G.R. No.

115286 August 11, 1994

INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and TRENDA WORLD SHIPPING (MANILA),
INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.

Marilyn Cacho-Naoe for petitioners.

Wilfred L. Pascasio for private respondent.

FELICIANO, J.:

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

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

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

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

On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the vessel had stopped in mid-ocean
for six (6) hours and forty-five (45) minutes due to a leaking economizer. He was instructed to shut down the economizer and use
the auxiliary boiler instead.4

On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore. 5 The Chief Engineer reminded Captain Tayong that the
oxygen and acetylene supplies had not been delivered.6 Captain Tayong inquired from the ship's agent in Singapore about the
supplies. The ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the stores had closed. 7

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

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

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

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

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

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

Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain Tayong. Petitioners alleged that he
had refused to sail immediately to South Africa to the prejudice and damage of petitioners. According to petitioners, as a direct
1
result of Captain Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours. This meant that
the charterers refused to pay the charter hire or compensation corresponding to twelve (12) hours, amounting to US$15,500.00,
due to time lost in the voyage. They stated that they had dismissed private respondent for loss of trust and confidence.

The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his untimely repatriation. The decision of
the POEA placed considerable weight on petitioners' assertion that all the time lost as a result of the delay was caused by Captain
Tayong and that his concern for the oxygen and acetylene was not legitimate as these supplies were not necessary or
indispensable for running the vessel. The POEA believed that the Captain had unreasonably refused to follow the instructions of
petitioners and their representative, despite petitioners' firm assurances that the vessel was seaworthy for the voyage to South
Africa.

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

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

The petition must fail.

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

It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and
without cause as reasonably established in an appropriate investigation. 15 Such employees, too, are entitled to security of
tenure, fair standards of employment and the protection of labor laws.

The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain,
for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a
representative of the country under whose flag he navigates.16 Of these roles, by far the most important is the role performed by
the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO]
of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the
protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the captain has authority
to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo.
The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading
of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the
shipowner.17 To the captain is committed the governance, care and management of the vessel. 18 Clearly, the captain is vested
with both management and fiduciary functions.

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

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

The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not supported by substantial
evidence. Petitioners rely on self-serving affidavits of their own officers and employees predictably tending to support
petitioners' allegation that Captain Tayong had performed acts inimical to petitioners' interests for which, supposedly, he was
discharged. The official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion that private
respondent Captain did not arbitrarily and maliciously delay the voyage to South Africa. There had been, Mr. Clark stated, a
2
disruption in the normal functioning of the vessel's turbo-charger19 and economizer and that had prevented the full or regular
operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the voyage to
South Africa, instead of waiting in Singapore for the supplies that would permit shipboard repair of the malfunctioning
machinery and equipment.

More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety
of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and
properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the
specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable
principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its
navigation.20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with
respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and
preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of
underwriters.21 It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise
his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion
of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. 22 Indeed, if the
ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship
agent's instructions (insisted upon by radio or telefax from their offices thousands of miles away) will result, in the very specific
circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek
absolution from his responsibility, if a marine casualty occurs, in such instructions. 23

Compagnie de Commerce v. Hamburg 24 is instructive in this connection. There, this Court recognized the discretionary authority
of the master of a vessel and his right to exercise his best judgment, with respect to navigating the vessel he commands.
In Compagnie de Commerce, a charter party was executed between Compagnie de Commerce and the owners of the
vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of Saigon, certain cargo destined for
the Ports of Dunkirk and Hamburg in Europe. The Sambia, flying the German flag, could not, in the judgment of its master, reach
its ports of destination because war (World War I) had been declared between Germany and France. The master of
the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of Manila. Compagnie de
Commerce sued in the Philippines for damages arising from breach of the charter party and unauthorized sale of the cargo. In
affirming the decision of the trial court dismissing the complaint, our Supreme Court held that the master of the Sambia had
reasonable grounds to apprehend that the vessel was in danger of seizure or capture by the French authorities in Saigon and was
justified by necessity to elect the course which he took i.e., to flee Saigon for the Port of Manila with the result that the
shipowner was relieved from liability for the deviation from the stipulated route and from liability for damage to the cargo. The
Court said:

The danger from which the master of the Sambia fled was a real and not merely an imaginary one as counsel
for shipper contends. Seizure at the hands of an "enemy of the King" though not inevitable, was a possible
outcome of a failure to leave the port of Saigon; and we cannot say that under the conditions existing at the
time when the master elected to flee from that port, there were no grounds for a "reasonable apprehension of
danger" from seizure by the French authorities, and therefore no necessity for flight.

The word "necessity" when applied to mercantile affairs, where the judgment must in the nature of things be
exercised, cannot, of course, mean an irresistible compelling power. What is meant by it in such cases is the
force of circumstances which determine the course a man ought to take. Thus, where by the force of
circumstances, a man has the duty cast upon him of taking some action for another, and under that obligation
adopts a course which, to the judgment of a wise and prudent man, is apparently the best for the interest of the
persons for whom he acts in a given emergency, it may properly be said of the course so taken that it was in a
mercantile sense necessary to take it.25 (Emphasis supplied)

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

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

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

A shipowner or shipmaster (if communication with the shipowner is impossible), will be allowed a reasonable
time in which to decide what course he will adopt in such cases as those under discussion; time must be allowed

3
 to him to ascertain the facts, and to balance the conflicting interests involved, of shipowner, cargo owner,
underwriter on ship and freight. But once the time has elapsed, he is bound to act promptly according as he has
elected either to repair, or abandon the voyage, or tranship. If he delays, and owing to that delay a perishable
cargo suffers damage, the shipowner will be liable for that damage; he cannot escape that obligation by
pleading the absence of definite instructions from the owners of the cargo or their underwriters, since he has
control of the cargo and is entitled to elect. 26(Emphasis supplied)

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

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

I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN TO YOU THAT WE ARE
INSECURITY/DANGER TO SAIL IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV PLENTY
TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER PIPELINE, ECONOMIZER LEAKAGE N ETC WE
COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I AND MR. CLARK WE CONTACTED EACH OTHER BY PHONE IN
PAPAN N HE ADVSED US TO SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE ALSO EXPLAINED
TO MY C/E HOW TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS
WHY WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY OXY/ACET BEFORE SAILING TO AVOID
RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16 DAYS FM SPORE TO RBAY. PLS.
UNDERSTAND UR SITUATION.28 (Emphasis partly in source and partly supplied)

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

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

ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss or excess of jurisdiction on the part
of the NLRC in rendering its assailed decision, the Petition for Certiorari is hereby DISMISSED, for lack of merit. Costs against
petitioners.

SO ORDERED.

G.R. No. 154305 December 9, 2004

MACONDRAY & CO., INC., petitioner,

vs.
PROVIDENT INSURANCE CORPORATION, respondent.

