MARITIME LAW – a corpus of rules, concepts, and legal practices governing certain reasons of insubordination in serious matters, robbery,
matters, robbery, theft, habitual drunkenness, and
centrally important concerns of the business of carrying goods and passengers by water
- System of law which particularly relates to marine commerce and navigation, to
business transacted at sea, or relating to navigation, to ships and shipping, to seamen,
to the transportation of persons and property by sea and to marine affairs generally
Article 586
The owner of a vessel and the 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
creditor proves that the amount claimed was invested therein.
By agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she happens to be.
Article 587
The agent shall also be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the care of the goods which the vessel carried; but he may
exempt himself therefrom by abandoning the vessel with all her equipments and the freight he
may have earned during the voyage.
Article 588
Neither the owner of the vessel nor the agent shall be liable for the obligations contracted by
the captain if the latter exceeds his powers and privileges which are his by reason of his
position or have been conferred upon him by the former.
However, if the amounts claimed were made use of for the benefit of the vessel, the owner or
agent shall be liable.
Article 603
Before a vessel goes out to sea the agent shall have at his discretion, a right to discharge the
captain and members of the crew whose contract did not state a definite period nor a definite
voyage, paying them the salaries earned according to their contracts, and without any
indemnity whatsoever, unless there is a special and specific agreement in respect thereto.
Article 605
If the contracts of the captain and members of the crew with the agent should be for a definite
period or voyage, they can not be discharged until the fulfillment of their contracts, except for
damage caused to the vessel or to its cargo by malice or manifest or proven negligence.
Article 609
Captains and masters of vessels must be Spaniards * having legal capacity to bind themselves
in accordance with this Code, and must prove that they have the skill, capacity, and
qualifications required to command and direct the vessel, as established by marine laws,
ordinances, or regulations, or by those of navigation, and that they are not disqualified
according to the same for the discharge of the duties of that position.
If the owner of a vessel desires to be the captain thereof and does not have the legal
qualifications therefor, he shall limit himself to the financial administration of the vessel, and
shall intrust her navigation to a person possessing the qualifications required by said
ordinances and regulations.
Article 610
The following powers are inherent in the position of captain or master of a vessel:
To appoint or make contracts with the crew in the absence of the agent and propose said crew,
should said agent be present; but the agent shall not be permitted to employ any member
against the captain's express refusal.
To command the crew and direct the vessel to the port of its destination, in accordance with
the instructions he may have received from the agent.
To impose, in accordance with the agreements and the laws and regulations of the merchants
marine, on board the vessel, correctional punishment upon those who do not comply with his
orders or who conduct themselves against discipline, holding a preliminary investigation on
the crimes committed on board the vessel on the high seas, which shall be turned over to the
authorities, who are to take cognizance thereof, at the first port touched.
To make contracts for the charter of the vessel in the absence of the agent or of her consignee,
acting in accordance with the instructions received and protecting the interests of the owner
most carefully.
To adopt all the measures which may be necessary to keep the vessel well supplied and
equipped, purchasing for the purpose all that may be necessary, provided there is no time to
request instructions of the agent.
To make, in similar urgent cases and on a voyage, the repairs to the hull and engines of the
vessel and to her rigging and equipment which are absolutely necessary in order for her to be
able to continue and conclude her voyage; but if she should arrive at a point where there is a
consignee of the vessel, he shall act in concurrence with the latter.
Article 611
In order to comply with the obligations mentioned in the foregoing article, the captain, when
he has no funds and does not expect to receive any from the agent, shall procure the same in
the successive order stated below:
By requesting said funds of the consignees or correspondents of a vessel.
By applying to the consignees of the cargo or to the persons interested therein.
By drawing on the agent.
By borrowing the amount required by means of a bottomry bond.
By selling a sufficient amount of the cargo to cover the amount absolutely necessary to repair
the vessel, and to equip her to pursue the voyage.
In the two latter cases he must apply to the judicial authority of the port, if in Spain * and to
the Spanish * consul, if in a foreign country; and where there should be none, to the local
authority, proceeding in accordance with the prescriptions of Article 583, and with the
provisions of the law of civil procedure.
Article 612
The following obligations are inherent in the office of captain:
To have on board before starting on a voyage a detailed inventory of the hull, engines,
rigging, tackle, stores, and other equipments of the vessel; the navigation certificate; the roll
of the persons who make up the crew of the vessel, and the contracts entered into with the
crew; the list of passengers; the health certificate; the certificate of the registry proving the
ownership of the vessel, and all the obligations which encumber the same up to that date; the
charters or authenticated copies thereof; the invoices or manifest of the cargo, and the
instrument of the expert visit or inspection, should it have been made at the port of departure.
To have a copy of this Code on board.
To have three folioed and stamped books, placing at the beginning of each one a note of the
number of folios it contains, signed by the maritime official, and in his absence by the
competent authority.
Article 615
Without the consent of the agent, the captain can not have himself substituted by another
person; and should he do so, besides being liable for all the acts of the substitute and bound to
the indemnities mentioned in the foregoing article, the substitute as well as the captain may be
discharged by the agent.
Article 618
The captain shall be civilly liable to the agent, and the latter to the third persons who may
have made contracts with the former —
For all the damages suffered by the vessel and his cargo by reason of want of skill or
negligence on his part. If a misdemeanor or crime has been committed he shall be liable in
accordance with the Penal Code.
For all the thefts committed by the crew, reserving his right of action against the guilty
parties.
For the losses, fines, and confiscations imposed an account of violation of the laws and
regulations of customs, police, health, and navigation.
For the losses and damages caused by mutinies on board the vessel, or by reason of faults
committed by the crew in the service and defense of the same, if he does not prove that he
made full use of his authority to prevent or avoid them.
For those arising by reason of an undue use of powers and non-fulfillment of the obligations
which are his in accordance with Articles 610 and 612.
For those arising by reason of his going out of his course or taking a course which he should
not have taken without sufficient cause, in the opinion of the officers of the vessel, at a
meeting with the shippers or supercargoes who may be on board.
No exception whatsoever shall exempt him from this obligation.
For those arising by reason of his voluntarily entering a port other than his destination, with
the exception of the cases or without the formalities referred to in Article 612.
For those arising by reason of the non-observance of the provisions contained in the
regulations for lights and evolutions for the purpose of preventing collisions.
Article 620
The captain shall not be liable for the damages caused to the vessel or to the cargo by reason
of force majeure; but he shall always be so — no agreement to the contrary being valid — for
those arising through his own fault.
Neither shall he be personally liable for the obligations he may have contracted for the repair,
equipment, and provisioning of the vessel, which shall be incurred by the agent, unless the
former has expressly bound himself personally or signed a draft or promissory note in his
name.
Article 627
The sailing mate, as the second chief of the vessel and unless the agent orders otherwise, shall
take the place of the captain in cases of absence, sickness, or death, and shall then assume all
his powers, obligations, and responsibilities.
Article 628
The sailing mate must supply himself with charts of the waters which are to be navigated,
with the maps and quadrants or sextants which are in use and which are necessary for the
discharge of his duties, being liable for the accidents which may arise by reason of his fault in
this matter.
Article 629
The sailing mate shall personally and specially keep a book folioed and stamped on all its
pages, called the "binnacle book", with a memorandum at the beginning stating the number of
folios it contains, signed by the competent authority, and shall enter therein daily the distance
and course travelled, the variations of the needle, the leeway, the direction and force of the
wind, the condition of the atmosphere and of the sea, the rigging set, the latitude and
longitude observed, the number of furnaces fired, the steam pressure, the number of
revolutions, and under the name of "incidents" the revolutions made, the meetings with other
vessels, and all the particulars and accidents which may occur during the voyage.
Article 630
In order to change the course and to take the one most convenient for a good voyage of the
vessel, the sailing mate shall come to an agreement with the captain. If the latter should
object, the sailing mate shall make the remarks he may consider necessary in the presence of
the other officers of the vessel. If the captain should still insist on his objection, the sailing
mate shall make the proper protest, signed by him and by another one of the officers in the log
book, and shall obey the captain, who shall be the only one liable for the consequences of his
order.
Article 631
The sailing mate shall be liable for all the damages suffered by the vessel and cargo by reason
of his negligence or want of skill, without prejudice to the criminal liability which may arise,
if a felony or misdemeanor were committed.
Article 632
It shall be the duty of the second mate:
To watch over the preservation of the hull, and rigging of the vessel, and to take charge of the
tackle and equipment which make up her outfit, suggesting to the captain the repairs
necessary and the replacement of the goods and implements which are rendered useless and
lost.
To take care that the cargo is well arranged, keeping the vessel always ready for evolutions.
To preserve order, discipline, and good service among the crew, requesting the necessary
orders and instructions of the captain, and quickly informing him of any occurrence in which
the intervention of his authority may be necessary.
To assign to each sailor the work he is to do on board, in accordance with the instructions
received, and see that it is exactly and carefully carried out.
To take charge by inventory of the rigging and all the equipments of the vessel, if it should be
laid up, unless the agent has ordered otherwise.
With regard to engineers the following rules shall govern:
In order to be taken on board as a marine engineer forming part of the complement of a
merchant vessel it shall be necessary to possess the qualifications which the laws and
regulations require, and not to be disqualified in accordance therewith to hold said position.
Engineers shall be considered as officers of the vessel, but they shall exercise no command
nor intervention except that which refers to the motive power.
When there are two or more engineers on one vessel, one of them shall be the chief, and the
other engineers and all the personnel of the engines shall be under his orders; he shall
furthermore have the motive power under his charge, as well as the spare pieces, instruments,
and implements belonging thereto, the fuel, the lubricating material and, finally, all which
comes under the jurisdiction of an engineer on board a vessel.
