D. Art.

652-689 – Charter Parties

Planters Products v. CA 226 SCRA 476 Sep 15, 1993 Misterio
Ouano v. CA 211 SCRA 740 Jul 23, 1992 Nalla
Caltex v. Sulpicio Lines 315 SCRA 709 Sep 30, 1999 Pelaez
Marimperio Compania v. CA 156 SCRA 368 Dec 14, 1987 Plaza
E. Art. 706-718, 353-375 – Bills of Lading
Keng Hua Paper Products v. CA G.R. No. 116863 Feb 12, 1998 Caballero
Macam v. CA G.R. No. 125524 Aug 25, 1999 Camasura
Roldan v. Lim Ponzo 37 PHIL 285 Dec 7, 1917 Ceballos
New Zealand v. Chua Joy 97 PHIL 646 Sep 30, 1955 Clark
Uy Chuaco v. Admiral Line 46 PHIL 418 Oct 7, 1924 Dalisay
F. Art. 719-731 – Loans on Bottomry & Respondentia
G. Art. 806-843 – Damages and Accidents in Maritime Commerce
Magsaysay v. Agan 96 PHIL 504 Jan 31, 1955 Lozada
Standard Oil v. Castelo G.R. No. 13695 Oct 18, 1921 Lucas
International v. Hamburg G.R. No. 11515 Jul 29, 1918 Misterio
Compagnie v. Hamburg 36 PHIL 590 Mar 31, 1917 Nalla
National Development v. CA 164 SCRA 593 Aug 19, 1988 Pelaez
Mecenas v. CA 180 SCRA 83 Dec 14, 1989 Plaza
Luzon Stevedoring v. CA 156 SCRA 169 Dec 3, 1987 Caballero
Lopez v. Duruelo 52 PHIL 229 Oct 22, 1928 Camasura
Caltex v. Sulpicio 315 SCRA 709 Sep 30, 1999 Ceballos
Manila Steamship v. Abdulhaman 100 PHIL 32 Sep 29, 1956 Clark
Planters Products vs. CA- Misterio
226 SCRA 476, September 15, 1993
Topic: Article 652-689 – Charter Parties

FACTS:

Planters Products, Inc. (PPI), purchased from Mitsubishi 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the
latter shipped in bulk aboard the cargo vessel M/V “Sun Plum” owned by private respondent KKKK from Alaska, U.S.A., to
La Union, Philippines.

Prior to its voyage, a time charter-party on the vessel M/V “Sun Plum” was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner.
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids, covered with three layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage.

Upon arrival of the vessel at her port of call, the steel pontoon hatches were opened with the use of the vessel’s boom.
Petitioner unloaded the cargo from the holds into its steelbodied dump trucks using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-party. The hatches remained open throughout the duration of the
discharge.

The Urea was transported to the consignee’s warehouse located some fifty meters from the wharf. It took eleven days
for PPI to unload the cargo. A private marine and cargo surveyor, CSCI, was hired by PPI to determine the “outturn” of
the cargo shipped. The survey report submitted by CSCI to the consignee (PPI) revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. In the Certificate
of Shortage/Damaged Cargo, PPI declared the shortage of 94.839 M/T and that about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and dirt.

PPI sent a claim letter to SSA, the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with
dirt.

Respondent SSA explained this “request” was denied by them because they “had nothing to do with the discharge of the
shipment.” Hence, PPI filed an action for damages with the CFI of Manila. The defendant carrier argued that the strict
public policy governing common carriers does not apply to them because they have become private carriers by reason of
the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant
carrier for the value of the goods lost or damaged.
On appeal, the CA reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost
or damaged. The appellate court ruled that the cargo vessel M/V “Sun Plum” was a private carrier and not a common
carrier by reason of the time charterer-party.

ISSUE:
Whether or not a common carrier becomes a private courier by reason of a charter party.

HELD:
No. A “charter-party” is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel
lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight; Charter parties are of two types: (a) contract of affreightment which involves the
use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by
demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its navigation, including the master and the crew, who are
his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 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
shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.
When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of
the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have
any control of the means in doing so carrier has sufficiently overcome, by clear and convincing proof, the prima facie
presumption of negligence. The hatches remained close and tightly sealed while the ship was in transit as the weight of
the steel covers made it impossible for a person to open without the use of the ship's boom. Bulk shipment of highly
soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent
during its unloading.

This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has sufficiently proved the inherent
character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which
further contributed to the loss.
On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due
diligence in order to minimize the loss or damage to the goods it carried.

Julius C. Ouano v. CA
G.R. No. 95900, July 23, 1992- Nalla

Fact:

Petitioner is the registered owner and operator of the motor vessel known as M/V Don Julio Ouano. On October 8, 1680,
petitioner leased the said vessel, for 60 thousand pesos, to respondent Florentino Rafols under a charter party. It was
expressly stipulated that the charterer should operate the vessel for his own benefit and should not sublet or sub-charter
the same without the knowledge and written consent of the owner. On Oct. 11, the same year, Rafols contracted with
respondent Market Developers, Inc. (MADE) under an agreement denominated as a ‘Fixture Note’ to transport 13, 000
bags of cement from Iligan City to General Santos City and consigned the same to one Julian Chua. The Fixture note did
not have the written consent of petitioner. On Oct. 03, petitioner wrote a letter to MADE to strongly request, if not
demand to hold momentarily any payment or partial payment whatsoever due M/V Don Julio Ouano until Rafols makes
goods his commitment to petitioner. But MADE paid Rafols the last installment of the freightage. Hence a complaint was
filed by herein petitioner in the RTC, which rendered a decision in favor of Ouano finding MADE, Chua and Rafols jointly
and severally liable. On appeal, CA reversed the decision and ruled that Ouano has no cause of action against MADE and
Chua, but only against Rafols.

Issue:

WON CA erred in not holding MADE and Chua liable for damages to petitioner.

Ruling:

No. The thesis of petitioner that the fixture note was in derogation of the prohibition against subletting or sub-charteing
of the vessel has been duly confuted by the responded court. It pointed out that Rafols did not, by entering into said
contract of transportation of the cement of cargo, thereby sublease the vessel. The possession, operation and
management of the vessel was not transferred to MADE but remained with Rafols as the lessee or charterer. Rafols was
the one who bound himself to transport as he did transport, the cargo of cement for a fixed price. It is a basic principle in
civil law that a contract can only bind parties who had entered into it or their successors who assumed their personalities
or their juridical positions, and that, as a consequence, such contract can neither favor nor prejudice a third person.

The contention that MADE and Chua should be held liable for damages for quasi-delict under Article 2176 CC for
having failed to obtain his consent before entering into an agreement with Rafols, and under 1314 CC for inducing Rafols
to violate the charter party is untenable. The obligation to obtain the written consent of petitioners before subleasing or
sub-chartening the vessel was on Rafols and not on MADE, hence the latter cannot be held liable for the supposed non-
compliance therewith.
CALTEX (PHILIPPINES), INC. vs. SULPICIO LINES, INC., et al.
G.R. No. 131166 September 30, 1999- Pelaez

Facts:
MT Vector left the port of Limay, Bataan, carrying petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex). MT
Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of
transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that particular voyage, the MT Vector
carried on board gasoline and other oil products owned by Caltex by virtue of a charter contract between
them. However, it collided during voyage with MV Doña Paz, a passenger and cargo vessel owned and operated by
Sulpicio Lines (hereafter Sulpicio), in the open sea within the vicinity of Dumali Point between Marinduque and Oriental
Mindoro. All the crewmembers of MV Doña Paz died, while the two survivors from MT Vector claimed that they were
sleeping at the time of the incident.

