1987 PHILIPPINE CONSTITUTION

ARTICLE XII

National Economy and Patrimony

SECTION 11. No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor
shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public. The participation of
foreign investors in the governing body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.

SECTION 17. In times of national emergency, when the public interest so requires, the State may, during
the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation
of any privately owned public utility or business affected with public interest.

SECTION 18. The State may, in the interest of national welfare or defense, establish and operate vital
industries and, upon payment of just compensation, transfer to public ownership utilities and other
private enterprises to be operated by the Government.

NEW CIVIL CODE

SECTION 4

Common Carriers (n)

SUBSECTION 1. General Provisions

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.

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.

SUBSECTION 2. Vigilance Over Goods

Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if
the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in article
1733.

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right
to receive them, without prejudice to the provisions of article 1738.

Article 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner
has made use of the right of stoppage in transitu.

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee
has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.

Article 1739. In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss. However, the common carrier must exercise
due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be exempted from liability for the loss, destruction,
or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in article 1734, No. 2.

Article 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.

Article 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable
in damages, which however, shall be equitably reduced.

Article 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character
of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.

Article 1743. If through the order of public authority the goods are seized or destroyed, the common
carrier is not responsible, provided said public authority had power to issue the order.
Article 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of
the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service rendered by the common carrier; and

(3) Reasonable, just and not contrary to public policy.

Article 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;

(3) That the common carrier need not observe any diligence in the custody of the goods;

(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family,
or of a man of ordinary prudence in the vigilance over the movables transported;

(5) That the common carrier shall not be responsible for the acts or omission of his or its employees;

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.

Article 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or
owner if the common carrier refused to carry the goods unless the former agreed to such stipulation.

Article 1747. If the common carrier, without just cause, delays the transportation of the goods or changes
the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in
case of the loss, destruction, or deterioration of the goods.

Article 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots
is valid.

Article 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding.

Article 1750. A contract fixing the sum that may be recovered. by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.

Article 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof,
to which the contract refers shall be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy.
Article 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to have been negligent in case of their loss,
destruction or deterioration.

Article 1753. The law of the country to which the goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or deterioration.

Article 1754. The provisions of articles 1733 to 1753 shall apply to the passenger's baggage which is not
in his personal custody or in that of his employee. As to other baggage, the rules in articles 1998 and 2000
to 2003 concerning the responsibility of hotel-keepers shall be applicable.

SUBSECTION 3. Safety of Passengers

Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in articles 1733 and 1755.

Article 1757. The responsibility of a common carrier for the safety of passengers as required in articles
1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.

Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability
for negligence is valid, but not for wilful acts or gross negligence.

The reduction of fare does not justify any limitation of the common carrier's liability.

Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence
or wilful acts of the former's employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.

Article 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated
or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise.

Article 1761. The passenger must observe the diligence of a good father of a family to avoid injury to
himself.

Article 1762. The contributory negligence of the passenger does not bar recovery of damages for his death
or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of
damages shall be equitably reduced.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful
acts or negligence of other passengers or of strangers, if the common carrier's employees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.
SUBSECTION 4. Common Provisions

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII
of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.

Article 1765. The Public Service Commission may, on its own motion or on petition of any interested party,
after due hearing, cancel the certificate of public convenience granted to any common carrier that
repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this
Section.

Article 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and by special laws.

CARRIAGE OF GOODS AT SEA ACT

Section 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;

(c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are
carried, fit and safe for their reception carriage and preservation.

(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the
goods carried.

(3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on
demand of the shipper, issue to the shipper a bill of lading showing among other things —

(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the
shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown
clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in
such a manner as should ordinarily remain legible until the end of the voyage.

(b) Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished
in writing by the shipper.

(c) The apparent order and condition of the goods: Provided, That no carrier, master, or agent of the
carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which
he has reasonable ground for suspecting not accurately to represent the goods actually received, or which
he has had no reasonable means of checking.

(4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein
described in accordance with paragraphs (3) (a), (b), and (c) of this section: Provided, That nothing in this
Act shall be construed as repealing or limiting the application of any part of the Act, as amended, entitled
"An Act relating to bills of lading in interstate and foreign commerce," approved August 29, 1916 (U. S. C.
title 49, secs. 81-124), commonly known as the "Pomerene Bills of Lading Act."

(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment
of the marks, number, quantity, and weight, as furnished by him; and the shipper shall indemnify the
carrier against all loss damages, and expenses arising or resulting from inaccuracies in such particulars.
The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the
contract of carriage or to any person other than the shipper.

(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to
the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be
prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss
or damage is not apparent, the notice must be given within three days of the delivery.

Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person taking
delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods should have
been delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should have been delivered

In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all
reasonable facilities to each other for inspecting and tallying the goods.

