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STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee,

vs.
MANUEL LOPEZ CASTELO, defendant-appellant.

Gabriel La O for appellant.


Lawrence and Ross for appellee.

By contract of character dated February 8, 1915, Manuel Lopez Castelo, as owner, let the small
interisland steamer Batangueo for the term of one year to Jose Lim Chumbuque for use in the
conveying of cargo between certain ports of the Philippine Islands. In this contract it was
stipulated that the officers and crew of the Batangueo should be supplied by the owner, and
that the charterer should have no other control over the captain, pilot, and engineers than to
specify the voyages that they should make and to require the owner to discipline or relieve them
as soon as possible in case they should fail to perform the duties respectively assigned to them.

While the boat was being thus used by the charterer in the interisland trade, the standard Oil
Company delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed to
the port of Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of the
usual form was delivered, with the stipulation that freight should be paid at the destination. Said
bill of lading contained no provision with respect to the storage of the petroleum, but it was in
fact placed upon the deck of the ship and not in the hold.

While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, a
violent typhoon passed over that region, and while the storm was at its height the captain was
compelled for the safety of all to jettison the entire consignment of petroleum consisting of two
hundred cases. When the storm abated the ship made port, and thirteen cases of the petroleum
were recovered, but the remainder was wholly lost.

To recover the value of the petroleum thus jettisoned but not recovered, the present action was
instituted by the Standard Oil Company against the owner of the ship in the Court of First
Instance of Manila, where judgment was rendered in favor of the plaintiff. From this judgment
the defendant appealed.

No question is made upon the point that the captain exercised proper discretion in casting this
petroleum overboard, as a step necessary to the salvation of the ship; and in fact it appears that
even after the vessel was thus eased, she was with difficulty prevented from capsizing, so great
was the intensity of the storm.

The first question for discussion is whether the loss of this petroleum was a general average loss
or a particular less to be borne solely by the owner of the cargo. Upon this point it will be
observed that the cargo was carried upon deck; and it is a general rule, both under the Spanish
Commercial Code and under the doctrines prevailing in the courts of admiralty of England
America, as well as in other countries, that ordinarily the loss of cargo carried on deck shall not
be considered a general average loss. This is clearly expressed in Rule I of the York-Antwerp
Rules, as follows: "No jettison of deck cargo shall be made good as general average." The reason
for this rule is found in the fact that deck cargo is in an extra-hazardous position and, if on a
sailing vessel, its presence is likely to obstruct the free action of the crew in managing the ship.
Moreover, especially in the case of small vessels, it renders the boat top-heavy and thus may
have to be cast overboard sooner than would be necessary if it were in the hold; and naturally it
is always the first cargo to go over in case of emergency. Indeed, in subsection 1 of article 815 of
the Code of Commerce, it is expressly declared that deck cargo shall be cast overboard before
cargo stowed in the hold.

But this rule, denying deck cargo the right to contribution by way of general average in case of
jettison, was first mad in the days of sailing vessels; and with the advent of the steamship as the
principal conveyer of cargo by sea, it has been felt that the reason for the rule has become less
weighty, especially with reference to coastwise trade; and it is now generally held that jettisoned
goods carried on deck, according to the custom of trade, by steam vessels navigating coastwise
and inland waters, are entitled to contribution as a general average loss (24 R. C. L., 1419).

Recognition is given to this idea in two different articles in the Spanish Code of Commerce. In the
first it is in effect declared that, if the marine ordinances allow cargo to the laden on deck in
coastwise navigation, the damages suffered by such merchandise shall not be dealt with as
particular average (art. 809 [3], Comm. Code); and in the other it is stated that merchandise
laden on the upper deck of the vessel shall contribute in the general average if it should be
saved; but that there shall be no right to indemnity if it should be lost by reason of being
jettisoned for the general safety, except when the marine ordinances allow its shipment in this
manner in coastwise navigation (art. 855, Comm. Code).

The Marine Regulations now in force in these Islands contain provisions recognizing the right of
vessels engaged in the interisland trade to carry deck cargo; and express provision is made as to
the manner in which it shall be bestowed and protected from the elements (Phil. Mar. Reg.
[1913], par 23). Indeed, there is one commodity, namely, gasoline, which from its inflammable
nature is not permitted to be carried in the hold of any passenger vessel, though it may be
carried on the deck if certain precautions are taken. There is no express provision declaring that
petroleum shall be carried on deck in any case; but having regard to its inflammable nature and
the known practices of the interisland boats, it cannot be denied that this commodity also, as
well as gasoline, may be lawfully carried on deck in our coatwise trade.

The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the
coastwise trade than upon those used for ordinary ocean borne traffic is to be found of course in
the circumstance that in the coastwise trade the boats are small and voyages are short, with the
result that the coasting vessel can use more circumspection about the condition of the weather
at the time of departure; and if threatening weather arises, she can often reach a port of safety
before disaster overtakes her. Another consideration is that the coastwise trade must as a
matter of public policy be encouraged, and domestic traffic must be permitted under such
conditions as are practically possible, even if not altogether ideal.
From what has been said it is evident that the loss of this petroleum is a general and not a
special average, with the result that the plaintiff is entitled to recover in some way and from
somebody an amount bearing such proportion to its total loss as the value of both the ship and
the saved cargo bears to the value of the ship and entire cargo before the jettison was effected.
Who is the person, or persons, who are liable to make good this loss, and what are the
conditions under which the action can be maintained?

That the owner of the ship is a person to whom the plaintiff in this case may immediately look
for reimbursement to the extent above stated is deducible not only from the general doctrines
of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the
case. It is universally recognized that the captain is primarily the representative of the owner;
and article 586 of the Code of Commerce expressly declares that both the owner of the vessel
and the naviero, or charterer, shall be civil liable for the acts of the master. In this connection, it
may be noted that there is a discrepancy between the meaning of naviero, in articles 586 of the
Code of Commerce, where the word is used in contradistinction to the term "owner of the
vessel" ( propietario), and in article 587 where it is used alone, and apparently in a sense broad
enough to include the owner. Fundamentally the word "naviero" must be understood to refer to
the person undertaking the voyage, who in one case may be the owner and in another the
charterer. But this is not vital to the present discussion. The real point to which we direct
attention is that, by the express provision of the Code, the owner of the vessel is civilly liable for
the acts of the captain; and he can only escape from this civil liability by abandoning his property
in the ship and any freight that he may have earned on the voyage (arts. 587, 588, Code of
Comm.).

Now, by article 852 of the Code of Commerce the captain is required to initiate the proceedings
for the adjustment, liquidation, and distribution of any gross average to which the circumstances
of the voyage may have given origin; and it is therefore his duty to take the proper steps to
protect any shipper whose goods may have been jettisoned for the general safety. In ordinary
practice this, we supposed, would be primarily accomplished by requiring the consignees of
other cargo, as a condition precedent to the delivery of their goods to them, to give a sufficient
bond to respond for their proportion of the general average. But it is not necessary here to
inquire into details. It is sufficient to say that the captain is required to take the necessary steps
to effect the adjustment, liquidation, and distribution of the general average. In the case before
us the captain of the vessel did not take those steps; and we are of the opinion that the failure of
the captain to take those steps gave rise to a liability for which the owner of the ship must
answer.

But it is said and the entire defense seems to be planted upon this proposition that the
liquidation of the general average is, under article 852 and related provisions, a condition
precedent to the liability of the defendant, and that at any rate the defendant, as owner of the
ship, should only be held liable for his proportion of the general average. It is also suggested that
if the plaintiff has any right of action at all upon the state of facts here presented, it is against the
captain, who has been delinquent in performing the duty which the law imposes on him.
This argument involves, we think, a misconception of the true import of the provisions relating to
the adjustment and liquidation of general average. Clearly, for one thing, those provisions are
intended to supply the shipowner, acting of cause in the person of the captain, with a means
whereby he may escape bearing the entire burden of the loss and may distribute it among all the
persons who ought to participate in sharing it; but the making of the liquidation is not a
condition precedent to the liability of the shipowner of the shipper whose property has been
jettisoned.

It is true that if the captain does not comply with the article relating to the adjustment,
liquidation, and distribution of the general average, the next article (852) gives to those
concerned whether shipowner (naviero) or shipper the right to maintain an action against
the captain for indemnification for the loss; but the recognition of this right of action does not by
any means involve the suppression of the right of action which is elsewhere recognized in the
shipper against the ship's owner. The shipper may in our opinion go at once upon the owner and
the latter, if so minded, may have his recourse for indemnization against his captain.

In considering the question now before us it is important to remember that the owner of the
ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper
of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and
exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the
cargo at the end of the voyage. It is therefore proper that any person whose property may have
been cast overboard by order of the captain should have a right of action directly against the
ship's owner for the breach of any duty which the law may have imposed on the captain with
respect to such cargo. To adopt the interpretation of the law for which the appellant contends
would place the shipowner in a position to escape all responsibility for a general average of this
character by means of the delinquency of his own captain. This cannot be permitted. The evident
intention of the Code, taken in all of its provisions, is to place the primary liability upon the
person who has actual control over the conduct of the voyage and who has most capital
embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is
very easy to do, from other individuals who have been drawn into the venture as shippers.

It results that the plaintiff is entitled to recover in this action; and the only additional point to be
inquired into is the amount that should be awarded. In this connection it appears that the total
value of the jettisoned cargo, belonging partly to the plaintiff to another shipper, was P880.35, of
which P719.95 represented the value of the plaintiff's petroleum. Upon the apportionment of
this total loss among the different interests involved, to wit, value of ship, value of cargo, and the
earned but lost freight, it appears that the amount of the loss apportionable to the plaintiff is
P11.28. Deducting this from the value of the petroleum, we have as a result, the amount of
P708.67, which is the amount for which judgment should be given.