Teresita Cañezal, et al., bereaved families of the deceased passengers, filed a complaint for "Damages Arising from
Breach of Contract of Carriage" against Sulpicio in the Manila RTC. Sulpicio, in turn, filed a third party complaint against
Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT
Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped,
unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doña Paz in the open sea setting MT
Vector's highly flammable cargo ablaze. The RTC dismissed the third party complaint. However, the CA modified the
ruling and held Vector Shipping Co. and Caltex (Phils.), Inc. equally liable.

Issue:
Whether or not Caltex, the charterer, is liable for damages resulting from a collision between MT Vector and a MV Doña
Paz.

Ruling:
No. 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.

Caltex and Vector entered into a contract of affreightment, also known as a voyage charter.

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person
for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole
or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight.

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

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

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.

The nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes. Caltex
and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident
occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as
a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard
itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for
damages.
Note: MT Vector is a common carrier. Charter parties fall into three main categories: (1) Demise or bareboat, (2) time
charter, (3) voyage charter. Does a charter party agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of the parties. In this case, the charter party agreement
did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the
character of the vessel as a common carrier. MT Vector fits the definition of a common carrier under Article 1732 of the
Civil Code.
Marimperio Compania vs. CA
GR No. L-40234(156 SCRA 368)- Plaza
December 14, 1987

Facts:
Philippine Traders Corp and Union Import & Export Corp entered into a joint business to buy copra from Indonesia and
sell them to Europe. To facilitate the shipment of copra to Europe, the Union Import hires a vessel through intermediaries
without disclosing their name as principal. Union Import and Philippine Traders was able to hire a vessel and became a
sub-lessee of Interocean Shipping Company over the vessel “SS PAXOI” owned and operated by Marimperio Compania.
The contract entered into between the Interocean Shipping and Marimperio Compania is one of a “Uniform Time
Charter”. In the clause of charter party, payment of the hire has to be made every 15 day in advance.

The offer to load the copra was planned to be on March 29, 1965, however Philippine Trader and the Union Import was
twice in default in its payments which were supposed to be done in advance. Although the charterer made payment but it
was refused by Marimperio Compania. Marimperio Compania withdraw the vessel from Charterer’s service, this prompted
the Philippine Traders and the Union Import to file an action for specific performance. The lower court rendered judgment
in favor of the Philippine Traders and the Union Import.

Issue:
(1) W/N Philippine Traders and the Union Import have the legal capacity to bring the suit for specific performance
against Marimperio Compania based on the charter party?

(2) W/N the default of Charterer in the payment of the charter hire within the time agreed upon gives Marimperio
Compania a right to rescind the charter party extra-judicially?

Ruling:
First Issue
NO. The Supreme Court (SC) cites Article 1311 of the Civil Code which states that a contract takes effect between the
parties who made it and also their assigns and heirs except in cases where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. Since a contract may be violated
only by the parties thereto as against each other, in an action upon that contract , the real parties in interest either as
plaintiff or as defendant must be parties to the contract. Therefore a party who has not taken part in it cannot sue or be
sued for performance or for cancellation thereof, unless he shows that he has a real interest affected thereby.
Furthermore Article 652 of the Code of Commerce provides that the charter party shall contain among others the name,
surname, domicile of the charterer, and if he states that he is acting by commission that of the person for whose account
he makes the contract.

In this case however, shows that the Philippine Traders and Union Import obtained the charter party through Overseas
Steamship Co. without disclosing its personality to the charter as per its instruction and Interocean Shipping sub-lease the
vessel to Overseas Steamship Co. Applying Article 1311, Philippine Traders and the Union Import cannot sue Marimperio
Compania because the former is not a party to a charter-party entered into between Interocean and Marimperio. Even if
in truth it is the original charter the fact that it did not disclose that Overseas Shipping is merely acting as an agent.
Under 1883 of the Civil Code if an agent acts in his own name, the principal has no right of action against the persons
whom the agent has contracted neither have such persons against the principal.

Since it involves a sub-lease, wherein Philippine Traders and the Union Import was a sub-lessee, Marimperio Compania
being a lessor can bring an action against the lessee, and this is provided under Article 1651 and 1652 of the Civil Code.

Second Issue
YES. It is provided in Clause 6 of the Charter party that the party (owner of the vessel) has the right to withdraw the
vessel from the service of the charterers without noting any protest and without interference of any court in the event the
charterer defaults in the payment of hire. It is clear from the said clause that payment of hire was to be made every 15
days in advance. It is undisputed that the vessel “SS PAXOI” came on hire on March 27, 1965 but payment was only
made on April 7, 1965 indeed the charterer was already in default. A contract is a law between the contracting parties
and when there is nothing in it which is contrary to law, morals, good custom, public policy or public order, the validity of
the contract must be sustained. Thus the petitioner can rescind the charter party extra-judicially

G.R. No. 116863 February 12, 1998

KENG HUA PAPER PRODUCTS CO. INC., petitioner,
vs.
COURT OF APPEALS; REGIONAL TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
respondents.- Caballero

Facts:
Sea Land Service Inc. (Sea- Land) a shipping company, is a foreign corporation licensed to do business in the Philippines.
Keng Hua Paper Products Co., Inc. (Keng Hua) received at its Hong Kong terminal a sealed container, Container No.
SEAU 67523, containing 67 bales of "unsorted waste paper" for shipment to Sea- Land. A bill of lading to cover the
shipment was issued by Sea- Land.

The shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to Keng Hua
but the latter failed to discharge the shipment from the container during the "free time" period or grace period. The said
shipment remained inside Sea- Land’s container from the moment the free time period expired on July 29, 1982 until the
time when the shipment was unloaded from the container on November 22, 1983, or a total of four hundred eighty-one
(481) days. During the 481-day period, demurrage charges accrued. Within the same period, letters demanding payment
were sent by Sea- Land to Keng Hua who, however, refused to settle its obligation which eventually amounted to
P67,340.00.

Both RTC and CA held that the bill of lading was a valid and perfected contract between the shipper (Ho Kee), the
consignee (Keng Hua), and the carrier (Sea-Land). Section 17 of the bill of lading provided that the shipper and the
consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment
beyond the grace period allowed by tariff rules. Applying said stipulation, both RTC and CA found Keng Hua liable.
However, Keng Hua contends that it should not be bound by the bill of lading because it never gave its consent thereto.
Although Keng Hua admits "physical acceptance" of the bill of lading, it argues that its subsequent actions belie the
finding that it accepted the terms and conditions printed therein.

Issue:
WON Keng Hua is bound by the Bill of Lading.

Ruling:
Yes. SC affirms Keng Hua's liability for demurrage, but modify the interest rate thereon. A bill of lading serves two
functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper,
the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. A "bill of lading
delivered and accepted constitutes the contract of carriage even though not signed," because the "(a)cceptance of a
paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its
terms and conditions of which the acceptor has actual or constructive notice." In a nutshell, the acceptance of a bill of
lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same
was a perfected and binding contract.

