TRANSPORTATION LAW l Atty.

Glenn Capanas l For the exclusive use of EH 404 2016-2017

Persons authorized to procure necessaries When agent not considered ship agent
Section 22, PD 1521 When agent not considered ship agent
The following persons shall be presumed to have authority from the 1. If his only function is limited to informing the consignee of the
owner to procure repairs, supplies, towage, use of dry dock or marine arrival of the vessel in order for the latter to immediately take
railway, and other necessaries for the vessel: possession of the cargoes.
1. The managing owner 2. If he has no hand in the provisioning of the vessel.
2. The ship’s husband
3. Master or any person to whom the management of the vessel at Ace Navigation Co. v. FGU Insurance Corp
the port of supply is entrusted
An agent is not a ship agent if his only function is limited to informing
the consignee of the arrival of the vessel in order for the latter to
Important: The officers and agents of a vessel shall be taken to include
immediately take possession of the cargoes or has no hand in the
such officers and agents when appointed by a character, by an owner
provisioning of the vessel.
pro hac vice, or by an agreed purchase in possession of a vessel.
(Section 23 of PD 1521)
The responsibilities of such agent is not governed by the Code of
Commerce but by the provisions of the New Civil Code including Article
When no lien is conferred
1897, which provides that an agent is not personally liable to the party
1. When the person possesses the vessel tortuously or unlawfully. with whom he contracts, unless:
2. When the furnisher knows, or by exercise of reasonable diligence 1. He expressly binds himself, or
could have ascertained, that because of the terms of a charter 2. Exceeds the limits of his authority without giving such party
party, agreement for sale of the vessel, or for any other reason, sufficient notice of his powers.
the person ordering the repairs, supplies, or other necessaries was
without authority to bind the vessel therefor. Here, both exceptions do not obtain in the said case. Records are bereft
of any showing that ACENAV, the agent, exceeded its authority in the
Personal action against debtor and prescriptive period discharge of its duties as a mere agent of CARDIA. Neither was it alleged
that ACENAV’s limited obligation as agent of the shipper, CARDIA, was
Personal action against debtor not known to HEINDRICH.
Section 17, PD 1521
If the proceeds of the sale should not be sufficient to pay all creditors Furthermore, since CARDIA was not impleaded as a party in the suit,
included in one number or grade, the residue shall be divided among the liability attributed upon it by the Court of Appeals on the basis of
them pro rata. finding that the damage sustained by the cargo was due to improper
packing cannot be borne by ACENAV. As a mere agent, ACENAV cannot
All credits not paid, whether fully or partially shall subsist as ordinary be made responsible or held accountable for the damage supposedly
credits enforceable by personal action against the debtor. The record of caused by its principal.
judicial sale or sale by public auction shall be recorded in the Record of
Transfers and Encumbrances of Vessels in the port of documentation. Triple roles of captain

Prescriptive Period A captain commonly performs three distinct roles:

(1) He is a general agent of the shipowner.
Under Article 1144 of the Civil Code, an action upon an obligation (2) He is also commander and technical director of the vessel.
created by law must be brought within 10 years from the time the right (3) He is a representative of the country under whose flag he
of action accrues. Hence, the enforcement of maritime lien imposed by navigates.
special law prescribes in 10 years.
Important: Of these roles, the most important is the role performed
PERSONS WHO TAKE PART IN MARITIME COMMERCE by the captain as commander of the vessel, for such role has to do with
the operation and preservation of the vessel during its voyage and the
Ship owner, agent, captain, crew, supercargo protection of the passengers (if any), crew and cargo.

Atty: Persons who take part in maritime commerce Role as general agent of the shipowner
1. Shipowner In his role as general agent of the shipowner, he has the authority to:
2. Ship agent 1. Sign bills of lading
3. Captain or shipmaster 2. Carry goods aboard and deal with freight earned
4. Officers or crew 3. Agree upon rates and decide whether to take cargo
5. Supercargo (not anymore relevant) 4. Enter into contracts with respect to the vessel and the trading of
the vessel, subject to applicable limitations established by statute,
Important: We use these terms in the Code of Commerce: contract or instructions and regulations of the shipowner.
A. Owner of the vessel refers to the ship owner (don’t confuse with
topics on common carriers). Management and fiduciary functions
B. Agent refers to the ship agent (don’t confuse with ordinary agent The ship captain is committed to the governance, care and management
under Civil Code). of the vessel. Clearly, the captain is vested with both management and
fiduciary functions.

5|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Discretion of the captain B. When the pilot, in so navigating the vessel was going, or was likely
to go into danger.
Discretionary authority
A ship’s captain must be accorded a reasonable measure of discretionary Important: In sum, where a compulsory pilot is in charge of a ship,
authority to decide what the safety of the ship and of its crew and cargo the master being required to permit him to navigate it, if the master
specifically requires on a stipulated ocean voyage. The discretionary observes that the pilot is incompetent or physically incapable, then it is
authority is recognized with respect to his right to exercise his best the duty of the master to refuse to permit the pilot to act. But if no such
judgment, with respect to navigating the vessel he commands. reasons are present, then the master is justified in relying upon the pilot,
but not blindly.
Important: The captain has control of all departments of service in the
vessel, and reasonable discretion as to its navigation.
CHARTER PARTIES
Presumption Slot charter party
There is a presumption that the captain is knowledgeable of the specific
requirements of seaworthiness and the particular risks and perils of the Slot charter party
voyage he is to embark upon. Slot charter parties or space charter agreements, is a charter party
whereby the shipper leases one or more “slots,” aboard a container ship.
Basic principle in Admiralty Law: Here, a space in the vessel was reserved for the exclusive use of the
In navigating the vessel, the master must be left free to exercise his charterer.
own best judgment.
A voyage charter party includes a sub-category known as a slot charter,
Master pro hac vice where the owner or operator ‘rents’ or ‘hires’ container spaces or a
percentage of the space on the vessel for a hire fee based on the space
Maritime Pilot rented to the slot charterer, which is payable regardless of whether the
A person duly qualified and licensed to navigate a vessel into or out of slot charterer fills the space or not. There may be no distinction between
ports, or in certain waters. a voyage charter and a slot charter as both involve chartering a space
on a ship.
Compulsory pilotage: In compulsory pilotage, states possessing harbors,
enacted laws or promulgated rules requiring vessels approaching their Slot charter party is a contract of affreightment
ports to take on board pilots licensed under local law. In the Philippines, A charter party has two types.
compulsory pilotage is being implemented in the Port of Manila, the
latter being within the Manila Pilotage District. 1. Contract of affreightment
Pilot is the master pro hac vice The use of shipping space on vessels is leased in part or as a whole,
There is a master pro hac vice when the pilot supersedes the master for to carry goods for others. The charter-party provides for the hire
the time being in the command and the navigation of the ship, and his of vessel only, either for a determinate period of time or for a single
orders must be obeyed in all matters connected with the ship’s or consecutive voyage. Consequently, the voyage remains under
navigation. As master pro hac vice, he should give all directions as to the responsibility of the carrier and it is answerable for the loss of
speed, course, stopping and reversing, anchoring, towing and the like. goods received for transportation. The charterer is free from
liability to third persons in respect of the ship.
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 2. Bareboat charter or charter by demise
vessel, or to decline to act as pilot.
The whole vessel is let to the charterer with a transfer to him of its
Role of Captain or Master v. Role of Maritime Pilot entire command and possession and consequent control over its
navigation, including the master and the crew, who are his
Far Eastern Shipping Co. v. Court of Appeals servants. The charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service stipulated
Master is still in command of the vessel notwithstanding the
and hence liable for damages or loss sustained by the goods
presence of the pilot
transported.
(a) The master is not wholly absolved from his duties while a pilot is
Important: A slot charter party is a contract of affreightment. Take
on board his vessel, and may advise or offer suggestions to him.
note that charter party is governed by the actual circumstances and not
by the denomination of the contract. Thus, even if the contract says
(b) He is still in command of the vessel, except so far as the vessel’s
affreightment, but the complete control and supervision over the vessel
navigation is concerned, and must cause the ordinary work of the
is let to the charterer, the same is a bareboat or demise charter.
vessel to be properly carried on and the usual precaution taken.
Effect on diligence of common carrier
(c) Thus, he is bound to see that there is sufficient watch on deck,
The carrier is bound to exercise extraordinary diligence in conveying its
and that the men are attentive to their duties, also that engines
slot charter agreement. Being a contract of affreightment, it is the carrier
are stopped, towlines cast off, and the anchors clear and ready to
and not the charterer, who is liable for damages or losses sustained by
go at the pilot’s order.
the goods transported.
Instances when the master may and should interfere and even
Heung-A Shipping v. Philam Insurance Co.
displace the pilot
As the carrier of the subject shipment, Heung-A was bound to exercise
A. When the pilot is obviously incompetent or intoxicated and the extraordinary diligence in conveying the same. Its slot charter
circumstances may require the master to displace a compulsory agreement with Dongnama did not divest it of such characterization nor
pilot because of incompetency or physical incapacity. relieve it of any accountability for the shipment.

