112. Caltex v.
Sulpicio Lines MT Vector collided with MV Doña Paz in the open sea within the vicinity of
G.R. No. 131166. September 30, 1999
Doctrine: 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
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.
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.
Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment.
Facts:
On December 19, 1987 at around 8 pm, the motor tanker MT Vector owned
and operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract
MV Doña Paz passenger and cargo vessel owned and operated by Sulpicio
Lines, Inc. left the port of Tacloban headed for Manila with 1,493 passengers
indicated in the Coast Guard Clear
Dumali Point between Marinduque and Oriental Mindoro, killing almost all the
passengers and crew members of both ships except for 24 survivors
MV Doña Paz carried an estimated 4,000 passengers most were not in the
passenger manifestboard of marine inquiry in BMI Case No. 653-87 after
investigation found that the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector Shipping Corporation,
were at fault and responsible for its collision with MV Doña Paz
Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and
mother respectively, filed a complaint for “Damages Arising from Breach of
Contract of Carriage” against Sulpicio Lines, Inc. for the death of Sebastian
E. Cañezal (public school teacher 47 years old) and his 11-year old daughter
Corazon G. Cañezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector
Shipping Corporation and Caltex
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
The RTC dismissed the third party complaint and favored the Cañezal's
against Sulpicio Lines
In its appeal, the CA modified the decsion of the RTC and included Caltex as
liable party
Issue/s:
1. Whether or not the charterer(CALTEX) has no liability for damages under
Philippine Maritime laws.
2. Whether or the MT Vector is a common carrier under the contract of
affreightment.
3.Whether or not Caltex is liable for damages under the Civil Code.
Held:
1
1. Yes. Caltex has no liability under Philippine Maritime Laws because it
is not a common carrier. 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.
Petitioner 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
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.
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.
Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment.
2. 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.
It is therefore imperative that 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. 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. Indubitably, 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.
Article 1732 defines common carriers. The above article makes no distinction
between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity
(in local idiom, as a sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such services on a an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e.,
the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think
that Article 1733 deliberately refrained from making such distinctions.
Under the Carriage of Goods by Sea Act :
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 xxx xxx
2
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the
ship. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.
The failure of a common carrier to maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear breach of its duty prescribed in
Article 1755 of the Civil Code.
The provisions owed their conception to the nature of the business of
common carriers. This business is impressed with a special public duty. The
public must of necessity rely on the care and skill of common carriers in the
vigilance over the goods and safety of the passengers, especially because
with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. For
these reasons, a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being obliged by
law to impliedly warrant its seaworthiness.
3. No. Caltex is not liable under the Civil Code.
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 the Court
of Appeals is without basis.
The relationship between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, shippers of goods, when
transacting with common carriers, 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.
Thus, the nature of the obligation of Caltex demands ordinary diligence like
any other shipper in shipping his cargoes.
Fallo: The SC granted the petition of Caltex. It reverse the decision of
the CA and relieve Caltex from any liability but it affirm the liabilities of
Sulpicio Lines and Vector Shipping to pay damages to the victims and
their relatives
113 PLANTERS PRODUCTS, INC., vs. COURT OF APPEALS,
SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA
226 SCRA 476 (1993); G.R. No. 101503. September 15, 1993
Maritime Law – Charter Party
DOCTRINE:
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.
3
FACTS:
 Planters Products, Inc. (PPI), purchased from Mitsubishi International
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons
(M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June
1974 aboard the cargo vessel M/V "Sun Plum" owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska,
U.S.A., to Poro Point, San Fernando, La Union, Philippines, as
evidenced by a Bill of Lading signed by the master of the vessel and
issued on the date of departure.
 Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter2 was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan.
 Before loading the fertilizer aboard the vessel, four (4) of her holds were
all presumably inspected by the charterer's representative and found fit
to take a load of urea in bulk pursuant to par. 16 of the charter-party.
 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 (3) 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 on 3 July 1974, 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 which were parked alongside the berth, 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.
 Each time a dump truck was filled up, its load of Urea was covered with
tarpaulin before it was transported to the consignee's warehouse located
some fifty (50) meters from the wharf. Midway to the warehouse, the
trucks were made to pass through a weighing scale where they were
individually weighed for the purpose of ascertaining the net weight of the
cargo.
 The port area was windy, certain portions of the route to the warehouse
were sandy and the weather was variable, raining occasionally while the
discharge was in progress.
 It took eleven (11) days for PPI to unload the cargo. A private marine and
cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired
by PPI to determine the "outturn" of the cargo shipped. The survey report
submitted by CSCI 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.
 PPI sent a claim letter to SSA the resident agent of the carrier, KKKK.
the resident agent of the carrier, KKKK SSA explained that they were not
able to respond to the consignee's claim for payment because, according
to them, what they received was just a request for shortlanded certificate
and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the shipment.”
 PPI filed an action for damages with the Court of First Instance 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. CFI ruled
in favour of plaintiffs, CA reversed.
ISSUES:
1. Whether a common carrier becomes a private carrier by reason of a
charter-party? - NO
2. Is the respondent carrier guilty of negligence? - NO
HELD:
1.) 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; 20 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 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.
Upon the other hand, the term "common or public carrier" is defined in Art.
1732 of the Civil Code. The definition extends to carriers either by land, air
or water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment
and not as a casual occupation. The distinction between a "common or public
4
carrier" and a "private or special carrier" lies in the character of the business, and inspected the condition of the hull of the vessel. The stevedores
such that if the undertaking is a single transaction, not a part of the general unloaded the cargo under the watchful eyes of the shipmates who were
business or occupation, although involving the carriage of goods for a fee, overseeing the whole operation on rotation basis.
the person or corporation offering such service is a private carrier.
Verily, the presumption of negligence on the part of the respondent carrier
Article 1733 of the New Civil Code mandates that common carriers, by has been efficaciously overcome by the showing of extraordinary zeal and
reason of the nature of their business, should observe extraordinary diligence assiduity exercised by the carrier in the care of the cargo.
in the vigilance over the goods they carry. In the case of private carriers,
however, the exercise of ordinary diligence in the carriage of goods will DISPOSITIVE PORTION:
suffice. WHEREFORE, the petition is DISMISSED. The assailed decision of the
Court of Appeals, which reversed the trial court, is AFFIRMED.
It is not disputed that respondent carrier, in the ordinary course of business, Consequently, Civil Case No. 98623 of the then Court of the First Instance,
operates as a common carrier, transporting goods indiscriminately for all now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
persons. When petitioner 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.

It is therefore imperative that 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. 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 114. Philippine American General Insurance Company vs. PKS
charter-party is concerned. Shipping Company G.R. No. 149038. April 9, 2003

2.) Respondent carrier has sufficiently overcome, by clear and convincing

proof, the prima facie presumption of negligence. The master of the carrying
vessel, Captain Lee Tae Bo, testified that before the fertilizer was loaded, the
four (4) hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel bonds.
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.
Doctrine: Article 1732 carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the ‘general public,’ i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population.

It was also shown during the trial that the hull of the vessel was in good
condition, foreclosing the possibility of spillage of the cargo into the sea or
seepage of water inside the hull of the vessel. When M/V "Sun Plum"
docked at its berthing place, representatives of the consignee boarded, and
in the presence of a representative of the shipowner, the foreman, the
stevedores, and a cargo surveyor representing CSCI, opened the hatches

