2017 Pointers - F

TRANSPO | POINTERS FOR FINALS ANSWERED (2017) | ATTY.
CAPANAS | EH403
I. AVIATION (WARSAW CONVENTION ONLY) c.) Place where carrier has a place of business
d.) Place of destination
INTERNATIONAL TRANSPORTATION
Since neither of these elements is present in the case, the petitioner
MAPA vs. CA contends that plaintiff cannot file the case in the Philippines. He further
“A contract is one of international transportation only if according to the posits that the second contract cannot be deemed as an extension of the first
contract made by the parties, the place of departure and the place of as the petitioner airline is not a participating airline in any of the destinations
destination, whether or not there be a break in the transportation or a under the first contract.
transshipment, are situated either within the territories of two High
Contracting Parties, or within the territory of a single High Contracting Party, Respondent on the other hand contends that the second contract she
if there is an agreed stopping place within a territory subject to the entered into at Geneva is part and parcel of the first contract, thus the third
sovereignty, mandate or authority of another power, even though that option under Article 28 of the Warsaw Convention would apply to him. He
power is not a party to this convention.” further pointed out that petitioner cannot deny the contract of agency with
Singapore Airlines after it honored the conjunction tickets issued by the
TWO CATEGORIES OF INTERNATIONAL TRANSPORTATION: latter.
1. That where the place of departure and the place of destination
are situated within the territories of two High Contracting Parties The court ruled that petitioner’s argument is void of merit with reference to
regardless of whether or not there be a break in the Article 1(3) of the Warsaw Convention. According to the said article,
transportation or a transshipment (even if there are different legs transportation to be performed by several carriers shall be deemed as one
of the trips); and and undivided. The number of tickets issued does not detract from the
 Ex: CEBU-LA via HONGKONG oneness of the contract of carriage. Hence, the third option of the plaintiff
2. That where the place of departure and the place of destination under Article 28 of the Warsaw Convention is clothed with jurisdiction.
are within the territory of a single High Contracting Party if there
is an agreed stopping place within a territory subject to the
KLM vs. CA
sovereignty, mandate, or authority of another power, even
though the power is not a party to the Convention.
ART. 30 of the Warsaw Convention:
High-Contracting Party – Country a party to the Warsaw Convention
(1) In the case of transportation to be performed by various successive
Note: If there is International Transportation or International Carriage, the carriers and failing within the definition set out in the third paragraph of
Warsaw Convention applies. Otherwise, other laws will apply like the NCC. Article I, each carrier who accepts passengers, baggage, or goods shall
be subject to the rules set out in the convention, and shall be deemed to
be one of the contracting parties to the contract of transportation
CARRIAGE TO BE PERFORMED BY SUCCESSIVE CARRIERS
insofar as the contract deals with that part of transportation which is
AMERICAN AIRLINES vs. CA performed under his supervision.
According to the said article, transportation to be performed by several (2) In the case of transportation of this nature, the passenger or his
carriers shall be deemed as one and undivided. The number of tickets issued representative can take action only against the carrier who performed
does not detract from the oneness of the contract of carriage. the transportation during which the accident or the delay occured, save
in the case where, by express agreement, the first carrier has assumed
FACTS: liability for the whole journey.
Private respondent purchased from Singapore Airlines in Manila conjunction FACTS:

tickets from Manila-Singapore-Athens-Larnaca-Rome-Turin-Zurich-Geneva-
Copenhagen-New York. In Geneva, he decided to forego his trip to Spouses Mendoza approached Mr. Reyes, the branch manager of Philippine
Copenhagen and go straight to New York. In the absence of a direct flight Travel Bureau, for consultation about a world tour which they were intending
under his conjunction tickets from Geneva to New York, he exchanged the to make with their daughter and niece. Three segments of the trip, the
unused portion of the conjunction ticket for a one way ticket from Geneva to longest, was via KLM. Respondents decided that one of the routes they will
New York from American Airlines, which issued its own ticket to respondent take was a Barcelona-Lourdes route with knowledge that only one airline,
in Geneva and claimed the value of the unused portion of the conjunction Aer Lingus, served it. Reyes made the necessary reservations. To this, KLM
ticket from the International Air Transport Association (IATA) clearing house secured seat reservations for the Mendoza’s and their companions from the
in Geneva. In September, 1989, respondent filed an action for damages carriers which would ferry them throughout their trip, which the exception of
before the Regional Trial Court of Cebu for the alleged embarrassment and Aer Lingus. When the Mendoza’s left the Philippines, they were issued KLM
mental anguish he suffered at the Geneva Airport when American Airline’s tickets for the entire trip. However, their coupon for Aer Lingus was marked
security officers prevented him from boarding the plane. “on request”.
ISSUE: When they were in Germany, they went to the KLM office and obtained a
confirmation from Aer Lingus. At the airport in Barcelona, the Mendozas and
Whether or not the issuance of American Airlines of a new ticket in exchange their companions checked in for their flight to Lourdes. However, although
of the conjunction ticket the respondent purchased in Manila bar him from their daughter and niece were allowed to take the flight, the spouses
seeking recourse in Philippine courts. Mendozas were off loaded on orders of the Aer Lingus manager, who
brusquely shoved them aside and shouted at them. So the spouses
RULING: Mendozas took a train ride to Lourdes instead.
The petitioner contends that under Article 28 of the Warsaw Convention, Thus, they filed a complaint for damages against KLM for breach of contract
action for damages may only be brought upon the following courts: of carriage. The trial court decided in favor of the Mendozas. On appeal, the
CA affirmed the decision. Hence, KLM brings this petition to the Supreme
a.) Domicile of the carrier Court. KLM cites Art 30 of the Warsaw Convention, which states: the
b.) Carrier’s principal place of business passenger or his representatives can take action only against the carrier who
TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 1

TRANSPO | POINTERS FOR FINALS ANSWERED (2017) | ATTY. CAPANAS | EH403
performed the transportation during which the accident or delay occurred. He requested that the situation be remedied but Air Kenya Flight 203 left for
Also, KLM avers that the front cover of each ticket reads: that liability of the Nairobi without him on board. Stranded in Bombay, Antiporda was booked
carrier for damages shall be limited to occurrences on its own line. for Nairobi via Addis Ababa only on September 27, 1984. He finally arrived in
Blantyre at 9:00 o'clock in the evening of September 28, 1984, more than a
ISSUE: couple of days late for his appointment with people from the institution he
was to work with in Malawi.
Whether or not KLM should be held liable for damage
Antiporda's counsel wrote the general manager of Lufthansa in Manila
RULING: demanding P1,000,000 in damages for the airline's "malicious, wanton,
disregard of the contract of carriage." In reply, Lufthansa general manager
YES. The argument that the KLM should not be held accountable for the Hagen Keilich assured Antiporda that the matter would be investigated.
tortious conduct of Aer Lingus because of the provision printed on the
respondents' tickets expressly limiting the KLM's liability for damages only to Apparently getting no positive action from Lufthansa, Antiporda filed with
occurrences on its own lines is unacceptable. As noted by the Court of the RTC a complaint against Lufthansa.
Appeals that condition was printed in letters so small that one would have to
use a magnifying glass to read the words. Under the circumstances, it would ISSUE:
be unfair and inequitable to charge the respondents with automatic
knowledge or notice of the said condition so as to preclude any doubt that it Whether or not petitioner Lufthansa German Airlines which issued a
was fairly and freely agreed upon by the respondents when they accepted confirmed Lufthansa ticket to private respondent Antiporda covering a five-
the passage tickets issued to them by the KLM. leg trip abroad different airlines should be held liable for damages
occasioned by the "bumping-off" of said private respondent Antiporda by Air
As maintained by the respondents and the Court of Appeals, the passage Kenya, one of the airlines contracted to carry him to a particular destination
tickets of the respondents provide that the carriage to be performed of the five-leg trip
thereunder by several successive carriers "is to be regarded as a single
operation," which is diametrically incompatible with the theory of the KLM RULING:
that the respondents entered into a series of independent contracts with the
carriers which took them on the various segments of their trip. This position YES. Lufthansa maintains that its liability to any passenger is limited to
of KLM we reject. The respondents dealt exclusively with the KLM which occurrences in its own line, and, thus, in the case at bench, its liability to
issued them tickets for their entire trip and which in effect guaranteed to Antiporda is limited to the extent that it had transported him from Manila to
them that they would have sure space in Aer Lingus flight 861. The Singapore and from Singapore to Bombay; that therefrom, responsibility for
respondents, under that assurance of the internationally prestigious KLM, the performance of the contract of carriage is assumed by the succeeding
naturally had the right to expect that their tickets would be honored by Aer carriers tasked to transport him for the remaining leg of his trip because at
Lingus to which, in the legal sense, the KLM had indorsed and in effect that stage, its contract of carriage with Antiporda ceases, with Lufthansa
guaranteed the performance of its principal engagement to carry out the acting, no longer as the principal in the contract of carriage, but merely as a
respondents' scheduled itinerary previously and mutually agreed upon ticket-issuing agent for the other carriers.
between the parties
On his part, private respondent Antiporda insists that he entered with
LUFTHANSA vs. CA Lufthansa an exclusive contract of carriage, the nature of which is a
continuous carriage by air from Manila to Blantyre Malawi; that it did not
FACTS: enter into a series of independent contracts with the carriers that
transported him for the remaining leg of his trip.
Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the
Philippines and a registered consultant of the Asian Development Bank, the In light of the stipulations expressly specified in the ticket defining the true
World Bank and the UNDP. He was, contracted by SGV to be the institutional nature of its contract of carriage with Antiporda, Lufthansa cannot claim that
financial specialist for the agricultural credit institution project of the its liability thereon ceased at Bombay Airport and thence, shifted to the
Investment and Development Bank of Malawi in Africa. For the engagement, various carriers that assumed the actual task of transporting said private
Antiporda would be provided one round-trip economy ticket from Manila to respondent.
Blantyre and back with a maximum travel time of four days per round-trip
and, in addition, a travel allowance of $50 per day, a travel insurance We, therefore, reject Lufthansa's theory that from the time another carrier
coverage of P100,000 and major hospitalization with AFIA and an accident was engaged to transport Antiporda on another segment of his trip, it merely
insurance coverage of P150,000. On September 17, 1984, Lufthansa, through acted as a ticket-issuing agent in behalf of said carrier. In the very nature of
SGV, issued ticket for Antiporda's confirmed flights to Malawi, Africa. their contract, Lufthansa is clearly the principal in the contract of carriage
with Antiporda and remains to be so, regardless of those instances when
Antiporda took the Lufthansa flight to Singapore from where he proceeded actual carriage was to be performed by various carriers. The issuance of a
to Bombay on board the same airline. He arrived in Bombay as scheduled confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg
and waited at the transit area of the airport for his connecting flight to trip abroad successive carriers concretely attests to this. This also serves as
Nairobi which was, per schedule given him by Lufthansa, to leave Bombay. proof that Lufthansa, in effect guaranteed that the successive carriers, such
as Air Kenya would honor his ticket; assure him of a space therein and
Finding no representative of Lufthansa waiting for him at the gate, Antiporda transport him on a particular segment of his trip.
asked the duty officer of Air India how he could get in touch with Lufthansa.
He was told to call up Lufthansa which informed him that somebody would CHINA AIRLINES vs. CHIOK
attend to him shortly. Ten minutes later, Gerard Matias, Lufthansa's traffic
officer, arrived, asked for Antiporda's ticket and told him to just sit down and The obligation of the ticket-issuing airline remained and did not cease,
wait. Matias returned with one Leslie Benent, duty officer of Lufthansa, who regardless of the fact that another airline had undertaken to carry the
informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been passengers to one of their destinations.
given to a very important person of Bombay who was attending a religious
function in Nairobi. Antiporda protested, stressing that he had an important FACTS:
professional engagement in Blantyre, Malawi.