Accordingly, modifying the judgment appealed from to this extent, we affirm the same, with
costs. So ordered.
VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA., S. en C., plaintiffs-appellants,
vs.
SILVINO LIM and SIY CONG BIENG and COMPANY, INC., defendants-appellants.

Ramon Sotelo for plaintiffs-appellants.


Gabriel La O for defendants-appellants.

STREET, J.:

This action was instituted in the Court of first Instance of the City of Manila by Vicente Versoza
and Ruiz, Rementeria y Compania, as owners of the coastwise vessel Perla, against Silvino Lim
and Siy Cong Bieng & Company, Inc., as owner and agent, respectively, of the vessel Ban Yek, for
the purpose of recovering a sum of money alleged to be the damages resulting to the plaintiffs
from a collision which occurred on March 9, 1921, between the two vessels mentioned, it being
alleged that said collision was due to the experience, carelessness and lack of skill on the part of
the captain of the Ban Yek and to his failure to observe the rules of navigation appropriate to the
case. The defendants answered with a general denial, and by way of special defense asserted,
among other things, that the collision was due exclusively to the inexperience and carelessness
of the captain and officers of the steamship Perla; for which reason the defendants in turn, by
way of counterclaim, prayed judgment for the damages suffered by the Ban Yek from the same
collision. At the hearing the trial judge absolved the defendants from the complaint and likewise
absolved the plaintiffs from the defendants' counterclaim. From this judgment both parties
appealed.

It appears in evidence that at about five o'clock in the afternoon of March 9, 1921, the coastwise
steamer Ban Yekleft the port of Naga on the Bicol River, in the Province of Camarines Sur, with
destination to the City of Manila. At the time of her departure from said port the sea was
approaching to high tide but the current was still running in through the Bicol River, with the
result that the Ban Yek had the current against her. As the ship approached the Malbong bend of
the Bicol River, in the municipality of Gainza, another vessel, the Perla, was sighted coming up
the river on the way to Naga. While the boats were yet more than a kilometer apart, the Ban
Yek gave two blasts with her whistle, thus indicating an intention to pass on the left, or to her
own port side. In reply to this signal the Perlagave a single blast, thereby indicating that she
disagreed with the signal given by the Ban Yek and would maintain her position on the right, that
is, would keep to the starboard. The Ban Yek made no reply to this signal. As the Perlawas
navigating with the current, then running in from the sea, this vessel, under paragraph 163 of
Customs Marine Circular No. 53, had the right of way over the Ban Yek, and the officers of
the Perla interpreted the action of the Ban Yek in not replying to the Perla's signal as an
indication of acquiescene of the officers of the Ban Yek in the determination of the Perla to keep
to the starboard.
The river at this point is about two hundred and fifty feet wide, and the courses thus being
respectively pursued by the two vessels necessarily tended to bring them into a head-on
collision. When the danger of such an occurrence became imminent, Captain Garrido of
the Perla, seeing that he was shut off by the Ban Yek from passing to the right, put his vessel to
port, intending to avoid collision or minimize its impact by getting farther out into the stream. An
additional reason for this maneuver, as stated by Captain Carrido, is that the captain of the Ban
Yek waived his hand to Garrido, indicating that the latter should turn his vessel towards the
middle of the stream. At about the same time that the Perla was thus deflected from her course
the engine on the Ban Yek was reversed and three blasts were given by this vessel to indicate
that she was backing.

Now, it appears that when the engine is reversed, a vessel swings to the right or left in
accordance with the direction in which the blades of the propeller are set; and as the Ban
Yek began to back, her bow was thrown out into the stream, a movement which was assisted by
the current of the river. By this means the Ban Yek was brought to occupy an oblique position
across the stream at the moment the Perla was passing; and the bow of the Ban Yekcrashed into
the starboard bumpers of the Perla, carrying away external parts of the ship and inflicting
material damage on the hull. To effect the repairs thus made necessary to the Perla cost her
owners the sum of P17,827, including expenses of survey.

The first legal point presented in the case has reference to the sufficiency of the protest. In this
connection it appears that within twenty-four hours after the arrival of the Perla at the port of
Naga, Captain Garrido appeared before Vicente Rodi, the auxiliary justice of the peace of the
municipality of Naga, and made before that officer the sworn protest which is in evidence as
Exhibit B. This protest is sufficient in our opinion to answer all the requirements of article 835 of
the Code of Commerce. A regular justice of the peace would without doubt be competent to
take a marine protest, and the same authority must be conceded to the auxiliary justice in the
absence of any showing in the record to the effect that the justice of the peace himself was
acting at the time in the municipality (Adm. Code, sec. 211; sec. 334, Code of Civ. Proc., subsecs.
14, 15). We note that in his certificate to this protest Vicente Rodi added to the appellation of
auxiliary justice of the peace, following his name, the additional designation "notary public ex-
officio." However, under subsection (c) of section 242 of the Administrative Code, it is plain that
an auxiliary justice of the peace is not an ex-officio notary public. It results that the taking of this
protest must be ascribed to the officer in his character as auxiliary justice of the peace and not in
the character of notary public ex-officio. It is hardly necessary to add that this court takes judicial
notice of the fact that Naga is not a port of entry and that no customs official of rank is there
stationed who could have taken cognizance of this protest.

Upon the point of responsibility for the collision we have no hesitancy in finding that the fault is
to be attributed exclusively to the negligence and inattention of the captain and pilot in charge
of the Ban Yek. The Perlaundoubtedly had the right of way, since this vessel was navigating with
the current, and the officers in charge of the Perla were correct in assuming, from the failure of
the Ban Yek to respond to the single blast of the Perla, that the officers in charge of the Ban
Yek recognized that the Perla had a right of way and acquiesced in her resolution to keep to the
right. The excuse urged for the Ban Yek is that this vessel is somewhat larger than the Perla and
that it was desirable for the Ban Yek to keep on the side of the long arc of the curve of the river;
and in this connection it is suggested that the river is deeper on the outer edge of the bend than
on the inner edge. It is also stated that on a certain previous occasion the Ban Yek on coming out
from this port had gotten stuck in the mud in this bend by keeping too far to the right.
Moreover, it is said to be the practice of ships in navigating this stream to keep nearer the
outside than to the inside of the bend. These suggestions are by no means convincing. It appears
in evidence that the river bottom here is composed of mud and silt, and as the tide at the time of
this incident was nearly at its flood, there was ample depth of water to have accommodated
the Ban Yek if she had kept to that part of the stream which it was proper for her to occupy. We
may further observe that the disparity in the size of the vessels was not such as to dominate the
situation and deprive the Perla of the right of way under the conditions stated. Blame for the
collision must therefore, as already stated, be attributed to the Ban Yek.

On the other hand no fault can be attributed to the officers navigating the Perla either in
maintaining the course which had been determined upon for that vessel in conformity with the
marine regulations applicable to the case or in deflecting the vessel towards the middle of the
stream after the danger of collision became imminent. The trial judge suggests in his opinion
that when Captain Garrido saw that the Ban Yek was holding her course to the left, he (Garrido)
should have changed the course of the Perla to port more promptly. The validity of this criticism
cannot be admitted. Among rules applicable to navigation none is better founded on reason and
experience than that which requires the navigating officers of any vessel to assume that an
approaching vessel will observe the regulations prescribed for navigation (G. Urrutia &
Co. vs. Baco River Plantation Co., 26 Phil., 632, 637). Any other rule would introduce guess work
into the control of ships and produce uncertainty in the operation of the regulations.

Our conclusion is that his Honor, the trial judge, was in error in not awarding damages to
the Perla; but no error was committed in absolving the plaintiffs from the defendants' cross-
complaint.

The sum of P17,827 in our opinion represents the limit of the plaintiffs' right of recovery. In the
original complaint recovery is sought for an additional amount of P18,000, most of which
consists of damages supposed to have been incurred from the inability of the Perla to maintain
her regular schedule while laid up in the dock undergoing repairs. The damages thus claimed, in
addition to being somewhat of a speculative nature, are in our opinion not sufficiently proved to
warrant the court in allowing the same. lawphil.net

Having determined the amount which the plaintiffs are entitled to recover, it becomes necessary
to consider the person, or persons, who must respond for these damages. Upon this point we
note that Silvino Lim is impleaded as owner; and Siy Cong Bieng & Co. is impleaded as the
shipping agent (casa naviera), or person in responsible control of the Ban Yek at the time of the
accident. We note further that in article 826 of the Code of Commerce it is declared that
the owner of any vessel shall be liable for the indemnity due to any other vessel injured by the
fault, negligence, or lack of skill of the captain of the first. We say "owner," which is the word
used in the current translation of this article in the Spanish Code of Commerce. It is to be
observed, however, that the Spanish text itself uses the word naviero; and there is some
ambiguity in the use of said word in this article, owing to the fact that naviero in Spanish has
several meanings. The author of the article which appears under the word naviero in
the Enciclopedia Juridica Espaola tells us that in Spanish it may mean either owner, outfitter,
charterer, or agent, though he says that the fundamental and correct meaning of the word is
that of "owner." That naviero, as used in the Spanish text of article 826, means owner is further
to be inferred from article 837, which limits the civil liability expressed in article 826 to the value
of the vessel with all her appurtenances and all the freight earned during the voyage. There
would have been no propriety in limiting liability to the value of the vessel unless the owner
were understood to be the person liable. It is therefore clear that by special provision of the
Code of Commerce the owner is made responsible for the damage caused by an accident of the
kind under consideration in this case; and in more than one case this court has held the owner
liable, when sued alone (Philippine Shipping Co. vs. Garcia Vergara, 6 Phil., 281; G. Urrutia &
Co. vs. Baco River Plantation Co., 26 Phil., 632).

