CHAPTERS 13-15

1. Lledo - Yu Con
2. Valera - Wing Kee
3. Verceles - Yu Biao
4. Velasco - Far Eastern
5. Tolentino - Puromines
6. Acosta - Litonjua
7. Alih - Planters
8. De Leon - Caltex
9. Santos, Eunice - Dela Torre
10. Santos, Rob - Ouano
11. Abrio - Magsaysay
12. Villanueva - Standard Oil

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

Facts:
The purpose of the action brought in these proceedings is to enable the plaintiff to recover from
the defendants jointly and severally the sum of P450 which had been delivered by the plaintiff to the
first (Ipil) and third (Solamo) of the above-named defendants, master and supercargo, respectively, of a
banca named Maria belonging to the second defendant (Lauron), to be carried, together with various
merchandise belonging to the plaintiff, from the port of Cebu to the town of Catmon.
The money disappeared from said craft during the night of October 18, 1911, while it was
anchored in the port of Cebu and ready to sail for its destination, Catmon, and was not afterwards
found.
The plaintiff based his action on the charge that the disappearance of said sum was due to the
abandonment, negligence, or voluntary breach, on the part of the defendants, of the duty they had in
respect to the safe-keeping of the aforementioned sum.
The defendants, besides denying the allegations of the complaint, pleaded in special defense that
the plaintiff, at his own expense and under his exclusive responsibility, chartered the said banca, the
property of the defendant Lauron, for the fixed period of three days, at the price of P10 per diem, and
that, through the misfortune, negligence, or abandonment of the plaintiff himself, the loss complained
of occurred, while said banca was at anchor in the port of Cebu, and was caused by theft committed by
unknown thieves.
They further alleged that said defendant Lauron, the owner of the banca merely placed this craft at
the disposal of the plaintiff for the price and period agreed upon, and did not go with the banca on its
voyage from Catmon to Cebu.
Ruling of the RTC: The court, in view of the evidence adduced, held that there was no room to
doubt that the sole cause of the disappearance of the money from the said banca was the negligence of
the master and the supercargo, the defendants Ipil and Solamo, respectively, and that the defendant
Narciso Lauron was responsible for that negligence, as owner of the banca, pursuant to articles 589,
587, and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover the amount lost.

Issue: WON the respondents were liable for the P450.

Held: The Supreme Court sustained the RTCs ruling.

It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the
P450, the property of the plaintiff, which, were in the possession of the defendants, the master and the
supercargo of the banca Maria, occurred through the manifest fault and negligence of said defendants,
for, not only did they fail to take the necessary precautions in order that the stateroom containing the
trunk in which they kept the money should be properly guarded by members of the crew and put in such
condition that it would be impossible to steal the trunk from it or that persons not belonging to the
vessel might force an entrance into the stateroom from the outside, but also they did not expressly
station some person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not
proven that the cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that the other
Cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted the statements made by
the two defendants on this point.

It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the said P450
belonging to the plaintiff, and that they received this sum from the latter for the purpose of delivering it
to the store of the town of Catmon, to which it had been consigned. Under such circumstances, said
defendants were the depositaries of the money. The said two defendants being the depositaries of the
sum in question, and they having failed to exercise for its safe-keeping the diligence required by the
nature of the obligation assumed by them and by the circumstances of the time and the place, it is
evident that, in pursuance of the provisions of articles 1601 and 1602, in their relation to articles 1783
and 1784, and as prescribed in articles 1770, of the Civil Code, they are liable for its loss or
misplacement and must restore it to the plaintiff, together with the corresponding interest thereon as
an indemnity for the losses and damages caused him through the loss of the said sum.

With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which the loss
or misplacement of the P450 occurred, of which vessel. It is therefore evident that, in accordance with
the provisions of the Code of Commerce in force, which are applicable to the instant case, the defendant
Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master and in
which, through the fault and negligence of the latter and of the supercago Justo Solamo, there occurred
the loss, theft, or robbery of the P450 that belonged to the plaintiff and were delivered to said master
and supercargo, a theft which, on the other hand, as shown by the evidence, does not appear to have
been committed by a person not belonging to the craft, should, for said loss or theft, be held civilly liable
to the plaintiff, who executed with said defendant Lauron the contract for the transportation of the
merchandise and money aforementioned between the port of Cebu and the town of Catmon, by means
of the said craft.

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2. WING KEE COMPRADORING COMPANY vs. THE BARK "MONONGAHELA," VICTOR S. FOX & CO., INC.,
owner of the bark Monongahela, THE ADMIRAL LINE, and C. G. LOTHIGIUS
G.R. No. L-19540 January 29, 1923

DOCTRINE: ART 587 states that: The owner of a vessel and the agent shall be civilly liable for the acts of
the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel,
provided the creditor proves that the amount claimed was invested therein.
By agent is understood the person intrusted with the provisioning of a vessel, or who represents her in
the port in which she happens to be.

We are of opinion and so hold that the Admiral Line, as agent for the Bark Monongahela, is liable to the
plaintiff for supplies furnished the Monongahela between March 16, 1921 and August 2, 1921(date of
the termination of the agency), but is not responsible for supplies furnished after that date.

FACTS: The plaintiff in this case, Wing Kee Compradoring Company, seeks to recover from the
defendants, principally the Admiral Line, as agent for the Bark Monongahela, the sum of P17,675.64,
with interest and costs, on account of goods, wares, and merchandise sold and delivered by the plaintiff
to the defendants for the use of the crew of the Bark Monongahela.

Turning first to the pleadings, we find the plaintiff in its amended complaint praying for judgment
against the defendants jointly and severally for the sum of P17,675.64, meaning, thereby, we presume,
that it had a just and preferred claim upon and against the Bark Monongahela, and that the debt was
due from the Admiral Line, the agent; C. G. Lothigius, the captain of the boat; and the owners of the
boat, either Victor S. Fox & Co., Inc., or the United States Shipping Board Emergency Fleet Corporation.
Captain Lothigius and the Admiral Line answered. The owners were not cited to appear. No action
against the bark was taken.

