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TRANSPORTATION LAWS TSN

From the lectures of Atty. Jocelyn Valencia


Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
JANUARY 11 d. What does the passenger have to
prove?
ACTIONS AND DAMAGES IN
CASE OF BREACH That the common carrier failed to
carry the passenger safely as far as
ACTIONS human care and foresight can
provide, using the utmost diligence
So under the Civil Code, from where shall of very cautious persons, with a due
obligations arise? regard for all the circumstances.

SOURCES OF OBLIGATION:
 In case of DEATH OR INJURY to the passenger,
Art. 1157. Obligations arise from: what does the common carrier have to prove?
(1) Law;
(2) Contracts; That it exercised extraordinary diligence and
(3) Quasi-contracts; the accident resulted from negligence on the
(4) Acts or omissions punished by law; and part of the passenger, or a third person, or a
(5) Quasi-delicts. fortuitous event, and it is the proximate and only
cause of the accident.
REMEDIES:  Can a common carrier in a culpa contractual
use the DEFENSE OF EXTRAORDINARY DILIGENCE
 What would be the REMEDIES available to the in the selection and supervision of its
passenger whose cause of action is being employees?
injured during a vehicular accident?
Yes, but it is not a complete defense. It will only
 The passenger in a culpa contractual is mitigate the liability of the common carrier. The
entitled to file an action for BREACH OF only exculpatory circumstances are those
CONTRACT against the common carrier for mentioned in Art. 1734.
failure to deliver the passenger safely.
a. What would be the quantum of We said that as a result of the accident, we
evidence required? have what you call culpa contractual, and we
may also have culpa aquiliana, for example
when a person who is not a passenger is injured
PREPONDERANCE OF EVIDENCE. by a collision of vehicles. Or a culpa criminal.

b. And what would be the liability of


CULPA CONTRACTUAL
the common carrier?
VS.
CULPA AQUILIANA
Primary liability.
So if a passenger were to elect whether to file an
action either for culpa contractual or culpa
aquiliana, what would be the DIFFERENCE?
c. Who has the burden of proof?
What would be the ADVANTAGE in a culpa
The passenger. contractual action which is not per se in a culpa
aquiliana?

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TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
In a CULPA CONTRACTUAL, the law already employees in the discharge of their duties. (RPC)
establishes a presumption of negligence on the
part of the common carrier, in case of breach  Where will you file an action to invoke the
of contract and the passenger dies or suffers common carrier‘s subsidiary liability?
injuries.
In the same court.
In a CULPA AQUILIANA, there is no such
presumption. The burden of proving the  What would be your basis in running after civil
negligence of the common carrier rests on the damages?
claiming party.
Art. 100. Civil liability of a person guilty of felony. —
In a CULPA CRIMINAL, the prosecution must
Every person criminally liable for a felony is also
prove beyond reasonable doubt that the
civilly liable.
common carrier is guilty of reckless imprudence
resulting to death or physical injuries.
DAMAGES
CULPA CRIMINAL

 In the case of culpa criminal, against whom


Art. 2197. Damages may be: (MENTAL)
should the case be filed?
(1) Actual or compensatory;
(2) Moral;
The action shall be filed against the driver, (3) Nominal;
(4) Temperate or moderate;
 And what will be the liability? (5) Liquidated; or
(6) Exemplary or corrective.
whose liability is primary and direct.
1.) MORAL DAMAGES
 And what will be the liability of the common
Art. 2217. Moral damages include:
carrier?
1. physical suffering
2. mental anguish
The common carrier will be subsidiarily liable in
3. fright
case the driver cannot pay for the claims or in
4. serious anxiety
case he will be declared insolvent.
5. besmirched reputation
6. wounded feelings
 What would be the document or evidence that
7. moral shock
the driver is insolvent?
8. social humiliation, and
9. similar injury.
The driver‘s Insolvency as evidenced by Sheriff‘s
Return of Judgment in Execution.
Though incapable of pecuniary estimation, moral
 What is the basis of the common carrier‘s damages are recoverable if they are the proximate
subsidiary liability? result of the defendant's wrongful act for omission.

Art. 103. Subsidiary civil liability of other persons. — Art. 2219. Moral damages may be recovered in the
The subsidiary liability established in the next following and analogous cases:
preceding article shall also apply to employers, (1) A criminal offense resulting IN PHYSICAL
teachers, persons, and corporations engaged in INJURIES;
any kind of industry for felonies committed by their (2) QUASI-DELICTS causing physical injuries;
servants, pupils, workmen, apprentices, or (3) Seduction, abduction, rape, or other

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TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
lascivious acts;
(4) Adultery or concubinage; Art. 2227. Liquidated damages, whether intended
(5) Illegal or arbitrary detention or arrest; as an indemnity or a penalty, shall be equitably
(6) Illegal search; reduced if they are iniquitous or unconscionable.
(7)Libel, slander or any other form of defamation;
(8) Malicious prosecution; Art. 2228. When the breach of the contract
(9) Acts mentioned in Article 309; committed by the defendant is not the one
(10) Acts and actions referred to in Articles 21, 26, contemplated by the parties in agreeing upon the
27, 28, 29, 30, 32, 34, and 35. liquidated damages, the law shall determine the
measure of damages, and not the stipulation.
The parents of the female seduced, abducted,
raped, or abused, referred to in No. 3 of this article, 5.) EXEMPLARY DAMAGES
may also recover moral damages.
Art. 2229. Exemplary or corrective damages are
The spouse, descendants, ascendants, and brothers
imposed, by way of example or correction for the
and sisters may bring the action mentioned in No. 9
public good, in addition to the moral, temperate,
of this article, in the order named. liquidated or compensatory damages.

2.) NOMINAL DAMAGES In the COMPUTATION OF THE INDEMNIFICATION FOR


DAMAGES, what are the TWO FACTORS that need
Art. 2221. Nominal damages are adjudicated in to be determined?
order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be Fortune Express vs CA
vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by FACTS: Petitioner is a bus company in northern
him. Mindanao. Private respondents are the widow of
Atty. Caorong and their children.
Note: This may be awarded even if no actual and
exemplary damages is awarded as long as there is On November 18, 1989, a bus of petitioner figured
a showing that the right of the passenger has been in an accident with a jeepney in Kauswagan,
violated. Lanao del Norte, resulting in the death of several
passengers of the jeepney, including two
3.) TEMPERATE OR MODERATE DAMAGES Maranaos. During investigation it was discovered
that the owner of the jeepney was a Maranao and
that certain Maranaos were planning to take
Art. 2224. Temperate or moderate damages, which
revenge on the petitioner by burning some of its
are more than nominal but less than compensatory buses. Upon the instruction of Sgt. Bastasa, the
damages, may be recovered when the court finds officer went to see Diosdado Bravo, operations
that some pecuniary loss has been suffered but its manager of petitioner, at its main office. Bravo
amount can not, from the nature of the case, be assured him that the necessary precautions to
provided with certainty. insure the safety of lives and property would be
taken.
Art. 2225. Temperate damages must be reasonable
under the circumstances. Four days thereafter, three armed Maranaos who
pretended to be passengers, seized a bus of
4.) LIQUIDATED DAMAGES petitioner at Linamon, Lanao del Norte while on its
way to Iligan City. Among the passengers of the bus
Art. 2226. Liquidated damages are those agreed was Atty. Caorong. The leader of the Maranaos,
upon by the parties to a contract, to be paid in Mananggolo, ordered the driver, Cabatuan, to
case of breach thereof. stop the bus on the side of the highway. Then one

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TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
of the companions of Mananggolo started pouring passengers, if the employees of the common carrier
gasoline inside the bus, as the other held the could have prevented the act the exercise of the
passengers at bay with a handgun. Mananggolo diligence of a good father of a family. In the
then ordered the passengers to get off the bus. The present case, it is clear that because of the
passengers, including Atty. Caorong, stepped out negligence of petitioner‘s employees, the seizure of
of the bus and went behind the bushes in a field the bus by Mananggolo and his men was made
some distance from the highway. possible.

However, Atty. Caorong returned to the bus to Despite warning by the Philippine Constabulary at
retrieve something from the overhead rack. At that Cagayan de Oro that the Maranaos were planning
time, one of the armed men was pouring gasoline to take revenge on the petitioner by burning some
on the head of the driver. Cabatuan heard Atty. of its buses and the assurance of petitioners
Caorong pleading with the armed men to spare operation manager, Diosdado Bravo, that the
the driver as he was innocent of any wrong doing necessary precautions would be taken, petitioner
and was only trying to make a living. The armed did nothing to protect the safety of its passengers.
men were, however, adamant as they repeated
their warning that they were going to burn the bus Had petitioner and its employees been vigilant they
along with its driver. During this exchange between would not have failed to see that the malefactors
Atty. Caorong and the assailants, Cabatuan had a large quantity of gasoline with them. Under
climbed out of the left window of the bus and the circumstances, simple precautionary measures
crawled to the canal on the opposite side of the to protect the safety of passengers, such as frisking
highway. He heard shots from inside the bus. Larry passengers and inspecting their baggages,
de la Cruz, one of the passengers, saw that Atty. preferably with non-intrusive gadgets such as metal
Caorong was hit. Then the bus was set on fire. Some detectors, before allowing them on board could
of the passengers were able to pull Atty. Caorong have been employed without violating the
out of the burning bus and rush him to the Mercy passengers constitutional rights. As this Court
Community Hospital in Iligan City, but he died while intimated in Gacal v. Philippine Air Lines, Inc., a
undergoing operation. common carrier can be held liable for failing to
prevent a hijacking by frisking passengers and
The private respondents brought this suit for breach inspecting their baggages.
of contract of carriage.

ISSUES: From the foregoing, it is evident that petitioner‘s


employees failed to prevent the attack on one of
1. WON there was breach of contract of carriage petitioners buses because they did not exercise the
on the part of petitioner diligence of a good father of a family. Hence,
2. WON the seizure of petitioner‘s bus was a petitioner should be held liable for the death of
fortuitous event for which petitioner could not Atty. Caorong.
be held liable
3. WON the deceased is guilty of contributory 2. NO.
negligence
4. WON the petitioner is liable to private Art. 1174 of the Civil Code defines a fortuitous even
respondent for damages as an occurrence which could not be foreseen or
which though foreseen, is inevitable. In Yobido v.
Held: Court of Appeals, we held that to be considered as
force majeure, it is necessary that: (1) the cause of
1. YES. the breach of the obligation must be independent
of the human will; (2) the event must be either
Art. 1763 of the Civil Code provides that a common unforeseeable or unavoidable; (3) the occurrence
carrier is responsible for injuries suffered by a must be such as to render it impossible for the
passenger on account of the willful acts of other debtor to fulfill the obligation in a normal manner;

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TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
and (4) the obligor must be free of participation in, in relation to Art. 2206 thereof, provides for the
or aggravation of, the injury to the creditor. The payment of indemnity for the death of passengers
absence of any of the requisites mentioned above caused by the breached of contract of carriage by
would prevent the obligor from being excused from a common carrier. Initially fixed in Art. 2206 at
liability. P3,000.00, the amount of the said indemnity for
Art. 1755 of the Civil Code provides that a common death has through the years been gradually
carrier is bound to carry the passengers as far as increased in view of the declining value of the
human care and foresight can provide, using the peso. It is presently fixed at P50,000.00. Private
utmost diligence of very cautious person, with due respondents are entitled to this amount.
regard for all the circumstances. Thus, we held in
Pilapil and De Guzman that the respondents therein ACTUAL DAMAGES. Art. 2199 provides that Except
were not negligent in failing to take special as provided by law or by stipulation, one is entitled
precautions against threats to the safety of to an adequate compensation only for such
passengers which could not be foreseen, such as pecuniary loss suffered by him as he has duly
tortious or criminal acts of third persons. In the proved. The trial court found that the private
present case, this factor of unforeseeablility (the respondents spent P30,000.00 for the wake and
second requisite for an event to be considered burial of Atty. Caorong. Since petitioner does not
force majeure) is lacking. As already stated, despite question this finding of the trial court, it is liable to
the report of PC agent Generalao that the private respondents in the said amount as actual
Maranaos were planning to burn some of damages.
petitioners buses and the assurance of petitioner‘s
operations manager (Diosdado Bravo) that the MORAL DAMAGES. Under Art. 2206, the spouse,
necessary precautions would be taken, nothing legitimate and illegitimate descendants and
was really done by petitioner to protect the safety ascendants of the deceased may demand moral
of passengers. damages for mental anguish by reason of the
death of the deceased. The trial court found that
3. NO. private respondent Paulie Caorong suffered pain
from the death of her husband and worry on how
The petitioner contends that Atty. Caorong was to provide support for their minor children, private
guilty of contributory negligence in returning to the respondents Yasser King, Rose Heinni, and Prince
bus to retrieve something. But Atty. Caorong did not Alexander. The petitioner likewise does not question
act recklessly. It should be pointed out that the this finding of the trial court. Thus, in accordance
intended targets of the violence were petitioner with recent decisions of this Court, we hold that the
and its employees, not its passengers. The assailants petitioner is liable to the private respondents in the
motive was to retaliate for the loss of life of two amount of P100,000.00 as moral damages for the
Maranaos as a result of the collision between death of Atty. Caorong.
petitioner‘s bus and the jeepney in which the two
Maranaos were riding. Mananggolo, the leader of Exemplary Damages. Art. 2232 provides that in
the group which had hijacked the bus, ordered the contracts and quasi-contracts, the court may
passengers to get off the bus as they intended to award exemplary damages if the defendant acted
burn it and its driver. The armed men actually in a wanton, fraudulent, reckless, oppressive, or
allowed Atty. Caorong to retrieve something from malevolent manner. In the present case, the
the bus. What apparently angered them was his petitioner acted in a wanton and reckless manner.
attempt to help the driver of the bus by pleading Despite warning that the Maranaos were planning
for his life. He was playing the role of the good to take revenge against the petitioner by burning
Samaritan. Certainly, this act cannot be considered some of its buses, and contrary to the assurance
an act of negligence, let alone recklessness. made by its operations manager that the necessary
precautions would be taken, the petitioner and its
4. YES. employees did nothing to protect the safety of
passengers. Under the circumstances, we deem it
INDEMNITY FOR DEATH. Art. 1764 of the Civil Code, reasonable to award private respondents

5
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
exemplary damages in the amount of P100,000.00. JANUARY 25

ATTORNEYS FEES. Pursuant to Art. 2208, attorneys The extent of damages that may be recoverable in
fees may be recovered when, as in the instant case of a CONTRACTUAL BREACH is provided under
case, exemplary damages are awarded. In the Article 2201.
recent case of Sulpicio Lines, Inc. v. Court of
Appeals, we held an award of P50,000.00 as DAMAGES IN BREACH OF
attorneys fees to be reasonable. Hence, the private
respondents are entitled to attorneys fees in that CONTRACT:
amount.
Art. 2201. In contracts and quasi-contracts, the
COMPENSATION FOR LOSS OF EARNING CAPACITY. damages for which the obligor who acted in good
Art. 1764 of the Civil Code, in relation to Art. 2206 faith is liable shall be those that are the natural and
thereof, provides that in addition to the indemnity probable consequences of the breach of the
for death arising from the breach of contract of obligation, and which the parties have foreseen or
carriage by a common carrier, the defendant shall could have reasonably foreseen at the time the
be liable for the loss of the earning capacity of the obligation was constituted.
deceased, and the indemnity shall be paid to the
heirs of the latter. The formula established in In case of fraud, bad faith, malice or wanton
decided cases for computing net earning capacity attitude, the obligor shall be responsible for all
is as follows: damages which may be reasonably attributed to
the non-performance of the obligation. (1107a)
Gross Necessary
Net earning = Life x Annual - Living
M: So again, applying it to common carriers with
Capacity Expectancy Income Expenses
respect to the first paragraph, how do you
understand it? What would be the extent of the
Life expectancy is equivalent to two thirds (2/3) recovery of a common carrier?
multiplied by the difference of eighty (80) and the
age of the deceased. Since Atty. Caorong was 37
S: With respect to the recovery, Ma‘am, as regards
years old at the time of his death, he had a life
the first paragraph, the common carrier is liable
expectancy of 28 2/3 more years. His projected
only if there is no bad faith. The liability is also limited
gross annual income, computed based on his
to the natural and probable consequences of the
monthly salary of P11,385.00 as a lawyer in the breach of the obligation, Ma‘am.
Department of Agrarian Reform at the time of his
death, was P148,005.00. allowing for necessary
M: So first, the common carrier must be in good
living expenses of fifty percent (50%) of his
faith. If he is in good faith, the extent of the liability
projected gross annual income, his total earning
of the common carrier is only to the extent of the
capacity amounts to P2,121,404.90. Hence, the
natural and probable consequences of the breach.
petitioner is liable to the private respondents in the So kung ano lang yung result, that which the parties
said amount as compensation for loss of earning have foreseen or could have reasonably foreseen
capacity.
at the time the obligation was constituted. With
COMPUTATION: regard to the second paragraph? If there is fraud,
80 (constant) - Atty. Caorong‘s age x 2/3 = Life bad faith or wanton attitude? What is the extent of
expectancy the liability of the shipper?
So: 80 – 37 x2/3 = 28 2/3 Atty. Caorong‘s life
expectancy. S: In this case, Ma‘am, the shipper shall be
Projected gross annual income: 148,005.00 responsible for all damages which may be
Necessary living expenses: 50% of projected gross reasonably attributed to the non-performance of its
annual income obligation, Ma‘am. So if there is bad faith, Ma‘am,
Total earning capacity: 2,121,404.90 the common carrier is liable for damages such as
moral….yung mental Ma’am. (Lels)

6
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
is referred to as actual or compensatory damages.
M: So yung beyond the probable consequences of
the loss, destruction or injury sustained. So,
therefore, based on 2201, we still have to determine
LOSS SUFFERED AND PROFIT
the manner by which the cargo was shipped. Was
there good faith or bad faith on the part of the Art. 2200. Indemnification for damages shall
common carrier? So the carrier may be compelled comprehend not only the value of the loss suffered,
to pay for damages. The owner of the goods or the but also that of the profits which the obligee failed
passenger may have a recourse to the common to obtain. (1106)
carrier who committed the negligent or fraudulent
act. But while the common carrier may be held
liable, the common carrier also have a recourse M: So what are the damages that may be
against the negligent employee. awarded under this provision? What are the two (2)
kinds of actual or compensatory damages here?
You said that the damages are provided for under
Article 2197. S: Under 2199, one is entitled to the actual
damages that he incurred by virtue of the breach
Art. 2197. Damages may be: of contract of the other party. Under 2200, he is also
(1) Actual or compensatory; entitled to lost profits, Ma‘am due to the loss
(2) Moral; suffered by the other party.
(3) Nominal;
(4) Temperate or moderate; M: So there are two (2) kinds of losses. You
(5) Liquidated; or remember in your Civil Code? (Ma’am mentions
(6) Exemplary or corrective. two latin terms I really cannot understand maski
unsa nakog balik balik sa recording. Sorry ).
M: Now, Article 2216 provides that: Meaning to say:
1. The loss in relation to what a person already
Art. 2216. No proof of pecuniary loss is necessary in possesses. Naputol, nawala, namatay,
order that moral, nominal, temperate, liquidated or naputol ang paa (Lels), you have to be
exemplary damages, may be adjudicated. The compensated.
assessment of such damages, except liquidated 2. The failure to receive the benefit that would
ones, is left to the discretion of the court, according have pertained to him.
to the circumstances of each case.
LOSS OF EARNING CAPACITY & INJURY TO
M: So, how is the damage assessed here? Except of BUSINESS/ CREDIT
course as to liquidated damages because it is left
to the agreement of the parties. It is left to whom? Article 2205. Damages may be recovered:
To the discretion of the court and depends on the (1) For loss or impairment of earning capacity in
circumstances of each case. Meaning, it is not cases of temporary or permanent personal injury;
automatic. There must be proof (e.g. testimonies) as (2) For injury to the plaintiff's business standing or
to the injuries sustained by the passenger, that he commercial credit.
suffered some kind of injury in so far as the damage
to the goods or damage to the person is ACTUAL DAMAGES-HOW DETERMINED?
concerned.
M: Based on what? Based on the claim for actual
1. ACTUAL DAMAGES and compensatory damages. So based on this,
Art. 2199. Except as provided by law or by damages cannot be presumed. And the courts, in
stipulation, one is entitled to an adequate giving an award, must point out the specific act
compensation only for such pecuniary loss suffered that will afford the court grounds for awarding
by him as he has duly proved. Such compensation damages. With respect to actual or compensatory

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TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
damages, there must be proof. Halimbawa, you caused by a crime or quasi-delict shall be at least
are hospitalized, so what would be the proof that three thousand pesos, even though there may
you will show to the court? Hospital bills, doctor‘s have been mitigating circumstances. In addition:
fee, etc. You need to prove that, actual and (1) The defendant shall be liable for the loss of the
compensatory damages. earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter;
With respect to goods, what would be the basis for such indemnity shall in every case be assessed and
the claim for the value of the goods with respect to awarded by the court, unless the deceased on
actual damages? To what is the plaintiff entitled to account of permanent physical disability not
in case of valuation of the goods? Of course, it caused by the defendant, had no earning
should always be based on the value of the goods capacity at the time of his death;
or property at the time of destruction. If there‘s a bill (2) If the deceased was obliged to give support
of lading, the common carrier is liable for the value according to the provisions of Article 291, the
indicated in the bill of lading. But there are recipient who is not an heir called to the
instances where the value of the cargo is based on decedent's inheritance by the law of testate or
the value of that cargo at the time of destruction. It intestate succession, may demand support from the
will also depend on the place where the goods are person causing the death, for a period not
to be delivered, that will be taken into exceeding five years, the exact duration to be fixed
consideration with regards to the value of the by the court;
cargo in terms of damages to be awarded. Again, (3) the spouse, legitimate and illegitimate
there must be proof because the shipper is entitled descendants and ascendants of the deceased
to a profit, it is for business purposes. For example may demand moral damages for mental anguish
binebenta nya ng P2,000 tapos tag P1,000 ang by reason of the death of the deceased.
cost. So he is entitled to the P1,000 na dapat nya
ma-earn. That will be taken into consideration in INDEMNITY FOR DEATH:
computing the damages.

Usually, in the claim for damages, there is usually a M: So what is the fixed amount of damages in case
demand. A demand from the common carrier that there is death? Based on Article 2206, it is only
this is the value. It is only when the common carrier P3,000. So ang value ng buhay nyo is only P3,000
does not pay the value that the shipper is forced to (Lels). However, the court has increased the
go to court to claim for damages. So in the hearing amount in cases (i.e. through jurisprudence). So
of the case, this is one of the pieces of evidence to ngayon P50,000 na. At least ang halaga ng buhay
be considered. nyo P50,000 na (Lels). That is in the case of
Escaño vs. Spouses Paz 346 SCRA 270.
So, damages in personal injury cases. Personal injury
and even death entitles claimant to all medical EARNING CAPACITY:
expenses as well as other reasonable expenses that So, part of the damage is loss of earning capacity.
may be incurred for treatment, after-treatment We have discussed that earlier that the amount of
(e.g. Rehab), kasama yun. With respect to death, loss of earning capacity that should be awarded in
the funeral expenses are also included. Pero di na accordance with par. 1 of Article 2206 is to be
kasali yung 9 days, 40 days and 1 year anniversary determined on the basis of this formula:
(Lels). So funeral expenses, yung food served UNTIL
the burial. Kung POST burial, di mo na yan ma Net Earning Capacity = Life Expectancy x (Gross
claim. Annual Income-Necessary Living Expenses)

ARTICLE 2206 AS REGARDS TO: WHO CAN With respect to the 1st factor, how is life expectancy
BE THE HEIRS? computed? This is the basis, another formula:

Art. 2206. The amount of damages for death Life Expectancy = 2/3 x 80 – Age at the Time of
Death

8
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
household helpers, laborers and skilled workers;
What is the basis of this formula? It is based on the (8) In actions for indemnity under workmen's
American Expectancy Table of Mortality. compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability
With respect to the rate (I think Ma‘am is referring to arising from a crime;
the 2nd factor in the formula), we take into (10) When at least double judicial costs are
consideration the expectancy. The proper awarded;
computation should be based on the gross income (11) In any other case where the court deems it just
of the victim minus the necessary and incidental and equitable that attorney's fees and expenses of
living expenses which the victim would have litigation should be recovered.
incurred if he were alive. So that‘s why the age is In all cases, the attorney's fees and expenses of
computed based on the time of death. For litigation must be reasonable.
example, we anticipate that he will still live for thirty
(30) years, then his earning capacity for the next 30 M: So based on this, the court must give a factual
years will be determined by the court kung and legal justification for the award of attorney‘s
magkano. So in the case of Atty. Caorong, P150,00 fees. The court said in the case of PAL vs. CA (2008),
a year times 38 years more minus the 50% that will it cannot just be stated by the court in its dispositive
be what will be awarded to the heirs because they portion without stating in the body of the decision
are entitled to the 50% of the income that was the basis for the award of such attorney‘s fees. So
supposed to be given to the deceased. attorney‘s fees, in contracts of carriage, may be
awarded in cases of Nos. 1,3,4,5,7,8 of Article 2208.
The amount of living expenses, according to the So yung interest, In a case for damages in case of
court, must also be established, to determine the breach, can interest be claimed?
net earning. The court has consistently ruled that
the amount is 50% of the gross income in the
absence of any proof. 50% of the living expenses
2. MORAL DAMAGES provided under 2217.
must be given to the heirs (or 50% of the gross
income is to be given ata ang pasabot ni Ma’am). Art. 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched
ATTORNEY‘S FEES: reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of
What about attorney‘s fees? Can attorney‘s fees pecuniary computation, moral damages may be
be automatically awarded? It is provided for under recovered if they are the proximate result of the
Article 2208. defendant's wrongful act for omission.

