Maritime Law

Real and Hypothecary

International Harvester v. Aragon, G.R. No. L-2372 (26 August 1949)

SUMMARY: Yaras and Company Far East sued International Harvester for the lost cargoes. The action was filed before the
Municipal Court of Manila, but was dismissed on the ground that the case should have been filed before the CFI because it has
jurisdiction on admiralty cases. The MTD was overruled by Judge Aragon.

The Court held that the Municipal Court has no jurisdiction. There are two rules on jurisdiction on admiralty cases: US rule
(subject-matter of the suit) and English rule (locality rule). The Court adopted the US rule which states that the test on whether or
not a contract is maritime depends not on the place where the contract is made and is to be executed, making the locality the
test, but on the subject-matter of the contract.
In this case, what is involved is a suit for lost cargoes, which is a maritime transaction; hence, the jurisdiction is with the CFI.

DOCTRINE: Whether or not a contract is maritime depends not on the place where the contract is made and is to be executed,
making the locality the test, but on the subject-matter of the contract, making the true criterion a maritime service or a maritime
transaction. (American rule)

FACTS:
Manila Terminal Co Inc (MTCI) is in charge of the custody and delivery to the respective owners of cargoes discharged at
the Government piers in the City of Manila. International Harvester is the agent in the Philippines of the vessel Belle of the
Sea
S/S Belle of the Sea took on board at LA, California goods for shipment to Manila, which were eventually discharged at
the Government piers under the supervision and custody of MTCI.
Yaras and Company, Far East filed a company against MTCI and International Harvester for the goods lost
o 1 carton of assorted samples with a stipulated value of P200 was not delivered to Yaras and Company
Before trial could proceed, International Harvester filed a Motion to Dismiss on the ground that the Municipal Court of
Manila had no jurisdiction to try case because the action involves admiralty or maritime jurisdiction. This was overruled.
International Harvester then filed in the CFI Manila a petition for prohibition against Judge Crisanto Aragon and Yaras and
Company Far East to restrain Judge Araon form proceeding with the case on the ground that admiralty or maritime
jurisdiction is involved. CFI ruled in favor of International Harvester and ordered Judge Aragon to desist from taking
cognizance of the civil case.

RULING: Appealed judgment is therefore affirmed

Whether the action involves admiralty or maritime jurisdiction? YES

Whether the Municipal Court has jurisdiction over the case? NO

Argument of Yaras and Company: Admiralty jurisdiction is not involved in this case because the contract in question was made
upon land and to be terminated upon land.

Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were executed or are to be
performed, but not over non-maritime contracts.
Whether or not a contract is maritime depends not on the place where the contract is made and is to be executed,
making the locality the test, but on the subject-matter of the contract, making the true criterion a maritime service or a
maritime transaction. (American rule)
o Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for the breach of a contract of
affreightment, whether evidenced by a bill of lading or a charter party. And typical of a controversy over contracts of
affreightment is a suit of one party against the other for loss of or damage to the cargo.
This is the very case now before us, because the respondent Yaras and Company seeks to recover from the petitioner
International Harvester Company of the Philippines the value of a certain lost cargo.
The liability of International Harvester is predicated on the contract of carriage by sea between the International Harvester
and Yaras and Company as evidenced by Bill of Lading No. 105, independently of the liability of MTCI, as operator of an
arrastre service.
The Court noted that the argument of Yaras and Company does not hold water because its view merely reflects the
English rule which had long been rejected in the US. Is it now settled in US that the jurisdiction of admiralty in matters of
contract depends upon the subject-matter (i.e. nature and character of the contract) and that the English rule which conceded
jurisdiction only to contracts made upon and to be performed upon navigable waters, is inadmissible. If admiralty has
jurisdiction over the subject-matter, to say that it is necessary for the parties to go upon the sea to execute the instrument
borders upon absurdity.
The Court adopted the sound American rule.
 Prohibition is the proper remedy since the Judge was taking cognizance of the case over which he had no jurisdiction
and his order overruling the motion to dismiss filed by the petitioner-appellee is interlocutory and therefore not appealable.

Phil Shipping Co. v. Vergara, 6 Phil 281 (1906)

Facts: The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification of
44,000 pesos for the loss of the said ship as a result of a collision. Ynchusti & Co. also claimed 24,705.64 pesos as an
indemnification for the loss of the cargo of hemp and coprax carried by the said ship on her last trip. The defendant, Francisco
Garcia Vergara, was the owner of the steamship Navarra, which collided with the Lourdes. The court below found as a matter of
fact that the steamship Lourdes was sailing in accordance with law, but that the Navarra was not, and was therefore responsible
for the collision. The court also found as a fact that "both ships with their respective cargoes were entirely lost." Construing article
837 of the Code Commerce, the court below held "that the defendant was not responsible to the plaintiff for the value of the
steamship Lourdes, with the costs against the latter." But the appellant, the Philippine Shipping Company, contends that the
defendant should pay to 18,000 pesos, the value of the Navarra at the time of its loss; that this is the sense in which the
provisions of article 837 of the Code of Commerce should be understood; that said code has followed the principles of the
English law and not those of the American law, and that it was immaterial whether the Navarra had been entirely lost, provided
her value at the time she was lost could be ascertained, since the extent of the liability of the owner of the colliding vessel for the
damages resulting from the collision is to be determined in accordance with such value. From the judgment of the trial court the
Philippine Shipping Company and the defendant Vergara appealed, but the latter has failed to prosecute his appeal by a bill of
exceptions or otherwise. The only appellant who has prosecuted this appeal now reduced its claim to 18,000 pesos, the value of
the colliding vessel.

Issues: WON Philippine Shipping should be indemnify for 18,000

Held: No, the defendant is liable for the indemnification to which the plaintiff is entitled by reason of the collision, but he is not
required to pay such indemnification of the reason that the obligation thus incurred has been extinguished on account of the loss
of the thing bound for the payment thereof, and in this respect the judgment of the court below is affirmed except in so far as it
requires the plaintiff to pay the costs of this action, which is not exactly proper. There is no doubt that if the Navarra had not been
entirely lost, the agent, having held liable for the negligence of the captain of the vessel, could have abandoned her with all her
equipment and the freight money earned during the voyage, thus bringing himself within the provisions of the article 837 in so far
as the subsidiary civil liability is concerned. This abandonment which would have amounted to an offer of the value of the vessel,
of her equipment, and freight money earned could not have been refused, and the agent could not have been personally
compelled, under such circumstances, to pay the 18,000 pesos, the estimated value of the vessel at the time of the collision.

Ratio : The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the
following as the basis of this decision: That which distinguishes the maritime from the civil law and even from the mercantile law
in general is the real and hypothecary nature of the former, and the many securities of a real nature that maritime customs from
time immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting
interest which are ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the
owners of the cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and
members of the crew as to their wages, and those of a constructor as to repairs made to the vessel. As evidence of this "real"
nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight
money, and (2) the right to retain the cargo and the embargo and detention of the vessel even cases where the ordinary civil law
would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money,
thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person. This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost
no personal action lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members
of the crew can not recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of
shipwrecks, those who loan their money on the vessel and cargo lose all their rights and can not claim reimbursement under the
law. There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed,
and ( 2 ) the "real" nature of maritime law, exclusively "real," according to which the liability of the parties is limited to a thing to
which is at mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through the
accidents of navigation it is only just that the maritime creditor have some means of obviating this precarious nature of his rights
by detaining the ship, his only security, before it is lost. The liens, tacit or legal, which may exist upon the vessel and which a
purchaser of the same would be obliged to respect and recognize in addition to those existing in favor of the State by virtue of
the privileges which are granted to it by all the laws pilot, tonnage, and port dues and other similar charges, the wages of the
crew earned during the last voyage as provided in article 646, of the Code of Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of the ship and
the insolvency of the owner as provided in article 608, and other liabilities arising from collisions under article 837 and 838.

Relation/Pertinent Law : Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the cases
prescribed in this section shall be understood as limited to the value of the vessel with all her equipment and all the freight money
earned during the voyage." This section is a necessary consequence of the right to abandon the vessel given to the shipowner in
article 587 of the code, and it is one of the many superfluities contained in the code. (Lorenzo Benito, "Lecciones," 352.) Art. 587.
The agent shall also the civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the
care of the goods which the vessel carried, but he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the trip. ART. 590. The part owners of a vessel shall be civilly liable, in the
proportion of their contribution to the common fund, for the results of the acts of the captain referred to in article 587. Each part
owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. The
"Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829) does not determine the
juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed
code, which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted
with the provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only
who represents the interest of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the
extent of the liability, both of the agent and for the owner of the vessel. Such liability is limited by the proposed code to the value
of the vessel and other things appertaining thereto."