He shall keep the engines and boilers in good condition and in state of cleanliness, and shall
order what may be proper in order that they may always be ready for regular use, being liable
for the accidents or damages which may arise by reason of his want of skill or negligence to
the motive apparatus, or to the vessel and cargo, without prejudice to the criminal liability
which may be proper if a felony or misdemeanor is proven.
He shall make no change in the motive apparatus, nor shall he repair the averages he may
have noticed in the same, nor change the normal speed of its movement without the prior
authority of the captain, to whom, if he should object to their being made, he shall state the
reasons he may deem proper in the presence of the other engineers or officers; and if,
notwithstanding this, the captain should insist on his objection, the chief engineer shall make
the proper protest, entering the same in the engine book, and shall obey the captain, who shall
be the only one liable for the consequences of his order.
He shall inform the captain of any average which may occur to the motive apparatus, and
shall inform him when it may be necessary to stop the engines for some time, or when any
other incident occurs in his department of which the captain should be immediately informed,
frequently advising him furthermore of the consumption of fuel and lubricating material.
He shall keep a book or registry called the "Engine Book," in which there shall be entered all
the data that refer to the work of the engines, such as, for example, the number of furnaces
fired, the steam pressure in the boilers and cylinders, the vacuum in the condenser, the
temperatures, the degree of saturation of the water, the consumption of fuel and lubricating
material, and under the heading of "Noteworthy occurrences" the average and imperfections
which occur in the engines and boilers, the causes therefor, and the means employed to repair
the same. There shall also be stated, taking the information from the binnacle book, and
direction of the wind, the rigging set, and the speed of the vessel.
Article 634
The captain may make up his crew with the number he may consider advisable, and in the
absence of Spanish * sailors he may ship foreigners residing in the country, the number
thereof not to exceed one-fifth of the total crew. If in foreign ports the captain should not find
a sufficient number of Spanish * sailors, he may make up the crew with foreigners, with the
consent of the consul or marine authorities.
The agreements which the captain may make with the members of the crew and others who
go to make up the complement of the vessels, to which reference is made in Article 612, must
be reduced to writing in the account book without the intervention of a notary public or clerk,
signed by the parties thereto, and vised by the marine authority if they are executed in Spanish
* territory, or by the consuls or consular agents of Spain * if executed abroad, stating therein
all the obligations which each one contracts and all the rights they acquire, said authorities
taking care that these obligations and rights are recorded in a concise and clear manner, which
will not give rise to doubts or claims.
The captain shall take care to read to them the articles of this Code, which concern them,
stating that they were read in the said document.
If the book includes the requisites prescribed in Article 612, and there should not appear any
signs of alterations in its clauses, it shall be admitted as evidence in questions which may arise
between the captain and the crew with regard to the agreements contained therein and the
amounts paid on account of the same.
Every member of the crew may request a copy of the captain, signed by the latter, of the
agreement and of the liquidation of his wages, as they appear in the book.
Article 637
Neither can the captain discharge a sailor during the time of his contract except for sufficient
cause, the following being considered as such:
The perpetration of a crime which disturbs order on the vessel.
Repeated offenses of insubordination, against discipline, or against the fulfillment of the
service.
Repeated incapacity or negligence in the fulfillment of the service to be rendered.
Habitual drunkenness.
Any occurrence which incapacitates the sailor to carry out the work under his charge, with the
exception of the provisions contained in Article 644.
Desertion.
The captain may, however, before setting out on a voyage and without giving any reason
whatsoever, refuse to permit a sailor he may have engaged from going on board and may
leave him on land, in which case he will be obliged to pay him his wages as if he had rendered
services.
This indemnity shall be paid from the funds of the vessel if the captain should have acted for
reasons of prudence and in the interest of the safety and good service of the former. Should
this not be the case, it shall be paid by the captain personally.
After the vessel has sailed, and during the voyage and until the conclusion thereof, the captain
can not abandon any member of his crew on land or on the sea, unless, by reason of being
guilty of some crime, his imprisonment and delivery to the competent authority is proper in
the first port touched, which will be obligatory on the captain.
Article 645
If a sailor should die during the voyage his heir shall be given the wages earned and not
received, according to his engagement and the reason for his death, namely —
If, before the beginning of the voyage, the captain attempts to change it, or there occurs a
naval war with the power to which the vessel was destined.
If a disease should break out and be officially declared epidemic in the port of destination.
If the vessel should change owner or captain.
Article 648
By the complement of a vessel shall be understood all the persons embarked, from the captain
to the cabin boy, necessary for the management, evolutions, and service, and there shall,
therefore, be understood as included in the complement the crew, sailing mates, engineers,
stokers, and other persons not having a specific name; but there shall not be included the
passengers nor the persons the vessel is only transporting.

If he should have died a natural death and should have been engaged on wages there shall be
paid what may have been earned up to the date of his death.
If the engagement had been made for a fixed sum for the whole voyage there shall be paid
half the amount earned if the sailor died on the voyage out, and the whole amount if he died
on the return voyage.
And if the engagement had been made on shares and the death should have occurred after the
voyage was begun, the heirs shall be paid the entire portion due the sailor; but should the
latter have died before the departure of the vessel from the port, the heirs shall not be entitled
to claim anything.
Article 649
Supercargoes shall discharge on board the vessel the administrative duties which the agent or
shippers may have assigned them; they shall keep an account and record of their transactions
in a book which shall have the same conditions and requisites as required for the accounting
book of the captain, and shall respect the latter in his duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when there is a supercargo, with regard
to that part of the administration legitimately conferred upon the latter, but shall continue in
force for all acts which are inseparable from his authority and office.

If the death should have occurred in the defense of the vessel, the sailor shall be considered as
living, and his heirs shall be paid, at the end of the voyage, the full amount of wages or the
full part of the profits due him as to the others of his grade.

The sailor shall likewise be considered as present in the event of his capture when defending
the vessel, in order to enjoy the same benefits as the rest; but should he have been captured on
account of carelessness or other accident not related to the service, he shall only receive the
wages due up to the day of his capture.

Article 647
The officers and the crew of the vessel shall be exempted from all obligations contracted, if
they deem it proper, in the following cases:

13. YU CON VS IPIL ET. AL
Plaintiff-appellee: YU CON
Defendants-appellants: GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO
Topic: The ship captain and master of the vessel
FACTS:
1. Plaintiff Yu Con is a merchant and a resident of San Nicolas, Cebu City, engaged in the
sale of cloth and domestic articles and having a share in a shop situated in the town of
Catmon. Yu Con had several times chartered from the defendant Narciso Lauron, a banca
named “Maria” belonging to the latter, of which Glicerio Ipil was master and Justo Solamo,
supercargo, for the transportation of certain merchandise and some money to and from the
said town and the port of Cebu.
2. On or about 17th of October, 1911, the Yu Con chartered the banca from Lauron for the
transportation of various merchandise from the port of Cebu to Catmon, at the price of P45 for
the round trip, which merchandise was loaded on board the said craft. That in the afternoon of
the following day, Yu Con delivered to the Ipil and Solamo, master and supercargo,
respectively, of the afore-named banca, the sum of P450, which was in a trunk belonging to
the former and was taken charge of by said two defendants, who received this money from
him.
3. On the night of 18th of October, the time scheduled for the departure of the “Maria” from
the port of Cebu, Ipil and Solamo transferred the P450 from the Yu Con’s trunk to theirs,
which was in a stateroom of the banca. From which stateroom both the trunk and the money
disappeared during that same night, and that the investigations, made to ascertain their
whereabouts, produced no result.
4. Ipil and Solamo also admitted that they received from the Yu Con said P450, which sum
was in the latter's own trunk placed outside the stateroom of the banca. Since there is no
room inside the stateroom, Ipil and Solamo decided to transfer said money to their trunk,
which was inside the stateroom, and that this trunk and the P450 therein contained
disappeared from the boat during the night of that same day.
5. Juan Quiamco and Gabriel Basang testified that the small window of the stateroom had
been broken, and that all the window-blinds had been removed from the windows, as well as
part of the partition in which they were, and that the trunk in which the money was contained
could have been passed through said small window.
6. The trial Court held that the sole cause of the disappearance of the money was due to the
negligence of the master and the supercargo, Ipil and Solamo, respectively, and that the
defendant Narciso Lauron was responsible for that negligence, as owner of the banca,
pursuant to articles 589, 587, and 618 of the Code of Commerce, the plaintiff therefore being
entitled to recover the amount lost.
PETITIONER’S CONTENTION:
The disappearance of said sum was due to the abandonment, negligence, or voluntary breach,
on the part of the defendants, of the duty they had in respect to the safe-keeping of the
aforementioned sum. Thus, defendants should be jointly and severally liable.
RESPONDENT’S CONTENTION:
1. Yu Con, at his own expense and under his exclusive responsibility, chartered the said
banca, and that, through the misfortune, negligence, or abandonment of the plaintiff himself,
the loss complained of occurred, while said banca was at anchor in the port of Cebu, and was
caused by theft committed by unknown thieves.
2. Defendant Lauron, the owner of the banca merely placed this craft at the disposal of the
plaintiff for the price and period agreed upon, and did not go with the banca on its voyage
from Catmon to Cebu.
3. They filed a counterclaim on the ground that Yu Con be ordered to pay the freight agreed
upon, as well as indemnity for the losses and damages caused them by the attachment of the
banca
ISSUES: Whether defendants Lauron, Ipil and Solamo are liable for the amount lost.
RULING: Yes, the Court held that the defendants Lauron, Ipil and Solamo are liable for the
amount lost.