5
The concept of a common carrier cannot change merely because individual
contracts are executed or entered into with patrons of the carrier. Such
restrictive interpretation would make it easy for a common carrier to escape
liability by the simple expedient of entering into those distinct agreements
with clients.
Facts: Davao Union Marketing Corporation (DUMC) contracted the services
of respondent PKS Shipping Company (PKS Shipping) for the shipment of
75,000 bags of cement worth P3,375,000.00 to Tacloban City. DUMC
insured the goods for its full value with petitioner Philippine American
General Insurance Company (Philamgen). The goods were loaded aboard
the dumb barge Limar I belonging to PKS Shipping.
On the evening of December 22, 1993, about 9 o’clock, while Limar I was
being towed by PKS Shipping’s tugboat, MT Iron Eagle, the barge sank a
couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur,
bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a claim with Philamgen for the full amount of the insurance.
Philamgen promptly paid. It then sought reimbursement from PKS Shipping
but the shipping company refused to pay. Philamgen filed a suit against PKS
Shipping with the Makati RTC.
The RTC dismissed the complaint. It found that the loss could have been
caused either by a fortuitous event, in which case the ship owner was not
liable, or through the negligence of the captain and crew of the vessel and
that, under Article 587 of the Code of Commerce adopting the “Limited
Liability Rule,” the ship owner could free itself of liability by abandoning, as it
apparently so did, the vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the CA which affirmed in toto the decision
of the RTC. The CA ruled that evidence was not sufficient to establish that
PKS Shipping was a common carrier at the time it undertook to transport the
bags of cement because of its peculiar method of carrying goods was not
generally held out as a business but as a casual occupation.
Philamgen contends that the fact that PKS Shipping has a limited clientele,
does not militate against its being a common carrier. Philamgen adds that
typhoon “APIANG” has not entered the Philippine area of responsibility and
that, even if it did, PKS Shipping would not be exempt from liability because
its employees, particularly the tugmaster, have failed to exercise due
diligence to prevent or minimize the loss.
Issues:
● Whether PKS Shipping is a common carrier.
● Whether PKS Shipping exercised the proper diligence required of a
common carrier.
Held:
● Yes. The Civil Code defines “common carriers” in the following
terms:
“Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public.”
Complementary to the codal definition is Section 13, paragraph (b), of the
Public Service Act; it defines “public service” to be—
“x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
6
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier
The leading case of De Guzman vs. Court of Appeals states the Article 1732
in conjunction with Public Service Act Sec. 13 (b) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as ‘a sideline’). Article 1732 also
carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its
services to the ‘general public,’ i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. The Court thinks that Article
1732 deliberately refrained from making such distinctions.
Much of the distinction between a “common or public carrier” and a “private
or special carrier” lies in the character of the business. If the undertaking is
an isolated transaction, not a part of the business or occupation, and the
carrier does not hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a fee, the
person or corporation providing such service could very well be just a private
carrier.
Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of
carrying goods for others, although for a limited clientele, undertaking
to carry such goods for a fee. The regularity of its activities in this area
indicates more than just a casual activity on its part. Neither can the
concept of a common carrier change merely because individual
contracts are executed or entered into with patrons of the carrier. Such
restrictive interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those distinct
agreements with clients.
● Yes. Article 1733 of the Civil Code requires common carriers to
observe extraordinary diligence in the vigilance over the goods they
carry. In case of loss, destruction or deterioration of goods, common
carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. The
provisions of Article 1733, notwithstanding, common carriers are
exempt from liability for loss, destruction, or deterioration of the
goods due to any of the following causes:
● Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
● Act of the public enemy in war, whether international or civil;
● Act or omission of the shipper or owner of the goods;
● The character of the goods or defects in the packing or in the
containers; and
● Order or act of competent public authority.
The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that
there was no way by which the barge’s or the tugboat’s crew could
have prevented the sinking of Limar I. The vessel was suddenly tossed
by waves of extraordinary height of six (6) to eight (8) feet and buffeted
by strong winds of 1.5 knots resulting in the entry of water into the
barge’s hatches. The official Certificate of Inspection of the barge issued by
the Philippine Coastguard and the Coastwise Load Line Certificate would
attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
All given then, the appellate court did not err in its judgment absolving
PKS Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs. SO ORDERED.
7

Caltex vs. Sulpicio Lines, Vector Shipping, Teresita Cañezal et al.
G.R. No. 131166. September 30, 1999
Topic: Charter Party
Doctrine/s: 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.
A public carrier shall remain as such, 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.
Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment.
Facts: On December 19, 1987 at about 8 pm, motor tanker MT Vector left
Limay, Bataan, enroute to Masbate, loaded with 8,800 barrels of petroleum
products shipped by Caltex. MT Vector is a tramping motor tanker owned
and operated by Vector Shipping Corporation, engaged in the business of
transporting fuel products. 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.
At about 6:30 am of the next day, the passenger ship MV Doña Paz left the
port of Tacloban headed for Manila with a complement of 59 crew members
including the master and his officers, and passengers totaling 1,493 as
indicated in the Coast Guard Clearance. The MV Doña Paz is a passenger
and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route
of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila,
making trips twice a week.
At about 10:30 pm, the two vessels collided 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.
The MV Doña Paz carried an estimated 4,000 passengers; many were not in
the passenger manifest. Only 24 survived the tragedy after having been
rescued from the burning waters by vessels that responded to distress calls.
Among those who perished were public school teacher Sebastian Cañezal
(47 years old) and his daughter Corazon Cañezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87
after investigation found that the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector Shipping Corporation,
were at fault and responsible for its collision with MV Doña Paz.
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian
Cañezal’s wife and mother respectively, filed with the RTC of Manila, a
complaint for Damages Arising from Breach of Contract of Carriage against
Sulpicio. Sulpicio, in turn, filed a third-party complaint against Francisco
Soriano, Vector Shipping Corporation and Caltex. Sulpicio alleged that
8
Caltex chartered MT Vector with gross and evident bad faith knowing fully the wages of the master of the crew,
well that MT Vector was improperly manned, ill-equipped, unseaworthy and a and defrays the expenses for the
hazard to safe navigation; as a result, it rammed against MV Doña Paz in the maintenance of the ship)
open sea setting MT Vectors highly flammable cargo ablaze.

RTC ruled in favor of the heirs of Cañezal but dismissed Sulpicio’s third-party
complaint. Upon Sulpicio’s appeal, the CA modified the decision, holding May be time or voyage charter.
Vector and Caltex equally liable to it.
Time Voyage
Issue: Whether Caltex, as charterer is liable for the damages caused by the
collision. the leased
vessel is
Held: No. Caltex and Vector entered into a contract of affreightment,
leased to the leased for a single
particularly, 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 charterer for a voyage
voyage, the rights and the responsibilities of ownership rest on the owner. fixed period of
The charterer is free from liability to third persons in respect of the ship. time

CHARTER PARTY Charterer’s liability to third party in respect of the ship

a contract where an entire ship, or some principal part thereof, is let by Charterer since he is
Free from liability, since owner still
the owner to another person for a specified time or use. temporarily treated as the
has control over the vessel
owner for the voyage*

3 main categories: (1) demise or bareboat, (2) time charter, and (3) MT Vector is a common carrier. A common carrier is a person or corporation
voyage whose regular business is to carry passengers or property for all persons
who may choose to employ and to remunerate him. MT Vector fits the
Contract of Affreightment Demise or bareboat Charter definition of a common carrier under Article 1732 of the Civil Code.

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.
Leaves the owner in possession of
the ship as the owner for the
voyage, and the rights and
responsibilities rest on the owner
(supplies the ship’s store, pays for
Charter is the one who mans
the vessel with his own people
and becomes, in effect, the
owner for the voyage or
service stipulated.
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
Planters Products, Inc. vs. Court of Appeals states:
It is therefore imperative that 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. 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.
9

In Coastwise Lighterage Corporation vs. Court of Appeals:
Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of
affreightment.
Under the Carriage of Goods by Sea Act:
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;
Carriers are deemed to warrant impliedly the seaworthiness of the ship. For a
vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure
of a common carrier to maintain in seaworthy condition the vessel involved in
its contract of carriage is a clear breach of its duty prescribed in Article 1755
of the Civil Code.
The provisions owed their conception to the nature of the business of
common carriers. This business is impressed with a special public duty. The
public must of necessity rely on the care and skill of common carriers in the
vigilance over the goods and safety of the passengers, especially because
with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. For
these reasons, a passenger or a shipper of goods is under no obligation
to conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
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.
The relationship between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, shippers of goods,
when transacting with common carriers, 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 carrier’s 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.
Thus, 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, there is no legal basis to hold
Caltex liable for damages.
Petition Granted. Set aside the CA’s decision insofar as it held Caltex liable
under the third-party complaint. The Court affirms the CA’s decision insofar
as it held Sulpicio liable to the heirs of Sebastian and Corazon Cañezal.
Vector Shipping Corporation and Francisco Soriano are held liable to
reimburse/indemnify Sulpicio whatever damages, attorney’s fees and costs
the latter is adjudged to pay.
Note: *credit to Tetel Guillermo for this table in her previous digest of the
same case.
10

Planters Products Inc. v. CA
G. R. No. 101503 September 15, 1993
Doctrine: Charter Party
FACTS:
In June 16 1974, Mitsubishi International Corporation (Mitsubishi) of New
York, U.S.A., 9,329.7069 M/T of Urea 46% fertilizer bought
by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V
"Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha (KKKK)
from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading 
In May 17 1974, a time charter-party on the vessel M/V "Sun Plum" pursuant
to the Uniform General Charter was entered into between Mitsubishi
as shipper/charterer and KKKK as shipowner, in Tokyo, Japan
Before loading the fertilizer aboard the vessel, 4 of her holds were all
presumably inspected by the charterer's representative and found fit
The hatches remained closed and tightly sealed throughout the entire voyage
In July 3, 1974, PPI unloaded the cargo from the holds into its steelbodied
dump trucks which were parked alongside the berth, using metal
scoops attached to the ship, pursuant to the terms and conditions of
the charter-partly.
Hatches remained open throughout the duration of the discharge
Each time a dump truck was filled up, its load of Urea was covered with
tarpaulin before it was transported to the consignee's warehouse
located some 50 meters from the wharf
Midway to the warehouse, the trucks were made to pass through a weighing
scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo.  Bulk shipment of highly soluble goods like fertilizer carries with it the risk of
The port area was windy, certain portions of the route to the warehouse were
sandy and the weather was variable, raining occasionally while the
discharge was in progress.
Tarpaulins and GI sheets were placed in-between and alongside the trucks
to contain spillages of the fertilizer
It took 11 days for PPI to unload the cargo
Cargo Superintendents Company Inc. (CSCI), private marine and cargo
surveyor, was hired by PPI to determine the "outturn" of the cargo
shipped, by taking draft readings of the vessel prior to and after
discharge
Shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt
Certificate of Shortage/Damaged Cargo prepared by PPI 
Short of 94.839 M/T and about 23 M/T were rendered unfit for commerce,
having been polluted with sand, rust and dirt 
PPI sent a claim letter 1974 to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing
the cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been contaminated
with dirt
SSA ruled that what they received was just a request for shortlanded
certificate and not a formal claim, and that they "had nothing to do
with the discharge of the shipment 
RTC ruled that the failure to destroy the presumption of negligence against
them, SSA are liable
CA REVERSED the RTC stating that it failed to prove the basis of its cause
of action
ISSUE: W/N a time charter between a shipowner and a charterer transforms
a common carrier into a private one as to negate the civil law
presumption of negligence in case of loss or damage to its cargo
HELD: NO. petition is DISMISSED
When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and control.
Hardly then can we charge the charterer, a stranger to the crew and
to the ship, with the duty of caring for his cargo when the charterer
did not have any control of the means in doing so
Carrier has sufficiently overcome, by clear and convincing proof, the  prima
facie presumption of negligence. The hatches remained close and
tightly sealed while the ship was in transit as the weight of the steel
covers made it impossible for a person to open without the use of the
ship's boom.
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.
11