6|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Effect of charter party on carrier Thus, the charterer becomes the owner “pro hac vice” of the vessel since
he mans the vessel with his own set of master and crew, effectively
Planter’s Products v. CA becoming the owner for the voyage or service stipulated, subject
however to any liability for damages arising from negligence.
A bareboat or demise charter converts a common carrier into a
private carrier Moreover, the bareboat charterer assumes, to a large extent, the
customary rights and liabilities of the shipowner in relation to third
A charter party may transform a common carrier into a private carrier. persons who may have dealt with him or with the vessel. In this latter
However, it must be a bareboat or demise charter where the charterer instance, the master of the vessel is the agent of the charterer, and not
mans the vessel with his own people and becomes, in effect, the owner of the shipowner, and therefore, it is the charterer or owner pro hac
for the voyage or service stipulated. vice, and not the general owner of the vessel, who is liable for the
expenses of the voyage including the wages of the seamen.
The common carrier is not transformed into a private carrier if the
charter party is a contract of affreightment like a voyage charter or a
time charter. In a voyage charter, the carrier is answerable to the loss LOANS ON BOTTOMRY AND RESPONDENTIA
of the goods received for transportation.
Bottomry v. Respondentia
In this case, the contract between Mitsubishi and KKKK being merely a Loan on bottomry
time charter party, KKKK remained as common carrier and thus, the A contract whereby the owner of a ship borrows for the use, equipment
presumption of fault and negligence in case of loss, destruction or or repair of the vessel, for a definite term and pledges the ship as
deterioration of goods applies. security with a stipulation that if the ship is lost during the voyage or
during the limited time on account of the perils enumerated, the lender
Liability of charterer under a contract of affreightment shall lose his money.

Caltex v. Sulpicio Lines Atty: It is a system of merchant insurance in which a ship is used as
If the charter party is a contract of affreightment, the rights and the security against a loan to finance a voyage, the lender losing the
responsibilities of ownership rests on the owner. The charterer is free investment if the ship sinks.
from liability to third persons in respect of the ship.
Loan on Respondentia
The charterer of a vessel has no obligation before transporting its cargo Where the goods or some part thereof are hypothecated as security for
to ensure that the vessel it chartered complied with all legal a loan, and repayable upon the safe arrival of the cargo at destination.
requirements. The duty rests upon the common carrier simply for being
engaged in public service. The Civil Code demands diligence which is Bottomry Loan respondentia
required by the nature of the obligation and that which corresponds with Pledge of the ship or Pledge of goods or
the circumstances of the persons, the time and the place. a portion thereof a portion thereof
Atty: In the case of Caltex v. Sulpicio Lines, a tanker was hit by a Lender does not lose his capital
Lender loses his capital should should the ship perish due to
vessel. The Supreme Court ruled that the charterer has no liability since the ship perish due to marine
the contract entered into was a contract of affreightment. The common marine peril, so long as the
peril goods survive or are saved
carrier remains as a common carrier even if it is under a contract of
affreightment. However, if it will be bareboat or demise charter, then
the charterer is the one liable. Requisites of a loan on bottomry or respondentia

In reality, however, there is no distinction between affreightment and 1. Shipowner borrows money for use, equipment or repair of the
vessel
bareboat because even if you have a bareboat charter, the ship owner
will never relinquish control over the vessel. This is because there is a 2. For a definite term and with extraordinary interest called premium
3. Secured by pledge of vessel (bottomry) or pledge of goods
possibility that the charterer will place a captain or crew who do not
know the equipment, etc. No matter what name the contract is, the ship (respondentia)
4. Loan repayment is conditioned on the safe arrival of the vessel or
owner will always want control over the vessel.
goods.
5. The obligation is extinguished if the ship is lost during the voyage
However, when faced with the issue of who shall be liable, be guided by
or during the limited time on account of the perils enumerated
the ruling of the Supreme Court in this case. So distinguish whether the
contract is that of affreightment or bareboat. It is only in the latter where
the charterer is liable. Common elements of loans on bottomry and respondentia
1. Exposure of security to marine peril;
Owner pro hac vice 2. Obligation of the debtor conditioned upon safe arrival of the
security at the point of destination.
Charterer is the owner pro hac vice in a bareboat charter
Important: There must be a marine risk upon which the loan is
Heung-A Shipping v. Philam Insurance Co.
predicated. Thus, there is neither bottomry nor respondentia if the
In a bareboat or demise charter, the shipowner leases to the charterer money borrowed is subject to repayment in any event.
the whole vessel, transferring to the latter the entire command,
possession and consequent control over the vessel’s navigation,
including the master and crew, who thereby become the charterer’s
“servant.”

As the shipowner is not normally required to provide for a crew, the

charterer gains possession of the vessel “bare,” hence, the term
“bareboat.”

