Transpo Law Digest Compilation 7

Transportation Law Case Digests | Atty. Norianne Tan | 2016

8. Code of Commerce

Far Eastern Shipping Co. v CA – Yogue, Akira Switzerland v. Ramirez – Lim, Aubbrey Tabacalera Insurance Co. v. North Front Shipping, Inc. – Lim, Yvette Phil. Home Assurance Corp. v. CA – Miranda, Wayne Caltex Phils. V. Sulpicio Lines – Rivera, Camille

FAR EASTERNSHIPPING V. CA G.R. No. 130068; October 1, 1998

CASE: (consolidated case ditey so more haba more fun. Sorry)

M/V PAVLODAR, owned and operate by FESC arrived at Part of Manila from Vancouver, British Columbia. The vessel was assigned at Berth 4 of the Manila International Port. Capt. Gavino (pilot) was assigned by MPA to conduct the docking maneuvers for the safe berthing of said vessel to Berth No. 4. Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles were dropped. However, the anchor did not take hold as expected. The speed of the vessel did not slacken. After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern.Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the full-astern code. Before the right anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier. The vessel sustained damage too. PPA filed before RTC-Manila, a complaint for a sum of money against FESC, Capt. Senen C. Gavino and the Manila Pilots Association praying that the defendants therein be held jointly and severally liable to pay PPA actual and exemplary damages plus costs of suit. TC ruled in favor of PPA.

Issues: (1) Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage caused by the vessel to the pier, at the port of destination, for his negligence? NO!; (2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of the master of vessel and the pilot under a compulsory pilotage? YES; and (3) Did CA err in holding MPA jointly and solidarity liable with its member

pilot, Capt.Gavino, in the absence of employer-employee relationship and in applying Customs Administrative Order No. 15-65, as basis for the adjudged solidary liability of MPA and Capt. Gavino? NO!

SC ruled that in the case at bar, Capt. Gavino (pilot) failed to measure up to such strict standard of care and diligence required of pilots in the performance of their duties. (see full ratio). However, this does not mean that he will be solely liable. While it is indubitable that in exercising his functions a pilot is in sole command of the ship and supersedes the master for the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. Where a compulsory pilot is in charge of a ship, the master being required to permit him to navigate it, if the master observes that the pilot is incompetent or physically incapable, then it is the duty of the master to refuse to permit the pilot to act. But if no such reasons are present, then the master is justified in relying upon the pilot, but not blindly. Under the circumstances of this case, if a situation arose where the master, exercising that reasonable vigilance which the master of a ship should exercise, observed, or should have observed, that the pilot was so navigating the vessel that she was going, or was likely to go, into danger, and there was in the exercise of reasonable care and vigilance an opportunity for the master to intervene so as to save the ship from danger, the master should have acted accordingly. It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov (master of the vessel) was no less responsible for as master of the vessel he stood by the pilot during the maneuvering procedures and was privy to every move the latter made, as well as the vessel's response to each of the commands. His choice to rely blindly upon the pilot's skills, to the point that despite being appraised of a notice of alert he continued to relinquish control of the vessel to Gavino, shows indubitably that he was not performing his duties with the diligence required of him and therefore may be charged with negligence along with defendant Gavino.

As to 2nd issue, the stark incompetence of Kavankov is competent evidence to prove the unseaworthiness of the vessel. It has been held that the incompetence of the navigator, the master of the vessel or its crew makes the vessel unseaworthy.

As to the 3rd issue, CA, while affirming the trial court's finding of solidary liability on the part of FESC, MPA and Capt. Gavino, correctly based MPA's liability not on the concept of employer-employee relationship between Capt. Gavino and itself, but on the provisions of Customs Administrative Order No. 15-65.

Lim A. Lim Y. Miranda Rivera Santos Yogue

http://micvillamayor.weebly.com/case-digests/far-eastern-shipping-v-ca

Transportation Law Case Digests | Atty. Norianne Tan | 2016 FACTS: • The M/V PAVLODAR, flying under the flagship of the USSR, owned and

operated by the Far Eastern Shipping Company (FESC), arrived at the Port of Manila from Vancouver, British Columbia.

• The vessel was assigned Berth 4 of the Manila International Port, as its berthing space. Captain Roberto Abellana was tasked by the Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino was assigned by Manila Pilots Association (MPA) to conduct docking maneuvers for the safe berthing of the vessel to Berth No. 4.

• Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and proceeded to the Manila International Port. The sea was calm and the wind was ideal for docking maneuvers.

• When the vessel reached the landmark (the big church by the Tondo North Harbor) one-half mile from the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles were dropped. However, the anchor did not take hold as expected. The speed of the vessel did not slacken. A commotion ensued between the crew members. A brief conference ensued between Kavankov and the crew members. When Gavino inquired what was all the commotion about, Kavankov assured Gavino that there was nothing of it.

• After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern. Abellana noticed that the vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the full-astern code. Before the right anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier. The vessel sustained damage too.