Keng Hua admits that it "received the bill of lading immediately after the arrival of the shipment". Having been afforded
an opportunity to examine the said document, Keng Hua did not immediately object to or dissent from any term or
stipulation therein. It was only six months later, that Keng Hua sent a letter to Sea- Land saying that it could not accept
the shipment. Keng Hua’s inaction for such a long period conveys the clear inference that it accepted the terms and
conditions of the bill of lading. Moreover, said letter spoke only of Keng Hua’s inability to use the delivery permit, i.e. to
pick up the cargo, due to the shipper's failure to comply with the terms and conditions of the letter of credit, for which
reason the bill of lading and other shipping documents were returned by the "banks" to the shipper. The letter merely
proved Keng Hua’s refusal to pick up the cargo, not its rejection of the bill of lading.

Keng Hua’s reliance on the Notice of Refused or On Hand Freight, as proof of its nonacceptance of the bill of lading, is of
no consequence. Said notice was not written by Keng Hua; it was sent by Sea- Land to Keng Hua in November 1982, or
four months after Keng Hua received the bill of lading. If the notice has any legal significance at all, it is to highlight Keng
Hua’s prolonged failure to object to the bill of lading. Contrary to Keng Hua’s contention, the notice and the letter support
— not belie — the findings of the two lower courts that the bill of lading was impliedly accepted by Keng Hua.
Keng Hua’s attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate
customs, tariff and central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear
demonstration that taking delivery of the shipment has become legally impossible, cannot defeat the Keng Hua’s
contractual obligation and liability under the bill of lading. In the case at bar, the prolonged failure of Keng Hua to receive
and discharge the cargo from Sea- Land’s vessel constitutes a violation of the terms of the bill of lading. It should thus be
liable for demurrage to the former.

Notes:
1. Amount of Demurrage:
The amount of demurrage charges in the sum of P67,340 is a factual conclusion of the trial court that was affirmed by
the Court of Appeals and, thus, binding on this Court. Besides, such factual finding is supported by the extant evidence.
The apparent discrepancy was a result of the variance of the dates when the two demands were made. Necessarily, the
longer the cargo remained unclaimed, the higher the demurrage.

2. Bill of Lading Separate from Other Letter of Credit Arrangements

In a letter of credit, there are three distinct and independent contracts:
(1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the
letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein.
"Few things are more clearly settled in law than that the three contracts which make up the letter of credit arrangement
are to be maintained in a state of perpetual separation." 28 A transaction involving the purchase of goods may also
require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the
same locale or country, and the goods purchased have to be transported to the latter.

Hence, the contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of
the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the
buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the
contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract
of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to
it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of
the shipper in the bill of lading and to verify their accuracy vis-a-viz the commercial invoice and the letter of a credit.
Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot
negate Keng Hua’s obligation to Sea- Land arising from the contract of transportation. Furthermore, Sea- Land, as carrier,
had no knowledge of the contents of the container. The contract of carriage was under the arrangement known as
"Shipper's Load And Count," and shipper was solely responsible for the loading of the container while carrier was
oblivious to the contents of the shipment. Keng Hua’s remedy in case of overshipment lies against the seller/shipper, not
against the carrier.

3. Payment of Interest
Keng Hua posits that it "first knew" of the demurrage claim of P67,340 only when it received, by summons, Sea- Land’s
complaint. Hence, interest may not be allowed to run from the date of Sea-Land’s extrajudicial demands on March 8,
1983 for P50,260 or on April 24, 1983 for P37,800, considering that, in both cases, "there was no demand for interest."

The case before us involves an obligation not arising from a loan or forbearance of money; thus, pursuant to Article 2209
of the Civil Code, the applicable interest rate is six percent per annum. Since the bill of lading did not specify the amount
of demurrage, and the sum claimed by Sea-Land increased as the days went by, the total amount demanded cannot be
deemed to have been established with reasonable certainty until the trial court rendered its judgment. Indeed,
"(u)nliquidated damages or claims, it is said, are those which are not or cannot be known until definitely ascertained,
assessed and determined by the courts after presentation of proof."

Macam vs. CA
GE No. 125524, August 25, 1999

Facts:
On 6 April 1989, petitioner Benito Macam shipped on board the vessel Nen Jiang, owned and operated by respondent
China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. boxes of watermelons and
mangoes which were covered by bill of ladings and exported through letters of credit issued by National Bank of Pakistan,
Hongkong (Pakistan Bank). The Bills of Lading contained the following pertinent provision: “One of the Bills of Lading
must be surrendered duly endorsed in exchange for the goods or delivery order.” The shipment was bound for Hongkong
with Pakistan Bank as consignee and Great Prospect Company of Kowloon, Hongkong (GPC) as notify party.
On 6 April 1989, copies of the bills of lading and commercial invoices were submitted to petitioner’s depository bank,
Consolidated Banking Corporation (Solidbank), which paid petitioner in advance the total value of the shipment.

Upon arrival in Hongkong and after receiving a telex instruction, the shipment was delivered by respondent Wallem
directly to GPC, not to Pakistan Bank, and without the required bill of lading having been surrendered. Subsequently, GPC
failed to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay petitioner
through Solidbank.

Issue:
Is Wallem liable for the goods it delivered to GPC without presentation of the bills of lading and bank guarantee?

Held:
NO. Wallem is not liable for the following reasons:

1. It delivered the goods to the person who has the right to receive them. This is in accordance with Art. 1736
which states that: The extraordinary responsibility of the common carriers lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive
them, without prejudice to the provisions of article 1738. GPC, even though designated as the notify party in the
bills of lading, was clearly named as buyer/importer in the export invoices.

2. The petitioner sent instructions through telex to deliver various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective shipper’s request since “for prepaid
shipt ofrt charges already fully paid.” GPC is listed as one among the several consignees in the telex.

Roldan v. Lim Ponzo & Co- Ceballos

G.R. No. 11325
Dec. 7, 1917

Facts:
Roldan entered into a contract with Lim Ponzo & Co for te delivery of 2,244 packages of sugar to Iloilo. The lorcha of Lim
had been wrecked in Jalaud River resulting to the loss of the sugar and only 1,022 packages were saved in a more or less
damaged condition. Roldan now seeks to recover damages of the of sugar in the amount of 3,780.12. The trial court
dismissed the case before all the evidences were presented and the Lim could call on any of its witnesses on the ground
that it was niether alleged or proved by Roldan that he complied with Art. 366 of the Commercial Code which states that:

Art. 366. "Within the twenty-four hours following the receipt of the merchandise a claim may be brought against the
carrier on account of damage or average found therein on opening the packages, provided that the indication of the
damage of average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said
claim would only be admitted on the receipt of the packages.

"After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall
be admitted against the carrier with regard to the condition
in which the goods transported were delivered."

Issue:

WON Art. 366 is applicable in the present case.

Held:

No, it is not applicable. Art. 366 limited to cases of claims for damage to goods actually turned over by the carrier and
received by the consignee, whether those damages be apparent from an examination of the packages in which the goods
are delivered, or of such a character that the nature and extent of the damage is not apparent until the packages are
opened and the contents examined.
In the present case, since the goods entrusted to Lim was never delivered to Roldan, as it was lost in a wreck, Art. 366 is
not applicable.

Art. 366’s object is for the carrier to verify all such claims at the time of delivery or within twenty-four hours thereafter,
and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods
while the matter is still fresh in the minds of the parties.

To this end provision is made in article 367 of the Code for the prompt settlement of disputes as to the nature and extent
of the alleged damages, and for the final disposition of the damaged goods.
Art. 367. If there should occur doubts and disputes between the consignee and the carrier with regard to the
condition of goods transported at the time of their delivery to the former, the said goods shall be examined by experts
appointed by the parties, and a third one, in case of disagreement, appointed by the judicial authority, the result of the
examination always being reduced to writing; and if the persons interested should not agree to the report of the experts
and could not reach an agreement, said judicial authority shall have the merchandise deposited in a safe warehouse, and
the parties interested shall make use of their rights in the proper manner.

