TRANSPO DIGEST BATCH 4
CASE FACTS
TRANSPORTATION OVERLAND
Lorenzo v. BJ Mathel ** Petitioner Lorenzo Shipping Corporation is a domestic
Digest by: Jen corporation engaged in coastwise shipping. It used to own the
cargo vessel M/V Dadiangas Express. On the other hand,
respondent BJ Marthel International, Inc. is a business entity
engaged in trading, marketing, and selling of various industrial
commodities. It is also an importer and distributor of different
brands of engines and spare parts.
BJ Marthel supplied Lorenzo Shipping with spare parts for the
latter's marine engines. According to the quotation it sent,
deliveries of such items are within 2 months after receipt of firm
order. Petitioner thereafter issued to respondent Purchase Order
No. 13839 for the procurement of one set of cylinder liner, valued
at P477,000, to be used for M/V Dadiangas Express. The
purchase order was co-signed by Jose Go, Jr., petitioner's
vice-president, and Henry Pajarillo, respondent’s sales manager.
Instead of paying the 25% down payment (indicated in the
purchase order) for the first cylinder liner, Lorenzo Shipping
issued in favor of respondent 10 postdated checks. The checks
were supposed to represent the full payment of the
aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, for
another unit of cylinder liner. This purchase order stated the term
of payment to be "25% upon delivery, balance payable in 5
bi-monthly equal installments." Like the first purchase order, the
second purchase order did not state the date of the cylinder
liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
ISSUE/HELD
● Whether or not respondent incurred delay in performing its obligation under the
contract of sale [​NO]
● Whether or not said contract was validly rescinded by petitioner. [​NO]
Petitioner maintains that its obligation to pay fully the purchase price was extinguished
because the adverted contract was validly terminated due to respondent's failure to deliver
within the two-month period. The threshold question, then, is: Was there late delivery of the
subjects of the contract of sale to justify petitioner to disregard the terms of the contract
considering that time was of the essence thereof?
In determining whether time is of the essence in a contract, the ultimate criterion is the actual
or apparent intention of the parties and before time may be so regarded by a court, there must
be a sufficient manifestation, either in the contract itself or the surrounding circumstances of
that intention. Petitioner insists that although its purchase orders did not specify the dates
when the cylinder liners were supposed to be delivered, nevertheless, respondent should
abide by the term of delivery appearing on the quotation it submitted to petitioner. Petitioner
theorizes that the quotation embodied the offer from respondent while the purchase order
represented its (petitioner's) acceptance of the proposed terms of the contract of sale. Thus,
petitioner is of the view that these two documents "cannot be taken separately as if there were
two distinct contracts." We do not agree.
While the Supreme Court recognizes the principle that contracts are respected as the law
between the contracting parties, this principle is tempered by the rule that the intention of the
parties is primordial and "once the intention of the parties has been ascertained, that element
is deemed as an integral part of the contract as though it has been originally expressed in
unequivocal terms."
In the present case, the Court cannot subscribe to the position of petitioner that the
documents, by themselves, embody the terms of the sale of the cylinder liners. One can easily
glean the significant differences in the terms as stated in the formal quotation and Purchase
Order No. 13839 with regard to the due date of the down payment for the first cylinder liner
 TRANSPO DIGEST BATCH 4
was postdated 18 January 1990, however, the same was
dishonored by the drawee bank due to insufficiency of funds. The
remaining nine postdated checks were eventually returned by
respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the
proceeds of which were applied to its other obligation to
respondent. For its part, respondent insisted that it returned said
postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at
petitioner's warehouse in Manila. The sales invoices evidencing
the delivery of the cylinder liners both contain the notation
"subject to verification" under which the signature of petitioner's
warehouseman, appeared.
Respondent sent a Statement of Account and respondent's
vice-president sent a demand letter dated to petitioner requiring
the latter to pay. Petitioner sent the former a letter offering to pay
only P150,000 for the cylinder liners. In said letter, petitioner
claimed that as the cylinder liners were delivered late and due to
the scrapping of the M/V Dadiangas Express, it (petitioner) would
have to sell the cylinder liners in Singapore and pay the balance
from the proceeds of said sale.
Respondent filed an action for sum of money and damages
before the RTC.
Petitioner afterwards filed its Answer alleging therein that time
was of the essence in the delivery of the cylinder liners and that
the delivery on 20 April 1990 of said items was late as respondent
committed to deliver said items "within two (2) months after
receipt of firm order."
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
1
and the date of its delivery as well as Purchase Order No. 14011 with respect to the date of
delivery of the second cylinder liner. While the quotation provided by respondent evidently
stated that the cylinder liners were supposed to be delivered within two months from receipt of
the firm order of petitioner and that the 25% down payment was due upon the cylinder liners'
delivery, the purchase orders prepared by petitioner clearly omitted these significant items.
The petitioner's Purchase Order No. 13839 made no mention at all of the due dates of delivery
of the first cylinder liner and of the payment of 25% down payment. Its Purchase Order No.
14011 likewise did not indicate the due date of delivery of the second cylinder liner.
In the instant case, the formal quotation provided by respondent represented the negotiation
phase of the subject contract of sale between the parties. As of that time, the parties had not
yet reached an agreement as regards the terms and conditions of the contract of sale of the
cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to
respondent while the latter could have, withdrawn or modified the same. The parties were at
liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection,
we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed,
renegotiated prior to the issuance of Purchase Order No. 13839.
The law implies, however, that if no time is fixed, delivery shall be made within a reasonable
time, in the absence of anything to show that an immediate delivery intended.
The Court also find significant the fact that while petitioner alleges that the cylinder liners were
to be used for dry dock repair and maintenance of its M/V Dadiangas Express between the
later part of December 1989 to early January 1990, the record is bereft of any indication that
respondent was aware of such fact. The failure of petitioner to notify respondent of said date is
fatal to its claim that time was of the essence in the subject contracts of sale.
Finally, the ten postdated checks issued in November 1989 by petitioner and received by the
respondent as full payment of the purchase price of the first cylinder liner supposed to be
delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a
commitment on the part of the respondent. The earliest maturity date of the checks was 18
January 1990. As delivery of said checks could produce the effect of payment only when they
have been cashed, respondent's obligation to deliver the first cylinder liner could not have
arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had
yet to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by
 TRANSPO DIGEST BATCH 4
Petitioner filed a Motion alleging therein that the cylinder liners
run the risk of obsolescence and deterioration to the prejudice of
the parties to this case. Thus, petitioner prayed that it be allowed
to sell the cylinder liners at the best possible price and to place
the proceeds of said sale in escrow. This motion was granted.
The RTC dismissed the complaint which ordered the plaintiff to
pay P50,000.00 to the defendant. It held respondent bound to the
quotation it submitted to petitioner particularly with respect to the
terms of payment and delivery of the cylinder liners. It also
declared that respondent had agreed to the cancellation of the
contract of sale when it returned the postdated checks issued by
petitioner.
The CA reversed the decision of the RTC.
Transasia Shipping v Private respondent Atty. Renato Arroyo, a public attorney, bought
CA* a ticket from petitioner, a corporation engaged in inter-island
Digest by: Eli shipping, for the voyage of M/V Asia Thailand vessel to Cagayan
de Oro City from Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, Atty Arroyo
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
2
respondent, it proceeded with the placement of the order for the cylinder liners with its
principal in Japan solely on the basis of its previously harmonious business relationship with
petitioner.
The Court emphasized that even where time is of the essence, a breach of the contract
in that respect by one of the parties may be waived by the other party's subsequently
treating the contract as still in force." Petitioner's receipt of the cylinder liners when
they were delivered to its warehouse on 20 April 1990 clearly indicates that it
considered the contract of sale to be still subsisting up to that time. Indeed, had the
contract of sale been cancelled already as claimed by petitioner, it no longer had any
business receiving the cylinder liners even if said receipt was "subject to verification."
By accepting the cylinder liners when these were delivered to its warehouse, petitioner
indisputably waived the claimed delay in the delivery of said items.
The Court, therefore, holds that in the subject contracts, time was not of the essence. The
delivery of the cylinder liners on 20 April 1990 was made within a reasonable period of time
considering that respondent had to place the order for the cylinder liners with its principal in
Japan and that the latter was, at that time, beset by heavy volume of work.
There having been no failure on the part of the respondent to perform its obligation, the power
to rescind the contract is unavailing to the petitioner.
Here, there is no showing that petitioner notified respondent of its intention to rescind the
contract of sale between them. Quite the contrary, respondent's act of proceeding with the
opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it
notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman
would pursue such action knowing that the contract of sale, for which the letter of credit was
opened, was already rescinded by the other party.
Issue: Is a common carrier’s liable for damages to a passenger who disembarked from
the vessel upon its return to the port of origin, after it suffered engine trouble and had
to stop at sea, having commenced the contracted voyage on one engine. Yes
Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary
diligence in ensuring the safety of the private respondent. That meant that the petitioner was,
 TRANSPO DIGEST BATCH 4
boarded the M/V Asia Thailand vessel. At that instance, Arroyo
noticed that some repair works [sic] were being undertaken on
the engine of the vessel. The vessel departed at around 11:00 in
the evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit
Island and dropped its anchor thereat. After half an hour of
stillness, some passengers demanded that they should be
allowed to return to Cebu City for they were no longer willing to
continue their voyage to Cagayan de Oro City. The captain
acceded to their request and thus the vessel headed back to
Cebu City.
At Cebu City, Arroyo together with the other passengers who
requested to be brought back to Cebu City, were allowed to
disembark. Thereafter, the vessel proceeded to Cagayan de Oro
City. Arroyo, the next day, boarded the M/V Asia Japan for its
voyage to Cagayan de Oro City, likewise a vessel of petitioner.
On account of this failure of petitioner to transport him to the
place of destination on November 12, 1991, Arroyo filed before
the trial court a complaint for damages against petitioner.
In his pre-trial brief, the private respondent asserted that his
complaint was “an action for damages arising from bad faith,
breach of contract and from tort,” with the former arising from the
petitioner’s “failure to carry [him] to his place of destination as
contracted,” while the latter from the “conduct of the [petitioner]
resulting [in] the infliction of emotional distress” to the private
respondent.
After due trial, the trial court rendered its decision and ruled that
the action was only for breach of contract, with Articles 1170,
1172, and 1173 of the Civil Code as applicable law—not Article
2180 of the same Code.
Respondent appealed to CA and CA reversed decision by
applying Article 1755 in relation to Articles 2201, 2208, 2217, and
2232 of the Civil Code and, accordingly, awarded compensatory,
moral (20,000), and exemplary (10,000) damages, 5000 atty fees
and cost of suit.
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
3
pursuant to Article 1755 of the said Code, bound to carry the private respondent safely as far
as human care and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.
Before commencing the contracted voyage, the petitioner undertook some repairs on the
cylinder head of one of the vessel’s engines. But even before it could finish these repairs, it
allowed the vessel to leave the port of origin on only one functioning engine, instead of two.
Moreover, even the lone functioning engine was not in perfect condition as sometime after it
had run its course, it conked out. This caused the vessel to stop and remain adrift at sea, thus
in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was
unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.
Actual or compensatory damages represent the adequate compensation for pecuniary loss
suffered and for profits the obligee failed to obtain.In contracts or quasi-contracts, the obligor
is liable for all the damages which may be reasonably attributed to the non-performance of the
obligation if he is guilty of fraud, bad faith, malice, or wanton attitude.
Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be
recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the
proximate result of, as in this case, the petitioner’s breach of the contract of carriage. Anent a
breach of a contract of common carriage, moral damages may be awarded if the common
carrier, like the petitioner, acted fraudulently or in bad faith
The Court of Appeals did not grant the private respondent actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as
required by Article 1169 of the Civil Code. This article, however, finds no application in
this case because, as found by the respondent Court, there was in fact no delay in the
commencement of the contracted voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when the voyage was subsequently
interrupted when the vessel had to stop near Kawit Island after the only functioning
engine conked out. As to the rights and duties of the parties strictly arising out of such
delay, the Civil Code is silent. However, as correctly pointed out by the petitioner,
Article 698 of the Code of Commerce specifically provides for such a situation.
Of course, this does not suffice for a resolution of the case at bench for, as earlier
stated, the cause of the delay or interruption was the petitioner’s failure to observe
extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200,
2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the
 TRANSPO DIGEST BATCH 4
Loadstar Shipping v. Loadstar shipping is the registered owner and operator of M/V
Pioneer Asia ** Weasel. On June 6 1984, Loadstar entered into a voyage charter
Digest by: Isabelle with Northern Mindanao Transport Company for the carriage of
65,000 bags of cement from Iligan City to Manila. The shipper
was Iligan Cement Corporation while the consignee in Manila was
Market Developers Inc.
On June 24 1984, 67,500 bags of cement were loaded on board
M/V Weasel and stowed in the cargo holds for delivery to the
consignee. Prior to the voyage, the consignee insured the
shipment of cement with Pioneer Asia for 1.4M.
June 24 1984: M/V Weasel left Iligan City for Manila in good
weather. However, in the morning of June 25 Captain Montera
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
4
petitioner is liable for any pecuniary loss or loss of profits which the private respondent
may have suffered by reason thereof. For the private respondent, such would be the
loss of income if unable to report to his office on the day he was supposed to arrive
were it not for the delay. This, however, assumes that he stayed on the vessel and was
with it when it thereafter resumed its voyage; but he did not.
We likewise fully agree with the Court of Appeals that the petitioner is liable for moral
and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the
port of origin and undertake the contracted voyage, with full awareness that it was
exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise
extraordinary diligence and obviously acted with bad faith and in a wanton and
reckless manner.
We hold that the petitioner’s defense cannot exculpate it nor mitigate its liability. On the
contrary, such a claim demonstrates beyond cavil the petitioner’s lack of genuine
concern for the safety of its passengers. It was, perhaps, only providential that the sea
happened to be calm. Even so, the petitioner should not expect its passengers to act in
the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or
frightened at the stoppage of a vessel at sea in an unfamiliar zone at nighttime is not
the sole prerogative of the faint-hearted.
We cannot, however, give our affirmance to the award of attorney’s fees. Under Article
2208 of the Civil Code, these are recoverable only in the concept of actual damages, not
as moral damages nor judicial costs. Hence, to merit such an award, it is settled that
the amount thereof must be proven. Moreover, such must be specifically prayed
for—as was not done in this case—and may not be deemed incorporated within a
general prayer for “such other relief and remedy as this court may deem just and
equitable.”
I​SSUE: WON Petitioner, is a common carrier and assuming that it is, is it liable for the
lost cement?
Petitioner contends that at the time of the voyage the carrier’s voyage charter with the shipper
converted it into a private carrier. ​Thus the presumption of negligence against CCs could
not apply. It further argues that the stipulation in the voyage charter holding it free rom liability
is valid and binds the respondent. In any event, the petitioner insists that it had exercised
extraordinary diligence and that the proximate cause of the loss of the cargo was a fortuitous
event.
Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services ​indiscriminately to the public. Thus without doubt it is
a common carrier. ​However, the petitioner entered into a voyage charter with Northern
Mindanao Transport Company. Had the voyage charter converted it into a private carrier?
 TRANSPO DIGEST BATCH 4
ordered the vessel be forced aground. ​Consequently the entire
shipment of cement was good as gone due to exposure to
sea water. ​Petitioner thus failed to delivery the goods to the
consignee in Manila.
The consignee demanded from the petitioner a full
reimbursement of the cost of the shipment. Petitioner refused to
reimburse despite demands.
Respondent insurance company pioneer paid the consigne 1.4M
plus an addition 500k for the lost cement. In return, insurance
company was subrogated to the rights of the consignee against
the petitioner.
Respondent filed a complaint against petitioner alleging that:
1) M/V Weasel was not seaworthy at the commencement
of the voyage
2) The weater and sea conditions were usual and expected
3) Petitioner was negligence in the selection and
supervision of the agents and employees then manning
the M/V/ Weasel
Petitioner in its answer alleged that there was no fault or
negligence on its part because the failure to delivery the cargo
was due to force majeure.
RTC: Petitioner is liable to pay reasoning that as a common
carrier, it bears the burden of proving it exercised extraordinary
diligence in its vigilance over the goods and that the defense of
force majeure was bereft of factual basis. RTC called attention to
the PAG ASA report that at the time of the incident, the tropical
storing ​Asiang​ had moved away from the Philippines.
CA: AFfirmed the RTC decision
Esso Standard v Manila Esso filed a complaint for recovery of a sum of money for the loss
Ralroad * and damage caused to 4 shipments of goods consigned to it
Digest by: Pau which arrived on 4 different occasions. These shipments were
handled by Manila Railroad as arrastre operator. The CFI-Manila
denied the complaint.
Esso appealed.
Manila Railroad’s contentions:
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
5
We think not. The voyage charter agreement between petitioner and Northern mindanao did
not in any way convert it into a private carrier.
Planters Products v. CA:
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.
Thus, petitioner remains a CC notwithstanding the charter agreement since the charter is
limited to the ship only and does not involve the vessel and its crew. As elucidated in Planter’s