The facts as follows:

Beginning with March 16, 1921, and ending with August 16, 1921, various supplies were furnished the
Bark Monongahela by Wing Kee Compradoring Company. Most of the bills for these goods are made out
against the "Admiral Line, S.S. Monongahela." All are considered by the master and the first steward. It
appears, therefore, that the plaintiff was looking to the Admiral Line for payment.

The first requisitions for the supplies are on forms headed "The Admiral Line." Then follows Manila, the
date, and the name, "Wing Kee Compradoring Co." Next is the order, reading: "Please deliver to S. S.
Monongahela now lying at Bay, the following goods and send bills to the Admiral Line:". After this goods
are named. At the foot is found, "United States Shipping Board Emergency Fleet Corporation," although
these words are erased in a few of the requisitions, "The Admiral Line (Pacific Steamship Co.) Operating
Agents. By J. J. Armstrong." On the side of the requisitions in red ink is the following: "Note: This
requisition must be receipted by either Chief Officer, Chief Steward or Chief Engineer and returned to
the Admiral Line, with six copies of invoice immediately after delivery of goods." After May 4, 1921, the
requisitions seem to have been made out by the steward and the master. We deduce from these
documents that the Admiral Line was the operating agent for Monongahela, and was responsible as
such until the agency was terminated.

In the Manila Daily Bulletin for August 2, 1921, appeared the following:
"Notice Bark Monongahela The undersigned hereby give notice that they are not responsible in
any manner whatsoever for any indebtedness incurred by the Bark Monongahela, its Master and/or
Crew The Admiral Line." The trial judge found as a fact that on or before August 4, 1921, the Admiral
Line had ceased to act as agent for the Monongahela. Nevertheless, supplies were furnished the
Monongahela after these dates by the plaintiff.

ISSUE: WON ADMIRAL LINE BEING AN AGENT FOR BARK MONOGAHELA IS LIABLE TO PAY WING KEE
COMPRADORING CO?

HELD:YES, Turning finally to the law, we find section 1 of Title 2 of our Code of Commerce, given up to
the subject, "Owners of Vessels and Their Agents." The first article in this section (art. 586), and the
provision of law which in our judgment is controlling, reads:

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

By agent is understood the person intrusted with the provisioning of a vessel, or who represents her in
the port in which she happens to be.

Applying more directly the law to the pleadings and the facts, it is first to be noted that the plaintiff has
not followed out its allegation that it has a claim against the Bark Monongahela, and might not have
prospered any way, considering the rather dubious doctrine announced in the case of Health vs.
Steamer San Nicolas ([1907], 7 Phil., 532). Not only this, but the plaintiff has made no effort to bring the
owner of the bark into the case and has pushed with no enthusiasm its case against the captain of the
boat. What apparently the plaintiff wants is for the Admiral Line, as the agent for the Bark
Monongahela, to pay the claim, leaving the latter to reimburse itself, if sees fit, from the owners.

To all this appellee(ADMIRAL) answers that as the agency has ceased, action cannot be brought against
the Admiral Line. To our minds this is a rather far-fetched argument, for, pursued to its logical
conclusion, every agent for a vessel could thus avoid responsibility pursuant to article 568 of the Code of
Commerce, by giving up its agency when threatened with suit to enforce the obligations of third parties.
Moreover, the bills were presented when the Admiral Line was yet the agent.

Therefore, we are of opinion and so hold that the Admiral Line, as agent for the Bark Monongahela, is
liable to the plaintiff for supplies furnished the Monongahela between March 16, 1921 and August 2,
1921, but is not responsible for supplies furnished after that date. The mathematical additions show that
the debt of the Admiral Line to the plaintiff amounts to P16,526.29.
______

3. YU BIAO SONTUA & CO vs.MIGUEL J. OSSORIO

G.R. No. L-17690 June 14, 1922

DOCTRINE: The general liability of a vessel owner extends to losses by fire arising from other than a
natural or other excepted cause, whether occurring on the ship accidentally, or communicated from
another vessel, or from the shore; and the fact that fire produces the motive power of a boat does not
affect the case. Such losses are not within the exceptions either of act of God, or peril of the sea, except
by local custom, unless proximately caused by one of these events. In jurisdictions where the civil law
obtains, however, it has been held that if property on a steamboat is destroyed by fire, the owners of
the boat are not responsible, if it was being navigated with proper diligence, although the accident
occurred at night. The common law liability extends even to loss by fires caused entirely by spontaneous
combustion of the cargo, without any negligence on the part of master or crew.

FACTS: On March 12, 1920, 2,000 cases of petroleum and 8,473 cases of gasoline were loaded in the
motor boat Alfonso. The loading was done without the permission from the customs authorities. The
cases were loaded by means of straps supporting 10-12 cases at a time. The cases were placed in the
hold of the ship, which is 14ft from the boiler of the main engine and 4ft from the boiler of the smaller
engine On March 13, the smaller engine was in operation preparatory to the departure Subsequently, a
fire broke out with an explosion on board Alfonso followed by a violent expulsion of gasoline and
petroleum Due to the magnitude of the fire and the inflammability of the materials and the proximity of
the steamer Y. Sontua, the fire spread to the said steamer Sontua brought this action to recover from
Ossorio, the owner of Alfonso, alleging that the damages were due to the negligence of the agents and
employees of Ossorio Ossorio contended that the damages were caused by a fortuitous event and are
not imputable to his or any of his agents/employees/mandataries negligence CFI ruled in favor of
Sontua and held that the explosion was due to the negligence of the persons in charge of Alfonso.
Ossorio is liable for the negligence of his agents and employees

ISSUES: Whether the owner of the motorboat, was liable for the negligence of his agents and
employees?

HELD: YES. Expert testimony introduced by Sontua shows the explosion and fire, which caused the
damages, are imputable to the negligence of the persons having charge of Alfonso at that time. It was
shown that due to the manner by which the cases were loaded, the cases would receive bumps resulting
in damage to the cans and consequent leakage (use of straps). The gases formed by the volatilization are
apt to accumulate in a compartment without sufficient ventilation (hold of a ship). This accumulation
will cause the gases to ignite upon coming in contact with a spark or upon temperature being sufficiently
raised (smaller engine was in operation). The rule is that where the vessel is one of freight, a public
concern or public utility, it owner or agent is liable for the tortuous acts of his agents The Code of
Commerce further provides that the general liability of a vessel owner extends to losses by fire arising
from other than a natural or other excepted cause, whether occurring on the ship, or communicated
from other vessel, or from the shore. This means that losses by fire are not within the exceptions (act of
God or peril of the sea except by local custom) UNLESS proximately caused by one of the exceptions Re:
allegation that obligations under Art. 612 of the Code of Commerce are inherent duties do not limit to
the latter the civil liability arising from their nonfulfillment, but while the master is responsible to the
ship agent, the ship agent, in turn, is responsible to third persons, as is clearly provided in article 618 of
said Code, in which express mention is made, is subsections 5 and 7, of the duties enumerated in the
said article 612.