Article 2208. In the absence of stipulation, attorney's


fees and expenses of litigation, other than judicial MORAL DAMAGES IN BREACH OF
costs, cannot be recovered, except: CONTRACT:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has When is moral damages awarded? Are moral
compelled the plaintiff to litigate with third persons damages recoverable in actions for breach of
or to incur expenses to protect his interest; contract?
(3) In criminal cases of malicious prosecution
against the plaintiff; General rule: No, in view of Articles 2219.
(4) In case of a clearly unfounded civil action or
proceeding against the plaintiff;
Art. 2219. Moral damages may be recovered in the
(5) Where the defendant acted in gross and
following and analogous cases:
evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim;
(1) A criminal offense resulting in physical injuries;
(6) In actions for legal support;
(2) Quasi-delicts causing physical injuries;
(7) In actions for the recovery of wages of

9
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
(3) Seduction, abduction, rape, or other lascivious according to the provisions of Article 291, the
acts; recipient who is not an heir called to the
(4) Adultery or concubinage; decedent's inheritance by the law of testate or
(5) Illegal or arbitrary detention or arrest; intestate succession, may demand support from
(6) Illegal search; the person causing the death, for a period not
(7) Libel, slander or any other form of defamation; exceeding five years, the exact duration to be
(8) Malicious prosecution; fixed by the court;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 3. The spouse, legitimate and illegitimate
27, 28, 29, 30, 32, 34, and 35. descendants and ascendants of the deceased
may demand moral damages for mental
The parents of the female seduced, abducted, anguish by reason of the death of the
raped, or abused, referred to in No. 3 of this article, deceased,
may also recover moral damages.
Art. 2220. Willful injury to property may be a legal
The spouse, descendants, ascendants, and brothers ground for awarding moral damages if the court
and sisters may bring the action mentioned in No. 9 should find that, under the circumstances, such
of this article, in the order named. damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in bad faith.
However, moral damages may be recovered in the
following cases:
DAVILA VS. PAL
1. When DEATH occurs: (Articles 1764 in Facts: There was a plane crash that involved PAL‘s
relation to 2206)
planes, the route of which was from Iloilo-Romblon-
2. Even when death did not occur (Article
Manila. It crashed at Mt. Baco, Mindoro, 1 hour and
2220)- DEFENDANT ACTED FRAUDULENTY OR
15 minutes after take-off. All passengers and crew
IN BAD FAITH.
of the said plane died.

Art. 1764. Damages in cases comprised in this The plaintiffs, parents of Pedro T. Davila, Jr., who
Section shall be awarded in accordance with Title was one of the passengers, had no definite news of
XVIII of this Book, concerning Damages. Article 2206 what had happened to their son, getting what
shall also apply to the death of a passenger caused information they could only from conflicting
by the breach of contract by a common carrier. newspaper reports, until they received, on
December 19, 1960, a letter of condolence from
Art. 2206. The amount of damages for death the defendant's president Andres Soriano, informing
caused by a crime or quasi-delict shall be at least them that their son had died in the crash. And it
three thousand pesos, even though there may was only on December 29 that his body was
have been mitigating circumstances. In addition: recovered and taken back to Iloilo.

1. The defendant shall be liable for the loss of the Parents of Davila filed a complaint against PAL for
earning capacity of the deceased, and the damages.
indemnity shall be paid to the heirs of the latter;
such indemnity shall in every case be assessed Issues:
and awarded by the court, unless the 1. Under the facts of the case, is PAL liable?
deceased on account of permanent physical 2. What is the extent of liability for lost earnings,
disability not caused by the defendant, had no gross or net and for how many years?
earning capacity at the time of his death; 3. Is PAL liable for exemplary damages? Why?
4. What is the total liability of PAL?
2. If the deceased was obliged to give support

10
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.

Held: Facts: Salvador and Lao here availed the services


1. Yes, there being no satisfactory explanation on of a travel agency to book their ticket. Manila-
the part of the defendant as to how and why Taipei to Los Angeles. What is the purpose of their
the accident occurred, the presumption is that travel? There was a program in Los Angeles. When
it was at fault, under Art 1756 NCC. they found out that Morella agency charged
higher than the Amesco agency, they dropped the
2. The CCs liability for lost earnings of the former and engaged the services of Amesco
deceased passenger are his net earnings during because Lao was an Amesco card holder. So Lao
his expected length of life based on accepted gave to Amesco their record booking para sa
morality tables. The deceased, Pedro Davila Jr, confirmation of their booking, however, nasa kay
was single and 30 years of age when he died. Morella and booking no. kasi mas mahal kaya they
At that age one‘s normal life expectancy is 33 opted to engage Amesco. But what they paid
1/3 years, according to the formula (2/3 x [80- Amesco was what? The booking reference that
30]) adopted by this court in the case of Villa china airlines issued to Morella which China Airline
Rey Transit v CA on the basis of the American confirmed. When the confirmation of the booking,
Expectancy table of Mortality. However, Amesco issued the passengers ticket. When they
although the deceased was in relatively good were at the airport, to board the airplane for their
health, his medical history shows that he had flight, Salvador and Lao were prevented from
complained of and been treated for such boarding because their names were not in the
ailments as backaches, chest pains and passengers‘ manifest because china airline revoke
occasional feelings of tiredness. It is reasonable the reservation which was made by Morella. So
to make an allowance for these circumstances they were only able to board on the following day.
and consider, for purposes of this case, a Trial court rendered in favour of Salvador and Lao
reduction of his life expectancy to 25 yrs. and they were ordered to pay 10,000 for moral
damages, 50,000 as exemplary damages and
3. No, PAL is not liable for exemplary damages. 50,000 by way of attorneys fees. The CA adopted
According to Art 2232 of the NCC, in contracts the lower court ruling. Now, the appeal to the SC.
and quasi-contracts, the court may award
exemplary damages if the defendant acted in Issues:
a wanton, fraudulent, reckless, oppressive or 1) was there breach of the contract of carriage in
malevolent manner. The failure of the cancelling the booking of Salvador and Lao.
defendant here to exercise extraordinary 2) Was there bad faith on the part of China airlines?
diligence, as required by law, does not amount
to anyone of the circumstances contemplated Held:
in the said provision. 1. China airline does not deny the confirmation of
the reservation made by Amesco. The ticket
4. Total liability of PAL is P232,000 as follows: issued by Amesco upon china airlines
confirmation are undeniably are proof of the
a. lost earnings P195,000 contract of carriage between china airline and
b. actual damages 3,500 Salvador and Lao. The nature of an airline's
c. moral damages 10,000 (for the parent‘s contract of carriage partakes of two types,
mental anguish) namely:
d. atty‘s fees P10,000
(a) a contract to deliver a cargo or
merchandise to its destination, and
(b) a contract to transport passengers to their
CHINA AIRLINES VS. CA destination.
At issue in this case is the decision of the CA What happens in this case? When china airline
awarding damages made by the trial court in confirmed the reservation, it bound itself to
favour of Salvador and Lao.

11
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
transport private respondents on its flight on 13 June injury not enough to warrant an award of actual
1990. The SC reiterated its ruling in the case of damages, the court may award nominal damages.
Alitalia v CA, ―when an airline issues a ticket to a The court may award nominal damages purely to
passenger confirmed for a particular flight on a vindicate a right of a plaintiff which defendant has
certain date, a contract of carriage arises. The violated and not to indemnify any loss the plaintiff
passenger then has every right to expect that he has suffered. The court may award nominal
would fly on that flight and on that date. If he does damages in every obligation arising from any
not, then the carrier opens itself to a suit for breach source enumerated in Article 1157 of the Civil
of contract of carriage.‖ Code, or in any case where there is an invasion of
2. No bad faith. any property right. So the SC awarded 5000 each
as a reasonable amount of damages. Kasi diba
As to moral damages, while China airlines ang gi-award ng trial court, 10,000, binabaan lang,
negligence caused it to breach its contract of nagging 5,000.
carriage. Its negligence is, however, not so gross
to amount to bad faith. Mere negligence, even if With respect to the attorney‘s fees, the SC held that
it causes the plaintiff to suffer mental anguish or the fact that private respondents were compelled
serious fright, is not a ground for awarding moral to litigate and incur expenses to protect and
damages. The law distinguishes a contractual enforce their claim does not justify the award of
breach effected in good faith from one attorney's fees. The court may award attorney's fees
attended by bad faith. Absent fraud or bad faith only in the instances mentioned in Article 2208 of
on defendant's part in breaching his contract, his the Civil Code, and this case is not one of them.
liability for damages is limited to the natural and Moreover, when there is no basis to award moral
probable consequences of the breach of the and exemplary damages, there is also no basis to
obligation, which the parties had foreseen or award attorney's fees.
could have reasonably foreseen. In such a case,
the liability would not include moral damages. FEBRUARY 1
For this reason, not every case of mental
anguish, fright or serious anxiety calls for the CATHAY PACIFIC AIRWAYS VS. VASQUEZ
award of moral damages.
1. Won the involuntary seat upgrading will
As for exemplary damages, Article 2232 of the Civil constitute a breach of contract
Code provides that in a contractual or quasi- 2. Was there a bad faith?
contractual relationship, exemplary damages may
be awarded only if the defendant had acted in "a Just take note that in this case in the lower court
wanton, fraudulent, reckless, oppressive or they prayed for 1M pesos for moral damages but
malevolent manner." China Airlines was not in bad they were awarded 2M for moral damages, 100K as
faith and its employees did not act in a wanton, nominal damages, 5M as exemplary damages and
fraudulent, reckless, oppressive or malevolent 1M for attorney‘s fees and litigation expenses which
manner. The award of exemplary damages is is even more than what they prayed for.
therefore unwarranted in this case.
The SC here was alarmed of the excessive award of
Private respondents were also not entitled to actual damages. In the end, they were awarded 5K as
damages. However, private respondents did not damages. On the question here resolved by the
shell out any money for their CAL tickets. Amexco court is WON the involuntary seat upgrading of the
voided the CAL tickets when private respondents seat of the passenger to a more superior class at no
requested Amexco to book them in another airline. cost on the part of the passenger will constitute a
breach of contract. The SC said NO.
Moreover, the SC noted that, private respondents
suffered some form of injury for the trouble, pasahe
papunta sa airport, they were awarded nominal
damages. When plaintiff suffers some species of

12
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
CODE OF COMMERCE After the contract has been complied with, the bill
of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of
this title with the thing transported, the respective
BILL OF LADING obligations and actions shall be considered
cancelled, unless in the same act the claim which
the parties may wish to reserve be reduced to
In the Code of Commerce the opening provision writing, with the exception of that provided for in
pertains to a Bill of Lading. So now we will now Article 366.
discuss what Bill of Lading is. If you have read this - it
is said that the contract is usually the Bill of Lading In case the consignee, upon receiving the goods,
which serves as the basis for the cargo. cannot return the bill of lading subscribed by the
carrier, because of its loss or of any other cause, he
For example, Bill of Lading with respect to cargo, must give the latter a receipt for the goods
tickets with respect to passengers for fare. delivered, this receipt producing the same effects
as the return of the bill of lading.
 WHAT DOES IT MEAN?
Take note of Magellan Manufacturing vs CA (132 S
It is written acknowledgment, signed by the master 529)
of a vessel or other authorized agent of the carrier,
that he has received the described goods from the 1.) The Bill of Lading being THE CONTRACT is the
shipper, to be transported on the expressed terms,
law between them and the parties here are
to the described place of destination, and to be
delivered there to the designated consignee or bound by the terms and conditions as
parties incorporated in the Bill of Lading provided
that the terms and conditions are not
 What is THE NATURE OF A BILL OF contrary to law, morals, public policy and
LADING? public order.

Art. 353 says that a Bill of Lading is: 2.) As provided in Art. 353, this is THE BEST LEGAL
1. a legal evidence of the contract between EVIDENCE therefore any dispute that may
the shipper and then carrier. arise on the basis of the contract, the court
2. It provides for the terms and conditions of will determine what is incorporated/stated
the agreement between the parties. in the Bill of Lading.
3. It contains the names of the parties
(consignor, consignee, and carrier), rates, PAROL EVIDENCE- NOT ALLOWED TO
freight charges, route, destination or other PROVE STIPULATION OTHER THAN WHAT IS
charges. WRITTEN IN THE BILL OF LADING:
4. It also stipulates the rights and obligations of
the parties. Therefore, PAROL EVIDENCE is not admissible. Parol
evidence refers to evidence not incorporated or
ARTICLE 353. The legal evidence of the contract stated in the contract. Under the Parol Evidence
between the shipper and the carrier shall be the Rule, whatever you had discussed prior to the
bills of lading, by the contents of which the disputes execution of the Bill of Lading or any
which may arise regarding their execution and contemporaneous agreement should have been
performance shall be decided, no exceptions incorporated in this Bill of Lading. Therefore, if there
being admissible other than those of falsity and is dispute that may arise (for example the goods
material error in the drafting. were not delivered in the same condition or there
was shortage in the delivery) the Court will
determine what is indicated in the Bill of Lading.

13
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
EXCEPTION: under Art. 353, it says ―other than for electronic commercial documents specifically
those of falsity and material error in the drafting‖ Sec. 25-26 which admits data messages or
1. FALSITY; and electronic documents to be used in lieu of transport
2. MATERIAL ERROR in the drafting documents in writing.

GENERAL RULE: The terms and conditions of the Section 25. Actions Related to Contracts of
Bill of Lading will be considered in the disputes that Carriage of Goods. - Without derogating from the
may arise. provisions of part two of this law, this chapter
applies to any action in connection with, or in
pursuance of, a contract of carriage of goods,
EXCEPTION: When there is FALSITY and MATERIAL including but not limited to:
ERROR IN THE DRAFTING.
(a) (i) furnishing the marks, number,
Hence, parol evidence is admissible meaning to say quantity or weight of goods;
any verbal or other evidence aliunde or other
evidence which is not incorporated in the Bill of (ii) stating or declaring the nature or value
Lading shall be considered. of goods;

Be it as it may, while the Bill of Lading is the best (iii) issuing a receipt for goods;
legal evidence as the contract between the
parties, Art. 354 provides that: (iv) confirming that goods have been
ARTICLE 354. In the absence of a bill of lading, loaded;
disputes shall be determined by the legal proofs
which the parties may present in support of their (b) (i) notifying a person of terms and
respective claims, according to the general conditions of the contract;
provisions established in this Code for commercial
contracts. (ii) giving instructions to a carrier;

What is its IMPLICATION? (c) (i) claiming delivery of goods;

These documents (Bill of Lading) are not necessary (ii) authorizing release of goods;
for the perfection of the contract because there is
already meeting of the minds. As long as there is (iii) giving notice of loss of, or damage to
meeting of the minds, the contract exist even in the goods;
absence of a Bill of Lading.
(d) giving any other notice or statement in
So a cargo can even be transported without it connection with the performance of
because the common carrier received it, the the contract;
shipper turned it over to common carrier for
shipment and accepted by the common carrier. (e) undertaking to deliver goods to a named
And the obligation of the common carrier to person or a person authorized to claim
exercise extraordinary diligence, notwithstanding delivery;
the absence of a Bill of Lading continued to exist.
Similar to what we discussed under the Civil Code (f) granting, acquiring, renouncing,
provision, the extraordinary diligence exist. surrendering, transferring or negotiating
However, there is modification based on what is rights in goods;
provided under the Civil Code.
NO BILL OF LADING; EVIDENCE ALLOWED (g) acquiring or transferring rights and
obligations under the contract.
Insofar as admissibility of evidence, the ELECTRONIC
COMMERCE ACT of 2000 or R.A. 8792 also provides Section 26. Transport Documents. - (1) Where the

14
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
law requires that any action referred to contract of
carriage of goods be carried out in writing or by FUNCTIONS OF BILL OF LADING:
using a paper document, that requirement is met if
the action is carried out by using one or more data It is both a:
messages or electronic documents. 1. RECEIPT of the goods; and
2. CONTRACT
(2) Paragraph (1) applies whether the
requirement there in is in the form of an obligation If there is a charter party, the charter party will
or whether the law simply provides consequences stand as the contract between the parties. The Bill
for failing either to carry out the action in writing or of Lading serves as the acknowledgment of the
to use a paper document. goods but the terms and conditions shall still be
governed by the charter party.
(3) If a right is to be granted to, or an
obligation is to be acquired by, one person and no In Telengtan Brothers & Sons, Inc. v. Court of
person, and if the law requires that, in order to Appeals (236 S 617) and SALUDO VS CA (GR 95536
effect this, the right or obligation must be conveyed 207), where the SC reiterated with respect to the
to that person by the transfer, or use of, a paper nature of a Bill of Lading being a written
document, that requirement is met if the right or acknowledgment of the receipt of the goods and
obligation is conveyed by using one or more an agreement to transport and deliver them at a
electronic data messages or electronic documents specific place to a person named or on his order of
unique; acceptance.

(4) For the purposes of paragraph (3), the


standard of reliability required shall be assessed in KINDS OF BILL OF LADING
the light of the purpose for which the right or
obligation was conveyed and in the light of all the 1. CLEAN BILL OF LADING AND FOUL BILL OF
circumstances, including any relevant agreement. LADING
A clean bill of lading is one that does not
(5) Where one or more data messages are contain any notation indicating any defect
used to effect any action in subparagraphs (f) and in the goods. A foul bill of lading is one that
(g) of Section 25, no paper document used to contains such notation.
effect any such action is valid unless the use of
electronic data message or electronic document 2. SPENT BILL OF LADING
has been terminated and replaced by the used of Where the carrier already delivers the
paper documents. A paper document issued in goods, the carrier is supposed to have
these circumstances shall contain a statement of retrieved the covering bill of lading that he
such termination. The replacement of the issued for the goods. If the goods were
electronic data messages or electronic documents already delivered but the bill of lading was
by paper documents shall not affect the rights or not retuned, the bill of lading is called a
obligation of the parties involved. ―spent bill of lading.‖
(6) If a rule of laws is compulsorily applicable 3. THROUGH BILL OF LADING
to a contract of carriage of goods which is in, or is A ―through bill of lading‖ is one issued by a
evidenced by, a paper document, that rule shall carrier who is obliged to use the facilities of
not be inapplicable to such a contract of carriage other carriers as well as his own facilities for
of goods which is evidenced by one or more the purpose of transporting the goods from
electronic data messages or electronic documents city of the seller to the city of the buyer,
by reason of the fact that the contract is which bill of lading is honored by the
evidenced by such electronic data messages or second and other interested carriers who do
electronic documents instead of by a paper not issue their own lading.
document.

15
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
4. ON BOARD BILL v. RECEIVED FOR SHIPMENT Eto yung mga container vans… usually if the
BILL shipper has cargoes and it‘s difficult for the
carrier to carry the cargo, the carrier usually
The Supreme Court explained the difference rents the container. the container van is
between an ―ON BOARD BILL OF LADING‖ brought to the premises of the shipper. You
and a ―RECEIVED FOR SHIPMENT BILL OF call this CONTAINERIZED SYSTEM. Dinadala
LADING‖ in one case in this wise: ― yung container van sa shipper, and the
shipper loads whatever is inside the van. The
 An ON BOARD BILL OF LADING is one which carrier has no intervention to check whether
it is stated that the goods have been tama ba, such as the quantity, because
received on board the vessel which is to once the goods are delivered to the
shipper, naka-lock na yun.
carry the goods, whereas
 a RECEIVED FOR SHIPMENT BILL OF LADING is In the bill of lading, as in the case of United States v
one in which it is stated that the goods have Commission of Customs, the carrier as we said,
been received for shipment with or without does not participate in the counting of the
specifying the vessel by which the goods merchandise for loading into the container. Having
are to be shipped. no actual knowledge, what the carrier will indicate
 RECEIVED FOR SHIPMENT bills of lading are in the bill of lading is ―said to contain‖ - meaning to
say ito yung sinabi ng shipper, without knowledge
issued whenever conditions are not normal
kung totoo ba yung sinabi ng shipper, since the
and there is insufficiency of shipping space. common carrier had no participation, and it is only
based on the declaration of the shipper, that the
shipper said it contains this quantity of boxes, this
 An ON BOARD BILL OF LADING is issued quantitiy of sacks, etc. So, said to contain.
when the goods have been actually placed
aboard the ship with every reasonable Having no actual knowledge of the kind, quantity,
expectation that the shipment is as good as or condition of the contents of the container, the
on its way. carrier issues the corresponding bill of lading based
 It is, therefore, understandable that a party on the declaration of the shipper and the bill of
lading simply states the contents of the container
to a maritime contract would require an on
either as advised by the shipper or prefaced by the
board bill of lading because of its apparent phrase (Said to Contain). The matter of the
guaranty of certainty of shipping as well as quantity, condition, and kind of goods inside the
the seaworthiness of the vessel which is to cargo is the sole responsibility of the shipper.
carry the goods. (Magellan Mfg. Marketing
Corp. v. CA GR. 95529) However, the ruling of the Supreme Court in Lina
Brokerage Inc. v Filipino Assurance Corp., the ruling
was made an exception to the doctrine in the
5. CUSTODY BILL OF LADING United States. It was held that even if a said to
In this type of bill of lading, the good are contain bill of lading covering containers, where it is
already received by the carrier but the additionally stated by the carrier that it is a receipt
vessel indicated therein has not yet arrived for the number of packages shown above, that
in the port. phrase explicitly admitted that the containerized
shipment in the bill of lading and the carrier is liable
6. PORT BILL OF LADING for the shortage of the cargo delivered. Kasi the
In a port of bill of lading, the vessel common carrier admitted, in effect, that is his
indicated in the bill of lading that will responsibility. If he really wants to check it, then
transport the goods is already in the port. open it.