products, its charter is only a voyage charter not a bareboat charter.
Petitioner claims that the loss of the goods was due to a FE yet its claim is unsubstantiated.
On the contrary, we find supported by evidence on record the conclusion of the lower courts
that the entire shipment loss was due to the gross negligence of the petitioner. Records show
that in the evening of June 24, the sea and weather conditions were calm. ​The records
reveal that the petitioners took a shortcut route instead of the usual route which
exposed the voyage to unexpected hazard. Petitioner has only itself to blame for its
misjudgement.
ISSUE:Has the right to bring the action prescribed?
NO. The dates of discharge are May 10, May 7, and May 30 all in the same year of 1962.
Applying the 1yr rule, Esso has one year to file from the date the claim is constructively denied
or from May 7, May 10, and May 30, 1963. Esso filed the complaint on Feb. 1, 1964 hence the
action has not prescribed.
Does the provisional claims satisfy the condition that the claim for value should be filed within
15 days from the date of discharge of the last package?
 TRANSPO DIGEST BATCH 4
It is alleged that the action has already prescribed having been
brought beyond the 1yr period counted from the date of discharge
of the shipment. It is also alleged that that the claims are not
merely “provisional claims” but they satisfy the condition of being
claims for value hence should be filed within 15days from the
date of discharge of the last package of the shipments.
Aboitiz Shipping v. On June 20, 1993, MSAS Cargo International Limited (MSAS)
Insurance Company ** procured a marine insurance policy from respondent Insurance
Digest by: Allen Company of North America (ICNA) UK Limited of London. The
insurance was for a ​transshipment of certain wooden work
tools and workbenches purchased for the consignee Science
Teaching Improvement Project (STIP), Ecotech Center in
Cebu. ICNA issued an all-risk open marine insurance policy
stating:
“This Company, in consideration of a premium as
agreed and subject to the terms and conditions printed
hereon, does insure for MSAS Cargo International
Limited &/or Associated &/or Subsidiary Companies on
behalf of the title holder: - Loss, if any, payable to the
Assured or order.”
The cargo, packed inside one container van, was shipped "freight
prepaid" from Hamburg, Germany on board M/S Katsuragi. A
clean bill of lading was issued by Hapag-Lloyd which stated the
consignee to be STIP, Ecotech Center.
Then, the container van was off-loaded at Singapore and
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
6
YES. Manila stresses the difference between a provisional claim and a claim for value. It
contends that said provisional claims are not in compliance with the Management Contract
because the latter requires the filing of a claim for value. However, the Court said that it is of
no consequence. The test in determining whether the section of the Management Contract
has been been complied with is whether a claim, be it called a provisional claim or a claim for
value, has served the purpose of giving the arrastre operator reasonable opportunity to check
the validity of the claim while the facts are still fresh in the minds of the persons who took part
in the transaction and while the pertinent documents are still available. The provisional claims
contain descriptions of the shipments in question sufficient to have allowed Manila Railroad to
make a reasonable verification.
As a side argument, Manila Railroad contends that the provisional claim does not cover actual
and itemized good lost or damaged but instead these are merely advisory in the sense that
they merely state that the entire shipments stated therein have been damaged and/or
short-delivered ex parte their respective carriers. The court said that it is not necessary that
such claims should state a detailed list of the loss or damage suffered by said shipments.
They only have to meet the test mentioned above. The determination and preparation of the
specific amount of damages claimed should be done carefully and without haste, and these
can be done practically only in a formal claim which can be filed even long after a provisional
claim has been filed.
ISSUES:
W/N ICNA is a real party in interest that possesses the right of subrogation. (YES)
W/N there was a timely filing of the notice of claim according to Art. 366 of the Code of
Commerce. (YES)
W/N Aboitiz is liable for damages. (YES)
Triple affirmative!!! Note: Check THIRD ISSUE for the issue on transporation!!
=== I ===
A foreign corporation not licensed to do business in the Philippines is not absolutely
incapacitated from filing a suit in local courts. Only when that foreign corporation is
"transacting" or "doing business" in the country will a license be necessary before it can
institute suits. It may, however, ​bring suits on isolated business transactions​, which is not
prohibited under Philippine law. ​Thus, a foreign insurance company may sue in Philippine
courts for marine insurance policies issued by it abroad to cover international-bound
cargoes shipped by a Philippine carrier, even if it has no license to do business in this
country.
Moreover, the present suit was filed by the said company's authorized agent in Manila. It was
the domestic corporation that brought the suit and not the foreign company. Its authority is
 TRANSPO DIGEST BATCH 4
transhipped on board M/S Vigour Singapore. On July 18, 1993
the ship arrived in Manila International Container Port where the
van was again off-loaded. ​On July 26, cargo was received by
Aboitiz Shipping Corporation through its representative
Aboitiz Transport System. The bill of lading issued by Aboitiz
contained the notation “grounded outside warehouse.”
The container van was stripped and transferred to another
crate/container van without any notation on the condition of the
cargo on the Stuffing/Stripping Report. On August 1, the
container van was loaded on board petitioner’s vessel MV Super
Concarrier I. From Manila, it went to Cebu.
On August 3, the shipment arrived in Cebu and discharged onto a
receiving apron of the Cebu International Port. It was then
brought to the Cebu Bonded Warehousing Corporation pending
clearance from the Customs authorities. ​In the Stripping Report,
petitioner's checker noted that the crates were slightly
broken or cracked at the bottom.
On August 11, ​the cargo was taken by consignee’s
representative Mr. Willig, and delivered to Don Bosco Technical
High School. Thereafter, consignee informed Aboitiz (through
Perez, petitioner’s claims head) that the cargo sustained water
damage. Perez checked the condition of the container and other
cargoes in the warehouse and found that the container van and
other cargoes stuffed there were completely dry and showed no
sign of wetness.
Perez found that except for the bottom of the crate which was
slightly broken, the crate itself appeared to be completely dry and
had no water marks. But he confirmed that the tools which were
stored inside the crate were already corroded. He further
explained that the "grounded outside warehouse" notation in the
bill of lading referred only to the container van bearing the cargo.
Further, Mr. Willig informed Aboitiz in a letter, that the crate was
broken at its bottom part such that the contents were exposed.
The work tools and workbenches were found to have been
completely soaked in water with most of the packing cartons
already disintegrating. The crate was properly sealed off from the
inside with tarpaper sheets. On the outside, galvanized metal
bands were nailed onto all the edges. ​The letter concluded that
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
7
expressly provided for in the open policy which includes the ICNA office in the Philippines as
one of the foreign company's agents.
There was also a proper indorsement of the insurance policy by MSAS, the shipper, in favor of
the consignee. Under the terms of its Open Policy, it authorizes the filing of any claim on the
insured goods, to be brought against ICNA UK, the company who issued the insurance, or
against any of its listed agents worldwide. ​Thus, MSAS, by accepting this provision, it is an
acceptance of the authority of the agents.
As to the subrogation issue, it was held in ​Pan Malayan Insurance v. CA​, that payment by
the insurer to the assured operates as an equitable assignment of all remedies the assured
may have against the third party who caused the damage. Subrogation is not dependent
upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer. Thus, upon payment to
the consignee of indemnity for damage to the insured goods, ICNA is entitled to
exercise its right of subrogation against petitioner in case of a contractual breach or
negligence.
=== II ===
MOREOVER, the giving of notice of loss or injury is a condition precedent to the action
for loss or injury or the right to enforce the carrier's liability. Circumstances peculiar to
this case lead Us to conclude that the notice requirement was complied with. ​This notice
requirement protects the carrier by affording it an opportunity to make an investigation of the
claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier
from false and fraudulent claims.
Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours
from receipt of the cargo if the damage is not apparent from the outside of the package. For
damages that are visible from the outside of the package, the claim must be made
immediately. To wit:
Article 366. ​Within twenty four hours following the receipt of the merchandise, the
claim against the carrier for damages or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of
receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
 TRANSPO DIGEST BATCH 4
apparently, the damage was caused by water entering
through the broken parts of the crate.
Consignee claimed for insurance from ICNA. ICNA, upon ocular
inspection, found that the goods sustained water damage, molds,
and corrosion which were discovered upon delivery to consignee.
Moreover, ​the claims adjuster found that on July 28-29 there
were heavy rains (as reported by PAGASA) which caused water
damage to the shipment as the shipment was placed outside
the warehouse of Pier No. ​4 when it was delivered on July 26. It
was only on July 31 when the shipment was stuffed inside
another container van for shipment to Cebu.
ICNA paid 280k to the consignees while Aboitiz refused the claim.
Mr. Willig signed a subrogation receipt. ​Hence, this claim for
damages through subrogation by ICNA against Aboitiz.
RTC dismissed the complaint. ​The RTC ruled that ICNA failed
to prove that it is the real party-in-interest to pursue the claim
against Aboitiz. ICNA UK was addressed at London but ICNA
Phils. Cannot establish that its predecessor in interest is ICNA
UK. Moreover, the subrogation receipt is merely hearsay