• The Philippine Ports Authority (PPA), through the SolGen, filed before RTC-Manila, a complaint for a sum of money against FESC., Capt. Senen C. Gavino and the Manila Pilots Association praying that the defendants therein be held jointly and severally liable to pay PPA actual and exemplary damages plus costs of suit.

• TC, in its decision, ordered the defendants therein jointly and severally to pay the PPA the amount of P1,053,300.00 representing actual damages and the cost of suit.

• CA affirmed the findings of the court a quo except that it found no employer-employee relationship existing between MPA and Capt. Gavino. This being so, it ruled instead that the liability of MPA is anchored, not on Article 2180 of the Civil Code, but on the provisions of Customs Administrative Order No. 15-65, and accordingly modified said decision of the TC by holding MPA, along with its co-defendants therein, still solidarily liable to PPA but entitled MPA to reimbursement from Capt. Gavino for such amount of the adjudged pecuniary liability in excess of the amount equivalent to seventy-five percent (75%) of its prescribed reserve fund.

• Neither FESC nor MPA was happy with the decision of the Court of Appeals and both of them elevated their respective plaints to SC via separate petitions for review on certiorari. o FOR GR. NO. 130068: (relevant contention for issue #1&2) Petitioner FESC asserts that since the MV PAVLODAR was

under compulsory pilotage at the time of the incident, it was a compulsory pilot, Capt. Gavino, who was in command and had complete control in the navigation and docking of the vessel. It is the pilot who supersedes the master for the time being in the command and navigation of a ship and his orders must be obeyed in all respects connected with her navigation. Consequently, he was solely responsible for the damage caused upon the pier apron, and not the owners of the vessel. The master cannot be faulted for relying absolutely on the competence of the compulsory pilot. If the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot.

o FOR G.R. NO. 130150: (relevant contention for Issue #3) MPA avers the CA’s errors consisted in disregarding and

misinterpreting Customs Administrative Order No. 15-65 which limits the liability of MPA. Said pilots' association asseverates that it should not be held solidarily liable with Capt. Gavino who, as held by respondent court, is only a member, not an employee, thereof. There being no employer-employee relationship, neither can MPA be held liable for any vicarious liability for the respective exercise of profession by its members nor be considered a joint tortfeasor as to be held jointly and severally liable.

It further argues that there was erroneous reliance on Customs Administrative Order No. 15-65 and the constitution and by-laws of MPA, instead of the provisions of the Civil Code on damages



which, being a substantive law, is higher in category than the aforesaid constitution and by-laws of a professional organization or an administrative order which bears no provision classifying the nature of the liability of MPA for the negligence its member pilots.

• Upon motion by FESC in G.R. No. 130150, said case was consolidated with G.R. No. 130068.

ISSUES:

1. Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage caused by the vessel to the pier, at the port of destination, for his negligence? NO!

2. Would the owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of the master of vessel and the pilot under a compulsory pilotage? YES!

3. Did CA err in holding MPA jointly and solidarity liable with its member pilot, Capt.Gavino, in the absence of employer-employee relationship and in applying Customs Administrative Order No. 15-65, as basis for the adjudged solidary liability of MPA and Capt. Gavino? No!

HELD+RATIO:

1. THE PILOT OF A COMMERCIAL VESSEL, UNDER COMPULSORY PILOTAGE IS NOT SOLELY LIABLE FOR THE DAMAGE CAUSE BY THE VESSEL TO THE PIER, FOR HIS NEGLIGENCE.

G.R. No. 130068:

According to American Jurisprudence, there is a presumption of fault against a moving vessel that strikes a stationary object such as a dock or navigational aid. In the absence of sufficient proof in rebuttal, the presumption of fault attaches to a moving vessel which collides with a fixed object and makes a prima facie case of fault against the vessel.

WHO WAS NEGLIGENT, THE MASTER OF THE SHIP, THE HARBOR PILOT OR BOTH? IN THIS CASE, BOTH THE PILOT AND THE MASTER OF THE SHIP WAS NEGLIGENT. HENCE, SOLIDARILY LIABLE.

A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it is to guide vessels into or out of

ports, or in particular waters and (2) those entrusted with the navigation of vessels on the high seas.

It is quite common for states and localities to provide for compulsory pilotage, and safety laws have been enacted requiring vessels approaching their ports, with certain exceptions, to take on board pilots duly licensed under local law. In line with such established doctrines, Chapter II of Customs Administrative Order No. 15-65 prescribes the rules of compulsory pilotage in the covered pilotage districts, among which is the Manila Pilotage District, viz. –

PARAGRAPH I. - Pilotage for entering a harbor and anchoring thereat, as well as docking and undocking in any pier or shifting from one berth to another shall be compulsory, except Government vessels and vessels of foreign governments entitled to courtesy, and other vessels engaged solely in river or harbor work, or in a daily ferry service between ports which shall be exempt from compulsory pilotage provisions of these regulations: provided, however, that compulsory pilotage shall not apply in pilotage districts whose optional pilotage is allowed under these regulations.

Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and knowledge in respect to navigation in the particular waters over which his license extends superior to and more to be trusted than that of the master. A pilot should have a thorough knowledge of general and local regulations and physical conditions affecting the vessel in his charge and the waters for which he is licensed, such as a particular harbor or river. He is not held to the highest possible degree of skill and care, but must have and exercise the ordinary skill and care demanded by the circumstances, and usually shown by an expert in his profession. Under extraordinary circumstances, a pilot must exercise extraordinary care.

IN THIS CASE, CAPT. GAVINO FAILED TO MEASURE UP TO SUCH STRICT STANDARD OF CARE AND DILIGENCE REQUIRED OF PILOTS IN THE PERFORMANCE OF THEIR DUTIES.

• An act may be negligent if it is done without the competence that a reasonable person in the position of the actor would recognize as necessary to prevent it from creating an unreasonable risk of harm to another.



• Every man who offers his services to another, and is employed, assumes to exercise in the employment such skills he possesses, with a reasonable degree of diligence. Furthermore, there is an obligation on all persons to take the care which, under ordinary circumstances of the case, a reasonable and prudent man would take, and the omission of that care constitutes negligence.

• Prudence required that he, as pilot, should have made sure that his directions were promptly and strictly followed. Assuming that Capt. Gavino did indeed give the command to drop the anchor on time, as pilot he should have seen to it that the order was carried out, and he could have done this in a number of ways, one of which was to inspect the bow of the vessel where the anchor mechanism was installed.

As can be gleaned from the logbook, Gavino ordered the left anchor and two (2) shackles dropped at 8:30 AM. He ordered the engines of the vessel stopped at 8:31 AM. By then, Gavino must have realized that the anchor did not hit a hard object and was not clawed so as to reduce the momentum of the vessel. In point of fact, the vessel continued travelling towards the pier at the same speed.Gavino failed to react. At 8:32 AM, the (2) tugboats began to push the stern part of the vessel from the port side but the momentum of the vessel was not contained. Still, Gavino did not react. He did not even order the other anchor and two (2) more shackles dropped to arrest the momentum of the vessel. Neither did he order full-astern. It was only at 8:34 AM, or four (4) minutes, after the anchor was dropped that Gavino reacted. But his reaction was even (haphazard) because instead of arresting fully the momentum of the vessel with the help of the tugboats, Gavino ordered merely "half-astern". It took Gavino another minute to order a "full-astern". By then, it was too late. The vessel's momentum could no longer be arrested and, barely a minute thereafter, the bow of the vessel hit the apron of the pier. Patently, Gavino miscalculated. He failed to react and undertake adequate measures to arrest fully the momentum of the vessel after the anchor failed to claw to the seabed. When he reacted, the same was even (haphazard). Gavino failed to reckon the bulk of the vessel, its size and its cargo. He erroneously believed that only one (1) anchor would suffice and even when the anchor failed to claw into the seabed or against a hard object in the seabed, Gavino failed to order the other anchor dropped immediately. His claim that the anchor was dropped when the vessel was only 1,000

feet from the pier is but a belated attempt to extricate himself from the quagmire of his own insouciance and negligence.

THE NEGLIGENCE ON THE PART OF CAPT. GAVINO IS EVIDENT; BUT CAPT. KABANKOV IS NO LESS RESPONSIBLE FOR THE ALLISION. HIS UNCONCERNED LETHARGY AS MASTER OF THE SHIP IN THE FACE OF TROUBLOUS EXIGENCE CONSTITUTES NEGLIGENCE.

• While it is indubitable that in exercising his functions a pilot is in sole command of the ship and supersedes the master for the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. If, however, the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot, but not blindly.

• The master is not wholly absolved from his duties while a pilot is on board his vessel, and may advise with or offer suggestions to him. He is still in command of the vessel, except so far as her navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on and the usual precaution taken.

• A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of his duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of maintaining watchful vigilance over this risky maneuver.

• For, while the pilot Gavino may indeed have been charged with the task of docking the vessel in the berthing space, it is undisputed that the master of the vessel had the corresponding duty to countermand any of the orders made by the pilot, aid even maneuver the vessel himself, in case of imminent danger to the vessel and the port.

• In fact, in his testimony, Capt. Kavankov admitted that all throughout the man(eu)vering procedures he did not notice anything was going wrong, and even observed that the order given to drop the anchor, was done at the proper time. He even ventured the opinion that the accident occurred because the anchor failed to take hold but that this did not alarm him because there was still time to drop a second anchor. Under normal circumstances, the above-mentioned facts would have caused the master of a vessel to take charge of the situation and see to the man(eu)vering of the vessel himself. Instead,



Capt. Kavankov chose to rely blindly upon his pilot, who by this time was proven ill-equipped to cope with the situation.

• It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov was no less responsible for as master of the vessel he stood by the pilot during the man(eu)vering procedures and was privy to every move the latter made, as well as the vessel's response to each of the commands. His choice to rely blindly upon the pilot's skills, to the point that despite being appraised of a notice of alert he continued to relinquish control of the vessel to Gavino, shows indubitably that he was not performing his duties with the diligence required of him and therefore may be charged with negligence along with defendant Gavino.