7|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Distinguished from ordinary loan Authority to constitute bottomry or respondentia

Bottomry/respondentia Ordinary loan Bottomry Respondentia

Not subject to usury law Subject to usury law
Shipowner
There must be a marine risk
which existence must be duly Risks need not be involved XPN: Captain – on account of Only the cargo owner
established extreme necessity and where he
Liability of borrower is contingent is the owner or part owner of
on the safe arrival of the vessel Not subject to any contingency the vessel
or cargo at destination
Must be executed in accordance May the captain contract a loan on bottomry?
Formal requisites regarding
with the forms and manner
contracts in general apply GR: The captain cannot contract loans on bottomry and should he do
required in the Code of
Commerce so, the contract shall be void.
Must be recorded in the registry
No such registration is required XPNs:
of vessels to bind third persons
Last lender is preferred First lender is generally 1. If captain is the owner or part owner of the vessel. Provided, that:
preferred
(a) No money has been previously owned on the whole vessel
Must have collateral May or may not have collateral
(b) No lien or obligation is chargeable against the vessel
Loss of collateral extinguishes Loss of collateral does not
the obligation extinguish the obligation 2. On account of extreme necessity

When simple loan applies

Consequences of loss of effects of the loans
Instances where the loan on bottomry or respondentia may be regarded
as simple loan only: General rule
If the effects of the loans is lost due to an accident of the sea designated
1. If the lender should prove that he loaned an amount which is larger in the contract and the cargo was on board –
than the value of the object liable for the bottomry loan due to
fraudulent means employed by the borrower. Effect: The lender loses his right to institute the action which would
pertain to him.
Important: Loan is valid only for the amount at which the object
is appraised by experts. The surplus principal shall be repaid with Exceptions: If the loss was caused by the:
legal interest. 1. Inherent defect of the thing
2. Fault or malice of the borrower
2. If the full amount of the loan contracted in order to load the vessel 3. Barratry on the part of the captain
is not used for the cargo. The balance will be considered as a simple 4. Damages suffered by the vessel as a consequence of being
loan which should be returned prior to the commencement of the engaged in a contraband
voyage. 5. Loading the goods on a vessel different from that designated in the
contract (xpn: change was due to fortuitous event)
3. Other cases where the money taken is not subjected to any risk
Other consequences:
Form of the loans
1. The lenders on bottomry or respondentia shall suffer in proportion
Form of the loans to their respective interest, the general average which may take
The loans on bottomry and respondentia must be executed in place in the things upon which the loans were made.
accordance with the form and manner prescribed in Art 720 of the Code
of Commerce: 2. In case of shipwreck, the amount for payment of the loan shall be
deduced to the proceeds of the effects which have been saved but
1. Public instrument only after deducting the costs of the salvage.
2. Policy signed by the contracting parties and the broker taking part
therein 4. If the loan should be on the vessel or any of her parts, the freight
3. Private instrument earned during the voyage for which the loan was contracted shall
also be liable for its payment, as far as it may reach.
Important: In whichever form, the following requirements must be
met, otherwise, they cannot have preference over other credits. 5. If the same vessel or cargo should be the object of the loan of
(a) Entered in the certificate of registry of the vessel and bottomry or respondentia and maritime insurance, the value of
(b) Recorded in the registry of vessels what may be saved in case of shipwreck shall be divided between
the lender and the insurer, in proportion to the legitimate interest
Atty: Remember that loans bottomry and respondentia should be in of each one, taking in consideration, for this purpose only, the
writing before they can ripen into a judicial action. Whether it is a private principal with respect to the loan and without prejudice to the right
document or a public document, that is a requirement. of preference of other creditors.

8|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

AVERAGES Ex: Voluntary jettison – the casting away of some portion of the
cargo to lighten the vessel.
Definition of Averages
Requisites of general average:
What are averages? 1. There must be a danger common to both vessel and cargo.
1. The extraordinary or accidental expenses incurred during the 2. That for the common safety, part of the vessel or of the cargo
voyage in order to preserve the cargo, vessel or both; and or both is sacrificed deliberately.
2. All damages or deterioration suffered by the vessel from departure 3. That from the expenses or damages caused follows the
to the port of destination, and to the cargo from the port of loading successful saving of the vessel and cargo.
to the port consignment. 4. That the expenses or damages should have been incurred or
inflicted after taking proper legal steps and authority.
Atty: Averages may be of two kinds, particular or general. (This will be
exhaustively discussed later) Important: No general contribution can be demanded if the
vessel or the cargoes sought to be saved were in fact not saved.
Important: Pilotage are ordinary expenses. They are not averages,
unless stipulated. Particular and General Averages distinguished
Particular/Simple Average General/Gross Average
Ordinary v. Extraordinary expenses Have not inured to the common Caused for the benefit of those
benefit of all persons interested interest in the vessel or cargoes
Important: Before determining whether the averages are particular or in the vessel or cargoes
general, determine first whether the expenses are ordinary or May be due to causes other Deliberately caused in order to
extraordinary. Because if they are merely ordinary expenses, the rule on than deliberate acts save the vessel or the cargoes
averages will never apply, except if the parties stipulate otherwise. Borne proportionately by the
Borne by the owner of thing
vessel or cargoes damaged persons having interest in the
Ordinary Expenses vessel or cargoes
Article 807, Code of Commerce
Effect of presence of negligence
Petty and ordinary expenses incident to navigation, such as those of
pilotage of coasts and ports, those of lighterage and towage, anchorage, American Home Assurance v. CA
inspection, health, quarantine, lazaretto, and other so-called port
The law on averages in the Code of Commerce cannot be applied in
expenses, costs of barges and unloading until the merchandise is placed
determining liability where there is negligence.
on the wharf, and any other usual expenses of navigation, shall be
considered ordinary expenses to be defrayed by the shipowner, unless
Atty: There is negligence here because the shipowner proceeded with
there is an express agreement to the contrary.
the voyage despite warning from PAG-ASA of a storm. This is the case
where almost 10,000 televisions were loaded on a vessel. The issue on
Important: Ordinary expenses are not averages because they are
negligence must first be resolved before provisions on Code of
foreseeable, unless the parties agree that averages will cover ordinary
Commerce may be applied.
expenses. The Code of Commerce does not prohibit the inclusion of
other expenses under averages.
NDC vs. Court of Appeals
Extraordinary Expenses Two vessels collided because of negligence of the captain. When the
These are expenses which are not usually foreseen. shipowner and ship agent were sued, they interposed the defense that
the law on averages must apply, so the loss must be proportionately
Ex. If machine does not work, you have to ask help of a tugboat. The spread. However, the Supreme Court said that the law on averages finds
expenses on the use of tugboat is a question of averages. This is no application where there is negligence and where the cargoes are not
extraordinary because it is not foreseen. jettisoned.

Atty: You have a vessel at present, we say present, because the book Atty: During the medieval times, the concept of averages was limited
makes a distinction about vessels during the medieval times and now. to instances where cargoes are jettisoned. At present, there can still be
If at present, your vessel is caught by fire, and to extinguish the fire, a averages even if the cargoes are not jettisoned.
certain equipment was used, the owner of that equipment will have to
be paid for rescuing. The ship owner would have to pay the expense. Expenses to refloat a vessel
This is not an ordinary expense because it does not normally happen in
a voyage. Magsaysay v. Agaan

Facts: A vessel, while unintentionally stranded inside a port, ran aground

Two classes of averages
at the mouth of the Cagayan River. Expenses were incurred in hiring a
company to refloat the vessel. The shipowner claims that the expenses
1. Particular averages – damages or expenses caused to the vessel
constitute general averages and thus the losses should be borne
or cargoes which did not inure to common benefit of all persons
proportionately.
interest in the vessel or cargo. Here, loss will lie on where it falls.
Issue: Whether the expenses constitute general averages.
Ex: If along the voyage, the vessel suffered damage, it is the
shipowner who bears the loss. Res perit domino.
Ruling: No. For expenses for refloating a vessel to constitute general
averages, the vessel must be intentionally stranded and the expenses
2. General averages – damages or expenses deliberately caused to
were incurred for the purpose of saving both the vessel and the cargo.
save the vessel, its cargo, or both, from real and known risk. Here,
loss will be spread proportionately. All persons having an interest
in the vessel and cargo shall contribute to satisfy the coverage.