Chua Yek Hong v. IAC, 166 SCRA 183 (1988)

Facts:

Petitioner: Chua Yek Hong

Respondents: Intermediate Appellate Court, Mariano Guno, and Dominador Olit

Background: Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are
the owners of the vessel, "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila. Petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V
Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because
somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo. Petitioner
instituted before the then CFI of Oriental Mindoro, a Complaint for Damages based on breach of contract of carriage against
private respondents. Private Respondents argued that even assuming that the alleged cargo was truly loaded aboard their
vessel, their liability had been extinguished by reason of the total loss of said vessel. Trial Court: The preponderance of
evidence militates in favor of the plaintiff and against the defendants. Ordered the defendants, jointly and severally, to pay the
plaintiff: o P101,227.40 representing the value of the cargo which was lost while in the custody of the defendants; o P65,550.00
representing miscellaneous expenses of plaintiff on said lost cargo; o Attorney's fees in the amount of P5,000.00 o Costs of suit.
Appellate Court: REVERSED. Applied Article 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema. Private
respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their interest in the vessel such that a
total loss thereof results in its extinction. Absolved defendants-appellants from any and all liabilities arising from the loss of
1,000 sacks of copra belonging to plaintiff-appellee.

Issue: WoN respondent Appellate Court erred in applying the doctrine of limited liability under Article 587 of the Code of
Commerce.

Held: No. Article 1766 of the Civil Code provides: Art. 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. In other words, the primary law is the Civil
Code (Arts. 1732-1766) and in default thereof, the Code of Commerce and other special laws are applied. Since the Civil Code
contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the
provisions of the Code of Commerce, more particularly Article 587, that govern in this case. In sum, it will have to be held that
since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the
liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is no showing
that the vessel was insured in this case.

Ratio: Art. 587 of the Code of Commerce. Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the
voyage. The term ship agent under Article 587 includes ship owner; Both shipagent and shipowner are civilly and directly liable.
The term "ship agent" as used in the foregoing provision (Article 587) is broad enough to include the ship owner (Standard Oil
Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship owner and ship agent are civilly
and directly liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of
goods transported, as well as for the safety of passengers transported (Yangco vs. Laserna, supra; Manila Steamship Co., Inc.
vs. Abdulhaman et al., 100 Phil. 32 [1956]). Limited liability rule; Shipowners or agents liability merely cextensive with his interest
in vessel; total loss results in extinction of liability. However, under the same Article, this direct liability is moderated and limited
by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle
of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the
ship agent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus
been held that by necessary implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right
to abandon the vessel with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof
if any" (Yangco vs. Lasema, supra). In other words, the ship owner's or agent's liability is merely co-extensive with his interest in
the vessel such that a total loss thereof results in its extinction. "NO VESSEL, NO LIABILITY" expresses in a nutshell the limited
liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach
(Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]). As this Court held: If the ship owner or agent
may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases
of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in
its extinction. (Yangco vs. Laserna, et al., supra). Rationale: To offset against hazards and perils of the sea and to encourage
ship building. The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the
Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to
encourage ship building and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising
from the operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the ship owner or agent
ABANDONED the ship, equipment, and freight, HIS LIABILITY WAS EXTINGUISHED. (Abueg vs. San Diego, 77 Phil. 730
[1946]) To protext the shipowner from the negligence of his captain. Without the principle of limited liability, a ship owner and
investor in maritime commerce would run the risk of being ruined by the bad faith or negligence of his captain, and the
apprehension of this would be fatal to the interest of navigation." (Yangco vs. Lasema, supra). To avoid the risk of losing his
whole fortune. As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the
actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel
even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will
be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just
that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his
rights by a final judgment, even to the prejudice of a third person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]). Exceptions
to the limited liability rule. The limited liability rule, however, is not without exceptions, namely: 1. where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila
Steamship Co., Inc. vs. Abdulhaman supra); 2. where the vessel is insured; and 3. in workmen's compensation claims Abueg vs.
San Diego, supra). In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the
private respondent as shipowners, or to their concurrent negligence with the captain of the vessel. The provisions of Civil Code
on common carriers have no effect. Considering the "real and hypothecary nature" of liability under maritime law, these
provisions would not have any effect on the principle of limited liability for ship owners or ship agents. As was expounded by this
Court: In arriving at this conclusion, the fact is not ignored that the ill-fated, S.S. Negros, as a vessel engaged in interisland trade,
is a common carrier, and that the relationship between the petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively 'real and
hypothecary nature of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In
the instant case it does not appear that the vessel was insured. (Yangco vs. Laserila, et al., supra).

Pertinent Laws: [Civil Code] Art. 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. [Code of Commerce] Art. 587. The ship agent shall also be
civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipments and the
freight it may have earned during the voyage.

Yangco v. Laserna, 73 Phil 330 (1941)

Facts: At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to petitioner here, Teodoro R.
Yangco, left the port of Romblon on its return trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was duly
advised and his attention thereto called by the passengers themselves before the vessel set sail. The boat was overloaded as
indicated by the load line which was 6 to 7 inches below the surface of the water. The passengers, numbering about 180, were
overcrowded, the vessel's capacity being limited to only 123 passengers. As the sea became increasingly violent, the captain
ordered the vessel to turn left, evidently to return to port, but in the maneuver, the vessel was caught sidewise by a big
wave which caused it to capsize and sink. Many of the passengers died in the mishap. Separate civil actions were filed against
petitioner to recover damages for the death of the passengers.

Issue: May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be
properly held liable in damages for the consequent death of its passengers?

Held: No. This question is controlled by the provisions of article 587 of the Code of Commerce. Said article reads:

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

The provisions accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to
that which he is entitled as of right to abandon "the vessel with all her equipment and the freight it may have earned during the
voyage."
Lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such
obligations arise from the contract of agency while as to any liability incurred by the captain through his unlawful acts, the ship
agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this
reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the codes of the principal
maritime nations provide with the vessel, and not individually.

If the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from
the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction.

Assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime
law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not
appear that the vessel was insured. Whether the abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law of not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle
ceremony.

Yangco is therefore absolved from the complaints.

Ohta Devt Co. v. Steamship Pompey, 49 Phil 117 (1926)

FACTS: (chronological order) 1. Plaintiff, Ohta Development Company, is the owner of a pier in Talomo Bay, Davao. On the
western side of the pier were groups of posts (3 to a group) about 20 feet apart, 2 feet away from the pier which served as a
protection to the pier against the impact of the vessel. 2. One morning of June 23, at around 7:00 AM, the Steamship Pompey in
command of Captain Alfredo Galvez, possessing a certificate of public convenience issued by the Commissioner of Public Utility
in the name of the National Coal Company, carrying cargo of flour and rice for the plaintiff, docked along the side of the pier. 3.
The Pompey docked with her bow (anchor) facing towards the land and fastened her ropes to the posts on the pier. She did not
stretch a rope to the tree to on the shore, neither did she drop her bow anchors. Other ships docking at the pier has always
observed that the bow facing towards the land and fastened a rope to a tree situated faster west on the beach as a precaution
taken to avoid the ship from getting too close to the pier. 4. After being docked, they proceeded to unload the flour and rice which
as first deposited on the pier and later transported to the plaintiffs warehouse on land where it was officially received. The
unloading of the cargo was done without any infererence of the part of the plaintiff and exclusively by laborers and the crew of the
ship. 5. The unloading was done in a hurry and their being 15 or 20 laborers engaged in the hauling of the same to the plaintiffs
warehouse, a large amount of cargo accumulated on the dock. Within 10 minutes past 11 on the same morning, the pier sank
with all of its merchandise. 6. COURT FINDINGS: The current forced the ship towards the pier. The impact caused the pier to
sink. When the pier sank, there was a current from west to east. The flour which floated after the sinking of the dock drifted from
west to east. The pier when it sank, leaned towards the west, going beyond the western line formerly occupied by the pier. The
hull of the ship came to a stop at a point where the piles of defense formerly stood. Based on the photograph taken after the
incident admitted by the court as Exhibit B. 7. DEFENSE CONTENDS: the pier sank because of the weight of the cargo and the
poor condition of the dock. Captain Razon, the first mate of Pompey on that trip the sole witness presented by the defense,
claims that the defense piles fell without coming into contact with the ship. COURT RULED: The pier underwent repairs in 1921
and 1922 wherein materials not in good condition were replaced. The testimony of the Captain Razon is inconceivable because
the piles were not attached to the pier but were 2 feet away from it. The sinking of the dock should not affect the defense piles. 8.
CONCLUSION OF THE COURT: dock on the account of the impact of the ship as a result of a strong current at the time; that the
ship was not fastened with the rope to a tree on shore and that bow anchors had not been dropped.

ISSUE(S): Whether the defendant National Coal Companys liability ceased when the merchandise was unload and placed on
the dock based on the bills of lading of the lost merchandise? NO.