4. FAR EASTERN SHIPPING COMPANY vs. COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY
G.R. No. 130150; October, 1998

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

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

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

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

5. Puromines Inc. vs. CA

Doctrine: Charter party defined; Kinds

American jurisprudence defines charter party as a contract by which an entire ship or some principal part
thereof is let by the owner to another person for a specified time or use. Charter or charter parties are of
two kinds. Charter of demise or bareboat and contracts of affreightment. Under the demise or bareboat
charter of the vessel, the charterer will generally be considered as owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro
hac vice, subject to liability to others for damages caused by negligence. To create a demise the owner
of a vessel must completely and exclusively relinquish possession, anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.

Facts: Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract with Philipp Brothers
Oceanic, Inc. for the sale of prilled Urea in bulk. On 22 May 1988, the vessel M/V Liliana Dimitrova
loaded on board at Yuzhny, USSR a shipment of 15,500 metric tons prilled Urea in bulk complete and in
good order and condition for transport to Iloilo and Manila, to be delivered to Puromines. 3 bills of
lading were issued by the ship-agent in the Philippines, Maritime Factors Inc., namely: Bill of Lading 1
dated 12 May 1988 covering 10,000 metric tons for discharge Manila; Bill of Lading 2 of even date
covering 4,000 metric tons for unloading in Iloilo City; and Bill of Lading 3, same date, covering 1,500
metric tons likewise for discharged in Manila. The shipment covered by Bill of Lading 2 was discharged in
Iloilo City complete and in good order and condition. However, the shipments covered by Bill of Ladings
1 and 3 were discharged in Manila in bad order and condition, caked, hardened and lumpy, discolored
and contaminated with rust and dirt. Damages were valued at P683, 056.29 including additional
discharging expenses.

Consequently, Puromines filed a complaint with the trial court for breach of contract of carriage against
Maritime Factors Inc. as ship-agent in the Philippines for the owners of the vessel MV Liliana
Dimitrova, while Philipp Brothers Oceanic Inc., was impleaded as charterer of the said vessel and
proper party to accord Puromines complete relief (Civil Case 89-47403). Maritime Factors, Inc. filed its
Answer to the complaint, while Philipp Bros. filed a motion to dismiss, dated 9 February 1989, on the
grounds that the complaint states no cause of action; that it was prematurely filed; and that Puromines
should comply with the arbitration clause in the sales contract. The motion to dismiss was opposed by
Puromines contending the inapplicability of the arbitration clause inasmuch as the cause of action did
not arise from a violation of the terms of the sales contract but rather for claims of cargo damages
where there is no arbitration agreement. On 26 April 1989, the trial court denied Philipp Bros. motion
to dismiss.

Elevating the matter to the Court of Appeals, and on 16 November 1989, Purominess complaint was
dismissed. The appellate court found that the arbitration provision in the sales contract and/or the bills
of lading is applicable in the present case. Hence, the special civil action for certiorari and prohibition.
The Supreme Court dismissed the petition and affirmed the decision of the court a quo.

Arbitration clause in Sales Contract S151.8.01018 entered by Puromines with Philipp Brothers Oceanic

The Sales Contract S151.8.01018 provided, among others, an arbitration clause which states that Any
disputes arising under this contract shall be settled by arbitration in London in accordance with the
Arbitration Act 1950 and any statutory amendment or modification thereof. Each party is to appoint an
Arbitrator, and should they be unable to agree, the decision of an Umpire appointed by them to be final.
The Arbitrators and Umpire are all to be commercial men and resident in London. This submission may
be made a rule of the High Court of Justice in England by either party.

2. Sales contract comprehensive enough to include claims for damages arising from carriage

The sales contract is comprehensive enough to include claims for damages arising from carriage and
delivery of the goods. As a general rule, the seller has the obligation to transmit the goods to the buyer,
and concomitant thereto, the contracting of a carrier to deliver the same.

3. Article 1523 NCC

Artiicle 1523 of the Civil Code provides that Where in pursuance of a contract of sale, the seller in
authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for in article 1503, first, second and third
paragraphs, or unless a contrary intent appear. Unless otherwise authorized by the buyer, the seller
must take such contract with the carrier on behalf of the buyer as may be reasonable, having regard to
the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the
goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier
as a delivery to himself,, or may hold the seller responsible in damages. xxx

4. Contract provides conditions relative to delivery of goods; Relevant provisions

The disputed sales contact provides for conditions relative to the delivery of goods, such as date of
shipment, demurrage, weight as determined by the bill of lading at load port and more particularly the
following provisions: (3) Intention is to ship in one bottom, approximately 5,000 metrics tons to
Puromines and approximately 15,000 metric tons to Makati Agro. However, Sellers to have right to ship
material as partial shipment or co-shipment in addition to above. In the event of co-shipment to a third
party within Philippines same to be discussed with and acceptable to both Puromines and Makati Agro.
(4) Sellers to appoint neutral survey for Sellers account to conduct initial draft survey at first discharge
port and final survey at last discharge port. Surveyors results to be binding and final. In the event draft
survey results show a quantity less than the combined Bills of Lading quantity for both Puromines and
Makati Agro, Sellers to refund the difference. In the event that draft survey results show a quantity in
excess of combined Bills of Lading of quantity of both Puromines and Makati Agro then Buyers to refund
the difference. (5) It is expressly and mutually agreed that neither Sellers nor vessels Owners have any
liability to separate cargo or to deliver cargo separately or to deliver minimum/maximum quantities
stated on individual Bills of Lading. At each port vessel is to discharge in accordance with Buyers local
requirements and it is Buyers responsibility to separate individual quantities required by each of them
at each port during or after discharged.