(7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier
to the shipper shall, if the shipper so demands, be a "shipped" bill of lading Provided, That if the shipper
shall have previously taken up any document of title to such goods, he shall surrender the same as against
the issue of the "shipped" bill of lading, but at the option of the carrier such document of title may be
noted at the port of shipment by the carrier, master, or agent with name or name the names of the ship
or ships upon which the goods have been shipped and the date or dates of shipment, and when so noted
the same shall for the purpose of this section be deemed to constitute a "shipped" bill of lading.

(8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from
liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in
the duties and obligations provided in this section, or lessening such liability otherwise than as provided
in this Act, shall be null and void and of no effect. A benefit of insurance in favor of the carrier, or similar
clause, shall be deemed to be a clause relieving the carrier from liability.

Section 4. (1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from
unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship
seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to make to the
holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried fit and
safe for their reception, carriage, and preservation in accordance with the provisions of paragraph (1) of
section 3. Whenever loss or damage has resulted from unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier or other persons claiming exemption under the section.

(2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from —

(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or
in the management of the ship;

(b) Fire, unless caused by the actual fault or privity of the carrier;

(c) Perils, dangers, and accidents of the sea or other navigable waters;

(d) Act of God;

(e) Act of war,

(f) Act of public enemies;

(g) Arrest or restraint of princes, rulers, or people, or seizure under legal process;

(h) Quarantine restrictions;

(i) Act or omission of the shipper or owner of the goods, his agent or representative;

(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general;
Provided, That nothing herein contained shall be construed to relieve a carrier from responsibility for the
carrier's own acts;

(k) Riots and civil commotions

(l) Saving or attempting to save life or property at sea;

(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice
of the goods;

(n) Insufficiency of packing;

(o) Insufficiency of inadequacy of marks;

(p) Latent defects not discoverable by due diligence; and

(q) Any other cause arising without the actual fault and privity of the carrier and without the fault or
neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming
the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or
neglect of the agents or servants of the carrier contributed to the loss or damage.

(3) The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising from
any cause without the act, fault, or neglect of the shipper, his agents, or servants.

(4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall
not be deemed to be an infringement or breach of this Act or of the contract of carriage, and the carrier
shall not be liable for any loss or damage resulting therefrom: Provided, however, That if the deviation is
for the purpose of loading cargo or unloading cargo or passengers it shall, prima facie, be regarded as
unreasonable.

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $600 per package lawful money of
the United States, or in case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill
of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be liable for more than the amount of
damage actually sustained.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection
with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently
misstated by the shipper in the bill of lading.

(6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof the carrier, master
or agent of the carrier, has not consented with knowledge of their nature and character, may at any time
before discharge be landed at any place or destroyed or rendered innocuous by the carrier without
compensation, and the shipper of such goods shall be liable for all damages and expenses directly or
indirectly arising out of or resulting from such shipment. If any such goods shipped with such knowledge
and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place,
or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to
general average, if any.

CODE OF COMMERCE

ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may
exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have
earned during the voyage.

ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of their contribution to
the common fund for the results of the acts of the captain, referred to in Article 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part
of the vessel belonging to him.

Art. 643. If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights
shall be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship
agent to recover the advances made.
ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall
be understood as limited to the value of the vessel with all her appurtenances and freight earned during
the voyage.

MONTREAL CONVENTION

Article 1 — Scope of Application

1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft
for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention, the expression international carriage means any carriage in which,
according to the agreement between the parties, the place of departure and the place of destination,
whether or not there be a break in the carriage or a transhipment, are situated either within the territories
of two States Parties, or within the territory of a single State Party if there is an agreed stopping place
within the territory of another State, even if that State is not a State Party. Carriage between two points
within the territory of a single State Party without an agreed stopping place within the territory of another
State is not international carriage for the purposes of this Convention.

3. Carriage to be performed by several successive carriers is deemed, for the purposes of this Convention,
to be one undivided carriage if it has been regarded by the parties as a single operation, whether it had
been agreed upon under the form of a single contract or of a series of contracts, and it does not lose its
international character merely because one contract or a series of contracts is to be performed entirely
within the territory of the same State.

4. This Convention applies also to carriage as set out in Chapter V, subject to the terms contained therein.

Article 17

Death and Injury of Passengers — Damage to Baggage

1. The carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition
only that the accident which caused the death or injury took place on board the aircraft or in the course
of any of the operations of embarking or disembarking.

2. The carrier is liable for damage sustained in case of destruction or loss of, or of damage to, checked
baggage upon condition only that the event which caused the destruction, loss or damage took place on
board the aircraft or during any period within which the checked baggage was in the charge of the carrier.
However, the carrier is not liable if and to the extent that the damage resulted from the inherent defect,
quality or vice of the baggage. In the case of unchecked baggage, including personal items, the carrier is
liable if the damage resulted from its fault or that of its servants or agents.