2. YES. The stark incompetence of Kavankov is competent evidence to prove the unseaworthiness of the vessel. It has been held that the incompetence of the navigator, the master of the vessel or its crew makes the vessel unseaworthy.

Since the colliding vessel is prima facie responsible, the burden of proof is upon the party claiming benefit of the exemption from liability. It must be shown affirmatively that the pilot was at fault, and that there was no fault on the part of the officers or crew, which might have been conducive to the damage. The fact that the law compelled the master to take the pilot does not exonerate the vessel from liability. The parties who suffer are entitled to have their remedy against the vessel that occasioned the damage, and are not under necessity to look to the pilot from whom redress is not always had for compensation. The owners of the vessel are responsible to the injured party for the acts of the pilot, and they must be left to recover the amount as well as they can against him. It cannot be maintained that the circumstance of having a pilot on board, and acting in conformity to his directions operate as a discharge of responsibility of the owners. Except insofar as their liability is limited or exempted by statute, the vessel or her owner are liable for all damages caused by the negligence or other wrongs of the owners or those in charge of the vessel. Where the pilot of a vessel is not a compulsory one in the sense that the owner or master of the vessel are bound to accept him, but is employed voluntarily, the owners of the vessel are, all the more, liable for his negligent act.

In the United States, by admiralty law, the fault or negligence of a compulsory pilot is imputable to the vessel and it may be held liable

therefor in rem. Where, however, by the provisions of the statute the pilot is compulsory only in the sense that his fee must be paid, and is not in compulsory charge of the vessel, there is no exemption from liability. Even though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners are liable. But the liability of the ship in rem does not release the pilot from the consequences of his own negligence.

City of Manila v. Gambee stands for the doctrine that the pilot who was in command and complete control of a vessel, and not the owners, must be held responsible for an accident which was solely the result of the mistake of the pilot in not giving proper orders, and which did not result from the failure of the owners to equip the vessel with the most modern and improved machinery. In China Navigation Co v. Vidal, the pilot deviated from the ordinary and safe course, without heeding the warnings of the ship captain. It was this careless deviation that caused the vessel to collide with a pinnacle rock which, though uncharted, was known to pilots and local navigators. Obviously, the captain was blameless. It was the negligence of the pilot alone which was the proximate cause of the collision.

3. CA, while affirming the trial court's finding of solidary liability on the part of FESC, MPA and Capt. Gavino, correctly based MPA's liability not on the concept of employer-employee relationship between Capt. Gavino and itself, but on the provisions of Customs Administrative Order No. 15-65. (Sorry, upon reaching this part, my head exploaded. HINDI KO TALAGA NAGETS. NAKAKAIYAK!!)

FOR G.R. NO. 130150: The liability of MPA for damages is not anchored on Article 2180 of the New Civil Code as erroneously found and declared by the Court a quo but under the provisions of Customs Administrative Order No. 15-65, in tandem with the by-laws of the MPA. There being no employer-employee relationship, clearly Article 2180 of the Civil Code is inapplicable since there is no vicarious liability of an employer to speak of.

The pertinent provisions in Chapter I of Customs Administrative Order No. 15-65 are:

"PAR. XXVII.-- In all pilotage districts where pilotage is compulsory, there shall be created and maintained by the pilots or pilots' association, in the manner hereinafter prescribed, a reserve fund equal to P1,000.00 for each pilot thereof for the purpose of paying claims for damages to vessels or property caused through acts or



omissions of its members while rendered in compulsory pilotage service. In Manila, the reserve fund shall be P2,000.00 for each pilot.

PAR. XXVIII.-- A pilots' association shall not be liable under these regulations for damage to any vessel, or other property, resulting from acts of a member of an association in the actual performance of his duty for a greater amount than seventy-five per centum (75%) of its prescribed reserve fund; it being understood that if the association is held liable for an amount greater than the amount above-stated, the excess shall be paid by the personal funds of the member concerned.

PAR. XXXI.-- If a payment is made from the reserve fund of an association on account of damages caused by a member thereof, and he shall have been found at fault, such member shall reimburse the association in the amount so paid as soon as practicable; and for this purpose, not less than twenty-five per centum of his dividends shall be retained each month until the full amount has been returned to the reserve fund.

PAR. XXXIV. - Nothing in these regulations shall relieve any pilots' association or members thereof, individually or collectively, from civil responsibility for damages to life or property resulting from the acts of members in the performance of their duties.