DECISION

PANGANIBAN, J.:

Hornbook is the doctrine that the negligence of counsel binds the client. Also settled is the rule that clients should take the
initiative of periodically checking the progress of their cases, so that they could take timely steps to protect their interest.

4
 The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the February 28, 2002 Decision2 and
the July 12, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 57077. The dispositive portion of the Decision reads as
follows:

"WHEREFORE, premises considered, the assailed Decision dated September 17, 1996 is hereby REVERSED and SET
ASIDE. Accordingly, [Petitioner] Macondray & Co., Inc., is hereby ORDERED to pay the [respondent] the amount
of P1,657,700.95."

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts

The CA adopted the factual antecedents narrated by the trial court, as follows:

"x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES LIMITED INC., of Saskatoon,
Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board the vessel M/V 'Trade Carrier', 5000 metric tons
of Standard Grade Muriate of Potash in bulk for transportation to and delivery at the port of Sangi, Toledo City, Cebu, in
favor of ATLAS FERTILIZER CORPORATION, (hereinafter CONSIGNEE) covered by B/L Nos. VAN-SAN-1 for the 815.96
metric tons and VAN-SAN-2 for the 4,184.04 metric tons. Subject shipments were insured with [respondent] against all
risks under and by virtue of an Open Marine Policy No. MOP-00143 and Certificate of Marine Insurance No. CMI-823-91.

"When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of 476.140 metric
tons valued at One Million Six Hundred Fifty Seven Thousand Seven Hundred Pesos and Ninety Five Centavos
(P1,657,700.95), Philippine Currency. Provident paid losses. Formal claims was then filed with Trade & Transport and
Macondray but the same refused and failed to settle the same. Hence, this complaint.

"As per Officer's Return dated 4 June 1992, summons was UNSERVED to defendant TRADE AND TRANSPORT at the given
address for reason that TRADE AND TRANSPORT is no longer connected with Macondray & Co. Inc., and is not holding
office at said address as alleged by Ms. Guadalupe Tan. For failure to effect service of summons the case against TRADE
& TRANSPORT was considered dismissed without prejudice.

"Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute relation with defendant
TRADE AND TRANSPORT, the alleged operator of the vessel who transported the subject shipment; that accordingly,
MACONDRAY is the local representative of the SHIPPER; the charterer of M/V TRADE CARRIER and not party to this case;
that it has no control over the acts of the captain and crew of the Carrier and cannot be held responsible for any
damage arising from the fault or negligence of said captain and crew; that upon arrival at the port of Sangi, Toledo City,
Cebu, the M/V Trade Carrier discharged the full amount of shipment, as shown by the draft survey with a total quantity
of 5,033.59 metric tons discharged from the vessel and delivered to the CONSIGNEE.

"ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by any party from the
vessel owned by defendant Trade and Transport. "Whether or not Macondray is liable for loss which was allegedly
sustained by the plaintiff in this case.

"EVIDENCE FOR THE PLAINTIFF

"Plaintiff presented the testimonies of Marina Celerina P. Aguas and depositions of Alberto Milan and Alfonso Picson
submitted as additional witnesses for PROVIDENT to prove the material facts of the complaint are deemed admitted by
defendant MACONDRAY, on their defense that it is not an agent of TRADE AND TRANSPORT.

"EVIDENCE FOR THE DEFENDANT MACONDRAY:

"Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that MACONDRAY was not an agent of defendant
TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a notice of readiness, statement of facts,
sailing notice and custom's clearance in order to attend to the formalities and the need of the vessel; that MACONDRAY
is performing functions in behalf of CANPOTEX and was appointed as local agent of the vessel, which duty includes
arrangement of the entrance and clearance of the vessel."

The trial court, in the decision dated September 17, 1996 earlier adverted to, ruled in favor of the [petitioner] x x x, the
dispositive portion of which reads:

"WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner] MACONDRAY is hereby DISMISSED.

"No pronouncement as to costs."4

5
 Ruling of the Court of Appeals

The CA affirmed the trial court's finding that petitioner was not the agent of Trade and Transport. The appellate court ruled,
however, that petitioner could still be held liable for the shortages of the shipment, because the latter was the ship agent of
Canpotex Shipping Services Ltd. -- the shipper and charterer of the vessel M/V Trade Carrier.

All told, the CA held petitioner "liable for the losses incurred in the shipment of the subject cargoes to the [respondent], who,
being the insurer of the risk, was subrogated to the rights and causes of action which the consignee, Atlas Fertilizer Corporation,
had against the [petitioner]."5

Hence, this Petition.6

The Issues

Petitioner raises the following issues for our consideration:

"Whether or not liability attached to petitioner despite the unequivocal factual findings, that it was not a ship agent.

"Whether or not the 28 February 2002 Decision of the Court of Appeals has attained finality.

"Whether or not by filing the instant Petition for Review on Certiorari, petitioner is guilty of forum-shopping."7

The Court's Ruling

The Petition has no merit.

First Issue:

Petitioner's Liability

As a rule, factual findings of the Court of Appeals -- when not in conflict with those of the trial court -- are not disturbed by this
Court,8 to which only questions of law may be raised in an appeal by certiorari. 9

In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical finding that petitioner was
the ship agent. Such factual finding was not in conflict with the trial court's ruling, which had merely stated that petitioner was
not the agent of Trade and Transport. Indeed, although it is not an agent of Trade and Transport, petitioner can still be the ship
agent of the vessel M/V Trade Carrier.

Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with provisioning or representing the
vessel in the port in which it may be found."

Hence, whether acting as agent of the owner10 of the vessel or as agent of the charterer, 11 petitioner will be considered as the
ship agent12 and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.

The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes arrangement for the
entrance and clearance of the vessel."13 Further, the CA found and the evidence shows that petitioner represented the vessel.
The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's
Clearance.14 Petitioner's employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they
stayed until it departed. They were also present during the actual discharging of the cargo. 15 Moreover, Mr. de la Cruz, the
representative of petitioner, also prepared for the needs of the vessel, like money, provision, water and fuel. 16

These acts all point to the conclusion that it was the entity that represented the vessel in the Port of Manila and was the ship
agent17 within the meaning and context of Article 586 of the Code of Commerce.

As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:

"Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed
was invested for the benefit of the same."

"Article 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 equipments and the freight it may have earned during the voyage."

6
Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric tons of standard-grade
Muriate of Potash valued at P1,657,700.95. Hence, we find no reason to delve further into the matter or to disturb the finding of
the CA holding petitioner, as ship agent, liable to respondent for the losses sustained by the subject shipment.

Second Issue:

Finality of the CA Decision

Petitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after receiving the postal notice the
day before. It further attributes gross negligence to its previous counsel for not informing the CA of his change of address. It thus
contends that notice of the assailed Decision given to the previous counsel cannot be considered as notice to petitioner.