7. SAID TO CONTAIN BILL OF LADING Take note also under ART. 706 OF THE CODE OF

16
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
COMMERCE, as reference, it also provides for the may refuse, because the general rule is that they
stipulations that must be written in the bill of lading cannot refuse.
for maritime commerce.
ARTICLE 357. If by reason of well-founded suspicion
ART. 707- 718 of falsity in the declaration as to the contents of a
Provide for other rules that apply in the bill of lading package the carrier should decide to examine it,
in the absence of Civil Code provisions, because he shall proceed with his investigation in the
take note that under Art. 1766- in all matters not presence of witnesses, with the shipper or
regulated by the Civil Code, the provisions of the consignee in attendance.
Code of Commerce shall apply. If the shipper or consignee who has to be cited
So these are additional provisions in a contract, for does not attend, the examination shall be made
example in a charter party, where the parties can before a notary, who shall prepare a memorandum
enter into the contract, the charter party enters of the result of the investigation, for such purposes
based on what is provided in the Code of as may be proper.
Commerce, and the Civil Code provisions. If the declaration of the shipper should be true, the
expense occasioned by the examination and that
COGSA, THE CARRIAGE OF GOODS BY SEA ACT also of carefully repacking the packages shall be for the
provide for the agreement that may be stipulated account of the carrier and in a contrary case for
as between the parties in drafting a contract of the account of the shipper.
carriage, and it provides that after receiving the
goods, the carrier, or the master, or the agent of Art. 357: (This is a right granted to the common
the carrier shall, on demand of the shipper, issue to carrier). If the common carrier has suspicions in the
shipper a bill of lading. This is provided under Sec. 3
falsity of the declaration as to the contents of the
(3) of COGSA.
package, and decides to examine it, he shall
proceed with the investigation with the presence of
A bill of lading is also listed as one of the documents
witnesses, with the shipper or the consignee.
of title, if by the terms, it is negotiable.
The carrier who wants to do the investigation must
So take note also Art. 356, it is still operative. We
inform na may duda siya sa laman.
already discussed 353, 354.
Should the shipper or consignee to be cited does
Art. 355 The liability of the carrier shall begin from not appear, the examination shall be made before
the moment he receives the merchandise, in a notary, who shall draft a certificate of the result of
person or through a person entrusted thereto in the the examination, for the proper purposes.
place indicated for receiving them.
THE EFFECT:
So, similar to the civil code provisions that provide If the declaration of the shipper should be correct,
that responsibility begins from the time the goods the expenses caused by the examination and those
are unconditionally placed in the possession of the of carefully repacking the packages shall be
common carrier. defrayed by the carrier, and in the contrary case
Art. 356 Carrier may refuse to accept packages by the shipper.
which are unfit for the transportation, and the
common carrier does not have the facilities ARTICLE 358. If there is no period fixed for the
required to preserve the cargo; and if said delivery of the goods the carrier shall be bound to
transportation is to be made over a railroad, and forward them in the first shipment of the same or
the shipment is insisted on, the company shall carry similar goods which he may make point where he
it, being exempt from all liability if its objections are must deliver them; and should he not do so, the
so stated in the bill of lading. damages caused by the delay should be for his
account.
So, this is one of the exceptions when the carrier ART. 358 provides when there is no period fixed for

17
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
the delivery of the goods. Should no period within If carrier refuses, remedy is to file a case.
which goods are to be delivered be previously
fixed, the carrier shall be under the obligation to  However, if prior to the filing of the case, the
forward them in the first shipment of the same or carrier delivers, can the shipper refuse to
similar merchandise which he may make to the accept the goods?
point of delivery; and should he not do so, the
damages occasioned by the delay shall be No. If the goods were safely kept by the
suffered by him. common carrier and the tender or delivery of
the goods should be made before the suit is
Art. 370 If a period has been fixed for the delivery of filed.
the goods, it must be made within the same;
otherwise the carrier shall pay the indemnity Example: Fondant cake for a birthday party, and it
agreed upon in the bill of lading, neither the shipper was safely kept, shipper cannot refuse so long as it
nor consignee being entitled to anything else. was delivered before the suit was filed.
If no indemnity has been stipulated and the delay
exceeds the time fixed in the bill of lading, the Art. 361 is already superseded by Art. 1745 of the
carrier shall be liable for the damages which the Civil Code.
delay may have caused.
PARTIAL DELIVERY
However, under the Civil Code, the damages shall
be paid if the carrier refuses to pay the stipulated ARTICLE 363. There is partial delivery if the goods
indemnity or is guilty of fraud in the fulfillment of his cannot be used. The consignee may refuse to
obligation. accept to refuse the partial delivery, IF he proves
Should no indemnity have been agreed upon and that he can no longer make use of the goods apart
the delay exceeds the time fixed in the bill of from the other.
lading, the carrier shall be liable for the damages
which may have been caused by the delay. Example: Statue of Liberty (kalahati lang na-deliver,
So if the carrier negligently delays the delivery, the wala ang paa. Huehuehue)
natural disaster shall not free the carrier from the
responsibility, this is under Art. 1740. This is the Going back to Bill of Lading
supplemental provision.
The issuance of a bill of lading carries the
 What if there is already DELAY IN THE DELIVERY presumption that the goods were delivered to the
OF THE GOODS, what are the OPTIONS carrier for immediate shipment, and that it shall be
available to shipper or consignee? PRIMA FACIE EVIDENCE OF THE RECEIPT OF THE
CARRIER.
o If for example, they can no longer
make use of the goods due to the  Saludo Jr. v CA – that in the absence of
delay, the remedy is to demand for convincing testimonies establishing mistake, the
conversion. What are the recitals in the bill of lading shall be controlling
requirements? between the parties. Whatever disputes may
arise, the stipulations made in the bill of lading
1. Demand to deliver shall be followed.
2. Carrier refused the delivery
 Unsworth Transport International v CA – the bill of
Shipper can now file a case. lading operates both as a receipt and a
contract.
CONVERSION- the monetary form of the goods will
be delivered in lieu of the goods that cannot be Malayan Insurance v Jardine Davies Transport. Just
used anymore because of the delay in the delivery. review that. WON Bill of Lading is a contract of
adhesion. Majority of the cases say that the bill is a

18
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
contract of adhesion since only the carrier prepares responsibilities of the parties in a contract of
it. carriage.

However, in the case of Maersk Lines v CA. A bill of Because based on Art. 1523 of the Civil Code, to
lading, although contracts of adhesion, are not whom should delivery be made? Art. 1523 provides
prohibited, and the terms thereof binding to the that ownership is transferred by tradition or delivery
parties since the other party is free to reject it. But in the contract of sale. This is the general provision.
the terms in the bill of lading, as in this case, which But sometimes there are things that are not
create an absurd situation as having the effect of incorporated or provided in the Code of
determining the arrival of the shipment to the sole Commerce or Civil Code provisions.
determination of the carrier, such bill of lading
cannot be enforced. That‘s why certain shipment terms have been
made such as in determining the point of
Read also the ff. cases: destination, the point of sale, the taxes that should
 MOF Company v Shin Yang Brokerage be paid, and where the shipment is consummated.
Corporation 600 S 521 That‘s why we have shipment terms such as FOB or
 Philippine Charter v Unknown Owner of the freight on board, freight alongside board, cost
Vessel M/V National Honor 463 S 202 insurance freight or CIF, or cost and freight lang,
 Belgian Overseas Charter vs Philippine First walang insurance.
Insurance, supra
 Federal Express v American Home  WHAT ARE THE FUNCTIONS OF THESE
Assurance 437 S 50 SHIPMENT TERMS?
 UCPB General Insurance Inc., v Aboitiz
Shipping Feb. 10, 2009 GR No. 168433 1. To determine the point of which the risk of
 Phil Charter Insurance vs Chem Oil loss passes from seller to buyer. Because
Lighterage GR No. 136888 basic is the fact that delivery is made to the
 Dole Phils. v Maritime Company 148 S 118 consignee to whom it is required to be
FEBRUARY 15 delivered and there are certain instances
where delivery to the carrier is delivery to
And we were discussing the functions, nature, and the buyer, and the buyer thereafter assumes
kinds of bill of lading. And we said that the bill of the risk from the time that the goods or
lading can incorporate terms and can be regarded cargoes are received by the common
as a contract of adhesion, and it can also be an carrier.
enforceable instrument if by the terms, as provided
in the bill of lading, it is negotiable. 2. They determine what performance by the
seller amounts to a tender which will put the
It is a contract of adhesion in the sense that if the buyer, if he thereafter refuses to accept
party agrees to it, then he is bound by it. delivery, in breach of contract.

There are also shipment terms, because as you 3. They are used for quoting the price.
would note, in Art. 1766 it states that:
4. They are also used to determine where
taxes should be paid.
Art. 1766. In all matters not regulated by this Code,
the rights and obligations of common carriers shall
be governed by the Code of Commerce and by FREIGHT ON BOARD (FOB):
special laws.
 SO WHAT IS FOB OR FREIGHT ON BOARD?
There are few terms and conditions in the Code of  WHAT IS THE SIGNIFICANCE OF FOB?
Commerce that is wanting in so far as the bill of
lading is concerned, or the obligations and It refers to the risk. The risk is passed to the buyer at

19
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
the FOB point. So what is the FOB point? It is usually The seller completes his performance by procuring
FOB Davao, or FOB Manila. Therefore, the FOB point the necessary documents such as bill of lading,
of destination means that the seller shall assume the insurance policy, sales invoice or what else is
risk until the goods reach the point of destination. required for the particular contract. And the seller
forwards it to the buyer for this purpose.
I.E., if the goods are shipped from abroad and in
the bill of lading it provides FOB Davao, the place In the meantime, the insurance in this situation is
of delivery is Davao and the point of destination is payable to the buyer, and therefore the buyer
Davao. In which case the buyer assumes the risk bears the risk of loss when the goods are in transit. It
only upon arrival of the goods at the place of means that only the seller acquires depending on
destination. Meanwhile, it is the seller. the agreement, the seller procures the insurance
policy covering the goods but it is charged to the
FREIGHT ALONG SIDE BOARD (FAS): buyer.

In FAS, it is a variant of FOB. Freight alongside COST AND FREIGHT:


board, or freight alongside the vessel, which means
that the seller relinquishes the risk the moment the If the buyer would like to get his own insurance, the
goods are delivered alongside the vessel, which term is Cost and Freight, wala nang Insurance. So
means in the port, unless we have this on-board bill only cost and freight minus the insurance because
of lading. When we say on-board, if there is already the insurance, as per agreement, is taken by the
an on-board bill of lading, this means that the buyer himself.
cargoes are already on-board the vessel which will
carry the cargoes. PRESCRIPTION:

FAS VS FOB: The Civil Code does not provide a prescriptive


period with respect to the claim. So in the event of
 So what is the difference between FAS vessel delivery, in the event there is delivery, the cargos
and FOB? were delivered not in the provision as it was
o It should be noted that in FAS vessel, delivered to the carrier, there are periods within
the seller here is under no obligation which a claim should be made by the buyer.
to see the loading of the cargo, and
all that is required of the seller is to So this is provided under Art. 366 of the Code of
deliver the cargo to the wharf. Commerce:
o Unlike if it is FOB vessel, the seller here
must see to it that the goods are ARTICLE 366. Within the twenty-four hours following
loaded and the responsibility of the the receipt of the merchandise, the claim against
seller here does not cease until the the carrier for damage or average be found therein
loading of the cargo on the vessel is upon opening the packages, may be made,
completed. An on-board bill of provided that the indications of the damage or
lading signifies the completion of the average which gives rise to the claim cannot be
loading of the cargo. ascertained from the outside part of such
packages, in which case the claim shall be
COST INSURANCE FREIGHT (C.I.F.) admitted only at the time of receipt.

 What is CIF? After the periods mentioned have elapsed, or the


transportation charges have been paid, no claim
Cost Insurance Freight indicates here that the price shall be admitted against the carrier with regard to
quoted by the seller includes the invoice price, plus the condition in which the goods transported were
the insurance, and the freight. delivered.

20
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
TO RECOVER DAMAGES- WHAT MUST BE DONE; EFFECT OF NON-COMPLIANCE WITH
CONDITION PRECEDENT:
CAUSE OF ACTION:
So if there is no claim within that period, then the
With respect to the notice of claim and prescriptive claim against the common carrier is barred. So
period, of course it is basic under Civil law that which means that the claim against the common
those in the performance of their obligation, if they carrier under Art. 366 is a condition precedent for
are guilty of fraud or negligence or delay and those the filing of an action in court. So if no claim was
who contravene the terms of the contract, shall be made, no action can be filed in court.
liable for damages. And in an action for damages
due to breach of contract, what is essential or IF CONDITION PRECEDENT COMPLIED WITH-
required on the part of the claimant to establish in WHEN ACTION BE COMMENCED:
order to recover his claim for damages?
If a claim is made and the common carrier refuses
1. The existence of the perfected contract; to acknowledge because of the damage being
2. What is the breach and who breached claimed by the consignee or the shipper, then
the contract; and within what period should the case be filed? After a
-Is it the common carrier or the shipper? claim is filed to the common carrier and after which
3. There was damage suffered due to the it is refused, so if there is a contract, within what
breach by the carrier or by the shipper. period? 10 years. If it is verbal? 6 years. So you can
file within the period of 10 years or 6 years, as the
NOTICE: AN ELEMENT TO CLAIM FOR case may be. But the condition precedent is, there
DAMAGES must be a claim filed pursuant to Article 366.

And it is clear that the non-filing of the claim bars


RULE AS TO WHEN CLAIM MUST BE MADE recovery. And the filing of the claim against the
carrier within the time period under Art. 366
1.) WHEN DAMAGE-APPARENT: constitutes a condition precedent to the accrual of
the right of action against the carrier for damages
Notice, of course, is an essential element in caused by the consignor.
order to determine a claim for damages. So
based on Art. 366, if the cargoes were So to what extent may the parties agree? The
delivered and the damage are apparent at period of 24 hours, depending on the agreement of
the parties. So if there is no agreement with respect
the external of the cargo, when should the
to the claim, then the provision of Art. 366 shall
claim be made? It should be made govern.
immediately. So the consignee may not
receive the goods because of the damage SIGNIFICANCE OF CLAIM; MADE IN WHOSE
or indicate that there is damage. FAVOR :

2.) WHEN DAMAGE- NOT APPARENT:  Why do you think is this condition for a claim
important? In whose favor or benefit would that
If the damage is internal and cannot be be?
ascertained at the external of the cargo,
Federal Express Corporation vs American Home
when should the claim of damages be
Assurance Company
filed? It should be filed WITHIN 24 HOURS
FROM RECEIPT OF THE CARGO. Facts: SMITHKLINE Beecham (SMITHKLINE for brevity)
of Nebraska, USA delivered to Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal

21
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
Express Corporation, a shipment of 109 cartons of despite absence of notice
veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Ruling: NO.
Makati City, Metro Manila. The shipment was
covered by Burlington Airway Bill No. 11263825 with In this jurisdiction, the filing of a claim with the
the words, 'REFRIGERATE WHEN NOT IN TRANSIT' and carrier within the time limitation therefor actually
'PERISHABLE' stamp marked on its face. Burlington constitutes a condition precedent to the accrual of
insured the cargoes in the amount of $39,339.00 a right of action against a carrier for loss of or
with American Home Assurance Company (AHAC). damage to the goods. The shipper or consignee
The following day, Burlington turned over the must allege and prove the fulfillment of the
custody of said cargoes to Federal Express which condition. If it fails to do so, no right of action
transported the same to Manila and were against the carrier can accrue in favor of the
immediately stored at Cargohaus' warehouse upon former. The aforementioned requirement is a
arrival. reasonable condition precedent; it does not
constitute a limitation of action.
Twelve (12) days after the cargoes arrived in
Manila, while the cargoes were about to be The requirement of giving notice of loss of or injury
released, it was discovered that the same [were] to the goods is not an empty formalism. The
stored only in a room with two (2) air conditioners fundamental reasons for such a stipulation are (1)
running, to cool the place instead of a refrigerator. to inform the carrier that the cargo has been
According to an employee, the cartons where the damaged, and that it is being charged with liability
vaccines were contained specifically indicated therefor; and (2) to give it an opportunity to
therein that it should not be subjected to hot or examine the nature and extent of the injury. "THIS
cold temperature. Thereafter, samples of the same PROTECTS THE CARRIER by affording it an
were taken and brought to the Bureau of Animal opportunity to make an investigation of a claim
Industry of the Department of Agriculture in the while the matter is fresh and easily investigated so
Philippines by SMITHKLINE for examination wherein it as to safeguard itself from false and fraudulent
was discovered that the 'ELISA reading of claims."
vaccinates sera are below the positive reference
serum. When an airway bill -- or any contract of carriage
for that matter -- has a stipulation that requires a
As a consequence of the foregoing result of the notice of claim for loss of or damage to goods
veterinary biologics test, SMITHKLINE abandoned shipped and the stipulation is not complied with, its
the shipment and, declaring 'total loss' for the enforcement can be prevented and the liability
unusable shipment, filed a claim with AHAC cannot be imposed on the carrier. To stress, notice
through its representative in the Philippines, the is a condition precedent, and the carrier is not
Philam Insurance Co., Inc. ('PHILAM') which liable if notice is not given in accordance with the
recompensed SMITHKLINE for the whole insured stipulation. Failure to comply with such a stipulation
amount of THIRTY NINE THOUSAND THREE HUNDRED bars recovery for the loss or damage suffered.
THIRTY NINE DOLLARS ($39,339.00). Thereafter,
[respondents] filed an action for damages against Being a condition precedent, the notice must
the [petitioner] imputing negligence on either or precede a suit for enforcement. In the present
both of them in the handling of the cargo. case, there is neither an allegation nor a showing of
respondents' compliance with this requirement
The RTC held the [petitioner] solidarily liable for the within the prescribed period. While respondents
loss. The appellate court held that the shipping may have had a cause of action then, they cannot
Receipts were a prima facie proof that the goods now enforce it for their failure to comply with the
had indeed been delivered to the carrier in good aforesaid condition precedent.
condition.
So it is actually for the benefit of the carrier,
Issue: WON the petitioner should be held liable because this will enable the carrier to immediately

22
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
investigate while the situation is still fresh (recent) in The requirement to give notice of loss or damage to
order for the carrier to be able to pinpoint who the goods is not an empty formalism. The
should be held accountable for the damage, fundamental reason or purpose of such a
whether external or internal. Because if you would stipulation is not to relieve the carrier from just
know, usually, the common carrier gets insurance liability, but reasonably to inform it that the
and they need to determine their liability, at least, shipment has been damaged and that it is
in the particular vessel. So again, the condition is for charged with liability therefor, and to give it an
the benefit of the common carrier, to provide them opportunity to examine the nature and extent of
the opportunity to immediately investigate the the injury. This protects the carrier by affording it an
situation and to determine upon whom the cause opportunity to make an investigation of a claim
of the damage should be charged against. while the matter is still fresh and easily investigated
so as to safeguard itself from false and fraudulent
It was explained in the case of UCPB General claims.
Insurance Company vs Aboitiz Shipping
Corporation with regard to the notice of claim We have construed the 24-hour claim requirement
which must be strictly complied with. as a condition precedent to the accrual of a right
of action against a carrier for loss of, or damage to,
UCPB General Insurance Company vs Aboitiz the goods. The shipper or consignee must allege
Shipping Corporation and prove the fulfillment of the condition.
Otherwise, no right of action against the carrier can
Facts: On June 18, 1991, three (3) units of waste accrue in favor of the former.
water treatment plant with accessories were
purchased by San Miguel Corporation (SMC for The shipment in this case was received by SMC on
brevity) from Super Max Engineering Enterprises, August 2, 1991. However, as found by the Court of
Co., Ltd. of Taipei, Taiwan. The goods came from Appeals, the claims were dated October 30, 1991,
Charleston, U.S.A. and arrived at the port of Manila more than three (3) months from receipt of the
on board MV "SCANDUTCH STAR". The same were shipment and, at that, even after the extent of the
then transported to Cebu on board MV "ABOITIZ loss had already been determined by SMC‘s
SUPERCON II". After its arrival at the port of Cebu surveyor. The claim was, therefore, clearly filed
and clearance from the Bureau of Customs, the beyond the 24-hour time frame prescribed by Art.
goods were delivered to and received by SMC at 366 of the Code of Commerce.
its plant site on August 2, 1991. It was then
discovered that one electrical motor of DBS Drive WHEN ABOVE RULE DOES NOT APPLY:
Unit Model DE-30-7 was damaged. MISDELIVERY:
Pursuant to an insurance agreement, plaintiff-
appellee paid SMC the amount of P1,703,381.40 Take note of the restriction that Art. 366 shall not
representing the value of the damaged unit. In turn, begin to run until the cargoes have been delivered
SMC executed a Subrogation Form dated March to the consignee. So Art. 366 does not apply to
31, 1992 in favor of plaintiff-appellee. misdelivery, meaning to say nagkamali yung
delivery. So what is important is the requirement
Consequently, plaintiff-appellee filed a Complaint that the 24-hour period shall commence at the time
on July 21, 1992 as subrogee of SMC seeking to actual delivery is made.
recover from defendants the amount it had paid
SMC. CIVIL CODE PROVISIONS ON PRESCRIPTION:
APPLICABLE
Issues: WON the claim was filed within the time
required Also, the Civil Code provisions on extinctive
prescription applies to overland transportation and
Held: NO. coastwise shipping because there are no special
rules with respect to the contract of carriage of

23
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
overland transportation and coastwise shipping. As within one year, then the claim is forever barred.
I‘ve said, the prescriptive period is 6 years if there is
no written contract, and 10 years if there is a written COGSA: EXTRAJUDICIAL DEMAND CANNOT
contract. Consequently, an action for damages for
breach of contract of carriage prescribes within 6
STOP THE RUNNING OF 1 YR. PRESCRIPTIVE
years if no bill of lading is made or any contract PERDIOD.
that may issue. Otherwise, 10 years.
In the case of DOLE Philippines vs Maritime
DIFFERENT RULE TO CLAIM DAMAGES Company, the court ruled that the period is not
suspended by an extrajudicial demand. So Art.
UNDER COGSA‘ NOTICE REQUIREMENT 1155 of the Civil Code cannot be applied because
WHEN TO BE MADE matters affecting transportation of goods by sea
should be decided in the shortest time possible. So
However, in the International Carriage of Goods, sa the application of Art. 1155 of the Civil Code would
COGSA, which is governed by Sec. 3(6). unnecessarily extend the period and permit delays
in the settlement of questions affecting
Sec. 3(6) of the COGSA provides a similar claim transportation, contrary to the clear intent and
mechanism as the Code of Commerce but purpose of the law.
prescribes a period of three (3) days within which
notice of claim must be given if the loss or damage
DOLE Philippines vs Maritime Company
is not apparent. It states: Facts: The cargo subject of the instant case was
discharged in Dadiangas unto the custody of the
Sec. 3(6). Unless NOTICE OF LOSS OR DAMAGE and consignee on December 18, 1971. The
the general nature of such loss or damage be given corresponding claim for the damages sustained by
in writing to the carrier or his agent at the port of the cargo was filed by the plaintiff with the
discharge or AT THE TIME OF THE REMOVAL OF THE defendant vessel on May 4, 1972. On June 11, 1973
GOODS INTO THE CUSTODY OF THE PERSON the plaintiff filed a complaint in the Court of First
ENTITLED TO DELIVERY thereof under the contract of Instance of Manila, docketed therein as Civil Case
carriage, such removal shall be prima facie No. 91043, embodying three (3) causes of action
evidence of the delivery by the carrier of the goods involving three (3) separate and different
as described in the bill of lading. IF THE LOSS OR shipments. The third cause of action therein
DAMAGE IS NOT APPARENT, the notice must be involved the cargo now subject of this present
given within three days of the delivery. litigation.

Said notice of loss or damage may be endorsed Issue: WON Article 1155 of the Civil Code providing
upon the receipt of the goods given by the person that the prescription of actions is interrupted by the
taking delivery thereof. making of an extrajudicial written demand by the
creditor is applicable to actions brought under the
The notice in writing need not be given if the state Carriage of Goods by Sea Act
of the goods has at the time of their receipt been
the subject of joint survey or inspection. Held: NO.

COGSA VS CODE OF COMMERCE: ON In a case governed by the Carriage of Goods by


NOTICE REQUIREMENTS Sea Act, the general provisions of the Code of Civil
Procedure on prescription should not be made to
apply. Similarly, we now hold that in such a case
The difference between the Code of Commerce the general provisions of the new Civil Code (Art.
and COGSA is that the period is not mandatory 1155) cannot be made to apply, as such
under COGSA. Failure to file a notice of claim within application would have the effect of extending the
the given period does not discharge the carrier one-year period of prescription fixed in the law. It is
because the consignee still has a period of one desirable that matters affecting transportation of
year within which to file the claim. If no claim is filed

24
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
goods by sea be decided in as short a time as shall be applicable with respect to those
possible; the application of the provisions of Article damaged and the consignee shall receive
1155 of the new Civil Code would unnecessarily those which are sound, this segregation to
extend the period and permit delays in the be made by distinct and separate pieces
settlement of questions affecting transportation, and without dividing a single object, unless
contrary to the clear intent and purpose of the law. the consignee proves the impossibility of
conveniently making use of them in this
Moreover, no different result would obtain even if form.
the Court were to accept the proposition that a
written extrajudicial demand does toll prescription The same rule shall be applied to
under the Carriage of Goods by Sea Act. The merchandise in bales or packages,
demand in this instance would be the claim for separating those parcels which appear
damage-filed by Dole with Maritime on May 4, sound.
1972. The effect of that demand would have been
to renew the one- year prescriptive period from the 2. Art. 371
date of its making. Stated otherwise, under Dole's
theory, when its claim was received by Maritime,
ARTICLE 371. In case of delay through the
the one-year prescriptive period was interrupted —
fault of the carrier, referred to in the
"tolled" would be the more precise term — and
preceding articles, the consignee may
began to run anew from May 4, 1972, affording
leave the goods transported in the hands of
Dole another period of one (1) year counted from the former, advising him thereof in writing
that date within which to institute action on its claim before their arrival at the point of
for damage. Unfortunately, Dole let the new period
destination.
lapse without filing action. It instituted Civil Case No.
91043 only on June 11, 1973, more than one month
When this abandonment takes place, the
after that period has expired and its right of action
carrier shall pay the full value of the goods
had prescribed. as if they had been lost or mislaid.