But while it is thus demonstrated that Silvino Lim is liable for these damages in the character of
owner, it does not necessarily follows that Siy Cong Bieng & Co., as character or agent (casa
naviera), is exempt from liability; and we are of the opinion that both the owner and agent can
be held responsible where both are impleaded together. In Philippine Shipping Co., vs. Garcia
Vergara (6 Phil., 281), it seems to have been accepted as a matter of course that both owner and
agent of the offending vessel are liable for the damage done; and this must, we think, be true.
The liability of the naviero, in the sense of charterer or agent, if not expressed in article 826 of
the Code of Commerce, is clearly deducible from the general doctrine of jurisprudence stated in
article 1902 of the Civil Code, and it is also recognized, but more especially as regards
contractual obligations, in article 586 of the Code of Commerce. Moreover, we are of the
opinion that both the owner and agent (naviero) should be declared to be jointly and severally
liable, since the obligation which is the subject of this action had its origin in a tortious act and
did not arise from contract. Article 1137 of the Civil Code, declaring that joint obligations shall be
apportionable unless otherwise provided, has no application to obligation arising from tort.

For the reasons stated the judgment appealed from will be affirmed in so far as it absolves the
plaintiffs from the defendants' cross-complaint but will be reversed in so far as it absolves the
defendants from the plaintiffs' complaint; and judgment will be entered for the plaintiffs to
recover jointly and severally from the defendants Silvino Lim and Siy Cong Bieng & Co. the sum
of seventeen thousand eight hundred and twenty-seven pesos (P17,827), with interest from the
date of the institution of the action, without special pronouncement as to costs of either
instance. So ordered.

BEHN, MEYER & CO., plaintiffs-appellants,


vs.
J. MCMICKING, ET AL., defendants-appellees.
Kinney and Lawrence, for appellants.
Marcelo Caringal for appellees.

TORRES, J.:

On the 3rd of December, 1907, counsel for the firm of Behn, Meyer and CO., filed a written
complaint with the Court of First Instance of this city praying that, upon bond being furnished by
them to the amount that the court might see fit to fix, and in accordance with the provisions of
section 166 of the Code of Civil Procedure, a writ of preliminary injunction be granted him
restraining the sheriff of Manila, Jose McMicking, his deputies and assistance, and the other
defendants, from attaching or seizing any kind of property belonging to the plaintiffs, and from
taking any measures for the purpose of carrying into effect or executing the judgment entered in
case No. 24851 of said court, pending the final decision in the litigation; and that judgment be
entered therein in favor of the plaintiff company, authorizing the same to pay the sheriff of
Manila, or to any of the defendants who may be entitled thereto, the sum of P2,279.67, in full
satisfaction of a judgment rendered in the said case No. 2485; and that, upon such payment, the
said preliminary injunction be made perpetual, and that costs be allowed, together with any
other just and equitable relief.

Upon bond in the amount of P2,000 having been furnished the preliminary writ of injunction
applied for was issued on the same date.

The defendants, on being notified, summoned, and cited to appear on the 4th of the said month
interposed a demurrer alleging that the facts set out by the complaint did not constitute a cause
of action, and that the said complaint was ambiguous, unintelligible, and vague. On the 16th of
the said month the demurrer was sustained, and, although in accordance with the law the
injunction should have been dissolved, the court below, however, ordered the same continued
pending the appeal that the plaintiff might interpose. The plaintiff company excepted thereto
and informed the court and the defendants that it preferred not to amend its former complaint;
thereupon the court below, entered judgment in favor of the defendants on the 24th of
December of the same year, dismissing the complaint with costs against the plaintiff.

Counsel for the plaintiff company excepted to the above decision, and immediately moved for a
new trial on the ground that said judgment was contrary to law; the motion was overruled on
the 4th of January, 1908, and the appellant company at once gave notice of its intention to
present and perfect a bill of exceptions, in order that the same might be certified and approved.

The appellant company after claiming in its brief that the court below erred in having admitted
the demurrer offered to its complaint by counsel for defendants, and in having dismissed the
said complaint, concluded by asking the repeal of the order sustaining the demurrer, inasmuch
as Behn, Meyer and CO., are entitled to exemption from the liability imposed in case No. 2485 by
placing in the hands by the sheriff, for delivery to the claimants the sum of P2,279.67, receipt as
freight of the steamship Kudat, and earned on the voyage during which the loss of the
lorcha Nevada took place, without however, making delivery of the said steamer and her
equipment.

In the main case cited above, Behn, Meyer and CO., were sentenced to pay the sum of P9,000 to
Jose Guzman, the owner of the said lorcha, for the loss thereof; in this new litigation they claim
to limit the liability fixed by the executory judgment, and to be authorized to comply therewith
by delivering the said amount and to be thereby exempted from the remainder of the liability.

As foundation for this new pretension the second part of article 587 of the Code of Commerce is
invoked, and the following question is submitted: Does the exemption provided in article 587
constitute a defense against the liability or a means of exoneration therefrom? After the
disquisition on the laws of the United States and some countries of Europe upon the liability of
the naviero or owner of the vessel, counsel for the plaintiffs expresses his opinion that the
exemption provided for by the said article of the Code of Commerce does not constitute a
defense against an action based on the first clause of said article, but a means of exoneration
from liability determined by a judicial decision.

If this question had been set up in the said litigation No. 2485, it would have been duly resolved,
as it should, in the judgment; but the firm of Behn, Meyer and CO., did not allege any such
exemption, nor the right or means granted by the second part of article 587 of the Commercial
Code above alluded to; but in answering the complaint, they simply denied all and everyone of
the allegations contained in the complaint of the owner of the lost lorcha, and after a final and
executory judgment was rendered in said case, the action of the court was limited to the
execution and enforcement of the final judgment in all of its parts and in accordance with its
express orders.

The provisions of Civil Code and those of the code of Commerce agree in fixing the liability of the
person who, being at the head of an enterprise or business establishment, places or selects
another to manage it, for the losses or damages that the said manager may cause in the
discharge of his office.

It should be borne in mind that the vessel herself is liable as a mortgaged thing for the credits of
the shippers or owners of the goods transported by her; and that the naviero (agent), even
though he is not the owner of the vessel, is in every way liable to the creditor for such losses and
damages, without prejudice to his rights against the owner on the value of the same, it s
equipment and freight.

Case No. 2485 being remanded to the Court of First Instance with the decision of this court
affirming the judgement appealed from, it is the duty of the judge below who is charged with the
enforecement of the final decision to resolve all matter that may hinder or obstruct the
complete execution thereof; among such impediments, the allegation of the right or means
prescribed in the second part of the aforesaid article 587 of the Commercial Code. Otherwise no
legal provision whatever has been alleged that may exempt him from fully complying with the
said judgment in all its parts.
For the foregoing reasons, and considering that the orders exempted to, of the court below
dated the 16th and 24th of December 1907, are in accordance with the law, it is our opinion that
the same should be and are hereby affirmed, with the costs against the appellants; it being of
course understood that the writ preliminary injunction issued on the 3d of the said month shall
be at once dissolved and set aside. So ordered.

Carson, Willard and Tracey, JJ., concur.

YU CON, plaintiff-appellee,
vs.
GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants.

Felix Sevilla y Macam for appellants.


Juan Singson and Dionisio Jakosalem for appellee.

ARAULLO, J.:

The purpose of the action brought in these proceedings is to enable the plaintiff to recover from
the defendants jointly and severally the sum of P450, which had been delivered by the plaintiff
to the first and third of the above-named defendants, master and supercargo, respectively, of
a banca named Maria belonging to the second defendant, to be carried, together with various
merchandise belonging to the plaintiff, from the port of Cebu to the town of Catmon of the
Province of Cebu. By virtue of the contract executed between the said second defendant and the
plaintiff, the money and merchandise were to be transported by the said craft between the
points above-named in consideration of the payment of a certain sum for each voyage. The
money disappeared from said craft during the night of October 18, 1911, while it was anchored
in the port of Cebu and ready to sail for its destination, Catmon, and was not afterwards found.
The plaintiff based his action on the charge that 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.

The defendants, besides denying the allegations of the complaint, pleaded in special defense
that the plaintiff, at his own expense and under his exclusive responsibility, chartered the
said banca, the property of the defendant Lauron, for the fixed period of three days, at the price
of P10 per diem, 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. They further alleged that said
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. As a counterclaim, the defendants also asked that the plaintiff be ordered to pay the
freight agreed upon, which had not yet been paid, amounting to P80, plus the sum of P70, as an
indemnity for the losses and damages caused them by the attachment of the banca, issued at
the instance of the plaintiff upon filing his complaint. They also prayed for the additional sum of
P100, for the deterioration of the said banca, and also that of P200 for other deterioration
suffered by the same since November, 1911, and which had not bee paid for. Finally, the
defendants asked to be absolved from the complaint.

Before commencing the hearing of this case, the defendants made a verbal motion asking that
the plaintiff be declared in default, with respect to the counterclaim filed by them in their
answer. On the same date, the plaintiff presented his answer to said counter claim, denying each
and all of the allegations thereof and of the defendants' special defense. The aforementioned
motion was overruled by the court, and the defendants excepted.