evidence. Moreover, a foreign insurance company must obtain
licenses/authority to do business in the Philippines. Without it,
they cannot sue in the Philippines.
CA reversed. CA ruled that the right of subrogation accrues
simply upon payment by the insurance company of the insurance
claim. As subrogee, ICNA is entitled to reimbursement from
Aboitiz, even assuming that it is an unlicensed foreign
corporation.
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
8
which the goods transported were delivered.
In this case, the shipment was delivered on August 11, 1993. It can be seen that the letter
informing the carrier of the damage was dated on August 15 and that together with the notice
of claim, it was only received by petitioner on September 23. ​However, Aboitiz admits that
even before it received the written notice of claim, Mr. Mayo B. Perez, Claims Head of
the company, was informed by telephone sometime in August 13. ​In fact, Perez
inspected the warehouse site.
In ​PCIC v. Chemoil Lighterage​, it was held that a notice through telephone did not comply
the notice requirement. ​However, there are peculiar circumstances in the instant case
that constrain Us to rule differently from the PCIC case (pro hac vice - not to be made a
precedent to other cases)​.
Stipulations requiring notice of loss or claim for damage as a condition precedent to the right
of recovery from a carrier must be given a reasonable and practical construction, ​adapted
to the circumstances of the case under adjudication, and their application is limited to cases
falling fairly within their object and purpose.
First, Perez confirmed that the goods were corroded. Second, we give due consideration to
the fact that the final destination of the damaged cargo ​was a school institution where
authorities are bound by rules and regulations governing their actions. Understandably, when
the goods were delivered, the necessary clearance had to be made before the package was
opened. Upon opening and discovery of the damaged condition of the goods, a report to this
effect ​had to pass through the proper channels before it could be finalized and
endorsed by the institution to the claims department of the shipping company.
In light of these facts, in that the call was made just after 2 days were the said damage could
not have corroded instantly overnight. ​Thus, there was substantial compliance with the
notice requirement.
=== III === TRANSPO
Art. 1735 of the NCC provides that:
The rule as stated in Article 1735 of the Civil Code is that in cases where the goods
are lost, destroyed or deteriorated, common carriers are ​presumed to have been at
fault or to have acted negligently, unless they prove that they observed
extraordinary diligence ​required by law.
Extraordinary diligence is that extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their own property rights. This
standard is intended to grant favor to the shipper who is at the mercy of the common carrier
 TRANSPO DIGEST BATCH 4
Lufthansa v. CA ** Tirso V. Antiporda Sr. was an associate director of the Central
Digest by: Nath Bank of the Philippines and registered consultant of ABD, World
Bank and UNDP. He was contracted by SGV to be the
institutional financial specialist for an agricultural credit institution
project of the Investment and Development Bank of Malawi in
Africa. He was informed via a letter that he would render his
services to the Malawi bank as an independent contractor,
whehere he would be paid $9,167 for 50 days commencing in
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
9
once the goods have been entrusted to the latter for shipment.
Here, the shipment delivered to the consignee sustained water damage. As found by the CA,
the petitioner failed to overturn the presumption. It was found that upon delivery of the
cargo to the consignee, the workbenches and work tools suffered damage due to wettage
although they were physically dry at that time. Thus, since Aboitiz failed to prove its exercise
of extraordinary diligence, they are presumed negligent or at fault ​from the time the goods
were unconditionally placed in its possession (July 26) up to the time the same were
delivered to the consignee (August 11).
It must be remembered that the shipment arrived in the port in Manila on July 26 and it was
also stripped from the container van. It was only on July 31 when the shipment was restuffed
inside another container van. Moreover, the bill of lading issued by petitioner contained the
notation that the goods were grounded outside warehouse suggesting that they were kept
outside the warehouse. And since evidence showed that rain fell over Manila during the same
period, We can conclude that this was when the shipment sustained water damage.
To prove the exercise of extraordinary diligence, petitioner must do more than merely show
the possibility that some other party could be responsible for the damage. It must prove that it
used "all reasonable means to ascertain the nature and characteristic of the goods tendered
for transport and that it exercised due care in handling them. ​Extraordinary diligence must
include safeguarding the shipment from damage coming from natural elements such as
rainfall.
Petitioner also failed to mention where exactly the goods were stored during the period in
question. It failed to show that the crate was properly stored indoors during those 5 days. This
is because petitioner argues that what was addressed by the notation was the container van
and not the good. However, they presented no evidence to explain where they would store the
goods otherwise.
Petitioner is thus liable for the water damage sustained by the goods due to its failure to
satisfactorily prove that it exercised the extraordinary diligence required of common carriers.
AFFIRMED.
W/N Lufthansa is the principal party to the contract of carriage (YES)
W/N the Warsaw Convention (Sec 1 and 2, Art. 30) is applicable (NO).
In light of the stipulations expressly specified in the ticket defining the true nature of its
contract of carriage with Tirso, Lufthansa cannot claim that its liability thereon ceased at
Bombay Airport and thence, shifted to the various carriers that assumed the actual task of
 TRANSPO DIGEST BATCH 4
September 1984. He would be provided a roundtrip economy
ticket from Manila to Blantyre and back with a maximum 4 days
travel per round trip, a travel allowance of $50 per day, travel
insurance P100,000 and major hospitalization with AFIA and
accident insurance up to P100,000.
Lufthansa, through SGV, issued a ticket confirming Tiro’s flights
to Malawi, Africa. (Manila – Singapore – Bombay -Nairobi –
Lilongwe – Blantyre) The status placed beside all 5 flights stated
OK.
On September 25, 1984, Tirso took the Lufthansa flight to
Singapore and then proceeded to Bombay as scheduled and
waited at the transit area of the airport for his connecting flight to
Nairobi, which was scheduled to leave Sept. 26 morning. Since
there were no Lufthansa representative waiting for him, he
approached an Air India duty officer who told him to call
Lufthansa. When he called he was told that someone will attend
to him shortly.
10 mins. Later, Gerard Matias, Lufthansa’s traffic officer, asked
for his ticket and told him to wait. Matias returned with Leslie
Benent, duty officer of Lufthansa, who informed Tirso that his seat
in Air India was given away to a VIP of Bombay who was
attending a religious function in Nairobi. Despite his protests (he
was supposed to arrive on September 26, 1984) and request for
a remedy, Air Kenya Flight 203 left without him on board. He was
stranded in Bombay and was only able to leave for Nairobi on a
flight he booked through Addis Ababa on Sept. 27. He finally
arrived in Blantyre at 9:00 pm on Sept. 28, 1984, a few days late
of his appointment.
Jan. 8 , 1985 , Tirso’s counsel wrote to the general manager of
Lufthansa demanding P 1M in damages for the airline’s
“malicious, wanton, disregard of the contract of carriage.” In reply,
the general manager assured them that an investigation will be
made. With no positive action from Lufthansa, Tirso filed a
complaint against Lufthansa in RTC of Quezon City.
RTC, guided by KLM Dutch Airlines v CA, et al., ruled that
Lufthansa breached the contract of carriage to transport Tirso
from Manila to Blantyre on the 5 leg trip. It said that from ​the
ticket​, ​it is clear that it was the duty and responsibility of
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
10
transporting said private respondent.
In the very nature of their contract, Lufthansa is the principal to the contract of
carriage, and not merely a ticketing agent, regardless of the instances where the actual
carriage was to be performed by other carriers. ​The issuance of the confirmed ticket
served as proof that Lufthansa was the principal and effectively guarantees that successive
carries (like Air Kenya) would honor the ticker, assuring Tiro space within the flight.
Art. 30 of the Warsaw Convention is not applicable because it refers to instances of accident
or delay, which did not happen. What happened was a bumping-off or a failure to carry a
passenger with a confirmed ticket. Lufthansa’s suggested definition of bumping-off (which is
included in delay), which is followed in American Jurisprudence are not controlling in this
jurisdiction. ​KLM v CA defines delay as to prolong the time of or before; to stop, detain
or hinder for a time, or cause someone or something to be behind in schedule or usual
rate of movement in progress. On the other hand, bumping-off is the refusal to
transport passengers with confirmed reservation to their planned and contracted
destinations, totally forecloses said passengers' right to be transported, whereas delay
merely postpones for a time being the enforcement of such right. ​So, section 2, Art. 30,
which does not contemplate the instance of bumping-off but merely a delay cannot be an
excuse for Lufthansa to evade liability.
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the
court should nd that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted fraudulently or in bad faith
The findings of the CA and RTC shows that the reasons given by the witnesses presented by
Lufthansa for Tirso’s bumping off was conflicting – which further proves the presence of bad
faith.
Clearly, bad faith was present in the performance of the contract for carriage because
representatives of Lufthansa already tried to evade liability, by claiming that the contract of
carriage ceased at Bombai. Also, despite Loewe’s knowledge that the seat was given away he
suppressed that information and presented a different reason.
Exemplary damages is awarded based on Art. 2232:
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
There is every indication that Lufthansa, through its Bombay representatives, acted in a
reckless and malevolent manner in dealing with Tirso.
 TRANSPO DIGEST BATCH 4
11