Daniel Chiok purchased from China Airlines, Ltd. an airline passenger ticket remained and did not cease, regardless of the fact that another airline had
for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket undertaken to carry the passengers to one of their destinations.
was exclusively endorsable to Philippine Airlines, Ltd. Before he left for said
trip, the trips covered by the ticket were pre-scheduled and confirmed by In the instant case, following the jurisprudence cited above, PAL acted as the
Chiok. When Chiok reached Hongkong, he went to the PAL office and sought carrying agent of CAL. In the same way that we ruled against British Airways
to reconfirm his flight back to Manila. The PAL office confirmed his return trip and Lufthansa in the aforementioned cases, we also rule that CAL cannot
on board Flight No. PR 311 and attached its own sticker. evade liability to respondent, even though it may have been only a ticket
issuer for the Hong Kong-Manila sector.
On the next day, Chiok proceeded to Hongkong International Airport for his
return trip to Manila. However, upon reaching the PAL counter, Chiok saw a APPLICATION OF ARTICLES 17, 18 AND 19
poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon
in Manila. He was then informed that all the confirmed ticket holders of PAL ARTICLE 17
Flight No. PR 311 were automatically booked for its next flight, which was to The carrier shall be liable for damages sustained in the event of the death or
leave the next day. He then informed PAL personnel that, being the founding wounding of a passenger or any other bodily injury suffered by a passenger,
director of the Philippine Polysterene Paper Corporation, he had to reach if the accident which caused the damage so sustained took place on board
Manila the following day because of a business option which he had to the aircraft or in the course of any of the operations of embarking or
execute on said date. disembarking.
The following day Chiok went to the airport. Cathay Pacific stewardess Lok ARTICLE 18
Chan took and received Choik’s plane ticket and luggage. However, Carmen 1. The carrier shall be liable for damage sustained in the vent of
Chan, PAL’s terminal supervisor, informed Chiok that his name did not destruction or loss of, or of damage to, any checked baggage, or
appear in PAL’s computer list of passengers and therefore could not be any goods, if the occurrence which caused the damage so
permitted to board PAL Flight No. PR 307. Thereafter, Chiok proceeded to sustained took place during the transportation by air.
PAL’s Hongkong office and confronted PAL’s reservation officer, Carie Chao 2. The transportation by air within the meaning of the preceding
(hereafter referred to as Chao), who previously confirmed his flight back to paragraph shall comprise the period during which the baggage or
Manila. Chao told Chiok that his name was on the list and pointed to the goods are in charge of the carrier, whether in an airport or on
latter his computer number listed on the PAL confirmation sticker attached board an aircraft, or, in the case of a landing outside an airport, in
to his plane ticket, which number was ‘R/MN62’. Chiok was not able to any place whatsoever.
return to Manila on time.
3. The period of the transportation by air shall not extend to any
Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for transportation by land, by sea or by river performed outside an
damages, against PAL and CAL, as defendants with the Regional Trial Court airport. If, however, such transportation takes place in the
Manila. He alleged therein that despite several confirmations of his flight, performance of a contract for transportation by air, for the
defendant PAL refused to accommodate him in Flight No. 307, for which purpose of loading, delivery, or transshipment, any damage is
reason he lost the business option aforementioned. He also alleged that presumed, subject to proof to the contrary, to have been the
PAL’s personnel, specifically Carmen, ridiculed and humiliated him in the result of an event which took place during the transportation by
presence of so many people. Further, he alleged that defendants are air.
solidarily liable for the damages he suffered, since one is the agent of the
other. ARTICLE 19
The carrier is liable for damage occasioned by delay in the carriage by air of
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and passengers, baggage or cargo.
severally liable. Ultimately, it was only the Appeal of CAL that reached the
Supreme Court. It allege among others that since it was only the ticket issuer,
NORTHWEST AIRLINES, INC vs. CUENCA, ET AL
it should not be held liable unlike PAL.
The same merely declare the carrier liable for damages in the enumerated
ISSUE:
cases, if the conditions therein specified are present. Neither said provisions
nor others in the aforementioned Convention regulate or exclude liability for
Considering the fact that CAL was only the ticket issuer, may it be held jointly
other breaches of contract by the carrier.
and severally liable for the acts of PAL’s employees?
FACTS:
RULING:
This is an action for damages for alleged breach of contract. After
YES. It is significant to note that the contract of air transportation was
appropriate proceedings the Court of First Instance of Manila, in which the
between petitioner and respondent, with the former endorsing to PAL the
case was originally filed, rendered judgment sentencing defendant
Hong Kong-to-Manila segment of the journey. Such contract of carriage has
Northwest Airlines, Inc. — hereinafter referred to as petitioner — to pay to
always been treated in this jurisdiction as a single operation. This
plaintiff Cuenca — hereinafter referred to as respondent — the sum of
jurisprudential rule is supported by the Warsaw Convention, to which the
P20,000 as moral damages, together with the sum of P5,000 as exemplary
Philippines is a party, and by the existing practices of the International Air
damages, with legal interest thereon from the date of the filing of
Transport Association (IATA).
complaint," December 12, 1959, "until fully paid, plus the further sum of
P2,000 as attorney's fees and expenses of litigation."
In American Airlines v. Court of Appeals, the court have noted that under a
general pool partnership agreement, the ticket-issuing airline is the principal
On appeal taken by petitioner, said decision was affirmed by the Court of
in a contract of carriage, while the endorsee-airline is the agent.
Appeals, except as to the P5,000.00 exemplary damages, which was
eliminated, and the P20,000.00 award for moral damages, which was
Likewise, as the principal in the contract of carriage, the petitioner in British
converted into nominal damages.
Airways v. Court of Appeals was held liable, even when the breach of
contract had occurred, not on its own flight, but on that of another airline.
ISSUE:
The Decision followed our ruling in Lufthansa German Airlines v. Court of
Appeals, in which we had held that the obligation of the ticket-issuing airline
Whether or not petitioner has a cause of action, pursuant to Articles 17, 18 transportation of the goods is inapplicable since the bag was not delivered to
and 19 of the Warsaw Convention private respondent during the whole trip.
RULING: ISSUE:
YES. Petitioner argues that pursuant to those provisions, an air "carrier is Whether or not Pan Am should be held liable
liable only" in the event of death of a passenger or injury suffered by him, or
of destruction or loss of, or damage to any checked baggage or any goods, or RULING:
of delay in the transportation by air of passengers, baggage or goods. This
pretense is not borne out by the language of said Articles. YES. Petitioner begins with the hypothesis that it is private respondents who
should be faulted for the alleged "delay in delivery" because an appreciable
The same merely declare the carrier liable for damages in the enumerated length of time elapsed from the moment they were informed of the
cases, if the conditions therein specified are present. Neither said provisions whereabouts of the bag until an effort was exerted to retrieve it. However,
nor others in the aforementioned Convention regulate or exclude liability for an argument of this nature, which springs from petitioner's incongruous
other breaches of contract by the carrier. Under petitioner's theory, an air interpretation of "delay", is far from persuasive, since it is designed to toss
carrier would be exempt from any liability for damages in the event of its the onus probandi on the admitted fact of non-delivery by the carrier to the
absolute refusal, in bad faith, to comply with a contract of carriage, which is passenger's shoulders.
absurd.
To bring the case within the ambit of the limited liability clause for loss,
PHILIPPINE AIRLINES, INC. vs. IAC damage, or delay under Article 22 in conjunction with the second paragraph
of Article 26 of the Warsaw Convention, petitioner is inclined to construe its
FACTS: accountability by arguing that the missing bag was merely delayed. Petitioner
is categorical in its disputation that since the bag was neither lost nor
Before boarding petitioner's airplane on August 4, 1974 for their business damaged, the baggage was merely delayed, hence the caveat must perforce
sojourn from Manila to Honolulu via Tokyo, private respondents, the spouses apply.
George and Veronica Lorenzana, checked in two pieces of baggage for which
they were given baggage claim tickets. George's personal effects and some of This process of exclusion typifies the classic fallacy of non-sequitur because
Veronica's things were in one baggage while the other luggage contained the fact of the matter is that the missing luggage was not turned over by the
Veronica's other personal items and samples of women's apparel intended to employees of petitioner to the Pan Am Office in Tokyo and was returned to
be shown to prospective customers in America and Canada. On the Tokyo- Manila on September 16, 1974. Still worse, the luggage was not forthwith
Honolulu leg, they changed planes from PAL to Pan Am. When they arrived in delivered to private respondents who returned from their trip to the U.S. and
Honolulu, only the luggage containing George's personal effects was located. Canada on September 24, 1974. It was not until more than a year thereafter,
Efforts exerted to report and claim the missing bag were futile and instead, or on December 5, 1975, when the luggage was finally delivered to private
private respondents were requested to follow-up the matter during their respondents.
stay in Honolulu.
There is thus no occasion to speak of delay since the baggage was not
After staying in Honolulu for three days, without the missing luggage being delivered at all to the passenger for purposes of the trip in contravention of a
delivered to them, George and Veronica decided to fly to Los Angeles where common carrier's undertaking to transport the goods from the place of
they stayed for more than a week before leaving for San Francisco where embarkation to the ultimate point of destination.
they spent two days. Thereafter, the couple proceeded to Vancouver and
Toronto, Canada and returned to Manila on September 24, 1974. AIRLINE GENERAL POOL MANAGEMENT
It was sometime in April, 1975 when the couple was informed that the AMERICAN AIRLINES vs. CA
luggage was located and on December 5, 1975, the luggage was finally Members of the IATA are under a general pool partnership agreement
delivered to them. It turned out that the missing luggage was not turned wherein they act as agent of each other in the issuance of tickets contracted
over by the employees of the Philippines Airlines to the Pan Am Office in passengers to boost ticket sales worldwide and at the same time provide
Tokyo and that the baggage was returned to Manila on September 16, 1974. passengers easy access to airlines which are otherwise inaccessible in some
parts of the world.
In the suit for breach of contract, Pan Am interposed the defense that it did
not receive the baggage from the Philippine Airlines. For its part, PAL Booking and reservation among airline members are allowed even by
admitted that it failed to deliver one of the pieces of luggage at the telephone and it has become an accepted practice among them.
destination of private respondents in the United States and during the entire
trip. Nevertheless, it proferred the excuse that private respondents omitted A member airline which enters into a contract of carriage consisting of a
to retrieve the bag after George was informed of its discovery and that at any series of trips to be performed by different carriers is authorized to receive
rate, the carrier's liability under the Warsaw Convention is limited, in the the fare for the whole trip and through the required process of interline
absence of a declaration from the passenger, of a higher value. settlement of accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced.
Regional Trial Court:
After due hearing, the trial court pronounced petitioner accountable for the APPLICATION OF THE CONVENTION
non-delivery mainly due to its frank representation that it breached the
contract with private respondents.
Applicability of the Warsaw Convention
The Warsaw Convention applies to all international carriage of persons,
Court of Appeals:
luggage or goods performed by aircraft for reward. It applies equally to
The appellate court relied more on the presumption of culpa which neither
gratuitous carriage by aircraft performed by an air transport undertaking.
PAL nor Pan Am was able to overcome by the requisite quantum of evidence.
Regarding the exculpation raised by petitioner premised on the caveat under
the Warsaw Convention, respondent court expressed the view that the LIMITED LIABILITY – WHEN APPLICABLE AND WHEN INAPPLICABLE
proviso which concerns limited culpability for damage, loss or delay in WHEN APPLICABLE