We are not persuaded. "It is well-settled that when a party is represented by counsel, notice should be made upon the counsel of
record at his given address to which notices of all kinds emanating from the court should be sent in the absence of a proper and
adequate notice to the court of a change of address." 18

In the present case, service of the assailed Decision was made on petitioner's counsels of record, Attys. Moldez and Galoz, on
March 6, 2002. That copy of the Decision was, however, returned to the sender for the reason that the addressee had "move[d]
out." If counsel moves to another address without informing the court of that change, such omission or neglect is inexcusable
and will not stay the finality of the decision.19 "The court cannot be expected to take judicial notice of the new address of a
lawyer who has moved or to ascertain on its own whether or not the counsel of record has been changed and who the new
counsel could possibly be or where he probably resides or holds office." 20

It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be that as it may, the negligence of counsel binds
the client.21 Service made upon the present counsel of record at his given address is service to petitioner. Hence, the assailed
Decision has already become final and unappealable.

In the present case, there is no compelling reason to overturn well-settled jurisprudence or to interpret the rules liberally in favor
of petitioner, who is not entirely blameless. It should have taken the initiative of periodically keeping in touch with its counsel,
checking with the court, and inquiring about the status of its case.22 In so doing, it could have taken timely steps to neutralize the
negligence of its chosen counsel and to protect its interests. "Litigants represented by counsel should not expect that all they
need to do is sit back, relax and await the outcome of their case." 23

In view of the foregoing, there is no necessity of passing upon the third issue raised by petitioner.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 171591 25 June 2012

ACE NAVIGATION CO., INC., petitioner,

vs.
FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY CORPORATION, Respondents.

DECISION

PERLAS-BERNABE, J.:

This is an appeal under Rule 45 of the Rules of Court seeking to reverse the June 22, 2004 Decision 1 and February 17, 2006
Resolution2 of the Court of Appeals (CA) ordering petitioner Ace Navigation Co., Inc., jointly and severally with Cardia Limited, to
pay respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. the sum of P213,518.20 plus interest at the rate of
six percentum (6%) from the filing of the complaint until paid.

The Facts

On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260 metric
tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee, Heindrich
Trading Corp. (HEINDRICH). The subject shipment was insured with respondents, FGU Insurance Corp. (FGU) and Pioneer
Insurance and Surety Corp. (PIONEER), against all risks under Marine Open Policy No. 062890275 for the amount of
P18,048,421.00. 3

7
The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd.
(SHINWA). 4 Representing itself as owner of the vessel, SHINWA entered into a charter party contract with Sky International, Inc.
(SKY), an agent of Kee Yeh Maritime Co. (KEE YEH), 5 which further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it
was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1. 6

On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of
HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it was found that out of the 165,200 bags of
cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of P1,423,454.60
from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each paid the consignee,
HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, 7 and consequently became subrogated to all the rights
and causes of action accruing to HEINDRICH.

Thus, on August 8, 1991, respondents filed a complaint for damages against the following defendants: "REGENCY EXPRESS LINES,
S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER OF THE
VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY, INC." 8 which was docketed as Civil Case
No. 90-2016.

In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that the suits against them cannot prosper
because they were not named as parties in the bill of lading. 9

Similarly, ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the
respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and claimed to be
the agent of the shipper, CARDIA. 10

For its part, SKY denied having acted as agent of the charterer, KEE YEH, which chartered the vessel from SHINWA, which
originally chartered the vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading its alleged
principal, KEE YEH. 11

On September 30, 1991, HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance Co.
(COMMERCIAL), docketed as Civil Case No. 91-2415, which was later consolidated with Civil Case No. 91-2016. However, the suit
against COMMERCIAL was subsequently dismissed on joint motion by the respondents and COMMERCIAL. 12

Proceedings Before the RTC and the CA

In its November 26, 2001 Decision, 13 the RTC dismissed the complaint, the fallo of which reads:

WHEREFORE, premises considered, plaintiffs complaint is DISMISSED. Defendants counter-claim against the plaintiffs are
likewise dismissed, it appearing that plaintiff[s] did not act in evident bad faith in filing the present complaint against them.

Defendant Pakarti and Shinwas cross-claims against their co-defendants are likewise dismissed for lack of sufficient evidence.

No costs.

SO ORDERED.

Dissatisfied, the respondents appealed to the CA which, in its assailed June 22, 2004 Decision, 14 found PAKARTI, SHINWA, KEE
YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim, with the remaining 30% to be shouldered solidarily by
CARDIA and its agent, ACENAV, thus:

WHEREFORE, premises considered, the Decision dated November 26, 2001 is hereby MODIFIED in the sense that:

a) defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and the latters agent Sky
International, Inc. are hereby declared jointly and severally liable, and are DIRECTED to pay FGU Insurance Corporation
the amount of Two Hundred Ninety Eight Thousand Nine Hundred Twenty Five and 45/100 (P298,925.45) Pesos and
Pioneer Insurance and Surety Corp. the sum of One Hundred Ninety Nine Thousand Two Hundred Eighty Three and
66/100 (P199,283.66) Pesos representing Seventy (70%) percentum of their respective claims as actual damages plus
interest at the rate of six (6%) percentum from the date of the filing of the complaint; and

b) defendant Cardia Ltd. and defendant-appellee Ace Navigation Co., Inc. are DECLARED jointly and severally liable and
are hereby DIRECTED to pay FGU Insurance Corporation One Hundred Twenty Eight Thousand One Hundred Ten and
92/100 (P128,110.92) Pesos and Pioneer Insurance and Surety Corp. Eighty Five Thousand Four Hundred Seven and
28/100 (P85,407.28) Pesos representing thirty (30%) percentum of their respective claims as actual damages, plus
interest at the rate of six (6%) percentum from the date of the filing of the complaint.

SO ORDERED.

8
Finding that the parties entered into a time charter party, not a demise or bareboat charter where the owner completely and
exclusively relinquishes possession, command and navigation to the charterer, the CA held PAKARTI, SHINWA, KEE YEH and its
agent, SKY, solidarily liable for 70% of the damages sustained by the cargo. This solidarity liability was borne by their failure to
prove that they exercised extraordinary diligence in the vigilance over the bags of cement entrusted to them for transport. On
the other hand, the CA passed on the remaining 30% of the amount claimed to the shipper, CARDIA, and its agent, ACENAV,
upon a finding that the damage was partly due to the cargo's inferior packing.

With respect to REGENCY, the CA affirmed the findings of the RTC that it did not acquire jurisdiction over its person for defective
service of summons.

PAKARTI's, SHINWA's, SKY's and ACENAV's respective motions for reconsideration were subsequently denied in the CA's assailed
February 17, 2006 Resolution.