Lufthansa to transport Tirso from Manila to Blantyre on a trip of 5 CA and RTC Decision AFFIRMED.
legs​. The stance taken by Lufthansa’s defense is diametrically
opposite to the condition embodied in their ticker, which was for
the “… ​carriage to be performed hereunder by several
successive carriers is regarded as a single operation​.”
Lufthansa canot limit its liability to a mere ticket issuing agent for
other airlines.

Also, under the pool arrangement of the International Air

Transport Association (IATA), which Lufthansa and Air Kenya are
members, member airlines are agents of each other in the
issuance of tickers and therefore in accordance with Ortigas v
Lufthansa, an airline company is considered bound by the
mistakes committed by another member, in behalf of the former,
had confirmed a passenger’s reservation for accommodation.

Moral and exemplary damages were awarded because the

breach of contract was aggravated by the discourteous and highly
arbitrary conduct of Gerard Matias. It was discovered that when
Tirso insisted on taking his flight, Gerard got mad and threw the
ticket and passport on Tirso’s lap and ordered him to go to the
basement and get his luggage. Instead of helping Tirso, he let
Tirso lug the 3 heavy pieces of luggage. When Tirso requested
for accommodation but Gerard just ignored him and left. Tirso
was forced to stay in the transit area, without any sleep for fear of
his belongings to be stolen. Every time he went to the toilet he
had to lug all his belongings with him. He tried to eat the
high-seasoned food at the airport but developed stomach
problems.

CA affirmed the decision of RTC. ​Although the contract of

carriage was to be performed by several air carriers, the
same is to be treated as a single operation conducted by
Lufthansa because Tirso dealt exclusively with it which
issued him a Lufthansa ticket for the entire trip. By issuing a
confirmed ticket, Lufthansa in effect guaranteed Tirso a sure seat
with Air Kenya.

Lufthansa cannot rely on Sections 1 and 2, Art. 30 of the Warsaw

Convention because it’s provisions are not applicable to the
instant case. Tirso’s cause of action is not based on the
occurrence of accident or delay as contemplated in section 2 of
Art. 30 but on Air Kenya’s refusal to transport him to