9|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Here, the stranding of the vessel was not intentional. Moreso, the Liability rules
expenses were not incurred for the common safety of the vessel and the
cargo, since they, or at least the cargo, were not in imminent peril. The Negligence-based
cargoes could have been unloaded without need of an expensive salvage Although the liability with respect to collision is not governed by quasi-
operation. delict, liability in collusion is still negligence based. Thus, the courts are
still called upon to determine the negligence of the persons involved in
In sum, where the expense sought to be recovered does not show that order to impose liability.
it is intended to save the vessel or cargo from common danger, it cannot
be considered a general average. Nature of liability
The person who caused the injury is both civilly and criminally liable.
Important: There is no proof that the vessel had to be put afloat to
save it from imminent danger. From the testimony of the shipowner, the Determination of negligence
vessel had to be salvaged in order to enable it to proceed to its port of In the determination of negligence, the same test of a reasonable man
destination. It is important to note that the true foundation of general in the position of an expert that applies in quasi- delict should also be
averages is the safety of the property and not of the voyage. applied, although with due consideration to the expertise of the persons
involved including the carrier itself, the captain, officers and crew of the
COLLISSIONS vessels.

Collision v. Allision Doctrines of contributory negligence and last clear chance not
applicable
Collision The doctrines of contributory negligence and last clear chance are not
An impact or contact between two vessels, both of which are moving. applicable. Thus, if both vessels negligently operated, it does not matter
if the other has the last clear chance of avoiding the injury because
Allision under Article 827, each must suffer its own damage if both of them are
An impact between a moving vessel and a stationary one. negligent. Consequently, both shall be solidarily liable for losses and
damages.
Zones in collision
Important: Proof that the plaintiff was negligent will bar recovery from
Three divisions in time of collision: the defendant in collision cases even if the Plaintiff’s negligence can be
classified as merely contributory.
1. First Division
This refers to all time up to the moment when risk of collision may Defense of due diligence in selection and supervision of
be said to have begun. Within this zone, no rule is applicable employees not applicable
because none is necessary. Each vessel is free to direct its course Even if the cause of action against the common carrier is based on quasi-
as it deems best without reference to the movements of the other delict, the defense of due diligence in the selection and supervision of
vessel. employees is unavailing in case of a maritime tort resulting in collision.
It is not a civil tort governed by the Civil Code but a maritime one
2. Second Division governed by Arts. 826-839 of the Code of Commerce.
This refers to the time between moment when risk of collision
begins and moment it becomes a practical certainty. Doctrine of limited liability rule applicable
The Doctrine of Limited Liability applies in case of collisions. The law
3. Third Division limits liability of the shipowner and ship agent to the value of the vessel
This covers the time of actual contact. This is when the collision is with all its appurtenances and freightage earned during the voyage.
certain and time of impact.
Specific rules under the Code of Commerce
Doctrine of Error in Extremis
This refers to the sudden movement made by a faultless vessel during 1. One vessel at fault
the 3rd zone of collision with another vessel which is at fault during the
2nd zone. Even if such sudden movement is wrong, no responsibility If a vessel should collide with another, through or the fault,
will fall on said faultless vessel. negligence, or lack of skill of the captain, sailing mate, or any other
member of the complement, the owner of the vessel at fault shall
Urrutia and Co. v. Baco River Plantation indemnify the losses and damages suffered, after an expert
If a vessel having a right of way suddenly changes its course during the appraisal. (Art. 826)
3rd zone (time between the moment when collision has become a
practical certainty and the moment of actual contact), in an effort to 2. Both vessels at fault
avoid an imminent collision due to the fault of another vessel, such act If the collision is both imputable to both vessels, each one shall
may be said to be done in extremis, and even if wrong, cannot create suffer its own damages, and both shall be solidarily responsible for
responsibility on the part of said vessel with the right of way. the losses and damages occasioned to their cargoes. The losses
rest where they falls.
Thus, it has been held that fault on the part of the sailing vessel at the
moment preceding a collision, that is, during the 3rd division of time, With respect to the cargoes, the ship-owner and ship agents of the
does not absolve the steamship which has suffered herself and a sailing vessels involved in the collision are liable to the shippers. The
vessel to get into such dangerous proximity as to cause inevitable harm liability is joint and several’ there will be no apportionment of
and confusion, and a collision results as a consequence. liability and each ship-owner or ship agent is liable for the whole
damage or injury. (Art. 827)
The steamer having a far greater fault in allowing such proximity to be
brought about is chargeable with all the damages resulting from the
collision; and the act of the vessel sailing having been done in extremis,
even if wrong, is not responsible for the result.

10 | U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

3. Party at fault cannot be determined Rule 18 of the International Rules of the Road
Each party shall also bear his own damage in cases in which it
Rule 18, International Rules of the Road
cannot be determined which of the two vessels has caused the
collision. They are solidary responsible for the losses and damages When two power-driven vessels are meeting end on, or nearly end on,
occasioned to their cargoes. (Art. 828) so as to involve risk of collision, each shall alter her course to starboard,
so that each may pass on the port side of the other.
Important: This is otherwise known as the doctrine of inscrutable
fault – where it cannot be determined which between the two Important note: This is actually Rule 14 the International Rules of the
vessels was at fault, both shall bear their respective damage, but Road. However, the Supreme Court, in the case of Smith Bell v. Go
both should be solidarily liable for damage to the cargo of both Thong, referred to this as Rule 18. Maybe it was Rule 18 before and was
vessels. repealed, I don’t know. Tried my best to figure out why, but failed. But
it would seem that this is the rule referred to by Sir as per his discussion.
4. Cause is fortuitous event
When applicable, when not applicable
If a vessel should collide with another, through fortuitous event or This Rule only applies to cases where vessels are meeting end on or
force majeure, each vessel and its cargo shall bear its own nearly end on, in such a manner as to involve risk of collision, and does
damages. (Art. 830) not apply to two vessels which must, if both keep on their respective
course, pass clear of each other.
If, by reason of a storm or other cause of force majeure, a vessel
which is properly anchored and moored should collide with vessels Smith Bell v. Go Thong (1991)
nearby, causing the latter vessels damages, the injury occasioned
shall be considered as particular average of the vessel run into. Atty: Go Thong was held responsible for collision in this case for
(Art. 832) violation of Rule 18 of the International Rules of the Road. This is
because of the following:
5. Third person at fault 1. It turned to portside (left), instead of turning to starboard (right)
2. There was no proper look-out
The owner of the third vessel shall indemnify the losses and 3. The second mate was the one in command of the vessel even if
damages caused, the captain thereof shall be civilly liable to said there was a captain on board.
owner. (Art. 831)
Mecenas v. Court of Appeals (1989)
6. Sinking on the way to port Atty: This is a peculiar case because the Supreme Court did not apply
A vessel which upon being run into sinks immediately, as well as international rules. Instead, it applied the presumption of gross
that which, having been obliged to make a port to repair the negligence under the New Civil Code.
damages caused by the collision, is lost during the voyage or is
obliged to be stranded in order to be saved, shall be presumed as Facts: M/T Tacloban (barge-type oil tanker) and the M/V Don Juan
lost by reason of collision. (Art. 833) (passenger vessel) collided. When the collision occurred, the sea was
calm, the weather fair and visibility good. As a result of this collision, the
M/V "Don Juan" sank and hundreds of its passengers perished.
Liability of charterer under Maritime Law

Is a charterer liable under maritime law? M/V Don Juan claimed that it should not be liable as it complied with
It depends if the charter party is a contract of affreightment or a Rule 18 of the International Rules of the Road, while M/T Tacloban City
bareboat/demise charter. did not. It appears that when the two vessels were only three-tenths
(0.3) of a mile apart, M/T Tacloban turned to port side (in violation of
A. Contract of affreightment Rule 18, while the M/V Don Juan veered hard to starboard.