Issues Before the Court

PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for review on certiorari before the Court, docketed as G.R. Nos.
171591, 171614, and 171663, which were ordered consolidated in the Courts Resolution dated July 31, 2006. 15

On April 21, 2006, SKY manifested 16 that it will no longer pursue its petition in G.R. No. 171614 and has preferred to await the
resolution in G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry of judgment 17against it was made on August
18, 2006. Likewise, on November 29, 2007, PAKARTI and SHINWA moved 18 for the withdrawal of their petitions for lack of
interest, which the Court granted in its January 21, 2008 Resolution. 19 The corresponding entry of judgment 20 against them was
made on March 17, 2008.

Thus, only the petition of ACENAV remained for the Court's resolution, with the lone issue of whether or not it may be held liable
to the respondents for 30% of their claim.

Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held liable for the damages sought to be
collected by the respondents. It also alleged that since its principal, CARDIA, was not impleaded as a party-defendant/respondent
in the instant suit, no liability can therefore attach to it as a mere agent. Moreover, there is dearth of evidence showing that it
was responsible for the supposed defective packing of the goods upon which the award was based.

The Court's Ruling

A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it,
stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight to be
delivered to the order or assigns of a specified person at a specified place." 21

It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting
parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and
obligations assumed by the parties. 22 As such, it shall only be binding upon the parties who make them, their assigns and heirs. 23

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the consignee
HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements, SHINWA, KEE YEH and
its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of CARDIA, also became a
party to the said contract of carriage.

The respondents, however, maintain 24 that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both the
CA 25 and the RTC. 26

The Court disagrees.

Article 586 of the Code of Commerce provides:

ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by
the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein.

By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she
may be found. (Emphasis supplied)

Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the vessel in
order for the latter to immediately take possession of the goods. No evidence was offered to establish that ACENAV had a hand
in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any time during the unloading of
the goods. Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they were unloaded from
the vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was not a ship agent within the
meaning and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper.
9
On this score, Article 1868 of the Civil Code states:

ART. 1868. By the contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.

Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.

Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded its authority in the
discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less proved, that ACENAV's limited obligation as
agent of the shipper, CARDIA, was not known to HEINDRICH.

Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon it by the CA 27 on the
basis of its finding that the damage sustained by the cargo was due to improper packing cannot be borne by ACENAV. As mere
agent, ACENAV cannot be made responsible or held accountable for the damage supposedly caused by its principal. 28

Accordingly, the Court finds that theCA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30o/o of the
respondents' claim.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED. The complaint against
petitioner Ace Navigation Co., Inc. is hereby DISMISSED.

SO ORDERED.

G.R. No. 106999 June 20, 1996

PHILIPPINE HOME ASSURANCE CORPORATION, petitioner,

vs.
COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents.

KAPUNAN, J.:p

Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for carriage to
Manila and Cebu, freight pre-paid and in good order and condition, viz: (a) two (2) boxes internal combustion engine parts,
consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (l0) metric ton. (334 bags) ammonium chloride,
consigned to Orca's Company under Bill of Lading No. KCE-I2; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental
Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo under Bills of Lading Nos. KMA-73
and KMA-74.

While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation
area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly
exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and
instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship.

Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned.

Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel
for the port of Naha, Japan.

Fire fighting operations were again conducted at the said port. After the fire was extinguished, the cargoes which were saved
were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts
corresponding to additional freight and salvage charges, as follows: (a) for the goods covered by Bill of Lading No. 042283, ESLI
charged the consignee the sum of P1,927.65, representing salvage charges assessed against the goods; (b) for the goods covered
by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of P2,980.64 for additional freight and P826.14 for salvage
charges against the goods; (c) for the goods covered by Bill of Lading No. KCE-8, ESLI charged the consignee the sum of P3,292.26
for additional freight and P4,130.68 for salvage charges against the goods; and
(d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the consignee the sum of P8,337.06 for salvage
charges against the goods.

The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees.

10
PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against
ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the
fault, negligence, illegal act and/or breach of contract of ESLI.

In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the
shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant
to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law.

The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating thus:

The question to be resolved is whether or not the fire on the vessel which was caused by the explosion of an
acetylene cylinder loaded on the same was the fault or negligence of the defendant.

Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel (Deposition of Jumpei
Maeda, October 23, 1980, p. 3) and before the ship loaded the Acetylene Cylinder No. NCW 875, the same has
been tested, checked and examined and was certified to have complied with the required safety measures and
standards (Deposition of Senjei Hayashi, October 23, 1980, pp. 2-3). When the fire was detected by the crew,
fire fighting operations was immediately conducted but due to the explosion of the acetylene cylinder, the
crew were unable to contain the fire and had to abandon the ship to save their lives and were saved from
drowning by passing vessels in the vicinity. The burning of the vessel rendering it a constructive total loss and
incapable of pursuing its voyage to the Philippines was, therefore, not the fault or negligence of defendant but
a natural disaster or calamity which nobody would like to happen. The salvage operations conducted by Fukuda
Salvage Company (Exhibits "4-A" and "6-A") was perfectly a legal operation and charges made on the goods
recovered were legitimate charges.

Act No. 2616, otherwise known as the Salvage Law, is thus applicable to the case at bar.
Section 1 of Act No. 2616 states:

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

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

In relation to the above provision, the Supreme Court has ruled in Erlanger & Galinger v.
Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are necessary to a valid
salvage claim, namely (a)a marine peril (b) service voluntarily rendered when not required as
an existing duty or from a special contract and (c) success in whole or in part, or that the
service rendered contributed to such success.

The above elements are all present in the instant case. Salvage charges may thus be assessed
on the cargoes saved from the vessel. As provided for in Section 13 of the Salvage Law, "The
expenses of salvage, as well as the reward for salvage or assistance, shall be a charge on the
things salvaged or their value." In Manila Railroad Co. v. Macondray Co., 37 Phil. 583, it was
also held that "when a ship and its cargo are saved together, the salvage allowance should be
charged against the ship and cargo in the proportion of their respective values, the same as in
a case of general average . . ." Thus, the "compensation to be paid by the owner of the cargo
is in proportion to the value of the vessel and the value of the cargo saved." (Atlantic Gulf and
Pacific Co. v. Uchida Kisen Kaisha, 42 Phil. 321). (Memorandum for Defendant, Records, pp.
212-213).

With respect to the additional freight charged by defendant from the consignees of the goods, the same are
also validly demandable.

As provided by the Civil Code:

Art. 1174. Except in cases expressly specified by law, or when it is otherwise declared by
stipulation, or when the nature of the obligation require the assumption of risk, no person
shall be responsible for those events which could not be foreseen, or which though foreseen,
were inevitable.