At the termination of the trial, the court, in view of the evidence adduced, held that there was
no room to doubt that the sole cause of the disappearance of the money from the
said banca was the negligence of the master and the supercargo, the defendants 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. Judgment was
rendered on April 20, 1914, in favor of the plaintiff and against the defendants jointly and
severally for the sum of P450, with interest thereon at the rage of 6 per cent per annum from
the date of filing of the complaint, October 24, 1911, with costs. The plaintiff was absolved from
the defendant's counterclaim. From this judgment the defendants excepted and at the same
time moved for a new trial. Their motion was denied, to which ruling they also excepted, and,
through the proper bill of exceptions, entered and appeal to this Supreme Court. In their brief
they allege that the trial court erred:

1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;

2. In overruling the motion for default presented by the defendants and in sentencing the
defendants jointly and severally to pay the plaintiff the amount mentioned in the
judgment; and

3. In absolving the plaintiff from the defendant's counterclaim.

The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San
Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share
in a shop, or small store, situated in the town of Catmon, of said province, 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, that, on or about
the 17th of October, 1911, the plaintiff chartered the said banca from the defendant 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 which was then at
anchor in front of one of the graded fills of the wharf of said port; that in the afternoon of the
following day, he delivered to the other two defendants, Ipil, and Solamo, master and
supercargo, respectively, of the afore-named banca, the sum of P450, which was in a trunk
belonging to the plaintiff and was taken charge of by said two defendants, who received this
money from the plaintiff, for the purpose of its delivery to the latter's shop in Catmon for the
purchase of corn in this town; that while the money was still in said truck abroad the vessel, on
the night of the said 18th of October, the time scheduled for the departure of the Maria from
the port of Cebu, said master and said supercargo transferred the P450 from the plaintiff's trunk,
where it was, 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.

The facts are also admitted by the aforementioned master and supercargo, two of the
defendants, that they received from the plaintiff said P450, which sum was in the latter's own
trunk which was placed outside the stateroom of the banca, for the reason, as they said, that
there was no room for it inside the stateroom; that these defendants therefore transferred 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; that said sum had not
been found or returned to the plaintiff; that the plaintiff, being on the banca in the afternoon of
that day, when his trunk containing the P450 was carried aboard, and seeing that said two
defendants, who had the key of the trunk, has removed said sum to their trunk inside the
stateroom, charged them to take special care of the money; that the master Ipil assured the
plaintiff that there was no danger of the money being lost; and that, final, during the night in
question, both the master and the supercargo and four cabin-boys were aboard the banca.

It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and the
cabin-boys of said vessel, Juan Quiamco and Gabriel Basang, before the provincial fiscal of Cebu
on the day following the commission of the theft, which affidavits were presented at the trial as
Exhibits A, 3, 4, and 5, and by the testimony given at the trial by the defendants Ipil and Solamo,
that both said cabin-boys and the other two, Simeon Solamo, and said cabin-boys ad the other
two, Simeon Solamo, and Eulalio Quiamco, knew of the existence of the money in the trunk
inside the stateroom and witnessed its removal to said trunk from the plaintiff's; that the last
two cabin- boys above-named, in company with the master and the supercargo, conveyed the
plaintiff's trunk, in which the money was previously contained, from the plaintiff's shop to
the banca; and that no person not belonging to the vessel knew that the money was in the trunk
inside said stateroom.

According to the testimony of the master Ipil himself he slept outside the stateroom that night,
but a cabin-boy named Gabriel slept inside. The latter, however, was not presented by the
defendants to be examined in regard to this point, nor does it appear that he testified in respect
thereto in his affidavit, Exhibit 5, before referred to, presented by the defendant's own counsel.
The master Ipil and the supercargo Solamo also testified that they left the cabin-boy Simeon
Solamo on guard that night; but this affirmation was not corroborated by Solamo at the trial, for
he was not introduced as a witness, and only his affidavit, Exhibit 2, taken before the fiscal of
Cebu on the day following the commission of the crime, was presented by the defendants. This
affidavit, which should have been admitted and not rejected, as was done by the court and
excepted to by the defendants, shows that Simeon Solamo stated that he was not designated to
do guard duty that night, but that on the morning of the said 19th of October, that is, the next
day, all agreed that affiant should say that he was on guard, though it was not true that he was.

Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation in
regard to the disappearance of the trunk and the money therein contained, from the stateroom
in which the trunk was, nor as to who stole or might have stolen it. The master of
the banca merely testified that they, he and the supercargo, did to know who the robbers were,
for, when the robbery was committed, they were sound asleep, as they were tired, and that he
believed that the guard Simeon also fell asleep because he, too, was tired. The second defendant
gave the same testimony. Both of them testified that the small window of the stateroom had
been broken, and the first of them, i.e., the master, stated 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,
because, as this witness himself had verified, the Chinaman's trunk, which differed but a little
from the one stolen, could be passed through the same opening. The chief pilot of the harbor of
Cebu, Placido Sepeda, who officially visited the said banca, also stated that the small wooden
window of the stateroom was broken, and that he believed that in breaking it much noise must
have been produced. However, no evidence whatever was offered by counsel for the defendants
to prove that it might have been possible to remove the trunk from the stateroom through the
opening made by the breaking of the small window, neither was the size of the trunk proven, in
relation to the Chinaman's to which the defendant master referred in his testimony, so that it
might be verified whether the statement made by the latter was true, viz., that it might have
been possible to remove from the stateroom through said opening the trunk in which the P450
were contained, which sum, the same as the trunk, its container, had not been found, in spite of
the investigation made for the purpose. Furthermore, it was not proven, nor is there any
circumstantial evidence to show, that the robbery in question was committed by persons not
belonging to the craft.

It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of
the P450, the property of the plaintiff, which, were in the possession of the defendants, the
master and the supercargo of the banca Maria, occurred through the manifest fault and
negligence of said defendants, for, not only did they fail to take the necessary precautions in
order that the stateroom containing the trunk in which they kept the money should be properly
guarded by members of the crew and put in such condition that it would be impossible to steal
the trunk from it or that persons not belonging to the vessel might force an entrance into the
stateroom from the outside, but also they did not expressly station some person inside the
stateroom for the guarding and safe-keeping of the trunk, for it was not proven that the cabin-
boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that the other Cabin-boy,
Simeon Solamo, was on guard that night, for the latter contradicted the statements made by the
two defendants on this point. On the contrary, it was proven by the master's own statement that
all the people of the vessel, including himself and the supercargo Solamo, slept soundly that
night; which fact cannot, in any manner, serve them as an excuse, nor can it be accepted as an
explanation of the statement that they were not aware of what was then occuring on board, if
the trunk was actually stolen by outsiders and removed through the small window of the
stateroom, a detail which also was not proven, but, on the contrary, increases their liability,
because it is very strange that none of them, who were six and were around or near the
stateroom, should have heard the noise which the robbers must have made in breaking its
window. All of these circumstances, together with that of its having been impossible to know
who took the trunk and the money and the failure to recover the one or the other make the
conduct of the two defendants and of the other members of the crew of banca, eminently
supicious and prevent our holding that the disappearance or loss of the money was due to a
fortuitous event, to force majeure, or that it was an occurrence which could not have been
foreseen, or which, if foreseen, was inevitable.

It is unquestionable that the defendants Glicerio Ipil and Justo 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.lawphi1.net

Manresa, in his Commentaries on the Civil Code (Vol. 10, p. 773), in treating of the provisions of
the said code concerning transportation by sea and by land of both persons and things, says:

Liability of carriers. In order that a thing may be transported, it must be delivered to


the carrier, as the Code says. 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.

The Code discovers in the relation of all these elements the factors which go to make up
the conception of a trust, and, taking into account that the delivery of the thing on the
part of the shipper is unavoidable, if the transportation is to take place, esteem that, at
least in certain respects, such trusts are necessary.

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, it is evident that, in pursuance of the
provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as
prescribed in articles 1770, of the Civil Code, they 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.

With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which
the loss or misplacement of the P450 occurred, of which vessel, as aforestated, Glicerio Ipil was
master and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the
positions they held, by the defendant himself, and, as the aforementioned sum was delivered to
the said master, Ipil, and the merchandise to be transported by means of said vessel from the
port of Cebu to the town of Catmon was laden by virtue of a contract executed by and between
the plaintiff and the owner of the vessel, Narciso Lauron, it behooves us to examine whether the
latter, also, should be held to be liable, as requested by the plaintiff in his complaint.

Said vessel was engaged in the transportation of merchandise by sea and made voyages to and
from the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its
owner, Narciso Lauron, with whom, as aforesaid, the plaintiff contracted for the transportation
of the merchandise which was to be carried, on the date hereinabove mentioned, from the port
of Cebu to the town of Catmon.

For legal purposes, that is, for the determination of the nature and effect of the relations created
between the plaintiff, as owner of the merchandise laden on said craft and of the money that
was delivered to the master, Ipil, and the defendant Lauron, as owner of the craft, the latter was
a vessel, according to the meaning and construction given to the word vessel in the Mercantile
Code, in treating of maritime commerce, under Title 1,
Book 3.

The word 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. (Commentaries on the Code of Commerce, in the General Review of Legislation
and Jurisprudence, founded by D. Jose Reus y Garcia, Vol., 2 p. 136.)

According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of
craft, considering solely the hull.

Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the
word "ship" and "vessels," says, in his work aforecited, that these terms designate every kind of
craft, large or small, whether belonging to the merchant marine or to the navy. And referring to
their juridical meaning, he adds: "This does not differ essentially from the grammatical meaning;
the words "ship" and "vessel" also designate every craft, large or small, so long as it be not an
accessory of another, such as the small boat of a vessel, of greater or less tonnage. This
definition comprises both the craft intended for ocean or for coastwise navigation, as well as the
floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the
service of an industry or in that of maritime commerce. . . ." (Vol. 1, p. 389.)

According to the foregoing definitions, then, we should that 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.

Glicerio Ipil, the master of the said banca Maria, must also be considered as its captain, in the
legal acceptation of this word.
The same Code of Commerce in force in these Islands compares, in its article 609, masters with
captains. It is to be noted that in the Code of Commerce of Spain the denomination of arraeces is
not included in said article as equivalent to that of masters, as it is in the Code of these Islands.