5. Charter party defined; Kinds

American jurisprudence defines charter party as a contract by which an entire ship or some principal part
thereof is let by the owner to another person for a specified time or use. Charter or charter parties are of
two kinds. Charter of demise or bareboat and contracts of affreightment.

6. Demise or bareboat charter of the vessel

Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner
for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create
a demise the owner of a vessel must completely and exclusively relinquish possession, anything short of
such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter
party at all.

7. Contract of affreightment

A contract of affreightment is in which the owner of the vessel leases part or all of its space to haul
goods for others. It is a contract for a special service to be rendered by the owner of the vessel and
under such contract the general owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his payment of the
charter hire. If the charter is a contract of affreightment, which leaves the general owner in possession
of the ship as owner for the voyage, the rights, responsibilities of ownership rest on the owner and the
charterer is usually free from liability to third persons in respect of the ship.

8. Responsibility to third persons for goods shipped follows vessels possession and employment

Responsibility to third persons for goods shipped on board a vessel follows the vessels possession and
employment; and if possession is transferred to the charterer by virtue of a demise, the charterer, and
not the owner, is liable as carrier on the contract of affreightment made by himself or by the master
with third persons, and is answerable for loss, damage or non-delivery of goods received for
transportation. An owner who retains possession of the ship, though the hold is the property of the
charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading or
unloading of the cargo.

9. Contract referred in determining liability for damages;

Arbitration clause should be respected in any case

Assuming that in the present case, the charter party is a demise or bareboat charter, then Philipp
Brothers is liable to Puromines, Inc., subject to the terms and conditions of the sales contract. On the
other hand, if the contract between Philipp Brothers and the owner of the vessel MV Liliana Dimitrova
was merely that of affreightment, then it cannot be held liable for the damages caused by the breach of
contract of carriage, the evidence of which is the bills of lading. In any case, whether the liability of
Philipp Bros. should be based on the same contract or that of the bill of lading, the parties are
nevertheless obligated to respect the arbitration provisions on the sales contract and/or the bill of
lading. Puromines being a signatory and party to the sales contract cannot escape from his obligation
under the arbitration clause.

10. Arbitration provision in bills of lading properly discussed even if not raised as special or affirmative
defense The three bills of lading were attached to the complaint as and are therefore parts thereof and
may be considered as evidence although not introduced as such. Hence, it was then proper for the
appellate court to discuss the contents of the bills of lading (especially the arbitration provisions
thereof), having been made part of the record; even if they are not raised as a special or affirmative
defense.

11. Arbitration valid and constitutional

Arbitration has been held valid and constitutional. Even before the enactment of RA 876, the Court has
countenanced the settlement of disputes through arbitration. The rule now is that unless the agreement
is such as absolutely to close the doors of the courts against the parties, which agreement would be
void, the courts will look with favor upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.

12. Arbitration; Mindanao Portland Cement vs. McDonough Construction Co. of Florida

As pointed out in the case of Mindanao Portland Cement Corp. v. McDonough Construction Company of
Florida, the Court said that Since there obtains herein a written provision for arbitration as well as
failure on respondents part to comply therewith, the court a quo rightly ordered the parties to proceed
to their arbitration in accordance with the terms of their agreement (Sec. 6 Republic Act 876).
Respondents arguments touching upon the merits of the dispute are improperly raised herein. They
should be addressed to the arbitrators. This proceeding is merely a summary remedy to enforce the
agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties
claims but only to determine if they should proceed to arbitration or not. And although it has been ruled
that a frivolous or patently baseless claim should not be ordered to arbitration it is also recognized that
the mere fact that a defense exist against a claim does not make it frivolous or baseless.

13. Arbitration; Bengson vs. Chan

In the case of Bengson v. Chan, the court upheld the provision of a contract which required the parties
to submit their disputes to arbitration. Therein, the court held that the trial court sensibly said that all
the causes of action alleged in the plaintiffs amended complaint are based upon the supposed violations
committed by the defendants of the Contract of Construction of a Building and that the provisions of
paragraph 15 hereof leave a very little room for doubt that the said causes of action are embraced
within the phrase any and all questions, disputes or differences between the parties hereto relative to
the construction of the building, which must be determined by arbitration of two persons and such
determination by the arbitrators shall be final, conclusive and binding upon both parties unless they to
court, in which the case the determination by arbitration is a condition precedent for taking any court
action. xxx We hold that the terms of paragraph 15 clearly express the intention of the parties that all
disputes between them should first be arbitrated before court action can be taken by the aggrieved
party.

HELD: We hold that the terms of paragraph 15 clearly express the intention of the parties that all
disputes between them should first be arbitrated before court action can be taken by the aggrieved
party." Premises considered, We uphold the validity and applicability of the arbitration clause as stated
in Sales Contract No. S151.8.01018 to the present dispute.

WHEREFORE, petition is hereby DISMISSED and decision of the court a quo is AFFIRMED.
SO ORDERED.

6. LITONJUA VS. NATIONAL SEAMEN BOARD AND GREGORIO P. CANDONGO

G.R. No. L-51910, August 10, 1989

Doctrine:
It is well settled that in a demise or bareboat charter, the charterer is treated as owner pro hac vice of
the vessel, the charterer assuming in large measure the customary rights and liabilities of the shipowner
in relation to third persons who have dealt with him or with the vessel. In such case, the Master of the
vessel is the agent of the charterer and not of the shipowner. The charterer or owner pro hac vice, and
not the general owner of the vessel, is held liable for the expenses of the voyage including the wages of
the seamen.

Facts:
The M/V Dufton Bay is an ocean-going vessel of foreign registry owned by the R.D. Mullion Ship Broking
Agency Ltd. ("Mullion"). Petitioner Litonjua Shipping Company (Litonjua) is the Philippine Agent or
duly appointed local crewing Managing Office of the Fairwind Shipping Corporation (Fairwind).

On September 11, 1976, the Master of the Vessel, Captain Ho, hired private respondent Gregorio
Candongo in Cebu City as 3rd engineer for a period of 12 months with a monthly wage of $500. At the
time, M/V Dufton Bay was chartered by Fairwind. On December 28, 1976, Candongo was dismissed and
required to disembark in Malaysia by owners arrange.