IPIL AND SOLAMO ARE LIABLE AS DEPOSITARIES.
It is a rule, that in order that a thing may be transported, it must be delivered to the carrier.
From the time it is delivered to the carrier or shipper until it is received by the consignee, the
carrier has it in his possession, as a necessary condition for its transportation, and is obliged to
preserve and guard it; wherefore it is but natural and logical that he should be responsible for
it.
In this case, it is unquestionable that the Ipil and Solamo were the carriers of the said P450
belonging to the plaintiff, and that they received this sum from the latter for the purpose of
delivering it to the store of the town of Catmon, to which it had been consigned. Under such
circumstances, said defendants were the depositaries of the money.
The said two defendants being the depositaries of the sum in question, and they having failed
to exercise for its safe-keeping the diligence required by the nature of the obligation assumed
by them and by the circumstances of the time and the place, are liable for its loss or
misplacement and must restore it to the plaintiff, together with the corresponding interest
thereon as an indemnity for the losses and damages caused him through the loss of the said
sum.
LAURON IS LIABLE AS THE OWNER OF VESSEL “MARIA”
It is well and good that the shipowner be not held criminally liable for such crimes or quasi
crimes; but the cannot be excused from liability for the damage and harm which, in
consequence of those acts, may be suffered by the third parties who contracted with the
captain, in his double capacity of agent and subordinate of the shipowner himself.
In maritime commerce, the shippers and passengers in making contracts with the captain do
so through the confidence they have in the shipowner who appointed him; they presume that
the owner made a most careful investigation before appointing him, and, above all, they
themselves are unable to make such an investigation, and even though they should do so, they
could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit,
appoint another captain instead.
The Code of Commerce in force omits the declaration of non-liability contained in the old
code, and clearly makes the shipowner liable civilly for the loss suffered by those who
contracted with the captain, in consequence of the misdemeanors and crimes committed by
the latter or by the members of the crew.
In this case, defendant Narciso Lauron, as the proprietor and owner of the vessel “Maria” of
which Ipil was the master and Solamo was the supercargo, in which, through their fault and
negligence there occurred the loss, theft, or robbery of the P450 that belonged to the plaintiff.
Moreover, evidence show that the theft, which occurred in the vessel, does not appear to have
been committed by a person not belonging to the craft. Thus, said loss or theft, they be held
civilly liable to the plaintiff, who executed with said defendant Lauron the contract for the
transportation of the merchandise and money aforementioned between the port of Cebu and
the town of Catmon, by means of the said craft.
DISPOSITION: Therefore, and for all the reasons above set forth, we affirm the judgment
appealed from, with the costs of this instance against the appellants. So ordered.
NOTES:
VESSEL
serves to designate every kind of craft by whatever particular or technical name it may now be
known or which nautical advancements may give it in the future.
“According to the foregoing definitions, the banca called Maria, chartered by the plaintiff Yu
Con from the defendant Narciso Lauron, was a "vessel", pursuant to the meaning this word
has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in
force.”
CAPTAIN OR MASTER
· The name of captain or master is given, according to the kind of vessel, to the person in
charge of it.
· The first denomination is applied to those who govern vessels that navigate the high seas
or ships of large dimensions and importance, although they be engaged in the coastwise trade.
· Masters are those who command smaller ships engaged exclusively in the coastwise
trade.
· For the purposes of maritime commerce, the words "captain" and "master" have the
same meaning; both being the chiefs or commanders of ships.
LIABILITY OF SHIPOWNERS
o In maritime commerce, the shippers and passengers in making contracts with the captain
do so through the confidence they have in the shipowner who appointed him; they presume
that the owner made a most careful investigation before appointing him, and, above all, they
themselves are unable to make such an investigation, and even though they should do so, they
could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit,
appoint another captain instead.
o On the other hand, if the shipowner derives profits from the results of the choice of the
captain and the crew, when the choice turns out successful, it is also just that he should suffer
the consequences of an unsuccessful appointment, by application of the rule of natural law
contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must
likewise suffer the losses that ensue therefrom.
14. INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and
TRENDA WORLD SHIPPING (MANILA), INC., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.
G.R. No. 115286
August 11, 1994
Topic: Ship captain’s discretionary authority
FACTS:
1. Private respondent Captain Rizalino Tayong, a licensed Master Mariner, was hired
by petitioners as the Master of the vessel M/V Oceanic Mindoro for one year. He assumed
position at the port of Hong Kong and was instructed to replenish bunker and diesel fuel, to
sail forthwith to Richard Bay, South Africa, and there to load 120,000 metric tons of coal.
2. In the process of unloading the cargo at Hong Kong, Captain Tayong received a
weather report that a storm would hit Hong Kong. They conducted safety measures on the
vessel and crew, knowing that the vessel’s turbo-charger was leaking and already 14 years
old.
3. On July 21, 1989, Captain Tayong followed up the requisition for supplies of oxygen
and acetylene, necessary for the welding-repair of the turbo-charger and the economizer.
4. On July 25, 1989, the vessel sailed from Hong Kong to Singapore. The Captain
reported a water leak from a gas casing. He was subsequently instructed to blank off the
cooling water and maintain reduced RPM unless authorized by the owners. 4 days after, the
Captain reported that the vessel stopped mid-ocean for 6 hours and 45 minutes due to a
leaking economizer. He was instructed to use the auxiliary boiler instead.
5. When the vessel arrived in Singapore, the Chief Engineer reminded Captain Tayong
that the oxygen and acetylene supplies had not arrived yet. It can only be delivered at 0800
hours on August 1 as the stores had closed.
Captain Tayong informed Sea Horse Ship Management, Inc. for a possible delay in the
delivery of supplies. Mr. Clark, the technical director, advised Captain Tayong to shut off the
water to the turbo chargers and use the auxiliary boiler instead. According to Mr. Clark,
Captain Tayong agreed that the vessel could sail as scheduled on 0100 hours on August 1.
However, according to Captain Tayong, he communicated his reservations in proceeding to
South Africa without the requested supplies and was advised by Sea Horse to wait until 0800
hours. At 0800 hours on August 1, the requisitioned supplies were delivered and Captain
Tayong sailed for Richard Bay.
6. When the vessel arrived at Richard Bay, Captain Tayong was instructed to turn-over
his post to the new captain, and was repatriated. He was not informed of the charges against
him.
7. Private respondent instituted a complaint for illegal dismissal before the POEA to
claim his unpaid salary for the unexpired period of his employment, plus attorney’s fees.
Petitioner’s contention
Petitioners denied that they illegally dismissed Captain Tayong. The latter refused to sail
immediately to South Africa which caused them damages. Due to such delay, the vessel was
placed “off-hire” by the charterers and was not paid US$15,500. They alleged that they
dismissed private respondent for loss of trust and confidence.
POEA Decision
The POEA dismissed the complaint of Tayong and held that there was valid cause
for his untimely repatriation. It held that Captain Tayong lost a lot of time and his concern for
the oxygen and acetylene was not legitimate because these were dispensable for running the
vessel.
NLRC decision
The NLRC set aside the decision of POEA. It held that Captain Tayong was not
given an opportunity to be heard and that no substantial evidence was adduced to establish the
basis of petitioners’ loss of trust or confidence. The Captain also merely acted to maintain the
seaworthiness of the vessel.
ISSUE:
Whether Captain Tayong had reasonable grounds to believe that the safety of the vessel and
crew required him to wait for the delivery of the supplies needed for the repair of the turbo-
charger and economizer. (YES)
RULING:
A captain of a vessel is a confidential and managerial employee. A master or captain
is the one who has command of a vessel. A captain commonly performs three (3) distinct
roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical
director of the vessel; and (3) he is a representative of the country under whose flag he
navigates. Of these roles, the most important is the role performed by the captain as
commander of the vessel. This has to do with the operation and preservation of the vessel
during its voyage and the protection of the passengers (if any) and crew and cargo.
A ship’s captain must be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew and cargo specifically requires on a
stipulated ocean voyage. The applicable principle is that the captain has control of all
departments of service in the vessel, and reasonable discretion as to its navigation. It is the
right and duty of the captain, in the exercise of sound discretion and in good faith, to do all
things with respect to the vessel and its equipment and conduct of the voyage which are
reasonably necessary for the protection and preservation of the interests under his charge,
whether those be of the shipowners, charterers, cargo owners or of underwriters. It is a basic
principle of admiralty law that in navigating a merchantman, the master must be left free to
exercise his own best judgment.
Regarding the issue, the Court held that it is relevant to recall that Captain Tayong
reported to Mr. Clark that the vessel stopped mid-ocean for 6 hrs and 45 mins. because of its
leaking economizer. The *telex sent by Capt. Tayong was also relevant. Under these
circumstances, it cannot be said that waiting for the supplies needed for welding repair was
arbitrary, capricious or a grossly insubordinate behavior on the part of Captain Tayong.
ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to
loss or excess of jurisdiction on the part of the NLRC in rendering its assailed decision, the
Petition for Certiorari is hereby DISMISSED, for lack of merit. Costs against petitioners.
