B) Under Rule 29 of the same set of
Rules, all consequences arising from the failure of the “Don Carlos” to keep a “proper look-out” must be
borne by the “Don Carlos.” In the case at bar, the failure of the “Don Carlos” to recognize in a timely
manner the risk of collision with the “Yotai Maru” coming in from the opposite direction, was at least in
part due to the failure of the “Don Carlos” to maintain a proper look-out.
(3) The third factor constitutive of negligence on the part of the “Don Carlos” relates to the fact that
Second Mate Benito German was, immediately before and during the collision, in command of the “Don
Carlos.” Second Mate German simply did not have the level of experience, judgment and skill essential
for recognizing and coping with the risk of collision as it presented itself that early morning when the
“Don Carlos,” running at maximum speed and having just overtaken the “Don Francisco” then
approximately one mile behind to the right side of the “Don Carlos,” found itself head-on or nearly head
on vis-a-vis the “Yotai Maru. ” It is essential to point out that this situation was created by the “Don
Carlos” itself.
FOR ALL THE FOREGOING, the Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
*Inscrutable Fault – where it cannot be determined which of the 2 vessels caused the collision, each
vessel shall suffer its own damages, and both shall be solidarily responsible for the losses and
damages occasioned to their cargoes.