LIMIT OF LIABILITY Article 9

The liability of the carrier for injuries to passengers under the Warsaw If the carrier accepts goods without an air consignment note having been
Convention is 250,000 francs. However, by special contract, the carrier and made out, or if the air consignment note does not contain all the particulars
the passenger may agree to a higher limit of liability. set out in Article 8(a) to (i) inclusive and (q), the carrier shall not be entitled
to avail himself of the provisions of this Convention which exclude or limit his
REGISTERED BAG AND CARGOS liability.
 Limit of liability is 250 francs per kilogram.
 The passenger may make a special declaration of interest in *Article 8
delivery at destination and pay a supplementary sum, if required. The air consignment note shall contain the following particulars:-
The carrier will be liable to pay a sum not exceeding the declared a) the place and date of its execution;
sum, unless he proves that the sum is greater than the actual b) the place of departure and of destination;
value to the consignor at delivery c) the agreed stopping places, provided that the carrier may reserve
the right to alter the stopping places in case of necessity, and that
General Rule: Only the total weight of the package or packages concerned if he exercises that right the alteration shall not have the effect of
shall be considered. depriving the carriage of its international character;
Exception: When the value of the other packages covered by the same d) the name and address of the consignor;
baggage check or the same airway bill is affected, the total weight of such e) the name and address of the first carrier;
other package shall also be taken into consideration. f) the name and address of the consignee, if the case so requires;
g) the nature of the goods;
PASSENGER TAKES CHARGE OF THE GOODS (HAND-CARRY BAGGAGE) h) the number of the packages, the method of packing and the
 The limit of liability is 5,000 francs per passenger. particular marks or numbers upon them;
i) the weight, the quantity and the volume or dimensions of the
WHEN INAPPLICABLE goods;
j) the apparent condition of the goods and of the packing;
1. Willful misconduct or default k) the freight, if it has been agreed upon, the date and place of
payment, and the person who is to pay it;
Article 25 l) if the goods are sent for payment on delivery, the price of the
The carrier shall not be entitled to avail himself of the provisions of this goods, and, if the case so requires, the amount of the expenses
Convention which exclude or limit his liability, if the damage is caused by his incurred;
willful misconduct or by such default on his part as, in accordance with the m) the amount of the value declared in accordance with Article 22
law of the Court seised of the case, is considered to be equivalent to willful (2);
misconduct. n) the number of parts of the air consignment note;
o) the documents handed to the carrier to accompany the air
Similarly the carrier shall not be entitled to avail himself of the said consignment note;
provisions, if the damage is caused as aforesaid by any agent of the carrier p) the time fixed for the completion of the carriage and a brief note
acting within the scope of his employment. of the route to be followed, if these matters have been agreed
upon;
Note: It is the law of the forum who will determine whether the damage is q) a statement that the carriage is subject to the rules relating to
caused by willful misconduct. liability established by this Convention.
2. If there is no delivery of the adequate transportation documents 5. Transportation outside the Convention
Article 3(2) 6. If the passenger or shipper declares a higher value

The absence, irregularity or loss of the passenger ticket does not affect the
existence or the validity of the contract of carriage, which shall none the less NOTICE OF CLAIM
be subject to the rules of this Convention. Nevertheless, if the carrier accepts
a passenger without a passenger ticket having been delivered he shall not be Article 26
entitled to avail himself of those provisions of this Convention which exclude 1. Receipt by the person entitled to delivery of luggage or goods
or limit his liability. without complaint is prima facie evidence that the same have
been delivered in good condition and in accordance with the
3. Absence of luggage without luggage ticket document of carriage.
Article 4(4) 2. In the case of damage, the person entitled to delivery must
The absence, irregularity or loss of the luggage ticket does not affect the complain to the carrier forthwith after the discovery of the
existence or the validity of the contract of carriage, which shall none the less damage, and, at the latest, within three days from the date of
be subject to the rules of this Convention. Nevertheless, if the carrier accepts receipt in the case of luggage and seven days from the date of
luggage without a luggage ticket having been delivered, or if the luggage receipt in the case of goods. In the case of delay the complaint
ticket does not contain the particulars set out at *(d), (f) and (h) above, the must be made at the latest within fourteen days from the date on
carrier shall not be entitled to avail himself of those provisions of the which the luggage or goods have been placed at his disposal.
Convention which exclude or limit his liability.
3. Every complaint must be made in writing upon the document of
*(d) the number of the passenger ticket; carriage or by separate notice in writing despatched within the
*(f) the number and weight of the packages; times aforesaid.
*(h) a statement that the carriage is subject to the rules relating to liability
established by this Convention; 4. Failing complaint within the times aforesaid, no action shall lie
against the carrier, save in the case of fraud on his part.
4. Acceptance of goods without air consignment note