Article 1207 of the Civil Code provides that there is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. Plainly, Customs Administrative Order No. 15-65, which as an implementing rule has the force and effect of law, can validly provide for solidary liability. Moreover, contrary to petitioners pretensions, the provisions of Customs Administrative Order No. 15-65 do not limit the liability of petitioner as a pilots' association to an absurdly small amount of seventy-five per centum (75%) of the member pilots' contribution of P2,000.00 to the reserve fund. The law speaks of the entire reserve fund required to be maintained by the pilots' association to answer (for) whatever liability arising from the tortious act of its members. And even if the association is held liable for an amount greater than the reserve fund, the association may not resist the liability by claiming to be liable only up to seventy-five per centum (75%) of the reserve fund because in such instance it has the right to be reimbursed by the offending member pilot for the excess. NOTES: On joint tortfeasors:

• It may be said, as a general rule, that negligence in order to render a person liable need not be the sole cause of an injury. It is sufficient that his negligence, concurring with one or more efficient causes other than plaintiff's, is the proximate cause of the injury. No actor's negligence ceases to be a proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury.

• There is no contribution between joint tortfeasors whose liability is solidary since both of them are liable for the total damage. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury. Where their concurring negligence resulted in injury or damage to a third party, they become joint tortfeasors and are solidarity liable for the resulting damage under Article 2194 of the Civil Code.

SWITZERLAND GENERAL INSURANCE COMPANY, LTD. v. RAMIREZ G.R. No. L-48264, February 21, 1980

CASE: A shipment of 60,000 bags of Urea Nitrogen was loaded on board a

vessel operated by Citadel Lines, Inc., which is the local agent in the Philippines of respondent Oyama Shipping Co., Inc. When the same was subsequently delivered to and received by the consignee, it was found to have sustained losses and/or damage. Upon paying the consignee, the petitioner insurance company was subrogated to the former’s rights and filed the present suit.

Citadel Lines argue that it is a mere agent of Oyama Shipping Co., Ltd., and not a ship agent and that granting that it is a ship agent, it contends that it should not be held liable because the principal, Oyama Shipping Co., Ltd. has been declared insolvent.

W/N Citadel Lines is a mere agent or a ship agent. A ship agent, according to Article 586 of the Code of Commerce, is

the person entrusted with the provisioning of a vessel or who represents her in the port in which she happens to be." In this case, upon arrival of the vessel S/S "St. Lourdes" in Manila, Citadel took charge of the unloading of the cargo and issued cargo receipts in its own name, and that claims


Transportation Law Case Digests | Atty. Norianne Tan | 2016 against the vessel S/S "St. Lourdes" for losses/damages sustained by shipments were in fact filed and processed by respondent Citadel Lines, Inc. These facts point to the inevitable conclusion that private respondent is the entity that represents the vessel in the port of Manila and hence is a ship agent within the meaning and context of Article 586 of the Code of Commerce. As such, it is liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing the value of the goods lost and or damaged. The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel Lines, Inc. is concerned. The law does not make the liability of the ship agent dependent upon the solvency or insolvency of the ship owner. Thus, the lower court erred in applying of the law of agency to the instant case. FACTS:

• 60,000 bags of Urea Nitrogen were shipped from Niihama Japan, on board the S/S St. Lourdes", claimed to be owned and operated by defendant Citadel Lines, Inc. The goods were consigned to Borden International Phils., Inc., and insured by petitioner for the sum of P9,319,105.00 against all risks.

• The shipment was discharged from the vessel S/S "St. Lourdes" shipside into lighters owned by Mabuhay Brokerage Company, Inc., but when the same was subsequently delivered to and received by the consignee, it was found to have sustained losses and/or damage amounting to P38.698.94.

• This amount was paid by petitioner insurance company to the consignee/assured, by virtue of which payment it became subrogated to the rights of the latter. Hence, petitioner filed a case against private respondents Oyama Shipping Co., Ltd., and Citadel Lines, Inc. which is the local agent of private, respondent Oyama Shipping Co., Inc. and/or Mabuhay Brokerage Co., Inc.

• Defendant Citadel Lines, Inc. filed an Answer alleging that defendant Citadel Lines was merely the civil agent in the Philippines for the Japanese firm Oyama Shipping Co., Ltd., which was the charterer of the vessel S/S "St. Lourdes", said vessel being owned by Companies Maritime de Brios, Sociedad Anonima a Panamanian corporation. It was further alleged that the principal agency relationship between the said Oyama Shipping Co., Ltd. and defendant Citadel Lines, Inc. was terminated on August 21, 1975 when the Tokyo District Court declared and decreed the insolvency of the said Oyama Shipping Co., Ltd.It was argued that defendant Citadel Lines "has always acted as an agent of a disclosed

principal and, therefore, the herein defendant is without any liability at all" in connection with the plaintiff's claim.

• RTC rendered a decision in favor of petitioner as against therein defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability.