RATIO: Under article 619 of the Code of Commerce, it is the delivery of the cargo at the port of discharge that determines the
cessation of the liability of the captain for the cargo. In the instant case, when the merchandise was lost by the sinking of the pier,
it had not yet been delivered, and therefore still under the responsibility of the captain. The defendant company, as agent, is liable
for the indemnities arising from the lack of skill or negligence of the captain. On the liability of ship agents provision of the
Article 587 of the Code of Commerce, limiting the liability of the agent to the value of the ship, its appurtenances and freight, is
not applicable when no abandonment of the vessel is made.

Aboitiz Shipping Corp. v. General Accident Fire and Life Insurance Corp., Ltd., 217 SCRA 359 (1993)

FACTS: (parties) ! Aboitiz Shipping: common carrier; owner of M/V P. Aboitiz ! General Accident Fire and Life Assurance Corp:
insurer of several cargoes carrier by Aboitiz; suborgee to insured. (facts) 1. M/V P. Aboitiz owned by Aboitiz Shipping sank on its
way to Hong Kong on Oct. 31, 1980. 2. The sinking prompted the shippers and suborgees (such as General Accident) to file suits
for recovery. 2.1 to state the obvious, General Accident is a suborgee because it already indemnified the insured. 3. Board of
Marine Inquiry (BMI) investigated the matter and found that: 3.1 the sinking was caused by force majeure 3.2 the vessel was
seaworthy 4. Despite the findings by the BMI, the RTC nevertheless ruled that Aboitiz was liable. 4.1 Also, RTC granted the
prayer of General Accident for execution for the full amount of the judgment award 4.2 The primary contention of Aboitiz, which
was grounded on the real and hypothecary nature of its liability, was swept aside. 5. This is elevated to the CA however the CA
dismissed the petition for certiorari filed by Aboitiz. 6. Hence this petition.

ISSUE/s: Whether or not the Doctrine of Limited Liability arising out of the real and hypothecary nature of maritime law is
applicable to the case? HELD: Yes. The ruling of the RTC and CA are set aside

RATIO: 1. The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses
related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the
guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years
when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters
to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime
commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from
the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation
served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the
trade. 2. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587,
590, and 837, hereunder quoted in toto: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for the results of
the acts of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him. Art. 837. The civil liability incurred by shipowners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage. (Emphasis supplied) 3. In the few instances when the matter was considered by this Court, we have been
consistent in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when there is an actual
finding of negligence on the part of the vessel owner or agent. 3.1 Unfortunately for General Accident. A careful reading of the
decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the records in the instant
case will show that there has been no actual finding of negligence on the part of petitioner.

Monarch Insurance Co., Inc. v. CA, 333 SCRA 71 (2000)

FACTS: 1. The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980 after securing a
departure clearance from the Hong Kong Port Authority. The departure was delayed for two hours because he (Capt. Racines)
was observing the direction of the storm that crossed the Bicol Region. He proceeded with the voyage only after being informed
that the storm had abated. The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980.Justo Iglesias, meteorologist of
PAGASA, testified in both cases that during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed
within the Philippine area of responsibility, particularly along the sea route from Hong Kong to Manila, because of tropical
depression "Yoning." 2. (Petitioners) Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due
to force majeure, relying mainly on the marine protest filed by Capt. Racines under scale No. 4 that describes the sea condition
as "moderate breeze," and "small waves becoming longer, fairly frequent white horses." Monarch and Tabacalera are insurance
carriers of lost cargoes. They indemnified the shippers and were consequently subrogated to their rights, interests and actions
against Aboitiz. 3. Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz. In its answer with
counterclaim, Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo vessel was due to force
majeure or an act of God. Aboitiz had repeatedly failed to appear in court, it then allowed Monarch and Tabacalera to present
evidence ex-parte 4. The survey established that on her voyage to Manila from Hong Kong, the vessel did not encounter weather
so inclement that Aboitiz would be exculpated from liability for losses. The survey added that the seaworthiness of the vessel was
in question especially because the breaches of the hull and the serious flooding of two (2) cargo holds occurred simultaneously in
"seasonal weather." In due course, the trial court rendered judgment against Aboitiz. It was appealed to CA. CA dismissed for
failure to file appellant's brief. 5. Consequently, Monarch and Tabacalera moved for execution of judgment. TC granted the motion
and issued separate writs of execution. However, Aboitiz, invoking the real and hypothecary nature of liability in maritime law,
filed an urgent motion to quash the writs of execution. 6. According to Aboitiz, since its liability is limited to the value of the vessel
which was insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify Monarch and Tabacalera ahead of the
other claimants would be prejudicial to the latter. Aboitiz filed with the CA a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order, and was granted.

ISSUE(S): Whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is entitled to the benefit of
the limited liability rule

HELD: NO. we reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd., that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We, however, take exception to the pronouncement
therein that said unseaworthiness could not be attributed to the ship owner but only to the negligent acts of the captain and crew
of the M/V P. Aboitiz. On the matter of Aboitiz negligence, we adhere to our ruling in Aboitiz Shipping Corporation v. Court of
Appeals, that found Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been concurrently negligent.

RATIO: 1) The principle of limited liability is enunciated in the following provisions of the Code of Commerce: Art. 587. The
shipagent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in
the care of goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the
equipments and the freight it may have earned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable in the
proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. 2) Each co-owner
may exempt himself from his liability by the abandonment, before a notary, of the part of the vessel belonging to him. Art. 837.
The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the
vessel with all its appurtenances and the freightage served during the voyage. Article 837 applies the principle of limited liability in
cases of collision, hence, Arts. 587 and 590 embody the universal principle of limited liability in all cases. In Yangco v. Laserna,
this Court elucidated on the import of Art. 587 as follows: "The provision accords a shipowner or agent the right of abandonment;
and by necessary implication, his liability is confined to that which he is entitled as of right to abandon-the vessel with all her
equipments and the freight it may have earned during the voyage. It is true that the article appears to deal only with the limited
liability of the shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability. The consensus of
authorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit of limited liability therein
provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the
captain." "No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowners or agents liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel
extinguishes maritime liens because there is no longer any res to which it can attach. This doctrine is based on the real and
hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during
the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage
shipbuilding and maritime commerce it was deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or insurance, if any. 3) Contrary to the petitioners theory that the limited
liability rule has been rendered obsolete by the advances in modern technology which considerably lessen the risks involved in
maritime trade, this Court continues to apply the said rule in appropriate cases. This is not to say, however, that the limited liability
rule is without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the shipowner, or to
the concurring negligence of the shipowner and the captain; (2) where the vessel is insured; and (3) in workmens compensation
claims. 4) We have categorically stated that Article 587 speaks only of situations where the fault or negligence is committed solely
by the captain. In cases where the ship owner is likewise to be blamed, Article 587 does not apply. Such a situation will be
covered by the provisions of the Civil Code on common carriers. 5) A finding that a fortuitous event was the sole cause of the loss
of the M/V P. Aboitiz would absolve Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which provides in
part that common carriers are responsible for the loss, destruction, or deterioration of the goods they carry, unless the same is
due to flood, storm, earthquake, lightning, or other natural disaster or calamity. On the other hand, a finding that the M/V P. Aboitiz
sank by reason of fault and/or negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render inapplicable the
rule on limited liability. These issues are therefore ultimately questions of fact which have been subject of conflicting
determinations by the trial courts, the Court of Appeals and even this Court. 6) It is true that as testified by Justo Iglesias,
meteorologist of Pag-Asa, during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed within the
Philippine area of responsibility, particularly along the sea route from Hong Kong to Manila, because of tropical depression
"Yoning". But even Aboitiz own evidence in the form of the marine protest filed by Captain Racines affirmed that the wind force
when the M/V P. Aboitiz foundered on October 31, 1980 was only ten (10) to fifteen (15) knots which, under the Beaufort Scale of
Wind, falls within scale No. 4 that describes the wind velocity as "moderate breeze," and characterizes the waves as "small x x x
becoming longer, fairly frequent white horses."[68] Captain Racines also testified in open court that the ill-fated M/V P. Aboitiz was
two hundred (200) miles away from storm "Yoning" when it sank.[69] 7) It therefore becomes incumbent upon this Court to
answer with finality the nagging question of whether or not it was the concurrent fault and/or negligence of Aboitiz and the captain
and crew of the ill-fated vessel that had caused it to go under water. Guided by our previous pronouncements and illuminated by
the evidence now on record, we reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd., that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We, however, take exception to the
pronouncement therein that said unseaworthiness could not be attributed to the ship owner but only to the negligent acts of the
captain and crew of the M/V P. Aboitiz. On the matter of Aboitiz negligence, we adhere to our ruling in Aboitiz Shipping
Corporation v. Court of Appeals, that found Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been concurrently
negligent. 8) We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it observed the
extraordinary diligence required of it as a common carrier. We therefore reiterate our pronouncement in Aboitiz Corporation v.
Court of Appeals[77] on the issue of Aboitiz liability in the sinking of its vessel, to wit: "In accordance with Article 1732 of the Civil
Code, the defendant common carrier from the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to all
circumstances of the case. While the goods are in the possession of the carrier, it is but fair that it exercise extraordinary
diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carriers fault or
negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier x x x. In the case at bar, the
defendant failed to prove that the loss of the subject cargo was not due to its fault or negligence." 9) The failure of Aboitiz to
present sufficient evidence to exculpate itself from fault and/or negligence in the sinking of its vessel in the face of the foregoing
expert testimony constrains us to hold that Aboitiz was concurrently at fault and/or negligent with the ship captain and crew of the
M/V P. Aboitiz. This is in accordance with the rule that in cases involving the limited liability of shipowners, the initial burden of
proof of negligence or unseaworthiness rests on the claimants. However, once the vessel owner or any party asserts the right to
limit its liability, the burden of proof as to lack of privity or knowledge on its part with respect to the matter of negligence or
unseaworthiness is shifted to it.[79] This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed to discharge the
burden of proving that the unseaworthiness of its vessel was not due to its fault and/or negligence should not however mean that
the limited liability rule will not be applied to the present cases. The peculiar circumstances here demand that there should be no
strict adherence to procedural rules on evidence lest the just claims of shippers/insurers be frustrated. The rule on limited liability
should be applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd.,[80] promulgated on January 21, 1993, that claimants be treated as "creditors in an insolvent corporation whose
assets are not enough to satisfy the totality of claims against it."[81] To do so, the Court set out in that case the procedural
guidelines: 10) "In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the
insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of having completed its action earlier than the rest. Thus, execution of
judgment in earlier completed cases, even those already final and executory must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata
should the insurance proceeds and freightage be not enough to satisfy all claims. "x x x............x x x............x x x. " In fairness to
the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should now be deposited in
trust. Moreover, petitioner should institute the necessary limitation and distribution action before the proper admiralty court within
15 days from finality of this decision, and thereafter deposit with it the proceeds from the insurance company and pending
freightage in order to safeguard the same pending final resolution of all incidents, for final pro-rating and settlement thereof." 11)
There is no record that Aboitiz has instituted such action or that it has deposited in trust the insurance proceeds and freightage
earned. Aboitiz blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd. cannot be anything but willful on its part. An act is considered willful if it is done with knowledge of its
injurious effect; it is not required that the act be done purposely to produce the injury. Aboitiz is well aware that by not instituting
the said suit, it caused the delay in the resolution of all claims against it. Having willfully caused loss or injury to the petitioners in
a manner that is contrary to morals, good customs or public policy, Aboitiz is liable for damages to the latter. 12) Thus, for its
contumacious act of defying the order of this Court to file the appropriate action to consolidate all claims for settlement, Aboitiz
must be held liable for moral damages which may be awarded in appropriate cases under the Chapter on human relations of the
Civil Code (Articles 19 to 36)