Upon returning to the Philippines, private respondent Candongo filed a complaint with the hearing
officer of the National Seamen Board (NSB) against petitioner Litonjua, as agent of charterer, and
Mullion, the shipowner, for damages. It was granted by NSB citing the lack of valid cause for dismissal.

On appeal to the central office of NSB by Litonjua, a decision was rendered:

It can be reasonably inferred that the master of the vessel acted for and in behalf of Fairwind Shipping
Corporation who had the obligation to pay the salary of the complainant. It necessarily follows that
Fairwind Shipping Corporation is the employer of said complainant. Moreover, it had been established
by complainant that Litonjua Shipping Company, Inc., had knowledge of and participated, through its
employee, in the recruitment of herein complainant.
Thus, petitioner asks for a certiorari of the NSB decision on grounds that:
As a general rule, admiralty law as embodied in the Philippine Code of Commerce fastens liability for
payment of the crew's wages upon the shipowner, and not the charterer;

Issue:
W.O.N the shipowner, Mullion, is liable for the wages due to private respondent Candongo

Ruling:
No. Under Maritime Law, there are 3 types of charter parties:

(a) the "bareboat" or "demise" charter;

(b) the "time" charter; and
(c) the "voyage" or "trip" charter.

A bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished house is a

demise of real property. The shipowner turns over possession of his vessel to the charterer, who then
undertakes to provide a crew and victuals and supplies and fuel for her during the term of the charter.
The shipowner is not normally required by the terms of a demise charter to provide a crew, and so the
charterer gets the "bareboat", i.e., without a crew. Sometimes, of course, the demise charter might
provide that the shipowner is to furnish a master and crew to man the vessel under the charterer's
direction, such that the master and crew provided by the shipowner become the agents and servants or
employees of the charterer, and the charterer (and not the owner) through the agency of the master,
has possession and control of the vessel during the charter period.

It is well settled that in a demise or bareboat charter, the charterer is treated as owner pro hac vice (for
this occasion) of the vessel, the charterer assuming in large measure the customary rights and liabilities
of the shipowner in relation to third persons who have dealt with him or with the vessel. In such case,
the Master of the vessel is the agent of the charterer and not of the shipowner. The charterer or owner
pro hac vice, and not the general owner of the vessel, is held liable for the expenses of the voyage
including the wages of the seamen.

In this case, Litonjua may be held liable for damages as agent of the charterer Fairwind. First, Litonjua
did not give a copy of the charter of M/V Dufton Bay. It can be assumed that petitioner knew of the
charter because they knew the legal effect of their principal being a bareboat charterer is contrary to
their position. Second, the charterer benefitted from the employment of private respondent Candongo.
Litonjua assisted in recruiting Candongo and 10 other Filipinos. Furthermore, the words "our ships" may
well be read to refer both to vessels registered in the name of Fairwind and vessels owned by others but
chartered by Fairwind. Third, if Litonjua is not held liable, it would be extremely difficult for respondents
to make claims because the ship is foreign owned and does not do regular business in the Philippines.
Therefore, it can be concluded that private respondent was properly regarded as an employee of the
charterer Fairwind and that petitioner Litonjua may be held to answer to private respondent for the
latter's claims as the agent in the Philippines of Fairwind.
7. Planters Products Inc. vs. Court of Appeals
Doctrine:

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

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to
the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan.
A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to
determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
discharge. 11
shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo
dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839
M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt.

The defendant carrier argued that the strict public policy governing common carriers does not apply to
them because they have become private carriers by reason of the provisions of the charter-party.

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

Held:
NO. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the
charterer did not have any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the determination of the course of
the voyage and other technical incidents of maritime navigation were all consigned to the officers and
crew who were screened, chosen and hired by the shipowner.

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

Note: In this case, nevertheless, the carrier was successful in proving that it exercised extraordinary
diligence.

8. Caltex v. Sulpicio Lines, Sept. 30,1999

131166 September 30, 1999
Lessons Applicable: Charter Party (Transportation)

FACTS:

December 19, 1987 8 pm: motor tanker MT Vector owned and operated by Vector Shipping
Corporation carried 8,800 barrels of petroleum products of Caltex wherein the latter chartered the
MT Vector (contract of affreightment)
December 20, 1987 6:30 am: MV Doa Paz passenger and cargo vessel owned and operated by
Sulpicio Lines, Inc. left the port of Tacloban headed for Manila with 1,493 passengers indicated in
the Coast Guard Clear
December 20, 1987: MT Vector collided with MV Doa Paz in the open sea within the vicinity of
Dumali Point between Marinduque and Oriental Mindoro, killing almost all the passengers and crew
members of both ships except for 24 survivors
MV Doa Paz carried an estimated 4,000 passengers most were not in the passenger manifest
board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector, its
registered operator Francisco Soriano, and its owner and actual operator Vector Shipping
Corporation, were at fault and responsible for its collision with MV Doa Paz

February 13, 1989: Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother
respectively, filed a complaint for Damages Arising from Breach of Contract of Carriage against
Sulpicio Lines, Inc. for the death of Sebastian E. Caezal (public school teacher 47 years old) and his
11-year old daughter Corazon G. Caezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex
Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully
well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe
navigation
RTC: dismissed the third party complaint and favored the Caezal's against Sulpicio Lines
CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for damages resulting from a collision
between the chartered vessel and a passenger ship

HELD: NO. Grants Petition. CA set aside.

respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage:
bill of lading or equivalent shipping documents; or
charter party or similar contract on the other
Caltex and Vector entered into a contract of affreightment, also known as a voyage charter
charter party. It is contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use
Charter parties fall into three main categories:

(1) Demise or bareboat

charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage
or service stipulated, subject to liability for damages caused by negligence
common carrier becomes private

(2) contract of affreightment

one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in consideration of the payment
of freight
may be either:
time charter - wherein the leased vessel is leased to the charterer for a fixed
period of time
voyage charter - wherein the ship is leased for a single voyage
- charter-party provides for the hire of the vessel only, either for a determinate period of time or
for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the ship
charterer is free from liability to third persons in respect of the ship
does not convert the common carrier into a private carrier