Notes:
*In this telex, Captain Tayong explained his decision to Sea Horse in the following terms:
I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN
TO YOU THAT WE ARE INSECURITY/DANGER TO SAIL IN SPORE W/OUT
HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV PLENTY TO BE DONE
REPAIR FM MAIN ENGINE LIKE TURBO CHARGER PIPELINE, ECONOMIZER
LEAKAGE N ETC WE COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I AND
MR. CLARK WE CONTACTED EACH OTHER BY PHONE IN PAPAN N HE ADVSED
US TO SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE
ALSO EXPLAINED TO MY C/E HOW TO FIND THE REMEDY W/OUT OXY/ACET
BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS WHY WE URG REQUEST[ED]
YR KIND OFFICE TO ARRANGE SUPPLY OXY/ACET BEFORE SAILING TO AVOID
RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16
DAYS FM SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION.28 (Emphasis partly
in source and partly supplied)
“A shipowner or shipmaster (if communication with the shipowner is impossible), will be
allowed a reasonable time in which to decide what course he will adopt in such cases as those
under discussion; time must be allowed to him to ascertain the facts, and to balance the
conflicting interests involved, of shipowner, cargo owner, underwriter on ship and freight. But
once the time has elapsed, he is bound to act promptly according as he has elected either to
repair, or abandon the voyage, or tranship. If he delays, and owing to that delay a perishable
cargo suffers damage, the shipowner will be liable for that damage; he cannot escape that
obligation by pleading the absence of definite instructions from the owners of the cargo or
their underwriters, since he has control of the cargo and is entitled to elect.”
15. FAR EASTERN SHIPPING COMPANY , petitioner , vs. COURT OF APPEALS
and PHILIPPINE PORTS AUTHORITY, respondents.
[G.R. No. 130068. October 1, 1998.]
Syllabus topic: The pilot
FACTS:
On June 20, 1980, the M/V PAVLODAR (under USSR flagship), owned and
operated by FESC, arrived at the Port of Manila from Vancouver, British Columbia. The
vessel was assigned Berth 4 of the Manila International Port (think of it as a parking space).
Appellant SENEN GAVINO was assigned by the appellant Manila Pilots’
Association (MPA) to conduct the docking maneuvers for the safe berthing (parking) of the
vessel in Berth No. 4. Gavino boarded the vessel and stationed himself at the bridge, with the
master of the vessel, Victor Kavankov, beside him. Gavino, after Kavankov’s briefing,
proceeded to the Manila International Port.
(Layman’s term/simplified: Bale the true master of the ship (Captain Jack Sparrow ganon) is
Kavankov. But in our laws, MPA assigns “pilots” wherein their duty is to board the ship and
they will be maneuvering the ship to the berthing station in Manila International Port, which
is called compulsory pilotage. Bale ini na mga pilot baga hira hin valet/parking attendants na
hira an nasakay ha imo sarakyan tapos hira an ma park. Will explain in detail later ha ruling
the rationale of having pilots “park” the vessels even though there is a competent master and
crew.)
When the vessel reached the landmark (big church by the Tondo North Harbor) one-
half mile from the pier, Gavino ordered the engine stopped. When the vessel was about 2,000
feet from the pier, Gavino ordered the anchor dropped. The left anchor was dropped but it did
not take hold, therefore the vessel did not slow down. A commotion ensued between the crew
members.
After Gavino noticed that the left anchor did not take hold, he ordered the engines
half-astern. Kavankov also noticed that the anchor did not take hold, so Gavino gave the “full-
stern” code. But before the right anchor and the additional shackles could be dropped, the bow
of the vessel (rear) rammed into the apron of the pier causing damage to the pier and also to
the vessel.
PPA FILED IN RTC
PPA filed before the RTC of Manila a complaint for a sum of money against FESC,
Captain Gavino, and the MPA, praying the defendants be held jointly and severally liable to
pay the plaintiff. RTC ordered the defendants to jointly and severally pay the PPA.
COURT OF APPEALS
CA affirmed the findings of RTC but it found no employer-employee relationship
between MPA and Capt. Gavino, hence the liability of MPA is based on the provisions of
Customs Administrative Order No. 15-65. It also held that MPA is still liable to PPA but it is
entitled to reimbursement from Gavino.
Neither FESC nor MPA was happy with CA’s decision, hence this petition.
PETITIONER’S CONTENTION
1. Since MP Pavlodar was under compulsory pilotage at the time of the incident, it
was Gavino (compulsory pilot) who was in command and had complete control in the
navigation and docking of the vessel. Thus, he is solely liable and not the owners of the
vessel.
2. The master of the vessel (Kavankov) did not commit any act of negligence when
he failed to countermand or overrule the orders of the pilot because he did not see any
justifiable reason to do so. The master cannot be faulted for relying absolutely on the
competence of the compulsory pilot.
RESPONDENT’S CONTENTION
It posts that although the vessel was piloted by Capt. Gavino, Kavankov was beside
him on the bridge. Their concurrent negligence was the immediate and proximate cause of the
collision between the vessel and the pier: Capt. Gavino, for his negligence in the conduct of
docking maneuvers for the safe berthing of the vessel; and Capt. Kabankov, for failing to
countermand the orders of the harbor pilot and to take over and steer the vessel himself in the
face of imminent danger, as well as for merely relying on Capt. Gavino during the berthing
procedure.
GR 130150 (will just be discussing this case briefly in case Prosec asks about the other case)
Petitioner: MPA which avers that CA’s error consisted in misinterpreting Customs
Administrative Order No. 15-65, which limits its liability. It holds that it should not be held
solidarily liable with Gavino because he is only a member and not an employee.
Respondent: PPA still avers that MPA is solidarily liable with Gavino and FESC.
Upon motion 17 by FESC dated April 24, 1998 in G.R. No. 130150, said case was
consolidated with G.R. No. 130068.
ISSUE:
1. WON compulsory pilot (Gavino) is negligent in the performance of his duties?
(YES)
2. WON the master of the ship (Kavankov) is liable to PPA even though the vessel was under
compulsory pilotage when the accident happened? (YES)
RULING:
1. PILOT GAVINO IS NEGLIGENT
The term “pilot” in maritime law, includes both (1) those whose duty it is to guide
vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation
of vessels on the high seas. However, the term "pilot" is more generally understood as a
person taken on board at a particular place for the purpose of conducting a ship through a
river, road or channel, or from a port. the pilot supersedes the master for the time being in the
command and navigation of the ship, and his orders must be obeyed in all matters connected
with her navigation. He becomes the master pro hac vice and should give all directions.
Capt. Gavino is held to the universally accepted high standards of care and diligence
required of a pilot, whereby he assumes to have skill and knowledge in respect to navigation
in the particular waters over which his license extends superior to and more to be trusted than
that of the master. Capt. Gavino failed to measure up to such strict standard of care and
diligence required of pilots in the performance of their duties. Assuming that he did indeed
give the command to drop the anchor on time, as pilot he should have seen to it that the order
was carried out, and he could have done this in a number of ways, one of which was to inspect
the bow of the vessel where the anchor mechanism was installed.
An act may be negligent if it is done without the competence that a reasonable
person in the position of the actor would recognize as necessary to prevent it from creating an
unreasonable risk of harm to another. Those who undertake any work calling for special skills
are required not only to exercise reasonable care in what they do but also possess a standard
minimum of special knowledge and ability. In all these employments where peculiar skill is
requisite, if one offers his services he is understood as holding himself out to the public as
possessing the degree of skill commonly possessed by others in the same employment, and if
his pretensions are unfounded he commits a specie of fraud on every man who employs him
in reliance on his public profession.
Generally, the degree of care required is graduated according to the danger a person
or property attendant upon the activity which the actor pursues or the instrumentality which
he uses. The greater the danger the greater the degree of care required. What is ordinary under
extraordinary of conditions is dictated by those conditions; extraordinary risk demands
extraordinary care. Similarly, the more imminent the danger, the higher the degree of care.
MPA IS JOINTLY AND SOLIDARILY LIABLE WITH ITS MEMBER PILOT
No reliance can be placed by MPA on the cited American rulings as to immunity
from liability of a pilots' association in light of existing positive regulation under Philippine
law. The Court of Appeals properly applied the clear and unequivocal provisions of Customs
Administrative Order No. 15-65 (see Note 1). In doing so, it was just being consistent with its
finding of the non-existence of employer-employee relationship between MPA and Capt.
Gavino which precludes the application of Article 2180 of the Civil Code.
True, Customs Administrative Order No. 15-65 does not categorically characterize
or label MPA's liability as solidary in nature. Nevertheless, a careful reading and proper
analysis of the correlated provisions lead to the conclusion that MPA is solidarily liable for
the negligence of its member pilots, without prejudice to subsequent reimbursement from the
pilot at fault. Article 1207 of the Civil Code provides that there is solidary liability only when
the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity. Plainly, Customs Administrative Order No. 15- 65 which as an implementing rule
has the force and effect of law, can validly provide for solidary liability.
2. MASTER OF THE SHIP IS STILL LIABLE EVEN IF VESSEL IS UNDER
COMPULSORY PILOTAGE
Where a compulsory pilot is in charge of a ship, the master being required to permit him to
navigate it, if the master observes that the pilot is incompetent or physically incapable, then it
is the duty of the master to refuse to permit the pilot to act. But if no such reasons are present,
then the master is justified in relying upon the pilot, but not blindly.
Under the circumstances of this case, if a situation arose where the master, exercising that
reasonable vigilance which the master of a ship should exercise, observed, or should have
observed, that the pilot was so navigating the vessel that she was going, or was likely to go,
into danger, and there was in the exercise of reasonable care and vigilance an opportunity for
the master to intervene so as to save the ship from danger, the master should have acted
accordingly. The master of a vessel must exercise a degree of vigilance commensurate with
the circumstances.