Exceptions -

Manila Steamship v. Abdulhaman, 100 Phil 32 (1956)

Facts: Respondent Abdulhaman filed a case against Manila Steamship Co Inc, owner of MS Bowline Knot, and Lim Hong To,
owner of M/LConsuelo V to recover damages for the death of his 5 children and loss of personal properties on board the M/L
Consuelo V as a result of a maritime collision between the 2 vessels. In 1948, the M/L Consuelo V left the port of Zamboanga
City for Siokon. On the same night, The M/S Bowline Knot was heading toZamboanga City. The weather was good and fair.
Abdulhaman, his wife and 5 children had paid their fare beforehand. It began raining and there were strong winds for an hour.
This weather lasted for an hour then it became fair although it was showering and the visibility was good enough. The two
vessels collided while the passengers were sleeping. M/L Consuelo V capsized quickly (before the passengers realized it, they
were already floating and swimming) 9 died and the cargo was lost. Before the collision, none of the passengers were warned or
informed of the impending danger as the collision was so sudden and unexpected. All those rescued at sea were brought by the
M/V Bowline Knot to Zamboanga City. The Board of Marine Inquiry found that the commanding officer of the colliding vessels
had both been negligent in operating their respective vessels. It held the owners of both vessels solidarily liable to Abdulhaman
for the damages caused to him by the collision, under Article 827of the Code of Commerce; but exempted Defendant Lim Hong
To from liability by reason of the sinking and total loss of his vessel, the M/L Consuelo V.CA affirmed. Manila Steamship
appealed because it was the one who was ordered to pay damages. It is exempt from any liability under Article 1903 of the Civil
Code because it had exercised the diligence of a good father of a family in the selection of its employees, particularly Third Mate
Simplicio Ilagan, the officer in command of its vessels, the M/SBowline Knot, at the time of the collision. It shouldnt be liable
for the actions of its agent (captain) and employees.

Issue: WON Manila Steamship is liable? YES

Ratio: DUE DILIGENCE. The defense of due diligence is untenable. While it is true that Plaintiffs action is based on a tort or
quasi delict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed
by Articles 826-939 of the Code of Commerce . Under Article 827 of the Code of Commerce, in case of collision between two
vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages
occasioned to their cargoes. The characteristic language of the law in making the vessels solidarily liable for the damages due to
the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the ship owner
under maritime law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in
Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one
liable to third persons. It is a general principle, well established maritime law and custom, that ship owners and ship agents are
civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article
587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that
the ship master or captain is primarily the representative of the owner. This direct liability, moderated and limited by the owners
right of abandonment of the vessel and earned freight (Article 587),has been declared to exist, not only in case of breached
contracts, but also in cases of tortious negligence ACT OF AGENT It is proven that the agents and employees, through whose
negligence the explosion and fire in question occurred, were agents, employees and mandatories of Manila Steamship. Where
the vessel is one of freight, a public concern or public utility, its owner or agents is liable for the tortious acts of his agents (Articles
587, 613, & 618 Code of Commerce; & Article 1902, 1903, 1908, Civil Code). Manila Steamship cites cases which are about
principals and agents in general BUT this case is about the relations between ship agent and his agents and employees. It is
easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and
crew) as exempting the ship owner from any liability for their faults, would render nugatory the solidary liability established by
Article 827 of the Code of Commerce for the greater protection of injured parties. Ship owners would be able to escape liability in
practically every case, considering that the qualifications and licensing of ship masters and officers are determined by the State,
and that vigilance is practically impossible to exercise over officers and crew of vessels at sea.To compel the parties prejudiced to
look to the crew for indemnity and redress would be an illusory remedy for almost always its members are, from captains down,
mere wage earners. Liability of Lim Hong To- HE IS LIABLE Both the master and the engineer of the motor launch Consuelo V
were not duly licensed as such. In applying for permission to operate, despite the lack of properly trained and experienced, crew,
Lim Hong To gave as a reason that the income derived from the vessel is insufficient to pay licensed officers who demand high
salaries, and expressly declaredThat in case of any accident, damage or loss, I shallassume full risk and responsibility for all
the consequences thereof His permit to operate, in fact, stipulatedthat in case of any accident, damage or loss, the registered
owner thereof shall assume full risk and responsibility for all the consequences thereof, and that said vessel shall be held
answerable for any negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising
from such negligence, disregard or violations. CA held that his permit and letter didnt contain waivers of his right to limit his
liability to the value of his motor launch and that he did not lose the statutory right to limit his liability by abandonment of the
vessel is a vague argument. By operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the
passengers and shippers of cargo aboard the Consuelo V would be subjected. In his desire to reap greater benefits in the
maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessels unwarry passengers, who would
normally assume that the launch officers possessed the necessary skill and experience to evade the perils of the sea. Hence, the
his liability cannot be the identical to that of a ship owner who bears in mind the safety of the passengers and cargo by employing
duly licensed officers. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a ship
owners liability, does not apply to cases where the injury or the average is due to ship owners own fault. Lim Hong To expressly
assumed the full risk and responsibility of such a collision.

Abueg v. San Diego, 77 Phil 730 (1946)

NATURE: This is appeal from a judgment rendered by the Court of First Instance of Manila in the above-entitled cases awarding
plaintiffs the compensation provided for in the Workmen's Compensation Act. (Records of the case were reconstituted as they
were destroyed during WWII) FACTS: 1. Dionisia, Marciana, and Rosario are widows of the deceased, who were machinists on
board the M/S San Diego II and M/S Bartolome belonging to the defendant-appellant. The boats sank as they were caught by a
typhoon while engaged in fishing operations around Mindoro Island on Oct. 1, 1941 ( boats were not covered by insurance) 2.
They filed against the owner, San Diego for compensation. 3. The Court of First Instance of Manila awarded plaintiffs the
compensation provided for in the Workmen's Compensation Act. San Diego appealed. 4. CA forwarded the case to the Supreme
Court as there were no questions of fact.