ISSUE: Whether or not respondent Citadel Lines, Inc., the local agent of a foreign ocean going vessel, the S/S "St. Lourdes", may be held primarily liable for the loss/damage found to have been sustained by subject shipment while on board and/or still in the custody of the said vessel. YES. As a ship agent, it is solidarily with its principal, Oyama Shipping Co., Ltd. Petitioner’s argument:Citadel Lines, Inc., being the ship agent for the vessel S/S "St. Lourdes", is liable under the pertinent provisions of the Code of Commerce and applicable jurisprudence. Citadel Lines’ argument: It is a mere agent of Oyama Shipping Co., Ltd., and not a ship agent. The provisions of the Code of Commerce relied upon by petitioner are applicable to a ship agent, but not to a mere agent like private respondent, and that granting that it is a ship agent, it contends that it should not be held liable because the principal, Oyama Shipping Co., Ltd. has been declared insolvent. It is claimed that petitioner, upon being informed of the insolvency of the Oyama Shipping Co., Ltd., should have filed its claim before the Trustee of the Oyama Shipping Co., Ltd. in Japan. HELD + RATIO: The lower court’s finding that respondent Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd. was a result of its erroneous application of the law of agency to the instant case. • A ship agent, according to Article 586 of the Code of Commerce, is the

person entrusted with the provisioning of a vessel or who represents her in the port in which she happens to be."

• It is not disputed by the private respondent that it is the local representative in the Philippines of the Oyama Shipping Co., Ltd. and, as alleged by petitioner, upon arrival of the vessel S/S "St. Lourdes" in Manila, it took charge of the unloading of the cargo and issued cargo receipts (or tally sheets) in its own name, for the purpose of evidencing discharge of cargoes and the conditions thereof from the vessel to the arrastre operators and/or unto barges/lighters, and that claims against the vessel S/S "St. Lourdes" for losses/damages sustained by



shipments were in fact filed and processed by respondent Citadel Lines, Inc. These facts point to the inevitable conclusion that private respondent is the entity that represents the vessel in the port of Manila and hence is a ship agent within the meaning and context of Article 586 of the Code of Commerce.

• Considering the relationship of the parties, respondent Citadel Lines, Inc. cannot be considered as a "mere agent" under the civil law on agency as distinguished from a ship agent, within the context of the Code of Commerce. In Yu Biao Sontua & Co. v. Ossorio, it was held that the doctrines having reference to the relations between principal and agent cannot be applied in the case of ship agents and ship owners.

• It appearing that the Citadel Lines is the ship agent for the vessel S/S "St. Lourdes" at the port of Manila, it is, therefore, liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing the value of the goods lost and or damaged, amounting to P38,698.94, which was likewise the amount paid by petitioner, as insurer, to the insured consignee. The Code of Commerce provides, among others, that the ship agent shall also be liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freightage he may have earned during the voyage.

• The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel Lines, Inc. is concerned. The law does not make the liability of the ship agent dependent upon the solvency or insolvency of the ship owner.

Other of Commerce provision mentioned in the case: Art. 618. The captain shall be civilly liable to the ship agent and the latter to the third persons who may have made contracts with the former — 1. For all the damages sufferred by the vessel and its cargo by reason of want of skill or negligence on his part. If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code. 2. For all the thefts and robberies committed by the crew, reserving his right of action against the guilty parties. 3. For the losses, fines, and confiscations imposed on account of violation. of the laws and regulations of customs, police, health, and navigation 4. For the losses and damages caused by mutinies on board the vessel or by reason of faults committed by the crew in the service and defense of the same, if he does not prove Chat, he made full use of his authority to prevent or avoid them. 5. For those arising by reason of a misuse of powers and non-fulfillment of

the duties which pertain to him in accordance with Articles 610 and 612. 6. For those arising by reason of his going out of his course or taking a course which, in the opinion of the officers of the vessel, at a meeting attended by the shippers or super cargoes who may be on board, he should not have taken without sufficient cause. No exception whatsoever shall exempt him from his obligation. 7. For those arising by reason of his voluntarily entering a port other than his destination, with the exception of the cases or without the formalities referred to in Article 612. 8. For those arising by reason of the non-observance of the provisions contained in the regulations for lights and maneuvers for the purpose of preventing collisions.

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD., vs.

NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, G.R. No. 119197. May 16, 1997

Case: On August 2, 1990, North Front shipped 20,234 sacks of corn grains for Republic Mills. The vessel was inspected by representatives of the shipper and was found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by representatives of Republic. The vessel was even issued a permit to sail by the Coast Guard. When the goods arrived in Manila, it took Republic 20 days to completely unload the cargo due to variable weather conditions and stoppages for no reason. When all the goods were unloaded there was a shortage of 26.33 metric tons of grains and the remaining were already moldy, rancid and deteriorating. Hence Republic rejected the entire goods. The Petitioners paid Republic for P2,189,433.40 and were subrogated to its rights. They filed a case for damages against North Front. The TC and CA dismissed the case. The Supreme Court reversed the decision finding North Front, as a Common Carrier, should exercise extraordinary diligence and that in case of lost, it is presumed negligent. In this case, North Front failed to overcome the presumption of negligence. It failed to explain why there was spoilage and how it occurred. Also it was shown that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, as there were already several patches on them, hence, making it highly probable for water to enter. Furthermore, North Front cannot disclaim liability on the account that the grains were already wet


Transportation Law Case Digests | Atty. Norianne Tan | 2016 prior to shipping, since they failed to indicate it in the bill of lading. However, Republic should share in the amount of damages (40% of the amount of loss) for contributory negligence due to their delay in unloading the shipment. Facts:

• On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640 were shipped on board NORTH FRONT 777, a vessel owned by Respondent. The cargo was consigned to Republic Flour Mills Corporation (Republic) in Manila under Bill of Lading No. 001 and insured with petitioners.