Commenting on said article, the aforementioned General Review of Legislation and


Jurisprudence says:

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. (Vol. 2, p. 168.)

Article 587 of the Code of Commerce in force provides:

The agent shall 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 trip.

Article 618 of the same Code also prescribes:

The captain shall be civilly liable to the agent and the latter to the third persons who may
have made contracts with the former

1. For all the damages suffered by the vessel and its cargo by reason of want of skill or
negligence on his part, If a misdemeanor or crime has been committed he shall be liable
in accordance with the Penal Code.

2. For all the thefts committed by the crew, reserving his right of action against the guilty
parties.

The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624,
provided that the agent or shipowner should not be liable for any excesses which, during the
navigation, might be committed by the captain and crew, and that, for the reason of such
excesses, it was only proper to bring action against the persons and property of those found
guilty.
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following
remarks, in referring to the exposition of reasons presented by the Code Commission which
prepared and presented for approval the Code of Commerce now in force, in which exposition of
reasons were set forth the fundamental differences between the provisions contained in both
codes, with respect to the subject-matter now under discussion. He says:

Another very important innovation introduced by the Code is that relative to the liability
for misdemeanors and crimes committed by the captain or by members of the crew. This
is a matter of the greatest importance on which a variety of opinions has been expressed
by different juris-consults.

The old code declares the captain civilly liable for all damage sustained by the vessel or its
cargo through lack of skill or care on his part, through violations of the law, or through
unlawful acts committed by the crew. As regards the agent or shipowners, it declares in
unmistakeable terms that he shall in no wise be liable for any excesses which, during the
navigation, may be committed by the captain and the crew.

Upon an examination, in the light of the principles of modern law, of the standing legal
doctrine on the non-liability of the shipowner for the unlawful acts, that is, the crimes or
quasi crimes, committed by the captain and the crew, it is observed that it cannot be
maintained in the absolute and categorical terms in which it is formulated.

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 fir, appoint another captain instead.

The shipowner is in the same case with respect to the members of the crew, for, though
he does not appoint directly, yet, expressly or tacitly, he contributes to their
appointment.

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.
Moreover, the Penal Code contains a general principle that resolves the question under
consideration, for it declares that such persons as undertake and carry on any iondustry
shall be civilly liable, in default of those who may be criminally liable, for the
misdemeanors and crimes committed by their subordinates in the discharge of their
duties.

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.

It is therefore evident that, in accordance with the provisions of the Code of Commerce in force,
which are applicable to the instance case, the defendant Narciso Lauron, as the proprietor and
owner of the craft of which Glicerio Ipil was the master and in which, through the fault and
negligence of the latter and of the supercago Justo Solamo, there occurred the loss, theft, or
robbery of the P450 that belonged to the plaintiff and were delivered to said master and
supercargo, a theft which, on the other hand, as shown by the evidence, does not appear to
have been committed by a person not belonging to the craft, should, for said loss or theft, 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.

Therefore, the trial court did not err in so holding in the judgement appealed from.

The plaintiff having filed his answer to the cross-complaint as soon as the defendant presented
their motion for] a declaration of the plaintiff's default in connection with said cross-complaint,
and it being optional with the court to make in such cases the declaration of default, as provided
in section 129 of the Code of Civil Procedure, the said court did not incur the second error
assigned by the appellants in their brief.

Lastly, as the banca Maria did not make the trip she should have made from the port of Cebu to
the town of Catmon, on the occasion in question, through cases chargeable, as has been seen, to
the captain and the supercargo of said banca, to wit, because of the loss, theft of robbery of the
P450 belonging to the plaintiff, and as a contract was made for the transportation of the said
sum and the merchandise from one of said points to the other, for the round trip, and not
through payment by the plaintiff of the wages due the crew for each day, as alleged by the
defendants, for the proofs presented by the latter in regard to this point were insufficient, as the
trial court so held, neither did the latter incur error in overruling the cross-complaint formulated
by the defendants in their answer against the plaintiff.

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.
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.

Marilyn Cacho-Naoe for petitioners.

Wilfred L. Pascasio for private respondent.

FELICIANO, J.:

Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in
commanding ocean-going vessels, was employed on 6 July 1989 by petitioners Trenda World
Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through petitioner Inter-Orient
Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1)
year, as evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed
command of petitioners' vessel at the port of Hongkong. His instructions were to replenish
bunker and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120,000
metric tons of coal.

On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain
Tayong received a weather report that a storm code-named "Gordon" would shortly hit
Hongkong. Precautionary measures were taken to secure the safety of the vessel, as well as its
crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14)
years old.

On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of
the Oceanic Mindoro for supplies of oxygen and acetylene, necessary for the welding-repair of
the turbo-charger and the economizer.1 This requisition had been made upon request of the
Chief Engineer of the vessel and had been approved by the shipowner. 2

On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing message,
Captain Tayong reported a water leak from M.E. Turbo Charger No. 2 Exhaust gas casing. He was
subsequently instructed to blank off the cooling water and maintain reduced RPM unless
authorized by the owners.3

On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the
vessel had stopped in mid-ocean for six (6) hours and forty-five (45) minutes due to a leaking
economizer. He was instructed to shut down the economizer and use the auxiliary boiler
instead.4
On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore.5 The Chief Engineer
reminded Captain Tayong that the oxygen and acetylene supplies had not been
delivered.6 Captain Tayong inquired from the ship's agent in Singapore about the supplies. The
ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the
stores had closed.7

Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and informed
them that the departure of the vessel for South Africa may be affected because of the delay in
the delivery of the supplies.8

Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in Tokyo
and who could provide a solution for the supply of said oxygen and acetylene. 9

On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that
the vessel cannot sail without the oxygen and acetylene for safety reasons due to the problems
with the turbo charger and economizer. Mr. Clark responded that by shutting off the water to
the turbo chargers and using the auxiliary boiler, there should be no further problems. According
to Mr. Clark, Captain Tayong agreed with him that the vessel could sail as scheduled on 0100
hours on 1 August 1989 for South Africa.10

According to Captain Tayong, however, he communicated to Sea Horse his reservations


regarding proceeding to South Africa without the requested supplies, 11 and was advised by Sea
Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had arranged to be
delivered on board the Oceanic Mindoro.12 At 0800 hours on 1 August 1989, the requisitioned
supplies were delivered and Captain Tayong immediately sailed for Richard Bay.

When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain
Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to
the Philippines, after serving petitioners for a little more than two weeks. 13 He was not informed
of the charges against him.14

On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the
Philippine Overseas Employment Administration ("POEA"), claiming his unpaid salary for the
unexpired portion of the written employment contract, plus attorney's fees.

Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain
Tayong. Petitioners alleged that he had refused to sail immediately to South Africa to the
prejudice and damage of petitioners. According to petitioners, as a direct result of Captain
Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours.
This meant that the charterers refused to pay the charter hire or compensation corresponding to
twelve (12) hours, amounting to US$15,500.00, due to time lost in the voyage. They stated that
they had dismissed private respondent for loss of trust and confidence.
The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his
untimely repatriation. The decision of the POEA placed considerable weight on petitioners'
assertion that all the time lost as a result of the delay was caused by Captain Tayong and that his
concern for the oxygen and acetylene was not legitimate as these supplies were not necessary or
indispensable for running the vessel. The POEA believed that the Captain had unreasonably
refused to follow the instructions of petitioners and their representative, despite petitioners'
firm assurances that the vessel was seaworthy for the voyage to South Africa.

On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the
decision of the POEA. The NLRC found that Captain Tayong had not been afforded an
opportunity to be heard and that no substantial evidence was adduced to establish the basis for
petitioners' loss of trust or confidence in the Captain. The NLRC declared that he had only acted
in accordance with his duties to maintain the seaworthiness of the vessel and to insure the
safety of the ship and the crew. The NLRC directed petitioners to pay the Captain (a) his salary
for the unexpired portion of the contract at US$1,900.00 a month, plus one (1) month leave
benefit; and (b) attorney's fees equivalent to ten percent (10%) of the total award due.

Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion.
Petitioners allege that they had adduced sufficient evidence to establish the basis for private
respondent's discharge, contrary to the conclusion reached by the NLRC. Petitioners insist that
Captain Tayong, who must protect the interest of petitioners, had caused them unnecessary
damage, and that they, as owners of the vessel, cannot be compelled to keep in their employ a
captain of a vessel in whom they have lost their trust and confidence. Petitioners finally contend
that the award to the Captain of his salary corresponding to the unexpired portion of the
contract and one (1) month leave pay, including attorney's fees, also constituted grave abuse of
discretion.

The petition must fail.

We note preliminarily that petitioners failed to attach a clearly legible, properly certified, true
copy of the decision of the NLRC dated 23 April 1994, in violation of requirement no. 3 of
Revised Circular No. 1-88. On this ground alone, the petition could have been dismissed. But the
Court chose not to do so, in view of the nature of question here raised and instead required
private respondent to file a comment on the petition. Captain Tayong submitted his comment.
The Office of the Solicitor General asked for an extension of thirty (30) days to file its comment
on behalf of the NLRC. We consider that the Solicitor General's comment may be dispensed with
in this case.

It is well settled in this jurisdiction that confidential and managerial employees cannot be
arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate
investigation.15 Such employees, too, are entitled to security of tenure, fair standards of
employment and the protection of labor laws.
The captain of a vessel is a confidential and managerial employee within the meaning of the
above doctrine. A master or captain, for purposes of maritime commerce, is 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. 16 Of these roles, by far the
most important is the role performed by the captain as commander of the vessel; for such role
(which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day
corporate enterprise) 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. In his role as general
agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and
deal with the freight earned, agree upon rates and decide whether to take cargo. The ship
captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the
vessel and the trading of the vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner. 17 To the captain is committed the
governance, care and management of the vessel.18 Clearly, the captain is vested with both
management and fiduciary functions.