117. NATIONAL STEEL CORPORATION vs. CA AND VLASONS
SHIPPING, INC.
G.R. No. 112287 | December 12, 1997 | J. Panganiban
Topic: Charter party
FACTS:
 The MV Vlasons I is a vessel which renders tramping service and, as
such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a
special contract of charter party with its owner. It is undisputed that
the ship is a private carrier. And it is in this capacity that its owner,
Vlasons Shipping, Inc., entered into a contract of affreightment or
contract of voyage charter hire with National Steel Corporation.
 On July 17, 1974, plaintiff National Steel Corporation (NSC) as
Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire whereby NSC hired
VSI’s vessel, the MV ‘VLASONS I’ to make one (1) voyage to load
steel products at Iligan City and discharge them at North Harbor,
Manila.
 The terms ‘F.I.O.S.T.’ which is used in the shipping business is a
standard provision in the NANYOZAI Charter Party which stands for
‘Freight In and Out including Stevedoring and Trading,’ which means
that the handling, loading and unloading of the cargoes are the
responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI
Charter Party, it states, ‘Charterers to load, stow and discharge the
cargo free of risk and expenses to owners.
 On August 6, 7 and 8, 1974, in accordance with the Contract of
Voyage Charter Hire, the MV ‘VLASONS I’ loaded at plaintiff’s pier at
Iligan City, the NSC’s shipment of 1,677 skids of tinplates and 92
packages of hot rolled sheets or a total of 1,769 packages with a
total weight of about 2,481.19 metric tons for carriage to Manila.
 The vessel arrived with the cargo at Pier 12, North Harbor, Manila,
on August 12, 1974. The following day, August 13, 1974, when the
vessel’s three (3) hatches containing the shipment were opened by
plaintiff’s agents, nearly all the skids of tinplates and hot rolled
sheets were allegedly found to be wet and rusty. The cargo was
discharged and unloaded by stevedores hired by the Charterer.
Unloading was completed only on August 24, 1974 after incurring a
delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations.
 To determine the nature and extent of the wetting and rusting, NSC
called for a survey of the shipment by the Manila Adjusters and
Surveyors Company (MASCO). MASCO reported that it found
wetting and rusting of the packages of hot rolled sheets and metal
covers of the tinplates; that tarpaulin hatch covers were noted torn at
various extents; that container/metal casings of the skids were
rusting all over. MASCO ventured the opinion that ‘rusting of the
tinplates was caused by contact with SEA WATER sustained while
still on board the vessel as a consequence of the heavy weather and
rough seas encountered while en route to destination.
 On the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of
the damaged tinplates in the amount of P941,145.18. Then on
October 3, 1974, plaintiff formally demanded payment of said claim
but defendant VSI refused and failed to pay. Plaintiff filed its
complaint against defendant in the CFI, Rizal.
 Plaintiff: claimed that it sustained losses in the aforesaid amount of
P941,145.18 as a result of the act, neglect and default of the master
and crew in the management of the vessel as well as the want of due
diligence on the part of the defendant to make the vessel seaworthy
and to make the holds and all other parts of the vessel in which the
cargo was carried, fit and safe for its reception, carriage and
preservation—all in violation of defendant’s undertaking under their
Contract of Voyage Charter Hire.
 Defendant: 1. Denied liability for the alleged damage claiming that
the MV ‘VLASONS I’ was seaworthy in all respects for the carriage of
plaintiff’s cargo; that said vessel was not a ‘common carrier’
inasmuch as she was under voyage charter contract with the plaintiff
as charterer under the charter party. 2. that under the Contract of
Voyage Charter Hire, defendant shall not be responsible for
losses/damages except on proven willful negligence of the officers of
the vessel, that the officers of said MV ‘VLASONS I’ exercised due
diligence and proper seamanship and were not willfully negligent.
3.The damage was due to the inherent defect, quality or vice of the
cargo or to the insufficient packing thereof or to latent defect of the
cargo not discoverable by due diligence or to any other cause arising
12
 without the actual fault or privity of defendant and without the fault of
the agents or servants of defendant. 4.. Defendant claimed that it
had complied with all its duties and obligations under the Voyage
Charter Hire Contract and had no responsibility whatsoever to
plaintiff.
 Defendant then filed a counterclaim against National Steel.
 RTC: Ruled in favor of private defendant based on the counterclaim.
 CA: Modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of
attorney’s fees and expenses of litigation.
ISSUE:
Whether or not VSI, upon entering with NSC a special contract of
charter party, became a common carrier?
carriage or charter party. Unlike in a contract involving a common carrier,
private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a
private carrier.
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17,
1974, that VSI "shall not be responsible for losses except on proven willful
negligence of the officers of the vessel." The NANYOZAI Charter Party,
which was incorporated in the parties' contract of transportation, further
provided that the shipowner shall not be liable for loss of or damage to the
cargo arising or resulting from unseaworthiness, unless the same was
caused by its lack of diligence to make the vessel seaworthy or to ensure
that the same e was "properly manned, equipped and supplied."

HELD:
In view of the above, NSC must prove that the damage to its shipment was
NO. The resolution of this preliminary question determines the law, caused by VSI's willful negligence or failure to exercise due diligence in
standard of diligence and burden of proof applicable to the present case. making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping
Article 1732 of the Civil Code defines a common carrier. It has been held that the cargo. Ineluctably, the burden of proof was placed on NSC by the parties'
the true test of a common carrier is the carriage of passengers or goods, agreement.
provided it has space, for all who opt to avail themselves of its transportation
service for a fee. A carrier which does not qualify under the above test is
deemed a private carrier. Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to carry goods for the DISPOSITION:
general public. The most typical, although not the only form of private
Petition DENIED. CA AFFIRMED with MODIFICATION that the demurrage
carriage, is the charter party, a maritime contract by which the charterer, a
awarded to VSI is DELETED.
party other than the shipowner, obtains the use and service of all or some
part of a ship for a period of time or a voyage or voyages.

In the instant case, it is undisputed that VSI did not offer its services
to the general public. It carried passengers or goods only for those it chose
under a special contract of charter party. MV Vlasons I was not a common
but a private carrier. It is a private carrier that renders tramping service and,
as such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a special
contract of charter party with its owner. Consequently, the rights and
obligations of VSI and NSC, including their respective liability for damage to
the cargo, are determined primarily by stipulations in their contract of private
13