The prescriptive period of one year under COGSA If the abandonment is not made, the
also applies to the insurer of the goods. Usually the indemnification for losses and damages by
insurer pays the consignee and the insurer also has reason of the delay cannot exceed the
a period of one year to file a claim against the current price which the goods transported
common carrier. would have had on the day and at the
place in which they should have been
In Maritime Law, there are 5 CASES OF delivered; this same rule is to be observed in
ABANDONMENT. Take note: all other cases in which this indemnity may
be due.
1. Art. 365
3. Art. 587. This is under Vessels.
ARTICLE 365. If, in consequence of the
damage, the goods are rendered useless Art. 587. The ship agent shall also be civilly
for sale and consumption for the purposes liable for the indemnities in favor of third
for which they are properly destined, the
persons which arise from the conduct of the
consignee shall not be bound to receive
captain in the care of the goods which the
them, and he may have them in the hands
vessel carried; but he may exempt himself
of the carrier, demanding of the latter their therefrom by abandoning the vessel with all
value at the current price on that day. her equipment and the freightage he may
have earned during the voyage.
If among the damaged goods there should
be some pieces in good condition and
without any defect, the foregoing provision 4. Art. 687

25
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
delivery was not made then the consignee
Art. 687. The charterers and shippers cannot may file a case for breach of contract
abandon merchandise damaged on because of the delay. However, if there was
account of its own inherent defect or tender PRIOR TO THE FILING OF THE SUIT, and
fortuitous event for the payment of the the goods were safely kept then the
freightage and other expenses. consignee cannot refuse to receive the
goods and proceed to file a case.
The abandonment shall be proper,
however, if the cargo should consist of ARTICLE 368. The carrier must deliver to the
liquids and should they have leaked out, consignee, without any delay or obstruction,
there remaining in the containers not more the goods which he may have received, by the
than one-quarter of their contents. mere fact of being named in the bill of lading to
receive them; and if he does not do so, he shall
5. Art. 370 and Art. 374. be liable for the damages which may be
caused thereby.
ARTICLE 370. If a period has been fixed for
the delivery of the goods, it must be made ARTICLE 369. If the consignee cannot be found
within such time, and, for failure to do so, at the residence indicated in the bill of lading,
the carrier shall pay the indemnity stipulated or if he refuses to pay the transportation
in the bill of lading, neither the shipper nor charges and expenses, or if he refuses to
the consignee being entitled to anything receive the goods, the municipal judge, where
else. there is none of the first instance, shall provide
for their deposit at the disposal of the shipper,
If no indemnity has been stipulated and the this deposit producing all the effects of delivery
delay exceeds the time fixed in the bill of without prejudice to third parties with a better
lading, the carrier shall be liable for the right.
damages which the delay may have
caused. TO WHOM GOODS SHALL BE DELIVERED:

ARTICLE 374. The consignees to whom the Art. 368 and Art. 369 provide to whom the
shipment was made may not defer the goods shall be delivered.
payment of the expenses and
transportation charges of the goods they  Art.368. Delivery should be made to whom?
receive after the lapse of twenty-four hours To the person who is indicated in the bill of
following their delivery; and in case of delay lading.
in this payment, the carrier may demand
the judicial sale of the goods transported in CONSIGNATION:
an amount necessary to cover the cost of
transportation and the expenses incurred.  Art.369. This is a case when goods may be
deposited. A situation wherein the consignee
The right of abandonment is also granted cannot be bound or if the consignee refuses
under Art. 370 and Art. 374 as we discussed to pay the transportation charges or if he
last time. If the goods were delayed due to refuses to receive the goods. So what is the
the fault of the common carrier the remedy here of the common carrier?
consignee refused to receive the goods by
filing a notice BEFORE THE ARRIVAL OF THE The remedy is to consign or to deposit it at the
GOODS. So that is the right of abandonment. Municipal Trial Court in the place where the
And just claim for the value of the cargoes goods are supposed to be delivered. Why is
that was delayed. However, we said if there that important? Because it will discharge the
was a tender, if there was a demand and liability of the common carrier and extinguish

26
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
now the responsibility to exercise extraordinary respective obligations and actions shall be
diligence. Consignment or the deposit of the considered cancelled, unless in the same act
goods with the court will constitute as delivery the claim which the parties may wish to reserve
of the goods. be reduced to writing, with the exception of
that provided for in Article 366.
ARTICLE 351. In transportation made by railroads
or other enterprises subject to regulation rate In case the consignee, upon receiving the
and time schedules, it shall be sufficient for the goods, cannot return the bill of lading
bills of lading or the declaration of shipment subscribed by the carrier, because of its loss or
furnished by the shipper to refer, with respect to of any other cause, he must give the latter a
the cost, time and special conditions of the receipt for the goods delivered, this receipt
carriage, to the schedules and regulations the producing the same effects as the return of the
application of which he requests; and if the bill of lading.
shipper does not determine the schedule, the
carrier must apply the rate of those which ARTICLE 354. In the absence of a bill of lading,
appear to be the lowest, with the conditions disputes shall be determined by the legal proofs
inherent thereto, always including a statement which the parties may present in support of their
or reference to in the bill of lading which he respective claims, according to the general
delivers to the shipper. provisions established in this Code for
commercial contracts.
ARTICLE 352. The bills of lading, or tickets in BILL OF LADING: BEST EVIDENCE; PAROLE
cases of transportation of passengers, may be EVEIDENCE- NOT ALLOWED; EXCEPTION.
diverse, some for persons and others for
baggage; but all of them shall bear the name Art. 353-354. As we have discussed, the bill of
of the carrier, the date of shipment, the points lading as the best evidence to prove the
of departure and arrival, the cost, and, with cargos on board and it is said the parol
respect to the baggage, the number and evidence in case of dispute that may arise in
weight of the packages, with such other the delivery of the goods then the bill of lading
manifestations which may be considered will be used as an evidence and parol
necessary for their easy identification. evidence is not be admissible EXCEPT only in so
far as to the issue with respect to the falsity and
In summary of the provisions of the Civil Code, material error in the drafting.
we mentioned Art. 351 only refers to the
schedule that carrier must keep. Art 352 refers to RESPONSIBILITY OF THE CARRIER:
passengers are both carriage of passengers
and cargo. Art. 352 not only refers to cargo but
WHEN/WHERE COMMENCED
also to passengers. ARTICLE 355. The responsibility of the carrier shall
commence from the moment he receives the
ARTICLE 353. The legal evidence of the contract merchandise, personally or through a person
between the shipper and the carrier shall be charged for the purpose, at the place
the bills of lading, by the contents of which the indicated for receiving them.
disputes which may arise regarding their
execution and performance shall be decided, RESPONSIBILITY OF CARRIER: DURATION
no exceptions being admissible other than Article 1736. The extraordinary responsibility of
those of falsity and material error in the drafting. the common carrier lasts from the time the
goods are unconditionally placed in the
After the contract has been complied with, the possession of, and received by the carrier for
bill of lading which the carrier has issued shall be transportation until the same are delivered,
returned to him, and by virtue of the exchange actually or constructively, by the carrier to the
of this title with the thing transported, the consignee, or to the person who has a right to

27
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
receive them, without prejudice to the EFFECTS OF DELAY:
provisions of article 1738.
ARTICLE 358. If there is no period fixed for the
Art. 355 should be read together with Art. 1736 of delivery of the goods the carrier shall be bound
the Civil Code. The liability of the carrier for the care to forward them in the first shipment of the same
of cargo begins from the moment it is or similar goods which he may make point
unconditionally delivered by the shipper to the where he must deliver them; and should he not
carrier for purposes of carriage. do so, the damages caused by the delay
should be for his account.
GOODS- WHEN MAY BE REFUSED:
Article 1747. If the common carrier, without just
ARTICLE 356. Carriers may refuse packages cause, delays the transportation of the goods or
which appear unfit for transportation; and if the changes the stipulated or usual route, the
carriage is to be made by railway, and the contract limiting the common carrier's liability
shipment is insisted upon, the company shall cannot be availed of in case of the loss,
transport them, being exempt from all destruction, or deterioration of the goods.
responsibility if its objections, is made to appear
in the bill of lading. Art. 358 and Art. 325 should be read with Art.
1747 of the Civil Code. The occurrence of a
RIGHT OF THE CARRIER TO EXAMINE fortuitous event will not extinguish the liability of
CARGO: a carrier where the fortuitous event occurs with
either due delay in starting the trip or unjustified
deviation. The unjustified deviation is the
ARTICLE 357. If by reason of well-founded change of route. As a general rule, common
suspicion of falsity in the declaration as to the carrier should stick to the route that is required
contents of a package the carrier should under the bill of lading. But if he deviates from
decide to examine it, he shall proceed with his the route and the common carrier encounters a
investigation in the presence of witnesses, with storm, then the common carrier can be held
the shipper or consignee in attendance. liable for damages.

If the shipper or consignee who has to be cited CHANGING CONSIGNEE:


does not attend, the examination shall be
made before a notary, who shall prepare a
memorandum of the result of the investigation, ARTICLE 360. The shipper, without changing the
for such purposes as may be proper. place where the delivery is to be made, may
change the consignment of the goods which
If the declaration of the shipper should be true, he delivered to the carrier, provided that at the
the expense occasioned by the examination time of ordering the change of consignee the
and that of carefully repacking the packages bill of lading signed by the carrier, if one has
shall be for the account of the carrier and in a been issued, be returned to him, in exchange
contrary case for the account of the shipper. for another wherein the novation of the
contract appears.
Art. 356 and Art. 357 these provisions authorize a
carrier to examine a cargo should a carrier The expenses which this change of
suspect that such cargo may be suspicious in consignment occasions shall be for the account
nature. The right is important today especially of the shipper.
with the danger of explosive, high jacking,
terrorism and attempts smuggling under the Art.360 refers to the contracting parties. Shipper
Tariffs and Customs Code. has the right to change the name of the
consignee at any time and the carrier must

28
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
respect this change of designation. CARGO AT THE POINT OF DESTINATION. This will
apply in the event there is abandonment if the
Article 1746. An agreement limiting the consignee opts to exercise the right to
common carrier's liability may be annulled by abandonment in view of the delay of the
the shipper or owner if the common carrier common carrier and instead demand for
refused to carry the goods unless the former conversion of the cargo. This will be applied to
agreed to such stipulation. the measure of the amount to be paid which
shall be based on the market value of the
cargo AT THE POINT OF DESTINATON.
Article 1752. Even when there is an agreement
limiting the liability of the common carrier in the
vigilance over the goods, the common carrier is ARTICLE 368. The carrier must deliver to the
disputably presumed to have been negligent in consignee, without any delay or obstruction,
the goods which he may have received, by the
case of their loss, destruction or deterioration.
mere fact of being named in the bill of lading to
receive them; and if he does not do so, he shall
 Art. 361 is repealed by Art. 1746. Art. 362 is be liable for the damages which may be
repealed by 1752. caused thereby.

CONDITION OF GOODS TO BE DELIVERED:  Art. 368 obligation of the vessel to deliver to


ARTICLE 363. Outside of the cases mentioned in consignee who has been designated by the
the second paragraph of Article 361, the carrier shipper.
shall be obliged to deliver the goods shipped in
the same condition in which, according to the CONSIGNEE -CANNOT BE FOUND, REFUSES
bill of lading, they were found at the time they
were received, without any damage or
TO PAY TRANSPORTATION CHARGES, OR
impairment, and failing to do so, to pay the REFUSES TO RECEIVE GOODS: REMEDY:
value which those not delivered may have at
the point and at the time at which their delivery ARTICLE 369. If the consignee cannot be found
should have been made. at the residence indicated in the bill of lading,
or if he refuses to pay the transportation
If those not delivered form part of the goods charges and expenses, or if he refuses to
transported, the consignee may refuse to receive the goods, the municipal judge, where
receive the latter, when he proves that he there is none of the first instance, shall provide
cannot make use of them independently of the for their deposit at the disposal of the shipper,
others. this deposit producing all the effects of delivery
without prejudice to third parties with a better
Art.363. The cargo must be delivered in the right.
condition it was received.
CONSIGNATION:
EFFECT OF DIMINUTION OF GOOD‘S VALUE:
Art. 369 pertains to consignation. Consignation is
ARTICLE 364. If the effect of the damage allowed under the following cases:
referred to in Article 361 is merely a diminution in 1. If the consignee cannot be found at the
the value of the goods, the obligation of the residence indicated in the bill of lading, or
carrier shall be reduced to the payment of the 2. If he refuses to pay the transportation
amount which, in the judgment of experts, charges and expenses, or
constitutes such difference in value. 3. If he refuses to receive the goods

Art. 364 pertains to measure of damages to


cargoes based on the MARKET VALUE OF THE

29
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
DELAY- WITH PERIOD TO DELIVER FIXED:
Article 1749. A stipulation that the common
ARTICLE 370. If a period has been fixed for the carrier's liability is limited to the value of the
delivery of the goods, it must be made within goods appearing in the bill of lading, unless the
such time, and, for failure to do so, the carrier shipper or owner declares a greater value, is
shall pay the indemnity stipulated in the bill of binding.
lading, neither the shipper nor the consignee
being entitled to anything else. Art. 372 is repealed by Art. 1749 which pertains
that subject matter is the validity of the carrier
If no indemnity has been stipulated and the to stipulate in the bill of lading for the reduction
delay exceeds the time fixed in the bill of of tis liability for damages.
lading, the carrier shall be liable for the
damages which the delay may have caused. SERVICE TO BE RENDERED WITH OTHER
CARRIERS: RESPECTIVE RIGHTS AND
DELAY- WITH PERIOD TO DELIVER FIXED: LIAIBILITIES OF CARRIERS; SHIIPPER‘S AND
RIGHT OF ABANDONMENT; IF NOT CONSIGNEE‘S CAUSE OF ACTION:
EXERCISED-EFFECT OF:
ARTICLE 373. The carrier who makes the delivery
ARTICLE 371. In case of delay through the fault of the merchandise to the consignee by virtue
of the carrier, referred to in the preceding of combined agreements or services with other
articles, the consignee may leave the goods carriers shall assume the obligations of those
transported in the hands of the former, advising who preceded him in the conveyance,
him thereof in writing before their arrival at the reserving his right to proceed against the latter if
point of destination. he was not the party directly responsible for the
fault which gave rise to the claim of the shipper
When this abandonment takes place, the or consignee.
carrier shall pay the full value of the goods as if
they had been lost or mislaid. The carrier who makes the delivery shall likewise
acquire all the actions and rights of those who
If the abandonment is not made, the preceded him in the conveyance.
indemnification for losses and damages by
reason of the delay cannot exceed the current The shipper and the consignee shall have an
price which the goods transported would have immediate right of action against the carrier
had on the day and at the place in which they who executed the transportation contract, or
should have been delivered; this same rule is to against the other carriers who may have
be observed in all other cases in which this received the goods transported without
indemnity may be due. reservation.

Art.370-371. These provisions cover the However, the reservation made by the latter
agreement between the common carrier and shall not relieve them from the responsibilities
the shipper for the delivery of goods on certain which they may have incurred by their own
date and consequent right of abandonment acts.
which we discussed earlier which means that if
there is a period fixed, then the common carrier Art. 373 provides that the original carrier that
should deliver the cargos on the date as enters into an inter-connecting contract of
agreed upon. Art.371 provides if the period carriage shall be liable for damages caused by
does not provide period for the delivery. When its connecting carriers. This is a case wherein a
should the cargo be transported? ON THE FIRST cargo is transshipped by a connecting carrier.
VESSEL that will carry the cargoes.

30
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
For example: A cargo is shipped from abroad to
Manila, before it is delivered to Surigao, another CARRIER‘S REMEDY:
vessel will carry it to Cebu then Davao then
Surigao. Art. 374, Art. 375 and Art. 376. These are the
provisions that give carriers several remedies
In those case of interconnecting vessel, IT under the Code of Commerce for collection for
WOULD STILL BE THE COMMON CARRIER FIRST freightage.
WHO ENTERED A CONTRACT with the shipper
that will be liable. It is not the inter-connecting 1. RETAINING LIEN. The carrier cannot be
carriers to be held liable when it happens to compelled to deliver or surrender until the
damage the goods. IT IS STILL THE COMMON freight is paid.
CARRIER WITH WHOM THE BILL OF LADING WAS
EXECUTED. It would be the responsibility of the 2. CARRIER‘S LIEN. The carrier may deliver the
common carrier to run after that inter- cargo and waive the retaining lien but
connecting vessel. with a RIGHT OF PREFERENCE over the
cargo for a period of 30 days. This has
DELAYED PAYMENT BY CONSIGNEE; been amended by Art. 2241 of the Civil
CARRIER‘S RIGHT FOR JUDICIAL SALE: Code. Art. 2241 provides for the..yung
ARTICLE 374. The consignees to whom the credits.. who shall be the first priority in
shipment was made may not defer the case of insolvency. Preference of credit is
payment of the expenses and transportation enumerated there. In this case, the
charges of the goods they receive after the carrier‘s lien can be considered as a
preferential creditor but within the period
lapse of twenty-four hours (24 HOURS) following
of 30 days, if he, the common carrier,
their delivery; and in case of delay in this
payment, the carrier may demand the judicial delivers the cargo without the freightage
sale of the goods transported in an amount being paid the debt/freight that has not
necessary to cover the cost of transportation been paid can be considered among the
preference of credit under Art.2241.
and the expenses incurred.
3. CONSIGNATION. Under Art.369.
LIEN OVER THE CARRIED GOODS:
ARTICLE 377. The carrier shall be liable for all the
ARTICLE 375. The goods transported shall be consequences which may arise from his failure
especially bound to answer for the cost of to comply with the formalities prescribed by the
transportation and for the expenses and fees laws and regulations of the public
incurred for them during their conveyance and administration, during the whole course of the
until the moment of their delivery. trip and upon arrival at the point of destination,
This special right shall prescribe eight days after except when his failure arises from having been
the delivery has been made, and once led into error by falsehood on the part of the
prescribed, the carrier shall have no other shipper in the declaration of the merchandise. If
action than that corresponding to him as an the carrier has acted by virtue of a formal order
ordinary creditor. of the shipper or consignee of the merchandise,
both shall become responsible.
ARTICLE 376. The preference of the carrier to the
payment of what is owed him for the Art. 377. The liability of carrier for damages
transportation and expenses of the goods arising from failure to comply with rules and
delivered to the consignee shall not be cut off regulations on the delivery of the cargo. It
by the bankruptcy of the latter, provided it is provides for the liability of the carrier. The carrier
claimed within the eight days mentioned in the shall be liable for the consequences which may
preceding article. arise from his failure to comply with the
formalities prescribe by laws and regulations.

31
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
(which also includes fishing vessels (PD 43)), but
ARTICLE 379. The provisions contained in Articles there are exceptions that are not considered
349 and following shall be understood as vessels for purposes of rules and regulations
equally applicable to those who, although they concerning common carriers:
do not personally effect the transportation of 1. Those owned or operated by the Armed
the merchandise, contract to do so through Forces of the Philippines and foreign
others, either as contractors for a particular and governments for military purposes
definite operation, or as agents for
transportations and conveyances. 2. Banka/sailboats or other water-borne
contrivance of less than 3 tons gross
In either case they shall be subrogated in the capacity and not motorized. So, non-
place of the carriers themselves, with respect to merchant vessels are not subject to
the obligations and responsibility of the latter, as maritime law.
well as with regard to their rights.
SIGNIFICANCE OF DEFINING VESSEL:
Art. 379. It refers to the provisions of the Code of
Why is this definition of vessel important?
Commerce on Transportation are equally
applicable to persons who, although they do
We have to know what vessels are covered for the
not personally affect the transportation of
purpose of applying the laws and regulations
objects contract to do so for others.
implemented by MARINA (Maritime Industry
Authority).
FEBRUARY 20
Under the DOMESTIC SHIPPING DEVELOPMENT ACT
VESSELS OF 2004 (RA 9295), "SHIPS" and "VESSELS" may be
used interchangeably. Also, it shall meet any kind,
class or type of craft or artificial contrivance
DEFINITION OF VESSEL: capable in floating in water, and for what purpose?
To be used as means of water transport in domestic
When we say vessel that is subject to registration, it trade for either carriage of passengers, cargo or
includes every sort of boat, or other artificial both.
contrivance used or capable of being used as a
means of transportation on water.
WHAT ARE THE KINDS OF VESSELS? SOLAS
PD 474 provided for the re-ogranization of maritime (SAFETY OF LIFE AT SEA) provides:
functions in the Philippines. It also created the
Maritime Industry Authority (MARINA) and other 1. PASSENGER SHIP- carries more than 12
purposes. passengers

2. CARGO SHIP
Section 3 Par 3 defines a VESSEL, for purposes of
falling within the jurisdiction of MARINA, as ‗any 3. TANKER- a cargo ship adapted for the
barge, lighter, carrier, passenger ship, freighter, carriage in bulk of liquid cargos of
tanker, container ship, fishing boat or pother inflammable nature
artificial contrivance, utilizing any source of motive
power, motor power, designed, used or capable of 4. FISHING VESSEL- used to catch living
being used as a means of transportation either as a resources at sea
common contract carrier, including vessels covered
under PD 43. 5. NUCLEAR SHIP- ship provided with a
nuclear power plant
So of course these VESSELS in order to be
considered for maritime purposes, it could either be 6. NEW SHIP- still under construction and
operating as a common carrier, contract carrier unregistered after the date of the

32
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
effectivity of SOLAS Philippine Registry, but a CERTIFICATE OF
OWNERSHIP If it is optional, the owner can still
7. EXISTING SHIP- contrary to new ship; used register it and he is issued a Certificate of
and registered Ownership. The Certificate of Phil. Registry is usually
used if the vessel is to be used in international trade.
What is the OBJECTIVE OF CONVENTION? It
standardizes minimum requirement as to
A foreign-owned vessel under charter or leased by
construction, equipment and inspection in respect
a Filipino national may be issued a TEMPORARY
of engineering safety.
CERTIFICATE OF REGISTRATION under the following
conditions (as provided by law):
The necessity for granting a maritime safety treaty
1. The charter or lease must be with the
was brought to the intention of the international
approval of the MARINA
community after 1912 after titanic (because there
were no life boats). 2. The duration is not less than one year

3. The vessel shall be used exclusively in


WHO ARE THE REGULATORY AGENCIES IN coastwise trade unless permitted by
VESSELS? MARINA to be used for overseas trade.

So you have to clarify. If it is coastwise (coastwise is


1. MARINA (Maritime Industry Authority) within the territory of the Philippines), but if the
vessel is qualified to be used internationally, it has to
-formulates policies rules for the growth of
secure a permit from the MARINA, not only a permit
shipping enterprises and concerned with the
but approval to operate in overseas trade.
purchase, lease and management of the
operation of vessels. So if you have a client
A CERTIIFCATE OF REGISTRATION is need for the
who wants to buy a vessel, you go to MARINA
purpose of renting the vessel out or for business. A
for registration to approve the deed of sale.
CERTIFICATE OF OWNERSHIP is if private and vessel
But the sale of public auction to Rubizo was
not for vessels.
recorded.
Several points of authority for vessels:
2. PRC (Professional Regulation Commission)
1. PHILIPPINE COAST GUARD- regulation,
-administers and supervises the examination documentation and licensing of vessels
of licensing of marine officers and crew
2. BMI (under the Coast Guard)-
investigates conduct of crew members
VESSEL REGISTRATION
and officers in terms of casualties, and
Under Section 806 of PD 34 (Tariff and Customs code recommends to the commandant for
amended by PD 761), the law requires that a vessel penalties in cases of violations
of more than 3 tons owned by Filipino citizens or
corporations and associations, at least the 60% of
the capital of which is owned by such citizen shall VESSELS AS PROPERTY:
be registered at the Philippine Coast Guard under
PD 1064. The registration of vessels 3 tons or less is Vessels are considered personal or movable
optional. property under Art. 585. Under the Civil Code, they
are also considered as personalty, often referred to
If the vessel is more than 15 tons gross it shall be as a particular kind of personal things. For all
issued a CERTIFICATE OF PHILIPPINE REGISTRY. The purposes of law not modified by CoC, vessels still
taking of certificates for vessels 15 tons or less is considered personal property. So there are rules not
optional. However in a domestic vessel weighing applicable to common carriers, similar to rules that
less than 5 tons will not be issued a Certificate of apply to real estate with respect to matter of real
estate.