The use of shipping space on vessels is leased in part or as a whole, Ruling: The “Route observance” of the International Rules of the Road
to carry goods for others. Consequently, the voyage remains under will not relieve a vessel from responsibility if the collision could have
the responsibility of the carrier and it is answerable for the loss of been avoided by proper care and skill on her part or even by a departure
goods received for transportation. The charterer is free from from the rules.
liability to third persons in respect of the ship.
Rule 18 like all other International Rules of the Road, are not to be
B. Bareboat charter or charter by demise obeyed and construed without regard to all the circumstances
surrounding a particular encounter between two vessels.
The whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its In ordinary circumstances, a vessel discharges her duty to another by a
navigation, including the master and the crew, who are his faithful and literal observance of the Rules of Navigation, and she cannot
servants. The charterer becomes the owner for the voyage or be held at fault for so doing even though a different course would have
service stipulated and hence liable for damages or loss sustained prevented the collision. This rule, however, is not to be applied where it
by the goods transported. is apparent, as in the instant case, that her captain was guilty of
negligence or of a want of seamanship in not perceiving the necessity
Important: It is only in bareboat or demise charter where the charterer for, or in so acting as to create such necessity for, a departure from the
is liable for damages or losses sustained. rule and acting accordingly.

Note: Sir reiterated the concept of charterer being the owner pro hac
vice in cases of bareboat or demise charter, and the requirement of
maritime protest in cases of collisions. These have already been
exhaustively discussed in page 7 and 2 of this reviewer, respectively.

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Circumstances that showed negligence: When not lawful

Article 820
(a) The "Don Juan" having sighted the "Tacloban City" on radar when
it was still a long way off was negligent in failing to take early 1. If the lack of provisions should arise from the failure to take the
preventive action. necessary provisions for the voyage according to usage and
customs, or if they should have been rendered useless or lost
(b) M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing through bad stowage or negligence in their care.
mahjong before and up to the time of collision.
2. If the risk of enemies, privateers, or pirates should not have been
(c) After the collision, the captain failed to institute appropriate well-known, manifest, and based on positive and provable facts.
measures to delay the sinking of MS Don Juan and to supervise 3. If the defect of the vessel should have arisen from the fact that it
properly the execution of his order of abandonship. was not repaired, rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous order of the
(d) As regards the officer on watch, Senior 3rd Mate Rogelio Devera, captain.
he admitted that he failed or did not call or inform Capt.
Santisteban of the imminent danger of collision and of the actual 4. When malice, negligence, want of foresight or lack of skill on the
collision itself. part of the captain exists in the act causing the damage.

(e) There is also evidence that the "Don Juan" was carrying more Atty: AUS means that the vessel can either go to the port of destination
passengers than she had been certified as allowed to carry. or to the most convenient or nearest court because of several causes.
Examples of these causes are lack of provision, well-founded fear of
(f) M/V Don Juan was twice as fast at M/T Tacloban. seizure, pirates, or accident along the voyage. But it becomes unlawful
when there is negligence on the part of the ship captain.
There is, therefore, no question that the M/V Don Juan was at least as
negligent as the M/T Tacloban City in the events leading up to the Unloading of cargo
collision and the sinking of the M/V Don Juan.
Article 822
Atty: In the total set of circumstances, had M/V Don Juan taken If in order to make repairs to the vessel or because there is danger that
seriously its duty of extraordinary diligence, could have easily avoided the cargo may suffer damage, it should be necessary to unload, the
the collision with the M/T Tacloban City. captain must request authorization from the competent judge or court
for the removal, and carry it out with the knowledge of the person
ARRIVAL UNDER STRESS interested in the cargo, or his representative, should there be any. In a
foreign port, it shall be the duty, of the Philippine Consul, where there
Definition is one, to give the authorization.

Arrival under stress (AUS) In the first case, the expenses shall be for the account of the ship agent
or owner, and in the second, they shall be chargeable against the
Article 819, Code of Commerce owners of the merchandise for whose benefit the act was performed. If
The arrival at the nearest and most convenient port, if during the the unloading should take place for both reasons, the expenses shall be
voyage, the captain should believe that the vessel cannot continue the divided proportionately between the value of the vessel and that of the
trip to the port of destination on account of: cargo.

1. Lack of provisions
2. Well-founded fear of seizure Liability of Shipowner
3. Privateers or pirates Article 821, Code of Commerce
4. By reason of any accident of the sea disabling it to navigate.
The expenses of an arrival under stress shall always be for the account
Important: The captain must make a protest. of the shipowner or agent, but they shall not be liable for the damages
which may be caused to the shippers by reason of the arrival provided
Steps to be taken in the determination of the propriety of the latter is legitimate. Otherwise, the ship agent and the captain shall
arrival under stress: be jointly liable.

1. Captain should determine during the voyage if there is a well- Important: The shipowner will always be liable for the expenses of an
founded fear of seizure, privateers of other valid grounds. arrival under stress, whether lawful or unlawful. The only difference lies
in the liability for damages caused to the shipper’s cargoes:
2. Captain shall then assemble the officers. 4. If AUS is lawful – not liable
3. Captain shall summon the persons interested in the cargo who may 5. Is AUS is unlawful – liable (here, shipowner is liable for both
be present and who may attend but without right to vote. the expenses of arrival under stress and damages caused to
the shipper)
4. The officers shall determine and agree if there is well-founded
reason after examining the circumstances; Captain shall have the Article 825, Code of Commerce
deciding vote.
The captain shall be liable for damages caused by his delay, if after the
5. Agreement shall be drafter and the proper minutes shall be signed cause of the arrival under stress has ceased, he should not continue the
and entered into the log book. voyage.

6. Objections and protests shall likewise be entered in the minutes

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

SALVAGE Why are expert salvors needed?

Because although it is not yet prevalent in our setting, in England,
Right to salvage reward salvors can be liable for damages if instead of salving or saving the
vessel, salvors would cause damage on the vessel.
Salvage
Salvage is the compensation allowed to persons by whose assistance a Salvage is a preferred maritime time
ship or her cargo has been saved, in whole or in part, from impending Salvage is a maritime lien under Sec 17 of PD 1521, such that if in a
peril on the sea, or in recovering such property from actual loss, as in given contract, salvors are not paid, the salvage reward has priority over
case of shipwreck, derelict, or recapture. other claims.