• The vessel left Cagayan de Oro City on 2 August 1990 and arrived in Manila on 16 August 1990. Republic was advised of its arrival but it did not immediately commence the unloading operations. There were days when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all. When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were completed twenty (20) days after the arrival of the barge at the wharf of Republic in Pasig City.

• Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying.

• Republic rejected the entire cargo and formally demanded from North Front payment for damages suffered by it. Demands however were unheeded. Hence petitioner insurance companies paid Republic Flour for P2,189,433.40 and was subrogated to its rights.

• Petitioners filed a complaint for damages against North Front claiming that the loss was exclusively attributable to the fault and negligence of the carrier.

o The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty.

• North Front averred that they were not negligent and in fact Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the corn grains were farm wet and not properly dried when loaded.

TRIAL COURT:

• DISMISSED THE CASE, it ruled that the agreement between the parties is a charter agreement making North Front a private carrier (only required to exercise ordinary diligence). It ruled that North Front exercised ordinary diligence.

CA • AFFIRMED TC BUT CONSIDERED NORTH FRONT AS A

COMMON CARRIER and found that it was not negligent.

ISSUE: 1. Whether North Front is a Private Carrier? 2. Whether North Front is liable for damages?

RULING: (Reversed) ISSUE NO. 1

• The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. Since a public carrier will always be a public carrier. As ruled in the case of Planters Products, Inc. v. Court of Appeals: o a public carrier shall remain as such, notwithstanding the charter

of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter

• North Front is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier.

ISSUE NO. 2

• As a common carrier it is thus required to observe extraordinary diligence in the goods it transports. When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently. North Front therefore has the burden of



proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo.

• North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast Guard.

• The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. In Compania Maritima v. Court of Appeals -

o x x x x Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability x x x x

o The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and 'to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires'

• It was also found during trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of North Front as there were already several patches on them, hence, making it highly probable for water to enter.

• Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front failed to rebut all the arguments. It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or omission of the

shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e) order or act of competent public authority.

• Hence the Court ruled that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its care. It failed to rebut the prima facie presumption of private respondent's negligence.

• However, the court found Republic guilty of contributory negligence. It should be noted that it was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss.

PHILIPPINE HOME ASSURANCE CORP. v. CA and EASTERN SHIPPING LINES, INC.

G.R. No. 106999, June 20, 1996 General Average

CASE: ESLI loaded various shipments on board SS Eastern Explorer from Kobe, Janpan to Manila and Cebu. While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges. PHAC, after paying under protest and in behalf of the consignees, filed a complaint against ESLI.


Transportation Law Case Digests | Atty. Norianne Tan | 2016 The Court ruled that the carrier is loable because fire is not an act of God. Furthermore, the CA erred in concluding that the expenses incurred in saving the cargo are considered general average because the formalities required by the Code of Commerce were not complied. (See Ratio 2) FACTS: • Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer

in Kobe, Japan, various shipment (consists of engine parts, bags of ammonium chloride, bags of Glue 300 and garments) for carriage to Manila and Cebu, freight pre-paid and in good order and condition.

• While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship.

• SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned.

• After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges.

• The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees.

• PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under protest.

• Petitioner contends: that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI.

• Respondent contends: it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law.

• Trial Court: dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating that the burning of the vessel rendering it a constructive total loss and incapable of pursuing its voyage to the Philippines was, therefore, not the fault or negligence of defendant but a natural disaster or calamity which nobody would like to happen.

• CA affirmed.

ISSUES: 1) Who, between the carrier and consignee/insurer, is liable for the

additional charges or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different carrier.

2) Whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average.

HELD & RATIO: • It is worthy to note at the outset that the goods subject of the present

controversy were neither lost nor damaged in transit by the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment took longer than necessary.

1) CARRIER is liable because the fire cannot be considered an act of

God.

• Fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency.

• In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder, obviously fully loaded, was stored in the accommodation area near the engine room and not in a storage area considerably far, and in a safe distance, from the engine room. Moreover, there was no showing, and none was alleged by the parties, that the fire was caused by a natural disaster or calamity not attributable to human agency. On the contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain and its crew. o First, the acetylene cylinder which was fully loaded should not have

been stored in the accommodation area near the engine room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of spontaneous combustion. Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly inflammable material was in real danger of exploding because it was stored in close proximity to the engine room.



o Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed to be reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury.

o Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having complied with the safety measures and standards by qualified experts before it was loaded in the vessel only shows to a great extent that negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship.

2) YES, the CA erred in concluding that the expenses incurred in saving the cargo are considered general average.