Art 1266. The debtor in obligations to do shall also be released when the prestation becomes
legally or physically impossible without the fault of the obligor."

11
 The burning of "EASTERN EXPLORER" while off Okinawa rendered it physically impossible for defendant to
comply with its obligation of delivering the goods to their port of destination pursuant to the contract of
carriage. Under Article 1266 of the Civil Code, the physical impossibility of the prestation extinguished
defendant's obligation..

It is but legal and equitable for the defendant therefore, to demand additional freight from the consignees for
forwarding the goods from Naha, Japan to Manila and Cebu City on board another vessel, the "EASTERN
MARS." This finds support under Article 844 of the Code of Commerce which provides as follows:

Art. 844. A captain who may have taken on board the goods saved from the wreck shall
continue his course to the port of destination; and on arrival should deposit the same, with
judicial intervention at the disposal of their legitimate owners. . . .

The owners of the cargo shall defray all the expenses of this arrival as well as the payment of
the freight which, after taking into consideration the circumstances of the case, may be fixed
by agreement or by a judicial decision.

Furthermore, the terms and conditions of the Bill of Lading authorize the imposition of additional freight
charges in case of forced interruption or abandonment of the voyage. At the dorsal portion of the Bills of
Lading issued to the consignees is this stipulation:

12. All storage, transshipment, forwarding or other disposition of cargo at or from a port of
distress or other place where there has been a forced interruption or abandonment of the
voyage shall be at the expense of the owner, shipper, consignee of the goods or the holder of
this bill of lading who shall be jointly and severally liable for all freight charges and expenses
of every kind whatsoever, whether payable in advance or not that may be incurred by the
cargo in addition to the ordinary freight, whether the service be performed by the named
carrying vessel or by carrier's other vessels or by strangers. All such expenses and charges
shall be due and payable day by day immediately when they are incurred.

The bill of lading is a contract and the parties are bound by its terms (Gov't of the Philippine Islands vs.
Ynchausti and Co., 40 Phil. 219). The provision quoted is binding upon the consignee.

Defendant therefore, can validly require payment of additional freight from the consignee. Plaintiff can not
thus recover the additional freight paid by the consignee to defendant. (Memorandum for Defendant, Record,
pp. 215-216).2

On appeal to the Court of Appeals, respondent court affirmed the trial court's findings and conclusions, 3 hence, the present
petition for review before this Court on the following errors:

I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S FINDINGS THAT THE
BURNING OF THE SS "EASTERN EXPLORER", RENDERING ET A CONSTRUCTIVE TOTAL LOSS, IS A NATURAL
DISASTER OR CALAMITY WHICH NOBODY WOULD LIKE TO HAPPEN, DESPITE EXISTING JURISPRUDENCE TO THE
CONTRARY.

II. THE RESPONDENT COURT ARBITRARILY RULED THAT THE BURNING OF THE SS "EASTERN EXPLORER" WAS
NOT THE FAULT AND NEGLIGENCE OF RESPONDENT EASTERN SHIPPING LINES.

III. THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT DEFENDANT HAD
EXERCISED THE EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AS REQUIRED BY LAW.

IV. THE RESPONDENT COURT ARBITRARILY RULED THAT THE MARINE NOTE OF PROTEST AND STATEMENT OF
FACTS ISSUED BY THE VESSEL'S MASTER ARE NOT HEARSAY DESPITE THE FACT THAT THE VESSEL'S MASTER,
CAPT. LICAYLICAY WAS NOT PRESENTED COURT, WITHOUT EXPLANATION WHATSOEVER FOR HIS NON-
PRESENTATION, THUS, PETITIONER WAS DEPRIVED OF ITS RIGHT TO CROSS- EXAMINE THE AUTHOR THEREOF.

V. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S CONCLUSION THAT
THE EXPENSES OR AVERAGES INCURRED IN SAVING THE CARGO CONSTITUTE GENERAL AVERAGE.

VI. THE RESPONDENT COURT ERRONEOUSLY ADOPTED THE TRIAL COURT'S RULING THAT PETITIONER WAS
LIABLE TO RESPONDENT CARRIER FOR ADDITIONAL FREIGHT AND SALVAGE CHARGES. 4

It is quite evident that the foregoing assignment of errors challenges the findings of fact and the appreciation of evidence made
by the trial court and later affirmed by respondent court. While it is a well-settled rule that only questions of law may be raised in
a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that the same admits of the following
exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b) when the
inference made is manifestly mistaken, absurd or impossible; (c) where there is a grave abuse of discretion; (d) when the
12
judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are
conclusions without citation of specific evidence on which they are based;
(i) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents;
and (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by
the evidence on record. 5 Thus, if there is a showing, as in the instant case, that the findings complained of are totally devoid of
support in the records, or that they are so glaringly erroneous as to constitute grave abuse of discretion, the same may be
properly reviewed and evaluated by this Court.

It is worthy to note at the outset that the goods subject of the present controversy were neither lost nor damaged in transit by
the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment took longer
than necessary. What is at issue therefore is not whether or not the carrier is liable for the loss, damage, or deterioration of the
goods transported by them but who, among the carrier, consignee or insurer of the goods, is liable for the additional charges or
expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different
carrier.

In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's finding that the fire that
gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion and we agree.

In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some act of man
or by human means.

It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency. 6

In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason thereof, the
same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder, obviously fully
loaded, was stored in the accommodation area near the engine room and not in a storage area considerably far, and in a safe
distance, from the engine room. Moreover, there was no showing, and none was alleged by the parties, that the fire was caused
by a natural disaster or calamity not attributable to human agency. On the contrary, there is strong evidence indicating that the
acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain and its crew.

First, the acetylene cylinder which was fully loaded should not have been stored in the accommodation area near the engine
room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of spontaneous combustion.
Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly inflammable material was in real
danger of exploding because it was stored in close proximity to the engine room.

Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed to be
reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury. Curious passengers, ignorant of the
danger the tank might have on humans and property, could have handled the same or could have lighted and smoked cigarettes
while repairing in the accommodation area.

Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having complied with
the safety measures and standards by qualified experts 7 before it was loaded in the vessel only shows to a great extent that
negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship. Indeed,
had the respondent and its agents not been negligent in storing the acetylene cylinder near the engine room, then the same
would not have leaked and exploded during the voyage.

Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed that the fire was not the
fault or negligence of respondent but a natural disaster or calamity. The records are simply wanting in this regard.