The failure to make a claim for damages under Art. 366 does not affect the respective rights of the parties. Since the
claim of Roldan is founded on damages based on the contract to transport goods, Art. 366 is not applicable.

The case was remanded to the trial court.

NEW ZEALAND INSURANCE CO., vs. ADRIANO CHOA JOY, ETC.,

G.R. No. L-7311 September 30, 1955- Clark

FACTS:
On May 20, 1950, the ship "Jupiter",received on board at Carangian, Samar, in good order and condition, 107 bundles of
first class loose weight hemp from Lee Teh & Co., Inc., for transportation and delivery to Manila, under a bill of lading
issued by the carrier to the shipper. The ship was owned by Adriano Choa Joy, doing business under the name of South
Sea Shipping Line, while the cargo was shipped by the branch office of Lee Teh & Co., Inc. at Carangian, Samar, for
transportation and delivery to its main office at Manila.

The cargo failed to arrive in Manila because the vessel ran aground while entering the Laoang Bay, Samar, on May 20,
1950, due to the negligence of its captain, Jose Molina, who, in the investigation conducted by the Marine Board of
Inquiry, was found negligent of his duties and was suspended from office for a period of three months. Of the cargo, only
7,590 kilos, or 120 piculs of hemp, were saved and because of their damaged condition, they were sold for the sum of
P2,040, the consignor having spent P500 for their salvage, thereby causing Lee Teh & Co., Inc. losses in the sum of
P5,196.20.

The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage caused to said cargo while in
transit, the losses were paid by said company to the shipper. The carrier having refused to reimburse these damages
despite demands made to that effect, the insurance company, as subrogee of the shipper instituted the present action
before the Court of First Instance of Manila.

After the parties had presented their evidence, the court found that, while the shipper had suffered damages because of
the inability of the carrier to transport the cargo as agreed upon, however, the liability of the carrier did not attach
because of the failure of the shipper or of the consignee to file its claim for damages within 24 hours from receipt of the
cargo as required by law. Consequently, the court dismissed the case, with costs against the plaintiff. Plaintiff brought
this case on appeal directly to this Court.

Issue:
"Whether Lee Teh & Co., Inc, of Manila, as consignee, or Lee Teh & Co., Inc. of Catarman, Samar, as consignor, should
have filed its claim for damages to the cargo with the shipping company, herein defendant, within twenty four hours from
the date the said cargo was salvaged by the consignor, in accordance with Article 366 of the Code of Commerce?

RULING: NO.

Article 366 of the Code of Commerce, which was applied by the court, provides:
Within twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average
which may be found therein upon opening the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of such packages, in which case the
claim shall be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted
against the carrier with regard to the condition in which the goods transported were delivered.

It would appear from the above that in order that the condition therein provided may be demanded there should be a
consignment of goods, through a common carrier, by a consignor in one place to a consignee in another place. And said
article provides that the claim for damages must be made "within twenty-four hours following the receipt of the
merchandise" by the consignee from the carrier. In other words, there must be delivery of the merchandise by the carrier
to the consignee at the place of destination.

In the instant case, the consignor is the branch office of Lee Teh & Co., Inc., at Catarman, Samar, which placed the cargo
on board the ship Jupiter, and the consignee, its main office at Manila. The lower court found that the cargo never
reached Manila, its destination, nor was it ever delivered to the consignee, the office of the shipper in Manila, because the
ship ran aground upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case, it follows that
the aforesaid article 366 does not have application because the cargo was never received by the consignee. Moreover,
under the bill of lading issued by the carrier (Exhibit C), it was the letter's undertaking to bring the cargo to its
destination—Manila,—and deliver it to consignee, which undertaking was never complied with. The carrier, therefore,
breached its contract, and, as such, it forfeited its right to invoke in its favor the conditions required by article 366.

One case parallel to the present is Roldan vs. Lim Ponzo & Co., 37 Phil., 285. In that case, plaintiff sought to recover
damages for failure of defendant to transport 2,244 packages of sugar from plaintiff's hacienda to Iloilo. It was proven
that the cargo did not reach its destination because the lorcha carrying it was wrecked in the river Jalaud through the
negligence and lack of skill of the master of the lorcha. And of the total cargo of 2,244 packages of sugar, only 1,022
were saved in damaged condition through the efforts made by the shipper. Because plaintiff failed to comply with the
requirement of article 366 of the Code of Commerce, the lower court found for defendant and dismissed the case. But
this Court held that said article "is limited to cases of claims for damages to goods actually received by the consignee; it
has no application in cases wherein the goods entrusted to the carrier are not delivered to the consignee by the carrier in
pursuance of the terms of the carriage contract." Elaborating on this point, this Court commented:

Article 366 of the Commercial Code is limited to cases of claims for damages to goods actually turned over by the carrier
and received by the consignee, whether those damages be apparent from an examination of the packages in which the
goods are delivered, or of such character that the nature and extend of the damage is not apparent until the packages
are opened and the contents examined. Clearly it has no application in cases wherein the goods entrusted to the carrier
are not delivered by the carrier to the consignee. In such cases there can be no question of a claim for damages suffered
by the goods while in transport, since the claim for damages arises exclusively out of the failure to make delivery. . . .

It is true that in the instant case there is some disagreement as to whether the salvage of the portion of the cargo that
was saved was due to the efforts of the carrier itself or to the combined efforts of the latter and the shipper as a result of
which the salvaged cargo was placed in possession of the shipper who sold it and deducted its proceeds from the liability
of the carrier. But this discrepancy, in our opinion, would seem to be immaterial because the law as well as the contract
contemplates delivery of the cargo to the consignee at its port of destination in order that the benefit of the law may be
availed of. The liability of the carrier must be determined in the light of the carriage contract, and since that contract calls
for reciprocal obligations, the carrier cannot demand fulfillment of its part from the shipper or consignee unless it first
complies with its own obligation. (Article 1100, old Civil Code.) The fact that the consignor is but the branch office of the
company that shipped the goods, and the consignee is the main office at Manila, is of no moment, because the duties of
each party under the law are different. Moreover, even if the consignor and the consignee be considered as one and the
same party, still the carrier cannot disclaim responsibility under its contract for the simple reason that it failed to comply
with its obligation to bring the cargo to its destination. This breach alone justifies its liability under the carriage contract.
UY CHACO SONS & CO. V. ADMIRAL LINE 46 PHIL 418
46 Phil 418 October 7, 1924- Dalisay

Facts:
Plaintiff Mariano Uy Chaco Sons & Co. alleges that upon arrival of the S. S. Satsuma at the port of Manila, there were
short-delivered one case of varnish and paint remover and fifty bales of oakum, for the conversion of which, defendant is
liable.

Defendant Admiral Line argues that the merchandise had been delayed, had been found, and delivery thereof had been
tendered and rejected.

It appears that the interval which elapsed between the date when the merchandise should have been delivered and the
presentation of the complaint was approximately 11 months. The delay which ensued between the date when the
merchandise should have been delivered and the date when it was finally tendered was close to 2 years and 4 months.
The time which passed between the date when the merchandise should have been delivered and the date when the
defense of tender was set up, was over 3 years.

Issue:
Whether or not defendant is guilty of conversion.