Transportation Overland and Vessels and Persons in Maritime Commerce

Lorenzo v. BJ Mathel- Heirs of Santos v. CA
 TRANSPO DIGEST BATCH 4
accommodate another.
Metrobank v. Chiok * On July 5, 1996, Wilfred Chiok bought UA$1,022,288.50 dollars
Digest by: Charlie from Gonzalo Nuguid where Chiok deposited the three manager’s
checks (Asian Bank MC Nos. 025935 and 025939, and
This is a negotiable Metrobank CC No. 003380), with an aggregate value of
instruments case; P26,068,350 in Nuguid’s account with BPI. Nuguid, however,
checks; TRO failed to deliver the dollar payment of the three checks as agreed
upon, prompting Chiok to request that payment on the three
checks be stopped.
On the following day, July 6, 1995, Chiok filed a c Complaint for
damages with application for ex parts restraining order and/or
preliminary injunction with the RTC of Quezon City against the
Spouses Gonzalo and Marinella Nuguid, and the depositary
banks, Asian Bank and Metrobank.
On July 25, 1995, the RTC issued an Order directing the
issuance of a writ of preliminary prohibitory injunction. When the
checks were presented for payment, Asian Bank refused to honor
MC Nos. 025935 ad 025939 in deference to the TRO.
VESSELS AND PERSONS IN MARITIME COMMERCE
Santiago Lighterage v. There are three parties to the case. Santiago Lighterage owns the
CA * ship MV Christine Gay. Pelaez is a sole proprietor who entered
Digest by: Marlo into a bareboat charter agreement with Santiago. Meaning,
Pelaez is the charterer and Santiago is the ship owner. In transpo
language, Pelaez is known as the disponent owner. After that,
Pelaez entered into an agreement with the third party, C-Square,
who signed a single voyage charter agreement with Pelaez for a
voyage to South Korea to ship chromite ores from PH to Korea.
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
12
ISSUE: WON the payment of manager’s and chaser’s checks are subject to the
condition that the payee thereof should comply with his obligation to the purchaser of
the checks.
No. A manager’s check, like a cashier’s check, in order of the bank to pay, dean upon itself,
committing in effect its total resources, integrity and honor behind its issuance. By its peculiar
character and general use in commerce, a manager’s check or a cashier’s check is regarded
substantially to be as good as the money it represents.
While manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against insufficient
funds, or for similar reasons such as a condition not appearing on the face of the check. Long
standing and accepted banking practices do not countenance the countermanding of
manager’s and cashier’s check on the basis of a mere allegation of failure of the payee to
comply with its obligations towards the purchaser. Therefore, when Nuguid failed to deliver the
agreed amount to Chiok, the latter had a cause of action against Nuguid to ask for the
recession of their contract; but, Chiok did not have a cause of action against Metrobank and
Global Bank that would allow him to rescind the contracts of sale of the manager’s or cashier’s
checks, which would have resulted in the crediting of the amounts thereof back to his
accounts.
Asian Bank, which is now Global Bank, obeyed the TRO and denied the clearing of the
manager’s checks. As such, Global Bank may not be held liable on account of the knowledge
of whatever else Chiok told them when he asked for the procedure to secure a Stop Payment
Order. On the other hand, there was no mention that Metrobank was ever notified of the
alleged failure of consideration. Only Asian Bank was notified of such fact. Furthermore, the
mere allegation of breach on the part of the payee of his personal contract with the purchaser
should not be considered a sufficient cause to immediately nullify such checks, thereby
eroding their integrity and honor as good as cash.
ISSUE: W/N Santiago lighterage, as owner, is liable (YES)
I. On liability: The Bareboat Charter Agreement between Santiago Lighterage and Pelaez itself
was clear that the “the OWNER Santiago Ligherage shall before and at the time of delivery
exercise due diligence to make the VESSEL seaworthy.” Santiago Ligherage contends that
the turn-over of the vessel to Pelaez already constituted a FULL performance of its obligation
under the agreement. This is not correct according to the Court. Under their agreement, the
physical transfer of a seaworthy vessel is necessary to satisfy delivery. The agreement also
 TRANSPO DIGEST BATCH 4
Pelaez warranted that MV Christine Gay was seaworthy and can
undertake a voyage. Pelaez and C-Square agreed that the
voyage charter agreement shall “automatically be considered
rescinded and inoperative if the vessel is found not seaworthy to
undertake a safe voyage to Korea.”
Santiago Lighterage “turned over” the ship M/V Christine Gay to
Pelaez in Manila. The new set of crew members employed by
Pelaez, the bareboat charterer, then boarded and took
possession of the vessel, and proceeded to Masinloc, Zambales.
During the voyage from Manila to Zambales, the crew observed
that a heavy smoke was coming out of the exhaust. The engine of
the vessel was therefore NOT in a good condition. Upon reaching
Zambales, the chromite ores were loaded on the vessel while
repairs were made. However, the captain of the ship found the
repairs inadequate and recommended to Pelaez that the vessel
may not be able to pursue her voyage to South Korea.
It was decided that the vessel which already carried the chromite
ores would just return to Manila. On her way, in the middle of the
sea, the vessel suddenly stopped because the engines stopped.
An investigation of M/V Christine Gay was conducted by the
Marina which later issued a report saying that the vessel was a
“dead ship” at the time of the inspection.
C-Square served Pelaez a notice to rescind the voyage charter
agreement and demanded damages of around Php 3M, because
the vessel was unseaworthy and C-Square had to contract with
other companies to transport the ores to Korea. A complaint was
filed against Pelaez and Pelaez, in turn, filed a third-party
complaint against Santiago Lighterage. Both the trial court and
the appellate court ordered Pelaez to pay C-Square, and
Santiago Lighterage to pay Pelaez. In other words, Santiago
Lighterage was adjudged ultimately liable.
Caltex v. Sulpicio ** Motor tanker MT Vector left Limay, Bataan enroute to Masbate at
Digest by: Jen around 8pm on Dec. 19, 1987. It is loaded with 8,800 barrels of
petroleum products shipped by petitioner Caltex. MT Vector is a
tramping motor tanker owned and operated by Vector Shipping
Corporation, engaged in the business of transporting fuel
products such as gasoline, kerosene, diesel and crude oil. During
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
13
expressly requires Santiago Lighterage “to make the VESSEL seaworthy” at the time of
delivery. Since Santiago Lighterage did not deliver a seaworthy vessel, it failed to perform its
obligation to Pelaez under the agreement.
II. On the concept of seaworthiness: To be seaworthy, a vessel “must have that degree of
fitness which an ordinary, careful and prudent owner would require his vessel to have at the
commencement of her voyage, having regard to all the probable circumstances of it.” Thus the
degree of seaworthiness varies in relation to the contemplated voyage.In examining what is
meant by seaworthiness we must bear in mind the dual nature of the carrier’s obligations
under a contract of affreightment. To satisfy these duties the vessel must (a) be efficient as an
instrument of transport and (b) as a storehouse for her cargo, or is cargoworthy. A mere right
given to the charterer to inspect the vessel before loading and to satisfy himself that she was
fit for the contracted cargo does not free the shipowner from his obligation to provide a
cargoworthy ship.
After the accident, M/V Christine Gay was still able to make voyages within the Philippines.
However, such subsequent voyages in the Philippines do not prove the vessel’s
seaworthiness to withstand a voyage to South Korea. Crossing the Atlantic calls for stronger
equipment than sailing across the Visayan Sea. Even if Santiago Lighterage was able to
present a lot of certifications as to the seaworthiness of the ship, issued by the proper
government authorities, these documents are only prima facie evidence of seaworthiness. The
testimonies and reports of the ship’s captain and engineer are more convincing.
ISSUE: Whether or not petitioner Caltex is liable for damages [NO]
NO. Caltex is not liable. First, The charterer has no liability for damages under Philippine
Maritime laws. The respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of carriage is a bill of lading
or equivalent shipping documents on the one hand, or a charter party or similar contract on
 TRANSPO DIGEST BATCH 4
that particular voyage, the MT Vector carried on board gasoline
and other oil products owned by Caltex by virtue of a charter
contract between them.
On Dec. 20, 1987, at about 6:30 a.m., the passenger ship MV
Doa Paz left the port of Tacloban headed for Manila with a
complement of 59 crew members including the master and his
officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance.
The MV Doa Paz is a passenger and cargo vessel owned and
operated by Sulpicio Lines, Inc. plying the route of Manila/
Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila,
making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels
collided in the open sea within the vicinity of Dumali Point
between Marinduque and Oriental Mindoro. All the crewmembers
of MV Doa Paz died, while the two survivors from MT Vector
claimed that they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many
indeed, were not in the passenger manifest. Only 24 survived the
tragedy after having been rescued from the burning waters by
vessels that responded to distress calls. Among those who
perished were public school teacher Sebastian Caezal (47 years
old) and his daughter Corazon Caezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
The board of marine inquiry 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.
Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
14
the other. Petitioner and Vector entered into a contract of affreightment, also known as a
voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or use; a contract of affreightment is one by
which the owner of a ship or other vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment
of freight.
If the charter is a contract of affreightment, which leaves the general owner in possession of
the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the
owner. The charterer is free from liability to third persons in respect of the ship.
Second, MT Vector is a common carrier. Does a charter party agreement turn the common
carrier into a private one? NO. In this case, the charter party agreement did not convert the
common carrier into a private carrier. The parties entered into a voyage charter, which retains
the character of the vessel as a common carrier.
CALTEX IS NOT LIABLE FOR DAMAGES. The charterer of a vessel has no obligation
before transporting its cargo to ensure that the vessel it chartered complied with all
legal requirements. The duty rests upon the common carrier simply for being engaged
in public service.
The relationship between the parties in this case is governed by special laws. Because of the
implied warranty of seaworthiness, shippers of goods, when transacting with common carriers,
are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand more from shippers and hold them liable in
case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of
the public in general is concerned. ​By the same token, the Court cannot expect
passengers to inquire every time they board a common carrier, whether the carrier
possesses the necessary papers or that all the carriers employees are qualified. Such a
practice would be an absurdity in a business where time is always of the essence.
Considering the nature of transportation ​business, passengers and shippers alike
customarily presume that common carriers possess all the legal requisites in its
operation.
 TRANSPO DIGEST BATCH 4
and mother respectively, filed with the RTC Manila, a complaint
for Damages Arising from Breach of Contract of Carriage against
Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint
against Francisco Soriano, Vector Shipping Corporation and
Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered
MT Vector with gross and evident bad faith knowing fully well that
MT Vector was improperly manned, ill-equipped, unseaworthy
and a hazard to safe navigation; as a result, it rammed against
MV Doa Paz in the open sea setting MT Vectors highly flammable
cargo ablaze.
The RTC rendered decision dismissing the third party complaint
against petitioner Caltex.
CA reversed. It held that third party defendants Vector Shipping
Co. and Caltex are held equally liable under the third party
complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of
the damages which the Sulpicio is adjudged to pay plaintiffs. It
should be be shared half by Vector Shipping Co. (being the
vessel at fault for the collision) and the other half by Caltex
(Phils.), Inc. (being the charterer that negligently caused the
shipping of combustible cargo aboard an unseaworthy vessel).
Macondray v. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
15
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper
in shipping his cargoes. The records convinces the Court that Caltex had reasons to believe
that MT Vector could legally transport cargo that time of the year.
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two
years before the tragic incident occurred in 1987. Past services rendered showed no reason
for Caltex to observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard itself was convinced of its
seaworthiness. All things considered, the Court found no legal basis to hold petitioner
Caltex liable for damages.
SIDE NOTE:
Charter parties fall into three main categories:
(1) Demise or bareboat
(2) time charter
(3) voyage charter.
A contract of affreightment may be either time charter, wherein the leased vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a
single voyage. In both cases, the charter-party provides for the hire of the vessel only, either
for a determinate period of time or for a single or consecutive voyage, the ship owner to
supply the ship’s store, pay for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship.
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his
own people and becomes, in effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence.
Issue: Whether or not liability attached to petitioner as a ship agent. - liable
 TRANSPO DIGEST BATCH 4
Provident* SHIPPING SERVICES LIMITED INC., of Saskatoon,
Digest by: Eli 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 P1,657,700.95PHP. 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.
Trial court rendered decision in favor of Macondray
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
16
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, to which only questions of law may be raised in an
appeal by certiorari. 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 owner of the vessel or as agent of the charterer, petitioner will be
considered as the ship agent 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.” 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. 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. Moreover, Mr. de la Cruz, the representative of petitioner, also
prepared for the needs of the vessel, like money, provision, water and fuel. 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 agent 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.”
 TRANSPO DIGEST BATCH 4
CA affirmed but found Macondray liable because the latter was
the ship agent of Canpotex Shipping Services Ltd.—the shipper
and charterer of the vessel M/V Trade Carrier.
Heirs of Santos v. CA ** The heirs of Delos Santos and other pauper litigant filed against
Digest by: Isabelle Compania Maritima for damages due to the death of several
passengers as a result of the sinking of the vessel of the
defendant M/V Mindoro on November 4 1967.
M/V Mindoro sailed from pier 8 of Manila bound for Aklan. The
vessel met a typhoon ​Welming ​causing the death of many of its
passengers. Mauricio Santos declared that he accompanied his
common law wife Amparo Santos and children to board the
Mindoro bound for Aklan. Amparo and the children drowned due
to the storm.
Lots of testimonies of other victims on the ship were presented as
well.
In the decision of the Board of Marine Inquiry, it ws found that the
captain and some officers of the crew were negligent in operating
the vessel and imposed upon them a suspension and revocation
of license.
Defendants allege that no negligence was ever established and in
fact, the ship owners and their officers took all the necessary
precautions in operating the vessel. They allege it was due to
force majeure because of typhoon ​Welming.
RTC: Dismissed the case stating that the demise of the ship was
due to force majeure
CA: Affirmed the decision. While it found that there was
concurrent negligence on the part of the captain imputable to
Maritima the CA ruled that Maritima cannot be held liable for
damages
Transportation Overland and Vessels and Persons in Maritime Commerce
Lorenzo v. BJ Mathel- Heirs of Santos v. CA
17
ISSUE: Is Compania Maritima liable?
At the outset, we note that there is no dispute as to the findings of the captain’s negligence in
the mishap. The present controversy centers on the question of Maritima’s negligence and the
application of Art 587 of the Code of Commerce.
"Art. 587. The ship agent shall also be civilly liable for indemnities in favor of third persons
which may arise from the conduct of the captain in the care of the goods which he loaded on
the vessel, but he may exempt himself therefrom by abandoning the vessel with all her
equipment's and the freight it may have earned during the voyage."​|||
Under this provision, a shipowever or agent has the right of abandonment and by necessary
implication ​his liability is confined to that which he is entitled as of right to abandon- the
vessel with all her equipments and the freight it may have earned during the voyage.
NOtwithstanding the passage of the New Civil Code, Art 587 is still good law. The reason lies
in the peculiar nature of maritime law ​which is exclusively real and hypothecary that
operates to limit such liability to the value of the vessel or to the insurance thereon. ​As
correctly stated by the CA, this rule is necessary to offset against the innumerable hazards
and perils of the sea of voyage and to encourage shipbuilding and marine commerce.
Contrary to the contention of the petitioners, the limited liability doctrine ​applies not only to
the goods but also in all cases like death or injury to passengers wherein the
shipowner or agent may properly be held liable for the negligence or illicit acts of the
captain.
It must be stressed at this point that Art 587 speaks only of situations ​where the fault or
negligence is committed solely by the captain. In cases where the shipowner is likewise
to be blamed, Art 587 does not apply. ​Such a situation will be covered by the NCC on
Common Carriers.
Guided by the above legal provisions, we found that Maritima negligence compelled us to
reverse the conclusion of the CA.
Maritima claims that it did not have any information about typhoon Whelming until after the
boat was already at sea. Modern technology belie such contention. The weather bureau is
now equipped with modern apparatus which enables it to detect any incoming atmospheric
disturbances. Dr. Kintanar of the weather bureau stated that during Nov 1-4 of 1967,the
bureau issued ​17 warnings or advisories on typhoon ​Welming​.
Considering the above report and evidence on record showing the late departure of the ship at
6pm instead of 2pm, we find it highly improbable that the weather bureau had not yet issued
any typhoon bulletin at any time during the day to the shipping companies. Maritima submitted
 TRANSPO DIGEST BATCH 4
18