Capt. Kabankov's shared liability is due mainly to the fact that he failed to act when the
perilous situation should have spurred him into quick and decisive action as master of the
ship. In the face of imminent or actual danger, he did not have to wait for the happenstance to
occur before countermanding or overruling the pilot. By his own admission, Capt. Kabankov
concurred with Capt. Gavino's decisions, and this is precisely the reason why he decided not
to countermand any of the latter's orders. Inasmuch as both lower courts found Capt. Gavino
negligent, by expressing full agreement therewith Capt. Kabankov was just as negligent as
Capt. Gavino. TIEHSA
FESU IS ALSO LIABLE TO PPA
The parties who suffer are entitled to have their remedy against the vessel that occasioned the
damage, and are not under necessity to look to the pilot from whom redress is not always had
for compensation. The owners of the vessel are responsible to the injured party for the acts of
the pilot, and they must be left to recover the amount as well as they can against him.
It cannot be maintained that the circumstance of having a pilot on board, and acting in
conformity to his directions operate as a discharge of responsibility of the owners. Even
though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the
negligence of the master or crew contributed thereto, the owners are liable. But the liability of
the ship in rem does not release the pilot from the consequences of his own negligence. The
rationale for this rule is that the master is not entirely absolved of responsibility with respect
to navigation when a compulsory pilot is in charge.
WHEREFORE, in view of all of the foregoing, the consolidated petitions for review are
DENIED and the assailed decision of the Court of Appeals is AFFIRMED in toto.
NOTES (GOOD TO KNOW STUFF)
1. Customs Administrative Code No. 15-65
PARAGRAPH I. — Pilotage for entering a harbor and anchoring thereat, as well as
docking and undocking in any pier or shifting from one berth to another shall be compulsory,
except Government vessels and vessels of foreign governments entitled to courtesy, and other
vessels engaged solely in river or harbor work, or in a daily ferry service between ports which
shall be exempt from compulsory pilotage provisions of these regulations; provided, however,
that compulsory pilotage shall not apply in pilotage districts whose optional pilotage is
allowed under these regulations.
2. Presumption of fault against a moving vessel (another part of syllabus)
In admiralty, this presumption does more than merely require the ship to go forward
and produce some evidence on the presumptive matter. The moving vessel must show that it
was without fault or that the collision was occasioned by the fault of the stationary object or
was the result of inevitable accident. It has been held that such vessel must exhaust every
reasonable possibility which the circumstances admit and show that in each, they did all that
reasonable care required.
3. Ruling in GR No. 130150 (just in case)
CA correctly based MPA's liability not on the concept of employer-employee
relationship between Capt. Gavino and itself, but on the provisions of Customs
Administrative Order No. 15-65. There being no employer-employee relationship, clearly
Article 2180 of the Civil Code is inapplicable since there is no vicarious liability of an
employer to speak of.
1. PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT DEVELOPMENT
CORPORATION, petitioners, vs. THE COURT OF APPEALS, CHINA BANKING
CORPORATION, respondents.
G.R. No. 128661 August 8, 2000
Topic: Doctrine of limited liability or the Limited liability rule
FACTS:
1. To finance the acquisition of seven (7) ocean-going vessels, the Philippine
International Shipping Corporation (hereinafter "PISC") applied for and was granted by
petitioner National Investment and Development Corporation (hereinafter "NIDC") guaranty
accommodations.
2. As security for such guaranty accommodations, PISC executed in favor of petitioners
mortgage documents.
3. Meanwhile, PISC entered into a Contract Agreement with Hong Kong United
Dockyards, Ltd. for the repair and conversion of the vessel M/V "Asean Liberty" at a contract
price of HK$2,200,000.00.
4. The Central Bank of the Philippines authorized PISC to open with private respondent
China Banking Corporation (hereinafter "CBC") a standby letter of credit for US$545,000.00
in favor of Citibank to cover the repair and partial conversion of the said vessel.
5. A promissory note for US$545,000.00 was executed by PISC in favor of Citibank
pursuant to the Loan Agreement for US$545,000.00 between PISC, as borrower, and
Citibank, as lender.
6. PISC failed to fulfill its obligation so petitioner PNB conducted, through the
Sheriff’s Office, an auction sale of the mortgaged vessels, except for the vessel M/V "Asean
Objective." Petitioner NIDC emerged as the highest bidder in these auctions.
7. Claiming that the foreclosure sale of its mortgaged vessels was illegal, unjust,
irregular, and oppressive, PISC instituted before the RTC of Makati, a civil case against
petitioners for the annulment of the foreclosure and auction sale of its vessels and damages.
8. In an Order dated September 29, 1984, then Judge Jose L. Coscolluela, Jr. dismissed
the complaint as against PNB and the counterclaimed defendants.
9. Complaint in intervention was filed by CBC. China Bank’s claims are predicated on:
(i) a China Bank Standby Letter of Credit in favor of Citibank, N. A. purportedly to cover
repair and partial conversion of M/V Asean Liberty, to the extent of US$242,225.00 paid by
China Bank to Citibank, and said to be now owing by PISC together with stipulated interest;
(ii) a China Bank loan of US$2,700,000.00 as evidenced by a promissory note, the loan
proceeds said to have allowed PISC to reduce overhead expenses and afford it competitive
advantage in overseas shipping, and to pay for bunker fuel, defray port expenses and storage,
container rental and insurance, as well as salaries and wages of crew members; and
(iii) a China bank commercial letter of credit to PISC in favor of Bank of America,
particularly a BA Draft for US$648,002.54 said to have been applied towards vessel repair
and conversion by the China Shipbuilding Corporation of Taiwan, together with stipulated
interests due from PISC. China Bank’s claims are premised on the above as being preferred
maritime liens. NIDC rejects said claims as not being maritime liens, much less preferred
maritime liens.
10. Trial court issued an order dismissing the complaint-in-intervention filed by private
respondent CBC for lack of merit stating that the claim of private respondent CBC was not a
preferred maritime lien but was merely a loan extended to PISC by CBC, to which CBC
appealed.
PETITIONER’S ARGUMENT/S:
It is the contention of petitioners that "(t)he Court of Appeals gravely erred in law in holding
that private respondent CBC’s claim under its Standby Letter of Credit No. 79/4174 is a
maritime lien, and that said maritime lien is preferred over the mortgage lien of petitioners
PNB/NIDC on the foreclosed vessel M/V Asean Liberty."
RESPONDENT’S DEFENSE/S:
It is the contention of private respondent CBC however, that it ultimately acquired the
maritime lien of Hongkong United Dockyards, Ltd. over the vessel M/V "Asean Liberty".
ISSUES:
WON Citibank was subrogated to the rights of Hongkong United Dockyards, Ltd. as maritime
lienor over the vessel. (YES)
RULING:
From the foregoing, it is clear that the amount used for the repair of the vessel M/V "Asean
Liberty" was advanced by Citibank and was utilized for the purpose of paying off the original
maritime lienor, Hongkong United Dockyards, Ltd. As a person not interested in the
fulfillment of the obligation between PISC and Hongkong United Dockyards, Ltd., Citibank
was subrogated to the rights of Hongkong United Dockyards, Ltd. as maritime lienor over the
vessel by virtue of Article 1302, par. 2 of the New Civil Code.
By definition, subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights. Considering that Citibank paid off the debt of PISC to
Hongkong United Dockyards, Ltd. it became the transferee of all the rights of Hongkong
United Dockyards, Ltd. as against PISC, including the maritime lien over the vessel M/V
"Asean Liberty."
Private respondent CBC, as guarantor, was itself subrogated to all the rights of Citibank as
against PISC, the latter’s debtor. Article 2067 of the New Civil Code provides that "(t)he
guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had
against the debtor."
Private respondent, having paid off the debt of PISC to Citibank, was therefore, subrogated to
all the rights Citibank had against its debtor PISC. Considering that Citibank had a maritime
lien over the vessel M/V "Asean Liberty," private respondent was likewise subrogated to this
right when it paid off Citibank under the contract of guarantee.
DISPOSITION:
WHERFORE, in view of the foregoing, the petition is denied and the decision of the Court of
Appeals dated March 21, 1997 in CA-G.R. CV. No. 38131 is hereby AFFIRMED.
2. Yangco v Laserna
GR No. L-47447-47449
October 29, 1941
Topic: Doctrine of limited liability or the limited liability rule
Parties: TEODORO R. YANGCO, ETC., petitioner, vs. MANUEL LASERNA, ET AL.,
respondents.
Facts:
1. At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros,
belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon on its retun trip to
Manila.
2. Typhoon signal No. 2 was then up, of which fact the captain was duly advised and
his attention thereto called by the passengers themselves before the vessel set sail. The boat
was overloaded as indicated by the loadline which was 6 to 7 inches below the surface of the
water. In addition, the vessel carried thirty sacks of crushed marble and about one hundred
sacks of copra and some lumber.
3. The passengers, numbering about 180, were overcrowded, the vessel's capacity being
limited to only 123 passengers. After two hours of sailing, the boat encountered strong winds
and rough seas between the islands of Banton and Simara, and as the waves splashed the
ladies' dresses, the awnings were lowered (added this kay usahay amo it mga side question ni
Prosec)
4. As the sea became increasingly violent, the captain ordered the vessel to turn left,
evidently to return to port, but in the manuever, the vessel was caught sidewise by a big wave
which caused it to capsize and sink.
5. These respondents instituted in the Court of First Instance of Capiz separate civil
actions against petitioner here to recover damages for the death of the passengers
aforementioned.
Petitioner’s Contention: Petitioner, by a verified pleading, sought to abandon the vessel to the
plainitffs in the three cases, together with all its equipments, without prejudice to his right to
appeal. The abandonment having been denied, an appeal was taken to the Court of Appeals,
wherein all the judgmnets were affirmed
Issue:
Whether or not the shipowner or agent, notwithstanding the total loss of the vessel as a result
of the negligence of its captain, be properly held liable in damages for the consequent death of
its passengers?
Ruling:
No.