Held:
Yes. As a general rule, mere delay in the delivery of goods by a common carrier, no matter how long continued, is not a
conversion thereof, but is only a breach of the contract of carriage. Therefore, where a carrier fails to deliver goods within
a reasonable time, although he thereby makes himself liable for the damages incurred by reason of the delay, the
consignee cannot refuse to accept the goods from him and recover their value but is compelled to receive them.

However, a demand and a refusal to deliver is sometimes essential to show a conversion. Even after demand, if the
goods are tendered before a suit is brought, the consignee cannot refuse to receive the goods and sue for conversion, his
sole remedy being an action for damages resulting from the delay.

Though the carrier may delay ever so long, the owner cannot charge him with a conversion, or for the value of the goods,
if they are safely kept, unless they have been demanded of the carrier and their delivery refused.

Where property in the hands of a common carrier is not delivered within a reasonable time after it has reached its
destination, the carrier, in the absence of any legal exemption and after demand has been made and delivery refused, is
liable for a conversion of the property. The consignee, under such circumstances, may elect to waive all the title to the
property and sue for conversion, and after he has done so, a subsequent tender by the carrier will not be available for it
as a defense.

A tender of the property, to be effectual, must have been made within the time in which the defendant was entitled to
deliver it and the plaintiff bound to receive it. In this case, the tender made was not until long after the lapse of this
period, and, not being accepted, is no bar to plaintiff’s right to recover.

A delay of more than 2 years in making delivery was conclusively unreasonable. A delay in pressing a defense predicated
on tender, of more than 2 years counted from the date when the complaint was filed, was likewise unreasonable.
Defendant was unable to turn the goods over to plaintiff at any time before the complaint was presented, and in fact,
could not do so until a long time thereafter. From the foregoing, defendant was in effect guilty of conversion and must
accordingly respond for the value of the property at the time of conversion.
G. Art. 806-843 – Damages and Accidents in Maritime Commerce

G.R. No. L-6393. January 31, 1955

A. MAGSAYSAY, INC. v. ANASTACIO AGAN- Lozada

Topic: under Art. 806-843 – Damages and Accidents in Maritime Commerce

FACTS:
The SS "San Antonio", owned by plaintiff A. Magsaysay Inc., left Manila bound for Basco, Batanes with general cargo
belonging to different shippers, among them the defendant Anastacio Agan. The vessel reached Aparri, and after a day’s
stopover in that port, weighed anchor to proceed to Basco. But while still in port, it ran aground at the mouth of the
Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff had it refloated by the Luzon
Stevedoring Co. at an agreed compensation. Once afloat, the vessel returned to Manila to refuel and then proceeded to
Basco, the port of destination. There the cargoes were delivered to their respective owners or consignees, who, with the
exception of defendant, made a deposit or signed a bond to answer for their contribution to the average.

Defendant, in his answer, denies liability for the amount, alleging, among other things, that the stranding of the vessel
was due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat did not
constitute general average

ISSUE:
Whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the
cargo owners

RULING:
No. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo
which have not inured to the common benefit (Art. 809, and are, therefore, to be borne only by the owner of the
property which gave rise to the same (Art. 810); while general or gross averages include "all the 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). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812).

In classifying averages into simple or particular and general or gross and defining each class, the Code (Art. 809 and 811)
at the same time enumerates certain specific cases as coming specially under one or the other denomination. Going over
the specific cases enumerated we find that, while the expenses incurred in putting plaintiff’s vessel afloat may well come
under number 2 of article 809 — which refers to expenses suffered by the vessel "by reason of an accident of the sea or
force majeure" — and should therefore be classified as particular average, the said expenses do not fit into any of the
specific cases of general average enumerated in article 811. No. 6 of this article does mention "expenses caused in order
to float a vessel," but it specifically refers to "a vessel intentionally stranded for the purpose of saving it" and would have
no application where, as in the present case, the stranding was not intentional

The requisites for general average:

1. there must be a common danger;
2. that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately;
3. that from the expenses or damages caused follows the successful saving of the vessel and cargo; and
4. that the expenses or damages should have been incurred or inflicted after taking proper legal steps and
authority.

It is the deliverance from an immediate, impending peril, by a common sacrifice, that constitutes the essence of general
average. (The Columbian Insurance- Company of Alexandria v. Ashby & Stribling Et. Al., 13 Peters 331; 10 L. Ed., 186).
In the present case there is no proof that the vessel had to be put afloat to save it from an imminent danger. What does
appear from the testimony of plaintiff’s manager is that the vessel had to be salvaged in order to enable it "to proceed to
its port of destination." But as was said in the case just cited, it is the safety of the property, and not of the voyage,
which constitutes the true foundation of general average.

With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit
of the vessel — to enable it to proceed to destination — and not for the purpose of saving the cargo, the cargo owners
are not in law bound to contribute to the expenses.
STANDARD OIL COMPANY OF NEW YORK, Plaintiff-Appellee, vs. MANUEL LOPEZ CASTELO

Topic: Damage and Accident in maritime commerce- Lucas

Facts:

 By contract of character Manuel Lopez Castelo(owner), let the small interisland steamer Batangueño for the term
of one year to Jose Lim Chumbuque for use in the conveying of cargo between certain ports of the Philippine
Islands.
 It was stipulated in the contract that:

1. the officers and crew of the Batangueño should be supplied by the owner

2.the charterer should have no other control over the captain, pilot, and engineers than to specify the voyages
that they should make and to require the owner to discipline or relieve them as soon as possible in case they
should fail to perform the duties respectively assigned to them.

 While the boat was being thus used by the charterer in the interisland trade, the standard Oil Company delivered
to the agent of the boat in Manila a quantity of petroleum to be conveyed to the port of Casiguran, in the
Province of Sorsogon.
 For this consignment a bill of lading of the usual form was delivered, with the stipulation that freight should be
paid at the destination.
 Said bill of lading contained no provision with respect to the storage of the petroleum , but it was in fact placed
upon the deck of the ship and not in the hold.
 While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, a violent typhoon
passed over that region, and while the storm was at its height the captain was compelled for the safety of all to
jettison the entire consignment of petroleum consisting of two hundred cases.
 When the storm abated the ship made port, and thirteen cases of the petroleum were recovered, but the
remainder was wholly lost.

 Hence an action was made by Standard Oil for the recovery of Petroleum and Jettisoned but was not recovered
against the shipowner where RTC ruled for Standard oil.
 No question is made upon the point that the captain exercised proper discretion in casting this petroleum
overboard, as a step necessary to the salvation of the ship; and in fact it appears that even after the vessel was
thus eased, she was with difficulty prevented from capsizing, so great was the intensity of the storm.

Issue: Who is liable for the loss of the cargo?

Held: The shipowner.