It is plain from the records of the present petition that Captain Tayong was denied any
opportunity to defend himself. Petitioners curtly dismissed him from his command and
summarily ordered his repatriation to the Philippines without informing him of the charge or
charges levelled against him, and much less giving him a chance to refute any such charge. In
fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October
1989 from Inter-Orient requiring him to explain why he delayed sailing to South Africa.

We also find that the principal contention of petitioners against the decision of the NLRC
pertains to facts, that is, whether or not there was actual and sufficient basis for the alleged loss
of trust or confidence. We have consistently held that a question of "fact" is, as a general rule,
the concern solely of an administrative body, so long as there is substantial evidence of record to
sustain its action.

The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not
supported by substantial evidence. Petitioners rely on self-serving affidavits of their own officers
and employees predictably tending to support petitioners' allegation that Captain Tayong had
performed acts inimical to petitioners' interests for which, supposedly, he was discharged. The
official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion
that private respondent Captain did not arbitrarily and maliciously delay the voyage to South
Africa. There had been, Mr. Clark stated, a disruption in the normal functioning of the vessel's
turbo-charger19 and economizer and that had prevented the full or regular operation of the
vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during
the voyage to South Africa, instead of waiting in Singapore for the supplies that would permit
shipboard repair of the malfunctioning machinery and equipment.

More importantly, 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 captain is held responsible, and properly so, for such safety. He is
right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the
specific requirements of seaworthiness and the particular risks and perils of the voyage he is to
embark upon. The applicable principle is that the captain has control of all departments of
service in the vessel, and reasonable discretion as to its navigation. 20 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.21 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. The requirements of safe navigation compel us to reject any suggestion that the
judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in
this age of electronic communications.22 Indeed, if the ship captain is convinced, as a reasonably
prudent and competent mariner acting in good faith that the shipowner's or ship agent's
instructions (insisted upon by radio or telefax from their offices thousands of miles away) will
result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or
serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a
marine casualty occurs, in such instructions.23

Compagnie de Commerce v. Hamburg24 is instructive in this connection. There, this Court


recognized the discretionary authority of the master of a vessel and his right to exercise his best
judgment, with respect to navigating the vessel he commands. In Compagnie de Commerce, a
charter party was executed between Compagnie de Commerce and the owners of the
vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of
Saigon, certain cargo destined for the Ports of Dunkirk and Hamburg in Europe. The Sambia,
flying the German flag, could not, in the judgment of its master, reach its ports of destination
because war (World War I) had been declared between Germany and France. The master of
the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of
Manila. Compagnie de Commerce sued in the Philippines for damages arising from breach of the
charter party and unauthorized sale of the cargo. In affirming the decision of the trial court
dismissing the complaint, our Supreme Court held that the master of the Sambia had reasonable
grounds to apprehend that the vessel was in danger of seizure or capture by the French
authorities in Saigon and was justified by necessity to elect the course which he took i.e., to
flee Saigon for the Port of Manila with the result that the shipowner was relieved from liability
for the deviation from the stipulated route and from liability for damage to the cargo. The Court
said:

The danger from which the master of the Sambia fled was a real and not merely
an imaginary one as counsel for shipper contends. Seizure at the hands of an
"enemy of the King" though not inevitable, was a possible outcome of a failure to
leave the port of Saigon; and we cannot say that under the conditions existing at
the time when the master elected to flee from that port, there were no grounds
for a "reasonable apprehension of danger" from seizure by the French authorities,
and therefore no necessity for flight.
The word "necessity" when applied to mercantile affairs, where the judgment
must in the nature of things be exercised, cannot, of course, mean an irresistible
compelling power. What is meant by it in such cases is the force of circumstances
which determine the course a man ought to take. Thus, where by the force of
circumstances, a man has the duty cast upon him of taking some action for
another, and under that obligation adopts a course which, to the judgment of a
wise and prudent man, is apparently the best for the interest of the persons for
whom he acts in a given emergency, it may properly be said of the course so
taken that it was in a mercantile sense necessary to take it. 25 (Emphasis supplied)

Compagnie de Commerce contended that the shipowner should, at all events, be held
responsible for the deterioration in the value of the cargo incident to its long stay on board the
vessel from the date of its arrival in Manila until the cargo was sold. The Supreme Court, in
rejecting this contention also, declared that:

But it is clear that the master could not be required to act on the very day of his
arrival; or before he had a reasonable opportunity to ascertain whether he could
hope to carry out his contract and earn his freight; and that he should not be held
responsible for a reasonable delay incident to an effort to ascertain the wishes of
the freighter, and upon failure to secure prompt advice, to decide for himself as to
the course which he should adopt to secure the interests of the absent owner of
the property aboard the vessel.

The master is entitled to delay for such a period as may be reasonable under the
circumstances, before deciding on the course he will adopt. He may claim a fair
opportunity of carrying out a contract, and earning the freight, whether by
repairing or transhipping. Should the repair of the ship be undertaken, it must be
proceeded with diligently; and if so done, the freighter will have no ground of
complaint, although the consequent delay be a long one, unless, indeed, the cargo
is perishable, and likely to be injured by the delay. Where that is the case, it ought
to be forwarded, or sold, or given up, as the case may be, without waiting for
repairs.

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.26(Emphasis supplied)
The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to
believe that the safety of the vessel and the crew under his command or the possibility of
substantial delay at sea required him to wait for the delivery of the supplies needed for the
repair of the turbo-charger and the economizer before embarking on the long voyage from
Singapore to South Africa.

In this connection, it is specially relevant to recall that, according to the report of Mr. Robert
Clark, Technical Director of petitioner Sea Horse Ship Management, Inc., the Oceanic
Mindoro had stopped in mid-ocean for six (6) hours and forty-five (45) minutes on its way to
Singapore because of its leaking economizer.27 Equally relevant is the telex dated 2 August 1989
sent by Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was en route
to South Africa. 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)

Under all the circumstances of this case, we, along with the NLRC, are unable to hold that
Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to wait
seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the requisitioned
supplies needed for the welding-repair, on board the ship, of the turbo-charger and the
economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly
insubordinate behavior on his part. In the view of the NLRC, that decision of Captain Tayong did
not constitute a legal basis for the summary dismissal of Captain Tayong and for termination of
his contract with petitioners prior to the expiration of the term thereof. We cannot hold this
conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of
jurisdiction; indeed, we share that conclusion and make it our own.

Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed
supplies before sailing from Singapore, and may have changed their estimate of their ability to
work with him and of his capabilities as a ship captain. Assuming that to be petitioners'
management prerogative, that prerogative is nevertheless not to be exercised, in the case at bar,
at the cost of loss of Captain Tayong's rights under his contract with petitioners and under
Philippine law.
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.

SO ORDERED.

FAR EASTERN SHIPPING COMPANY vs.


COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY
G.R. No. 130150; October, 1998

FACTS:
M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company (FESC), arrived at
the Port of Manila and was assigned Berth 4 of the Manila International Port, as its berthing
space. Gavino, who was assigned by the Appellant Manila Pilots' Association to conduct the
docking maneuvers for the safe berthing, boarded the vessel at the quarantine anchorage and
stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After
a briefing of Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel lifted
anchor from the quarantine anchorage and proceeded to the Manila International Port. The sea
was calm and the wind was ideal for docking maneuvers. When the vessel reached the landmark,
one-half mile from the pier, Gavino ordered the engine stopped. When the vessel was already
about 2,000 feet from the pier, Gavino ordered the anchor dropped. Kavankov relayed the
orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles, were
dropped. However, the anchor did not take hold as expected. The speed of the vessel did not
slacken. A commotion ensued between the crew members. After Gavino noticed that the
anchor did not take hold, he ordered the engines half-astern. Abellana, who was then on the pier
apron, noticed that the vessel was approaching the pier fast. Kavankov likewise noticed that the
anchor did not take hold. Gavino thereafter gave the "full-astern" code. Before the right anchor
and additional shackles could be dropped, the bow of the vessel rammed into the apron of the
pier causing considerable damage to the pier as well as the vessel.

ISSUES:
(1) Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage
caused by the vessel to the pier, at the port of destination, for his negligence?;
(2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent
negligence of the master of the vessel and the pilot under a compulsory pilotage?

HELD:
(1) Generally speaking, 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 as to speed,
course, stopping and reversing anchoring, towing and the like. And when a licensed pilot is
employed in a place where pilotage is compulsory, it is his duty to insist on having effective
control of the vessel, or to decline to act as pilot. Under certain systems of foreign law, the pilot
does not take entire charge of the vessel, but is deemed merely the adviser of the master, who
retains command and control of the navigation even in localities where pilotage is compulsory. It
is quite common for states and localities to provide for compulsory pilotage, and safety laws
have been enacted requiring vessels approaching their ports, with certain exceptions, to take on
board pilots duly licensed under local law. The purpose of these laws is to create a body of
seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and
thus protect life and property from the dangers of navigation. Upon assuming such office as
compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and
diligence required of a pilot, whereby he assumes to have skill and knowledge in respect to
navigation in the particular waters over which his license extends superior to and more to be
trusted than that of the master. He is not held to the highest possible degree of skill and care,
but must have and exercise the ordinary skill and care demanded by the circumstances, and
usually shown by an expert in his profession. Under extraordinary circumstances, a pilot must
exercise extraordinary care. In this case, Capt. Gavino failed to measure up to such strict
standard of care and diligence required of pilots in the performance of their duties. As pilot, he
should have made sure that his directions were promptly and strictly followed.