Furthermore, Carriage of Goods by Sea Act provides that:

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

(a) Make the ship seaworthy;

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

 xxx xxx xxx

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

a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and
its crew, the carrier being obliged by law to impliedly warrant its seaworthiness
nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping
his cargoes
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two
years before the tragic incident occurred in 1987. Past services rendered showed no reason for
Caltex to observe a higher degree of diligence.
Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard
itself was convinced of its seaworthiness

Therefore, Caltex Inc, charterer is not liable for damages resulting from a collision between the
chartered vessel and a passenger ship

9. Dela Torre vs CA

FACTS:
1. Concepcion owned LCT- Josephine a vessel registered with the Philippine Coast Guard
2. Concepcion entered into a Preliminary Agreement with Roland Dela Torre
for the dry-docking and repairs of the said vessel as well as for its charter afterwards.
3. Under this agreement, Concepcion agreed that after the dry-docking and repair of LCT-Josephine, it
should be chartered for 10,000.00 per month
4. One of the conditions was: The CHARTERER will be the one to pay the insurance premium of the
vessel
5. PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship
owned by Rolands father, Agustin de la Torre (Agustin)
6. On November 23, 1984, the LCT-Josephine with its cargo of sand and gravel arrived at Philpos, Isabel,
Leyte. The vessel was beached near the NDC Wharf.
7. With the vessels ramp already lowered, the unloading of the vessels cargo began with the use of
Larrazabals payloader.
8. While the payloader was on the deck of the LCT-Josephine scooping a load of the cargo, the vessels
ramp started to move downward, the vessel tilted and sea water rushed in. Shortly thereafter,
LCT-Josephine sank
9. Concepcion demanded that PTSC/ Roland refloat LCT-Josephine
10. But it did not materialize
ISSUE:
W/N the Charterer as well as the sub charterer should be liable

HELD:
1. In the present case, the charterer and the sub-charterer through their respective contracts of
agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was
likewise manned by the charterer and later by the sub-charterers people. With the complete and
exclusive relinquishment of possession, command and navigation of the vessel, the charterer and later
the sub-charterer became the vessels owner pro hac vice. Now, and in the absence of any showing that
the vessel or any part thereof was commercially offered for use to the public, the above
agreements/charter parties are that of a private carriage where the rights of the contracting parties are
primarily defined and governed by the stipulations in their contract.

2. Although certain statutory rights and obligations of charter parties are found in the Code of
Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the present case.
Indeed, none of the provisions found in the Code of Commerce deals with the specific rights and
obligations between the real shipowner and the charterer obtaining in this case. Necessarily, the Court
looks to the New Civil Code to supply the deficiency. Thus, the RTC and the CA were both correct in
applying the statutory provisions of the New Civil Code in order to define the respective rights and
obligations of the opposing parties.

3. Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion
for the dry-docking and repair of LCT-Josephine, is liable under Article 1189 of the New Civil Code. There
is no denying that the vessel was not returned to Concepcion after the repairs because of the provision
in the Preliminary Agreement that the same should be used by Roland for the first two years. Before the
vessel could be returned, it was lost due to the negligence of Agustin to whom Roland chose to
sub-charter or sublet the vessel.
PTSC is liable to Concepcion under Articles 1665 and 1667 of the New Civil Code. As the charterer or
lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to return the
thing leased and it was liable for the deterioration or loss of the same.

4. Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under
Article 1651 of the New Civil Code. Although he was never privy to the contract between PTSC and
Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his
non-inclusion in the complaint of Concepcion, it was deemed amended so as to include him because,
despite or in the absence of that formality of amending the complaint to include him, he still had his day
in court as he was in fact impleaded as a third-party defendant by his own son, Roland the very same
person who represented him in the Contract of Agreement with Larrazabal.
In any case, all three petitioners are liable under Article 1170 of the New Civil Code.

5. The necessity of insuring the LCT-Josephine, regardless of who will share in the payment of the
premium, is very clear under the Preliminary Agreement and the subsequent Contracts of Agreement
dated June 20, 1984 and August 1, 1984, respectively. The August 17, 1984 letter of Concepcions
representative, Rogelio L. Martinez, addressed to Roland in his capacity as the president of PTSC
inquiring about the insurance of the LCT-Josephine as well as reiterating the importance of insuring the
said vessel is quite telling.

6. Clearly, the petitioners, to whom the possession of LCT Josephine had been entrusted as early as the
time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to
do so in clear contravention of their respective agreements. Certainly, they should now all answer for
the loss of the vessel.

10. OUANO vs. CA

G.R. No. 95900, July 23, 1992

DOCTRINES:
The act of the charterer in sub-chartering the vessel, in spite of a categorical prohibition may be
a violation of the contract, but the owner's right of recourse is against the original charterer,
either for rescission or fulfillment, with the payment of damages in either case.
Where the charter constitutes a demise of the ship and the charterer is the owner for the
voyage, the general owner has no lien on the cargo for the hire of the vessel, in the absence of
an express provision therefor

FACTS:
Julius Ouano is the registered owner and operator of the motor vessel known as M/V Don Julio Ouano.
Ouano leased the said vessel to respondent Rafols under a charter party. It was expressly stipulated that
the charterer should operate the vessel for his own benefit and should not sublet or sub-charter to the
same without the knowledge and written consent of the owner.

Rafols contracted with respondent Market Developers, Inc. (hereafter, MADE) through its group
manager, respondent Julian O. Chua, under an agreement denominated as a "Fixture Note" to transport
13,000 bags of cement from Iligan City to General Santos City, consigned to respondent Supreme
Merchant Construction Supply, Inc. The fixture note did not have the written consent of Ouano.

Subsequently, Ouano wrote a letter to MADE through its aforesaid manager, Chua, "to strongly request,
if not demand to hold momentarily any payment or partial payment whatsoever due M/V Don Julio
Ouano until Mr. Florentino Rafols makes goods his commitment" to Ouano. However, MADE, as shipper,
paid Rafols the amount of P23,075.00 corresponding to the last installment of the freightage for the
aforestated cargo of cement.