 The Marine Regulations now in force in these Islands contain provisions recognizing the right of vessels engaged
in the interisland trade to carry deck cargo; and express provision is made as to the manner in which it shall be
bestowed and protected from the elements (Phil. Mar. Reg. [1913], par 23).
 gasoline, which from its inflammable nature is not permitted to be carried in the hold of any passenger vessel,
though it may be carried on the deck if certain precautions are taken. There is no express provision declaring that
petroleum shall be carried on deck in any case; but having regard to its inflammable nature and the known
practices of the interisland boats, it cannot be denied that this commodity also, as well as gasoline, may be
lawfully carried on deck in our coatwise trade.
 The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the coastwise trade
than upon those used for ordinary ocean borne traffic is to be found of course in the circumstance that in the 1.
coastwise trade the boats are small and voyages are short , with the result that the coasting vessel can use more
circumspection about the condition of the weather at the time of departure ; and if threatening weather arises,
she can often reach a port of safety before disaster overtakes her.
 Another consideration is that the 2. coastwise trade must as a matter of public policy be encouraged, and
domestic traffic must be permitted under such conditions as are practically possible, even if not altogether ideal.c
  it is evident that the loss of this petroleum is a general and not a special average, with the result that the plaintiff
is entitled to recover in some way and from somebody an amount bearing such proportion to its total loss as the
value of both the ship and the saved cargo bears to the value of the ship and entire cargo before the jettison was
effected.
 it is important to remember that the owner of the ship ordinarily has vastly more capital embarked upon a
voyage than has any individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain,
has complete and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of
the cargo at the end of the voyage.
 It is therefore proper that any person whose property may have been cast overboard by order of the captain
should have a right of action directly against the ship's owner for the breach of any duty which the law may have
imposed on the captain with respect to such cargo.
 To adopt the interpretation of the law for which the appellant contends would place the shipowner in a position
to escape all responsibility for a general average of this character by means of the delinquency of his own
captain.
 The evident intention of the Code, taken in all of its provisions, is to place the primary liability upon the person
who has actual control over the conduct of the voyage and who has most capital embarked in the venture,
namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who
have been drawn into the venture as shippers.

International Harvester Company in Russia (International) vs. Hamburg-American Line (Hamburg)

G.R. No. L-11515, July 29, 1918
Topic: Article 806-843 (Damages and Accidents in Maritime Commerce)- Misterio

FACTS:

In the spring of 1914 a German vessel undertook to carry merchandise, the property of an American, corporation, from
Hamburg to Vladivostock, reserving the right in case of inability to effect discharge at the port of destination to forward
the same at its own expense by some other means.

The bill of lading which was issued to International provides, that the goods should be forwarded by the defendant
company from Hamburg to Vladivostock at the ship's expense but at the risk of the owner of the goods.

When the voyage was almost completed, war broke out between Germany and Russia, and the ship put in to the port of
Manila, where it was interned. The captain did not elect to discharge the cargo, and refused to surrender it to the owner,
who recovered possession by means of an action of replevin.

Held: That while the out-break of war absolved the ship from its obligation to carry the cargo to the Russian port, it was
nevertheless liable for the cost of forwarding the cargo by another line, the full freight having been received by the ship
at the commencement of the voyage.

ISSUE:

Whether the defendant is liable for the expenses of transferring the cargo to another ship and transporting it to the port
of destination.

HELD:

Yes. That while the out-break of war absolved the ship from its obligation to carry the cargo to the Russian port, it was
nevertheless liable for the cost of forwarding the cargo by another line, the full freight having been received by the ship
at the commencement of the voyage.

The outbreak of war between two powers does not abrogate a contract between a subject of one of the belligerents and
the subject of a neutral power; and though the contract may thus become impossible of exact performance, it will still be
given effect if it can by any reasonable construction be treated as still capable of being performed in substance.
Further, a stipulation in a bill of lading emitted in a foreign country to the effect that all disputes arising under the
con-tract shall be decided exclusively in the courts of the country wherein the contract is made can not have the effect of
defeating the jurisdiction of the courts of the Philippine Islands, in any case involving the application of such contract, and
properly coming before those courts.

Compagnie v. Hamburg 36 PHIL 590 Mar 31, 1917 Nalla

COMPAGNIE VS. HAMBURG

(March 31, 1917)

Facts:
In July 1914, defendant’s vessel undertook to carry a cargo of rice mean in the French port of Saigon for delivery to
Dunkirk under a contract of affreightment with a French shipper. While the loading of the cargo was made, rumors of the
outbreak of war between French and Germany spread. The master of the Germany vessel, after completion of the loading
of the cargo and after being refused by the French Governor at Saigon for a pass or safe-conduct, fled with his vessel and
her cargo and took refuge in Manila. Considering the nature of the cargo and its impossibility of being delivered to its
destination within reasonable time, the master of the vessel consulted the shipper’s instructions as to the disposition of
the cargo, but the shipper’s agent refused to assume responsibility. Defendant’s agent in Manila, upon the court’s
authority secured by the master of the vessel, sold said rice meal and deposited the proceeds thereof with the court
minus the expenses incident to the sale. Plaintiff filed an action for recovery of the proceeds of the sale and the resulting
damages. Defendant also claimed, in a cross-complaint, contribution from plaintiff for general average for the expenses
incurred by the vessel’s stay in Manila. Trial court decided for the plaintiff including damages for defendant’s breach of
the charter party. Both parties appealed.

Ruling:
The danger from which the master of the vessel fled was a real and not merely an imaginary one. Seizure at the hands of
the enemy, though not inevitable, was a possible outcome of a failure to leave the port of Saigon; and it cannot be said
that under the conditions existing at the time when the master elected to flee from that port, there were no grounds for a
reasonable apprehension of danger from seizure by French authorities, and therefore no necessity for flight. The
deviation of the vessel therefore, from the route prescribed in her charter party, and the subsequent abandonment by the
master of the voyage contemplated in the contract of affreightment, must be held to have been justified by the necessity
under which the master was placed to elect that course which would remove and preserve the vessel from danger of
seizure by the public enemy of the flag which the vessel sailed; and that neither the vessel nor her owners are liable for
the resultant damages suffered by the owner of the cargo. The claim for general average by the shipowner, however,
cannot be sustained under the provisions of the York-Antwerp Rules. An examination of the entire body of these rules
discloses that general average is never allowed
thereunder unless the loss of damage sought to be made good as general average has been incurred for the common
safety. It is very clear that in feeling from the port of Saigon and taking refuge in Manila, the master of the vessel was
not acting for the “common safety” of the vessel and her cargo. The French cargo was absolutely secure from danger of
seizure or confiscation so long as it remained in the port of Saigon, and there can be no question that the flight of the
vessel was a measure of precaution adopted solely and exclusively for the preservation of the vessel from danger of
seizure or capture. Delivery of the net proceeds of the sale to plaintiff should be affirmed, but recovery of damages by
plaintiff should be reversed. Defendant cannot claim for general average.
National Development Company vs. CA- Pelaez
G.R. No. L-49407; August 19, 1988

Facts:
National Development Company (NDC) appointed Maritime Company of the Philippines (MCP) as its agent to manage and
operate the vessel named ‘Doña Nati ' for and in its behalf. E. Philipp Corporation of New York loaded bales of American
raw cotton on board the vessel. Also loaded on the same vessel at Tokyo, Japan, were the cartons of sodium lauryl
sulfate and cases of aluminum foil of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation.
En route to Manila the vessel Doña Nati figured in a collision at Ise Bay, Japan with a Japanese vessel 'SS Yasushima
Maru' as a result of which bales of American raw cotton were lost and/or destroyed. Also considered totally lost were the
aforesaid shipment of Kyokuto, Boekui Kaisa Ltd. Development Insurance & Surety Corporation (DISC) then paid to the
consignees or their successors-in-interest the amount of lost or damaged cargoes. Hence, DISC filed a complaint to
recover the amount from NDC and MCP as owner and ship agent respectively of SS Doña Nati. The trial court held that
MCP and NDC are jointly and solidarity liable to DISC. On appeal, NDC insists that it would have been relieved of liability
under the Carriage of Goods by Sea Act. As to the extent of liability, MCP insists that their liability should be limited to
P200.00 per package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that
the law on averages should be applied in determining their liability. However, the CA applied Article 287 of the Code of
Commerce and affirm the trial court’s decision.