Valenzuela Hardwood and Industrial Supply Inc. v CA and Seven
Brothers Shipping Corp.
FACTS:
1. Petitioner Valenzuela Hardwood and Industrial Supply Inc.
(Valenzuela) entered into an agreement with Seven Brothers
Shipping Corp. (Seven Brothers) whereby the latter undertook to
load on board its vessel M/V Seven Ambassador the former’s lauan
round logs numbering 940 at the port of Maconacon, Isabela for
shipment to Manila.
2. Valenzuela insured the logs against loss and/or damage with South
Sea Surety and Insurance Co., Inc (South Sea).
3. The vessel sank, resulting in the loss of the logs.
4. Valenzuela demanded from South Sea the payment of the proceeds
of the policy but the claim was denied.
5. Valenzuela likewise filed a formal claim with Seven Brothers for the
value of the logs lost but the claim was denied.
6. TC: In favor of Valenzuela, against South Sea and Seven Brothers.
7. Both South Sea and Seven Brothers appealed.
8. Seven Brothers contends that the lower court erred in declaring that
the non-liability clause of the Seven Brothers from the logs of the
cargo stipulated in the charter party is void for being contrary to
public policy invoking Art. 17451 of the New Civil Code.
1 is required by the nature of the obligation and corresponds with the circumstances of the
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper; (2) That the common
carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the
common carrier need not observe any diligence in the custody of the goods; (4) That the
common carrier shall exercise a degree of diligence less than that of a good father of a family, or
of a man of ordinary prudence in the vigilance over the movables transported; (5) That the
common carrier shall not be responsible for the acts or omissions of his or its employees; (6)
That the common carrier’s liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the
common carrier is not responsible for the loss, destruction, or deterioration of goods on account
9. CA: affirmed in part the RTC judgment by sustaining the liability of
South Sea, but modified it by holding that Seven Brothers was not
liable for the lost cargo. It appears that there is a stipulation in the
charter party that the ship owner would be exempted from liability in
case of loss. The court a quo erred in applying the provisions of the
Civil Code on common carriers to establish the liability of the
shipping corporation. The provisions on common carriers should not
be applied where the carrier is not acting as such but as a private
carrier.
10. Valenzuela: Stipulation is void for being contrary to Articles 586 and
587 of the Code of Commerce 2 and Articles 1170 and 1173 of the
Civil Code.3Citing Art. 1306 and par. 1, Art. 1409 of the Civil Code 4,
petitioner further contends that said stipulation “gives no duty or
obligation to the private respondent to observe the diligence of a
good father of a family in the custody and transportation of the cargo.
ISSUE: Whether a stipulation in the charter party executed between the
parties exempting Seven Brothers from liability for the loss of the logs arising
from negligence is valid?
HELD: YES. The charter party between the petitioner and private respondent
of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.
2
Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and
for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the
creditors prove that the amount claimed was invested therein.
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the vigilance over the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments
and the freight he may have earned during the voyage.”
3
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which
persons, of the time and of the place. When negligence shows bad faith, the provisions of
Articles 1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.
4
Art. 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order
or public policy;
14
stipulated that the “(o)wners shall not be responsible for loss, split,
shortlanding, breakages and any kind of damages to the cargo.
It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven Ambassadors
resulting in the loss of its cargo was the “snapping of the iron chains and the
subsequent rolling of the logs to the portside due to the negligence of the
captain in stowing and securing the logs on board the vessel and not due to
fortuitous event.” Likewise undisputed is the status of Private Respondent
Seven Brothers as a private carrier when it contracted to transport the cargo
of Petitioner Valenzuela.
Civil Code provides that “(r)ights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or good customs, or
prejudicial to a person with a right recognized by law.” As a general rule,
patrimonial rights may be waived as opposed to rights to personality and
family rights which may not be made the subject of waiver. Being patently
and undoubtedly patrimonial, petitioner’s right conferred under said articles
may be waived. This, the petitioner did by acceding to the contractual
stipulation that it is solely responsible for any damage to the cargo, thereby
exempting the private carrier from any responsibility for loss or damage
thereto.

Arts. 1170 and 1173 of the Civil Code

Art. 1745 of the Civil Code
Private respondent had acted as a private carrier in transporting petitioner’s
lauan logs. Thus, Article 1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party.
The foregoing articles are applicable only to the obligor or the one with an
obligation to perform. In the instant case, Private Respondent Seven
Brothers is not an obligor in respect of the cargo, for this obligation to bear
the loss was shifted to petitioner by virtue of the charter party. This shifting of
responsibility, as earlier observed, is not void.

In a contract of private carriage, the parties may validly stipulate that

responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by The provisions cited by the petitioner are, therefore, inapplicable to the
the negligence of the or public policy. Indeed, their contract of private present case.
carriage is not even a contract of adhesion. We stress that in a contract of
private carriage, the parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a
WHEREFORE, premises considered, the petition is hereby DENIED for its
common carrier, private carriage does not involve the general public. Hence,
utter failure to show any reversible error on the part of Respondent Court.
the stringent provisions of the Civil Code on common carriers protecting the
The assailed Decision is AFFIRMED. SO ORDERED.
general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein
is not contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers.