The entire cargo was thereafter unloaded without any attempt on the part of either the captain of M/V
Don Julio Ouano or the sobre cargo of Rafols, or even of Ouano himself who was then in General Santos
City Port, to hold and keep in deposit either the whole or part of the cement cargo to answer for
freightage. Neither was there any demand made on any of the respondents for a bond to secure
payment of the freightage, nor to assert in any manner the maritime lien for unpaid freight over the
cargo by giving notice thereof to the consignee SMCI. The cement was sold in due course of trade by
SMCI to its customers.

Ouano filed a complaint in the Regional Trial Court of Cebu against MADE, as shipper; SMC, as
consignee; and Rafols, as charterer, seeking payment of P23,000.00 representing the freight charges for
the cement cargo. The trial court rendered a decision in favor of Ouano. On appeal, the CA reversed the
aforesaid decision. Hence, this petition.

ISSUES:
1. Whether the aforestated fixture note executed by Rafols and MADE was in derogation of the
prohibition against the subletting or sub-chartering of the vessel.
2. Whether the maritime lien on the cargo subsists, the first freight installment having remained unpaid
to petitioner Ouano as owner of M/V Don Julio Ouano

RULING:
1. NO. Rafols did not, by entering into said contract of transportation of the cement cargo, thereby
sublease the vessel. The possession, operation, and management of the vessel was not transferred to
MADE but remained with Rafols as the lessee or charterer. Rafols, as such lessee, was the one who
bound himself to transport, as he did transport, the cargo of cement for a fixed price. The aforesaid
allegations of Ouano that Rafols violated the prohibition in the contract against the sublease or
sub-charter of the vessel without his knowledge and written consent, even if true, does not give rise to a
cause of action against the supposed sublease or sub-charterer. The act of the charterer in
sub-chartering the vessel, in spite of a categorical prohibition may be a violation of the contract, but the
owner's right of recourse is against the original charterer, either for rescission or fulfillment, with the
payment of damages in either case.

Furthermore, there is no evidence on record to show that said respondents had knowledge of the
prohibition imposed in the original charter party to sublease or sub-charter the vessel. Also, as stated in
the fixture note, the agreement between Rafols and MADE was for the former to transport the cement
of the latter using either the "M/V Don Julio Ouano or substitute vessel at his discretion." Hence, the
decision to use the M/V Don Julio Ouano in transporting the cargo of MADE was solely that of Rafols.

Now, even on Ouano's theory that there was a sublease, the personality of the lessee qua lessee does
not disappear; his rights and obligations vis-a-vis the lessor are not passed on to nor acquired by the
sublessee. The lessor is, in the main and except only in the instances specified in the Civil Code, a
stranger to the relationship between the lessee-sublessor and the sublessee. MADE was, therefore,
under no obligation to pay petitioner since the freightage was payable to Rafols. To further withhold the
payment of said installment would constitute a breach of MADE's obligation under the foregoing
contract.

2. NO. Herein petitioner Ouano, as owner of the vessel, has no lien on the cargo. A charter party may,
among other classifications, be of two kinds: One is where the owner agrees to carry a cargo which the
charterer agrees to provide, and the second is where there is an entire surrender by the owner of the
vessel to the charterer, who hires the vessel as one hires a house, takes her empty, and provides the
officers and provisions, and, in short, the entire outfit. In such a contract, the charterer is substituted in
place of the owner and becomes the owner for the voyage. This second type is also known as a bareboat
charter or otherwise referred to as a demise of the vessel. In a charter party of the second kind, not only
the entire capacity of the ship is let but the ship itself, and the possession is passed to the charterer. The
entire control and management of it is given up to him. The general owner loses his lien for freight, but
the lien itself is not destroyed; the charterer is substituted in his place, in whose favor the lien continues
to exist when goods are taken on freight. The general owner, however, has no remedy for the charter of
his vessel but his personal action on the covenants of the charter party. It is a contract in which he trusts
in the personal credit of the charterer.

Therefore, where the charter constitutes a demise of the ship and the charterer is the owner for the
voyage, and that is the kind of charter party involved in the instant case, the general owner has no lien
on the cargo for the hire of the vessel, in the absence of an express provision therefor as in the case at
bar.

Moreover, even on the assumption that petitioner had a lien on the cargo for unpaid freight, the same
was deemed waived when the goods were unconditionally released to the consignee at the port of
destination. In the present case, the cargo of cement was unloaded from the vessel and delivered to the
consignee on October 23, 1980, without any oral or written notice or demand having been made on
SMCSI for unpaid freight on the cargo. Consequently, after the lapse of thirty (30) days from the date of
delivery, the cargo of cement had been released from any maritime lien for unpaid freight.

11. Magsaysay Inc. v Agan

GR No. L-6393 January 31, 1955

Doctrine The law on averages is contained in the Code of Commerce. Under that law, averages are
classified into simple or particular and general or gross. Generally speaking, simple or particular
averages include all expenses and damages caused to the vessel or cargo which have not inured to the
common benefit (Art. 809), and are, therefore, to be borne only by the owner of the property gave rise
to same (Art. 810); while general or gross averages include "all the 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" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of
the articles saved (Art. 812). The following are the requisites for general average: First, there must be a
common danger. This means, that both the ship and the cargo, after has been loaded, are subject to the
same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises
from the accidents of the sea, dispositions of the authority, or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent or may rationally be said to be
certain and imminent. This last requirement exclude measures undertaken against a distant peril.
Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately.
Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo.
Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal
steps and authority.
FACTS The S S "San Antonio", vessel owned and operated by plaintiff, left Manila on October 6, 1949,
bound for Basco, Batanes, vis Aparri, Cagayan, with general cargo belonging to different shippers,
among them the defendant. The vessel reached Aparri on the 10th of that month, and after a day's
stopover in that port, weighed anchor to proceed to Basco. But while still in port, it ran aground at the
mouth of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff have
it refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel returned to
Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were delivered
to their respective owners or consignees, who, with the exception of defendant, made a deposit or
signed a bond to answer for their contribution to the average. On the theory that the expenses incurred
in floating the vessel constitute general average to which both ship and cargo should contribute, plaintiff
brought the present action in the Court of First Instance of Manila to make defendant pay his
contribution, which, as determined by the average adjuster, amounts to P841.40. Defendant, in his
answer, denies liability to his amount, alleging, among other things, that the stranding of the vessel was
due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat
did not constitute general average, and that the liquidation of the average was not made in accordance
with law.