Anent petitioner's objection to the admissibility of Exhibits "4'' and ''5", the Statement of Facts and the Marine Note of Protest
issued by Captain Tiburcio A. Licaylicay, we find the same impressed with merit because said documents are hearsay evidence.
Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents, was not presented in court to testify to the truth
of the facts he stated therein; instead, respondent ESLI presented Junpei Maeda, its Branch Manager in Tokyo and Yokohama,
Japan, who evidently had no personal knowledge of the facts stated in the documents at issue. It is clear from Section 36, Rule
130 of the Rules of Court that any evidence, whether oral or documentary, is hearsay if its probative value is not based on the
personal knowledge of the witness but on the knowledge of some other person not on the witness stand. Consequently, hearsay
evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the
exceptions to the hearsay evidence rule. 8 It is excluded because the party against whom it is presented is deprived of his right
and opportunity to cross-examine the persons to whom the statements or writings are attributed.

On the issue of whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo
are considered general average, we rule in the affirmative. As a rule, general or gross averages include all damages and expenses
which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk 9 While
the instant case may technically fall within the purview of the said provision, the formalities prescribed under Articles 813 10 and
814 11 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not

13
complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the
occurrence of the average turns to naught.

Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to respondent
carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein petitioner the amount
it paid under protest for additional freight and salvage charges in behalf of the consignees.

WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. Respondent Eastern Shipping Lines, Inc. is
ORDERED to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the
consignees herein.

SO ORDERED.

G.R. No. L-49407 August 19, 1988

NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees.

No. L-49469 August 19, 1988

MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents- appellees.

Balgos & Perez Law Office for private respondent in both cases.

PARAS, J.:

These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled "Development
Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development
Company defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First Instance of
Manila, Sixth Judicial District, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance and
Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND
EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing of plaintiffs complaint on
April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for attorney's
fee.

On defendant Maritime Company of the Philippines' cross-claim against the defendant National Development
Company, judgment is hereby rendered, ordering the National Development Company to pay the cross-
claimant Maritime Company of the Philippines the total amount that the Maritime Company of the Philippines
may voluntarily or by compliance to a writ of execution pay to the plaintiff pursuant to the judgment rendered
in this case.

With costs against the defendant Maritime Company of the Philippines.

(pp. 34-35, Rollo, GR No. L-49469)

The facts of these cases as found by the Court of Appeals, are as follows:

The evidence before us shows that in accordance with a memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of three
ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to manage
and operate said vessel for and in its behalf and account (Exh. A). Thus, on February 28, 1964 the E. Philipp
Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco, California, a total of 1,200
bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the People's
Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents
Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo, Japan,
were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting
of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En route to Manila the
vessel Dofia Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS

14
 Yasushima Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost (Exh. G). The damaged and lost
cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills Corporation
as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3
and R-3}. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was P19,938.00
which the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3).
Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-
interest, for the said lost or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount from
the defendants-NDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-
49469, p.38)

On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First Instance of Manila an
action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal),
pp. 1-6).

Interposing the defense that the complaint states no cause of action and even if it does, the action has prescribed, MCP filed on
May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a
reply on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to
dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and
cross-claim against NDC.

NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an answer to
MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's
complaint was stricken off from the record for its failure to answer DISC's written interrogatories and to comply with the trial
court's order dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it executed
with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC
filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.

On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering the
defendants MCP and NDC to pay jointly and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be
computed from the filing of the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim against NDC.

MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its motion to set aside
the decision was denied by the trial court in its order dated February 13,1970.

On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court.

Hence these appeals by certiorari.

NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July 25,1979, this Court
ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these consolidated cases were given due course
(Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136).

In its brief, NDC cited the following assignments of error:

THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF
COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY
FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED
AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.

II

THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN
PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant
National Development Company; p. 96, Rollo).

On its part, MCP assigned the following alleged errors:

15
I

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT
DISMISSING THE COMPLAINT.

II

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE
PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.

III

THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENTS EXHIBIT "H" AND IN FINDING
ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF
BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE
COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI

IV

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE PETITIONER APPELLANT
MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER
APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE
YASUSHIMA MARU.

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF
AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00
PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS
NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.

VI

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT COMPANY AND
COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY
PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief
for the Maritime Company of the Philippines; p. 121, Rollo)

The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of goods due to
collision of vessels outside Philippine waters, and the extent of liability as well as the rules of prescription provided thereunder.

The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the case at bar and not
the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or damage
resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the Court of
Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability under the
Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP were ordered to
reimburse the insurance company for the amount the latter paid to the consignee as earlier stated.

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it was
held under similar circumstance "that the law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid
down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code
and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of
commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to
the provision of the Civil Code.

In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo,
Japan to the Philippines and that they were lost or due to a collision which was found to have been caused by the negligence or
fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and
it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.

16
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public policy are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negigently,
unless it proves that it has observed the extraordinary diligence required by law.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can
be found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which
deal exclusively with collision of vessels.

More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel,
the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to
the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed
on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and not to
foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the
subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." By
such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly
does not repeal nor limit its application.

On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety Corporation, has no
cause of action against it because the latter did not prove that its alleged subrogers have either the ownership or special
property right or beneficial interest in the cargo in question; neither was it proved that the bills of lading were transferred or
assigned to the alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff- appellee in
this case. (Brief for the Maritime Company of the Philippines, p. 16).

The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading
covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said
goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact.
Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said consignees for
the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has paid)
from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).

MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and operator of the vessel Dona
Nati not a ship agent. As the general managing agent, according to MCP, it can only be liable if it acted in excess of its authority.

As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law.
In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the
NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability.

It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded
(Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly
responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the
Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability
of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations
in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared
jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise
from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not
be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned
to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its
equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).

As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw
cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in
determining their liability.

17
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less by
invoices offered as evidence ' during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v.
Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was caused by its
own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being
jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the
law on averages (Articles 806 to 818, Code of Commerce).

MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to the
Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said claim is not only at variance with
NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots
were at fault for not changing their excessive speed despite the thick fog obstructing their visibility.

Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow trans-shipment of the cargo,
which simply means that the date of arrival of the ship Dona Nati on April 18,1964 was merely tentative to give allowances for
such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment
of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in
Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question
been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in the instant case was
filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged cargo "should have been
delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.

PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the respondent Appellate
Court is AFFIRMED.

SO ORDERED.

G.R. No. 88052 December 14, 1989

JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P.
MECENAS; and OFELIA M. JAVIER, petitioners,
vs.
HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., INC., respondents.

Benito P. Favie and Jose Dario Magno for petitioners.

Hernandez, Velicaria, Vibar & Santiago for private respondents.

FELICIANO, J.:

At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a
gross tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and
Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and
headed towards Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland vessel, also
of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation)
left Manila bound for Bacolod with seven hundred fifty (750) passengers listed in its manifest, and a complete set of officers and
crew members.

On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the "Don Juan" collided at the
Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was
calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers
perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas,
whose bodies were never found despite intensive search by petitioners.