NOTICE OF CLAIM From the initial proceedings in the trial court up to the present, petitioner
Must be filed within: has tirelessly pointed out that respondents’ claim and right of action are
1. Three (3) days from receipt of the baggage already barred. Indeed, this fact has never been denied by respondents and
2. Seven (7) days from receipt of goods is plainly evident from the records.
3. Fourteen (14) days, in case of delay, counted from the time the
baggage was placed at the disposal of the passenger Airway Bill No. 11263825 issued by Burlington as agent of petitioner, states:
The notice of claim is a condition precedent to the accrual of a right of action “6. No action shall be maintained in the case of damage to or partial loss of
against a carrier for loss of or damage to the goods. the shipment unless a written notice, sufficiently describing the goods
concerned, the approximate date of the damage or loss, and the details of
FEDEREAL EXPRESS vs. AMERICAN HOME the claim, is presented by shipper or consignee to an office of Burlington
within (14) days from the date the goods are placed at the disposal of the
Notice is a condition precedent, and the carrier is not liable if notice is not person entitled to delivery, or in the case of total loss (including non-delivery)
given in accordance with the stipulation. Failure to comply with such a unless presented within (120) days from the date of issue of the [Airway Bill]."
stipulation bars recovery for the loss or damage suffered.
Relevantly, petitioner’s airway bill states:
FACTS:
"12./12.1 The person entitled to delivery must make a complaint to the
Shipper SMITHKLINE USA delivered to carrier Burlington Air Express carrier in writing in the case:
(BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a
shipment of 109 cartons of veterinary biologicals for delivery to consignee 12.1.1 of visible damage to the goods, immediately after discovery of the
SMITHKLINE and French Overseas Company in Makati City. The shipment was damage and at the latest within fourteen (14) days from receipt of the goods;
covered by Burlington Airway Bill No. 11263825 with the words, xxx"
‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp marked on
its face. That same day, Burlington insured the cargoes with American Home Article 26 of the Warsaw Convention, on the other hand, provides:
Assurance Company (AHAC). The following day, Burlington turned over the
custody of said cargoes to FEDEX which transported the same to Manila. "(2) In case of damage, the person entitled to delivery must complain to the
carrier forthwith after the discovery of the damage, and, at the latest, within
The shipments arrived in Manila and were immediately stored at [Cargohaus 3 days from the date of receipt in the case of baggage and 7 days from the
Inc.’s] warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC date of receipt in the case of goods.
Cargo International Corporation, the customs broker hired by the consignee
to facilitate the release of its cargoes from the Bureau of Customs, of the (3) Every complaint must be made in writing upon the document of
impending arrival of its client’s cargoes. transportation or by separate notice in writing dispatched within the times
aforesaid.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed
custom’s broker who was assigned by GETC, found out, while he was about (4) Failing complaint within the times aforesaid, no action shall lie against the
to cause the release of the said cargoes, that the same [were] stored only in carrier, save in the case of fraud on his part.”
a room with 2 air conditioners running, to cool the place instead of a
refrigerator. DIONEDA, upon instructions from GETC, did not proceed with Condition Precedent:
the withdrawal of the vaccines and instead, samples of the same were taken In this jurisdiction, the filing of a claim with the carrier within the time
and brought to the Bureau of Animal Industry of the Department of limitation therefor actually constitutes a condition precedent to the accrual
Agriculture in the Philippines by SMITHKLINE for examination wherein it was of a right of action against a carrier for loss of or damage to the goods. The
discovered that the ‘ELISA reading of vaccinates sera are below the positive shipper or consignee must allege and prove the fulfillment of the condition.
reference serum.’ If it fails to do so, no right of action against the carrier can accrue in favor of
the former. The aforementioned requirement is a reasonable condition
As a consequence of the foregoing result of the veterinary biologics test, precedent; it does not constitute a limitation of action.
SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the
unusable shipment, filed a claim with AHAC through its representative in the The requirement of giving notice of loss of or injury to the goods is not an
Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed empty formalism. The fundamental reasons for such a stipulation are (1) to
SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an inform the carrier that the cargo has been damaged, and that it is being
action for damages against the FEDEX imputing negligence on either or both charged with liability therefor; and (2) to give it an opportunity to examine
of them in the handling of the cargo. the nature and extent of the injury. “This protects the carrier by affording it
an opportunity to make an investigation of a claim while the matter is fresh
Trial ensued and ultimately concluded with the FEDEX being held solidarily and easily investigated so as to safeguard itself from false and fraudulent
liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate claims.”
court ruled in favor of PHILAM and held that the shipping Receipts were a
prima facie proof that the goods had indeed been delivered to the carrier in When an airway bill -- or any contract of carriage for that matter -- has a
good condition. stipulation that requires a notice of claim for loss of or damage to goods
shipped and the stipulation is not complied with, its enforcement can be
ISSUE: prevented and the liability cannot be imposed on the carrier. To stress,
notice is a condition precedent, and the carrier is not liable if notice is not
Is FEDEX liable for damage to or loss of the insured goods given in accordance with the stipulation. Failure to comply with such a
stipulation bars recovery for the loss or damage suffered.
RULING:
Being a condition precedent, the notice must precede a suit for enforcement.
NO. In the present case, there is neither an allegation nor a showing of
respondents compliance with this requirement within the prescribed period.
Prescription of Claim:

While respondents may have had a cause of action then, they cannot now The passenger can file an action only against the carrier in whose carriage
enforce it for their failure to comply with the aforesaid condition precedent. the accident or delay occurred.
JURISDICTION IN ARTICLE 28 Exception: Where there is an agreement whereby the first carrier assumed
liability for the whole journey.
Article 28
1. An action for damages must be brought, at the option of the In case of transportation of baggage or goods
plaintiff, in the territory of one of the High Contracting Party, 1) The consignor can file an action against the first carrier and the
either before the Court having jurisdiction where the carrier is carrier in which the damage occurred. These carriers are jointly
ordinarily resident, or has his principal place of business, or has an and severally liable.
establishment by which the contract has been made or before the
Court having jurisdiction at the place of destination. 2) The consignee can file an action against the last carrier and the
carrier in which the damage occurred. These carriers are jointly
2. Questions of procedure shall be governed by the law of the Court and severally liable.
seised of the case.
ONLY THE ACTUAL CARRIER CAN INVOKE ARTICLE 30 AND NOT THE
The plaintiff may bring the action for damages before: CONTRACTING CARRIER.
1. The court where the carrier is domiciled
2. The court where the carrier has its principal place of business II. CONCEPTS
3. The court where the carrier has an establishment by which the MARITIME LAW
contract has been made
4. The court of the place of destination Maritime law is the system of law which particularly relates to the affairs and
business of the sea, to ships, their crews and navigation, and to marine
Note: Venue under the Warsaw Convention is jurisdictional in character. It
conveyance of persons and property.
cannot be waived.
DOCTRINE OF LIMITED LIABILITY – WHEN APPLICABLE AND WHEN
PRESCRIPTION – “IN RESPECT OF LOSS OR DAMAGE” INAPPLICABLE?
Article 29 “NO VESSEL, NO LIABILITY”

The right to damages shall be extinguished if an action is not brought within
two years, reckoned from the date of arrival at the destination, or from the Shipowner’s liability or agent’s liability is merely co-extensive with his
date on which the aircraft ought to have arrived, or from the date on which interest in the vessel such that a total loss thereof results in its extinction.
the carriage stopped. The total destruction of the vessel extinguishes maritime liens because there
is no longer any res to which it can attach.
Two (2) years reckoned from either:
1. Date of arrival at the destination; It was designed to offset adverse conditions and to encourage people and
2. Date on which the aircraft ought to have arrived; or entities to venture into maritime commerce despite the risks and the
3. Date on which the carriage stopped prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and
agent arising from operation of such vessel were confined to the vessel itself,
DEFENSE IN ARTICLE 30 its equipment, freight, and insurance, if any, which limitation served to
induce capitalists into effectively wagering their resources against the
consideration of large profits attainable in the trade.
Article 30
1. In the case of carriage to be performed by various successive
The real and hypothecary nature of maritime law simply means that the
carriers and falling within the definition set out in the third
liability of the carrier in connection with losses related to maritime contracts
paragraph of Art. 1, each carrier who accepts passengers, luggage
is confined with the vessel.
or goods is subjected to the rules set out in this Convention, and is
deemed to be one of the contracting parties to the contract of
CODE OF COMMERCE
carriage in so far as the contract deals with that part of the
carriage which is performed under his supervision.
Liability to 3rd persons
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor
2. In the case of carriage of this nature, the passenger or his
of third persons which arise from the conduct of the captain in the vigilance
representative can take action only against the carrier who
over the goods which the vessel carried; but he may exempt himself
performed the carriage during which the accident or the delay
therefrom by abandoning the vessel with all her equipment and the freight
occurred, save in the case where, by express agreement, the first
he may have earned during the voyage.
carrier has assumed liability for the whole journey.
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion
3. As regards luggage or goods, the passenger or consignor will have
of their contribution to the common fund for the results of the acts of the
a right of action against the first carrier, and the passenger or
captain, referred to in Article 587. Each co-owner may exempt himself from
consignee who is entitled to delivery will have a right of action
this liability by the abandonment, before a notary, of that part of the vessel
against the last carrier, and further, each may take action against
belonging to him.
the carrier who performed the carriage during which the
destruction, loss, damage or delay took place. These carriers will
Collisions
be jointly and severally liable to the passenger or to the consignor
Art. 643. If the vessel and her cargo should be totally lost, by reason of
or consignee.
capture or wreck, all rights shall be extinguished, both as regards the crew to
demand any wages whatsoever, and as regards the ship agent to recover the
RULE IN CASE OF VARIOUS SUCCESSIVE CARRIERS
advances made.
In case of transportation of passengers
If a portion of the vessel or of the cargo, or of both, should be saved, the