San Diegos arguments: 1. Article 587 of the Code of Commerce which provides that if the vessel together with all her tackle and
freight money earned during the voyage are abandoned, the agent's liability to third persons for tortious acts of the captain in the
care of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil., 330) 2. Article 837 of the same code which
provides that in cases of collision, the ship owners' liability is limited to the value of the vessel with all her equipment and freight
earned during the voyage (Philippine Shipping company vs. Garcia, 6 Phil., 281) 3. Article 643 of the same Code which provides
that if the vessel and freight are totally lost, the agent's liability for wages of the crew is extinguished.

ISSUE Whether or not San Diego, as owner of the ships which sank due to typhoon, is liable for compensation YES.

The provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's Compensation
Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees. It is not the liability for the
damage or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the captain or master of the
ship; nor the liability for the loss of the ship as result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged in the
performance of their work or employment, or the heirs and dependents and laborers and employees in the event of death caused
by their employment. Such compensation has nothing to do with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be included in the budget of any well-managed industry.

RATIO: The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of the Maritime Law,
Book III, Code of Commerce, had its origin in the prevailing continues of the maritime trade and sea voyages during the medieval
ages, attended by innumerable hazards and perils. To offset against these adverse conditions and encourage shipbuilding and
maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to
the vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and
freight, his liability was extinguished. HOWEVER, as discussed, the provisions of the Code of Commerce do not apply in this
case. The Workmen's Compensation Act was enacted to abrogate the common law and our Civil Code upon culpable acts and
omissions, and that the employer need not be guilty of neglect or fault, in order that responsibility may attach to him and that
shipowner was liable to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the fact that the
motorboat was totally lost. If an accident is compensable under the Workmen's Compensation Act, it must be compensated even
when the workman's right is not recognized by or is in conflict with other provisions of the Civil Code or the Code of Commerce.
The reason behind this principle is that the Workmen's Compensation Act was enacted by the Legislature in abrogation of the
other existing laws."

OTHER ISSUES: San Diego contends that the motorboats engaged in fishing could not be deemed to be in the coastwise and
interisland trade, as contemplated in section 38 of the Workmen's Compensation Act (No. 3428), as amended by Act no. 3812,
inasmuch as, according to counsel, a craft engaged in the coastwise and interisland trade is one that carries passengers and/or
merchandise for hire between ports and places in the Philippine Islands. SC: This new point raised by counsel for the appellant is
inconsistent with the first, for, if the motor ships in question, while engaged in fishing, were to be considered as not engaged in
interisland and coastwise trade, the provisions of the Code of Commerce invoked by them regarding limitation of the shipowner's
liability or extinction thereof when the shipowner abandons the ship, cannot be applied Granting however, that the motor ships
run and operated by the appellant were not engaged in the coastwise and interisland trade, as contemplated in section 38 of the
Workmen's Compensation Act, as amended, still the deceased officers of the motor ships in question were industrial employees
within the purview of section 39, paragraph (d), as amended, for industrial employment "includes all employment or work at a
trade, occupation or profession exercised by an employer for the purpose of gain." The only exceptions recognized by the Act are
agriculture, charitable institutions and domestic service. Even employees engaged in agriculture for the operation of mechanical
implements, are entitled to the benefits of the Workmen's Compensation Act.

PI v. Insular Maritime Co., 45 Phil 805 (1924)

Facts: The Government of the Philippine Islands seeks by this action to recover from The Insular Maritime Company the sum of
P30,437.91 for repairs made by the Bureau of Commerce and Industry on the motor ship Insular. The Insular Maritime
Company became the owner of one vessel only, the Insular, valued at P150,000. On October 29, 1919, The Insular Maritime
Company asked the Bureau of Commerce and Industry to perform certain repairs on the Insular. The Government consented
and terminated said repairs on November 29 of the same year. Subsequent thereto, on April 15, 1920, the Insular suffered a
total loss by fire. The bill prepared by the chief accountant of the Bureau of Commerce and Industry for work done on the motor
ship Insular in the amount of P30,437.91, was dated July 31, 1920. Collection of the claim was attempted pursuant to formal
demand made by the Acting Insular Auditor of date April 30, 1921. It will thus be noted, as was emphasized by the defense and
by His Honor, the trial judge, that no steps were taken by the Government to secure payment for the repairs until after the loss of
the vessel Insular. The trial judge further found in effect, as a legal conclusion, that the loss of the vessel Insular extinguished
the obligation. The Attorney-General challenges the correctness of this view. Issue: WON the obligation of Insular Maritime
Company to pay the Bureau of Commerce and Industry for the repairs done has extinguished. Held: No. The obligation to pay on
the part of Insular Maritime Company still exists. Ratio: The decision of the trial judge was predicated on his understanding of
the provisions of article 591 of the Code of Commerce in relation with other articles of the same Code, and with the decision of
this court in the case of Philippine Shipping Co. vs. Garcia Vergara ([1906], 6 Phil., 281). As to the applicability of article 591 of
the Code of Commerce, there is nothing in the language to denote that the liability of the owners of a vessel is wiped out by the
loss of that vessel. As to the applicability of the decision in the case of Philippine Shipping Co. vs. Garcia Vergara, supra, the
facts are not the same. There, the owners and agents of a vessel causing the loss of another vessel by collision were held "not
liable beyond the vessel itself causing the collision," but were "not required to pay such indemnification for the reason that the
obligation thus incurred has been extinguished on account of the loss of the thing bound for the payment thereof." Here; there is
a contractual relation which remains unaffected by the loss of the thing concerned in the contract and which is governed
principally by the provisions of the Civil Code. The rights and liabilities of owners of ships are in many respects essentially the
same as in the case of other owners of things. As a general rule, the owners of a vessel and the vessel itself are liable for
necessary repairs. Naturally the total destruction of the vessel extinguishes a maritime lien, as there is no longer any res to
which it can attach. But the total destruction of the vessel does not affect the liability of the owners for repairs on the vessel
completed before its loss. The trial court was accordingly right in its exposition of the fact but not in its application of the law.
Judgment must therefore be as it is hereby reversed, and in lieu of the judgment appealed from, another shall be entered here in
favor of the plaintiff and against the defendant for the sum of P30,437.91 with legal interest from July 20, 1921, when the
complaint was presented, until payment. Without special findings as to costs in either instance, it is so ordered.

Phil Am Gen Insurance Co, Inc. v. CA, 273 SCRA 260 (1997) (previously assigned)

Facts: 1. 6 July 1983 - Coca-Cola Bottlers Philippines, Inc., loaded on board MV Asilda, a vessel owned and operated by
respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee CocaCola Bottlers Philippines, Inc., Cebu. The shipment was insured with
petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN). 2. MV Asilda left the port of Zamboanga in fine
weather at eight oclock in the evening of the same day. 3. 7 July 1983 - The vessel sank in the waters of Zamboanga del Norte
together with its cargo, which includes the 7,500 cases of Coca-Cola softdrink bottles. 4. 15 July 1983 - The consignee Coca-
Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages due to the loss of its
softdrink bottles. 5. Respondent denied the claim so Coca-Cola filed an insurance claim with PHILAMGEN which paid its claim of
P755,250.00. 6. Claiming its right of subrogation PHILAMGEN now seeks recourse againt respondent FELMAN. Consequently,
on 29 November 1983, PHILAMGEN sued the shipowner for sum of money and damages. 7. PHILAMGENs contentions: The
sinking and total loss of MV Asilda and its cargo were due to the vessels unseaworthiness since it was put to sea in an unstable
condition; and The vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate
measures to proceed to a nearby port or beach after the vessel started to list. 8. FELMANs contentions: No right of subrogation
in favor of PHILAMGEN was transmitted by the shipper; and FELMAN had abandoned all its rights, interests and ownership
over MV Asilda together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art.
587 of the Code of Commerce. 9. RTC Ruled in favor of FELMAN It found that MV Asilda was seaworthy when it left the port
of Zamboanga (as confirmed by certificates issued by the Philippine Coast Guard and the shipowners surveyor attesting to its
seaworthiness). Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which
case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in
which case, Art. 587 of the Code of Commerce should apply. 10. CA Ruled in favor of FELMAN MV Asilda was found to be
unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words,
while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of
the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the claim of PHILAMGEN
on the ground that the assureds implied warranty of seaworthiness was not complied with.