Arts. 586 and 587, Code of Commerce

Whatever rights petitioner may have under the aforementioned statutory

provisions were waived when it entered into the charter party. Article 6 of the

15

119 COASTWISE LIGHTERAGE CORP. v. COURT OF APPEALS
245 SCRA 797 (1995)
Facts:
Pag-asa Sales Inc entered into a contract to transport molasses from Negros
to Manila with Coastwise, using the latter’s dumb barges. The barges were
towed in tandem by the tugboat Mt Marica, which is likewise owned by
Coastwise.
When it reached Manila Bay, one of the barges struck an unknown sunken
object. It was damaged and water gushed in through a hole (2 inches wide
and 22 inches long) Because of this, the molasses at the cargo tanks were
contaminated and rendered unfit for the use it was intended. The consignee,
Pag-asa Sales, rejected the shipment. Then it filed a formal claim with the
insurer of its lost cargo, respondent Philippine General Insurance Company
and against the carrier, petitioner Coastwise. Coastwise denied the claim and
it was PhilGen which paid the consignee P700k which is the value of the
damaged cargo of molasses.
PhilGen then filed an action against Coastise to recover the amount paid to
Pag-asa. PhilGen now claims to be subrogated to all the contractual rights
and claims which the consignee may have against the carrier which is
presumed to have violated the contract of carriage.
RTC awared the amount prayed for by PhilGen
CA affirmed
Issue:
● Whether Coastwise was transformed into a private carrier by virtue
of the contract it entered into with Pag-asa and whether it exercised
Due Diligence
● Whether upon payment by insurer PhilGen to Paga-asa (consignee)
of the cargo of molasses while being transported by petitioner was
subrogated into all the rights which Pag-asa may have had against
the carrier, petitioner Coastwise
Held:
● Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order
to carry cargo from one point to another, but the possession,
command mid navigation of the vessels remained with petitioner
Coastwise Lighterage. Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained
a common carrier and was still liable as such. The law and
jurisprudence on common carriers both hold that the mere proof of
delivery of goods in good order to a carrier and the subsequent
arrival of the same goods at the place of destination in bad order
makes for a prima facie case against the carrier. It follows then that
the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption, which is overcome only
by proof of the exercise of extraordinary diligence, remained
unrebutted in this case. Jesus R. Constantino, the patron of the
vessel "Coastwise 9" admitted that he was not licensed. Coastwise
Lighterage cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are
16
 questionable, at the helm of the vessel which eventually met the
fateful accident. It may also logically, follow that a person without
license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by seasoned
and legally authorized ones. Had the patron been licensed he could
be presumed to have both the skill and the knowledge that would
have prevented the vessel's hitting the sunken derelict ship that lay
on their way to Pier 18. As a common carrier, petitioner is liable for
breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.
● SC ruled that the damage sustained by the loss of the cargo which
petitioner-carrier was transporting, it was not the carrier which paid
the value to Pag-asa but the latter’s insurer, PhilGen.
CC 2207 provides that:
Art. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person
who violated the contract. . . .
If the insured property is destroyed through the fault or negligence of a party
other than the assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the wrong doer to the
extent that the insurer has been obligated to pay. Payment by the insurer to
the assured operated as an equitable assignment to the former of all
remedies which the latter may have against the 3rd party whose negligence
of wrongful act caused the loss. The right of subrogation is not dependent
upon any privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.
Upon payment by respondent insurer PhilGen of P700k to Pag-asa, the
consignee of the cargo of molasses while being transported by petitioner
Coastwise, the former was subrogated into all the rights which Pag-asa may
have had against the carrier, herein petitioner
120. LITONJUA SHIPPING COMPANY INC. vs. NATIONAL SEAMEN
BOARD and GREGORIO P. CANDONGO 
G.R. No. L-51910 August 10, 1989
Facts:
 Petitioner Litonjua is the duly appointed local crewing Managing Office of
the Fairwind Shipping Corporation ('Fairwind). The M/V Dufton Bay is an
ocean-going vessel of foreign registry owned by the R.D. Mullion Ship
Broking Agency Ltd. ("Mullion").
 On 11 September 1976, while the Dufton Bay was in the port of Cebu
and while under charter by Fairwind, the vessel's master contracted the
services of, among others, private respondent Gregorio Candongo to
serve as Third Engineer for a period of twelve (12) months with a
monthly wage of US$500.00.
o This agreement was executed before the Cebu Area Manning
Unit of the NSB. Thereafter, private respondent boarded the
vessel.
 On 28 December 1976, before expiration of his contract, private
respondent was required to disembark at Port Kelang, Malaysia, and was
returned to the Philippines on 5 January 1977. The cause of the
discharge was described in his Seaman's Book as 'by owner's arrange".
 Shortly after returning to the Philippines, private respondent filed a
complaint before public respondent NSB, which complaint was docketed
as NSB-1331-77, for violation of contract, against Mullion as the shipping
company and petitioner Litonjua as agent of the shipowner and of the
charterer of the vessel.
17
 At the initial hearing, the NSB hearing officer held a conference with the
parties, at which conference petitioner Litonjua was represented by one
of its supercargos, Edmond Cruz. Edmond Cruz asked, in writing, that
the hearing be postponed for a month upon the ground that the
employee of Litonjua in charge of the case was out of town.
o The hearing officer denied this request and then declared
petitioner Litonjua in default.
 At the hearing, private respondent testified that when he was recruited by
the Captain of the Dufton Bay, the latter was accompanied to the NSB
Cebu Area Manning Unit by two (2) supercargos sent by petitioner
Litonjua to Cebu, and that the two (2) supercargos Edmond Cruz and
Renato Litonjua assisted private respondent in the procurement of his
National Investigation and Security Agency (NISA) clearance. Messrs.
Cruz and Litonjua were also present during private respondent's
interview by Captain Ho King Yiu of the Dufton Bay.
NSB Hearing Officer= Ordered respondents R.D. Mullion Shipbrokers Co.,
Ltd., and Litonjua Shipping Co., Inc., jointly and solidarily to pay the
complainant $4,657.63) or its equivalent in the Phil. Currency. No valid cause
for respondents to terminate the contract. MR= Denied.
NSB Central Office= Suspended its hearing officer's decision and lifted the
order of default against petitioner Litonjua. Subsequently, it reversed itself.
MR= Denied. From this observation, it can be reasonably inferred that
the  master of the vessel acted for and in behalf of Fairwind Shipping
Corporation who had the obligation to pay the salary of the complainant. It
necessarily follows that Fairwind Shipping Corporation is the employer of
said complainant.
 [PETITIONERS ARGUMENT] Petitioner Litonjua assails the decision of
public respondent NSB declaring the charterer Fairwind as employer of
private respondent, and for whose liability petitioner was made
responsible, as constituting a grave abuse of discretion amounting to
lack of jurisdiction.
 Petitioner Litonjua contends that the shipowner, not the charterer, was
the employer of private respondent; and that liability for damages cannot
be imposed upon petitioner which was a mere agent of the charterer. It is
insisted that private respondent's contract of employment and affidavit of
undertaking clearly showed that the party with whom he had contracted
was none other than Mullion, the shipowner, represented by the ship's
master. 
Issue: Whether or not Litonjua may be held liable to the private respondent
on the contract of employment? (YES.)
Held:
 We are not persuaded by petitioner's argument. We believe that there
are two (2) grounds upon which petitioner Litonjua may be held liable to
the private respondent on the contract of employment.
 The first basis is the charter party which existed between Mullion, the
shipowner, and Fairwind, the charterer. In modern maritime law and
usage, there are three (3) distinguishable types of charter parties: (a) the
"bareboat" or "demise" charter; (b) the "time" charter; and (c) the
"voyage" or "trip" charter. A bareboat or demise charter is a demise of a
vessel, much as a lease of an unfurnished house is a demise of real
property. The shipowner turns over possession of his vessel to the
charterer, who then undertakes to provide a crew and victuals and
supplies and fuel for her during the term of the charter. The shipowner is
not normally required by the terms of a demise charter to provide a crew,
and so the charterer gets the "bare boat", i.e., without a crew. 
Sometimes, of course, the demise charter might provide that the
shipowner is to furnish a master and crew to man the vessel under the
charterer's direction, such that the master and crew provided by the
shipowner become the agents and servants or employees of the
charterer, and the charterer (and not the owner) through the agency of
the master, has possession and control of the vessel during the charter
period. A time charter, upon the other hand, like a demise charter, is a
contract for the use of a vessel for a specified period of time or for the
duration of one or more specified voyages.
o In this case, however, the owner of a time-chartered vessel
(unlike the owner of a vessel under a demise or bare-boat
charter), retains possession and control through the master
and crew who remain his employees. What the time
charterer acquires is the right to utilize the carrying capacity
and facilities of the vessel and to designate her destinations
during the term of the charter. A voyage charter, or trip
charter, is simply a contract of affreightment, that is, a
contract for the carriage of goods, from one or more ports
of loading to one or more ports of unloading, on one or on a
series of voyages. In a voyage charter, master and crew
remain in the employ of the owner of the vessel. 
 It is well settled that in a demise or bare boat charter, the charterer is
treated as owner pro hac vice of the vessel, the charterer assuming in
18
 large measure the customary rights and liabilities of the shipowner in
relation to third persons who have dealt with him or with the vessel.  In
such case, the Master of the vessel is the agent of the charterer and not
of the shipownerThe charterer or owner pro hac vice, and not the general
owner of the vessel, is held liable for the expenses of the voyage
including the wages of the seamen.
 It is important to note that petitioner Litonjua did not place into the record
of this case a copy of the charter party covering the M/V Dufton Bay. We
must assume that petitioner Litonjua was aware of the nature of a
bareboat or demise charter and that if petitioner did not see fit to
include in the record a copy of the charter party, which had been
entered into by its principal, it was because the charter party and
the provisions thereof were not supportive of the position adopted
by petitioner Litonjua in the present case, a position diametrically
opposed to the legal consequence of a bareboat charter. Treating
Fairwind as owner pro hac vice, petitioner Litonjua having failed to
show that it was not such, we believe and so hold that petitioner
Litonjua, as Philippine agent of the charterer, may be held liable on
the contract of employment between the ship captain and the
private respondent.
 There is a second and ethically more compelling basis for holding
petitioner Litonjua liable on the contract of employment of private
respondent. The charterer of the vessel, Fairwind, clearly benefitted
from the employment of private respondent as Third Engineer of
the Dufton Bay, along with the ten (10) other Filipino crewmembers
recruited by Captain Ho in Cebu at the same occasion.  If private
respondent had not agreed to serve as such Third Engineer, the ship
would not have been able to proceed with its voyage. The equitable
consequence of this benefit to the charterer is, moreover, reinforced by
convergence of other circumstances of which the Court must take
account. There is the circumstance that only the charterer, through the
petitioner, was present in the Philippines. Secondly, the scope of
authority or the responsibility of petitioner Litonjua was not clearly
delimited. Petitioner as noted, took the position that its commission was
limited to taking care of vessels owned by Fairwind. But the documentary
authorization read into the record of this case does not make that clear at
all. The words "our ships" may well be read to refer both to vessels
registered in the name of Fairwind and vessels owned by others but
chartered by Fairwind. Indeed the commercial, operating requirements of
a vessel for crew members and for supplies and provisions have no
relationship to the technical characterization of the vessel as owned by or
as merely chartered by Fairwind.
 In any case, it is not clear from the authorization given by Fairwind to
petitioner Litonjua that vessels chartered by Fairwind (and owned by
some other companies) were not to be taken care of by petitioner
Litonjua should such vessels put into a Philippine port. The statement of
account which the Dufton Bay'sMaster had signed and which pertained
to the salary of private respondent had referred to a Philippine agency
which would take care of disbursing or paying such account. 'there is no
question that Philippine agency was the Philippine agent of the charterer
Fairwind. Moreover, there is also no question that petitioner Litonjua did
assist the Master of the vessel in locating and recruiting private
respondent as Third Engineer of the vessel as well as ten (10) other
Filipino seamen as crew members. In so doing, petitioner Litonjua
certainly in effect represented that it was taking care of the crewing and
other requirements of a vessel chartered by its principal, Fairwind.
 Last, but certainly not least, there is the circumstance that extreme
hardship would result for the private respondent if petitioner Litonjua, as
Philippine agent of the charterer, is not held liable to private respondent
upon the contract of employment. Clearly, the private respondent, and
the other Filipino crew members of the vessel, would be
defenseless against a breach of their respective contracts. While
wages of crew members constitute a maritime lien upon the vessel,
private respondent is in no position to enforce that lien. If only
because the vessel, being one of foreign registry and not ordinarily
doing business in the Philippines or making regular calls on
Philippine ports cannot be effectively held to answer for such
claims in a Philippine forum. Upon the other hand, it seems quite
clear that petitioner Litonjua, should it be held liable to private
respondent for the latter's claims, would be better placed to secure
reimbursement from its principal Fairwind. In turn, Fairwind would
be in an indefinitely better position (than private respondent) to
seek and obtain recourse from Mullion, the foreign shipowner,
should Fairwind feel entitled to reimbursement of the amounts paid
to private respondent through petitioner Litonjua.
SC= Petition for certiorari is DISMISSED and Decision of National
Seamen Board hereby AFFIRMED.
19