crew engaged on wages, including the captain, shall retain their rights on the However, the LLR applies to the paying insurer when it exercises its right of
salvage, so on the amount of the freightage of the cargo saved; but sailors subrogation against the shipowner. The cause of action of the insurer in the
who are engaged on shares shall not have any right whatsoever on the exercise of his subrogation is the same cause of action of the shipper, hence,
salvage of the hull, but only on the portion of the freightage saved. If they the insurer is subject to the defenses available to the shipowner as if it were
should have worked to recover the remainder of the shipwrecked vessel, the shipper who directly sued the same insurer.
they shall be given from the amount of the salvage an award in proportion of
the efforts made and to the risks, encountered in order to accomplish the WORKMEN’S COMPENSATION
salvage. Even is the vessel is lost, the liability under the Workmen’s Compensation act
is still enforceable against the shipowner or employer. It must be noted that
Art. 837. The civil liability incurred by the shipowners in the cases prescribed it is now administered by the Employees Compensation Commission (ECC)
in this section, shall be understood as limited to the value of the vessel with and governed by the Labor Code. It is not the employer who will be held
all her appurtenances and freight earned during the voyage. liable but the ECC.
Note: Articles 837, 587 and 590 covers only: TN: If an accident is compensable under the Workmen’s Compensation Act, it
(1) liability to 3rd persons must be compensated even when the workman’s right is not recognized by
(2) acts of the captain; and or is in conflict with other provisions of the Civil Code or of the Code of
(3) collision. Commerce.
The Civil Code contains no provision regulating liability of shipowners or REPAIRS BEFORE DEPARTURE
agents in the event of total loss or destruction of the vessel, it is the While the total loss of the vessel extinguished a maritime lien, as there is no
provisions of the Code of Commerce that governs. longer any risk to which it can attach, the total destruction of the vessel does
not affect the liability of the owner for repairs of the vessel completed before
WHEN APPLICABLE its loss.
Liability of the shipowner or agent is limited to the value of the vessel with all Additional notes
her equivalent and freight earned during the vessel if the shipowner or If the failure to maintain the seaworthiness of the vessel can be ascribed to
agent abandoned the ship with all the equipment and freight. the shipowner alone or the shipowner concurrently with the captain then the
limited liability principle CANNOT be invoked.
SHIPOWNER ENTITLED TO LIMITED LIABILITY
The shipowner is the very person for whom the Limited Liability Rule (LLR) The carrier is liable for the damages to the full extent and not up to the value
has been conceived to protect. of the vessel if it was established that the carrier was guilty of negligence in
allowing the captain and crew to play mah-jong during the voyage, in failing
ABANDONMENT to maintain the ship as seaworthy and in allowing the ship to carry more
Abandonment of the vessel, its appurtenances and freightage is an passengers than it was allowed to carry.
INDISPENSABLE requirement before the shipowner or ship agent can enjoy
the benefits of the LLR. If the carrier does not want to abandon the vessel, Authorizing the voyage notwithstanding its knowledge of a typhoon is
then he is still liable even beyond the value of the vessel. tantamount to negligence that exempts the case from the operation of the
limited liability rule.
The only instance where such abandonment is dispensed with is when the
vessel was entirely lost. In such case, the obligation is thereby extinguished. APPLICABILITY OF THE CIVIL CODE
Additional notes: The primary law on the maritime commerce is the New Civil Code
The shipowner’s or ship agent’s liability is limited to the value of the vessel if provisions on common carriers. The code of commerce and special laws
the damage was caused by the unseaworthiness of the vessel caused by the apply only suppletorily.
negligence of the captain or crew during the voyage.
In connection with Article 587 of the Code of Commerce, the carrier cannot
Civil liability for collision is merely co-existent with his interest in the vessel; invoke Articles 1733, 1735 of the NCC. While the primary law in maritime
since there was total loss, his liability is also extinguished. commerce is the NCC, in all matters not regulated by said Code, the Code of
Commerce and other special laws shall govern.
WHEN INAPPLICABLE
Since the Civil Code contains no provision regulating the liability of
LLR IS NOT APPLICABLE UNDER THE FOLLOWING INSTANCES: shipowners or agents in the event of total loss or destruction of the vessel, it
1. Where the injury or death to a passenger is due either to the fault is the provisions of the Code of Commerce, particularly Article 587 that
of the shipowner, or to the concurring negligence of the governs.
shipowner and the captain.
2. Where the vessel is insured. Governing laws
3. In the workmen’s compensation claims. 1. New Civil Code – Primary law on maritime commerce
4. Expenses for repairs and provisioning of the ship prior to the 2. Book III Code of Commerce – Applied suppletorily
departure thereof. 3. Special Laws
5. The vessel is not abandoned. a) Salvage Law (Act no. 2616)
b) Carriage of Goods by Sea Act (CA no. 65)
NOT APPLICABLE TO INSURANCE CLAIM c) Ship Mortgage Decree of 1978 (PD 1521)
The LLR does not apply to insurance claims. Thus in Vasquez v CA case, the
court held that total loss of the vessel did not extinguish the liability of the MARITIME PROTEST – WHEN APPLICABLE?
carrier’s insurer. Despite the loss of the vessel, therefore, its insurance
answers for the damages that a shipowner or agent may be held liable for by
reason of the death of its passengers.

Protest is the written statement by the master of a vessel or any authorized include minor craft engaged only in river and bay traffic. Consequently, a
officer, attested by property officer or a notary, to the effect that damages passenger, on board a motor boat is not required to make a protest as a
has been suffered by the ship. condition precedent to his right of action for the injury suffered by him in the
collision, as the Code of Commerce does not apply.
In collisions, the maritime protest must be made within 24 hours after a
collision and circumstances of the collision are declared or made known Additional notes
before a competent authority at the point of accident or the first port of  When the mercantile code speaks of vessels, they refer solely and
arrival if in the Philippines or the Philippine consul in a foreign country. exclusively to mercantile ships, as they do not include warships,
and furthermore, they almost always refer to craft which are not
In a collision, between a shipper and passenger, the passenger is expected to accessory to another as in the case of launches, lifeboats and etc.
know the circumstances regarding the collision. Therefore, he cannot
maintain an action if he did not file a maritime protest as provided for under  They refer exclusively to those which are engaged in the
Article 863 or the Code of Commerce. transportation of passengers and freight from one port to another
or from one place to another
WHEN APPLICABLE
 They refer to merchant vessels and in NO WAY can they or should
When maritime protest applies? they be understood as referring to pleasure craft, yachts,
1. When the vessel makes an arrival under stress pontoons, health service and harbor police vessels, etc.
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a hurricane or the captain  Ships ought to be understood in the sense of vessel serving the
believes that the cargo has suffered damages or averages purpose of maritime navigation or seagoing vessel, and not in the
4. Maritime collisions sense of vessel devoted to the navigation of rivers.
Who can file a maritime protest?  Book III of the code of commerce, dealing with maritime
1. The captain, in cases of numbers 1 to 3 commerce, was evidently intended to define laws relative to
2. The passenger or other persons interested, in cases of maritime merchant vessels and maritime shipping; and as appears from
collisions. said code, the vessel intended in that book are such run by
masters having special training with elaborate apparatus of crew
When protest not required? and equipment indicated in the code.
1. When it does not fall under any of the four instances mentioned.
2. When tort is involved. Only vessels engaged in what is ordinarily known as maritime commerce are
3. When no vessel is involved. within the provision of law conferring limited liability on the owner in case of
4. Where the interested person is not on board the vessel. maritime disaster.
APPLICATION OF LIMITED LIABILITY RULE TO CHARTERER REQUIREMENT OF PROTEST
The shipowner is the very person for whom the Limited Liability Rule (LLR) In relation to protest contemplated under Article 835 of the Code of
has been conceived to protect. The shipowner is the one who is supposed to Commerce dealing with collisions, the vessels contemplated are sea-going
be encouraged to pursue maritime commerce. Hence, the charterer vessels. Therefore, it CANNOT be applied to small boats engaged in river
CANNOT invoke the LLR against the shipowner in a case filed by the and bay traffic.
shipowner against the former.
Vessels which are licensed to engage in maritime commerce, or commerce
Even if the contract is for bareboat or demise charter where possession, by sea, whether foreign or coastwise trade, are regulated by Book III of the
free administration and even navigation are temporarily surrendered to the Commerce of Code. Other vessels of a minor nature not engaged in maritime
charterer, dominion over the vessel remains with the shipowner. Therefore, commerce, such as river boats and those carrying passengers from ship to
the charterer or the sub-charterer, whose right cannot rise above that of the shore, must be governed, as to their liability to passengers, by the provisions
former, can never set up the LLR against the very owner of the vessel. of the Civil Code or other appropriate special provisions of law.
III. VESSELS IV. SHIP MORTGAGE