33
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
as provided in Arts. 576 or 578.
As explained by SC in several cases, ships or vessels
whether moved by steam or sail, pertain to an 2. It can be acquired THROUGH
extent of the nature and condition of realty on FORECLOSURE OF MORTGAGE, either
account of their value and importance in the judicial or extrajudicial foreclosure.
commerce. So a purchaser of a vessel in a public
auction of a vessel (so there is a judicial foreclosure) 3. Ownership may also be acquired
whose certificate of sale was registered in a registry through DONATION or by INHERITANCE;
shall prevail over an earlier purchase of the vessel testate or intestate SUCCESSION
by another person who did not register his
4. Ownership through PRESCRIPTION,
purchase.
CONSTRUCTION, BARTER OR TIME OR
 What happened in Rubizo? BAREBOAT CHARTER basis without
ownership, acquiring only the use of
SC characterized maritime transactions as having a vessels.
real nature (similar to registration of real property)
with respect to effectivity against 3rd persons. In this Title of ownership is thru delivery. As earlier
case, defendant acquired by purchase the pilot discussed, DELIVERY may be actual or constructive.
Real or actual delivery takes place when the vessel
boat on date prior to the purchase and
sold is placed in the control and possession of the
adjudication by plaintiff Rubizo. But the sale to
Rubizo was recorded in the office of collector of vendee. Cross-reference it to Article 1477 of the
customs in January 7 and the commercial registry in Civil Code
March 17. As ruled, the requisite of registration is a
necessary and indispensable in order for the Art. 1477. The ownership of the thing sold shall be
purchaser‘s right be maintained against third transferred to the vendee upon the actual or
persons (Art 573). constructive delivery thereof. (n)

Under Article 573, vessels are personal/movable Constructive delivery may be through legal
property, or a chattel, so until the enactment of the formalities or traditional symbolica. The Civil Code
Ship Mortgage Decree of 1978, ships are covered that when the sale is made through a public
by the provisions of Chattel Mortgage Law. Since instrument, the execution thereof is equivalent to
ships are valuable movable property dealt within the delivery of the thing which is the subject of the
commerce, they may be dealt and bought and contract.
sold or chartered or hired out for long periods. With regard to immovable property in general, it
These operations of vessels are generally through may be made through delivery of keys. For ships, it
agents which are called ship brokers. may likewise be made by mere consent of the
agreement of the parties. So if the thing sold
Ship brokers are commonly used when vessels are cannot be transferred to the possession of a party
to be built, or when shipyards are to be contracted to the vendee at the time of the sale.
with. These are being undertaken by ship brokers.
They are professional experts in shipping, In order to be binding to third parties, it must be in a
specializing in particular types of tonnage/damage written instrument (Art 573) and recorded in the
(?) or particular transactions. MARINA. The requisite of registration is not to
validate the sale, but it is indispensable in order that
ACQUISITIONS OF VESSELS the purchaser's rights against the third persons may
be maintained. For example, placing a near-
Vessels may be acquired or transferred by means defunct vessel in a public auction, the purchaser
recognized by law. whose certifcate of sale must register will prevail
1. In complete and outright ownership by over an earlier purchase of a purchaser who did
not register his purchase (Rubizo)
PURCHASE, on cash payments or
deferred payment subject to mortgage

34
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
But as between the parties, ownership is parties Redemption dissolves a perfected and
upon execution of the Deed of Sale and delivery of consummated sale while pre-emption prevents the
the vessel. sale to third parties. In redemption, the action is
against the purchaser, while in that of pre-emption,
In the case of Froilan vs. Oriental Shipping (12 S it is against the seller.
276), the SC ruled that: In the absence of stipulation
to the contrary, the ownership of the thing sold Illustration: If A wants to sell his share to X, he must
passes to the vendee upon the actual or first offer the same to his co-owners. This is the right
constructive delivery thereof (Art. 1477, New Civil of preemption. If A does not do so and sell to X, B
Code). It is for this reason that Froilan was able to and C have the right to buy back such share from
constitute a mortgage on the vessel in favor of the X. This is the right of redemption which must be
Administration, to secure payment of the unpaid exercised within nine days following the inscription
balance of the purchase price. This is true if the sale of the sale in the registry, and by depositing the
has been made on credit or pyament and the price at the same time.
price is not essential to the trasnfer of ownership, as
long as the property has been delivered. SALE OF VESSEL WHILE ON VOYAGE:

SALE OF VESSEL-WHAT IT INCLUDES: ARTICLE 577.If the alienation of the vessel should be
made while it is on a voyage, the freightage which
ARTICLE 576. In the sale of a vessel it shall always be it earns from the time it receives its last cargo shall
understood as included the rigging, masts, stores pertain entirely to the purchaser, and the payment
and engine of a streamer appurtenant thereto, of the crew and other persons who make up its
which at the time belongs to the vendor. The arms, complement for the same voyage shall be for his
munitions of war, provisions and fuel shall not be account. If the sale is made after the vessel has
considered as included in the sale. The vendor shall arrived at the port of its destination, the freightage
be under the obligation to deliver to the purchaser shall pertain to the vendor, and the payment of the
a certified copy of the record sheet of the vessel in crew and other individuals who make up its
the registry up to the date of the sale. complement shall before his account, unless the
contrary is stipulated in either case.
Article 576 states what are and what are not
included in sale of a vessel. Article 577 states who shall be entitled to the
freightage and who shall be obliged to pay the
RIGHTS OF CO-OWNER IN SALE OF VESSEL: crew and other persons who make up the
complement of the vessel, depending upon the
ARTICLE 575. Co-owners of vessels shall have the time of the sale.
right of repurchase and redemption in sales made
The freight shall belong to the purchaser, and the
to strangers, but they may exercise the same only
within the NINE DAYS (9 DAYS) following the payment of the crew shall be for his account. But if
inscription of the sale in the registry, and by the sale was made after the vessel arrived at the
port, freightage shall pertain to the seller/vendor,
depositing the price at the same time.
who during the voyage shall any freight gained
shall belong to the purchaser. But if the sale was
RIGHT OF REDEMPTION consummated at the port of destination,
VS
RIGHT OF PRE-EMPTION: VOLUNTRY ALIENATION OF VESSEL ON
VOYAGE; FORMALITIES REQUIRED:
Article 575 grants a right of pre-emption and a right
of redemption to co-owners in sales made to ARTICLE 578. If the vessel being on a voyage or in a
strangers. Redemption arises after the sale is made, foreign port, its owner or owners should voluntarily
while preemption, before making the sale. alienate it, either to Filipinos or to foreigners

35
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
domiciled in the capital or in a port of another
country, the BILL OF SALE shall be executed before The third and fourth paragraphs Art. 578 and the
the consul of the Republic of the Philippines at the first paragraph of Att. 579 prescribe the formalities
port where it terminates its voyage and said required to be observed for the sale of vessels when
instrument shall produce no effect with respect to they are rendered useless for navigation as follows:
third persons if it is not inscribed in the REGISTRY OF 1. APPLICATION by the captain for
THE CONSULATE. The consul shall immediately examination to the judge or court of the
forward a true copy of the instrument of purchase port of arrival if in the Philippines, or if in a
and sale of the vessel to the REGISTRY OF VESSELS of foreign country, to the consul of the
the port where said vessel is inscribed and Philippines, should there be one, or where
registered. there is none, to the judge or court or to the
In every case the alienation of the vessel must be
local authority;
made to appear with a statement of whether the
vendor receives its price in whole or in part, or 2. NOTIFICATION of the consignee or the
whether he preserves in whole or in part any claim insurer should they reside at said port or their
on said vessel. In case the sale is made to a Filipino, representatives thereat;
this fact shall be stated in the certificate of
navigation. 3. PROOF OF DAMAGE AND IMPOSSIBILITY OF
THE REPAIR of the vessel; and
The first and second paragraphs of Art. 578
prescribe the FORMALITIES required for the voluntary 4. ORDER FOR THE SALE of the vessel at public
sale of vessels abroad as follows: auction.
1. Execution of the BILL OF SALE before the
consul of the Philippines at the port where it SALE OF VESSEL AT PUBLIC AUCTION-
terminates its voyage; RULES:
2. Inscription in THE REGISTRY OF ITS The rules to be followed in the sale of a vessel at
CONSULATE; public auction after the damage to the vessel and
the impossibility of her being repaired in order to
3. Forwarding by the consul of a true copy of continue its voyage have been shown are
the instrument or purchase and sale to the enumerated in Article 579.
REGISTRY OF VESSELS of the port of ARTICLE 578. If the vessel being on a voyage or in a
registration; and foreign port, its owner or owners should voluntarily
alienate it, either to Filipinos or to foreigners
4. A statement must be made to appear on domiciled in the capital or in a port of another
said instrument of whether the vendor country, the bill of sale shall be executed before
receives its price in whole or in part, or the consul of the Republic of the Philippines at the
whether he preserves in whole or in part, any port where it terminates its voyage and said
claim on said vessel. instrument shall produce no effect with respect to
third persons if it is not inscribed in the registry of the
DAMAGED VESSEL- IMPOSSIBLE TO consulate. The consul shall immediately forward a
REPAIR; SALE true copy of the instrument of purchase and sale of
the vessel to the registry of vessels of the port where
ARTICLE 579. After the damage to the vessel and said vessel is inscribed and registered.
the impossibility of her being repaired, in order to In every case the alienation of the vessel must be
continue the voyage had been shown, its sale at made to appear with a statement of whether the
public auction shall be ordered. vendor receives its price in whole or in part, or
whether he preserves in whole or in part any claim
on said vessel. In case the sale is made to a Filipino,
SALE OF VESSELS RENDERED USELESS FOR this fact shall be stated in the certificate of
NAVIGATION-FORMALITIES: navigation.

36
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
The first and second paragraphs of Art. 578 examination to the judge or court of the
prescribe the FORMALITIES required for the voluntary port of arrival if in the Philippines, or if in a
sale of vessels abroad as follows: foreign country, to the consul of the
1. Execution of the bill of sale before the Philippines, should there be one, or where
consul of the Philippines at the port where it there is none, to the judge or court or to the
terminates its voyage; local authority;
2. Inscription in the registry of its consulate; 2. NOTIFICATION of the consignee or the
insurer should they reside at said port or their
3. Forwarding by the consul of a true copy of
representatives thereat;
the instrument or purchase and sale to the
registry of vessels of the port of registration; 3. PROOF OF DAMAGE and IMPOSSIBILITY OF
and THE REPAIR of the vessel; and
4. A statement must be made to appear on 4. Order for the sale of the vessel at public
said instrument of whether the vendor auction.
receives its price in whole or in part, or
whether he preserves in whole or in part, 5. The rules to be followed in the sale of a
any claim on said vessel. vessel at public auction after the damage
to the vessel and the impossibility of her
NB: Where the bill of sale is not inscribed in the being repaired in order to continue its
consular registry, it shall produce no effect as to voyage have been shown are enumerated
third persons. in Article 579.

Article 578. When a vessel, being on a voyage, shall


be rendered useless for navigation, the captain
MARITIME LAW
shall apply to the competent judge on court of the CHARACTERISTICS OF MARITIME LAW:
port of arrival, should it be in the Philippines; and
What are the distinguishing characteristics of
should it be in a foreign country, to the consul of the
Maritime Law from Civil Law? Mercantile Law
Republic of the Philippines, should there be one, or,
(Code of Commerce) in general?
where there is none, to the judge or court or to the
local authority; and the consul, or the judge or 1. EXCLUSIVELY REAL – The recognition that
court, shall order an examination of the vessel to be vessels are considered personal property.
made. However, it has the nature of real property
If the consignee or the insurer should reside at said because of their value and requirement of
port, or should have representatives there, they
registration. So you have to register and
must be cited in order that they may take part in
because of value, it is in the nature of
the proceedings on behalf of whoever may be
exclusively real.
concerned.

Recall that vessels are considered female,


ARTICLE 579. After the damage to the vessel and they are referred to as ‗she.‘ That is why the
the impossibility of her being repaired, in order to captains are considered the husbands of
continue the voyage had been shown, its sale at their ships, they cannot leave their ship
public auction shall be ordered. (Captain sinks with the ship, recall Titanic.
Maiden voyage, trivia, etc).
The third and fourth paragraphs Art. 578 and the
first paragraph of Att. 579 prescribe the formalities 2. HYPOTHECARY – The liability of the ship owner
required to be observed for the sale of vessels when or the agent in connection with maritime
they are rendered useless for navigation as follows:
contracts is confined to the res, which refers
to the vessel.
1. APPLICATION by the captain for

37
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
longer be held liable.
The interest of the ship-owner (SO) or the ship The limited liability statutes in other jurisdiction
agent (SA), the liability is confined to the cover almost all maritime casualties. As
vessel (res). This is hypothecated for such enumerated, it includes:
obligations or as the guarantee for their - Shipwreck removal
settlement. So the guarantee is the vessel - Fire claims
itself. - Cargo lost
- Embezzlement
And as a rule subject to certain exceptions, if
the vessel is lost, in relation to its hypothecary - Loss or destruction of any person or
nature, the ship-owner and the ship agent property
have no more liability because the interest of - Goods or merchandise shipped or put on
the ship-owner/agent is co-extensive with the board such vessel
value of the vessel. - For any loss or damage caused

However, if the vessel is not lost, the ship- In other countries, lahat yan covered by the right
owner/agent may abandon the vessel to the of abandonment of the ship owner or agent. But
creditors in satisfaction of their claim. The ship under our jurisdiction, tatlo lang yung cases where
owner or agent cannot be held personally the limitation of liability will apply. The ship owner
liable in excess of its interest in the vessel. here may limit their liability to the value of the
vessel or the ship only in three instances (see
In effect, what this means is, ‗no vessel, no enumeration above).
liability.‘ This is the limited liability rule so if the
vessel sank or is lost, then wala nang liability si EXCEPTION TO LIMITED LIABILITY RULE:
ship-owner/agent. If the vessel is not lost but
the value of the cargo is more than the value However, the law provides an exception to the
of the vessel, then the ship owner/agent may hypothecary nature in maritime transaction. The
abandon the vessel in favor of their creditor. limited liability or right of abandonment of the ship
The ship owner/agent may not become owner or agent or the right of the ship owner or
liable more than the value of the vessel. agent to say that he cannot be made liable
beyond his interest in the vessel will not apply:
LIMITED LIABILITY RULE: The Law of Limitation of
Liability is an important part in maritime law. The 1. If the SHIP OWNER IS AT FAULT
limited liability provisions in our Code of Commerce 2. If there is INSURANCE
are not identical to the limitation of liability statutes Meaning to say, the creditors or claimants
of other well-developed countries, such as can run after the insurance. So the liability of
England, US or Canada. The reason is because the the common carrier is only with respect to its
Code of Commerce provision covers only the: interest in the vessels, then the claimants can
run after the insurance of the common carrier
1. Liability of the ship owner or agent for or ship owner.
COLLISIONS under Article 837 3. If the LIABILITY of the ship owner or agent is
2. INJURIES TO THIRD PARTIES under Article 587 UNDER THE LABOR CODE.
Reason: because it is part of its operations. If
3. ACTS OF THE CAPTAIN under Article 590 there is illegal dismissal or claims for money
from the workers, the carrier cannot say that
So meaning to say, the liability of the common its liability is limited
carrier under our jurisdiction in our Code of 4. SHIP CHATTEL MORTGAGE
Commerce, is covered only under the three
Because this is a loan. Chattel mortgage, so
circumstances. In Articles 837, 587 and 590, the
this is an account to be paid. It is not covered
liability of the ship owner or agent is liable only until
by the limited liability. Example, if nasanla
to the value of the vessel. If it is more, it can no
yung vessel and it is lost, can the ship owner

38
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
say that he will no longer pay because the As to who may enter into international
vessel is lost? No, because it is a loan prior to conventions, such is determined by the municipal
the loss of the vessel. laws of the country who wants to contract in the
5. If VOYAGE is NOT MARITIME IC. In the Philippines, the Constitution authorizes
both the Congress and the Philippines.
So yung mga small time na bangka, hindi
included. The international conventions, therefore, cannot
6. EXPENSES FOR EQUIPPING OR REPAIRING the enforce obligations against states not a party to it.
However, it is said to be conceivable that vessels
conditions of the vessels completed before its
flying the flag of a state which is not a party to a
loss
particular convention may be compelled to
7. If the vessel is a PRIVATE CARRIER observe the terms of such convention when they
enter into the port of a contracting state. This
INTERNATIONAL CONVENTIONS: situation arises because the international
convention forms part of the municipal law of the
ROLE: contracting state and applies within their territory.
What is the role of international conventions?
INTERNATIONAL CONVENTIONS WHICH THE
Because Maritime questions are not confined to
one country, Maritime Law has always had to PHILIIPINES IS A SIGNTORY:
adopt something of international xxx. Otherwise,
wide variations must occur in the practice of What are the lists of international conventions or
different maritime courts in different countries. agreements to which the Philippines is a signatory?
1. Carriage of Goods by Sea Act (COGSA) RA
In historical times, this need was recognized by the 521 – Enacted by the 74th Act of US
use of customary roles which were recognized in
Congress to give effect to the Brussels
several countries. In modern times, the more formal
Treaty
system of international system and agreement is
used. This Act embodies the commonly known as
the Hague Laws.
An international convention is an agreement
between states that the parties to it, to observe 2. SOLAS (SAFETY OF LIFE AT SEA) International
and enforce a common set and principles on a Convention for the Safety of Life at Sea -
particular subject or issue. As an agreement, it is Done in London, June 17, 1960; Entered into
the law among the contracting parties. As such PH: 1965.
law, it forms part of the municipal laws of the states
of the contracting parties. This convention standardizes the minimum
requirements as to construction,
If you can remember, our international xxx is equipment, and inspection with respect to
covered by the WARSAW Convention. In engineering safety, masters, trails and radio
transportation by sea, there are several methods. Take note that the xxx in drafting
international conventions which govern. maritime safety treaty was brought to the
attention to the international community in
These international conventions are not part of the 1912 by the sinking of the Titanic, which like
Philippine laws. They only become part of the most ships, did not carry enough number of
Philippines laws when they are put into effect by a life boats
properly act of the Congress and approved by the
President. Therefore, it is the law enacted by 3. International Conventions of Load Lines in
Congress or the Presidential Decree that the Court 1966 – This pertains to tankers or vessels
apply when an issue arises and not the
carrying tankers.
international convention.

39
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
4. International Regulations for Preventing
Collisions at Sea  In all these cases what are the
CHARACTERISTICS OF ABANDONMENT?
5. International Convention for the Prevention
of Collision at Sea by Oil – Adopted in Abandonment under these circumstances has 2
London in May 1954 and entered into CHARACTERISTICS:
Philippines on 1964
1. It is a unilateral right.
The right of a ship owner has a right of a
6. International Convention on Tonnage
consignee or a shipper
Measurement of Ships

2. It is perfected by mere notice.


7. Special Trade Passenger Ship Agreement –
Adopted in London in 1971 and in the The shipper who is to notify, so it does not
Philippines in 1974 require consent of the vessel or common
carrier.
8. Convention on the Prevention of Marine
Collision by Dumping Wastes and Other  What is the EFFECT OF THE RIGHT OF
Matters – Open for Signature in London, ABANDONMENT?
Boston, Mexico, Washington; entered into
the Philippines in 1975 Ownership passes, or the ownership over the
damaged goods passes to the carrier
9. Agreement for the Facilitation of Search for
Ships in Distress and Rescue for Ships  What is the OBLIGATION OF THE CARRIER?
Accidents The carrier pays the market value of the goods

MARCH 4 (EDITOR‘S PART)


 Where?
At the point of destination
RIGHT OF ABANDONMENT
1ST CASE OF ABANDONMENT: ARTICLE 365
In maritime commerce we have what you call OF THE CODE OF COMMERCE:
ABANDONMENT.

 What do you mean by ABANDONMENT? ARTICLE 365. If, in consequence of the damage, the
goods are rendered useless for sale and
(It is the) Giving up of something for the consumption for the purposes for which they are
vessel; the owner gives up whatever interest; properly destined, the consignee shall not be
the ship owner gives up his corresponding bound to receive them, and he may have them in
interest in the vessel the hands of the carrier, demanding of the latter
their value at the current price on that day.
If among the damaged goods there should be
5 CASES OF ABANDONMENT UNDER THE some pieces in good condition and without any
MARITIME LAW: defect, the foregoing provision shall be applicable
1. Art. 365 of the Code of Commerce with respect to those damaged and the consignee
2. Art. 371 of the Code of Commerce shall receive those which are sound, this
3. Art. 587 of the Code of Commerce segregation to be made by distinct and separate
4. Art. 687 of the Code of Commerce pieces and without dividing a single object, unless
the consignee proves the impossibility of
5. Sec. 138 of the Insurance Code
conveniently making use of them in this form.

40
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
The same rule shall be applied to merchandise in was not damaged…would this still
bales or packages, separating those parcels which apply? Can the carrier force the
appear sound. shipper to receive it, notwithstanding
the fact that that portion has not
What are the CIRCUMSTANCES UNDER ARTICLE 365? been damaged?
The goods arrived in what condition? o It is on the part of the shipper now to
1. It arrives in a condition that it becomes
say/prove that he can no longer use
useless
that portion even if it was not
2. It is useless for sale or for consumption
damaged and instead claim for the
purposes.
value of the entire thing.
And the RIGHT OF THE CONSIGNEE?
 The consignee may not receive the goods, 2ND CASE OF ABANDONMENT: ARTICLE
[and] abandon it, and instead give a notice 371 OF THE CODE OF COMMERCE:
to the common carrier that he is exercising
his right of abandonment: ARTICLE 371. In case of delay through the fault of
o The ownership over the damaged the carrier, referred to in the preceding articles, the
goods passes to the carrier, and the consignee may leave the goods transported in the
hands of the former, advising him thereof in writing
carrier is obligated to pay (? But sounds
before their arrival at the point of destination.
like sale*) the shipper the market value When this abandonment takes place, the carrier
of the goods at the point of destination shall pay the full value of the goods as if they had
been lost or mislaid.
Take note: that the right of abandonment is If the abandonment is not made, the
perfected by mere notice; and on what basis? That indemnification for losses and damages by reason
the goods are [useless] or are [no longer fit] for of the delay cannot exceed the current price
consumption or for sale; or it can no longer be which the goods transported would have had on
used. the day and at the place in which they should
have been delivered; this same rule is to be
observed in all other cases in which this indemnity
What are the OTHER CONSEQUENCES here? may be due.