Issue: Whether the limited liability under Art. 587 of the Code of Commerce should apply? NO

Ratio: 1. Art. 587 of the Code of Commerce is not applicable to the case at bar. Simply put, the ship agent is liable for the
negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment
of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the
ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the
shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a
shipowners liability, does not apply to cases where the injury or average was occasioned by the shipowners own fault. It must be
stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain.
Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the
Civil Code on common carrier. 2. It was already established at the outset that the sinking of MV Asilda was due to its
unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo
was loaded on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such,
FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the
vessel by virtue of Art. 587 of the Code of Commerce. 3. Under Art 1733 of the Civil Code, (c)ommon 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" In the event of loss of
goods, common carriers are presumed to have acted negligently. FELMAN, the shipowner, was not able to rebut this
presumption.

Loadstar Shipping, Co., Inc. v. CA, 315 SCRA 339 (1999) (previously assigned)

FACTS: 1. On 19 November 1984, LOADSTAR received on board its M/V Cherokee the following goods for shipment: (a) 705
bales of lawanit hardwood; (b) 27 boxes and crates of tilewood assemblies; and (c) 49 bundles of mouldings R & W (3) Apitong
Bolidenized. 2. The goods (w/c amounted to P 6,067,178) were insured for the same amount with Manila Insurance Co. (MIC)
against various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. 3. The vessel was insured by Prudential
Guarantee & Assurance, Inc. (PGAI) for P 4 million. 4. On 20 November 1984, on its way to Manila from the port of Nasipit,
Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. 5. As a result of the total loss of its shipment, the
consignee made a claim with LOADSTAR. (LOADSTAR ignored.) 6. As the insurer, MIC paid to the insured in full settlement of
the claim. MIC then executed a subrogation receipt. 7. On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI.
(Alleged that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees; That PGAI be
ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MICs claim
from LOADSTAR.) 8. In its answer, LOADSTAR denied any liability for the loss and claimed that the sinking was due to force
majeure. 9. PGAI averred that MIC had no cause of action against it, LOADSTAR being the party insured. (In any event, PGAI
was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.) 10. RTC: In favor of MIC. (Loadstar
liable.) 11. CA: Affirmed RTC. [CA Ratio: (1) LOADSTAR is not a private carrier LOADSTAR retained control over its crew; (2)
As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the rights and
liabilities of the parties; (3) The vessel was not seaworthy because it was undermanned. It could have withstood the natural and
inevitable action of the sea when the condition of the sea was moderate there was negligence; (4) Between MIC and
LOADSTAR, the provisions of the Bill of Lading do not apply because it binds only the shipper/consignee and the carrier. When
MIC paid, it was subrogated to the latters rights as against LOADSTAR; (5) There was breach of the contract of carriage when
the shippers goods never reached their destination; and (6) Art. 361, Code of Commerce: When goods are delivered on board a
ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves
upon the shipowner to both allege and prove that the goods were damaged by reason of some fact which legally exempts him
from liability. Transportation of the merchandise at the risk and venture of the shipper means that the latter bears the risk of loss
or deterioration of his goods arising from fortuitous events, force majeure, or the inherent nature and defects of the goods, but not
those caused by the presumed negligence or fault of the carrier, unless otherwise proved.] 12. Pet.s allegation/s: (1) The vessel
was a private carrier because it was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a
fixed route, and there was only one shipper, one consignee for a special cargo.; (2) The vessel was seaworthy; (3) Before the
sail, the vessel was dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the
Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew was experienced, licensed and
competent. With all these precautions, LOADSTAR exercised the diligence of a good father of a family in ensuring the vessels
seaworthiness; (4) The loss was due to force majeure. When the vessel left, the weather was fine until the next day when the
vessel sank due to strong waves; (5) Being a private carrier, any agreement limiting its liability is valid. Since the cargo was being
shipped at owners risk, LOADSTAR was not liable for any loss or damage; and (6) MICs claim had prescribed, the case having
been instituted beyond the period stated in the bills of lading which shall be within 60 days from the accrual of the right of action.
The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.] 13. Resp.s contention/s:
(1) the issue as to the classification of the M/V Cherokee was not timely raised barred by estoppel; (2) Assuming it was due to
force majeure, LOADSTAR was guilty of contributory negligence; (3) Did not raise the issue of prescription deemed waived; and
(4) the limited liability theory is not applicable because LOADSTAR was at fault or negligent failed to maintain a seaworthy
vessel.

ISSUE/s: (1) Whether Loadstar is a private or common carrier. (2) Whether or not it had exercised due and/or ordinary diligence
in the case. >> WON Loadstar is liable. YES (CA Affirmed.) HELD: (1) Common Carrier, the singular fact that the vessel was
carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private carrier. (2) Loadstar was at
fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an
approaching typhoon.

RATIO: 1. LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience and
this is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic, or unscheduled. 2. The
records do not disclose that the M/V Cherokee, on the date in question, undertook to carry a special cargo or was chartered to a
special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general
provision to the effect that the M/V Cherokee was a general cargo carrier. Further, the bare fact that the vessel was carrying a
particular type of cargo (wood products) for one shipper, which appears to be purely coincidental, is not reason enough to convert
the vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying
passengers. 3. Under the facts & circumstances in the case, LOADSTAR fits the definition of a common carrier under Art. 1732,
CC. 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. 4. De
Guzman v. CA: 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. Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the general public, i.e., the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population. 5. A certificate of public convenience is not a requisite for the incurring of
liability under the Civil Code governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute
and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured the certificate of public convenience, would be
offensive to sound public policy; that would be to reward private resp. for failing to comply with applicable statutory requirements.
6. The business of a common carrier impinges directly intimately upon the safety and well being and property of those members
of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for
the safety and protection of those who utilize their services. The law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. 7. M/V Cherokee was not
seaworthy when it embarked on its voyage. The vessel was not even sufficiently manned at the time. 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 its vessel involved in a contract of carriage is a clear breach of
its duty prescribed in Article 1755 of the Civil Code. 8. The doctrine of limited liability does not apply where there was negligence
on the part of the vessel owner or agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in
having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm
that may be deemed as force majeure, the wind condition in the area where it sank was determined to be moderate. Since it was
remiss in the performance of its duties, LOADSTAR cannot hide behind the limited liability doctrine to escape responsibility. 9.
The stipulation in the case at bar which effectively reduces the common carriers liability for the loss or destruction of the goods to
a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments
made at owners risk. Such stipulation is obviously null and void for being contrary to public policy. 10. Three kinds of
stipulations often made in a bill of lading: (1) Exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence (Invalid); (2) Providing for an unqualified limitation of such liability to an agreed valuation (Invalid); and (3)
Limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of
freight. (Valid) 11. Since the stipulation is null and void, it follows that when MIC paid the shipper, it was subrogated to all the
rights which the latter has against LOADSTAR. 12. Re: Prescription: MICs cause of action had not yet prescribed. Inasmuch as
neither the Civil Code nor the Code of Commerce states a specific prescriptive period, the Carriage of Goods by Sea Act
(COGSA) provides for a 1-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may
be applied suppletorily to the case. Moreover, a stipulation reducing the 1-year period is null and void. It must be struck down.

Vessels

Yu Con v. Ipil, 41 Phil 770 (1916)

FACTS
Respondent, Yu Con (Yu Con), chartered the banca Maria owned by petitioner Narciso Lauron (Lauron) with
 Gilcerio Ipil (Ipil) as its master and Juto Solamo (Solamo) as it supercargo to transport certain merchandise and money
from the port of Cebu to Catmon.
Yu Con loaded the merchandise and delivered the money, placed in a trunk, to Ipil and Solamo.
Allegedly because there was no more room for Yu Cons trunk, Ipil and Solamo transferred the money to their own trunk
in the stateroom.
Before the ship could sail, the trunk and the money placed therein disappeared.

ISSUES/HELD
Are the petitioners liable for the loss? YES.

RATIONALE
It is therefore beyond all doubt that the loss of the money occurred through the manifest fault and negligence of
Ipil and Solamo.
o They failed 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 they also did not expressly station some person
inside the stateroom for the guarding and safe-keeping of the trunk.
o All of these circumstances, together with that of its having been impossible to know who took the trunk and the
money, make the conduct of Ipil, Solamo, and the other crew members eminently supicious and prevent our holding that
the disappearance or loss of the money was due to a fortuitous event, to force majeure.
Ipil and Solamo were depositaries of the sum in question and, having failed to exercise the diligence required by the
nature of the obligation of safe-keeping assumed by them and by the circumstances of the time and the place, it is evident
that they are liable for its loss or misplacement and must restore it.
With respect to Lauron, he is also liable in accordance with the provisions of the Code of Commerce in force because,
as the proprietor and owner of the vessel who executed a contract of carriage with Yu Con , there occurred the loss,
theft, or robbery of the P450 that belonged to Yu Con through the negligence of Ipil and Solamo and which theft does not
appear to have been committed by a person not belonging to the craft.
The old Code of Commerce absolved the shipowner from liability for the negligence of the captain and its crew
but, in the light of the principles of modern law, this doctrine on the non-liability of the shipowner for the unlawful
acts, crimes or quasi crimes, committed by the captain and the crew can no longer be maintained in its absolute and
categorical terms.
o In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence
they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before
appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should
do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another
captain instead.
o Thus, it is only proper that the shipowner should be made liable

Lopez v. Duruelo, et al., 52 Phil 229 (1928)

Facts: On February 10, 1927, plaintiff Augusto Lopez was desirous of embarking upon the interisland steamer San Jacinto in
order to go to Cebu, the plaintiff embarked at the landing in the motorboat Jison which was engaged in conveying passengers
and luggage back and forth from the landing to the boats at anchor.