Art 857 of the Code of Commerce provides that:
The agent shall also be civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel carried;
but he may exempt himself therefrom by abandoning the vessel with all her equipments and
the freight he may have earned during the voyage.
The provisions accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon — "the
vessel with all her equipments and the freight it may have earned during the voyage." It is true
that the article appears to deal only with the limited liability of shipowners or agents for
damages arising from the misconduct of the captain in the care of the goods which the vessel
carries, but this is a mere deficiency of language and in no way indicates the true extent of
such liability. The consensus of authorities is to the effect that notwithstanding the language
of the aforequoted provision, the benefit of limited liability therein provided for, applies in all
cases wherein the shipowner or agent may properly be held liable for the negligent or illicit
acts of the captain.
In another case, SC said: This is the difference which exists between the lawful acts and
lawful obligations of the captain and the liability which he incurs on account of any unlawful
act committed by him. In the first case, the lawful acts and obligations of the captain
beneficial to the vessel may be enforced as against the agent for the reason that such
obligations arise from te the contract of agency (provided, however, that the captain does not
exceed his authority), while as to any liability incurred by the captain through his unlawful
acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to
the vessel and it does not extend further. For this reason the Code of Commerce makes the
agent liable to the extent of the value of the vessel, as the codes of the principal maritime
nations provide with the vessel, and not individually. Such is also the spirit of our Code.
It only remains to be noted that the rule of limited liability provided for in our Code of
Commerce reflects merely, or is but a restatement, imperfect though it is, of the almost
universal principle on the subject. While previously under the civil or common law, the owner
of a vessel was liable to the full amount for damages caused by the misconduct of the master,
by the general maritime law of modern Europe, the liability of the shipowner was
subsequently limited to his interest in the vessel.
In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any
way be held civilly liable at all for injury to or death of passengers arising from the negligence
of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction.
In arriving at this conclusion, we have not been unmindful of the fact that the ill-fated
steamship Negros, as a vessel engaged in interisland trade, is a common carrier, and that the
as a vessel engaged in interisland trade, is a common carrier, and that the relationship between
the petitioner and the passengers who died in the mishap rests on a contract of carriage. But
assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability to the value of the vessel,
or to the insurance thereon, if any. In the instant case it does not appear that the vessel was
insured.
Whether the abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law of not, is immaterial. The vessel having totally perished, any act of
abandonment would be an idle ceremony.
Disposition: Judgement is reversed and petitioner is hereby absolved of all the complaints,
without costs.
Notes:
1. A cursory examination will disclose that the principle of liomited liability of a
shipowner or agent is provided for in but three articles of the Code of Commerce — article
587 aforequoted and article 590 and 837.
2. Th real nature of the maritime law we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the freight money, and (2) the right to retain the
cargo and the embargo and detention of the vessel even in cases where the ordinary civil law
would not allow more than a personal action against the debtor or person liable. It will be
observed that these rights are correlative, and naturally so, because if the agent can exempt
himself from liability by abandoning the vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the business, it is also just that his maritime creditor
may for any reason attach the vessel itself to secure his claim without waiting for a settlement
of his rights by a final judgment, even to the prejudice of a third person.
3. CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT, MARIANO
GUNO, and DOMINADOR OLIT
G.R. No. 74811
September 30, 1988
MELENCIO-HERRERA, J.
Topic: Exemptions of Limited Liability Rule
FACTS:
Petitioner is a duly licensed copra dealer based at Puerto Galera, Oriental Mindoro loaded
1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I", a
common carrier and owned by the respondent, for shipment from Puerto Galera, Oriental
Mindoro, to Manila.
However, it did not reach its destination, the vessel capsized and sank with all its cargo
somewhere between Cape Santiago and Calatagan, Batangas.
Petitioner:
Instituted a complaint against a private respondent for breach of contract incurring damages.
Private respondent’s defense:
That even assuming that the alleged cargo was truly loaded aboard their vessel, their liability
had been extinguished by reason of the total loss of said vessel.
RTC:
Rendered judgment in favor of Chua Yek Hong.
CA:
Reversed the decision by applying Article 587 of the Code of Commerce and the doctrine in
Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship
owners, for the loss of the cargo is merely co-extensive with their interest in the vessel such
that a total loss thereof results in its extinction. Dismissing the complaint against defendants-
appellants and absolving them from any and all liabilities arising from the loss of 1,000 sacks
of copra.
Thus this petition.
ISSUE:
Whether or not the respondent's situation is one of the exemptions of a limited liability rule.
(NO)
SUPREME COURT RULING:
No, the respondents are freed from their liabilities applying the limited liability rule
for having totally lost the vessel and none of the exceptions apply to them, the liability for the
loss of the cargo of the copra must be deemed extinguished.
“Article 587 of the Code of Commerce provides: The ship agents shall be civilly
liable for the indemnities in favor of third persons which may arise from the conduct of the
captain in the care of the goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the equipment and the freight it may have earned
during the voyage.”
Pursuant to said provision, both the ship owner and ship agent are civilly and directly
liable for the indemnities in favor of third persons, which may arise from the conduct of the
captain in the care of goods transported, as well as for the safety of passengers transported.
 However, under the same Article, this direct liability is moderated and limited by the G.R. No. L-58897,
ship agent's or ship owner's right of abandonment of the vessel and earned freight. This
expresses the universal PRINCIPLE OF LIMITED LIABILITY under maritime law. Dec. 3, 1987

The ship owner's or agent's liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. "NO VESSEL, NO LIABILITY" Facts:
expresses in a nutshell the limited liability rule. The total destruction of the vessel
extinguishes maritime liens as there is no longer any res to which it can attach. May 30, 1968 at past 6:00 AM: A maritime collision occurred within the vicinity of the
entrance to the North Harbor, Manila between the tanker LSCO “Cavite” owned by Luzon
If the ship owner or agent may in any way be held civilly liable at all for injury to or Stevedoring Corporation (LSC) and MS “Fernando Escano”, a passenger ship owned by Hijos
death of passengers arising from the negligence of the captain in cases of collisions or De F. Escano, Inc (HDE). Due to this, the passenger ship sunk.
shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total
loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).

The limited liability rule, however provides for EXCEPTIONS: (1) where the injury
or death to a passenger is due either to the fault of the ship owner, or to the concurring
negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman
supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs.
San Diego, supra).
In this case, there is nothing in the records to show that the loss of the cargo was due
to the fault of the private respondent as shipowners, or to their concurrent negligence with the
captain of the vessel.
An action in admiralty was filed by HDE, Inc. and Domestic Insurance Company of the
Philippines against the Luzon Stevedoring Company (LSC) in the CFI, Cebu. Two appointed
commissioners determined P180K as the value of the LSCO “Cavite”.
CFI: LSCO “Cavite” is solely liable for the collision, thus, is ordered to pay Domestic
Insurance Company and Hijos de F. Escano. It also held that Art. 837 of the Code of
Commerce is inapplicable.

In sum, it is held that the respondents are freed from their liabilities applying the CA: affirmed CFI. MR: denied. 2 nd MR: denied. Thus, this petition for certiorari.
limited liability rule for having totally lost the vessel and NONE OF THE EXCEPTIONS
APPLY to them, the liability for the loss of the cargo of the copra must be deemed
extinguished. Issue: WON LSC can invoke Art. 837 to limit its liability. (NO)
The judgment sought to be reviewed is hereby AFFIRMED.

Ruling:

Articles 587, 590, and 837 of the Code of Commerce provide as follows:
4. LUZON STEVEDORING CORP v. CA
 “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 equipment and the freight he may have earned during the voyage.”
“ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of
their contribution to the common fund for the results of the acts of the captain, referred to in
Article 587, Each co-owner may exempt himself from this liability by the abandonment,
before a notary, of that part of the vessel belonging to him.”
“ART. 837. The civil liability incurred by the shipowners in the cases prescribed in
this section, shall be understood as limited to the value of the vessel with all her
appurtenances and freight earned during the voyage.”
In the case of collision, abandonment of the vessel is necessary in order to limit the
liability of the shipowner or the agent to the value of the vessel, its appurtenances and
freightage earned in the voyage in accordance with Article 837 of the Code of Commerce.
The only instance where such abandonment is dispensed with is when the vessel was entirely
lost. In such case, the obligation is thereby extinguished.
In the case of Government of the Philippines vs. Maritime this Court citing
Philippine Shipping stated the exception thereto in that while "the total destruction of the
vessel extinguishes a maritime lien, as there is no longer any risk to which it can attach, but
the total destruction of the vessel does not affect the liability of the owner for repairs of the
vessel completed before its loss, interpreting the provision of Article 591 of the Code of
Commerce in relation with the other Articles of the same Code.
The Court also cited Abueg v. San Diego, which involves a claim of compensation
under the Workmen's Compensation Act for the deceased members of the crew of the MS
"San Diego II" and MS "Bartolome" which were caught by a typhoon in the vicinity of
Mindoro Island and as a consequence of which they were sunk and totally lost. In that case, it
was held that the limited liability of the shipowner or agent under Art. 587 and 836 of the
Code of Commerce does not apply to the liability under Workmen’s Compensation Act where
even the vessel was lost, the liability thereunder is still enforceable against the employer or
shipowner.
The Court also cited Manila Steamship Company v. Insa Abdulhaman and Lim Hong
To, wherein it held that where the collision was imputable to both vessels, each vessel shall
suffer her own damages and both shall be solidarily liable for the damages. The shipowners
and ship agents are held civilly liable for the acts of the captain and indemnities due the 3rd
persons. This liability is limited by the owner’s right of abandonment of vessel and earned
freight (Art. 587) which exists not only in case of breached contracts but also in cases of
tortious negligence.