 But it also said that if among the damaged


What is the SITUATION here?
goods there should be some pieces in good 1. The shipper and the carrier agree in
condition and without any defect. advance …that the cargo has (to arrive) at
o The foregoing provision shall be a certain date, however, the date arrived
applicable only with those but the cargo has not (yet arrived) due to
damaged and the carrier‘s fault- so, take note that it is not
o the consignee(s) shall receive those the fault of the shipper.
which are sound.
2. The shipper here can exercise the right of
 However the shipper, if the good portion abandonment by notifying the carrier and
can also no longer be used for the purpose once the shipper notifies the carrier,
(merong pwedeng gamitin, but without the ownership of the undelivered cargo passes
damaged part, still can not be used.) to the carrier, and the carrier must pay the
o i.e., you ordered a statue of liberty, shipper the market value of the goods at the
dumating yung katawan, wala na! point of destination.
yung paa nalang… the leg portion

41
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
So we have 2 articles with respect to a situation carrier here?
similar to Article 371
S: the liability of the carrier would be, if there is an
What is the DISTINCTION BETWEEN ART. 358 and ART. agreed indemnity, so the carrier shall pay the
351? indemnity as agreed upon…

ARTICLE 358. If there is no period fixed for the Q: if there is no indemnity?


delivery of the goods the carrier shall be bound to
forward them in the first shipment of the same or S: if there is no indemnity, the carrier shall be liable
similar goods which he may make point where he for the damages which the delay may have
must deliver them; and should he not do so, the caused
damages caused by the delay should be for his
account. M: If there is an agreed Indemnity, the shipper
cannot be entitled to receive more than what was
ARTICLE 371. In case of delay through the fault of agreed upon. So if the indemnity agreed upon
the carrier, referred to in the preceding articles, the under Article 358 is ₱100,00, the shipper cannot
consignee may leave the goods transported in the receive more than ₱100,00. However, if the carrier
hands of the former, advising him thereof in writing refuses to pay the indemnity of ₱100,00, as agreed
before their arrival at the point of destination. upon, then that is the time the shipper can claim for
When this abandonment takes place, the carrier damages in view of the refusal of the common
shall pay the full value of the goods as if they had carrier.
been lost or mislaid.
If the abandonment is not made, the M: So under article 371?
indemnification for losses and damages by reason
of the delay cannot exceed the current price S: Under article 371, if the delay is through the fault
which the goods transported would have had on of the carrier, the consignee may exercise his right
the day and at the place in which they should of abandonment so here the liability of the carrier, if
have been delivered; this same rule is to be the shipper has exercised his right of abandonment,
observed in all other cases in which this indemnity would be for the value of the goods; if however, the
may be due. shipper will not exercise his right of abandonment,
the liability of the carrier would be for the current
Article 358 speaks of a situation where a period has price as of the date the goods could have been
not been fixed insofar as when the goods shall be delivered.
delivered
CONVERSION:
Article 371 speaks of a situation where there is a
fixed date. The shipper and the carrier agree that Take note that under Art. 358, there is what we call
on a fixed date… the amount of conversion.

M: So what happens if, under Art. 358? What would So what do we understand when delay amounts to
be the consequences here? conversion

S: Under Art 358 if there is no period fixed for the WHAT IS CONVERSION?
delivery, if the carrier does not deliver, the damage
caused by the delay shall be for his account We say earlier that conversion can only be made:
1. if there was a DEMAND and
M: account of whom? 2. the delivery was REFUSED
3. in which case the shipper can now FILE A
S: the carrier
CASE against the common carrier.
M: so what would be the liability of the Common

42
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
But if ever before the filing of the suit the carrier can
show that the goods received were kept and the Indemnification, or losses and damages by reason
carrier tendered to deliver the goods prior to the of the delay cannot exceed the current price
filing of the suit, the shipper cannot proceed to which the goods transported would have had on
claim for conversion of the goods under Article 358. the day and at the place in which they should
have been delivered.
He will be forced to receive the goods if the carrier
will be able to show that the goods received, were And this same rule shall be observed in all cases in
kept -na delay lang; the goods shipped were safely which the indemnity may be due.
kept and that it was a tender to deliver-- it must be
prior to the filing of the suit. 3RD CASE OF ABANDONMENT: ARTICLE 587
Under 370, we speak of a situation where there was
OF THE CODE OF COMMERCE
an agreement as to when the delivery should be
made ARTICLE 587. The ship agent shall also be civilly
liable for the indemnities in favor of third persons
M: So, what happens if there is an agreed date of which may arise from the conduct of the captain in
delivery and the carrier failed to deliver? the care of the goods which he loaded on the
vessel; but he may exempt himself therefrom by
The carrier shall pay for the indemnity stipulated in abandoning the vessel with al her equipment and
the bill of lading. And the shipper or the consignee freight it may have earned during the voyage.
cannot be entitled to anything else
The HYPOTHECARY NATURE of the maritime
M: However under the 2nd par. what is the transaction.
circumstance if there is no indemnity agreed upon?  What is the CHARACTERISTIC OF A VESSEL?

If no indemnity has been stipulated and the delay We say that it is real in nature and hypothecary.
exceeds the time fixed in the bill of lading, the 1. It is REAL- means, it has a similarity to real
carrier shall be liable for the damages which the estate because it requires registration in
delay may have caused. order to affect 3rd person.
2. When we say HYPOTHECARY, which means
Article 371: In case of delay through the fault of the
carrier, referred to Article 370, the consignee may that if the vessel is lost, the carrier‘s
leave (the goods). The consignee here is given the obligation is extinguished: ―no vessel, no
right to abandon. liability.‖ So that is what is meant by the
limited liability rule- because the liability of
The consignee may leave the goods transported in the common carrier is only coextensive to
the hands of the carrier advising him but there must
the value of the vessel, or to his interest in
be …what is the REQUIREMENT?
the vessel.
1. The shipper must give a notice. There must
be a demand and notice. A writing before- 4TH CASE OF ABANDONMENT: ARTICLE 687
when? OF THE CODE OF COMMERCE
2. Before the arrival of the goods at the point
of destination. ARTICLE 687. The charterers and shippers may not
abandon merchandise damaged on account of
So when abandonment takes place the carrier shall inherent defect or fortuitous event, for the payment
pay the full value of goods as if they have been lost of the freightage and other expenses.
or mislaid …
The abandonment shall be proper, however if the
M: if abandonment is not made, what happens? cargo should consist of liquids and they have

43
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
leaked out, nothing remaining in the containers but freight it may have earned during the voyage.
one-fourth part of their contents.
The limited liability is applicable to what under art
With respect to charters, the charterers in charter 587?
party, or the lease of the vessel, the charterers and  For any civil liability for indemnity in favor of
the shipper may abandon the merchandise whom?
damaged if the cargo should consist of liquids and -In favor of 3rd person
they have leaked out nothing remaining in the
containers but 1/4 of their contents on the account
of an inherent defect or fortuitous event.  Which arises from what?
1. The conduct of the captain in the care of
the goods which the vessel carry
5TH CASE OF ABANDONMENT: SECTION 138
2. if it was due to the fault of the captain,
OF THE CODE OF COMMERCE
that the goods were damaged, then the
limited liability will apply as provided.
SECTION. 138 Abandonment, in marine insurance, is
the act of the insured by which, after a constructive So that is the liability. Which means if it is covered by
total loss, he declares the relinquishment to the limited liability rule, the carrier can exercise the right
insurer of his interest in the thing insured. of abandonment.
 Which pertains to the right of abandonment for Another is under article 837
constructive loss.
 Which takes place when the vessel suffers Art. 837 The civil liability incurred by the ship owners
damage in excess of ¾ of its insured value. in the case prescribed in this section, shall be
 So the insured then exercises the right of understood as limited to the value of the vessel with
abandonment by notifying the insurer and all its appurtenances and the freightage earned
during the voyage.
therefore the ownership over the damaged
vessel passes to the insurer and the insurer must
So this refers to COLLISION:
pay the insured as if it were an actual loss of the This covers what the carrier can abandon, however
vessel. these are subject to certain EXCEPTIONS.
1. When the injury or death of passenger is
LIMITED LIABILITY RULE due either to the fault of the ship owner or
 When is limited liability rule applicable? to the concurring negligence of the ship
owner and the captain. (It is not covered
The nature of limited liability rule is that ―no vessel,
no liability‖; and the total destruction of the vessel by limited liability rule, which means that
now extinguishes the maritime lien as there is no the ship owner cannot say that his liability
other res to which it can be attached. However, this is extinguished upon the loss of the vessel.)
is subject to certain exception. 2. When the vessel is insured, the insur[ed]
portion can now be claimed by the
What are the EXCEPTIONS, wherein the limited
shippers. (It is not covered by limited
liability rule is not applicable? It is based on Article
587. liability rule. So the insurance proceeds
insofar as the amount is concerned,
Article 587. The ship agent shall also be civilly liable cannot be abandoned by the carrier. So
for the indemnities in favor of third persons which the shippers and the consignees can run
may arise from the conduct of the captain in the after the insurance proceeds.)
care of the goods which he loaded on the vessel; 3. The workmen‘s compensation claim – so
but he may exempt himself therefrom by whatever is due to the workers shall not be
abandoning the vessel with al her equipment and
covered by the limited liability rule

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Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
because that is part of the operations or shall include the crew, the sailing mates, the
the administrative calls of the carrier. It is engineers, stokers, and other employees on
part of his business. board not having specific designations; but it
shall not include the passengers or the persons
whom the vessel is transporting (Black‘s Law
Dict.)
PARTIES INVOLVED IN MARITIME
COMMERCE 3. CAPTAIN:

 So who are the parties who take part in the Who is the Captain, what is the nature of the
maritime commerce? role of captain?
1. The ship owner,
A captain is a confidential and managerial
2. The ship agent
employee, within the meaning of the doctrine
that confidential and managerial employees
*just read what are their duties and liabilities…
cannot be arbitrarily dismissed at any time
without cause as reasonably established in an
1. SHIP AGENT
appropriate investigation.
 So who is a SHIP AGENT?
So these employees are also entitled to
A ship agent as provided, is a person security of tenure. Because the constitution
particularly entrusted with the provisioning of provides that no person shall be deprived of
the vessel or who represents the vessel in the life, liberty, and property without due process
port where it may be found of law. (Your work is your property)

Art. 586 (2nd par) By ship agent is understood the  WHO IS THE CAPTAIN; NATURE AND ROLE OF A
person entrusted with provisioning or representing CAPTAIN
the vessel in the port in which it may be found.
That is answered in the case of:
Art. 595 (2nd par.) The ship agent shall represent the INTER-ORIENT V. NLRC
ownership of the vessel, and may, in his own name G.R. No. 115286 August 11, 1994
and in such capacity, take judicial and extrajudicial
steps in matters relating to commerce. DOCTRINE:
It is well settled in this jurisdiction that confidential
Liability: and managerial employees cannot be arbitrarily
So the ship agent is SOLIDARILY LIABLE with the dismissed at any time, and without cause as
ship owner, or to his principal for any loss, or reasonably established in an appropriate
damage to the cargo which the vessel is investigation. Such employees, too, are entitled to
responsible without prejudice to his rights over to security of tenure, fair standards of employment
run after the ship owner. and the protection of labor laws.

2. COMPLEMENTS: The captain of a vessel is a confidential and


managerial employee within the meaning of the
 So who are the Complements of the vessel? above doctrine.

A master or captain, for purposes of maritime


[Who are we] referring to?
commerce, is one who has command of a vessel.
It is understood as all persons on board (the
vessel) from the captain to the cabin boy,
(Note: this answers the question of ma’am as to
necessary for the management, maneuver,
who the captian is)
and service, and therefore the complement

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
A captain commonly performs three (3) distinct than two weeks. He was not informed of the
roles: charges against him.
1.) he is a general agent of the shipowner;
2.) he is also commander and technical Captain Tayong instituted a complaint for illegal
director of the vessel; and dismissal before the Philippine Overseas
3.) he is a representative of the country under Employment Administration ("POEA"), claiming his
whose flag he navigates. unpaid salary for the unexpired portion of the
written employment contract.
FACTS:
Petitioners, in their answer to the complaint, denied
Tayong, a licensed Master Mariner , was employed that they had illegally dismissed Captain Tayong.
by petitioners Trenda World Shipping (Manila), Inc. Petitioners alleged that he had refused to sail
and Sea Horse Ship Management, Inc. through immediately to South Africa to the prejudice and
Inter-Orient Maritime Enterprises, Inc. as Master of damage of petitioners. According to petitioners, as
the vessel M/V Oceanic Mindoro, for a period of a direct result of Captain Tayong's delay,
one (1) year (on 6 July 1989) petitioners' vessel was placed "off-hire" by the
charterers for twelve (12) hours. This meant that the
Captain Tayong assumed command of petitioners' charterers refused to pay the charter hire or
vessel at the port of Hongkong. compensation corresponding to twelve (12) hours,
amounting to US$15,500.00, due to time lost in the
While the vessel was en route to Singapore, voyage. They stated that they had dismissed
Captain Tayong reported that the vessel had private respondent for loss of trust and confidence.
stopped in mid-ocean for six (6) hours and forty-five
(45) minutes due to a leaking economizer. He was ISSUE:
instructed to shut down the economizer and use Was Captain Tayong validly dismissed in his post as
the auxiliary boiler instead. captain?

Mr. Clark received a call from Captain Tayong Held: No.


informing him that the vessel cannot sail without the
oxygen and acetylene for safety reasons due to the A CAPTAIN IS A CONFIDENTIAL AND MANAGERIAL
problems with the turbo charger and economizer. EMPLOYEE
Mr. Clark responded that by shutting off the water
to the turbo chargers and using the auxiliary boiler, It is well settled in this jurisdiction that confidential
there should be no further problems. and managerial employees cannot be arbitrarily
dismissed at any time, and without cause as
According to Captain Tayong, however, he reasonably established in an appropriate
communicated to Sea Horse his reservations investigation. Such employees, too, are entitled to
regarding proceeding to South Africa without the security of tenure, fair standards of employment
requested supplies, and was advised by Sea Horse and the protection of labor laws.
to wait for the supplies at 0800 hrs. of 1 August 1989,
which Sea Horse had arranged to be delivered on The captain of a vessel is a confidential and
board the Oceanic Mindoro. 12 At 0800 hours on 1 managerial employee within the meaning of the
August 1989, the requisitioned supplies were above doctrine. A master or captain, for purposes
delivered and Captain Tayong immediately sailed of maritime commerce, is one who has command
for Richard Bay. of a vessel. The captain of a vessel is a confidential
and managerial employee within the meaning of
When the vessel arrived at the port of Richard Bay, the above doctrine. A master or captain, for
South Africa on 16 August 1989, Captain Tayong purposes of maritime commerce, is one who has
was instructed to turn-over his post to the new command of a vessel. A captain commonly
captain. He was thereafter repatriated to the performs three (3) distinct roles: (1) he is a general
Philippines, after serving petitioners for a little more agent of the shipowner; (2) he is also commander

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Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
and technical director of the vessel; and (3) he is a normal functioning of the vessel's turbo-charger 19
representative of the country under whose flag he and economizer and that had prevented the full or
navigates. regular operation of the vessel.

A CAPTAIN IS THE COMMANDER OF A VESSEL PRINCIPLE: THE CAPTAIN HAS CONTROL OF ALL
DEPARTMENTS OF SERVICE IN THE VESSEL, AND
Of these roles, by far the most important is the role REASONABLE DISCRETION AS TO ITS NAVIGATION.
performed by the captain as commander of the
vessel; for such role (which, to our mind, is a ship's captain must be accorded a reasonable
analogous to that of "Chief Executive Officer" [CEO] measure of discretionary authority to decide what
of a present-day corporate enterprise) has to do the safety of the ship and of its crew and cargo
with the operation and preservation of the vessel specifically requires on a stipulated ocean voyage.
during its voyage and the protection of the The captain is held responsible, and properly so, for
passengers (if any) and crew and cargo. such safety. He is right there on the vessel, in
command of it and (it must be presumed)
A CAPTAIN IS THE GENERAL AGENT OF THE knowledgeable as to the specific requirements of
SHIPOWNER seaworthiness and the particular risks and perils of
the voyage he is to embark upon. The applicable
In his role as general agent of the shipowner, the principle is that the captain has control of all
captain has authority to sign bills of lading, carry departments of service in the vessel, and
goods aboard and deal with the freight earned, reasonable discretion as to its navigation. 20 It is the
agree upon rates and decide whether to take right and duty of the captain, in the exercise of
cargo. The ship captain, as agent of the shipowner, sound discretion and in good faith, to do all things
has legal authority to enter into contracts with with respect to the vessel and its equipment and
respect to the vessel and the trading of the vessel, conduct of the voyage which are reasonably
subject to applicable limitations established by necessary for the protection and preservation of
statute, contract or instructions and regulations of the interests under his charge, whether those be of
the shipowner. To the captain is committed the the shipowners, charterers, cargo owners or of
governance, care and management of the vessel. underwriters.
Clearly, the captain is vested with both
management and fiduciary functions. THE MASTER MUST BE LEFT FREE TO EXERCISE HIS OWN
BEST JUDGMENT.
CAPTAIN TAYONG WAS NOT VALIDLY DISMISSED
It is a basic principle of admiralty law that in
It is plain from the records of the present petition navigating a merchantman, the master must be left
that Captain Tayong was denied any opportunity free to exercise his own best judgment. The
to defend himself. Petitioners curtly dismissed him requirements of safe navigation compel us to reject
from his command and summarily ordered his any suggestion that the judgment and discretion of
repatriation to the Philippines without informing him the captain of a vessel may be confined within a
of the charge or charges levelled against him, and straitjacket, even in this age of electronic
much less giving him a chance to refute any such communications. Indeed, if the ship captain is
charge. In fact, it was only on 26 October 1989 that convinced, as a reasonably prudent and
Captain Tayong received a telegram dated 24 competent mariner acting in good faith that the
October 1989 from Inter-Orient requiring him to shipowner's or ship agent's instructions (insisted
explain why he delayed sailing to South Africa. upon by radio or telefax from their offices
thousands of miles away) will result, in the very
CAPTAIN TAYONG‘S ACTION-JUSTIFIED specific circumstances facing him, in imposing
unacceptable risks of loss or serious danger to ship
respondent Captain did not arbitrarily and or crew, he cannot casually seek absolution from
maliciously delay the voyage to South Africa. There his responsibility, if a marine casualty occurs, in such
had been, Mr. Clark stated, a disruption in the instructions.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.

CAPTAIN TAYONG‘S ACTION: NOT ARBITRARY M: So, if during the voyage, what would be the
result if the captain and the members of the crew
We are unable to hold that Captain Tayong's are discharged during the voyage?
decision (arrived at after consultation with the
vessel's Chief Engineer) to wait seven (7) hours in The consequence shall be they shall continue to
Singapore for the delivery on board the Oceanic receive their salaries until they return to the port
Mindoro of the requisitioned supplies needed for where the contract was made, unless there should
the welding-repair, on board the ship, of the turbo- be just motive for their discharge, in accordance
charger and the economizer equipment of the with Art. 636,
vessel, constituted merely arbitrary, capricious or
grossly insubordinate behavior on his part. In the But the provisions of Article 603, and Article 604 shall
view of the NLRC, that decision of Captain Tayong apply only if the captain is not a co-owner.
did not constitute a legal basis for the summary Meaning if the captain is discharged during the
dismissal of Captain Tayong and for termination of voyage, and the captain is a co-owner of the
his contract with petitioners prior to the expiration of vessel- he cannot be discharged, in which case,
the term thereof. under Article 606:

ARTICLE 606 if the captain should be a co-owner of


the vessel he may not be discharged unless the ship
DISMISSAL agent returns to him the amount of his interest
 When may a captain or crew be validly therein, which in the absence of an agreement
dismissed? between the parties, shall be appraised by experts
appointed in the manner established in the law of
ART. 603 Before the vessel set out to sea the ship civil procedure.
agent may at his discretion discharge the captain
and members of the crew whose contracts are not ARTICLE 607 If the captain who is a co-owner should
for a definite period or voyage, paying them the have obtained the command of the vessel by
salaries earned according to their contracts, and virtue of a special agreement contained in the
without any indemnity whatsoever, unless there is articles of association, he may not be deprived of
an express and specific agreement is respect his office except for the causes mentioned in Art.
thereto. 605

M: So when can they be discharged? “A journey of a thousand miles begins with a single
Prior to the sailing of the vessel step.”
-Lao-tzu (604 BC-531BC)
M: If ship owner discharges the captain and the
crew, what should be paid to them? So, if during the voyage what would be the result if
the captain and the members of the crew were
They should be paid with the salaries they have
discharged during the voyage? The consequence
earned according to their contracts, and without
indemnity whatsoever unless there is expressed and would be they shall receive their salaries until they
specific agreement with respect thereto. return to the court until their contract was made,
unless there should be just motive for their discharge
i.e., they are covered by an employment contract, in accordance with Article 636.
but before the vessel sets out to sea and the ship
owner changed his mind, changed the captain But the provisions of 603 and 604 shall apply only
and crew, they can be discharged prior to the when the caption is not a co-owner. Meaning to
sailing of the vessel but the shipper should pay them say if the captain is a co-owner of the vessel, he
what is provided under their employment contract., cannot be discharged during the voyage. In which
unless there is contrary agreement.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
case, under Article 606, if the captain should be a 30, when they arrived at the port where the
co-owner, he may not be discharged without the contract was executed (Manila).
ship agent returning to him the amount of the
interest in the vessel, which in the absence of the LIABILITY OF THE SHIP OWNER AND THE SHIP
agreement between the parties shall be appraised AGENT
by experts appointed in the manner established
We mentioned earlier the liability of the ship owner
under the law of civil procedure. And if the captain
and the ship agent.
who is a co-owner should have obtained the
command of the vessel by virtue of a special 1. Under 587, the ship owner and the ship
agreement, contained in the articles of co- agent shall be liable for the acts of the
partnership, the captain cannot be deprived of his captain;
office except for just causes: insubordination, 2. For the contracts entered into by the
serious matters, robbery, theft, habitual captain to repair, equip, provision the
drunkenness, or damages caused to the vessels or vessel, provided that the amount claim
to her cargoes by malice or manifest or total (?) was invested for the benefit of the vessel
negligence under 607 in connection to Article 605. under 587. Meaning to say, if the captain
In the case of borrowed money, the purpose must to
equip or for the provision the vessel. The
MADRIGAL SHIPPING COMPANY, INC. v. JESUS G. ship owner and the ship agent will be
OGILVIE, SALVADOR ORTILE, MIGUEL M. FERMIN,
liable for the loan. But if he contracted
ANTONIO C. MILITAR and THE COURT OF APPEALS
the loan not for the provisioning of the
G.R. No. L-8431 October 30, 1958
vessel but for his own consumption, that is
FACTS: Respondents Ogilvie et. al. were not covered by the liability of the ship
contracted by Madrigal Shipping Company to be owner or the ship agent;
part of a crew of a vessel bound for Japan to 3. For indemnities in favour of a third person
Manila. The contract was to expire on the arrival of which may arise from the conduct of the
the port of Manila. They then left Japan, and upon captain in the care of the goods
reaching Hong Kong, said crew members were transported as well as for the safety of
dismissed and replaced on March 16. They were the passengers transported;
not paid of their salaries of the period from March
17 until September 30, when the vessel arrived at 4. For damages to thirds persons; for torts or
the port of Manila quasi-delict committed by the captain
except if collision with another vessel;
ISSUE: May the dismissed crew members recover
damages? 5. For damages in case of collision due to
the fault, negligence, or want of skill of
RULING: Yes, their contact was for a definite the captain, sailing-mate or any other
voyage, and therefore they cannot be member of the complement under
discharged until after the fulfilment of their Article 826.
contract except under the reasons provided for
under Article 607. 6. However, the law provides that the
agent, although not the ship-owner, is
But since there is no showing in the particular case liable to the shippers and cargo owner
that they should be discharged for any of the for losses and damages occasioned to
reason or the grounds provided for under the such cargo without prejudice to his right
code, they are entitled to salaries until September against the ship-owner, as to the extent

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
of the value of the vessel, its equipment ISSUE: Whether petitioner is liable for the loss of the
and freight. cargoes considering that the BMI exonerated
them administratively.
In the case of:
Petitioner contends that it was not in the exercise
ALEJANDRO ARADA, doing business under the
of its function as a common carrier when it
name and style "SOUTH NEGROS ENTERPRISES" vs.
HONORABLE COURT OF APPEALS entered into a contract with San Miguel, but was
G.R. No. 98243 July 1, 1992 then acting as a private carrier under its charter
not bound by its requirement of extraordinary
diligence and the factual findings pf the BMI are
FACTS: Sometime in March 24, 182, petitioner
binding and conclusive on the court.
through its crew master applied for a clearance
with the Philippine coast guard for M/L Maya to Private respondent contends that M/L Maya was
leave the port of San Carlos City. But due to a in the exercise of its functions as a common
typhoon, it was denied. carrier and its failure to observed extraordinary
diligence over the cargo makes petitioner liable
On march 25, M/L Maya was already given
of the value of the said cargoes.
clearance as there was no more storm and the
sea was already calm. So, he said vessel left for RULING: Respondent‘s argument is supported by
Mandaue City. evidence. It was noted here that the Babao knew
of the impending typhoon on March 24, when
While it was navigating towards Cebu, a typhoon
the PCG denied the clearance for the same. Less
developed, and said vessel was buffeted on all its
than 24 hours since the denial and the time when
sides by big waves. Its rudder was destroyed and
the clearance was finally issued, it was shown
it drifted for 16 hours, although its engine was
that Babao did not ascertain where the typhoon
running.
was headed by the use of his barometer and
Two days after, on March 2, at about 4 am, the radio.
vessel sank with whatever was left of its cargoes.
Neither did the captain monitor the weather
The crew was rescued by a passing pump boat
conditions everyday as required by Article 612 of
and was brought to Leyte, where a marine
the Code of Commerce.
protest was filed (Why? because a marine test is
a requirement to be able to claim for damages). Had he done so while navigating for 31 hours, he
could have anticipated the strong winds and big
On the basis of such marine protest, the board of
waves and should have taken shelter.
Marine Inquiry conducted a hearing of the sinking
of M/L Maya. The Board found that the owner, The exoneration of the BMI but was with respect
operator, officers and crew of M/L Maya were to the administrative liability of the owner,
exonerated or absolved from any administrative operator, officers, and crew of the M/L Maya. It
liability on account of the incident. The Board‘s could not have meant the exoneration of the
report containing its findings and petitioner from its liability as a common carrier for
recommendation was then forwarded to the his failure to observe extraordinary diligence in
Philippine Coast Guard, for appropriate action. the vigilance over the goods it was transporting
and for the negligent acts of its employees. Such
On the basis of the report, the commander of the
is the function for the court, not the BMI.
Philippine Coast Guard rendered a decision
exonerating the from any administrative liability of So, what is the difference if they were exonerated
the account of the said incident. for administrative liability? That is only in so far as the