111 COMPAGNIE DE COMMERCE ET DE NAVIGATION D'EXTREME
ORIENT vs.
THE HAMBURG AMERIKA PACKETFACHT ACTIEN GESELLSCHAFT
Topic: Freight (Disclaimer: Difficult case  Tried my hardest to understand it
 Included only those necessary to the topic)
PARTIES:
This is an action by the PLAINTIFF, corporation organized in France, with a
branch in Saigon, against DEFENDANT, organized in Germany, with a
principal office in Hamburg, Germany, and represented in Manila by Behn,
Meyer & Company.
FACTS:
Defendant chartered and hired unto the plaintiff the steamship or vessel
called the Sambia for the purpose of carrying a full cargo of rice, rice bran
and cargo meal from the port of Saigon to the port of Dunkirk and Hamburg,
via Suez Canal, upon the terms and conditions set forth and contained in the
written charter party made and executed between the said parties.
(Shipowner – Defendant; Cargo owner – Plaintiff)
There were rumors of impending war between Germany and France and
other nations of Europe. The master of the steamship was told to take refuge
at a neutral port (because Saigon was a French port). Plaintiff asked for
compulsory detention of its vessel to prevent its property from leaving
Saigon. However, the Governor of Saigon refused to issue an order because
he had not been officially notified of the declaration of the war.
The steamship sailed from Saigon, and was bound for Manila, because it
was issued a bill of health by the US consul in Saigon. The steamship stayed
continuously in Manila and where it contends it will be compelled to stay until
the war ceases. No attempt was made on the part of the defendants to
transfer and deliver the cargo to the destinations as stipulated in the charter
party.
Behn, Meyer & Company offered to purchase the cargo from the plaintiff, but
the latter never received the cable messages so they never answered.
When a survey was done on the ship, it was found that the cargo was
infested with beetles, so Behn, Meyer & Company asked for court authority
to sell the cargo and the balance to be dumped at sea. The proceeds of the
sale were deposited in the court, waiting for orders as to what to do with it.
Behn, Meyer & Company wrote the plaintiff again informing the latter of the
disposition which it made upon the cargo. Plaintiff answered that it was still
waiting for orders as to what to do. Now, the plaintiff wants all the proceeds
of the sale to be given to them (as damages for the defendants’ failure to
deliver the cargo to the destinations Dunkirk and Hamburg), while
defendants contended that they have a lien on the proceeds of the sale
20
(amount due to them because of the upkeep and maintenance of the
ship crew and for commissions for the sale of the cargo).
TC: In favor of the plaintiffs.
Defendants appealed, and made the following assignment of errors:
1. Court had no jurisdiction
2. Fear of capture was not force majeure
3. Defendant is liable for damages for non-delivery of cargo, and the
value of the award of damages)
On appeal, the plaintiffs also contended that the court erred in not giving the
full value of damages.
ISSUES:
1. W/N the master of Sambia, when he fled from the port of Saigon and took
refuge in the port of Manila, had reasonable grounds to apprehend that his
vessel was in danger of seizure or capture by the public enemies of the flag
under which he sailed
2. W/N defendant is entitled to freight ***
3. W/N the claim of the defendant for general average can be sustained
SC:
1. YES
If it was his duty to remain in the port of Saigon under the circumstances
existing at the time when he completed the loading of the vessel, in the hope
that he would be granted a laissezpasser or safeconduct by the French
authorities, it is manifest that his flight subjected the ship and her owners to
liability for the resultant damages suffered by the cargo.
If, on the other hand, the master had reasonable ground to believe that by
remaining in the port of Saigon he would expose the vessel to a real, and not
a merely imaginary danger of seizure by the French authorities from which
he could secure her by taking refuge in the port of Manila, his flight must be
held to have been justified by the necessity under which he was placed to
elect that course which would secure the vessel from danger of seizure by a
public enemy of the country under whose flag she sailed; and the shipowner
must be held to be relieved from liability for the deviation from the route
prescribed in the charter party and the resultant damages to the cargo, under
the general provisions of maritime law
Petitioner’s Contention: having in mind accepted principles of public
international law, the established practice of nations, and the express terms
of the Sixth Hague Convention (1907), the master should have confidently
relied upon the French authorities at Saigon to permit him to sail to his port of
destination under a laissezpasser or safeconduct, which would have secured
both the vessel and her cargo from all danger of capture by any of the
belligerents.
Defendant’s Defense: in the light of the developments of the present war, the
master was fully justified in declining to leave his vessel in a situation in
which it would be exposed to danger of seizure by the French authorities,
should they refuse to be bound by the alleged rule of international law laid
down by opposing counsel.
The Court concluded that under the circumstances surrounding the flight of
the Sambia from the port of Saigon, her master had no such assurances,
under any wellsettled and universally accepted rule of public international
law, as to the immunity of his vessel from seizure by the French authorities,
21
as would justify us in holding that it was his duty to remain in the port of
Saigon in the hope that he would be allowed to sail for the port of destination
designated in the contract of affreightment with a laissezpasser or safe-
conduct which would secure the safety of his vessel and cargo en route.
 It is true that soon after the outbreak of the war, the Republic of
France authorized and directed the grant of safe conducts to enemy
merchant vessels in its harbors, under certain reasonable regulations
and restrictions; so that it would appear that had the master of the
Sambia awaited the issuance of such a safeconduct, he might have
been enabled to comply with the terms of his contract of
affreightment. But until such action had been taken, the Sambia was
exposed to the risk of seizure in the event that the French
government should decline to conform to the practice; and in the
absence of any assurance in that regard upon which the master
could confidently rely, his duty to his owner and to his vessel's flag
justified him in fleeing from the danger of seizure in the port of an
enemy to the absolute security of a neutral port.
 The danger from which the master of the Sambia fled was a real and
not merely an imaginary one as counsel for the shipper contends.
Seizure at the hands of an "enemy of the King," though not
inevitable, was a possible outcome of a failure to leave the port of
Saigon; and we cannot say 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
the French authorities, and therefore no necessity for flight.
 There can be and there is no question as to the necessity, arising out
of the presence of enemy cruisers on the high seas which compelled
the Sambia, once she had left the port of Saigon, to take refuge in
the port of Manila and to stay there indefinitely pending the outcome
of the war. We conclude, therefore, that the deviation of the Sambia
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 he was placed to elect that course which
would remove and preserve the vessel from danger of seizure by the
public enemies of the flag under which she sailed; and that neither
the vessel nor her owners are liable for the resultant damages
suffered by the owner of the cargo.
2. NO
The claim advanced on behalf of the shipowner for freights is wholly
without merit. Under the terms of the contract of affreightment, the
amount of the freight was made payable on delivery of the cargo at the
designated port of destination. It is clear then, that under the terms of
that instrument freight never became payable. Carrying the cargo from
Saigon to Manila was not even a partial performance of a contract to
carry it from Saigon to Europe; and even it if could be treated as such,
the shipowner would have no claim for freight, in the absence of any
agreement, express or implied, to make payment for a partial
performance of the contract.
Should the master relinquish the attempt either to carry on the goods in his
own ship or to send them to their destination in another ship, he will thereby
wholly abandon any claim for freight in respect to them, unless it has been
made payable in advance, or irrespective of delivery. Where freight is only
payable on delivery, no part is earned until it is earned completely. So that
whether the abandonment of the voyage be due to inability, or prevention of
the ship, or to the necessity of selling the goods, either to raise funds for the
ship's repairs or their owner's interest, the shipowner loses the whole freight.
On the other hand, if the cargo be accepted at the port of refuge under an
agreement that delivery there shall be treated as a performance by the
shipowner of his contract; or if the owner of the goods, by any act or default,
prevents the shipowner from carrying them on to their destination, the whole
of the freight becomes at once payable.
Also sometimes the shipowner becomes entitled, by agreement, on delivery
at a port of refuge, to freight in proportion to the part of the voyage which has
been accomplished. This subject will be discussed more fully hereafter. Here
it is enough to say that no agreement of this kind can arise, by implication,
unless the cargo owner has consented to accept the goods under
circumstances which left him an option to have them carried on to their
destination by the shipowner, in his own or some other vessel.
22
Where the vessel has been abandoned at sea by the master and crew,
without any intention of returning to her, the freighter is entitled to treat the
contract as abandoned; so that if she be brought into port by salvors, he may If then, any doubt could properly arise as to the meaning and effect of the
claim the goods without becoming liable to pay freight. words "common safety" as used in this body of rules, we would be justified in
resolving it in accordance with settled principles of maritime law; and an
examination of the authorities discloses a substantial unanimity of opinion as
3. NO to the general doctrine which provides that claims for contribution in general
average must be supported by proof that sacrifices on account of which such
claims are submitted were made to avert a common imminent peril, and that
extraordinary expenses for which reimbursement is sought, were incurred for
The claim of the shipowner for general average cannot be sustained under
the joint benefit of ship and cargo.
the provisions of the YorkAntwerp Rules of 1890, by reference to which, it
was expressly stipulated in the charter party, all such questions should be
settled, Rules X and XI, which treat of "Expenses at Port of Refuge, etc.,"
and "Wages and Maintenance of Crew in Port of Refuge, etc.," provide for
general average "When a ship shall have entered a port or place of refuge, or
shall have returned to her port or place of loading, in consequence of
accident, sacrifice, or other extraordinary circumstances which render that
SC concluded that much of the judgment entered in the court below as
necessary for the common safety . . .;" and an examination of the entire body
provides for the delivery to the plaintiff in this action of the sum of
of these rules discloses that general average is never allowed thereunder
P128,977.71, the net proceeds of the sale of the cargo of rice aboard the
unless the loss or damage sought to be made good as general average has
Sambia, which has been deposited subject to the order of the court below,
been incurred for the "common safety." It is very clear that in fleeing from the
less any commissions to which the clerk of that court may be lawfully entitled
port of Saigon and taking refuge in Manila Bay the master of the Sambia was
at the date of payment, should be affirmed; but that so much of the judgment
not acting for the common safety of the vessel and her cargo. The French
as provides, for the recovery of damages in the sum of P60,814.32, should
cargo was absolutely secure from danger of seizure or confiscation so long
be reversed
as it remained in the port of Saigon, and there can be no question that the
flight of the Sambia was a measure of precaution adopted solely and
exclusively for the preservation of the vessel from danger of seizure or
capture.

Rule 18 of the YorkAntwerp Rules is as follows:

“Except as provided in the foregoing rules, the adjustment

shall be drawn up in accordance with the law and practice
that would have governed the adjustment had the contract of
affreightment not contained the clause to pay general
average according to these rules.”