As the motorboat approached San Jacinto in a perfectly quiet sea, it came too near to the stern of the ship, and as the propeller
of the ship had not yet ceased to turn, the blades of the propeller strucked the motorboat and sank it at once. As it sank, the
plaintiff was thrown into the water against the propeller, and the revolving blades inflicted various injuries upon him. The plaintiff
was hospitalized. He filed a complaint seeking to recover damages from the defendant. The defendant however alleged that the
complaint does not have a right of action, a demurrer was submitted directed to the fact that the complaint does not allege that
the protest had been presented by the plaintiff, within twenty-four hours after the occurrence to the competent authority at the port
where the accident occurred as provided for Article 835 of the Code of Commerce.

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

Held: The word vessel as used in the third section of tile IV, Book III of the Code of Commerce, dealing with collisions, does not
include all ships, craft or floating structures of any kind without limitation. The said section does not apply to minor craft engaged
in a river and bay traffic.Therefore, a passenger on boat like the Jison, is not required to make protest as a condition precedent to
his right of action for the injury suffered by him in the collision described in the complaint.Article 835 of the Code of Commerce
does not apply.

Rubiso v. Rivera, 37 Phil 72 (1917)

Facts: The counsel of plaintiff brought a suit alleging that his clients were the owners of the pilot boat named Valentine, which
has been in bad condition and on the date of the complaint, was stranded in the place called Tingly, of the municipality of
Battings. The defendant Rivera took charge or took possession of the said boat without the knowledge or consent of the plaintiff
and refused to deliver it to them, under the claim that he was the owner thereof. The refusal on the part of the defendant has
caused the plaintiff damages because they were unable to derive profit from the voyages for which the said pilot boat was
customarily used. The defendant, on the other hand, alleged that they purchased the subject pilot boat. The plaintiff alleged that
the sale on behalf of the defendant Rivera was prior to that made at public auction to Rubio, but the registration of this latter sale
was prior to the sale made to the defendant.

Issue: Whether or not, the plaintiff still has the better right over the subject vessel?

Held: Under the Code of Commerce, Art 573 provides:

Merchant vessels constitute property that may be acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if
not recorded in the commercial registry.

The requisite of registration in the registry of the purchase of a vessel is necessary and indispensable in order that the
purchasers rights may be maintained against a claim filed by third person. It is undeniable that Riveras right cannot prevail over
those acquired by Rubiso in the ownership of the pilot boat, thought the latters acquisition of the vessel at public auction was
subsequent to its purchase by the defendant, Rivera.

Arroyo v. Yu, 54 Phil 511

In the Court of First Instance of Iloilo, the sheriff of that province instituted an action to compel the various persons and entities
with claims to the lorchas China and Cuylim to interplead with one another to determine their conflicting rights. As a result, Po
Suy Liong, Ti Liong & Co., J. M. Po Pauco, Maria Corazon Yu de Sane, and the Philippine National Bank presented their
respective answers and complaints. Thereafter, it is probable that a hearing was had and evidence taken, although no such
evidence has been transcribed and elevated to this court, which means that we must perforce accept the findings of fact made by
the trial judge. His decision concluded with the following pronouncements:
"In view of these proven facts, the court holds that the mortgage of the lorchas China and Cuylim executed in favor
of J. M. Po Paueo through notarial deed Exhibit 2, and the transfer of said mortgage by J. M, Po Pauco, the
mortgagee, to the Philippine National Bank through notarial deed Exhibit 1, duly recorded in the registry of deeds of
the Province of Iloilo on November 29, 1919, are valid and legal.

"The fact that this mortgage was not registered in the Bureau of Customs of the port of Iloilo until March 5th of this year does not
invalidate it; since it was proved at the trial of this case that such deferred registration was due to certain doubts entertained by
the collector of customs of the port of Iloilo touching the applicability of Act No. 3324, amending section 1176 of the Administrative
Code; and that said collector only decided to admit and register said mortgage upon lorchas China and Cuylim in March of this
year after receipt of advice from Manila regarding the applicability of Act No. 3324, which was approved on. December 4, 1926, to
a mortgage executed on November 6, 1918, in favor of a Chinese subject a prohibition not found in the original section 1176 of
the Administrative Code, but which went into effect when the aforementioned Act No. 3324, approved on December 4, 1926, took
effect.
"But the lorchas China and Cuylim do not, by the mere fact of being mortgaged, cease to pertain to the Lim Ponzo Navigation
Co., as evidenced by certificates of ownership Exhibits A and B; and being property appertaining to the Lim Ponzo Navigation
Co., they were validly attached, as shown by Exhibits E, F, G and H, and levied upon by virtue of the writ of execution Exhibit I,
issued December 6, 1928, upon petition of plaintiff Maria Corazon Yu de Sane filed in civil case No. 7688, Exhibit C. It was on
December 6, 1928, that by virtue of said writ of execution the sheriff levied upon the lorchas China and Cuylim, which, according
to Exhibit F, had been attached on December 4, 1928; it being understood that both attachment and execution were subject to all
liens existing upon said lorchas on the date of the attachment, which liens were the mortgages in favor of J. M. Po Pauco
transferred by the same to the Philippine National Bank, according to Exhibits 1 and 2.
"The aforementioned writ of execution Exhibit I was not carried out by the sheriff because the Philippine National Bank filed a
third-party claim, Exhibit 12, and according to Exhibit 14, Maria Corazon Yu de Sane, the judgment creditor, failed to give
indemnity bond as required by the sheriff.
"But the court also holds that the provincial sheriff of Iloilo did not act legally when, after giving notice, Exhibit 15, on December
28 or 29, 1928, he dissolved the attachment levied upon the lorchas China and Cuylim, and delivered them to J. M. Po Pauco, as
was proved at the trial of this case, for on December 28, 1928, those lorchas were under the control of this court in the instant
case, wherein, on December 17, 1928, the complaint of interpleading filed by the sheriff was entered in the docket, and, without
authority of the court in the instant case, said sheriff should not have assumed to dispose of the lorchas China and Cuylim as he
did. The complaint of interpleading filed on December 17, 1928, was presented by the provincial sheriff of Iloilo, according to
paragraph 11 thereof, for the purpose of protecting himself from any claim that might arise from the sale of said lorchas; and this
protection thus invoked covered not only the person of the sheriff, but also the lorchas in his possession which were the object of
contradictory claims filed by several persons. But the sheriff, by his own authority, and without the knowledge and authority of this
court, disposed of said lorchas, as stated in Exhibit 15, and in so acting he assumed full responsibility for all his acts.
"The court holds that the now defendant Maria Corazon Yu de Sane may, if she so desires, ask for another order of execution in
civil case No. 7688, and may by virtue thereof attach the lorchas China and Cuylim, and order their sale by public auction subject
to the mortgage executed thereon by the owner, the Lim Ponzo Navigation Co., in favor of the Philippine National Bank, which is
hereby declared valid.
"The court holds that the damages at the rate of P100 a day claimed by defendants Po Suy Liong, Ti Liong & Co., and J. M. Po
Pauco through the counterclaim contained in their answer filed on December 18, 1928, have not been proved.
"As to the cross-complaint filed by the Philippine National Bank against J. M. Po Pauco, Maria Corazon Yu de Sane, Po Suy
Liong, and Ti Liong & Co., the court finds that the basic facts thereof have been established, as hereto-fore stated in paragraphs
numbered 2, 3, 4, 5, and 6, holding J. M. Po Pauco in debt to the Philippine National Bank for the sum of P131,994.95, including
interest up to March 31, 1928, and the interest mentioned in Exhibit 10, from April 1, 1928, until payment, to which is added the
stipulated 10 per cent of the sum total by way of attorney's fees, which the court hereby reduces to 5 per cent of the whole.
"This debt of J. M. Po Pauco is secured by a mortgage of the property described in Exhibits 1 and 3, already due and
demandable when the cross-complaint was filed by the Philippine National Bank.
"Let judgment be entered for the Philippine National Bank, ordering J. M. Po Pauco to pay to it the sum of P131,994.95, plus the
interest mentioned in Exhibit 10, from April 1, 1928, until payment, plus 5 per cent of the debt as attorney's fees and costs of
collection.
"If said J. M. Po Pauco fails to pay the amount of this judgment within three months from the date hereof, the court will decree the
sale of the mortgaged property, as prayed for by the Philippine National Bank in its cross-complaint; and should the proceeds of
the sale thereof fall short of the amount of this judgment, a writ of execution shall issue against whatsoever unexempted property
said J, M. Po Pauco holds, until the whole balance remaining is satisfied.
"Maria Corazon de Sane, and Po Suy Liong & Co. are hereby absolved from the cross-complaint interposed by the
Philippine National Bank against them. "The Philippine National Bank, J. M. Po Pauco, Po Suy Liong, and Ti Liong &
Co., are hereby absolved from the cross-complaint interposed against them by Maria Corazon Yu de Sane."