PREFERRED MORTGAGE
A vessel or watercraft is defined under PD No. 474 as “any barge, lighter,
bulk carrier, passenger ship freighter, tanker, container ship, fishing boats, or SECTION 2 OF PD 1521 (SHIP MORTGAGE DECREE)
other artificial contrivance utilizing any source of motive power, designed use
or capable of being used as a means of transportation operating either as a Who may constitute a Ship Mortgage
common carrier, including fishing vessels covered under PD No. 43. Any citizen of the Philippines, or any association or corporation organized
under the laws of the Philippines, at least sixty per cent of the capital of
Except: which is owned by citizens of the Philippines may, for the purpose of
1. Those owned and/or operated by the Armed Forces of the financing the construction, acquisition, purchase of vessels or initial
Philippines and by the Foreign Government for its Military operation of vessels, freely constitute a mortgage or any other lien or
purpose. encumbrance on his or its vessels and its equipment with any bank or other
2. Bancas, sailboat and other waterborne contrivance of less than financial institutions, domestic or foreign.
three tons capacity and not motorized.
SECTION 10 OF PD 1521
MINOR CRAFT A preferred mortgage shall constitute a lien upon the mortgaged vessel in
the amount of the outstanding mortgage indebtedness secured by such
Minor crafts like motorboats are not considered “vessels” vessel. Upon the default of any term or condition of the mortgage such lien
The word "vessel" was not intended to include all ships, craft or floating ay be enforced by the mortgagee by suit in remaining admiralty wherein the
structures of every kind without limitation. Thus, it should not be held to
vessel itself may be made a party defendant and be arrested in the manner specified portion of the mortgage indebtedness. If a preferred
as provided in Section 11. mortgage so provides for the separate discharge, the amount of
the portion of such payment shall be endorsed upon the
SECTION 4 OF PD 1521 documents of the vessel.
Preferred Mortgages
a. A valid mortgage which at the time it is made includes the whole f. A preferred mortgage includes more than one vessel and provides
of any vessel of domestic ownership shall have, in respect to such for the separate discharge of each vessel by the payment of a
vessel and as of the date of recordation, the preferred status portion of mortgage indebtedness, the amount of such portion of
given by the provisions of Section 17 hereof, if such payment shall be endorsed upon the documents of the
vessel. In case such mortgage does not provide for the separate
1. The mortgage is recorded as provided in Section 3 hereof; discharge of a vessel and the vessel is to be sold upon the order of
2. An affidavit is filed with the record of such mortgage to the a district court of the Philippines in a suit in rem in admiralty, the
effect that the mortgage is made in good faith and without court shall determine the portion of the mortgage indebtedness
any design to hinder, delay, or defraud any existing or future increased by 20 per centum (1) which, in the opinion of the court,
creditor of the mortgagor or any lien or of the mortgaged the approximate value of all the vessels covered by the mortgage,
vessel; and (2) upon the payment of which the vessel shall be discharged
3. The mortgage does not stipulate that the mortgagee waives from the mortgage.
the preferred status thereof
b. Any mortgage which complies with the above conditions is Note: The preference is not absolute because there are other claims that
hereafter called a "preferred mortgage". For purposes of this prevail over ship mortgage.
Decree, a vessel holding a Provisional Certificate of Philippine
Registry is considered a vessel of domestic ownership such that it PREFERRED MARITIME LIEN
can be subject of preferred mortgage. The Philippine Coast Guard
is hereby authorized to enter a vessel holding a Provisional A maritime lien is a privileged claim on a vessel for some service rendered to
Certificate of Philippine Registry in the Registry of Vessels and to it to facilitate its use in navigation. It is a special property right in a ship given
record any mortgage executed thereon. Such mortgage shall have to a creditor by law as security for a debt or claim subsisting from the
the preferred status as of the date of recordation upon moment the debt arises with right to have the ship sold and debt paid out of
compliance with the above conditions. the proceeds.
c. There shall be endorsed upon the documents of a vessel covered It is akin to a mortgage lien in that in spite of the transfer of ownership, the
by a preferred mortgage lien is not extinguished. The maritime lien is inseparable from the vessel and
until discharged, it follows the vessel. Hence, enforcement of a maritime lien
1. The names of the mortgagor and mortgagee; is in the nature and character of a proceeding quasi in rem.
2. The time and date the endorsement is made; PREFERRED CLAIMS
3. The amount and date of maturity of the mortgage; and Section 17 of PD 1521
Preferred mortgage lien should have PRIORITY over all claims against the
4. Any amount required to be endorsed by the provisions of vessel, EXCEPT the following claims in the order stated:
paragraphs (e) or (f) of this Section. 1. Expenses and fees allowed and costs taxed by the court and taxes
due to the Government
d. Such endorsement shall be made (1) by the Coast Guard District 2. Crew's wages
or Station Commander of the port of documentation of the 3. General average
mortgaged vessel, or (2) by the Coast Guard District or Station 4. Salvage; including contract salvage
Commander of any port in which the vessel is found, if such Coast 5. Maritime liens arising prior in time to the recording of the
Guard District or Station Commander is directed to make the preferred mortgage
endorsement by the Coast Guard District or Station Commander 6. Damages arising out of tort, and
of the port of documentation. The Coast Guard District or Station 7. Preferred mortgage registered prior in time.
Commander of the port of documentation shall give such
direction by wire of letter at the request of the mortgagee and MARITIME LIENS ARE CREATED BY OPERATION OF LAW
upon the tender of the cost of communication of such direction. Abovementioned are maritime liens that attaches to the vessel. Notice of
Whenever any new document is issued for the vessel, such their existence is not necessary. These maritime liens do not arise from
endorsement shall be transferred to and endorsed upon the new specific agreement. Although they may arise out of contract or in the
document by the Coast Guard District or Station Commander. absence of contract, they are imposed even in the absence of specific
contractual provisions providing a lien. Similarly, the parties may not impose
In the case of a vessel holding a provincial certificate of Philippine a maritime lien by agreement if one is not provided by law. In other words,
Registry, the endorsement shall be made by the Philippine consul the claim must be one of those enumerated under Section 17.
abroad upon direction by wire or letter from the Maritime
Industry Authority at the request of the mortgagee and upon The claims are not based on possession. Possession of the vessel is not
tender of the cost of communication of such direction. A necessary for the maritime liens under Section 17 to attach to the vessel. In
certificate of such endorsement, giving the place, time and other words, the nature of the claims does not presuppose nor originate in
description of the endorsement, shall be recorded with the possession.
records of registration to be maintained at the Philippine
Consulate. The provision of PD 1521 on the order of preference in the satisfaction of the
claims against the vessel is the more applicable compared to the Civil Code
e. A mortgage which includes property other than a vessel shall not provisions on the concurrence and preference of credit. General legislation
be held a preferred mortgage unless the mortgage provides for must give way to special legislation on the same subject, and generally be so
the separate discharge of such property by the payment of a
interpreted as to embrace only cases in which the special provisions are not Japan while the vessel is in Japan and they need a new crew. The
applicable. expense incurred for transportation in flying to Japan by the new
is considered other necessaries.
The Statute of Frauds under Article 1403 (2) of the Civil Code is inapplicable.
The claim on the maritime lien is based on law, PD 1521, and not on any Examples of maritime liens for necessaries
contract or agreement. 1. Claims with respect to expenses for the payment of bunker
oil/fuel, unused stores and oil, bonded stores, provisions and
Note: Section 17 of PD 1521 refers to preferred claims and Section 4 of PD repair and docking of the vessel.
1521 refers to preferred mortgages. Thus, if a vessel will be sold on auction, 2. Ship modification cost.
and there are preferred claims, proceeds of the sale shall first be applied to
the preferred claims before they are applied to preferred mortgages. How to enforce maritime lien:
1. Collection of sum of money
PRESCRIPTIVE PERIOD 2. To nullify a foreclosure, intervene
3. Collection suit with attachment
Under Article 1144 of the Civil Code, an action upon an obligation created by
law must be brought within 10 YEARS from the time the right of action Note: Liquor, according to the Supreme Court, is not considered as other
accrues. Hence, enforcement of a maritime lien imposed by special law necessaries. As long as an expense on the vessel is indispensable to the
prescribes in 10 years. maintenance and navigation of vessel, it may properly be treated as a
maritime lien for necessaries under Section 21 of PD 1521
Laches may also lie if there was unreasonable delay on the part of claimant in
asserting its rights. The protection against 3rd person accorded to the PERSONS AUTHORIZED TO PROCURE NECESSARIES
maritime lienor is narrowly circumscribed by the requirement that he must
act promptly to assert his rights. SECTION 22 OF PD 1521
Persons Authorized to Procure Repairs, Supplies, and Necessaries. The
MARITIME LIENS following persons shall be presumed to have authority from the owner to
procure repairs, supplies, towage, use of dry dock or marine railway, and
MARITIME LIENS FOR NECESSARIES other necessaries for the vessel:
The maritime liens that are superior to the preferred mortgage includes 1. The managing owner,
maritime lien for necessaries. 2. ship's husband, master or
3. any person to whom the management of the vessel at the port of
SECTION 21 OF PD 1521 supply is entrusted.
Maritime Lien for Necessaries; person entitled to such lien - Any person
furnishing repairs, supplies, towage, use of dry-dock or marine railway, or No person tortuously or unlawfully in possession or charge of a vessel shall
other necessaries, to nay vessel, whether foreign or domestic, upon the have authority to bind the vessel.
order of the owner of such vessel, or of a person authorized by the owner,
shall have a maritime lien on the vessel, which may be enforced by suit in The officers and agents of a vessel shall be taken to include such officers and
rem, and it shall be necessary to allege or prove that credit was given to the agents when appointed by a character, by owner pro hac vice, or by an
vessel. agreed purchaser in possession of the vessel.
Requirement for a maritime lien for necessaries which is enforceable by No lien is conferred when:
suit in rem: 1. The furnisher knows, or by exercise of reasonable diligence could
1. The “necessaries” must have been furnished to and for the have ascertained, that because of the terms of a charter party,
benefit of the vessel agreement for sale of the vessel, or for any other reason, the
2. The “necessaries” must have been necessary for the continuation person ordering the repairs, supplies, or other necessaries was
of the voyage of the vessel without authority to bind the vessel therefor.
3. The credit must have been extended to the vessel 2. The person is tortuously or unlawfully in possession or charge of a
4. There must be necessity for the extension of the credit, and vessel.
A necessity of credit will be presumed where it appears that the PERSONAL ACTION AGAINST DEBTOR
repairs and supplies were necessary for the ship and that they
were ordered by the master. Hence, this presumption does not SECTION 17 OF PD 1521
arise in a case where it was established that the master did not
order the fuels and there was no proof of necessity of supplies. Preferred Maritime Lien, Priorities, Other Liens
a) Upon the sale of any mortgaged vessel in any extra-judicial sale or
5. The necessaries must be ordered by persons authorized to by order of a district court of the Philippines in any suit in rem in
contract on behalf of the vessel admiralty for the enforcement of a preferred mortgage lien
thereon, all pre-existing claims in the vessel, including any
Two concepts of maritime lien on necessaries: possessory common-law lien of which a lienor is deprived under
1. Maritime lien on necessaries the provisions of Section 16 of this Decree, shall be held
Necessaries include those items required to facilitate the use of terminated and shall thereafter attach in like amount and in
the ship, save her from danger and enable her to perform those accordance with the priorities established herein to the proceeds
acts currently demanded of her. Ex: Supply of Fuel (use of the ship of the sale. The preferred mortgage lien shall have priority over all
or to save her from danger) claims against the vessel, except the following claims in the order
stated: (1) expenses and fees allowed and costs taxed by the court
2. Maritime lien on other necessaries and taxes due to the Government; (2) crew's wages; (3) general
Ex: Expense incurred by travel agency for the transportation of average; (4) salvage; including contract salvage; (5) maritime liens
crew not directly related to the ship but indirectly necessary for arising prior in time to the recording of the preferred mortgage;
the ship. Situation: One of the crew will have to disembark in