23

NATIONAL FOOD AUTHORITY, ROSELINDA GERALDEZ, RAMON
SARGAN and ADELINA A. YAP, petitioners, vs. THE HON. COURT OF
APPEALS AND HONGFIL SHIPPING CORPORATION, respondents.
Facts:
National Food Authority (NFA), thru its officers then, Emil Ong, Roselinda
Geraldez, Ramon Sargan and Adelina A. Yap, entered into a Letter of
Agreement for Vessel /Barge Hire with Hongfil Shipping Corporation (Hongfil)
for the shipment of 200,000 bags of corn grains from Cagayan de Oro City to
Manila. NFA sent Hongfil a Letter of Advice that its (Hongfil) vessel should
proceed to Cagayan de Oro City. On February 6, 1987, M/V
DIANE/CHARLIE of Hongfil arrived in Cagayan de Oro City 1500 hours.
Hongfil notified the Provincial Manager of NFA in Cagayan de Oro, Eduardo
A. Mercado, of its said vessels readiness to load and the latter received the
said notification on February 9, 1987.
A certification of charging rate was then issued by Gold City Integrated Port
Services, Inc. (INPORT), the arrastre firm in Cagayan de Oro City, which
certified that it would take them (INPORT) seven (7) days, eight (8) hours
and forty-three (43) minutes to load the 200,000 bags of NFA corn grains. On
February 10, 1987, loading on the vessel commenced and was terminated
on March 4, 1987. As there was a strike staged by the arrastre workers and
in view of the refusal of the striking stevedores to attend to their work, the
loading of said corn grains took twenty-one (21) days, fifteen hours (15) and
eighteen (18) minutes to finish.
On March 6, 1987, the NFA Provincial Manager allowed MV
CHARLIE/DIANE to depart for the Port of Manila. On March 11, 1987, the
vessel arrived at the Port of Manila and a certification of discharging rate was
issued at the instance of Hongfil, stating that it would take twelve (12) days,
six (6) hours and twenty-two (22) minutes to discharge the 200, 000 bags of
corn grains. Unfortunately, unloading only commenced on March 15, 1987
and was completed on April 7, 1987. It took a total period of twenty (20)
days, fourteen (14) hours and thirty-three (33) minutes to finish the
unloading, due to the unavailability of a berthing space for M/V
CHARLIE/DIANE.
After the discharging was completed, NFA paid Hongfil the amount of
P1,006,972.11 covering the shipment of corn grains. Thereafter, Hongfil sent
its billing to NFA, claiming payment for freight covering the shut-out load or
deadfreight as well as demurrage, allegedly sustained during the loading and
unloading of subject shipment of corn grains.When NFA refused to pay the
amount reflected in the billing, Hongfil brought an action against NFA and its
officers for recovery of deadfreight and demurrage, docketed as Civil Case
No. 55892 before Branch 165 of the Regional Trial Court in Pasig City.
Regional Trial Court handed down its decision in favor of Hongfil and against
NFA and its officers.
Issue/s:
1.) Whether petitioners can be held liable for dead freight (YES)
2.) Whether petitioners can be held liable for demurrage (NO)
3.) Whether personal civil liability may attach to the officers of NFA
(NO)
Held:
Subject contract is one of affreightment, whereby the owner of the vessel
leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel. Under such
contract the ship owner retains the possession, command and navigation of
24
the ship, the charterer or freighter merely having use of the space in the
vessel in return for his payment of the charter hire.
On the first issue: petitioners contend that the respondent corporation is not
entitled to deadfreight as the contract itself limited their liability. Section 7 of
the Letter Agreement for Vessel/Barge Hire provided a freight rate of Seven
and 30/100 (P7.30) Pesos per bag or a total of P1,460,000 based on out-turn
weight of 50 kilos per bag.
The Court of Appeals, however, held that since the charter of MV
CHARLIE/DIANE was for the whole vessel, and inasmuch as the vessel may
no longer accept any other cargo without the consent of the charterer NFA,
the latter is liable to pay the total amount of P1,460,000.00 based on 200,000
bags, at the rate of P7.30 per bag; in accordance with the Letter of
Agreement for Vessel/Barge Hire.
The submission of petitioners is unsustainable. They theorize that what
should be paid for was what was actually unloaded and not the number of
bags of corn grains NFA contracted to load.
Under the law, the cargo not loaded is considered as deadfreight. It is
the amount paid by or recoverable from a charterer of a ship for the
portion of the ships capacity the latter contracted for but failed to
occupy. Explicit and succinct is the law that the liability for deadfreight is on
the charterer. The law in point is Article 680 of the Code of Commerce which
provides:
Art. 680. A charterer who does not complete the full cargo he bound himself
to ship shall pay the freightage of the amount he fails to ship, if the captain
does not take other freight to complete the load of the vessel, in which case
the first charterer shall pay the difference, should there be any.
The words more or less when used in relation to quantity or distance, are
words of safety and caution, intended to cover some slight or unimportant
inaccuracy. It allows an adjustment to the demands of circumstances which
do not weaken or destroy the statements of distance and quantity when no
other guides are available.
In fact, it is further disclosed by the evidence that there was a communication
from NFA Administrator Emil Ong to Oscar Sanchez, Manager of Hongfil
Shipping Corporation, stating clearly that the vessel M/V CHARLIE/DIANE
was chartered to load our 200,000 bags corn grains from Cagayan de Oro to
Manila at P7.30 per 50 kg./bag. Therefrom, it can be gleaned unerringly that
the charter party was to transport 200,000 bags of corn grains.
It is thus decisively clear that the letter of agreement covered 200,000 bags
of corn grains but only 166,798 bags were unloaded at the Port of Manila.
Consequently, shut-out load or deadfreight of 33,201 bags at P7.30 per bag
or P242,367.30 should be paid by NFA to Hongfil Shipping Corporation.
On the Second issue:
As regards the claim for demurrage, the letter of agreement between the
parties does not contain any provision for the amount of demurrage, which is
the sum fixed by the contract of carriage, or which is allowed, as
remuneration to the owner of the ship for the detention of his vessel beyond
the number of days allowed by the charter party for loading or unloading or
for sailing. Nonetheless, despite the absence of an express provision on
demurrage in the agreement, such demurrage may be demanded under the
law. Article 656 of the Code of Commerce provides:
Article 656. If in the charter party the time in which the loading or unloading
are to take place is not stated, the usages of the port where these acts are to
take place shall be observed. After the stipulated customary period has
passed, and there is no express provision in the charter party fixing the
indemnity for delay, the Captain shall be entitled to demand demurrage for
the lay days and extra lay days which may have elapsed in loading and
unloading.
While the right to demand demurrage is vested in the captain of the vessel,
the said right may very well be exercised by the shipowner appellee which is
the principal of the captain. Moreover, while the causes of delay may not be
wholly attributable to appellant NFA (except the old and defective bags or
sacks used), the same may not also be blamed on appellee Hongfil.(except
the allegedly defective munkcrane).
Demurrage is the sum fixed in a charter party as a renumeration to the
owner of the ship for the detention of his vessel beyond the number of
days allowed by the charter party for loading or unloading or for
sailing. Liability for demurrage, using the word in its strict technical sense,
exists only when expressly stipulated in the contract.
Shipper or charterer is liable for the payment of demurrage claims when he
exceeds the period for loading or unloading as agreed upon or the agreed
laydays. The period for such may or may not be stipulated in the contract. A
charter party may either provide for a fixed laydays or contain general or
indefinite words such as customary quick dispatch or as fast as the steamer
can load.
In the case under scrutiny, the charter party provides merely for a general or
indefinite words of customary quick dispatch.
25

The stipulation Laydays (Loading and Unloading): Customary Quick Dispatch
implies that loading and unloading of the cargo should be within a reasonable
period of time. Due diligence should be exercised according to the customs
and usages of the port or ports of call. The circumstances obtaining at the
time of loading and unloading are to be taken into account in the
determination of Customary Quick Dispatch.
What is a reasonable time depends on the existing as opposed to normal
circumstances, at the port of loading and the custom of the port.
While what was certified to by the arrastre did not tally with the actual period
of loading and unloading, it appears that the cause of delay was not
imputable to either of the parties. The cause of delay during the loading was
the strike staged by the crew of the arrastre operator, and the unavailability
of a berthing space for the vessel during the unloading. The lack of a
berthing space was understandable under the circumstances since the North
Harbor in Manila, where the unloading took place, is a large port but there
was congestion due to the number of ships or vessels which were all waiting
to dock.
Delay in loading or unloading, to be deemed as a demurrage, runs against
the charterer as soon as the vessel is detained for an unreasonable length of
time from the arrival of the vessel because no available berthing space was
provided for the vessel due to the negligence of the charterer or by reason of
circumstances caused by the fault of the charterer.
In the present case, charterer NFA could not be held liable for demurrage for
the delay resulting from the aforementioned circumstances. The provision
Laydays: Customary Quick Dispatch invoked by Hongfil is unavailing as a
basis for requiring the charterer to pay for demurrage absent convincing
proof that the time for the loading or unloading in question was beyond the
reasonable time within the contemplation of the charter party. Here, the Court
holds that the delay sued upon was still within the reasonable time embraced
in the stipulation of Customary Quick Dispatch.
In a contract of affreightment, the shipper or charterer merely contracts a
vessel to carry its cargo with the corresponding duty to provide for the
berthing space for the loading or unloading. Charterer is merely required to
exercise ordinary diligence in ensuring that a berthing space be made
available for the vessel. The charterer does not make itself an absolute
insurer against all events which cannot be foreseen or are inevitable. The law
only requires the exercise of due diligence on the part of the charterer to
scout or look for a berthing space.
Furthermore, considering that subject contract of affreightment contains an
express provision Demurrage/Dispatch: NONE, the same left the parties with
no other recourse but to apply the literal meaning of such stipulation. The
cardinal rule is that where, as in this case, the terms of the contract are clear
and leave no doubt over the intention of the contracting parties, the literal
meaning of its stipulations is controlling.
On the issue of whether personal civil liability may attach to the officers
of NFA, the court rules in the negative.
A corporation, being a juridical entity, may act only through its officers,
directors and employees. Obligations incurred or contracted by them, acting
as such corporate agents, are not theirs but the direct accountability of the
corporation they represent.
The present case under scrutiny does not fall under any of such exceptions.
A careful perusal of the contract litigated upon reveals that the petitioners, as
officers of NFA, did not bind themselves to be personally liable nor did they
ink any undertaking that should NFA fail to pay Hongfils claims, they would
be personally liable. Hongfil has not cited any provision of law under which
the officers of NFA are liable under the contract entered into.
What is more, there is nothing on record to show that the petitioner-officers
acted in bad faith or were guilty of gross negligence, to warrant personal
liability. Neither the trial court nor the Court of Appeals found of bad faith or
gross negligence on the part of the said officers of NFA.
MAGSAYSAY V AGAN
Transportation – General Averages – Stranding of a Vessel
In 1949, SS San Antonio, owned by AMInc, embarked on its voyage to
Batanes via Aparri. It was carrying various cargoes, one of which was owned
by Agan. One fine weather day, it accidentally ran aground the mouth of the
Cagayan River due to the sudden shifting of the sands below. SS San
Antonio then needed the services of Luzon Stevedoring Co. to tow the ship
and make it afloat so that it can continue its journey. Later, AMInc required
the cargo owners to pay the expenses incurred in making the ship afloat
(P841.40 each). The expenses, AMInc claims, fall under the General
Averages Rule under the Code of Commerce, which is to be shared by ship
owner and cargo owners as well.
ISSUE: Whether or not general averages exist in the case at bar.
HELD: No. General averages contemplate that the stranding of the vessel is
intentionally done in order to save the vessel itself from a certain and
imminent danger. Here, the stranding was accidental and it was made afloat
26
for the purpose of saving the voyage and not the vessel. Note that this
happened on a fine weather day. Also, it cannot be said that the towing was
made to save the cargos, for the cargos were not in danger imminent danger.