(2) The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less
responsible for the allision. The master is still in command of the vessel notwithstanding the
presence of a pilot. A perusal of Capt. Kabankov's testimony makes it apparent that he was
remiss in the discharge of his duties as master of the ship, leaving the entire docking procedure
up to the pilot, instead of maintaining watchful vigilance over this risky maneuver. The owners of
a vessel are not personally liable for the negligent acts of a compulsory pilot, but by admiralty
law, the fault or negligence of a compulsory pilot is imputable to the vessel and it may be held
liable therefor in rem. Where, however, by the provisions of the statute the pilot is compulsory
only in the sense that his fee must be paid, and is not in compulsory charge of the vessel, there is
no exemption from liability. Even though the pilot is compulsory, if his negligence was not the
sole cause of the injury, but the negligence of the master or crew contributed thereto, the
owners are liable. But the liability of the ship in rem does not release the pilot from the
consequences of his own negligence. The master is not entirely absolved of responsibility with
respect to navigation when a compulsory pilot is in charge. Except insofar as their liability is
limited or exempted by statute, the vessel or her owners are liable for all damages caused by the
negligence or other wrongs of the owners or those in charge of the vessel. As a general rule, the
owners or those in possession and control of a vessel and the vessel are liable for all natural and
proximate damages caused to persons or property by reason of her negligent management or
navigation.

CALTEX (PHILIPPINES), INC., petitioner,


vs.
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S.
GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND
S. GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL, AND
SOTERA E. CAEZAL, respondents.

PARDO, J.:

Is the charterer of a sea vessel liable for damages resulting from a collision between the
chartered vessel and a passenger ship?

When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum
products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would
collide with MV Doa Paz, killing almost all the passengers and crew members of both ships, and
thus resulting in one of the country's worst maritime disasters.

The petition before us seeks to reverse the Court of Appeals decision 1 holding petitioner jointly
liable with the operator of MT Vector for damages when the latter collided with Sulpicio Lines,
Inc.'s passenger ship MV Doa Paz.

The facts are as follows:

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute
to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. 2 MT
Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation,
engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and
crude oil. During that particular voyage, the MT Vector carried on board gasoline and other oil
products owned by Caltex by virtue of a charter contract between
them. 3

On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of
Tacloban headed for Manila with a complement of 59 crew members including the master and
his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance. 4 The MV
Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the
route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips
twice a week.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the
vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV
Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the
time of the incident.1wphi1.nt
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the
passenger manifest. Only 24 survived the tragedy after having been rescued from the burning
waters by vessels that responded to distress calls. 5 Among those who perished were public
school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old),
both unmanifested passengers but proved to be on board the vessel.

On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation
found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual
operator Vector Shipping Corporation, were at fault and responsible for its collision with MV
Doa Paz. 6

On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezal's wife and
mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for
"Damages Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter
Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with
gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-
equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa
Paz in the open sea setting MT Vector's highly flammable cargo ablaze.

On September 15, 1992, the trial court rendered decision dismissing, the third party complaint
against petitioner. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against


defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:

1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G.
Caezal, including loss of future earnings of said Sebastian, moral and exemplary
damages, attorney's fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation
and with costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

A
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On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court
of Appeal modified the trial court's ruling and included petitioner Caltex as one of the those
liable for damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional
Trial Court is hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of


Sebastian E. Caezal and Corazon Caezal:

1. Compensatory damages for the death of Sebastian E. Caezal and Corazon


Caezal the total amount of ONE HUNDRED THOUSAND PESOS (P100,000);

2. Compensatory damages representing the unearned income of Sebastian E.


Caezal, in the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED
EIGHTY (P306,480.00) PESOS;

3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS


(P300,000.00);

4. Attorney's fees in the concept of actual damages in the amount of FIFTY


THOUSAND PESOS (P50,000.00);

5. Costs of the suit.


Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held
equally liable under the third party complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. of the above-mentioned damages, attorney's fees and costs
which the latter is adjudged to pay plaintiffs, the same to be shared half by Vector
Shipping Co. (being the vessel at fault for the collision) and the other half by
Caltex (Phils.), Inc. (being the charterer that negligently caused the shipping of
combustible cargo aboard an unseaworthy vessel).

SO ORDERED.

J
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WE CONCUR:
RAMON U. MABUTAS, JR. PORTIA ALIO HERMACHUELOS

Associate Justice Associate Justice. 8

Hence, this petition.

We find the petition meritorious.

First: The charterer has no liability for damages under


Philippine Maritime laws.

The respective rights and duties of a shipper and the carrier depends not on whether the carrier
is public or private, but on whether the contract of carriage is a bill of lading or equivalent
shipping documents on the one hand, or a charter party or similar contract on the other. 9

Petitioner and Vector entered into a contract of affreightment, also known as a voyage
charter. 10

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a contract of affreightment is one by which
the owner of a ship or other vessel lets the whole or part of her to a merchant or other person
for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight. 11

A contract of affreightment may be either time charter, wherein the leased vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to supply the
ship's store, pay for the wages of the master of the crew, and defray the expenses for the
maintenance of the ship. 12

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

If the charter is a contract of affreightment, which leaves the general owner in possession of the
ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner.
The charterer is free from liability to third persons in respect of the ship. 13

Second: MT Vector is a common carrier

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3)
voyage charter. Does a charter party agreement turn the common carrier into a private one? We
need to answer this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of the vessel as a
common carrier.

In Planters Products, Inc. vs. Court of Appeals, 14 we said:

It is therefore imperative that a public carrier shall remain as such,


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

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15

Although a charter party may transform a common carrier into a private one, the
same however is not true in a contract of affreightment . . .

A common carrier is a person or corporation whose regular business is to carry passengers or


property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of
Appeals, 17 we ruled:

The Civil Code defines "common carriers" in the following terms:

Art. 1732. Common carriers are persons, corporations, firms or associations


engaged in the business of carrying or transporting passengers for passengers or
goods or both, by land, water, or air for compensation, offering their services to
the public.

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such services on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think
that Article 1733 deliberately refrained from making such distinctions.
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such backhauling was done on a periodic,
occasional rather than regular or scheduled manner, and even though
respondent's principal occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his customers a fee for hauling
their goods; that the fee frequently fell below commercial freight rates is not
relevant here.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to
be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code. 18

The provisions owed their conception to the nature of the business of common carriers. This
business is impressed with a special public duty. The public must of necessity rely on the care
and skill of common carriers in the vigilance over the goods and safety of the passengers,
especially because with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. 19 For these reasons, a
passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and
its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.

Third: Is Caltex liable for damages under the Civil Code?

We rule that it is not.

Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license
renewed;

2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery
Corporation;

3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast
Guard.

Sulpicio further argues that Caltex chose MT Vector transport its cargo despite these
deficiencies.

1. The master of M/T Vector did not posses the required Chief Mate license to command and
navigate the vessel;

2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate
only in bays and rivers when the subject collision occurred in the open sea;

3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and lookout; and

5. The vessel had a defective main engine. 20

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:

Art. 20. Every person who contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.

Art. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.

And what is negligence?

The Civil Code provides:

Art. 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with
the circumstances of the persons, of the time and of the place. When negligence
shows bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply.
If the law does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be
required.

In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as commonly
understood, is conduct which naturally or reasonably creates undue risk or harm to others. It
may be the failure to observe that degree of care, precaution, and vigilance, which the
circumstances justly demand, or the omission to do something which ordinarily regulate the
conduct of human affairs, would do.

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel
it chartered complied with all legal requirements. The duty rests upon the common carrier
simply for being engaged in "public service." 22 The Civil Code demands diligence which is
required by the nature of the obligation and that which corresponds with the circumstances of
the persons, the time and the place. Hence, considering the nature of the obligation between
Caltex and MT Vector, liability as found by the Court of Appeals is without basis.1wphi1.nt

The relationship between the parties in this case is governed by special laws. Because of the
implied warranty of seaworthiness, 23 shippers of goods, when transacting with common
carriers, are not expected to inquire into the vessel's seaworthiness, genuineness of its licenses
and compliance with all maritime laws. To demand more from shippers and hold them liable in
case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of
the public in general is concerned. By the same token, we cannot expect passengers to inquire
every time they board a common carrier, whether the carrier possesses the necessary papers or
that all the carrier's employees are qualified. Such a practice would be an absurdity in a business
where time is always of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers possess all the legal
requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.

A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector
could legally transport cargo that time of the year.

Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing
the entries here under "VESSEL'S DOCUMENTS

1. Certificate of Inspection No. 1290-85, issued December 21,


1986, and Expires December 7, 1987", Mr. Witness, what steps did
you take regarding the impending expiry of the C.I. or the
Certificate of Inspection No. 1290-85 during the hiring of MT
Vector?
Apolinario Ng: At the time when I extended the Contract, I did
nothing because the tanker has a valid C.I. which will expire on
December 7, 1987 but on the last week of November, I called the
attention of Mr. Abalos to ensure that the C.I. be renewed and Mr.
Abalos, in turn, assured me they will renew the same.

Q: What happened after that?

A: On the first week of December, I again made a follow-up from


Mr. Abalos, and said they were going to send me a copy as soon as
possible, sir. 24

xxx xxx xxx

Q: What did you do with the C.I.?

A: We did not insist on getting a copy of the C.I. from Mr. Abalos
on the first place, because of our long business relation, we trust
Mr. Abalos and the fact that the vessel was able to sail indicates
that the documents are in order. . . . 25

On cross examination

Atty. Sarenas: This being the case, and this being an admission by
you, this Certificate of Inspection has expired on December 7. Did
it occur to you not to let the vessel sail on that day because of the
very approaching date of expiration?