Section 1, Salvage Law Towage v. Salvage

When in case of shipwreck, the vessel or its cargo shall be beyond the
control of the crew, or shall have been abandoned by them, and picked Towage
up and conveyed to a safe place by other persons, the latter shall be A contract whereby one vessel pulls another, whether loaded or not with
entitled to a reward for the salvage. cargo, from one place to another, for a compensation. This is the service
rendered to a vessel by towing for the mere purpose of expediting her
Those who, not being included in the above paragraph, assist in saving voyage without reference to any circumstances of danger.
a vessel or its cargo from shipwreck, shall be entitled to a like reward.
Salvage
When salvage reward may be had A service rendered by one to the owner of a ship or goods, by his own
1. Shipwreck labor preserving the goods or the ship which the owner or those
2. When the vessel or its cargo shall be beyond the control of the entrusted with the care of them have either abandoned in distress at
crew sea or are unable to protect and secure.
3. When the vessel or its cargo shall have been abandoned by them
Kinds of salvage:
Persons entitled to salvage reward 1. Voluntary – compensation is dependent upon success
1. Those who picked up and conveyed the vessel or its cargo to a safe 2. Rendered under a contract – payable at all events
place 3. Under a contract for a compensation – payable only in case of
2. Those who assist in saving a vessel or its cargo from shipwreck success.

Important: The salvor, under the Salvage Law must have no relation, The main distinction lies in the element of peril.
contractual or otherwise, upon the ship in distress. Barrios v. Go Thong

Persons not entitled to salvage reward Facts: Barrios was the master of MV Henry I. He received a distress
signal by blinkers from MV Don Alfredo, owned by Go Thong Co. Barrios
Section 8 altered the course of his vessel and headed towards MV Don Alfredo.
The following shall have no right to a reward for salvage or assistance: The latter was in trouble due to engine failure and the loss of her
1. The crew of the vessel shipwrecked or which was in danger of propeller. With the consent and knowledge of the master of MV Don
shipwreck Alfredo, the vessel was caused to be tied and towed by MV Henry I.
2. He who shall have commenced the salvage in spite of opposition
of the captain or his representative, and Later however, at the sight of MV Don Alfredo’s sister ship, the latter’s
3. He who shall have failed to comply with the provisions of Sec. 3. captain requested that the towlines be released. The parties now argue
whether the undertaking was a salvage or a mere towage.
Important: While the crew of the vessel shipwrecked have no right to
a salvage reward, the crew of the salvaging ship is entitled to salvage. Ruling: It was a mere towage. There was no marine peril in the case.
Although the vessel was in a helpless condition, it did not drift too far
Section 3 from the place where it was. The weather was fair, clear, and good.
He who shall save or pick up a vessel or merchandise at sea, in the Although said vessel was drifting towards the open sea, there was no
absence of the captain of the vessel, owner, or a representative of either danger of it floundering or being stranded, as it was far from any island
or then, they being unknown, shall convey and deliver such vessel or or rocks.
merchandise, as soon as possible, to the Collector or Customs, if the
port has a collector, and otherwise to the provincial treasurer or There was no danger that defendant's vessel would sink. The crew did
municipal mayor. not even find it necessary to lower its launch and two motor boats, in
order to evacuate its passengers aboard. Neither did they find occasion
Elements of a valid salvage claim to jettison the vessel's cargo as a safety measure.
1. There exists a marine peril.
2. Service is voluntarily rendered and is not be required as an existing Importance of the distinction for members of the crew of the
duty or from a special contract. salvaging ship
3. Success in whole or in part, or that the service rendered The distinction between salvage and towage is of importance to the
contributed to such success crew of the salvaging ship, for the following reasons:
4. The vessel is shipwrecked, ship or its cargo is beyond the control
of the crew or shall have been abandoned (a) If it is in fact towage – It is the owner of the towing vessel and
not the crew who is entitled to remuneration.
Atty: At present, salvage law may not be as relevant, because expert (b) If it is in fact salvage – The crew of the salvaging ship is entitled
salvors don’t do salvage, unless covered by a salvage contract. to salvage, and can look to the salvaged vessel for its share.
Consequently, this is a violation of the second requisite because the
same is no longer voluntary.

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

CARRIAGE OF GOODS BY SEA ACT (COGSA) Notice of claim

When applicable Section 3 (6), COGSA

If the loss or damage is not apparent, the notice must be given within
When applicable three (3) days of the delivery. Said notice of loss or damage may be
A. Applies suppletorily to the Civil Code if the goods are to be shipped endorsed upon the receipt of the goods given by the person taking
delivery thereof. The notice in writing need not be given if the state of
form a foreign port to the Philippines
the goods has at the time of their receipt been the subject of joint survey
B. COGSA is applicable in international maritime commerce. or inspection.
C. It can be applied in domestic sea transportation if agreed upon by
the parties (paramount clause). In any event, carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after
Article 1753, NCC delivery of the goods or the date when the goods should have been
The law of the country to which the goods are to be transported shall delivered: Provided, that, if a notice of loss or damage, either apparent
govern the liability of the common carrier for their loss, destruction or or concealed, is not given as provided for in this section, that fact shall
deterioration. not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should
Atty: Thus, the New Civil Code is the primary law on goods that are have been delivered.
being transported from a foreign port to the Philippines. Nevertheless,
the COGSA remains to be a suppletory law for such type of Notice of claim
transportation – international shipping. A. If loss or damage is apparent – notice must be given immediately
B. If loss or damage is not apparent – notice must be given within 3
Bill of lading necessary for COGSA to apply days from delivery.
Bill of lading or any other document, is needed for the application of Important: Non-compliance with the notice requirement shall not
COGSA. It can be an acknowledgement receipt, received or signed by prejudice the right of the shipper to bring suit within 1 year from delivery
the ship captain involving the goods. of the goods or the date when the goods should have been delivered.

Reason: In international trade, other countries are also involved. A bill Distinguished from the NCC
of lading is the contract between the shipper and the carrier. Being so,
regardless of country, it shall be governing law between the two. COGSA NCC
Consequently, in case of suit, the law to be applied won’t be an issue (a) If damage is (a) If damage is
because it is the contract (bill of lading) that will govern. apparent – apparent –
immediately immediately
When COGSA not applicable Notice of
1. When liability is based on a contract of insurance claim
(b) If not apparent – (b) If not apparent –
2. In cases of misdelivery of goods within 3 days from within 24 hours
delivery
Delivery to arrastre operator for purposes of Sec. 3 (6)
Prescription 1 year 10-6-4 years
Section 3 (6), COGSA
Unless notice or loss or damage and the general nature of such loss or Prescriptive period, when reckoned
damage given in writing to the carrier or his agent at the port of
discharge or at the time of the removal of the goods into the custody of Section 3 (6), COGSA
the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier The carrier and the ship shall be discharged from all liability in respect
of the goods as described in the bill of lading. of loss or damage unless suit is brought within one year after delivery
of the goods or the date when the goods should have been delivered:
“Delivery” means delivery to arrastre operator Provided, that, if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall not
Union Carbide Phils v. Manila Railroad affect or prejudice the right of the shipper to bring suit within one year
“Delivery” within the meaning of Section 3 (6) of COGSA means delivery after the delivery of the goods or the date when the goods should have
to the arrastre operator. That delivery is evidenced by tally sheets which been delivered.
show whether the goods were landed in good order or in bad order, a
fact which the consignee or shipper can easily ascertain through the Prescriptive period
customs broker. Suit for loss or damage to the cargo must be brought within 1 year from:
(a) Delivery of the goods, or
Atty: To avoid confusion as to when and in whose hands the damage (b) The date when the goods should be delivered.
was caused, delivery shall mean delivery to the arrastre operator, and
not to the consignee. However, in cases of ports not covered by arrastre The one-year prescriptive period does not apply to cases of
operators, delivery shall mean delivery to consignee. misdelivery or conversion.
Philam Insurance v. Heung-a
Loss contemplates merely a situation where no delivery at all was made
by the shipper of the goods because the same had perished, gone out
of commerce, or disappeared in such a way that their existence is
unknown or they cannot be recovered. It does not include a situation
where there was indeed delivery – but delivery to the wrong person, or
a misdelivery.