On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City, docketed as Civil Case No.
Q-31525, against private respondents Negros Navigation and Capt. Roger Santisteban, the captain of the "Don Juan" without,
however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners alleged that they were the seven (7)
surviving legitimate children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses perished in the collision which
had resulted from the negligence of Negros Navigation and Capt. Santisteban. Petitioners prayed for actual damages of not less
than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them.

Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon claiming damages against
Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of
the "Don Juan." Manuel Ciocon's body, too, was never found.
18
The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986,
after trial, the trial court rendered a decision, the dispositive of which read as follows:

WHEREFORE, the Court hereby renders judgment ordering:

a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and severally liable to pay
plaintiffs in Civil Case No Q-31525, the sum of P400,000.00 for the death of plaintiffs' parents, Perfecto A.
Mecenas and Sofia P. Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for attorney's fees; plus
costs of the suit.

b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil Company/PNOC Shipping and
Transportation Company, to pay the plaintiff in Civil Case No. Q-33932, the sum of P100,000.00 for the death of
Manuel Ciocon, to pay said plaintiff jointly and severally, the sum of P1 5,000.00 as and for attorney's fees, plus
costs of the suit. 1

Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision to the Court of Appeals. Later,
PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the
Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon
that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court.

In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following:

WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified with respect to Civil Case
No. 31525, wherein defendant appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally
liable to pay the plaintiffs the amount of P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees
and the cost of the suit. 2

The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in reducing the amount of
the damages awarded by the trial court to the petitioners from P400,000.00 to P100,000.00.

We note that the trial court had granted petitioners the sum of P400,000,00 "for the death of [their parents]" plus P15,000.00 as
attorney's fees, while the Court of Appeals awarded them P100,000.00 "as actual and compensatory damages" and P15,000.00
as attorney's fees. To determine whether such reduction of the damages awarded was proper, we must first determine whether
petitioners were entitled to an award of damages other than actual or compensatory damages, that is, whether they were
entitled to award of moral and exemplary damages.

We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case No. Q-31525) brought by
the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We believed that
action is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as
regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers
are in effect suing the carrier in representation of their deceased parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the
widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and
as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an action based upon a breach of the contract of carriage, the
carrier under our civil law is liable for the death of passengers arising from the negligence or willful act of the carrier's employees
although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the
carrier, 4 which liability may include liability for moral damages. 5 It follows that petitioners would be entitled to moral damages
so long as the collision with the "Tacloban City" and the sinking of the "Don Juan" were caused or attended by negligence on the
part of private respondents.

In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232 of the Civil Code:

Article 2332. In contracts and quasi-contracts, the court may exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 6

Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private respondents
acted recklessly, that is, with gross negligence.

We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were grossly negligent during
the events which culminated in the collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting heavy loss
of lives.

The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the
"Tacloban City" was "primarily and solely [sic] at fault and responsible for the collision." 7 Initially, the Minister of National
Defense upheld the decision of Commodore Ochoco. 8 On Motion for Reconsideration, however, the Minister of National
Defense reversed himself and held that both vessels had been at fault:

19
 It is therefore evident from a close and thorough review of the evidence that fault is imputable to both vessels
for the collision. Accordingly, the decision dated March 12, 1982, subject of the Motion for Reconsideration
filed by counsel of M/T Tacloban City, is hereby reversed. However, the administrative penalties imposed oil
both vessels and their respective crew concerned are hereby affirmed. 9

The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of
National Defense had reached that both the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court
summarized the testimony and evidence of PNOC and PNOC Shipping as well as of Negros Navigation in the following terms:

Defendant PNOC's version of the incident:

M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN, January 21, 1985, p. 13); it was
on the starboard (right) side of Tacloban City. This was a visual contact; not picked up by radar (p. 15, Ibid).
Tacloban City was travelling 310 degrees with a speed of 6 knots, estimated speed of Don Juan of 16 knots
(TSN, May 9, pp. 5-6). As Don Juan approached, Tacloban City gave a leeway of 1 0 degrees to the left. 'The
purpose was to enable Tacloban to see the direction of Don Juan (p. 19, Ibid). Don Juan switched to green light,
signifying that it will pass Tacloban City's right side; it will be a starboard to starboard passing (p. 21, Ibid)
Tacloban City's purpose in giving a leeway of 10 degrees at this point, is to give Don Juan more space for her
passage (p. 22, Ibid). This was increased by Tacloban City to an additional 15 degrees towards the left (p. 22,
Ibid). The way was clear and Don Juan has not changed its course (TSN, May 9,1985, p. 39).

When Tacloban City altered its course the second time, from 300 degrees to 285 degrees, Don Juan was about
4.5 miles away (TSN, May 9,1985, p. 7).

Despite executing a hardport maneuver, the collision nonetheless occurred. Don Juan rammed the Tacloban
City near the starboard bow (p. 7, Ibid)."

NENACO's [Negros Navigation] version.

Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, May 24, 1983). Tacloban City
showed its red and green lights twice; it proceeded to, and will cross, the path of Don Juan. Tacloban was on
the left side of Don Juan (TSN, April 20,1983, p. 4).

Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard (TSN, p. 4, Ibid.) This maneuver
is in conformity with the rule that 'when both vessels are head on or nearly head on, each vessel must turn to
the right in order to avoid each other. (p. 5, Ibid). Nonetheless, Tacloban appeared to be heading towards Don
Juan (p. 6, Ibid),

When Don Juan executed hard starboard, Tacloban was about 1,500 feet away (TSN, May 24,1983, p. 6). Don
Juan, after execution of hard starboard, will move forward 200 meters before the vessel will respond to such
maneuver (p. 7, Ibid). The speed of Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t "Between 9 to
15 seconds from execution of hard starboard, collision occurred (p. 8, Ibid). (pp. 3-4 Decision). 10

The trial court concluded:

M/ V Don Juan and Tacloban City became aware of each other's presence in the area by visual contact at a
distance of something like 6 miles from each other. They were fully aware that if they continued on their
course, they will meet head on. Don Juan - steered to the right; Tacloban City continued its course to the left.
There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed
maneuvers inadequate, and too late, to avoid collision.

The Court is of the considered view that the defendants are equally negligent and are liable for damages. (p. 4,
decision). 11

The Court of Appeals, for its part, reached the same conclusion. 12

There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban City" in the events leading up
to the collision and the sinking of the "Don Juan." The remaining question is whether the negligence on the part of the "Don
Juan" reached that level of recklessness or gross negligence that our Civil Code requires for the imposition of exemplary
damages. Our own review of the record in the case at bar requires us to answer this in the affirmative.