(6) damages arising out of tort; and (7) preferred mortgage ACENAV. As a mere agent, ACENAV cannot be made responsible or held
registered prior in time. accountable for the damage supposedly caused by its principal.
b) If the proceeds of the sale should not be sufficient to pay all TRAMP SERVICE
creditors included in one number or grade, the residue shall be
divided among them pro rata. All credits not paid, whether fully or RA NO. 9515 (AN ACT DEFINING THE LIABILITY OF SHIP AGENTS IN THE
partially shall subsist as ordinary credits enforceable by personal TRAMP SERVICE AND FOR OTHER PURPOSES)
action against the debtor. The record of judicial sale or sale by
public auction shall be recorded in the Record of Transfers and "Tramp Service" shall mean the operation of a contract carrier which has no
Encumbrances of Vessels in the port of documentation. regular and fixed routes and schedules but accepts cargo wherever and
whenever the shipper desires, is hired on a contractual basis, or chartered by
WHEN PROCEEDS NOT SUFFICIENT any one or few shippers under mutually agreed terms and usually carries
If the proceeds of the sale should not be sufficient to pay all creditors bulk or break bulk cargoes
included in one number or grade, the residue shall be divided among them
pro rata. All credits not paid, whether fully or partially shall subsist as "Tramp Agent" shall mean a ship agent appointed by the ship owner,
ordinary credits enforceable by personal action against the debtor. charterer or carrier iti the tramp service for one particular voyage whose
authority is limited to the customary and usual procedures and formalities
V. PERSONS WHO TAKE PART required for the facilitation of the vessel’s entry, stay and departure in the
SHIP AGENT port and does not include the assumption of the ship owner’s, charterer’s, or
carrier’s obligations with the shipper or receiver for the goods carried by the
ship;
A “ship agent” is defined in the Code of Commerce as the person entrusted
with provisioning of the vessel, or who represents her in the port in which
"Ship Agent" shall mean the person entrusted with the provisioning or
she happens to be (Article 595, first paragraph, Code of Commerce)
representing the vessel in the port in which it may be found;
Powers of Ship Agent
"General Agent" shall mean a ship agent appointed by the ship owner or
 The ship agent can enter into contracts to provision the ship. Hence, he
carrier in the liner service for all voyages and covered by a General Agency
can purchase necessary supplies and fuel that are necessary for a
Agreement whereby the agent assumes the role and responsibility of its
particular voyage.
principal within the Philippine territory including but not limited to
 Representation of a vessel, includes the right to represent the vessel in
solicitation of cargo and freight, payment of discharging or loading expenses,
any action in a court or tribunal.
collection of shipping charges and issuing/releasing bills of lading and cargo
 Art. 595 of the Code of Commerce provides that the ship agent shall
manifest;
represent the ownership of the vessel, and may, in his own name and in
such capacity, take judicial and extrajudicial steps in matters relating to
Liability of the Ship Agent, General Agent and Tramp Agent
commerce.
The responsibility or liability, if any, of the ship agent, general agent and
 Whether acting as agent of the owner of the vessel or as agent of the tramp agent shall continue to be governed by the pertinent provisions of the
charterer, petitioner will be considered as the ship agent and may be Code of Commerce: Provided, that in the case of the tramp agent, his liability
held liable as such, as long as the latter is the one that provisions or shall not extend to the obligations assumed by the ship owner, charterer or
represents the vessel. carrier with the shipper or receiver for the goods carried by the ship:
Provided, further, That it is the duty of the tramp agent, however, to assist
WHAT IF THE OBLIGATION OF A PERSON IS LIMITED TO INFORMING THE the shipper or receiver in making cargo liability claims against the ship
CONSIGNEE ON THE ARRIVAL OF THE GOODS? owner, charterer or carrier: Provided, finally, That failure or inaction to
perform the aforesaid duty shall subject the tramp agent to applicable
ACE NAVIGATION CO., INC. vs. FGU INSURANCE CORPORATION administrative sanctions based on the Implementing Rules and Regulations
The Court ruled that an agent is not a ship agent if its only function is limited (IRR) to be formulated thereon by the Maritime Industry Authority (MARINA)
to informing the consignee of the arrival of the vessel in order for the latter under the Depatment of Transportation and Communication (DOTC) and by
to immediately take possession of the cargoes. An agent is not a ship agent if the Philippine Shippers Bureau (PSB) under the Department of Trade and
there’s no hand in the provisioning of the vessel. The responsibilities of such Industry (DTI).
agent is not covered by the Code of Commerce but by the provisions of the
New Civil Code, including Art. 1897. Article 1897 of the same code provides TRIPLE ROLES OF CAPTAIN
that an agent is not personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the limits of his authority CAPTAIN
without giving such party sufficient notice of his powers. The captain of a vessel is a confidential and managerial employee within the
meaning of the above doctrine. A master or captain, for the purposes of
The Court ruled in Ace Navigation Co. Inc., v. FGU Insurance Corporation that maritime commerce, is one who has command of the vessel.
both exceptions do not obtain in the case. Records show that the obligation
of ACENAV was limited to informing the consignee HEINDRICH of the arrival A captain commonly performs 3 distinct roles:
of the vessel in order for the latter to immediately take possession of the 1. He is a general agent of the ship owner
goods. No evidence was offered to establish that ACENAV had a hand in the 2. He is also commander and technical director of the vessel
provisioning of the vessel or that it represented the carrier, its charterers, or 3. He is a representative of the country under whose flag he
the vessel at any time during the unloading of the goods. navigates
Records are bereft of any showing that ACENAV, the agent, exceeded its As commander of the vessel
authority in the discharge of its duties as a mere agent of CARDIA. Neither Of these three roles, the most important is the role performed by the captain
was it alleged, much less proved, that ACENAV’s limited obligation as agent as commander of the vessel; for such role (which is analogous to that of
of the shipper, CARDIA, was not known to HEINDRICH. Furthermore, since “Chief Executive Officer” of a present-day corporate enterprise) has to do
CARDIA was not impleaded as a party in the suit, the liability attributed upon with the operation and preservation of the vessel during its voyage and the
it by the Court of Appeals on the basis of its finding that the damage protection of the passengers (if any) and crew and cargo.
sustained by the cargo was due to improper packing cannot be borne by
party for the acts of the pilot, and they must be left to recover the amount as
As general agent of the ship owner well as they can against him.
Captain has authority to sign bills of lading, carry goods aboard and deal with
the freight earned, agree upon rates and decide whether to take cargo. The Where a compulsory pilot is in charge of a ship, the master being required to
captain also has legal authority to enter into contracts with respect to the permit him to navigate it, if the master observes that the pilot is incompetent
vessel and the trading of the vessel, subject to applicable limitations or physically incapable, then it is the duty of the master tor refuse to permit
established by the statute, contract or instructions an regulations of the ship the pilot to act. But if no such reasons are present, then the master is
owner. The captain is committed the governance, care and management of justified in relying upon the pilot, but not blindly. Under the circumstances of
the vessel. He is vested with both management and fiduciary functions. this case, if a situation arose where the master, exercising that reasonable
vigilance which the master of a ship should exercise, observed, or should
DISCRETION OF CAPTAIN OR MASTER have observed, that the pilot was so navigating the vessel that she was going,
or was likely to go, into danger, and there was in the exercise of reasonable
INTER-ORIENT MARITIME ENTERPRISES vs. CA care and vigilance an opportunity for the master to intervene so as to save
“A ship's captain must be accorded a reasonable measure of discretionary the ship from danger, the master should have acted accordingly. The master
authority to decide what the safety of the ship and of its crew and cargo of a vessel must exercise a degree of vigilance commensurate with the
specifically requires on a stipulated ocean voyage. The captain is held circumstances.
responsible, and properly so, for such safety. He is right there on the vessel,
in command of it and (it must be presumed) knowledgeable as to the specific ROLES OF CAPTAIN v. ROLE OF MARITIME PILOT
requirements of seaworthiness and the particular risks and perils of the
Captain or Master Maritime Pilot
voyage he is to embark upon.
For purposes of maritime A pilot, in maritime law, is a person
commerce, is one who has duly qualified, and licensed to
The applicable principle is that the captain has control of all departments of
command of a vessel. conduct a vessel into or out of ports,
service in the vessel, and reasonable discretion as to its navigation. It is the
or in certain waters.
right and duty of the captain, in the exercise of sound discretion and in good
faith, to do all things with respect to the vessel and its equipment and
“pilot” includes those whose duty is
conduct of the voyage which are reasonably necessary for the protection and
to guide vessels into or out of ports,
preservation of the interests under his charge, whether those be of the
or in particular waters and those
shipowners, charterers, cargo owners or of underwriters. It is a basic
entrusted with the navigation of
principle of admiralty law that in navigating a merchantman, the master
vessels on high seas.
must be left free to exercise his own best judgment.
The requirements of safe navigation compel us to reject any suggestion that