Apolinar Ng: No sir, because as I said before, the operation


Manager assured us that they were able to secure a renewal of the
Certificate of Inspection and that they will in time submit us a
copy. 26

Finally, on Mr. Ng's redirect examination:

Atty. Poblador: Mr. Witness, were you aware of the pending expiry
of the Certificate of Inspection in the coastwise license on
December 7, 1987. What was your assurance for the record that
this document was renewed by the MT Vector?

Atty. Sarenas: . . .

Atty. Poblador: The certificate of Inspection?


A: As I said, firstly, we trusted Mr. Abalos as he is a long time
business partner; secondly, those three years; they were allowed
to sail by the Coast Guard. That are some that make me believe
that they in fact were able to secure the necessary renewal.

Q: If the Coast Guard clears a vessel to sail, what would that mean?

Atty. Sarenas: Objection.

Court: He already answered that in the cross examination to the


effect that if it was allowed, referring to MV Vector, to sail, where
it is loaded and that it was scheduled for a destination by the Coast
Guard, it means that it has Certificate of Inspection extended as
assured to this witness by Restituto Abalos. That in no case MV
Vector will be allowed to sail if the Certificate of inspection is,
indeed, not to be extended. That was his repeated explanation to
the cross-examination. So, there is no need to clarify the same in
the re-direct examination. 27

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two
years before the tragic incident occurred in 1987. Past services rendered showed no reason for
Caltex to observe a higher degree of diligence.

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

As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals' ruling insofar
as Vector is concerned.

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of
Appeals in CA-G.R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the
damages the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the
Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal
and Corazon Caezal damages as set forth therein. Third-party defendant-appellee Vector
Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant
Sulpicio Lines, Inc. whatever damages, attorneys' fees and costs the latter is adjudged to pay
plaintiffs-appellees in the case.1wphi1.nt

No costs in this instance.

SO ORDERED.
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party1 between a shipowner and a charterer transform a common carrier into a
private one as to negate the civil law presumption of negligence in case of loss or damage to its
cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI)
of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped
in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent
Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La
Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and
issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party
starting from par. 16 to 40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3
and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th
of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant
to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from


National Cargo Bureau inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo spaces. The vessel's hold
to be properly swept, cleaned and dried at the vessel's expense and the vessel to
be presented clean for use in bulk to the satisfaction of the inspector before
daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout
the entire voyage.5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to
the ship, pursuant to the terms and conditions of the charter-partly (which provided for an
F.I.O.S. clause).6 The hatches remained open throughout the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf.
Midway to the warehouse, the trucks were made to pass through a weighing scale where they
were individually weighed for the purpose of ascertaining the net weight of the cargo. The port
area was windy, certain portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress.8 The petitioner's warehouse
was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the
dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI
sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th,
14th and 18th).10A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings
of the vessel prior to and after discharge. 11 The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same
results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared
by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T
were rendered unfit for commerce, having been polluted with sand, rust and
dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion said to have
been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for shortlanded
certificate and not a formal claim, and that this "request" was denied by them because they "had
nothing to do with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action
for damages with the Court of First Instance of Manila. The defendant carrier argued that the
strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the defendant carrier for the value of
the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that
a shipper has to do in a suit to recover for loss or damage is to show receipt by the
carrier of the goods and to delivery by it of less than what it received. After that,
the burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shipted to the carrier, common or private he may be.
Even if the provisions of the charter-party aforequoted are deemed valid, and the
defendants considered private carriers, it was still incumbent upon them to prove
that the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do. By this omission,
coupled with their failure to destroy the presumption of negligence against them,
the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo
vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of negligence do not find application in the case
at bar. Thus

. . . In the absence of such presumption, it was incumbent upon the plaintiff-


appellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show
in a satisfactory manner the facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense (Moran, Commentaries on
the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis
of its cause of action, i.e. the alleged negligence of defendant carrier. It appears
that the plaintiff was under the impression that it did not have to establish
defendant's negligence. Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a stipulation in the charter-party
delimiting the liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all respects, and not
whether the presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the possession and
control of the vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier, and
instead shifting the onus probandi on the shipper to show want of due deligence on the part of
the carrier, when he was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant case
was able to prove that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being
so, we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; 20 a contract of affreightment
by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry
goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the
whole vessel is let to the charterer with a transfer to him of its entire command and possession
and consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a
determinate period of time or for a single or consecutive voyage, the shipowner to supply the
ship's stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out
as ready to engage in carrying goods or transporting passengers or both for compensation as a
public employment and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of
their business, should observe extraordinary diligence in the vigilance over the goods they
carry.25 In the case of private carriers, however, the exercise of ordinary diligence in the carriage
of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them.26 On the contrary, no such presumption applies to
private carriers, for whosoever alleges damage to or deterioration of the goods carried has the
onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered
the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ
of the shipowner and therefore continued to be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring
for his cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of the decks,
the determination of the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened, chosen and hired by
the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes
both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private,
at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains possession and control of the ship, although her
holds may, for the moment, be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the
validity of a stipulation in the charter-party exempting the shipowners from liability for loss due
to the negligence of its agent, and not the effects of a special charter on common carriers. At any
rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo
is not a common carrier, 29 does not find application in our jurisdiction, for we have observed
that the growing concern for safety in the transportation of passengers and /or carriage of goods
by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules
governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30

As a matter of principle, it is difficult to find a valid distinction between cases in


which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control
of her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or damage
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence
required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977
before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned,
dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the
steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers
of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and
tightly sealed while the ship was in transit as the weight of the steel covers made it impossible
for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing
the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the
hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was confirmed by respondent appellate court thus

. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not negligent in
performing its obligations. Particularly, the following testimonies of plaintiff-
appellee's own witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of the cargo was
sealed and nobody could open the same except in the presence of the owner of
the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that the
cover of the hatches was made of steel and it was overlaid with tarpaulins, three
layers of tarpaulins and therefore their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals
would have to be broken, all the seals were found to be intact (TSN, 20 July 1977,
pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it
as a public carrier began from the time the cargo was unconditionally placed in its charge after
the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the
vessel reached its destination and its hull was reexamined by the consignee, but prior to
unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to
the standard "GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free
from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the stowing is done by stevedores employed
by him, and therefore under his control and supervision, not when the same is done by the
consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the
loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects
in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the
shipper, and that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is
proved, as against him, that they arose through his negligence or by reason of his having failed to
take the precautions which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not
normally evaporate even on a long voyage, provided that the temperature inside the hull does
not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading
fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The
primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the
wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an


extremely high temperature in its place of storage, or when it comes in contact with water.
When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the
salvaged portion which is in liquid form still remains potent and usable although no longer
saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various pieces
of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to
seep into the vessel's holds during the voyage since the hull of the vessel was in good condition
and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects
seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the
cargo, it was more likely to have occurred while the same was being transported from the ship to
the dump trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained
that the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just an
approximation or estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her
cargo. It rained from time to time at the harbor area while the cargo was being discharged
according to the supply officer of PPI, who also testified that it was windy at the waterfront and
along the shoreline where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of
the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character
of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was adduced by
the petitioner showing that the carrier was remise in the exercise of due diligence in order to
minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of
the First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

Transportation Case Digest: Phil Am Gen Insurance Co, Et Al. V. PKS Shipping Co (2003)

G.R. No. 149038 April 9, 2003


Lessons Applicable: Charter Party (Transportation)
FACTS:
Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping
Company (PKS Shipping) for the shipment to Tacloban City of 75,000 bags of cement worth
P3,375,000.
DUMC insured the goods for its full value with Philippine American General Insurance
Company (Philamgen).
The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping.
December 22, 1988 9 pm: While Limar I was being towed by PKS tugboat MT Iron Eagle, the
barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing
down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen
promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid
to DUMC but the shipping company refused to pay so Philamgen to file suit against PKS
Shipping
RTC: dismissed the complaint - fortuitous event
CA:Affirmed - not a common carrier but a casual occupation
ISSUE: W/N PKS Shipping is NOT liable since it was NOT a common carrier

HELD: NO. Petition is DENIED

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public
Complementary is Section 13, paragraph (b), of the Public Service Act

public service" to be
"x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier, railroad,
street railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship, or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless communication systems,
wire or wireless broadcasting stations and other similar public services
So understood, the concept of `common carrier under Article 1732 may be seen to coincide
neatly with the notion of `public service, under the Public Service Act
distinction between:
common or public carrier
private or special carrier - character of the business, such that if the undertaking is an
isolated transaction , not a part of the business or occupation, and the carrier does not hold
itself out to carry the goods for the general public or to a limited clientele, although involving
the carriage of goods for a fee
EX: charter party which includes both the vessel and its crew, such as in a bareboat or
demise, where the charterer obtains the use and service of all or some part of a ship for a
period of time or a voyage or voyages and gets the control of the vessel and its crew.
The regularity of its activities in this area indicates more than just a casual activity on its part
The appellate court ruled, gathered from the testimonies and sworn marine protests of the
respective vessel masters ofLimar I and MT Iron Eagle, that there was no way by which the
barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of 6 to 8 feet and buffeted by strong winds
of 1.5 knots resulting in the entry of water into the barges hatches. The official Certificate of
Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load Line
Certificate would attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized
exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial
court are contradictory; (2) when the conclusion is a finding grounded entirely on
speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals
from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is a
grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making
its findings, went beyond the issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is
premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice
certain relevant facts which, if properly considered, would justify a different conclusion; (8)
when the findings of fact are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which they are based; and (10) when
the findings of fact of the Court of Appeals are premised on the absence of evidence but
such findings are contradicted by the evidence on record would appear to be clearly extant
in this instance.

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