Issues:
1. Whether or not the CA erred in applying Article 827 of the code of commerce instead of Section 4(2a) of
Commonwealth Act No. 65, otherwise known as the carriage of goods by sea act, in determining the liability for loss of
cargoes.

2. Whether or not Maritime Company is solidarily liable with National Development Company for loss of or damages
to cargo resulting in the collision of SS Doña Nati said vessel with Yasushima Maru.

Rulings:
1. No. This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC where it was held
under similar circumstance "that the law of the country to which the goods are to be transported governs the liability of
the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was
specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier
shall be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea
Act, a special law, is merely suppletory to the provision of the Civil Code.

It appears that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can be
found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce,
which deal exclusively with collision of vessels. More specifically, Article 826 of the Code of Commerce provides that
where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and
damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which
provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be
solidarily responsible for the losses and damages suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is
not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability
is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is
merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Y'eung
Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and
not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically
provide for the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage
of goods by sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that
"nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force,
or as limiting its application." By such incorporation, it is obvious that said law not only recognizes the existence of the
Code of Commerce, but more importantly does not repeal nor limit its application.

2. Yes. MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the language of the
court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of
goods where such injury or loss was caused by its own negligence." Negligence of the captains of the colliding vessel
being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial
court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of
Commerce).

MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to
the Japanese Coast pilot navigating the vessel Doña Nati need not be discussed lengthily as said claim is not only at
variance with NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of
Appeals, that both pilots were at fault for not changing their excessive speed despite the thick fog obstructing their
visibility.
Mecenas vs. CA- Plaza
GR no. 88052 (180 SCRA 83 )
December 14, 1989

Facts:
M/T Tacloban City is owned and operated by PNOC shipping while MV Don Juan is a passenger ship owned and operated
by Negros Navigation. On April 22, 1980 M/T Tacloban City collided with MV Don Juan results into death of almost of the
passengers of the latter. Among those passengers who died from the collision are the parents of herein petitioners where
their bodies were never found. Petitioners filed an action for damages against Negros Navigation and Captain Santisteban
on the basis of quasi-delict which the trial court rendered judgment in favor of the petitioners and award them the sum of
P 400,000.00 and attorney’s fee of P 15,000.00. The CA however reduced the amount of award to P 100,000.00.

Issue:
W/N the CA erred in reducing the award from P 400,000.00 to P 100,000.00?

Ruling:
YES. The Supreme Court believed that the action instituted by petitioners is more appropriately regarded as grounded on
contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and
Negros Navigation. In an action based upon a breach of the contract of carriage, the carrier under the civil law is liable
for the death of passengers arising from the negligence or willful act of the carrier’s employees although such employees
may have acted beyond the scope of their authority or even in violation of the instruction of the carrier. It follows that the
petitioners would be entitled to moral damages so long as the collision was caused or attended by negligence on the part
of the respondent.

Based on the investigation conducted by the Commandant of the Philippine Coast Guard and Minister of National Defense,
the fault was imputable to both vessels the M/T Tacloban City and MV Don Juan for the collision. For the petitioners to be
entitled with exemplary and compensatory damages it must be established that the Captain and crew of MV Don Juan
had acted in a wanton, fraudulent, reckless or malevolent manner. It was shown from the investigation that firstly MV
Don Juan’s Master Captain Santisteban was playing mahjong before and up to the time of collision, secondly the vessel
can carry maximum of 864 passengers only while the actual passengers on board is 1,004 which some were not listed in
the manifest, thirdly, Don Juan’s top speed was 17 knots while that of Tacloban City was 6.3 knots and lastly visual
confirmation of radar contact was established by the “Don Juan” while the Tacloban City was still 2.7 miles away. Taken
into consideration all the circumstances, had Don Juan taken seriously the duty of extraordinary diligence, could have
easily avoided the collision with the Tacloban City.

Since it was shown that the master and crew of M/S Don Juan was recklessly negligent the SC concluded that Capt.
Santisteban and Negros Navigation are properly liable for gross negligence in connection with the collision of the Don
Juan and Tacloban City and the sinking of the Don Juan leading to the death of hundreds of passengers. In this regard
the SC did not sustain the award given by the CA moreover the petitioners are also entitled of the compensatory and
exemplary damages.

G.R. No. L-58897 December 3, 1987

LUZON STEVEDORING CORPORATION, petitioner,

vs.
COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE
PHILIPPINES, respondents. - Caballero

Facts:

A maritime collision occurred within the vicinity of the entrance to the North Harbor, Manila between the tanker LSCO
"Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando Escano" a passenger ship owned by Hijos de F.
Escano, Inc. as a result of which said passenger ship sunk. An action in admiralty was filed by Hijos de F. Escano, Inc.
and Domestic Insurance Company of the Philippines against the Luzon Stevedoring Company in CFI Cebu. As determined
by the Commissioners, the value of the LSCO "CAVITE” is P180,000.00. RTC and CA ruled that LSCO "Cavite" was solely
to blame for the collision.
MR was filed by Luzon Stevedoring limiting the issue to the legal question of whether under Art. 837 of the Code of
Commerce abandonment of vessel at fault is necessary in order that the liability of owner of said vessel shall be limited
only to the extent of the value thereof, its appurtenances and freightage earned in the voyage.

Issue:
WON abandonment is required under Article 837 of the Code of Commerce.

Ruling:

Yes. In the case of collision, abandonment of the vessel is necessary in order to limit the liability of the shipowner or the
agent to the value of the vessel, its appurtenances and freightage earned in the voyage in accordance with Article 837 of
the Code of Commerce. The only instance where such abandonment is dispensed with is when the vessel was entirely
lost. In such case, the obligation is thereby extinguished. Article 837 of the Code of Commerce provides:

"The civil liability contracted by the shipowners in the cases prescribed in this section shall be understood as
limited to the value of the vessel with all her equipment and all the freight money earned during the voyage"

"This section is a necessary consequence of the right to abandon the vessel given to the shipowner in article 587
of the code, and it is one of the many superfluities contained in the code."

In the case of Government of the Philippines vs. Maritime this Court citing Philippine Shipping stated the exception
thereto in that while "the total destruction of the vessel extinguishes a maritime lien, as there is no longer any risk to
which it can attach, but the total destruction of the vessel does not affect the liability of the owner for repairs of the
vessel completed before its loss, interpreting the provision of Article 591 of the Code of Commerce in relation with the
other Articles of the same Code.

In another case, the Court reiterated that the liability of the shipowner or agent under the provision of Articles 587 and
837 of the Code of Commerce is limited to the value of the vessel with all her equivalent and freight earned during the
voyage if the shipowner or agent abandoned the ship with all the equipment and freight. However, it does not apply to
the liability under the Workmen's Compensation Act where even as in said case the vessel was lost the liability thereunder
is still enforceable against the employer or shipowner.

In this case, there is no question that the action arose from a collision and the fault is laid at the doorstep of LSCO
"Cavite" of Luzon Stevedoring. Undeniably, Luzon Stevedoring has not abandoned the vessel. Hence, Luzon
Stevedoring cannot invoke the benefit of the provisions of Article 837 of the Code of Commerce to limit its liability to the
value of the vessel, all the appurtenances and freightage earned during the voyage.

Notes:

It is clear that in case of collision of vessels, in order to avail of the benefits of Article 837 of the Code of Commerce the
shipowner or agent must abandon the vessel. In such case the civil liability shall be limited to the value of the vessel with
all the appurtenances and freight earned during the voyage. However, where the injury or average is due to the ship-
owner's fault as in said case, the shipowner may not avail of his right to limited liability by abandoning the vessel.