Hence, the rule is that in case of collision there should be abandonment of the vessel
by the shipowner or agent in order to enjoy the limited liability provided for under said
Article 837.
The exception to this rule is when the vessel is totally lost in which case there is no
vessel to abandon so abandonment is not required. Because of such total loss the liability of
the shipowner or agent for damages is extinguished. Nevertheless, the shipowner or agent is
personally liable for claims under the Workmen's Compensation Act and for repairs of the
vessel before its loss.
In case of illegal or tortious acts of the captain the liability of the shipowner and
agent is subsidiary. In such instance the shipowner or agent may avail of the provisions of
Article 837 of the Code by abandoning the vessel.
However, if the injury or damage is caused by the shipowner's fault as where he
engages the services of an inexperienced and unlicensed captain or engineer, he cannot avail
of the provisions of Article 837 of the Code by abandoning the vessel. He is personally liable
for the damages arising thereby.
In the case now before the Court there is no question that the action arose from a
collision and the fault is laid at the doorstep of LSCO "Cavite" of LSC. Undeniably LSC has
not abandoned the vessel. Hence, LSC cannot invoke the benefit of the provisions of Article
837 of the Code of Commerce to limit its liability to the value of the vessel, all the
appurtenances and freightage earned during the voyage. In the light of the foregoing
conclusion, the issue as to when abandonment should be made need not be resolved.
WHEREFORE, the petition is DENIED with costs against petitioner.
5. Vasquez vs CA
GR. No. 42926 | September 13, 1985
TOPIC: Abandonment no longer required when vessel is totally lost
FACTS:
● MV Pioneer Cebu was owned and operated by the defendant Filipinas Pioneer and
used in the transportation of goods and passengers in the inter-island shipping.
● Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez;
plaintiffs Cleto Bagaipo and Agustina Virtudes are the parents of Filipinas Bagaipo; and
plaintiffs Romeo Vasquez and Maxima Cainay are the parents of the child, Mario Marlon
Vasquez.
● In May 1966, it left the port of Manila and bounded for Cebu. It had on board the
spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon
Vasquez, among her passengers.
● The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef
somewhere north of the island of Cebu and subsequently sunk. The aforementioned
passengers were unheard from since then.
● Plaintiffs seek the recovery of damages due to the loss of their children during said
voyage.
Defenses alleged by the defendant that the sinking of the vessel was caused by force majeure,
and that the defendant's liability had been extinguished by the total loss of the vessel.
ISSUE: Whether total loss of the vessel could extinguish the liability of the shipowner? [NO]
RULING:
With respect to private respondent's submission that the total loss of the vessel extinguished
its liability pursuant to Article 587 of the Code of Commerce as construed in Yangco vs.
Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case, it was held that the
liability of a shipowner is limited to the value of the vessel or to the insurance thereon.
Despite the total loss of the vessel therefore, its insurance answers for the damages that a
shipowner or agent may be held liable for by reason of the death of its passengers.
OTHER NOTES:
On defense of caso fortuito:
Upon the evidence and the applicable law, we sustain the trial Court. "To constitute a caso
fortuito that would exempt a person from responsibility, it is necessary that (1) the event must
be independent of the human will; (2) the occurrence must render it impossible for the debtor
to fulfill the obligation in a normal manner; and that (3) the obligor must be free of
participation in, or aggravation of, the injury to the creditor." 1 In the language of the law, the
event must have been impossible to foresee, or if it could be foreseen, must have been
impossible to avoid. 2 There must be an entire exclusion of human agency from the cause of
injury or loss.
Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having
been kept posted on the course of the typhoon by weather bulletins at intervals of six hours,
the captain and crew were well aware of the risk they were taking as they hopped from island
to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of
the utmost diligence required of very cautious persons, 9 they decided to take a calculated
risk. In so doing, they failed to observe that extraordinary diligence required of them
explicitly by law for the safety of the passengers transported by them with due regard for an
circumstances 10 and unnecessarily exposed the vessel and passengers to the tragic mishap.
They failed to overcome that presumption of fault or negligence that arises in cases of death
or injuries to passengers.
6. The Philippine Shipping Company v. Vergara,
G.R. No. L-1600. June 1, 1906; Phil. 281
Topic: Subsidiary liability of the shipowner and agent
Principle: Owners and agents of a vessel causing the loss of another vessel by collision
are not liable beyond the vessel itself causing the collision and other things appertaining
thereto.
FACTS:
● The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de
Lourdes, claims an indemnification of 44,000 pesos for the loss of the said ship as a result of a
collision. Ynchusti & Co. also claimed 24,705.64 pesos as an indemnification for the loss of
the cargo of hemp and coprax carried by the said ship on her last trip. The defendant,
Francisco Garcia Vergara, was the owner of the steamship Navarra, which collided with the
Lourdes.
● The trial court found as a matter of fact that the steamship Lourdes was sailing in
accordance with law, but that the Navarra was not, and was therefore responsible for the
collision.
● The court also found as a fact that "both ships with their respective cargoes were
entirely lost." Construing article 837 of the Code Commerce, the court below held "that the
defendant was not responsible to the plaintiff for the value of the steamship Lourdes, with the
costs against the latter." (Bill of exceptions)
● From the judgment of the trial court the Philippine Shipping Company and the
defendant Vergara appealed, but the latter has failed to prosecute his appeal by a bill of
exceptions or otherwise. The only appellant who has prosecuted this appeal now reduced its
claim to 18,000 pesos, the value of the colliding vessel.
RESPONDENT’S DEFENSE/S:
● But the appellant, the Philippine Shipping Company, contends that the defendant
should pay to 18,000 pesos, the value of the Navarra at the time of its loss; that this is the
sense in which the provisions of article 837 of the Code of Commerce should be understood;
that said code has followed the principles of the English law and not those of the American
law, and that it was immaterial whether the Navarra had been entirely lost, provided her value
at the time she was lost could be ascertained, since the extent of the liability of the owner of
the colliding vessel for the damages resulting from the collision is to be determined in
accordance with such value.
ISSUE: WON Philippine Shipping should be indemnified for 18,000. NO
RULING:
The defendant is liable for the indemnification to which the plaintiff is entitled by reason of
the collision, but he is not required to pay such indemnification of the reason that the
obligation thus incurred has been extinguished on account of the loss of the thing bound for
the payment thereof, and in this respect the judgment of the court below is affirmed except in
so far as it requires the plaintiff to pay the costs of this action, which is not exactly proper.
There is no doubt that if the Navarra had not been entirely lost, the agent, having held liable
for the negligence of the captain of the vessel, could have abandoned her with all her
equipment and the freight money earned during the voyage, thus bringing himself within the
provisions of the article 837 in so far as the subsidiary civil liability is concerned. This
abandonment which would have amounted to an offer of the value of the vessel, of her
equipment, and freight money earned could not have been refused, and the agent could not
have been personally compelled, under such circumstances, to pay the 18,000 pesos, the
estimated value of the vessel at the time of the collision.
Notes:
Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners
in the cases prescribed in this section shall be understood as limited to the value of the vessel
with all her equipment and all the freight money earned during the voyage."
This section is a necessary consequence of the right to abandon the vessel given to the
shipowner in article 587 of the code, and it is one of the many superfluities contained in the
code. (Lorenzo Benito, "Lecciones," 352.)
Art. 587. The agent shall also the civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel carried,
but he may exempt himself therefrom by abandoning the vessel with all her equipments and
the freight he may have earned during the trip.
ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their
contribution to the common fund, for the results of the acts of the captain referred to in article
587. Each part owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him.
The "Exposicion de motivos" of the Code of Commerce contains the following: "The present
code (1829) does not determine the juridical status of the agent where such agent is not
himself the owner of the vessel. This omission is supplied by the proposed code, which
provides in accordance with the principles of maritime law that by agent it is to be understood
the person intrusted with the provisioning of the vessel, or the one who represents her in the
port in which she happens to be. This person is the only who represents the interest of the
owner of the vessel. This provision has therefore cleared the doubt which existed as to the
extent of the liability, both of the agent and for the owner of the vessel. Such liability is
limited by the proposed code to the value of the vessel and other things appertaining thereto."
7. Manila Steamship Co. Inc. vs. Abdulhaman
G.R. No. L-9534
Assigned to: Dom
PRINCIPLE/S:
1. GR: Limited Liability Rule
Exception: Injury or death to a passenger is due either to the fault of the ship owner, or to the
concurring negligence of the ship owner and the captain.
2. Civil tort is different from maritime tort resulting in a collision at sea.
CIVIL TORT
Governed by the Civil Code
Effect: may escape liability if s/he exercised due diligence in the selection and supervision of
the vessel’s officers and crew
MARITIME TORT
Governed by Articles 826-939 of the Code of Commerce
Effect: The shipowner is directly and primarily responsible in tort resulting in a collision at
sea, and it may not escape liability on the ground that s/he exercised due diligence in the
selection and supervision of the vessel’s officers and crew
3. It is well settled principle in maritime and custom, that shipowners and ship agents are
civilly liable for the acts of the captain and for indemnities due to third person. (Art. 586 code
of coomerce)
4.) LIABILITY OF SHIPOWNERS. — The shipowner is directly and primarily responsible
in tort resulting in a collision at sea, and it may not escape liability on the ground that it
exercised due diligence in the selection and supervision of the vessels officer and crew.
5.) LIABILITY OF SHIPOWNER WHERE OFFICERS OF THE SHIPARE UNLICENSED.