64 Eastern Shipping Lines, Inc. v. IAC and Development Insurance &

Surety Corp.

G.R. No. L-69044 May 29, 1987

Eastern Shipping Lines, Inc. v. The Nisshin Fire and Marine Insurance
International harvester v hamburg Co., andDowa Fire & Marine Insurance Co., Ltd.

42 Phil. 845 – Civil Law – Transportation – General Averages – Stranding by G.R. No. 71478 May 29, 1987
Reason of War
FACTS:
The International Harvester Company in Russia (IHCR), an American
Company, contracted the Hamburg-American Line (HAL) to transport 852  In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
crates of agricultural machinery from Baltimore, Maryland (USA) to Hamburg, ASIATICA, a vessel operated by petitioner Eastern Shipping Lines,
Germany and that after it reached Hamburg, the crates were to be delivered, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
at the order of the consignor, to Vladivostock, Russia. The crates were Japan for transportation to Manila, 5,000 pieces of calorized lance
delivered via the vessel Bulgaria to Hamburg, at the expense of HAL. It was pipes in 28 packages valued at P256,039.00 consigned to Philippine
transferred to the German ship Suevia to resume journey from Hamburg to Blooming Mills Co., Inc., and 7 cases of spare parts valued at
Russia. During Suevia’s journey, war broke out between Russia and P92,361.75, consigned to Central Textile Mills, Inc. Both sets of
Germany. Suevia’s captain ordered the ship to be placed on neutral ground, goods were insured against marine risk for their stated value with
which happened to be the nearest port of Manila. IHCR demanded HAL to respondent Development Insurance and Surety Corporation.
continue the journey by transferring the cargoes to a non-German ship (as
agreed upon in the Bill of Lading in case of war). HAL declined. IHCR sued
 In G.R. No. 71478, during the same period, the same vessel took on
HAL in Manila. RTC Manila issued a writ of replevin hence IHCR recovered
board 128 cartons of garment fabrics and accessories, in two (2)
its cargoes, it then contracted a separate ship to continue the transport. HAL
containers, consigned to Mariveles Apparel Corporation, and two
claimed that IHCR is liable for general averages for the expenses of
cases of surveying instruments consigned to Aman Enterprises and
the Suevia while at the port of Manila. IHCR claimed that HAL is liable for the
General Merchandise. The 128 cartons were insured for their stated
expenses incurred by ICHR in contracting a different shipping line.
value by respondent Nisshin Fire & Marine Insurance Co., for US
ISSUE: Whether or not IHCR is liable for general averages. $46,583.00, and the 2 cases by respondent Dowa Fire & Marine
Insurance Co., Ltd., for US $11,385.00.
HELD: No. The cargoes were not contraband and are not in danger at
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
war. Suevia’s captain merely thought about the safety of the ship, not of the
resulting in the total loss of ship and cargo. The respective
cargos hence there is no common benefit here between the ship and the
respondent Insurers paid the corresponding marine insurance values
cargo; therefore, general averages does not exist. HAL is liable for the
to the consignees concerned and were thus subrogated unto the
expenses incurred by IHCR in contracting a different shipper. By the terms of
rights of the latter as the insured.
the contract of affreightment HAL was bound to forward the cargo to
Vladivostock at the steamer’s expense, not necessarily by a steamer
 G.R. NO. 69044
belonging to HAL; and it does not by any means follow that it is not liable for
On May 11, 1978, respondent Development Insurance & Surety
the expense incurred by IHCR in completing the unfinished portion of the
Corporation (Development Insurance, for short), having been
voyage in another ship.
subrogated unto the rights of the two insured companies, filed suit
27
 against petitioner Carrier for the recovery of the amounts it had paid
to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss
was due to an extraordinary fortuitous event, hence, it is not liable
under the law.
Petitioner-Carrier denied liability mainly on the ground that the loss
was due to an extraordinary fortuitous event, hence, it is not liable
under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and
P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the
then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on
Certiorari.
 In this case, the vessel caught fire and sank, resulting in the total
loss of ship and cargo
ISSUES:
1. which law should govern — the Civil Code provisions on Common carriers
or the Carriage of Goods by Sea Act?;
2. who has the burden of proof to show negligence of the carrier?
3. what is the extent of the carrier’s liability?
HELD:
1. 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. As the cargoes were transported from Japan to the Philippines,
the liability of Petitioner Carrier is governed primarily by the Civil Code.
However, 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
special laws. Thus, the Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code. 2. Article 1735 of the Civil
Code provides that all cases than those mention in Article 1734,the common
carrier shall be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary diligence required by
law. The burden is upon Eastern Shipping Lines to prove that it has
exercised the extraordinary diligence required by law.
Petitioner Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity. " However, we are of
the opinion that fire may not be considered a natural disaster or calamity.
This must be so as it arises almost invariably from some act of man or by
human means. Clearly, this is not within the contemplation of Art.1734 for it
arises almost invariably from some act of man or by human means; it does
not fall within the category of an act of God unless caused by lightning or by
other natural disaster or calamity
 Petitioner Carrier failed to discharge the burden of proving that it had
exercised the extraordinary diligence required by law, Eastern
Shipping Lines cannot escape liability for the loss of the cargo. As it
was at fault, it cannot seek the protective mantle of Sec. 4(2) of
Carriage of Goods by Sea Act which provides: “Neither the carrier
nor the ship shall be responsible for loss or damage arising or
resulting from x x x (b) Fire, unless caused by the actual fault or
privity of the carrier.”
there was actual fault of the carrier shown by lack of diligence in that when
the smoke was noticed, the fire was already big; that the fire must have
started 24 hours before the same was noticed; and that after the cargoes
were stored in the hatches, no regular inspection was made as to their
condition during the voyage. And even if fire were to be considered a
"natural disaster" within the meaning of Article 1734 of the Civil Code, it
is required under Article 1739 of the same Code that the "natural
disaster" must have been the "proximate and only cause of the loss,"
and that the carrier has "exercised due diligence to prevent or minimize
the loss before, during or after the occurrence of the disaster. " This
Petitioner Carrier has also failed to establish satisfactorily.
3. Article 1749 of the New Civil Code also allows the limitations of liability as
in this case. It is to be noted that the Civil Code does not of itself limit the
28
liability of the common carrier to a fixed amount per package although the
Code expressly permits a stipulation limiting such liability. Thus, the COGSA
which is suppletory to the provisions of the Civil Code, steps in and
supplements the Code by establishing a statutory provision limiting the
carrier's liability in the absence of a declaration of a higher value of the goods
by the shipper in the bill of lading. The provisions of the Carriage of Goods
by.Sea Act on limited liability are as much a part of a bill of lading as though
physically in it and as much a part thereof as though placed therein by
agreement of the parties . The question is, is there any limitation of liability in
the Bill of Lading in this case?

None. In this case, there isno stipulation in the Bills of Lading limiting the
carrier’s liability for the lossor destruction of the goods; no declaration of a
higher value of the goods; Hence, Eastern Shipping Lines’ liability should not
exceed US $500 per package (as provided in 4(5) of the COGSA), or its
peso equivalent, at the time of payment of the value of the goods lost, but
inno case more than the amount of damage actually sustained

29