We reiterate what We said in previous decisions that the real and hypothecary nature of the liability of the shipowner or
agent is embodied in the provisions of the Maritime Law, Book III, Code of Commerce. Articles 587, 590 and 837 of the
same code are precisely intended to limit the liability of the shipowner or agent to the value of the vessel, its
appurtenances and freightage earned in the voyage, provided that owner or agent abandons the vessel. Although it is not
specifically provided for in Article 837 of the same code that in case of collision there should be such abandonment to
enjoy such limited liability, said article on collision of vessels is a mere amplification of the provisions of Articles 587 and
590 of same code where abandonment of the vessel is a pre-condition. Even without said article, the parties may avail of
the provisions of Articles 587 and 590 of same code in case of collision. This is the reason why Article 837 of the same
code is considered a superfluity.
Hence the rule is that in case of collision there should be abandonment of the vessel by the shipowner or agent in order
to enjoy the limited liability provided for under said Article 837.

The exception to this rule is when the vessel is totally lost in which case there is no vessel to abandon so abandonment is
not required. Because of such total loss the liability of the shipowner or agent for damages is extinguished. Nevertheless,
the shipowner or agent is personally liable for claims under the Workmen's Compensation Act and for repairs of the vessel
before its loss.

In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In such instance the
shipowner or agent may avail of the provisions of Article 837 of the Code by abandoning the vessel.

However, if the injury or damage is caused by the shipowner's fault as where he engages the services of an
inexperienced and unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of the Code by
abandoning the vessel. He is personally liable for the damages arising thereby.

Lopez vs Duruelo
52 Phil 229, October 22, 1928- Camasura

Facts:
On February 10, 1927, plaintiff Augusto Lopez was desirous of embarking upon the interisland steamer San Jacinto in
order to go to Cebu, the plaintiff embarked at the landing in the motorboat Jison which was engaged in conveying
passengers and luggage back and forth from the landing to the boats at anchor. As the motorboat approached San
Jacinto in a perfectly quiet sea, it came too near to the stern of the ship, and as the propeller of the ship had not yet
ceased to turn, the blades of the propeller strucked the motorboat and sank it at once. As it sank, the plaintiff was thrown
into the water against the propeller, and the revolving blades inflicted various injuries upon him. The plaintiff was
hospitalized. He filed a complaint seeking to recover damages from the defendant. The defendant however alleged that
the complaint does not have a right of action, a demurrer was submitted directed to the fact that the complaint does not
allege that the protest had been presented by the plaintiff, within twenty-four hours after the occurrence to the
competent authority at the port where the accident occurred as provided for Article 835 of the Code of Commerce.

Issue:
Whether the motorboat Jison is a vessel provided for by Article 835 of the Code of Commerce?

Held:

No. The word vessel as used in the third section of tile IV, Book III of the Code of Commerce, dealing with collisions,
does not include all ships, craft or floating structures of any kind without limitation. The said section does not apply to
minor craft engaged in a river and bay traffic. Therefore, a passenger on boat like the Jison, is not required to make
protest as a condition precedent to his right of action for the injury suffered by him in the collision described in the
complaint. Article 835 of the Code of Commerce does not apply

Notes:

1.SHIPPING; COLLISION; PROTEST.—The protest required by article 835 of the Code of Commerce in case of collision
between vessels is not necessary to preserve the rights of a person aboard a motor boat engaged in conveying
passengers between ship and shore who is injured in a collision between the motor boat and the larger vessel.

2.ID. ; ID. ; ID. ; CASE AT BAR.—A person desirous of embarking on a ship which was some distance away from the
shore in a Philippine port took passage upon a small motor boat, which was used in conveying passengers and luggage to
and fro between the shore and the shipside. Owing to the negligence of the patron or incompetence of the person in
charge—so the complaint averred—the boat approached too near to the stern of the ship, with the result that the
propeller of the ship, which was still turning, struck the motor boat and sunk it, injuring the plaintiff. Held: Upon
demurrer, that the failure of the complaint to allege that the plaintiff had made protest according to article 835 of the
Code of Commerce was no impediment to the maintenance of a civil action, under articles 1902 and 1903 of the Civil
Code, to recover damages for the tort.
3.ID.; ID.; ID.; MEANING OF WORD VESSEL.—The word "vessel" (Spanish, "buque," "nave") used in the Third Section of
Title IV, Book Third, of the Code of Commerce, dealing with collisions, does not include all ships, craft or floating
structures of any kind without limitation. The provisions of said section do not apply to minor craft engaged in river and
bay traffic.

Caltex (Philippines, Inc. v. Sulpicio Lines, Inc. - Ceballos

G. R. No. 131166
Sept. 30, 1999

Facts:
Caltex and Vector Shipping entered into a charter contract for the transport if gasoline and other oil products on board
M/T Vector. M/T Vector collided with MV Doña Paz in the vicinity of Dumali Point. MV Doña Paz was owned and operated
by Sulpicio Lines Inc. The collision resulted to the death of many of the passengers and crew of both vessel. Teresita
Cañezal, spouse of a deceased passenger, and Sotera Cañezal, mother of a deceased passenger instituted an action to
recover damages from breach of contract if carriage against Sulpicio. Sulpicio filed a third party complaint against Vector
Shipping and Caltex. The trial court dismissed the third party complaint and held Sulpicio liable for damages against
Cañezals. On appeal the CA held Vector and Caltex equally liable with Sulpicio on the ground that Vector Shipping Co.,
being the vessel at fault for the collision and Caltex (Phils.), Inc. being the charterer that negligently caused the shipping
of combustible cargo aboard an unseaworthy vessel. Only Caltex appealed the decision to the SC.

Issue:
WON Caltex is equally liable for damages.

Held:
No, Caltex is not liable.

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 of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight.

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

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

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter.

Caltex and Vector entered into a contract of affreightment also known as a voyage charter which retains the character of
the vessel as a common carrier thus did not convert the common carrier into a private carrier.

In Planters Products, Inc. v. CA, the court held that 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.

Further, an implied warranty to the seaworthiness of the ship is provided for under the Carriage of Goods by Sea Act, it
states that:
 Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to-
a) Make the ship seaworthy;
b) Properly man, equip, and supply the ship; xxx

With this implied warranty, Caltex was only required to observe ordinary diligence like any other shipper in shipping his
cargoes. Caltex observed this diligence when it inquired if the renewal of the certificate of inspection was complied with
by Vector to which the operations manager of Vector replied that they will send them a copy of the certificate as soon as
possible. Caltex correctly relied that M/V Vector would not have sailed if it did not renew the certificate of inspection.
Caltex could also not be faulted for the lack of license of the crew of M/V Vector as well as the fact that the vessel had a
defective engine.

This warranty is for the purpose of practicality as passengers or shippers do not have the time to inspect the necessary
papers or that the carrier’s employees are qualified.

Manila Steamship Co. Inc. VS. Insa Abdulhaman- Clark

(100 Phil 32)

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

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

The Court held the owners of both vessels solidarily liable to plaintiff for damages caused to the latter under Article 827
of the Code of Commerce but exempted defendant Lim Hong To from liability due to the sinking and total loss of his
vessel. While Manila steamship, owner of the Bowline Knot was ordered to pay all of plaintiff’s damages.
Petitioner Manila Steamship Co. pleads that it is exempt from any liability under Article 1903 of the Civil Code because it
had exercised the diligence of a good father of a family in the selection of its employees, particularly the officer in
command of the M/S Bowline Knot.

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

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