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
employer-employee relationship, because if they Compania Maritima cannot be liable on the
were at fault, they could be held liable for the principle of limited liability of the ship owner and
damages caused to the carrier. Considering that the ship agent.
they were exonerated, there was no negligence on
ISSUE: Whether Compania Maritima can raise the
their part so there is no basis for any disciplinary
defense of limited liability.
actions against the members of the crew.
RULING: The Supreme Court ruled that the limited
So, the finding of the BMI was only insofar as
liability does not apply in the case.
whether or no they were negligent or whether they
performed their functions as employees of the The ship owner was equally liable with the
vessels. captain‘s negligence. While the vessel was
delayed for four hours, Maritima cannot be
As far as the values of the cargoes are concerned,
excused for the delay, because it did not check
that is between the shipper and the carrier,
the reason for the delay. It was during this period
because the contract is entered into by the shipper
of the delay that unmanifested passengers and
and the carrier. If they were not exonerated from
cargo were loaded and boarded.
the administrative liability, the officers may also be
held liable by the carrier for whatever the carrier A close supervision by Maritima could have
has paid, or they can be terminated. That then is prevented the effects of the typhoon.
separate and distinct from the liability of the shipper
In the case of:
to the carrier, under contract of carriage.
THE PHILIPPINE AMERICAN GENERAL INSURANCE
In the case of:
COMPANY, INC. vs. COURT OF APPEALS and
HEIRS OF AMPARO DE LOS SANTOS, ET AL. vs. FELMAN SHIPPING LINES
HONORABLE COURT OF APPEALS AND COMPANIA G.R. No. 116940. June 11, 1997
MARITIMA
G.R. No. L-51165 June 21, 1990 In this case, the Supreme Court ruled against the
claim of limited liability of the ship owner and
considered the incident as exceptional
This is a case where the vessel is made liable by
circumstance wherein the ship owner or ship
despite the loss of the vessel.
agent will still be held answerable despite the
FACTS: A vessel of Compania Maritima was abandonment.
crowded with passengers and loaded with
FACTS: Felman is the owner and operator of M/V
cargo. Although the vessel was clear for
Asilda, contracted to load 7500 cases of one liter
departure by the coast guard at 2am, its
Coca-Cola bottles, which were found to have
departure was delayed for four hours.
been improperly stowed on deck for transport
During the delay, there were unmanifested from Zamboanga to Cebu.
cargoes and passengers that were loaded,
Despite the fair weather, the vessel sunk and the
resulting to the overloading of the vessel. The
cargoes were lost, because of the inordinate
typhoon sunk due to the typhoon, causing the
loading of the vessel, making it top heavy, which
drowning of several passengers.
resulted to its unstable condition.
After the investigation, the Board of Marine
Felman abandoned all his rights and interest over
Investigation found that the Captain and officers
the vessel for the purpose of limiting and
were negligent in operating the vessel.
extinguishing his liability.
The report ruled that since the vessel sunk, the
ISSUE: Whether Felman is no longer liable for the

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
loas of the cargo. transported by them, ―according to all the
circumstances of each case" In the event of loss
RULING: The Supreme court found Felman equally
of goods, common carriers are presumed to have
liable for the loss.
acted negligently. FELMAN, the shipowner, was
Art. 587 of the Code of Commerce is not not able to rebut this presumption.
applicable to the case at bar. Simply put, the ship
agent is liable for the negligent acts of the
captain in the care of goods loaded on the In the case of:
vessel. This liability however can be limited
through abandonment of the vessel, its PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B.
BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ
equipment and freightage as provided in Art.
and MAXIMINA CAINAY vs. THE COURT OF APPEALS
587. Nonetheless, there are exceptional
and FILIPINAS PIONEER LINES, INC.,
circumstances wherein the ship agent could still G.R. No. L-42926 September 13, 1985
be held answerable despite the abandonment,
as where the loss or injury was due to the fault of In this case, the sinking of the vessel due to a
the shipowner and the captain. The international typhoon was not considered by the Supreme
rule is to the effect that the right of abandonment Court as an exempting cause, as the captain was
of vessels, as a legal limitation of a shipowners negligent in overloading the vessel and
liability, does not apply to cases where the injury proceeding despite notice of bad weather.
or average was occasioned by the shipowners
However, since there was no negligence on the
own fault. It must be stressed at this point that Art.
part of the ship owner, the liability of the ship
587 speaks only of situations where the fault or
owner and the ship agent can be extended only
negligence is committed solely by the captain.
to the proceeds of the insurance.
Where the shipowner is likewise to be blamed,
Art. 587 will not apply, and such situation will be FACTS: The MV "Pioneer Cebu" encountered
covered by the provisions of the Civil Code on typhoon "Klaring" and struck a reef on the southern
common carrier. part of Malapascua Island, and subsequently sunk.
The relatives of petitioners who were passengers
It was already established at the outset that the
then were unheard from since then.
sinking of MV Asilda was due to its
unseaworthiness even at the time of its departure The petitioners sued Filipinas Pioneer for damages.
from the port of Zamboanga. It was top-heavy as ISSUE: Whether the ship owner should be liable for
an excessive amount of cargo was loaded on the damages.
deck. Closer supervision on the part of the
shipowner could have prevented this fatal RULING: No.
miscalculation. As such, FELMAN was equally With respect to private respondent's submission
negligent. It cannot therefore escape liability that the total loss of the vessel extinguished its
through the expedient of filing a notice of liability pursuant to Article 587 of the Code of
abandonment of the vessel by virtue of Art. 587 of Commerce, suffice it to state that the liability of a
the Code of Commerce. shipowner is limited to the value of the vessel or to
Under Art 1733 of the Civil Code, (c)ommon the insurance thereon. Despite the total loss of the
carriers, from the nature of their business and for vessel therefore, its insurance answers for the
reasons of public policy, are bound to observe damages that a shipowner or agent may be held
extraordinary diligence in the vigilance over the liable for by reason of the death of its passengers.
goods and for the safety of the passengers

53
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
DUES ASSESSED ON VESSELS: after a successful voyage

 How do we distinguish certain dues that are 6. DEMURRAGE – another name for a penal
assessed unto a vessel from arrival of departing clause to compensate the owner of the
from a particular port? We call this tonnage vessel for its non-use. It is a sum fixed in a
dues, wharfage dues, hardboard fees, and charter party as a remuneration to a ship
berthing fees. owner for the detention of the vessel
beyond the number of days allowed by
1. BERTHING FEES – like parking fees. With
the charter party for loading or unloading
respect to vessels, we call it birth. Parking
or for sailing. The liability for demurrage
is for cars. Parking of a vessel we refer to
exist only when expressly stipulated in the
as berthing. They are also levied on vessels
contract (NFA vs. CA).
coming or mooring with specified places
or waters of a port. Berthing charges are So, if you draft a charter party, if you are
assessed against a vessel for berthing or the lawyer of the carrier, possibly you will
mooring at a pier, in wharf, in bulkhead ask for the demurrage fees. Kasi malulugi
wharf, river or channel, marginal wharf, or yung client ninyo if you will stay several
for mooring within any slip channel, basin, days in the port. In the NFA case, the
or river, or canal under the jurisdiction of shipper or charterer is liable for the
any port of the Philippines. Berthing payment of demurrage fees if he exceeds
charges are like wharfage dues, in the the period of loading or unloading as
sense that they are imposed for the use of agreed upon or the agreed laydays. The
the wharf regardless of the ownership period for such may or may not be
thereof. The only difference between stipulated in the contract. A charter party
berthing and wharfage dues is that while may either provide for fixed laydays or
berthing charges are assessed the vessels, contain general or indefinite words such
wharfage dues are assessed against the as ―customary quick dispatch‖ or ―as fast
cargo. as the steamer can go.‖

2. TONNAGE DUES - assessed for vessel When we say CUSTOMARY ―QUICK


coming to the Philippine from a foreign DISPATCH‖ this implies that the loading
port, or going to a foreign port from the and unloading of the cargo should be
Philippines. within a reasonable period of time. Due
diligence should be exercised according
3. HARBOR FEES – fees assessed for entrance
to the customs and usages of a particular
into or departure from a port of entry, the
port or ports of call.
vessel is assessed with.
The circumstances obtaining at the time
4. WHARFAGE DUES – assessed against the
of loading and unloading are to be taken
cargo discharged by the vessel engaged
into account. When the provision is for
in foreign trade. So, if a vessel is engaged
―demurrage‖, ―bar‖, ―dispatch‖ tapos
in the foreign trade, so yung cargo niya
may term na ―none‖ it will be deemed a
from foreign trade is unloaded in a
waiver of the right to claim damages or
Philippine port, they are charged with
demurrages.
wharfage dues.
7. LAYDAYS – period when the vessel will be
5. PRIMAGE – bonus paid to the captain
delayed in port for loading and unloading.

54
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
8. EXTRA LAYDAYS – days after the laydays. they were jettisoned.
Meaning to say, the vessel is already Article 661, Code of Commerce: Neither
overstaying. merchandise lost by reason of shipwreck nor
stranding nor those seized by the pirates or
So, if you are overstaying for two or three days, enemies, shall pay freightage.
you call that overstaying laydays, if it exceeds
the laydays as the laydays agreed upon. If the freightage should have been paid in
advance, it shall bee returned, unless there is an
Usually in the contract, they allow for laydays agreement to the contrary.
probably on occasion of weather or availability
of crew members. CARGOES WITHOUT FREIGHT:
9. DEAD FREIGHT – cargo not loaded, which
covers the amount paid by or recoverable from Cargoes not required to pay freight under Art. 660
& Art 661
the charterer for the portion of the ship‘s
capacity the latter contracted for but failed to 1. Those JETTISONED - tinatapon inorder to
occupy. Under 680 that the liability of the dead preserve the vessel and the crew and
freight is on the charterer. passengers; if the vessel is in danger of
sinking, in order to lighten the vessel, they will
PREFERRED CREDITORS sInk hard those needs to be jettisoned.

WHO ARE CONSIDERED PREFERRED CREDITORS?  Those jettisoned for the common safety,
the freight that should have been paid
In case of an extrajudicial foreclosure of vessel, shall be considered as GENERAL
under PD 1521 – the Ships Mortgage Decree – AVERAGE and therefore computed
mortgage of vessel registered prior in time accordingly. The shipper whose
(because of the need or registration to affect third cargoes have been saved as a result of
parties) becomes the preferred mortgage lien the jettison of some cargoes, the
which shall have priority over all claims against the onwers of cargoes that was saved will
vessel, except for: contribute to the general fund in
proportion or pro rata to the value of
1. Expenses and fees allowed and costs their cargo and this is considered as
taxed by the court and TAXES due to the general average which shall be paid to
Government; those shippers whose cargoes were
2. Payment of CREW‘S WAGES; jettisoned.
3. GENERAL AVERAGE;
4. SALVAGE, including contract salvage; 2. Those lost to SHIP WRECK OR STRANDING - if
5. MARITIME LIENS arising prior in time to the the freight shall be paid in advance, it shall
recording of the preferred mortgage; be returned unless there was an agreement
6. Damages arising out of TORT; and to the contrary.
7. Preferred MORTGAGE REGISTERED prior
in time. 3. Those SEIZED BY PIRATES OR ENEMIES - and if
the freightage shall have been paid in
CARGO NOT REQUIRED TO PAY FREIGHT advance it shall also be returned unless
otherwise agreed upon.
Article 660, Code of Commerce: Merchandise
jettisoned for the common safety shall not pay
freightage; but the amount of the latter shall be
considered as general average computing the
same in proportion to the distance covered when

55
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
EFFECTS OF REDEMPTION: Cargoes sold by the captain to pay for the
necessary repairs to the hull, machinery or
Article 662, Code of Commerce: If the vessel or the equipment or for unavoidable or urgent needs, but
merchandise should be redeemed, or the effects of the freightage may or may not be required to be
the shipwreck be salvaged, the freightage paid in full. When the vessel arrived at her
corresponding to the distance covered by the destination, the freightage shall be paid in
vessel transporting thee cargo shall be paid; and proportion to the distance covered until the vessel
should the vessel, after being repaired transport is lost. That is 659.
said merchandise to the port of destination, the full
freightage shall be paid, without prejudice to what Cargos which suffer deterioration or diminishing on
may be due by reason of average. account of inherent defects or bad quality of the
packing or fortuitous event, under 663, and cargoes
that increase in size or weight by natural cause,
If the vessel or the goods are redeemed or
then such cargo shall pay the proper freightage
salvages, the freightage corresponding to the
fixed in the contract under 644.
distance covered by the vessel transporting the
cargo shall be paid. Therefore if the agreed
amount of freightage is 1000 and pirates seize the SPECIAL CONTRACTS FOR MARITIME
goods when the vessel has gone halfway, no need
to pay the half of the freightage. He can pay only
COMMERCE
500.
CHARTER PARTY
If the cargoes were redeemed from the pirates,
they must pay the balance of the freightage, which
was in proportion to the distance covered by the  Definition: a written contract between the
vessel. ship owner or ship agent and charterer,
whereby ship owner or the agent leases the
vessel to transport passengers or cargoes for
CARGOES REQUIRED TO TAKE FREIGHTAGE:
a fixed prize. It amounts to a lease of
Article 659, Code of Commerce: The goods sold by personal property, but with 2 distinctions
the Master to attend to the indispensable repair of provided under 689 and 690.
the hull, engines or rigging, or for unavoidable and
urgent needs, shall accrue carriage fees.
The price of these goods shall be set according to
TERMINATION OF CHARTER PARTY:
the success of the expedition, that is:
1. If the ship safely reaches the destination port, Article 689, Code of Commerce: At the request of
the Master shall pay them at the price the person from whom the vessel is chartered the
obtained for those of the same class as those charter party may be rescinded:
sold;
2. If the ship is lost, at that which would have 1. If the charterer, at the termination of the extra
been obtained from sale of the goods. lay days, does not place the cargo alongside
the vessel
Article 663, Code of Commerce: Goods that suffer
deterioration or shrinkage due to inherent flaws or (Note: In that event, the charterer must pay half the
bad quality and condition of the packaging, or for carriage agreed, in addition to the lay-days and
fortuitous causes, shall accrue the full carriage fees, demurrage accrued.)
just as stipulated in the charter contract.
Article 644, Code of Commerce: Natural increase in 2. If the person from whom the vessel was
the weight or measurement of the freight loaded chartered should sell it before the charterer has
on the ship shall inure to the benefit of the owner begun to load it, and the purchaser should load
thereof and the relevant carriage fees set in their it for his own account.
contract shall accrue.
In such case the vendor shall indemnify the

56
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
charterer for the losses he may suffer the payment of freight. Contract of
affreightment
If the new owner of the vessel should not load it for  may either be
his own account, the charter party shall be
a. TIME CHARTER, wherein the vessel is
respected, and the vendor shall indemnify the
purchaser if the former did not inform him of the leased to the charterer for a fixed
charter pending at the time of making the sale. period of time, or
b. VOYAGE CHARTER, wherein the ship
Article 690, Code of Commerce: The charter party is leased for a single voyage.
shall be rescinded and all the action arising  In both cases, the charter-party provides for
therefrom shall be extinguished if, before the vessel the hire of vessel only, either for a
puts to sail from the port of departure, any of the
determinate period of time or for a single or
following cases should occur:
1. A declaration of war or interdiction of consecutive voyage, the ship-owner to
commerce with the power to whose ports the supply the ship's stores, pay for the wages of
vessel was to make its voyage; the master and the crew, and defray the
2. A condition of blockade of the port of expenses for the maintenance of the ship.
destination of said vessel, or the breaking out of
an epidemic after the contract was executed KINDS OF CHARTER:
3. The prohibition to receive at the said port the
merchandise constituting the cargo of the 1. DEMISE OR BAREBOAT CHARTER - the charterer
vessel. takes hold of the vessel, the ownership is in the
4. An Indefinite detention, by reason of an hands of the charterer in the meantime for the
embargo of the vessel by the order of the period covering the charter party. It is under
government or for any other reason the control of the charterer, as if the charterer is
independent of the will of the ship agent. the owner of the vessel.
5. The inability of the vessel to navigate, without a. Obligation or liability:
fault of the captain or ship agent i. Ship owner or ship agent only
The unloading shall be made for the account of the assures confidently that the
charterer. vessel is seaworthy;
ii. Charterer is the owner pro hac
A charter refers to a lease but under different
vise (owner in the meantime)
circumstances as an ordinary lease. If you lease a
property, it is only for a specific period. In charter,
2. CONTRACT OF AFFREIGHTMENT – one by which
the parties of the charter may make RESCISSION.
the owner of a ship or other vessel lets the
Rescission may be at the instance of the charterer,
whole or a part of her to a merchant or other
the ship owner by reason of causes independent of person for the conveyance of goods, on a
the will of the parties. That sets it apart from an
particular voyage, in consideration of the
ordinary lease.
payment of freight.
Planters Products, Inc. vs. CA 225 SCRA
National Freight Insurance v. 184 S 682
A "charter-party" is defined as a contract by which
in cases where a Bill of Lading has been issued by a
an entire ship, or some principal part thereof, is let carrier covering goods shipped aboard a vessel
by the owner to another person for a specified time
under a charter party, and the charterer is also the
or use.
holder of the bill of lading, "the bill of lading
operates as the receipt for the goods, and as
 A CONTRACT OF AFFREIGHTMENT by which
document of title passing the property of the
the owner of a ship or other vessel lets the goods, but not as varying the contract between
whole or a part of her to a merchant or the charterer and the shipowner". The Bill of Lading
other person for the conveyance of goods, becomes, therefore, only a receipt and not the
on a particular voyage, in consideration of contract of carriage in a charter of the entire

57
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
vessel, for the contract is the Charter Party, and is to look for the vessel not only at the port of arrival
the law between the parties who are bound by its but also in the neighborhood within distance of 150
terms and condition provided that these are not kilometers,
contrary to law, morals, good customs, public order
and public policy (Article 1306, Civil Code). If the captain, through indolence or malice, should
In a charter party, if there is a bill of lading atached not furnish a vessel to its destination, the shipper
to the charter, the BOL merely represents as receipt after requiring the captain to charter a vessel within
for the goods received, the terms and conditions an inextendible period, may charter one and
under the charter party govern the rights and petition the judicial authority to summarily approve
obligations of parties in case of disputes that may the charter party which they may have made.
arise.
The same authority shall judicially (‗por la via de
EFFECT OF A CHARTER PARTY EXECUTED BY appremio‘) compel the captain, to carry out, for his
A CAPTAIN IN THE ABSENCE OF THE SHIP account and under his responsibility, the charter
made by the shippers.
OWNER:
WHEN SHOULD FREIGHT ACCRUE:
Article 655, Code of Commerce: Charter parties
executed by the captain in the absence of the ship
agent shall be valid and effective even though in Article 658, Code of Commerce: The freightage
executing them he should have acted in violation shall accrue according to the conditions stipulated
of the orders and instructions of the ship agent or in the contract, and should they not be expressed,
ship-owner; but the latter shall have a right of or should they be ambiguous, the following rules
action against the captain for damages. shall be observed:
1. If the vessel has been chartered by months or
by days, the freightage shall begin to run from
EFFECT WHEN NO DATE OF LOADING OR the day the loading of the vessel is begun;
UNLOADING: 2. in charters made for a fixed period, the
freightage shall begin to run from that very day
Article 656, Code of Commerce: If in the charter 3. If the freightage is charged according to
party the time in which the loading and unloading weight, the payment shall be made according
are to take place is not stated, the usages of the to the gross weight, including the3 containers,
port where these acts take place shall be such as barrels or any other objects in which
observed. After the stipulated or the customary the cargo is contained.
period has passed, and (if) there is no express
proviso in the charter party fixing the indemnity for Just read loans on bottomry or respondentia, I don‘t
the delay, the captain shall be entitled to demand think it is still observed now. Just go over that.
demurrage for the lay days which may have BOTTOMRY AND RESPONDENTIA
elapsed in loading and unloading.
 In LOANS ON BOTTOMRY, the collateral is the
In the absence stipulation n the charter party, the vessel.
customs or usages of the port shall be obrserved.  LOANS ON REPONDENTIA are a loan
contracted by a carrier chargeable against
EFFECT IF THE VESSEL IS UNSEAWORTHY: the cargo.