ISSUE W/NOT the trial court erred in allowing the general average and thus, making the defendant to
pay for its contribution of the expenses.

RULING YES. The stranding of plaintiff's vessel was due to the sudden shifting of the sandbars at the
mouth of the river which the port pilot did not anticipate. The standing may, therefore, be regarded as
accidental, and the question is whether the expenses incurred in floating a vessel so stranded should be
considered general average and shared by the cargo owners.

With respect to the first requisite, the evidence does not disclose that the expenses sought to be
recovered from defendant were incurred to save vessel and cargo from a common danger. The vessel
ran aground in fine weather inside the port at the mouth of a river, a place described as "very shallow".
It would thus appear that vessel and cargo were at the time in no imminent danger or a danger which
might "rationally be sought to be certain and imminent." It is, of course, conceivable that, if left
indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated at
the above quotation, "this last requirement excludes measures undertaken against a distant peril." It is
the deliverance from an immediate, impending peril, by a common sacrifice, that constitutes the
essence of general average. In the present case there is no proof that the vessel had to be put afloat to
save it from imminent danger. What does appear from the testimony of plaintiff's manager is that the
vessel had to be salvaged in order to enable it "to proceed to its port of destination." But as was said in
the case just cited it is the safety of the property, and not of the voyage, which constitutes the true
foundation of the general average.

As to the second requisite, we need only repeat that the expenses in question were not incurred for the
common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. The
cargo could, without need of expensive salvage operation, have been unloaded by the owners if they
had been required to do so.

With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice
was for the benefit of the vessel to enable it to proceed to destination and not for the purpose of
saving the cargo, the cargo owners are not in law bound to contribute to the expenses.

The final requisite has not been proved, for it does not appear that the expenses here in question were
incurred after following the procedure laid down in article 813 et seq.

In conclusion we found that plaintiff not made out a case for general average, with the result that its
claim for contribution against the defendant cannot be granted.

12. STANDARD OIL COMPANY OF NEW YORK vs CASTELO

G.R. No. L-13695 October 18, 1921

DOCTRINE: The loss of this petroleum is a general and not a special average, with the result that the
plaintiff is entitled to recover in some way and from somebody an amount bearing such proportion to its
total loss as the value of both the ship and the saved cargo bears to the value of the ship and entire
cargo before the jettison was effected.
The owner of the ship is a person to whom the plaintiff in this case may immediately look for
reimbursement.

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

While the boat was being thus used by the charterer in the interisland trade, the standard Oil Company
delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed to the port of
Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of the usual form was
delivered, with the stipulation that freight should be paid at the destination. Said bill of lading contained
no provision with respect to the storage of the petroleum, but it was in fact placed upon the deck of the
ship and not in the hold.
While the boat was on her way to the port mentioned, a violent typhoon passed over that region, and
while the storm was at its height the captain was compelled for the safety of all to jettison the entire
consignment of petroleum consisting of two hundred cases. When the storm abated the ship made port,
and thirteen cases of the petroleum were recovered, but the remainder was wholly lost.
ISSUE:
Whether the loss of this petroleum was a general average loss or a particular less to be borne solely by
the owner of the cargo. Who is the person, or persons, who are liable to make good this loss?

HELD:
Under the Spanish Commercial Code and under the doctrines prevailing in the courts of admiralty of
England America, as well as in other countries, that ordinarily the loss of cargo carried on deck shall not
be considered a general average loss. But, it has been felt that the reason denying deck cargo the right
to contribution by way of general average in case of jettison for the rule has become less weighty,
especially with reference to coastwise trade; and it is now generally held that jettisoned goods carried
on deck, according to the custom of trade, by steam vessels navigating coastwise and inland waters, are
entitled to contribution as a general average loss

The Marine Regulations contain provisions recognizing the right of vessels engaged in the interisland
trade to carry deck cargo. There is one commodity, namely, gasoline, which from its inflammable nature
is not permitted to be carried in the hold of any passenger vessel, though it may be carried on the deck if
certain precautions are taken. There is no express provision declaring that petroleum shall be carried on
deck in any case; but having regard to its inflammable nature and the known practices of the interisland
boats, it cannot be denied that this commodity also, as well as gasoline, may be lawfully carried on deck
in our coatwise trade.

From what has been said it is evident that the loss of this petroleum is a general and not a special
average, with the result that the plaintiff is entitled to recover in some way and from somebody an
amount bearing such proportion to its total loss as the value of both the ship and the saved cargo bears
to the value of the ship and entire cargo before the jettison was effected.

The owner of the ship is a person to whom the plaintiff in this case may immediately look for
reimbursement. By the express provision of the Code, the owner of the vessel is civilly liable for the acts
of the captain; and he can only escape from this civil liability by abandoning his property in the ship and
any freight that he may have earned on the voyage (arts. 587, 588, Code of Comm.).
Now, by article 852 of the Code of Commerce the captain is required to initiate the proceedings for the
adjustment, liquidation, and distribution of any gross average to which the circumstances of the voyage
may have given origin; and it is therefore his duty to take the proper steps to protect any shipper whose
goods may have been jettisoned for the general safety. If the captain does not comply with the article
relating to the adjustment, liquidation, and distribution of the general average, the next article (852)
gives to those concerned whether shipowner (naviero) or shipper the right to maintain an action
against the captain for indemnification for the loss; but the recognition of this right of action does not by
any means involve the suppression of the right of action which is elsewhere recognized in the shipper
against the ship's owner. The shipper may in our opinion go at once upon the owner and the latter, if so
minded, may have his recourse for indemnization against his captain.
The owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any
individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain, has complete
and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the
cargo at the end of the voyage. It is therefore proper that any person whose property may have been
cast overboard by order of the captain should have a right of action directly against the ship's owner for
the breach of any duty which the law may have imposed on the captain with respect to such cargo. To
adopt the interpretation of the law for which the appellant contends would place the shipowner in a
position to escape all responsibility for a general average of this character by means of the delinquency
of his own captain. This cannot be permitted. The evident intention of the Code, taken in all of its
provisions, is to place the primary liability upon the person who has actual control over the conduct of
the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving
him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the
venture as shippers.