In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the "Tacloban City" as
"primarily and solely [sic] at fault and responsible for the collision," did itself set out that there had been fault or negligence on
the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the two (2) vessels.
The decision of Commodore Ochoco said:

xxxxxxxxx
20
 M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision.
Moreover, after the collision, he failed to institute appropriate measures to delay the sinking MS Don Juan and
to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd
Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent
danger of collision and of the actual collision itself Also, he failed to assist his master to prevent the fast sinking
of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining
order among the passengers after the collision.

x x x x x x x x x. 13

We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of
collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and
welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or
"on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation
of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes
the duty of extraordinary diligence-

[t]he duty to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances. 14

The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by
playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such
behaviour, must be deemed grossly negligent.

Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, "to institute appropriate
measures to delay the sinking of M/V Don Juan." This appears to us to be a euphemism for failure to maintain the sea-worthiness
or the water-tight integrity of the "Don Juan." The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes
after initial contact with the "Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers and crew in the
process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision,
did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and,
moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers
and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed
to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself "

There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. The
Certificate of Inspection 16 dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan's
home port, states:

Passengers allowed : 810

Total Persons Allowed : 864

The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially cleared with 878
passengers on board when she sailed from the port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the
passengers "did not include the 126 crew members, children below three (3) years old and two (2) half-paying passengers" which
had been counted as one adult passenger. 17 Thus, the total number of persons on board the "Don Juan" on that ill-starred night
of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by the "Don Juan," per its
own Certificate of Inspection. 18 We note in addition, that only 750 passengers had been listed in its manifest for its final voyage;
in other words, at least 128 passengers on board had not even been entered into the "Don Juan's" manifest. The "Don Juan's"
Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum
number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons
actually on board that tragic night of 22 April 1980.

We hold that under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and
of its ship-owner arises; this presumption was never rebutted by Negros Navigation.

The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the context
of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top speed was
17 knots; while that of the "Tacloban City" was 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of officers and
crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which was
functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City" on his radar screen while the
latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don Juan" while the
"Tacloban City" was still 2.7 miles away. 20In the total set of circumstances which existed in the instant case, the "Don Juan," had
it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City," Indeed, the
"Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.

21
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-
driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the
port side (left) of the other.21 The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned
(for the second time) 150 to port side while the "Don Juan" veered hard to starboard. This circumstance, while it may have made
the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances obtaining
before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed and
construed without regard to all the circumstances surrounding a particular encounter between two (2) vessels. 22 In ordinary
circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, 23 and she
cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not
to be applied where it is apparent, as in the instant case, that her captain was guilty of negligence or of a want of seamanship in
not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting
accordingly. 24 In other words, "route observance" of the International Rules of the Road will not relieve a vessel from
responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the
rules. 25

In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing to
take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for the
"Don Juan" could choose its own distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port shortly before
the moment of collision, signalled its intention to do so by giving two (2) short blasts with horn. 26A The "Don Juan " gave no
answering horn blast to signal its own intention and proceeded to turn hatd to starboard. 26B

We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the
collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of passengers.
We find no necessity for passing upon the degree of negligence or culpability properly attributable to PNOC and PNOC Shipping
or the master of the "Tacloban City," since they were never impleaded here.

It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the death of their parents in the
"Don Juan" tragedy. Clearly, the trial court should have included a breakdown of the lump sum award into its component parts:
compensatory damages, moral damages and exemplary damages. On appeal, the Court of Appeals could have and should have
itself broken down the lump sum award of the trial court into its constituent parts; perhaps, it did, in its own mind. In any case,
the Court of Appeals apparently relying upon Manchester Development Corporation V. Court of Appeals 27 reduced the
P400,000.00 lump sum award into a P100,000.00 for actual and compensatory damages only.

We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before the trial court had in the
body indicated that the petitioner-plaintiffs believed that moral damages in the amount of at least P1,400,000.00 were properly
due to them (not P12,000,000.00 as the Court of Appeals erroneously stated) as well as exemplary damages in the sum of
P100,000.00 and that in the prayer of their complaint, they did not specify the amount of moral and exemplary damages sought
from the trial court. We do not believe, however, that theManchester doctrine, which has been modified and clarified in
subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can be applied in the instant case
so as to work a striking out of that portion of the trial court's award which could be deemed nationally to constitute an award of
moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, which
embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the case at bar was filed
on 29 December 1980, that is, long before either Manchester or Circular No. 7 of 24 March 1988 emerged. The decision of the
trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular No. 7 were promulgated. We do not
believe that Manchester should have been applied retroactively to this case where a decision on the merits had already been
rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is
no indication at all that petitioners here sought simply to evade payment of the court's filing fees or to mislead the court in the
assessment of the filing fees. In any event, we apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by
holding that the petitioners shall pay the additional filing fee that is properly payable given the award specified below, and that
such additional filing fee shall constitute a lien upon the judgment.

We consider, finally, the amount of damages-compensatory, moral and exemplary-properly imposable upon private respondents
in this case. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the
Court of Appeals in the following manner:

1. actual or compensatory damages proved in the course of trial consisting of actual expenses

incurred by petitioners

in their search for their

parents' bodies- -P126,000.00

2. actual or compensatory

damages in case of

22
 wrongful death

(P30,000.00 x 2) -P60,000.00 29

(3) moral damages -P107,000.00

(4) exemplary damages -P107,000.00

Total -P400,000.00

Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in number and that they lost
both father and mothe in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching
for their parents among the survivors and the corpses recovered from the sea or washed ashore, we believe that an additional
amount of P200,000.00 for moral damages, making a total of P307,000.00 for moral damages, making a total of P307,000.00 as
moral damages, would be quite reasonable.

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard
which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of
negligence against them, the law seels to compel them to control their employees, to tame their reckless instincts and to force
them to take adequate care of human beings and their property. The Court will take judicial notive of the dreadful regularity with
which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford
domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of
people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law
and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in
an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Considering the foregoing,
we believe that an additional award in the amount of P200,000.00 as exmplary damages, is quite modest.

The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of the trial court. We
underscore once more, however, the firmly settled doctrine that this Court may consider and resolved all issues which must be
decided in order to render substantial justice to the parties, including issues not explicity raised by the party affected. In the case
at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the imperious requirements of
public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages was erronoeusly
deledted and must be restored and augmented and brought more nearely to the level required by public policy and substantial
justice.

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court of Appeals insofar as it
redurce the amount of damages awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The award granted
by the trial court is hereby RESTORED and AUGMENTED as follows:

(a) P 126,000.00 for actual damages;

(b) P 60,000.00 as compensatory damages for wrongful death;

(c) P 307,000.00 as moral damages;

(d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and

(e) P 15,000.00 as attorney's fees.

Petitioners shall pay the additional filing fees properly due and payable in view of the award here made, which fees shall be
computed by the Clerks of Court of the trial court, and shall constitute a lien upon the judgment here awarded. Cost against
private respondents.

SO ORDERED.

23