From the aforementioned decision and judgment, two appeals have been taken, one by Maria Corazon Yu de Sane, and the
other by J. M. Po Pauco and Po Suy Liong. These appeals will be disposed of in order.
I. The appeal of Maria Corazon Yu de Sane relates to the preferences to the two lorchas as between herself and the Philippine
National Bank. Among the facts found by the trial judge, it is gleaned that the lorchas China and Cuylim were owned by the Lim
Ponzo Navigation Co. On November 6,1918, the two lorchas were mortgaged to J. M. Po Pauco to guarantee a loan of P20,000.
Two days later, the mortgage was duly registered in the office of the register of deeds of Iloilo. On November 28, 1919, J. M. Po
Pauco executed a mortgage in favor of the Philippine National Bank to protect a loan of P50,000, and covering, among other
things, the titles, rights, and interests which Po Pauco had in the lorchas China and Cuylim. One day later, this mortgage was
registered in the office of the register of deeds of Iloilo. Subsequently, the credit of Po Pauco with the Philippine National Bank
was increased to P90,000 which, with accrued interest, is alleged to now reach the sum of P131,994.95. To return again to the
chattel mortgage, it was only recorded in the office of the collector of customs of Iloilo on March 5, 1929.
Maria Corazon Yu de Sane secured a judgment against the Lim Ponzo Navigation Co. for P7,179.65. In due course, a writ of
attachment and an execution were secured, the date of the latter being December 6, 1928. The notice of seizure was recorded by
the collector of customs of Iloilo on December 4,1928, on which date the records of that office disclosed the vessels as free from
encumbrances.
The registration of vessels is now governed by the Administrative Code. Section 1171 thereof provides:
"Record of documents affecting title. In the record of transfers and incumbrances of vessels, to be kept at each
principal port of entry, shall be recorded at length all transfers, bills of sale, mortgages, liens, or other documents
which evidence ownership or directly or indirectly affect the title of registered vessels, and therein shall be recorded
all receipts, certificates, or acknowledgments canceling or satisfying, in whole or in part, any such obligation. No
other record of any such document or paper shall be required than such as is affected hereunder."

It is clear that section 1171 of the Administrative Code has modified the provisions of the Chattel Mortgage Law, Act No. 1508,
particularly section 4 thereof. It is now not necessary for a chattel mortgage of a vessel to be noted in the registry of the register
of deeds. On the other hand, it is essential that a record of documents affecting the title of a vessel be entered in the office of the
collector of customs at a port of entry (Rubiso and Gelito i>s. Rivera [1917], 37 Phil., 72; 2 Araneta, Administrative Code, note to
section 1171). The law as now existing is designed to protect persons who deal with a vessel on the strength of the record title.
Mortgages on vessels, although not recorded, are good as between the parties. But as against creditors of the mortgagor, an
unrecorded mortgage is invalid (37 Cyc, 54).
Consolidating the facts, we find the mortgage of the Philippine National Bank dated November 28, 1919, but not recorded in the
office of the collector of customs until March 5, 1929. The execution sued out by Maria Corazon Yu de Sane was dated
December 6, 1928, and noted at the port of entry two days prior thereto. Under these facts, the execution holder would have a
prior right over the un recorded mortgage. However, in the decision of the trial court, we find an explanation of the delay which
appears to have been proved at the trial, and which we must accept since there is nothing in the record to the contrary. His Honor
states that the fact that the mortgage was not registered in the office of the collector of customs of Iloilo until March, 5, 1929, was
because of the doubts entertained by the collector relative to the applicability of Act No. 3324 to a mortgage executed in 1918 in
favor of a Chinese subject. This uncontradicted fact must be taken as curing the bank's defective title. That the collector of
customs did not perform his duty was no fault of the bank. Constructive registration of the mortgage must, therefore, be accepted.
We rule that as between the appellant, Maria Corazon Yu de Sane, and the appellee, the Philippine National Bank, the latter has
a superior claim in the amount of P20,000, the amount of the mortgage of Po Pauco which was transferred to the Philippine
National Bank.
II. The remaining appeal concerns the respective rights of Jose M. Po Pauco and Po Suy Liong on the one hand and the
Philippine National Bank on the other. There is no particular merit in the arguments offered on behalf of Po Suy Liong, for his
mortgage was not on the boats themselves, and moreover his mortgage, so far as the record discloses, has never been recorded
in the office of the collector of customs. But the appeal of Po Pauco does present a rather anomalous condition of affairs.
It will be recalled that the action was begun by the several parties interpleading. On these pleadings, the trial judge was led to
order the foreclosure of the mortgage of the Philippine National Bank against Po Pauco. But the record does not disclose that any
one other than the attorney for Po Pauco was notified, that any summons was issued, or that an opportunity was afforded Po
Pauco to interpose his defense, if he had any. Obviously, the procedure provided by law for the foreclosure of a mortgage must
be substantially carried out. It is no answer for the appellee to state that no objection was interposed in the lower court. The
question is one which goes to the jurisdiction of the court, and a question of this nature may be raised for the first time on appeal.
With the foregoing pronouncements which, except as they relate to the judgment of the Philippine National Bank against J. M. Po
Pauco, in the main coincide with the pronouncements of the trial judge, the judgment appealed from will in part be affirmed and in
part set aside, and the record remanded to the court of origin for further proceedings. It will be so ordered, without special
pronouncement as to costs in this instance.

Macondray & Co., Inc. v. CIR, 62 SCRA 427 (1975)

FACTS:

On November 2, 1962, the vessel S/S TAI PING, of which petitioner is the local agent, arrived at the port of Manila from
San Francisco, California, U.S.A., conveying various shipments of merchandise, among which was a shipment of one (1)
coil carbon steel, one (1 bundle carbon steel flat and one (1) carbon containing carbon tool holders carbide cutters,
ground, all of which appeared in the Bill of Lading No. 22, consigned to Bogo Medellin Millings Co., Inc. The shipment,
except the one (1) coil carbon steel was not reflected in the Inward Cargo Manifest as required by Section 1005 in
relation to Section 2521 of the Tariff and Custom Code of the Philippines. Allied Brokerage Corporation, acting for and in
behalf of Bogo Medellin Milling Co. requested petitioner Macondray & Co., agent of the vessel S/S TAI PING, to correct
the manifest of the steamer so that it may take delivery of the goods at Customs House. Collector of Custom required
petitioner to explain and show cause why no administrative fine should be imposed upon said vessel. The fine of
1,000.00 was paid by petitioner under protest. Hearing of the protest proceeded thereafter.
Collector of Customs of the Port of Manila ordered the dismissal of said protest for lack of merit. On appeal to the
Commissioner of Customs the latter sustained the Collector of Customs. Petitioner filed a petition for review with the
Court of Tax Appeals. The CTA affirmed the decision of the Collector of Customs as affirmed by the Commissioner of
Customs.

ISSUE:
Whether or not the Collector of Customs erred in imposing a fine on vessel, S/S TAI PING, for alleged violation of Section
1005 in relation to Section 2521 of the Tariff and Customs Code for landing unmanifested cargo at the port of Manila.

HELD:
sThe inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequoted
sections of the Tariff and Customs Code. It is to be noted that nowhere in the said sections is the presentation of a Bill of Lading
required required, but only the presentation of a Manifest containing a true and accurate description of the cargoes. This is for the
simple reason that while a manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the
cargo and is a matter of business convenience based exclusively on a contract. The Court cannot accept or place an implied
imprimatur on the contention of petitioner that the entries in the bill of lading adequately supplied the deficiency of the manifest
and cured its infirmity. The mandate of the law is clear and Court cannot settle for less. The law imposes the absolute obligation,
under penalty for failure, upon every vessel from a foreign port to have on board complete written or typewritten manifests of all
her cargo, signed by the master. Where the law requires a manifest to be kept or delivered, it is not complied with unless the
manifest is true and accurate. Amendment of cargo manifest even if later approved by customs authorities does not relieve
carrying vessel of liability of fine incurred prior to its correction. The philosophy and purpose behind the law authorizing
amendment, under paragraph 3 of Section 1005 of the Tariff and Customs Code, is to protect innocent importers or consignees
from the mistake or unlawful acts of the master.