3. If the carrier admits the loss of the checked baggage, or if the checked baggage has not arrived at the
expiration of twenty-one days after the date on which it ought to have arrived, the passenger is entitled
to enforce against the carrier the rights which ß ow from the contract of carriage.

4. Unless otherwise specified, in this Convention the term “baggage” means both checked baggage and
unchecked baggage.
Article 18 — Damage to Cargo

1. The carrier is liable for damage sustained in the event of the destruction or loss of, or damage to, cargo
upon condition only that the event which caused the damage so sustained took place during the carriage
by air.

2. However, the carrier is not liable if and to the extent it proves that the destruction, or loss of, or damage
to, the cargo resulted from one or more of the following:

a) inherent defect, quality or vice of that cargo;

b) defective packing of that cargo performed by a person other than the carrier or its servants or agents;

c) an act of war or an armed conflict;

d) an act of public authority carried out in connection with the entry, exit or transit of the cargo.

3. The carriage by air within the meaning of paragraph 1 of this Article comprises the period during which
the cargo is in the charge of the carrier.

4. The period of the carriage by air does not extend to any carriage by land, by sea or by inland waterway
performed outside an airport. If, however, such carriage takes place in the performance of a contract for
carriage by air, for the purpose of loading, delivery or transhipment, any damage is presumed, subject to
proof to the contrary, to have been the result of an event which took place during the carriage by air. If a
carrier, without the consent of the consignor, substitutes carriage by another mode of transport for the
whole or part of a carriage intended by the agreement between the parties to be carriage by air, such
carriage by another mode of transport is deemed to be within the period of carriage by air.

Article 19 — Delay

The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo.
Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its
servants and agents took all measures that could reasonably be required to avoid the damage or that it
was impossible for it or them to take such measures.

Article 25 — Stipulation on Limits

A carrier may stipulate that the contract of carriage shall be subject to higher limits of liability than those
provided for in this Convention or to no limits of liability whatsoever.

Article 26 — Invalidity of Contractual Provisions

Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down
in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity
of the whole contract, which shall remain subject to the provisions of this Convention.

Article 33 — Jurisdiction

1. An action for damages must be brought, at the option of the plaintiff, in the territory of one of the
States Parties, either before the court of the domicile of the carrier or of its principal place of business, or
where it has a place of business through which the contract has been made or before the court at the
place of destination.

2. In respect of damage resulting from the death or injury of a passenger, an action may be brought before
one of the courts mentioned in paragraph 1 of this Article, or in the territory of a State Party in which at
the time of the accident the passenger has his or her principal and permanent residence and to or from
which the carrier operates services for the carriage of passengers by air, either on its own aircraft, or on
another carrier’s aircraft pursuant to a commercial agreement, and in which that carrier conducts its
business of carriage of passengers by air from premises leased or owned by the carrier itself or by another
carrier with which it has a commercial agreement.

3. For the purposes of paragraph 2,

a) “commercial agreement” means an agreement, other than an agency agreement, made between
carriers and relating to the provision of their joint services for carriage of passengers by air;

b) “principal and permanent residence” means the one fixed and permanent abode of the passenger at
the time of the accident. The nationality of the passenger shall not be the determining factor in this regard.

4. Questions of procedure shall be governed by the law of the court seised of the case.

Article 35 — Limitation of Actions

1. The right to damages shall be extinguished if an action is not brought within a period of two years,
reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have
arrived, or from the date on which the carriage stopped.

2. The method of calculating that period shall be determined by the law of the court seised of the case.

SHIP MORTGAGE DECREE

Section 4. Preferred Mortgages

(a) A valid mortgage which at the time it is made includes the whole of any vessel of domestic
ownership shall have, in respect to such vessel and as of the date of recordation, the preferred status
given by the provisions of Section 17 hereof, if

1. The mortgage is recorded as provided in Section 3 hereof;

2. An affidavit is filed with the record of such mortgage to the effect that the mortgage is made in good
faith and without any design to hinder, delay, or defraud any existing or future creditor of the mortgagor
or any lien or of the mortgaged vessel;

3. The mortgage does not stipulate that the mortgagee waives the preferred status thereof;

Section 10. Lien of preferred Mortgage; foreclosure; jurisdiction; procedure A preferred mortgage shall
constitute a lien upon the mortgaged vessel in the amount of the outstanding mortgage indebtedness
secured by such vessel. Upon the default of any term or condition of the mortgage such lien may be
enforced by the mortgagee by suit in remaining admiralty, wherein the vessel itself may be made a partly
defendant and be arrested in the manner as provided in Section 11 hereof. Original jurisdiction of all such
suits is granted to the Court of First Instance of the Philippines exclusively. In addition to any notice by
publication, actual notice of commencement of any such suit shall direct, to (1) the master, other ranking
officer, or caretaker of the vessel, and (2) any person who has recorded a notice of claim of an
undischarged lien upon the vessel, as provided in Section 7 hereof, unless after search by the mortgage
satisfactory to the court, such mortgagor, master, other ranking officer, caretaker, or claimant is not found
within the Philippines. Failure to give notice to any such person, as required by this Section, shall be liable
to such person for damages in the amount of his interest in the vessel terminated by the suit.