Article 657, Code of Commerce: if during the The common condition under these two loans is
voyage the vessel should be rendered that the security is exposed to marine peril,
unseaworthy, the captain shall be obliged to which is an essential part of those loans. The
charter at his expense another one in good obligation of the debtor is conditioned only
condition to receive the cargo and carry it to its upon the safe arrival of the security at the point
destination, for which purpose he shall be obliged of destination. But if it was not exposed to

58
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
marine peril, that is another thing. considered a simple or particular average.
An example of this is when you try to ship 100 kg of
MARCH 8 garlic and when you reach the port of destination,
it is now only 90 kg. So that is a simple or particular
RISKS, DAMAGES, AND ACCIDENTS OF average that is caused by the nature of the cargo
and be borne by the owner of the cargo. Article
MARITIME COMMERCE 810 of the Code of Commerce provides:

Definition of AVERAGES Art. 810. The owner of the goods which gave rise to
the expense or suffered the damage shall bear the
Art. 806. For the purposes of this code the following simple or particular averages.
shall be considered averages:
Art 810 is consistent with the maxim res perit domino
a) all extraordinary or accidental expenses which
(owner bears the loss.).
may be incurred during the voyage in order to
preserve the vessel, the cargo, or both;
The shipowner would be liable if the cargo was lost
due to his negligence and it did not inure to the
b) any damages or deteriorations which the vessel benefit of the others. The owner of the goods
may suffer from the time it puts to sea from the cannot claim the loss from the other cargo owners
port of departure until it casts anchor in the port because they did not benefit from it.
of destination, and those suffered by the
merchandise from the time they loaded in the Take note also of Article 732 of the Code of
port of shipment until they are unloaded in the Commerce
port of their consignment.
Art. 732. Lenders on bottomry or respondentia shall
DEFINITION OF PETTY AND ORDINARY suffer in proportion to their respective interest, the
EXPENSES: general average which may take place in the
goods on which the loan was made.
Art. 807. The petty and ordinary expenses of In particular averages, in the absence of an express
navigation, such as pilotage of coasts and ports, agreement between the contracting parties, the
lighterage and towage, anchorage dues, lender on bottomry or respondentia shall also
inspection, health, quarantine, lazaretto, and other contribute in proportion to his respective interest,
so-called port expenses, costs of barges, and should it not belong to the kind of risks excepted in
unloading, until the merchandise is placed on the the foregoing article.
wharf, and any other expenses common to
navigation shall be considered ordinary expenses BOTTOMRY is a contract whereby the owner of a
to be defrayed by the shipowner, unless there is a ship borrows for the use, equipment or repair of the
special agreement to the contrary. vessel, for a definite term, and pledges the ship as
security, with the stipulation that if the ship is lost
KINDS OF AVERAGES during the voyage or during the limited time on
account of perils enumerated, the lender shall lose
his money.
ART. 808. Averages shall be:
1. Simple or particular. RESPONDENTIA is where the goods, or some part
2. General or gross. thereof, are hypothecated as security for a loan,
the payment of which is dependent upon maritime
SIMPLE AVERAGE shall include all expenses and risks.
damages caused to the vessel or to her cargo
which has not inured to the common benefit and Examples of SIMPLE AVERAGES are provided for
profit of all the persons interested in the vessel and under Art. 809.
her cargo. If damage is not a general average, it is

59
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
damages and expenses which are deliberately
Art. 809. Simple or particular averages shall be, as a caused in order to save the vessel, the cargo, or
general rule, all the expenses and damages both at the same time from a real and known risk.
caused to the vessel or to her cargo which have
not redounded to the benefit and common profit Art. 811. General or gross averages shall be, as a
of all the persons interested in the vessel and her general rule, all the damages and expenses which
cargo, and especially the following: are directly caused in order to save the vessel, her
1. The damages suffered by the cargo from the cargo, or both at the same time, from a real and
time of its embarkation until it is unloaded, either on known risk, and particularly the following:
account of the nature of the goods or by reason of 1. The goods or cash invested in redemption of the
an accident at sea or force majeure, and the vessel or cargo captured by enemies, privateers, or
expenses incurred to avoid and repair the same. pirates, and the provisions, wages, and expenses of
2. The damages suffered by the vessel in her hull, the vessel detained during the time the
rigging, arms, and equipment, for the same causes arrangement or redemption is taking place.
and reasons, from the time she put to sea from the 2. The goods jettisoned to lighten the vessel, even
port of departure until she anchored in the port of though they belong to the vessel, to the cargo, or
destination and the expenses arising therefrom. to the crew, and the damage suffered through said
3. The damages suffered by the merchandise act by the goods kept.
loaded on deck, except in coast navigation, if the 3. The cables or masts which are cut or rendered
marine ordinances allow it. useless, the anchors and the chains which are
4. The wages and maintenance(food) of the crew abandoned in order to save the cargo, the vessel,
when the vessel should be detained or embargoed or both.
by a legitimate order or force majeure, if the 4. The expenses of transferring or removing a
charter should have been for a fixed sum for the portion of the cargo in order to lighten the vessel
voyage. and place her in condition to enter a port or
5. The necessary expenses on arrival at a port, in roadstead, and the damage resulting therefrom to
order to make repairs or secure provisions. the goods removed or transferred.
6. The lowest value of the goods sold by the 5. The damage suffered by the goods of the cargo
captain in arrivals under stress for the payment of through the opening made in the vessel in order to
provisions and in order to save the crew, or to cover drain her and prevent her sinking.
any other need of the vessel against which the 6. The expenses caused through floating a vessel
proper amount shall be charged. intentionally stranded for the purpose of saving her.
7. The victuals and wages of the crew during the 7. The damage caused to the vessel which it is
time the vessel is in quarantine. necessary to break open, scuttle, or smash in order
8. The damage suffered by the vessel or cargo by to save the cargo.
reason of an impact or collision with another, if it 8. The expenses of curing and taking care of
were accidental and unavoidable. If the accident members of the crew who may have been
should occur through the fault or negligence of the wounded or crippled in defending or saving the
captain, the latter shall be liable for all the damage vessel.
caused. 9. The pay of any member of the crew detained as
9. Any damage suffered by the cargo through the hostage by enemies, privateers, or pirates, and the
faults, negligence, or barratry of the captain or of necessary expenses which he may incur in his
the crew, without prejudice to the right of the imprisonment, until he is returned to the vessel or to
owner to recover the corresponding indemnity from his domicile, should he prefer it.
the captain, the vessel, and the freightage. 10. The pay and food of the crew of a vessel
chartered by the month during the time it should be
Whatever losses that are suffered under the embargoed or detained by force majeure or by
following circumstances enumerated shall only be order of the Government, or in order to repair the
borne by the owner of the cargo or the shipowner. damage caused for the common good.
11. The loss suffered in the value of the goods sold
Now, a general average shall include ALL the at arrivals under stress in order to repair the vessel

60
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
because of gross average. there was general average. The Court said that the
12. The expenses of the liquidation of the average. agricultural machinery was not contraband and
was not subject to seizure or forfeiture even if the
The REQUISITES OF GENERAL AVERAGE are as follows ship will be captured. So therefore, there is no
as per Tolentino in the case of Magsaysay Inc. vs common danger because the fact that the ship
Agan: took refuge in Manila was exclusively for the
1. First, there must be a common danger. protection or benefit of the ship owner.
This means, that both the ship and the
cargo, after has been loaded, are In another case of Compagnie de Commerce, et
subject to the same danger, whether al. vs. Hamburg Amerika, et. Al, which also
during the voyage, or in the port of involved a German vessel and took refuge in
loading or unloading; that the danger Manila during World War 1. The shipper was French
arises from the accidents of the sea, who loaded the goods in Saigon. Saigon was then
dispositions of the authority, or faults of under the French. After the loading of the cargo,
men, provided that the circumstances the vessel left Saigon to seek refuge in Manila at the
producing the peril should be outbreak of the war. The Supreme Court said that
ascertained and imminent or may there was no general average because the French
rationally be said to be certain and cargo was absolutely secure from danger of seizure
imminent. This last requirement excludes or confiscation at the Saigon port as long as it
measures undertaken against a distant remained there. There is no question that the flight
peril. of the vessel was only a measure of precaution
adapted that is solely and exclusively for the
2. Second, that for the common safety part preservation of the vessel from danger of seizure or
of the vessel or of the cargo or both is capture.
sacrificed deliberately.
It follows here that there is no general average if
3. Third, that from the expenses or damages there is no danger at all. The Court also said that
caused follows the successful saving of there is no common danger if the measure was
the vessel and cargo. undertaken against a distant peril. Even if there is a
common peril, as long as it is still distant or not
4. Fourth, that the expenses or damages imminent, it cannot be justified as a voluntary
should have been incurred or inflicted sacrifice if it can be avoided by the ship without
after taking proper legal steps and such sacrifice.
authority.
In the case of National Dev’t Company vs. CA, the
In International Harvester Co. v. Hamburg-American Supreme Court ruled here that the law on averages
Line (42 Phil. 845), International Harvester shipped its does not apply on collision cases where the collision
agricultural machinery through a German vessel was caused by the negligence of the captains of
owned by respondent. On its way to the the colliding vessels and the cargo was not
destination, there was a war that broke out in jettisoned to save some of the cargo and vessel.
Europe and the vessel decided to seek refuge in One of the requisites of general averages is that
Manila. The shipper demanded for the goods to be there must be a deliberate sacrifice. But if it is
forwarded to its destination in another vessel. The unintentional, it cannot be considered as a general
ship agent agreed only on the condition to average.
consider the cost and expenses of the vessel‗s stay
in manila as a general average. The shipper did not Normally, the sacrifice of the cargo could be done
agree to such condition and as such, the agent through jettison or throwing the cargo overboard.
refused to deliver the goods which in turn forced
the shipper to file an action for recovery of the For example, if there involves a jettison or casting
goods plus damages. Eventually, the Supreme away for the purpose of avoiding a common peril,
Court rejected the argument of the ship agent that it cannot involve in a damage which resulted

61
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
beyond the control of the captain and crew or Art. 860 If, notwithstanding the jettison of
without of any intention in their part. merchandise, breakage of masts, ropes, and
equipment, the vessel should be lost running the
There can also be general averages even if the same risk, no contribution whatsoever by reason of
sacrifices were not made during the voyage under gross average shall be proper.
Article 816, 817 and 818 of the Code of Commerce.
(Please refer to 816-818) The owners of the goods saved shall not be liable
for the indemnification of those jettisoned, lost, or
Take note under Art. 816 that it is not automatic damaged.
that your cargo that was jettisoned can be
considered as a general average. It is a So, for example. Si Mr. A may goods belonging him
requirement that in order for the owner of the
that was sacrificed from a ship because of a strong
saved cargo, be entitled to gross average, this
typhoon. There will be no general average
article requires that the owner must prove it through
contribution, if the ship sank because of the same
a Bill of Lading. With those belonging to the vessel, it
typhoon. Therefore, the sacrifice was not
should be included with the inventory. In other successful. One of the requisites is not present in
words, if the equipment of the vessel was jettisoned,
order to be entitled to a general average.
in order for the shipowner to claim general
average, the equipment should be part of the
So compliant with legal steps, the fourth requisite,
inventory of the vessel.
expenses or damages should have been incurred
or inflicted after taking proper legal steps and
It should be noted class that the goods can no authority. In this connection, the proper steps and
longer be considered as a general average if the
legal authority in making the sacrifice are
thing is inevitably lost. Consistently, under the York-
prescribed from Article 813-815.
Antwerp (YA) Rules, this refers to a situation with
respect to loading of cargoes on deck because for
international overseas trade, cargoes on deck are Article 813. In order to incur the expenses and
not allowed. Why? Kasi matagal yan i-travel. The cause the damages corresponding to gross
cargoes will be exposed sa wind, sa sea, etc. average, there must be a resolution of the captain,
adopted after deliberation with the sailing mate
However, in domestic coast-wise trade, it depends and the other officers of the vessel, and after
on the customs of the port if it is allowed kasi if the hearing the persons interested in the cargo who
owner allows cargo to be placed on deck, it may may be present.
be jettisoned but it may not be considered as a
general average, if it is prohibited. Unlike sa coast- If the latter shall object, and the captain and
wise, diba tinapon yun on deck, the owner of the officers or a majority of them, or the captain, if
cargo is also liable for general average and can opposed to the majority, should consider certain
also be placed for general average. Because hindi measures necessary, they may be executed under
siya prohibited in coast-wise trade. That is only one his responsibility, without prejudice to the right of
of the provisions of YA Rules. the shippers to proceed against the captain before
the competent judge or court, if they can prove
Third, the sacrifice must be successful. We say that that he acted with malice, lack of skill, or
common danger, deliberate sacrifice and the negligence.
sacrifice must be successful. Kasi if hindi siya
successful at hinulog lang ang cargo, walang If the persons interested in the cargo, being on
general average. board the vessel, have not been heard, they shall
not contribute to the gross average, their share
So, no general contribution may be demanded if being chargeable against the captain, unless the
the vessel and the cargo that are sought to be urgency of the case should be such that the time
saved is (inaudible) consistent with Article 860. necessary for the previous deliberations was
wanting.

62
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
Article 814. The resolution adopted to cause the 2. Those which are below the upper deck,
damages which constitute general average must always beginning with those of the greatest weight
necessarily be entered in the log book, stating the and smallest value, to the amount and number
motives and reasons for the dissent, should there be absolutely indispensible.
any, and the irresistible and urgent causes which
impelled the captain if he acted of his own accord. Refers to the order of jettison. Yung embarrass, hindi
yung ikinahihiya kundi yung obstruct.
In the first case the minutes shall be signed by all
the persons present who could do so before taking So maisip mo, saan kaya nakalagay yung may
action, if possible; and if not, at the first opportunity. greatest weight. So tapun nalang kayo nang
In the second case, it shall be signed by the tapon. Nasusunod kaya ito? Of course, life is more
captain and by the officers of the vessel. valuable.

In the minutes, and after the resolution, shall be So with respect to general average, what are
stated in detail all the goods jettisoned, and examples of it? It is provide in Article 811.
mention shall be made of the injuries caused to
those kept on board. The captain shall be obliged Article 809, enumerates what are considered simple
to deliver one copy of these minutes to the or particular average because it did not inure to
maritime judicial authority of the first port he may the public benefit.
make, within 24 hours after his arrival, and to ratify it
immediately under oath. So what are considered as general average, it is
provided in Article 811. The enumeration however is
So, ang scenario here is nagmi.meeting pa kayo not exclusive.
kung ano ang unahin kahit nalulubog na ang
barko. But the law is the law. It may be harsh, but it Article 811. As a general rule, general or gross
is the law. You have to prove under the law that the averages shall include all the damages and
requirement is satisfied. A formality that there must expenses which are deliberately caused in order to
be a resolution of the captain adopted when? save the vessel, its cargo, or both at the same time,
After deliberation with the other officers, after from a real and known risk, and particularly the
hearing all the persons interested in the cargoes. following:
So, if the interested parties disagree, what will 1. The goods or cash invested in the
happen? The decision of the captain shall prevail redemption of the vessel or of the cargo captured
but the persons who disagree should record their by enemies, privateers, or pirates, and the
objection. And the resolution must be entered into provisions, wages and expenses of the vessel
the logbook stating for the reasons and motive for detained during the time the settlement or
the dissent. Irresistible and urgent causes if he redemption is being made.
acted on his own accord, it must be signed, in the 2. The goods jettisoned to lighten the vessel,
first case by all persons present in the hearing. So, in whether they belong to the cargo, to the vessel, or
the second case, by the captain and of all the to the crew, and the damage suffered through said
officers in the vessel. In the minutes must also act by the goods which are kept on board.
contain details all the goods jettisoned and injuries 3. The cables and masts which are cut or
caused to those on board. Ang hirap nito diba? But rendered useless, the anchors and the chains which
it is the law. are abandoned, in order to save the cargo, the
vessel, or both.
Article 815. The captain shall direct the jettison, and 4. The expenses of removing or transferring a
shall order the goods cast overboard in the portion of the cargo in order to lighten the vessel
following order: and place it in condition to enter a port or
1. Those which are on deck, beginning with roadstead, and the damage resulting therefrom to
those which embarrass the maneuver or damage the goods removed or transferred.
of the vessel, preferring, if possible, the heaviest 5. The damages suffered by the goods of the
ones with the least utility and value. cargo by the opening made in the vessel in order

63
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
to drain it and prevent its sinking
6. The expenses caused in order to float a The owner of the goods to which are sacrificed is
vessel intentionally stranded for the purpose of entitled to receive the general average
saving it. contribution. However, there are situations wherein
7. The damage caused to the vessel which the goods, even if deliberately sacrificed are not
had to be opened, scuttled or broken in order to considered as a general average.
save the cargo.
8. The expenses for the treatment and 1. Goods as carried on deck unless the rule of
subsistence of the embers of the crew who may special law or customs of the place allows it.
have been wounded or crippled in defending or Under Article 855.
saving the vessel. 2. Goods that are not recorded in the books or
9. The wages of any member of the crew held records of the vessel. Also in Article 855.
as hostage by enemies, privateers, or pirates, and 3. Fuel for the vessel if there is more sufficient fuel
the necessary expenses which he may incur in his in the voyage. So it is provided under the YA
imprisonment, until he is returned to the vessel or to Rule.
his domicile, should he prefer it.
10. The wages and victuals of the crew of a
vessel chartered by the month, during the time that MAGSAYSAY INC. VS. AGAN
it is embargoed or detained by force majeure or by (GR L-6393, 31 January 1955)
order of the government, or in order to repair the
damage caused for the common benefit. FACTS: The S S ―San Antonio‖, a vessel owned and
11. The depreciation resulting in the value of the operated by A. Magsaysay Inc., left Manila on 6
goods sold at arrival under stress in order to repair October 1949, bound for Basco, Batanes, via Aparri,
the vessel by reason of gross average. Cagayan, with general cargo belonging to
12. The expenses of the liquidation of the different shippers, among them Anastacio Agan.
average. The vessel reached Aparri on the 10th of that
month, and after a day‘s stopover in that port,
There is a provision here in the liquidation of weighed anchor to proceed to Basco. But while still
averages, meaning to say, it is a matter of in port, it ran aground at the mouth of the Cagayan
computation or liquidation as to whose cargo has river, and, attempts to refloat it under its own power
been thrown or ano yung nasave. It is to determine having failed, Magsaysay had it refloated by the
how much or what is the value of the things Luzon Stevedoring Co. at an agreed
jettisoned for the purpose of liquidating it and pay it compensation. The stranding of Magsaysay‘s vessel
to the corresponding owners of those cargoes was due to the sudden shifting of the sandbars at
which are jettisoned. the mouth of the river which the port pilot did not
anticipate. Once afloat, the vessel returned to
Who are liable for general average? Who shall bear Manila to refuel and then proceeded to Basco, the
it? port of destination. There the cargoes were
delivered to their respective owners or consignees,
Article 812. In order to satisfy the amount of the who, with the exception of Agan, made a deposit
gross or general averages, all the persons having an or signed a bond to answer for their contribution to
interest in the vessel and cargo therein at the time the average.
of the occurrence of the average shall contribute.
On the theory that the expenses incurred in floating
the vessel constitute general average to which
This include the ship owner and the owners of the
both ship and cargo should contribute, Magsaysay
cargoes that were saved and the contributions
brought the action in the CFI of Manila to make
may be imposed on the insurers of the vessel or the
Agan pay his contribution, which, as determined by
cargo that has been saved as well as the lenders of
the average adjuster, amounts to P841.40. Agan, in
bottomry or respondentia.
his answer, denies liability for this amount, alleging,
among other things, that the stranding of the vessel
 Who is entitled to the indemnity?

64
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
was due to the fault, negligence and lack of skill of present case, the stranding was not intentional.
its master, that the expenses incurred in putting it
afloat did not constitute general average, and that There must be a common danger. This means, that
the liquidation of the average was not made in both the ship and the cargo, after it has been
accordance with law. After trial, the lower court loaded, are subject to the same danger, whether
found for Magsaysay and rendered judgment during the voyage, or in the port of loading or
against Agan for the amount of the claim, with unloading; that the danger arises from accidents of
legal interests. From this judgment, Agan has the sea, dispositions of the authority, or faults of
appealed directly to the Supreme Court. men, provided, that the circumstance producing
the peril should be ascertained and imminent - or
HELD: The Supreme Court reversed the decision may rationally be said to be certain and imminent.
appealed from, and dismissed Magsaysay‘s This last requirement excludes measures undertaken
complaint; with costs. against a distant peril. (2) That for the common
safety part of the vessel or of the cargo or both is
Law on averages sacrificed deliberately. (3) That from the expenses
The law on averages is contained in the Code of or damages caused follows the successful saving of
Commerce. Under that law, averages are classified the vessel and cargo. (4) That the expenses or
into simple or particular and general or gross. damages should have been incurred or inflicted
Generally speaking, simple or particular averages after taking proper legal steps and authority.
include all expenses and damages caused to the
vessel or cargo which have not inured to the Requisite 1 not present; Safety of property, not
common benefit (Art. 809, and are, therefore, to be voyage, true foundation of general average
borne only by the owner of the property which With respect to the first requisite, the evidence does
gave rise to the same (Art. 810); while general or not disclose that the expenses sought to be
gross averages include ―all the damages and recovered from defendant were incurred to save
expenses which are deliberately caused in order to vessel and cargo from a common danger. The
save the vessel, its cargo, or both at the same time, vessel ran aground in fine weather inside the port at
from a real and known risk‖ (Art. 811). Being for the the mouth of a river, a place described as ―very
common benefit, gross averages are to be borne shallow‖. It would thus appear that vessel and
by the owners of the articles saved (Art. 812). cargo were at the time in no imminent danger or a
danger which might ―rationally be sought to be
Expenses are of particular averages (Article 809 certain and imminent.‖ It is conceivable that, if left
[2]), not general averages (not Article 811 [6]) indefinitely at the mercy of the elements, they
would run the risk of being destroyed, but as stated,
In classifying averages into simple or particular and ―this last requirement excludes measures
general or gross and defining each class, the Code undertaken against a distant peril.‖ It is the
(Art. 809 and 811) at the same time enumerates deliverance from an immediate, impending peril,
certain specific cases as coming specially under by a common sacrifice, that constitutes the
one or the other denomination. Herein, while the essence of general average. Herein, there is no
expenses incurred in putting Magsaysay‘s vessel proof that the vessel had to be put afloat to save it
afloat may well come under number 2 of article 809 from an imminent danger. The vessel had to be
— which refers to expenses suffered by the vessel salvaged in order to enable it ―to proceed to its
―by reason of an accident of the sea or force port of destination.‖ It is the safety of the property,
majeure‖ — and should therefore be classified as and not of the voyage, which constitutes the true
particular average, the said expenses do not fit into foundation of general average.
any of the specific cases of general average
enumerated in article 811. Number 6 of Article 811 Requisite 2 not present; Cargo not in imminent peril
does mention ―expenses caused in order to float a As to the second requisite, the expenses in question
vessel,‖ but it specifically refers to ―a vessel were not incurred for the common safety of vessel
intentionally stranded for the purpose of saving it‖ and cargo, since they, or at least the cargo, were
and would have no application where, as in the not in imminent peril. The cargo could, without

65
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.
need of expensive salvage operation, have been expenses incurred in putting the vessel afloat
unloaded by the owners if they had been required provided in Article 809 (2) referring to expenses
to do so. suffered by the vessel due to accident of the sea or
force majeure. This expense do not mean to other
Requisite 3; Sacrifice for benefit of vessel and not specifics under specification of general average
purpose of saving cargo enumerated under Article 811.
With respect to the third requisite, the salvage
operation was a success; however, as the sacrifice So, no. 6 of 811 mentions expenses caused to afloat
was for the benefit of the vessel — to enable it to a vessel BUT it specifically refers to a vessel
proceed to destination — and not for the purpose intentionally stranded for the purpose of saving it
of saving the cargo, the cargo owners are not in and would have no application where the
law bound to contribute to the expenses. stranding was unintentional. But it may fall with
general average if the vessel was intentionally
Requisite 4 need not be proved in light of stranded for the purpose of saving it. So, that can
circumstances qualify as a general average.
The final requisite has not been proved, for it does
not appear that the expenses in question were The expenses incurred for the common safety of the
incurred after following the procedure laid down in vessel and the cargo in this case did not arise from
articles 813 et seq. an imminent common danger. The cargo should
have been unloaded by the owner had it been
MAGSAYSAY INCORPORATED VS AGAN required to do so. And the refloating was a success
(Atty. V) but as a sacrifice for the vessel‘s benefit to enable it
to proceed to its destination and not for the
FACTS: Plaintiff Vessel, SS Antonio, left Manila for purpose of saving the cargo. The owners, in law,
Basco, Batanes with general cargo owned by are not bound to contribute to the expenses.
different shippers including that of the defendant. Similarly, if the procedure in Article 613 was not
Upon reaching Apparri, it accidentally ran proved to have been complied with which is the
aground. Nasadsad siya sa shallow waters, hindi na final requisite. So one of the requisite was not
nakamove. Plaintiff had it refloated by LuzSteveCo considered.
for a compensation. Of course, i-afloat mo ba
naman ang barko, so there is a compensation. The maritime protest, we mentioned earlier that
After the refueling, the vessel proceeded to Basco after the assembly the captain must report what
where the goods was delivered. So, on the theory transpired within 24 hours from the arrival of the
that the expenses for refloating incurred thereto vessel at the first port, not at the point of destination.
constituted a general average to which both the That is what we call maritime protest. It is a written
ship and the cargo should contribute, Magsaysay statement under oath made by the master of the
asked for the shipper‘s deposit or bond to answer vessel after the occurrence of an accident or
for the contribution to the average. So all other disaster in which the vessel or cargo is lost with
shippers accepted except the defendant. So the respect to the circumstances attending such
court ruled in favor of Magsaysay. Agan appealed occurrence.
contending that the floating of the vessel
unintentionally stranded inside a port at the mouth So what is the purpose? It is intended to show that
of the river during a fine weather does not the lost or damage resulted from the peril of the sea
constitute a general average expense. or from some other causes for which neither the
master nor the owner was responsible and
So, in classifying the average, the Supreme Court concludes with the protestation against any liability
said that the average is classified into simple or of the owner of such loss or damage.
particular and general or gross average in the
Code of Commerce at the same time enumerates Upon the arrival at the point of destination, the
certain specific cases as coming specially as to one captain must rectify the protest within 24 hours.
or the other class. So the court said that while the

66
TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017
Edited by: Ace U.

 So, we mentioned earlier about the YA Rules.


Why is it important?

It I important to determine the liability in the


application of the YA Rules which allows the cargo
to coast-wise shipping and prohibit the same to
overseas trade. If the deck cargo is located with
the consent of the shipper on overseas trade, it
must always contribute to general average but if
the cargo was jettisoned it could not be entitled to
reimbursement as the cargo are loaded in the deck
which is a violation of the YA Rules.

On the other hand, if the deck cargo is located is


loaded with the consent of the shipper on the
coast-wise shipping, it must always contribute to
general average and the owner of the cargoes
which were jettisoned will be entitled to
reimbursement.

Why is there a distinction between a cargoes


loaded on deck in overseas and domestic trade?

Usually, in overseas trade, it is more exposed to risk,


that is why it not allowed.

67

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