• As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk (Art. 811, Code of Commerce).

• Other Applicable Laws: o Art 813. In order to incur the expenses and cause the damages

corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present. If the latter shall object, and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider certain measures necessary they may be executed under his responsibility, without prejudice to the right of the shippers to proceed against the captain before the competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence. If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable against the captain, unless the urgency of the case should be such that the time necessary for previous deliberations was wanting.

o Art 814. The resolution adopted to cause the damages which constitute general average must necessarily be entered in the log book, stating the motives and reasons for the dissent, should there be

any, and the irresistible and urgent causes which impelled the captain if he acted of his own accord. In the first case the minutes shall be signed by all the persons present who could do so before taking action, if possible; and if not, at the first opportunity. In the second case, it shall be signed by the captain and by the officers of the vessel. In the minutes, and after the resolution, shall be stated in detail all the goods jettisoned, and mention shall be made of the injuries caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he may make, within twenty-four hours after his arrival, and to ratify it immediately under oath.

• While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Articles 813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught.

• It indubitably follows that the cargo consignees cannot be made liable to respondent carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein petitioner the amount it paid under protest for additional freight and salvage charges in behalf of the consignees.

CALTEX (PHILIPPINES), INC. vs. SULPICIO LINES, INC, et al

G.R. No. 131166. September 30, 1999 CASE:

MT Vector, owned and operated by VSC, and MV Doa Paz, owned and operated by Sulpicio Lines, collided in the open sea. MV Doa Paz carried an estimated 4k passengers; many were not in the passenger manifest. BMI found that MT Vector, its registered operator Soriano, and its owner and actual operator VSC, were at fault and responsible for the collision. The wife and mother of a deceased passenger filed a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines. Sulpicio, in turn, filed a third-party complaint against Soriano, VSC and Caltex. CA held VSC and Caltex equally liable for damages.



(1) W/N the charterer of a sea vessel (Caltex) is liable for damages resulting from a collision between the chartered vessel and a passenger ship- NO

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. Caltex and Vector entered into a contract of affreightment, also known as a voyage charter. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.

(2) W/N a charter party agreement turn the common carrier into a private one- NO

The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyagecharter, which retains the character of the vessel as a common carrier. Public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter.

(3)W/N Caltex is liable for damages under the Civil Code-NO Special laws govern the relationship between the parties in this

case. Because of the implied warranty of seaworthiness,shippers of goods are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. As a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, there is no legal basis to hold Caltex liable for damages. FACTS:

• On Dec. 19, 1987, MT Vector, tramping motor tanker owned and operated by Vector Shipping Corporation (VSC), left Limay, Bataan, around 8pm, bound for Masbate, loaded with 8,800 barrels of petroleum products shipped by Caltex by virtue of a charter contract between them.

• On Dec. 20, 1987, at about 6:30 a.m., the passenger ship (owned and operated by Sulpicio Lines) MV Doa Paz left Tacloban port for Manila with a complement of 59 crew members and 1,493 passengers as indicated in the Coast Guard Clearance .

• The two vessels collided in the open sea within Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the incident.

• MV Doa Paz carried an estimated 4,000 passengers; many were not in the passenger manifest. Only 24 survived the tragedy. Among those who perished were public school teacher Sebastian Caezal and his daughter Corazon (11 y/o), both unmanifested passengers but proved to be on board the vessel.

• The board of marine inquiry found that MT Vector, its registered operatorFrancisco Soriano, and its owner and actual operator VSC, were at fault and responsible for the collision.

• Sebastian Caezal’s wife and mother filed a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines. Sulpicio, in turn, filed a third-party complaint against Soriano, VSC and Caltex. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that it was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vector’s highly flammable cargo ablaze.

• TC dismissed the third party complaint against Caltex. • CA held VSC and Caltex equally liable for damages.

ISSUE:

1. W/N the charterer of a sea vessel (Caltex) is liable for damages resulting from a collision between the chartered vessel and a passenger ship- NO

2. W/N a charter party agreement turn the common carrier into a private one- NO

3. W/N Caltex is liable for damages under the Civil Code.-NO

HELD & RATIO: 1. The charterer has no liability for damages under Philippine Maritime laws.

• The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other.

• A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which



the owner of a ship or other vessel lets the whole or part to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.

• A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.

• Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.

• Caltex and Vector entered into a contract of affreightment, also known as a voyage charter. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.

2. The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier.

• Public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned (Planters Products, Inc. vs. CA). A ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer

• Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment (Coastwise Lighterage Corporation v. CA).

3. Caltex is NOT liable for damages.

• Carriers are deemed to warrant impliedly the seaworthiness of the ship.

• The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in public service. The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Hence, considering the nature of the obligation between Caltex and MT Vector, the liability as found by CA is without basis.

• Special laws govern the relationship between the parties in this case. Because of the implied warranty of seaworthiness,shippers of goods are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.

• As a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, there is no legal basis to hold Caltex liable for damages.


Transpo Law Digest Compilation 7

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