In case of judicial foreclosure as provided herein, the provisions of Rule 68 of the New Rules of Court, if
not inconsistent herewith, shall apply.

The lien of a preferred ship mortgage may also be enforced by a suit in rem in admiralty or otherwise in
any foreign country in which the vessel may be found pursuant to the procedure of said country for the
enforcement of ship mortgages constituting maritime liens on vessels documented under the laws of said
country.

Section 14. Extrajudicial Foreclosure The provisions of the Chattel Mortgage Law on the remedy of extra-
judicial foreclosure of mortgages in so far as they are not inconsistent herewith shall still apply. For the
purpose of taking possession of the vessel or vessels, the foreclosing creditor may secure from a judge of
the Court of First Instance of the province where the vessel may be found or where the creditor or debtor
resides an order for the arrest or seizure of the vessel. Upon such order of seizure or arrest being issued,
the sheriff shall immediately take possession of the vessel or vessels for the purpose of foreclosure and
sale. The vessel may only be released in accordance with the provisions of Section 13 of this Act, or when
the debtor pays the outstanding obligation.

Section 18. Suit in Personam in Admiralty on Default

(a) Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee
may, in addition to all other remedies granted by this Decree, bring suit in personal in admiralty in a district
court of the Philippines, against the mortgagor for the amount of the outstanding mortgage indebtedness
secured by such vessel or any deficiency in the full payment thereof.

(b) This Decree shall not be construed, in the case of a mortgage covering, in addition to vessels,
realty or personality other than vessels, or both, to authorize the enforcement by suit in rem in admiralty
of the rights of the mortgage in respect to such realty or personality other than vessels.

Section 20. Who May Bid in the Foreclosure Sale The following persons are qualified to bid in the
foreclosure sale of the mortgaged vessel:

(a) Citizens of the Philippines or corporations 60% of the capital of which is owned by Filipino citizens.

(b) A foreign mortgagee or foreign national whose country has diplomatic relations with the
Philippines or whose country grants reciprocal rights to Filipino citizens.

In case the purchaser is a foreign individual or entity, the Philippine Coast Guard shall, upon presentation
of the certificate of sale, cancel the registration of the vessel and issue a certificate to that effect upon
request.
SALVAGE LAW

Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or
shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the
latter shall be entitled to a reward for the salvage.

Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck,
shall be entitled to a like reward.

Sec. 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the
vessel, owner, or a representative of either of them, they being unknown, shall convey and deliver such
vessel or merchandise, as soon as possible, to the Collector of Customs, if the port has a collector, and
otherwise to the provincial treasurer or municipal mayor.

Sec. 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a salvage is reported,
shall order:

a. That the things saved be safeguard and inventoried.

b. The sale at public auction of the things saved which may be in danger of immediate loss or of those
whose conservation is evidently prejudicial to the interests of the owner, when no objection is made to
such sale.

c. The advertisement within the thirty days subsequent to the salvage, in one of the local newspapers or
in the nearest newspaper published, of all the details of the disaster, with a statement of the mark and
number of the effects requesting all interested persons to make their claims.

Sec. 7. No claim being presented in the three months subsequent to the publication of the advertisement
prescribed in sub-section (c) of Section five, the things save shall be sold at public auction, and their
proceeds, after deducting the expenses and the proper reward shall be deposited in the insular treasury.
If three years shall pass without anyone claiming it, one-half of the deposit shall be adjudged to him who
saved the things, and the other half to the insular government.

Sec. 8. The following shall have no right to a reward for salvage or assistance:

a. The crew of the vessel shipwrecked or which was is danger of shipwreck;

b. He who shall have commenced the salvage in spite of opposition of the captain or his representative;
and

c. He who shall have failed to comply with the provisions of Section three.

Sec. 9. If, during the danger, an agreement is entered into concerning the amount of the reward for
salvage or assistance, its validity may be impugned because it is excessive, and it may be required to be
reduced to an amount proportionate to the circumstances.

Sec. 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel,
the reward for salvage or for assistance shall be divided between the owner, the captain, and the
remainder of the crew of the latter vessel, so as to give the owner a half, the captain a fourth, and all the
remainder of the crew the other fourth of the reward, in proportion to their respective salaries, in the
absence of an agreement to the contrary. The express of salvage, as well as the reward for salvage or
assistance, shall be a charge on the things salvaged on their value.