no convincing evidence to show this omission. Significantly, the CA found that the ship captain
through his action showed prior knowledge of the typhoon. The court said that in the
radiogram of Maritima, the captain had reporting that he was still observing the weather
condition thereby implicitly suggesting that he had known even before the departure fo the
unusual weather condition. If the captain knew of the typhoon beforehand, it is inconceivable
for Maritima to be totally in the dark of Welming. In allowing the ship to depart late from
Manila, Maritima displayed lack of foresight and minimum concern for the safety of its
passengers.
While we agree with the CA that the captain was negligence for overloading the ship,
Maritima shares equally in his negligence. Though the Coast guard had cleared departure
for 2 pm, the ships departure was delayed for 4 hours. Maritima did not even inquire as to why
the delay occurred. A closer supervision by Maritima could have prevented the overloading of
the ship.

On being sea-worthy:
Maritima presented evidence of the seaworthy condition of the ship prior to its departure to
prove that it exercised extraordinary diligence in the case. M/V Mindoro was dry-doccked for
about a month. Necessary repairs were made on the ship. Lifesaving equipment and
navigation instruments were installed.

While indeed it is true that all these things were done on the vessel, Maritima, however, could
not present evidence that it specifically installed a radar which could have allowed the vessel
to navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of
'Welming' in the open sea because although it was already in the vicinity of the Aklan river, it
was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to
darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning
or could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, ​ibid, p.
160). Storms and typhoons are not strange occurrences. In 1967 alone before 'Welming,'
there were about 17 typhoons that hit the country (Exh. M, Index of Exhibits, p. 115), the latest
of which was typhoon Uring which occurred on October 20-25, which cost so much damage to
lives and properties. With the impending threat of 'Welming,' an important device such as the
radar could have enabled the ship to pass through the river and to safety.

The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled
with the negligence of the captain as found by the appellate court were the proximate causes
of the sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the
victims.

Transportation Overland and Vessels and Persons in Maritime Commerce

Lorenzo v. BJ Mathel- Heirs of Santos v. CA