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

When prescription reckoned. In this case, the provisional claim was filed on January 3, 1962 or on
the 15th day following December 19, 1961, the date of the discharge of
Union Carbide Phils v. Manila Railroad the last package from the carrying vessel. That claim was never formally
rejected or denied by the arrastre operator.
Facts: On December 18, 1961 the vessel DaishinMaru arrived in Manila
with a cargo of 1,000 bags of synthetic resin consigned to General Base Having complied with the condition precedent for the filing of a claim
Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc. within the fifteen-day period, Union Carbide could file the court action
The following day, on December 19, 1961, the cargo was delivered to within one year, either from December 19, 1961 or from December 19,
the arrastre operation in good order and condition except for 25 bags 1962. This second date is regarded as the expiration of the period within
which were in bad order. which the arrastre operator should have acted on the claim.
Of the 1,000 bags, only 898 bags were delivered to consignee. In other words, the consignee has a two-year prescriptive period,
Moreover, 50 of the 898 bags were damaged. Thus, consignee filed on counted from the date of the discharge of the goods, within which to
January 3, 1962, a provision claim against the arrastre operator, and file the action in the event that the arrastre contractor, as in this case,
agent of the carrier, advising them that the shipment in question was has not rejected nor admitted liability.
"short-landed, short-delivered and landed in bad order".
Since the action in this case against the arrastre operator was filed on
Later, on December 21, 1962, a case was filed against both the arrastre December 21, 1962, or within the two-year period expiring on December
operator and the agent of the carrier. It was however dismissed on the 19, 1963, that action was filed on time.
ground that the action had already prescribed because it was not
brought within one year after delivery of the goods", as contemplated
in Section 3 (6) of COGSA. Meaning of delivery under Section 3 (6) on prescription

Liao v. American President Lines (1956)

Relevant dates:
1. December 19, 1961 – delivery of the goods to the arrastre operator Facts: Liao entered into a contract with Kent Sales of NYC for the
2. January 3, 1962 – provisional claim was filed importation of fresh hen eggs. Kent Sales contracted with APL to have
3. December 21, 1962 – case was filed in court the eggs shipped to Manila. Liao claims that the discharge of his cargo
at the port of San Francisco was wrongful and unjustified as the eggs
Issue: Whether the action filed by the consignee, Union Carbide, was were exposed to the hot summer weather without having been placed
barred by the statute of limitations. in refrigeration.

Ruling: Yes, with respect to the claim against the carrier’s agent, but As a special defense, APL claimed that while Liao received the goods in
not with respect to the claim against the arrastre operator. question on December 26, 1946, he filed a claim with APL for damages
only on July 25, 1947, and brought suit on May 25, 1948, more than a
Claim against the carrier's agent has prescribed year from the receipt of the goods, and so Liao’s action had prescribed
The one-year period within which the consignee should sue the carrier under Section 3 (6) of the COGSA.
is computed from the delivery of the goods or the date when the goods Liao countered that there is a distinction between damage to the goods
should have been delivered. and damages to the shipper. Consequently, damage to goods is
governed by COGSA, while damage to the shipper is governed by the
“Delivery” within the meaning of Section 3(6) of COGSA means delivery NCC. In the latter, the prescriptive period is 10 years.
to the arrastre operator. That delivery is evidenced by tally sheets which
show whether the goods were landed in good order or in bad order, a Issue: Whether the claim has prescribed under COGSA.
fact which the consignee or shipper can easily ascertain through the
Ruling: Yes. There is no difference between damage to goods and
customs broker.
damage to the shipper. Whatever damage or injury is suffered by the
goods while in transit would result in loss or damage to either the
To use as basis for computing the one-year period, the date of delivery
shipper or the consignee. As long as it is claimed, therefore, as it is done
to the consignee would be unrealistic and might generate confusion
here, that the losses or damages suffered by the shipper or consignee
between the loss or damage sustained by the goods while in the carrier's
were due to the arrival of the goods in damaged or deteriorated
custody and the loss or damage caused to the goods while in the
condition, the action is still basically one for damage to the goods, and
arrastre operator's possession.
must be filed within the period of one year from delivery or receipt,
under COGSA.
Under the facts of this case, the one-year period was correctly reckoned
from December 19, 1961, when, as agreed upon by the parties and as Mitsui v. Court of Appeals
shown in the tally sheets, the cargo was discharged from the carrying
vessel and delivered to the arrastre operator. That one-year period Facts: Mitsui, as common carrier, entered into a contract of carriage
expired on December 19, 1962. Inasmuch as the action was filed on with Lavine Co. to transport the latter’s goods from Manila to France.
December 21, 1962, it was barred by the statute of limitations. Mitsui undertook to transport the goods to France 28 days from initial
loading. However, the goods were not transhipped immediately in
Claim against the arrastre operator has not prescribed Taiwan. As a result, the shipment arrived later.
The action against the arrastre operator to enforce liability for loss of
the cargo or damage thereto should be filed within one year from the The consignee paid only half the value of the said goods on the ground
date when the claim for the value of such goods has been rejected or that they did not arrive in France until the off season in that country.
denied by the arrastre operator. The remaining half was charged to the account of Lavine. Lavine now
sues Mitsui for damages, more than a year from delivery of the goods.
However, before such action can be filed a condition precedent should By way of special defense, Mitsui argued that Lavine’s claim has already
be complied with and that is, that a claim (provisional or final) shall have prescribed.
been previously filed with the arrastre operator within 15 from the date
of the discharge of the last package from the carrying vessel.

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Issue: Whether Lavine’s claim has already prescribed. agreement of the parties for in such a case, their agreement
becomes the law for them.
Ruling: No, because in the first place, COGSA is not applicable in the
case at bar. “In respect of loss or damage” under COGSA means physical In this case, the period was suspended because of the exchange
damage to the goods (not economic and not including the depreciation of communication by the parties. It was considered by the court
of the value of the goods upon arrival at the port of destination). that they have mutual agreed to extend the time to file the suit.

In the case at bar, there is neither deterioration nor disappearance nor TN: The circumstances in this are peculiar and cannot be applied
destruction of goods. What is in issue is not the liability of petitioner for in all cases.
its handling of goods as provided by Section 3 (6) of the COGSA, but its
liability under its contract of carriage. 3. Implied admission

The suit instituted by Lavine in this case is not for loss or damage to Cua v. Wallem
goods contemplated in Section 3 (6) of COGSA. Thus, the question of In the allegations of his complaint, petitioner alleged that they have
prescription of action is governed not by the COGSA but by Art. 1144 of agreed to extend the prescriptive period. When the defendant
the Civil Code which provides for a prescriptive period of ten years. answered, it was not specifically denied. So the court said that it
was a presumed admission. Therefore, there was no prescription.
Meaning of “in respect of loss or damage”
4. Amended complaint
Section 3 (6), COGSA
The carrier and the ship shall be discharged from all liability in respect Wallen Phils v. SR Farms
of loss or damage unless suit is brought within one year after delivery
of the goods or the date when the goods should have been delivered: The one year prescriptive period is reckoned not from the filing of
Provided, that, if a notice of loss or damage, either apparent or the original complaint, but from the filing of the amended
concealed, is not given as provided for in this section, that fact shall not complaint.
affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have 5. Fault attributable to insurer
been delivered.
New World v. Seaboard
Hague Rules v. Hague Visby In this case, the one year already prescribed. But the SC allowed
the filing of the action because there was fault on the part of the
A. Hague Rules – physical damage to goods only. insurance company, the subrogee:

B. Hague Visby – covers both physical damage to goods and damage (a) The insurer did not answer the claim.
to the shipper with respect to the value of the goods by reason of (b) The insurer asked for an itemized list of the goods which
the delay. were damaged.
(c) There was no rejection of the claim
Atty: But since we have not adopted the Hague Visby, we have to rely
on the Hague Rule. Apply the case of Mistui, unless the problem is The Supreme Court said that the insurer cannot ask for an itemized
general, without referring to facts similar to the case of Mistui. In which list because the claim was for total loss. So there’s no need for a
case, apply the two cases. list of the goods damaged since the claim is total.