— The owner of a vessel who had caused the same to sail without licensed officers is liable
for the injuries caused by the collision over and beyond the value of his vessel; hence, he
cannot escape liability because of the sinking of the vessel.
FACTS:
● Abdulhaman together with his family boarded M/L Consuelo V. (Zamboanga-
Siokon) The master and the engineer of the motor launch of the said vessel were not duly
licensed. In the evening of May 4, 1948, the said ship collided with M/S Bowline Knot
(Maribojoc-Zamboanga). M/L Consuelo V capsized that resulted to the death of 9 passengers,
including Abdulhaman’s 5 children, and the loss of all the cargoes on board.
● Abdulhaman then filed a case against Manila Steamship Co., owner of the M/S
“Bowline Knot”, and Lim Hong To, owner of the M/L “Consuelo V”, to recover damages for
the death of his children and loss of personal properties on board the M/L “Consuelo V” as a
result of the said maritime collision.
● CA held that it affirmed the findings of the Board of Marine Inquiry which held the
owners of both vessels solidarily liable to plaintiff for damages caused to the latter under
Article 827 of the Code of Commerce but exempted defendant Lim Hong To from liability
due to the sinking and total loss of his vessel. Manila Steamship, owner of the Bowline Knot,
was ordered to pay all of plaintiff’s damages.

Petitioner Manila Steamship Co.: Pleads to this court that it is exempt from any liability under
Article 1903 of the Civil Code because it had exercised the diligence of a good father of a
family in the selection of its employees, particularly the officer in command of the M/S
Bowline Knot.
ISSUE/s:
1) WON petitioner Manila Steamship Co (owner of M/S Bowling Knot). is exempt from any
liability under Art. 1903 of the Civil Code. (NO)
2.) WON Manila steamship Co.is exempt from liability for the collision with the M/L
“Consuelo V” due to absence of negligence on its parts in the selection and supervision of the
officers and crew of the M/S “Bowline Knot”. (NO)
2) WON Lim Hong To (owner of M/L Consuelo) is exempt from any liability. (NO)
HELD:
1) NO. While it is true that plaintiff’s action against petitioner is based on a tort or
quasi delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under
Art. 827 of the Code of Commerce, in case of collision between two vessels imputable to both
of them, each vessel shall suffer her own damage, and both shall be solidarily liable for the
damages occasioned to their cargoes. The shipowner is directly and primarily responsible in
tort resulting in a collision at sea, and it may not escape liability on the ground that s/he
exercised due diligence in the selection and supervision of the vessel’s officers and crew.
This direct responsibility is recognized in Article 618 of the Code of Commerce
under which the captain shall be civilly liable to the ship agent, and the latter is the one liable
to third persons. The direct nature of the responsibilities on account of the collision incurred
by the shipowner under maritime law is distinguished from the civil law and mercantile law in
general.
2.) It is easy to see that to admit the defense of due diligence of a bonus paterfamilias
(in the selection and vigilance of the officers and crew) as exempting the shipowner from any
liability for their faults, would render nugatory the solidary liability established by Article 827
of the Code of Commerce for the greater protection of injured parties. Shipowners would be
able to escape liability in practically every case, considering that the qualifications and
licensing of ship masters and officers are determined by the State, and that vigilance is
practically impossible to exercise over officers and crew of vessels at sea. To compel the
parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy
for almost always its members are, from captains down, mere wage earners.
3.) NO. The legal limitation of a shipowner’s liability does not apply to cases where
the injury or the average is due to shipowner’s own fault. In the instant case, the fact that the
master and the engineer of the motor launch “Consuelo V” were not duly licensed deliberately
increased the risk to which the passengers and shippers of cargo aboard the “Consuelo V”
would be subjected and willfully augmented the dangers and hazards to his vessel’s unwarry
passengers. Hence Lim Hong To is liable since he cannot invoke the limited liability rule
since it was through his own fault that injury was caused to his passengers.
8. THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., vs.
COURT OF APPEALS
GR NO. 116940
JUNE 11, 1997
DIGESTED BY: GULA
FACTS:
● Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned
and operated by respondent Felman Shipping Lines 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers
Philippines, Inc., Cebu
● The shipment was insured with petitioner Philippine American General Insurance
Co., Inc. (PHILAMGEN)
● "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the
evening of the same day. At around eight forty-five the following morning, the vessel sank in
the waters of Zamboanga del Norte bringing down her entire cargo with her including the
subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
● The consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with
respondent FELMAN for recovery of damages it sustained as a result of the loss of its
softdrink bottles that sank with "MV Asilda.
● Respondent denied the claim thus prompting the consignee to file an insurance claim
with PHILAMGEN which paid its claim of P755,250.00.
● Claiming its right of subrogation PHILAMGEN sought recourse against respondent
FELMAN which disclaimed any liability for the loss.
● Consequently, PHILAMGEN sued the shipowner for sum of money and damages.
PETITIONER, PHILAMGEN’S ALLEGATIONS:
● The sinking and total loss of "MV Asilda" and its cargo were due to the vessel's
unseaworthiness as she was put to sea in an unstable condition.
● That the vessel was improperly manned and that its officers were grossly negligent in
failing to take appropriate measures to proceed to a nearby port or beach after the vessel
started to list.
PRIVATE RESPONDENT, FELMAN’S DEFENSE:
● FELMAN filed a motion to dismiss based on the affirmative defense that no right of
subrogation in favor of PHILAMGEN was transmitted by the shipper, and
● That, in any event, FELMAN had abandoned all its rights, interests and ownership
over "MV Asilda" together with her freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of Commerce
RTC RULING:
● The trial court rendered judgment in favor of FELMAN.
● It ruled that "MV Asilda" was seaworthy when it left the port of Zamboanga as
confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor
attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be
attributed to either a fortuitous event, in which case, no liability should attach unless there was
a stipulation to the contrary, or to the negligence of the captain and his crew, in which case,
Art. 587 of the Code of Commerce should apply.
● And assuming "MV Asilda" was unseaworthy, still PHILAMGEN could not recover
from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its
implied warranty on the vessel's seaworthiness. Resultantly, the payment made by
PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not
legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring
an action in court as a subrogee.
CA RULING:
● Respondent appellate court rendered judgment finding "MV Asilda" unseaworthy for
being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on
deck. In other words, while the vessel possessed the necessary Coast Guard certification
indicating its seaworthiness with respect to the structure of the ship itself, it was not
seaworthy with respect to the cargo.
● Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground
that the assured's implied warranty of seaworthiness was not complied with. Perfunctorily,
PHILAMGEN was not properly subrogated to the rights and interests of the shipper.
● Furthermore, respondent court held that the filing of notice of abandonment had
absolved the shipowner/agent from liability under the limited liability rule.
ISSUES:
(1) Whether or not "MV Asilda" was seaworthy when it left the port of Zamboanga (NO)
(2) Whether or not the limited liability under Art. 587 of the Code of Commerce should apply
(NO)
(3) Whether or not PHILAMGEN was properly subrogated to the rights and legal actions
which the shipper had against FELMAN (YES)
RULING:
(1) "MV Asilda" was unseaworthy when it left the port of Zamboanga
We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the
proximate cause of the sinking of "MV Asilda" was its being top-heavy.
Contrary to the ship captain's allegations, evidence shows that approximately 2,500 cases of
softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an estimated
2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking.
Considering that the ship's hatches were properly secured, the empty Coca-Cola cases
recovered could have come only from the vessel's deck cargo. It is settled that carrying a deck
cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo
will not interfere with the proper management of the ship. However, in this case it was
established that "MV Asilda" was not designed to carry substantial amount of cargo on deck.
The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric
height 7 thus making it unstable. The strong winds and waves encountered by the vessel are
but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already
unstable and unseaworthy condition.
(2) Art. 587 of the Code of Commerce is not applicable to the case at bar.
The ship agent is liable for the negligent acts of the captain in the care of goods loaded on the
vessel. This liability however can be limited through abandonment of the vessel, its
equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the abandonment,
as where the loss or injury was due to the fault of the shipowner and the captain.9 The
international rule is to the effect that the right of abandonment of vessels, as a legal limitation
of a shipowner's liability, does not apply to cases where the injury or average was occasioned
by the shipowner's own fault. 10 It must be stressed at this point that Art. 587 speaks only of
situations where the fault or negligence is committed solely by the captain. Where the
shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be
covered by the provisions of the Civil Code on common carrier.
It was already established at the outset that the sinking of "MV Asilda" was due to its
unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-
heavy as an excessive amount of cargo was loaded on deck. Closer supervision on the part of
the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally
negligent. It cannot therefore escape liability through the expedient of filing a notice of
abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.
(3) YES
Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the
vessel is seaworthy and such warranty is as much a term of the contract as if expressly written
on the face of the policy. However, the implied warranty of seaworthiness can be excluded by
terms in writing in the policy of the clearest language. The marine policy issued by Philamgen
to cocacola has dispensed that the "seaworthiness of the vessel as between the assured and the
underwriters is hereby admitted."
The result of the admission of seaworthiness by Philamgen may mean two things: (1) the
warranty of seaworthiness is fulfilled and (2) the risk of unseaworthiness is assumed by the
insurance company. This waiver clause would mean that Philamgen has accepted the risk of
unseaworthiness, therefore Philamgen is liable.
On the matter of subrogation, it is provided that;
Art. 2207. If the plaintiff's 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 has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or injury.
Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor
does it grow out of any privity of contract or upon payment by the insurance company of the
insurance claim. It accrues simply upon payment by the insurance company of the insurance
claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave
the former the right to bring an action as subrogee against FELMAN. Having failed to rebut
the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter
Coca-Cola soft drink bottles is inevitable.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is
ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.