When to apply the Hamburg or Hague Rule or Hague Visby

It would depend on who is suing. Package liability limitation

Package liability limitation

(a) If it is a suit by Philippine shipper or consignee of the goods, the Under the COGSA, the liability of the carrier shall be limited to $500 per
COGSA will apply, especially if the destination is the Philippines as package or pallet in the absence of declaration in the bill of lading of the
provided under Section 1753 of the New Civil Code. value of the shipped goods. Note further that COGSA applies only when
there is bill of lading or similar document.
(b) But if it is a suit by the owner of a foreign vessel against a Filipino
vessel – COGSA will not apply. If the foreign vessel owner will file Section 4 (5), COGSA
a case here in the Phils, that is tantamount to an admission that
the Phil. Law governs, the New Civil Code, on quasi-delict. Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the
Suspension of prescriptive period by parties United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency,
1. Modification in the prescriptive period unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This
Hamburg provision declaration, if embodied in the bill of lading shall be prima facie
Provision recognizing the party’s right to extend the prescriptive evidence, but shall be conclusive on the carrier.
period.
Philam Insurance v. Heung-a
2. Exchange of correspondence Facts: Novartis imported from Jinsuk in South Korea plastic packaging
material. Jinsuk engaged the services of a freight forwarder to forward
Universal Shipping v. IAC the goods to the consignee, Novartis. The goods were then loaded on a
This provision under Section 3 (6) of COGSA admits of an vessel owned by Heung-A. Wallem Phils Shipping is Heung-A’s agent in
exception, that is, if the one-year period is suspended by express the Philippines.

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TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Based on the bill of lading issued, the cargo was on freight prepaid basis Atty: There is a need to emphasize the applicability of International
and on "shipper’s load and count" which means that the container was Transportation. Warsaw talked about the carriage of:
packed with cargo by one shipper where the quantity, description and a. Passengers
condition of the cargo is the sole responsibility of the shipper. b. Baggage
c. Cargo or Goods
When the shipment reached Novartis, it was discovered that the boxes The transportation documents to be issued by the carrier:
of the shipment were wet and damaged. A complaint was thus filed 1. Passenger – ticket
against Heung-A and Wallem for damages. The court ruled that Heung- 2. Baggage – baggage check
A and Wallem have the right to limit their liability under the package 3. Goods – airway bill
limitation of liability of Section 4 (5) of the COGSA, in view of its
observation that nowhere in the bill of lading did that the lading did the TN: If the carrier fails to carry transportation documents, the carrier
shipper declare the value of the subject cargo. cannot limit liability; one of the defenses against limitation of liability.
Also, when you will be obtaining a ticket from the airline and it is
Issue: Whether the package liability limitation applies in favor of transportation outside the Philippines by air, there is always that
Heung-A and Wallem. provision in the ticket that the WARSAW Convention, Guadalahara
Protocol, etc. will apply. Absent that stipulation, the common carrier
Ruling: Yes. Pursuant to Section 4 (5) of COGSA, when there is loss or cannot avail of limited liability.
damage to goods covered by a contract of carriage from a foreign port
to a Philippine port, the carrier’s liability is limited to $500 per package, Important: Warsaw prevails over the Civil Code and the Rules of Court.
in the absence of a shipper’s declaration of the value of the goods in the (a) COGSA/WARSAW – applies to foreign vessels or airplane or
bill of lading. international travel.
(b) Code of Commerce – applies to inter-island or domestic travel.
Invocation of arrastre operator of prescription

Relevant Warsaw Convention provisions

Section 3 (6), COGSA
“In any event, carrier and the ship shall be discharged from all liability Important: These are the provisions tackled in the cases below. Refer
in respect of loss or damage unless suit is brought within one year after to these when Warsaw provisions are mentioned. Be guided accordingly.
delivery of the goods or the date when the goods should have been
delivered.” Article 1 (3), Warsaw
Insurance Co. of NA vs. Asian A carriage to be performed by several successive air carriers shall be
deemed, for the purposes of this Convention, to be one undivided
COGSA does not apply to arrastre operators. Section 3 (6) of COGSA
transportation, if it has been regarded by the parties as a single
applies only to carriers. Carrier under Section 1 of COGSA includes the
operation, whether it has been agreed upon under the form of a single
owner or the charterer who enters into a contract of carriage with a
contract or a series of contracts, and it shall not lose its international
shipper. Consequently, not being a common carrier, an arrastre operator
character merely because one contract or series of contracts is to be
cannot invoke the prescriptive period of one year.
performed entirely within the territory subject of the sovereignty,
suzerainty, mandate or authority of the same High Contracting Party.
AVIATION LAW
Purpose: The evident purpose underlying this Article is to promote
WARSAW CONVENTION international air travel by facilitating the procurement of a series of
contracts for air transportation through a single principal and obligating
International Transportation different airlines to be bound by one contract of transportation.

Applicability of the Warsaw Convention Article 28 (1), Warsaw

The Warsaw Convention applies to all international carriage of persons,
luggage or goods performed by aircraft for reward. It applies equally to An action for damages must be brought at the option of the plaintiff, in
gratuitous carriage by aircraft performed by an air transport the territory of one of the High Contracting Parties, either before the
undertaking. court of the domicile of the carrier or of his principal place of business
or where he has a place of business through which the contract has
International Transportation or Carriage (Under WARSAW) been made, or before the court at the place of destination.
Means any carriage in which, according to the contract made by the
parties, where: Article 30, Sections 1 and 2, Warsaw

1. The place of departure and the place of destination are within the (1) In the case of transportation to be performed by various
territories of two contracting countries regardless of whether or not successive carriers and falling within the definition set out in the
there was a break in the transportation or transhipment. third paragraph of Article I, each carrier who accepts passengers,
baggage, or goods shall be subject to the rules set out in the
2. The place of departure and the place of destination are within the convention, and shall be deemed to be one of the contracting
territory of a single contracting country if there is an agreed parties to the contract of transportation insofar as the contract
stopping place within a territory subject to the sovereignty, deals with that part of the transportation which is performed
mandate or authority of another power, even though the power is under his supervision.
not a party to the Convention.
(2) In the case of transportation of this nature, the passenger or his
representative can take action only against the carrier who
Important: If there is International Transportation or International
performed the transportation during which the accident or the
Carriage, then the WARSAW Convention applies. Otherwise, other laws
delay occurred, save in the case where, by express agreement,
will apply like the NCC.
the first carrier has assumed liability for the whole journey.

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