the judgment and discretion of the captain of a vessel may be confined On compulsory pilotage grounds
within a straitjacket, even in this age of electronic communications. Indeed, if The Harbor Pilot providing the The Master shall retain overall
the ship captain is convinced, as a reasonably prudent and competent service to a vessel shall be command of the vessel even on
mariner acting in good faith that the shipowner's or ship agent's instructions responsible for the damage to a pilotage grounds whereby he can
(insisted upon by radio or telefax from their offices thousands of miles away) vessel or to life and property at countermand or overrule the order
will result, in the very specific circumstances facing him, in imposing ports due to his negligence or fault. or command of the Harbor Pilot on
unacceptable risks of loss or serious danger to ship or crew, he cannot He can only be absolved form board. In such event, any damage
casually seek absolution from his responsibility, if a marine casualty occurs, in liability if the accident is caused by caused to a vessel or to life or
such instructions.” force majeure or natural calamities property at ports by reason of the
provided he has exercised fault or negligence of the Master
MASTER PRO HAC VICE prudence and extra diligence to shall be the responsibility and
prevent or minimize damage. liability of the registered owner of
Pilot is the master pro hac vice the vessel concerned without
Under English and American authorities, generally speaking, the pilot prejudice to recourse against said
supersedes the master for the time being in the command and navigation of Master.
the ship, and his orders must be obeyed in all matters connected with her
navigation. He becomes the MASTER PRO HAC VICE and should give all
directions as to speed, course, stopping and reversing, anchoring, towing and
the like. And when a licensed pilot is employed in a place where pilotage is
compulsory, it is his duty to insist on having control if the vessel or to decline Compulsory Pilotage
to act as pilot. Under the certain systems of foreign law, the pilot does not  For entering a harbor and anchoring thereat, or passing through rivers
take entire charge of the vessel, but is deemed merely the adviser of the or straits within a pilotage district, as well as docking and undocking at
master, who retains command and control of the navigation even localities any pier/wharf, or shifting from one berth or another, every vessel
where pilotage is compulsory. engaged in coastwise and foreign trade shall be under compulsory
pilotage.
In general, a pilot is personally liable for damages caused by his own  Implemented in the Port of Manila.
negligence or default to the owners of the vessel, and to third parties for
damages sustained in a collision. Such negligence of the pilot in the
VI. CHARTER PARTIES
performance of duty constitutes a maritime tort.
The fact that the law compelled the master to take the pilot does not TWO MAIN CATEGORIES
exonerate the vessel from liability. The parties who suffer are entitled to
have their remedy against the vessel that occasioned the damage, and are A. Bareboat or Demise Charter
not under necessity to look to the pilot from whom redress is not always had Ship owner leases to the charterer the whole vessel, transferring to the
for compensation. The owners of the vessel are responsible to the injured latter the entire command, possession and consequent control over the
vessel’s navigation, including the master and the crew, who becomes
the charterer’s “servants”.
If the charter is a contract of affreightment, which leaves the general owner

The charterer takes over the ship, lock, stock and barrel. As the in possession of the ship as owner for the voyage, the rights and the
shipowner is not normally required to provide for a crew; the charterer responsibilities of ownership rest on the owner. The charterer is free from
gains possession of the vessel “bare”, hence, the term “bareboat”. liability to third persons in respect of the ship.
B. Contract of Affreightment In this case, the charter party agreement did not convert the common carrier
The charterer hires the vessel only, either for a determinate period of into a private carrier. The parties entered into a voyager charter, which
time or for a single or consecutive voyage, with the ship owner retains the character of the vessel as a common carrier.
providing for the provisions of the ship, the wages of the master and In Planters Products, Inc. vs. Court of Appeals, we said: "It is therefore
crew, and the expenses for the maintenance of the vessel. 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
a. Time Charter – use of a vessel for a specified period of timeor for the charter is limited to the ship only, as in the case of a time-charter or
the duration of one or more specified voyages. Owner of a time voyage charter. It is only when the charter includes both the vessel and its
chartered vessel retains possession and control through the crew, as in a bareboat or demise that a common carrier becomes private, at
master and crew who remains employees. What the time least insofar as the particular voyage covering the charter-party is concerned.
charterer acquires is the right to utilize the carrying capacity and Indubitably, a ship-owner in a time or voyage charter retains possession and
facilities of the vessel and to designate her destinations during the control of the ship, although her holds may, for the moment, be the property
term of the charter. of the charterer."
b. Voyage Charter or Trip Charter – contract for the carriage of The charterer of a vessel has no obligation before transporting its cargo to
goods from one or more ports of loading to one or more ports of ensure that the vessel it chartered complied with all legal requirements. The
unloading, on one or on a series of voyages. In a voyage charter, duty rests upon the common carrier simply for being engaged in "public
the master and crew remain in the employ of the owner of the service." The Civil Code demands diligence which is required by the nature of
vessel. the obligation and that which corresponds with the circumstances of the
persons, the time and the place. Hence, considering the nature of the
c. Slot Charter Party – Shipper leases one or more “slots” aboard a obligation between Caltex and MT Vector, the liability as found by the Court
container ship. Here, a space in the vessel is reserved for the use of Appeals is without basis.
of the charterer. A slot or space charter agreement is in the
nature of a contract of affreightment. Hence, the Curt observed in OWNER PRO HAC VICE
one case the slot charter agreement did not divest the carrier of
such characterization as a carrier not relieved it of any The bareboat charterer becomes the owner “pro hac vice” of the vessel
accountability for the shipment. since he mans the vessel with his own set of master and crew, effectively
becoming the owner for the voyage or service stipulated, subject however to
SLOT CHARTER PARTY AND ITS EFFECT ON DILIGENCE OF COMMON any liability for damages arising from negligence.
CARRIER
The bareboat charterer assumes, to a large extent, the customary rights and
The carrier is bound to exercise extraordinary diligence in conveying its slot liabilities of the shipowner in relation to third persons who may have dealt
charter agreement. Being a contract of affreightment, it is the carrier and not with him or with the vessel. In this latter instance, the master of the vessel is
the charterer, who is liable for damages or losses sustained by the goods the agent of the charterer, and not of the shipowner, and this, it is the
transported. charterer or owner pro hac vice, and not the general owner of the vessel,
who is liable for the expense of the voyage including the wages of seamen.
HEUNG-A SHIPPING vs. PHILAM INSURANCE CO.
“As the carrier of the subject shipment, Heung-A was bound to exercise VII. LOANS ON BOTTOMRY AND RESPONDENTIA
extraordinary diligence in conveying the same and its slot charter agreement
with Dongmana did not divest it to such characterization nor relieve it of any CHARACTERISTICS OF BOTTOMRY AND RESPONDENTIA
accountability for shipment.
LOAN ON BOTTOMRY
The slot charter was in fact a contract of affreightment which means that the In maritime law, is a contract whereby the owner of a ship borrows for the
use of shipping space on vessel is leased in part or as a whole, to the carry for use, equipment or repair of the vessel, for a definite term, and pledges the
the good of others. The voyage remains under the responsibility of the ship (or the keel or bottom of the ship pars pro toto) as security, with the
carrier and it is answerable for the loss of goods received for transportation.” stipulation that id the ship is lost during the voyage or during the limited time
on account of the perils enumerated, the lender shall lose his money.
EFFECT OF CHARTER PARTY ON CARRIER
LOAN ON RESPONDENTIA
Where the goods, or some part thereof, are hypothecated as security for a
A charter party may transform a common carrier into a private carrier.
loan, the repayment of which is dependent upon maritime risks
However, it must be a bareboat or demise charter where the charterer
means the vessel with his own people and becomes, in effect, the owner for
Usual form is that of a bond. In this kind of maritime loan, it is the borrower’s
the voyage or service stipulated.
personal responsibility which is deemed to be the principal security for the
performance of a contract, hence the term “respondentia”
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.
BOTTOMRY RESPONDENTIA
Pledges the ship or the keel or Goods, or some part thereof, are
LIABILITY OF CHARTERER UNDER A CONTRACT OF AFFREIGHTMENT bottom of the ship pars pro toto hypothecated as security
Lender does not lose his capital
Generally, the character of the common carrier is not affected by the charter should the ship perish due to marine
party if the same is a contract of affreightment. Lender loses his capital should the
peril, so long as the goods subject of
ship perish due to marine peril
the loan survive or are saved; but
where the ship and the cargo on
board should disappear due to perils Note: Petty and ordinary expenses incident to navigation, such as those
of the sea, the lender on pilotage of coasts and ports, those of lighterage and towage, anchorage,
respondentia shall suffer loss of his inspection, health, quarantine, lazaretto, and other so-called oirt expenses,
capital costs of barges and unloading until the merchandise is placed on the wharf,
Ship owner has authority to and any other usual expenses of navigation, shall be considered ordinary
constitute loan on bottomry. A part expenses to be defrayed by the shipowner, unless there is an express
owner shall be limited to loan only agreement to the contrary.
up to the extent of his share. The cargo owner shall have the right
to enter into a loan on respondentia You have a vessel at present, we say present, because the book makes a
A ship captain, who is a part owner, involving his cargo. distinction about vessels during the medieval times and now. If at present,
may obtain a loan on bottomry only your vessel is caught by fire, and to extinguish the fire, a certain equipment
to the extent of his interest. The captain, being a mere agent of was used, the owner of that equipment will have to be paid for rescuing. The
the ship owner and not of the cargo ship owner would have to pay the expense. This is not an ordinary expense
A ship captain, who is not an owner, may not contract a loan on because it does not normally happen in a voyage.
owner, may enter into a loan on respondentia. If he does so, it would
bottomry on account of extreme be void. GENERAL AVERAGE
necessity.
General average - includes all damages and expenses which are deliberately
caused in order to save the vessel, its cargo or both at the same time, from
real and known risk.
Important: There must be a marine risk upon which the loan is predicated.
Thus, there is no bottomry nor respondentia if the money borrowed is Requisites:
subject to repayment in any event. 1. There must be a common danger
2. For the common safety part of the vessel or of the cargo or both is
VIII. AVERAGES sacrificed deliberately
3. From the expenses or damages caused follows the successful
WHAT ARE AVERAGES?
saving of the vessel and cargo
4. Expenses or damages should have been incurred or inflicted after
1. All extraordinary expenses or accidental expenses which may be incurred taking the proper legal steps and authority
during the voyage in order to preserve the cargo, the cargo or both.
Particular/Simple Average Gross/General Average
2. Any damages or deteriorations which the vessel may suffer from the
Have not inured to the common
time it puts to sea from the port of departure until it casts anchor in the Caused for the benefit of those
benefit of all persons interested in the
port of destination, and those suffered by the merchandise from the time interest in the vessel or cargoes
vessel or cargoes
they are loaded in the port of shipment until they are unloaded in the port
May be due to causes other than Deliberately caused in order to
of their consignment
deliberate acts save the vessel or the cargoes
It is classified into two: simple or particular; and general or gross average. Borne proportionately by the
Borne by the owner of thing vessel or
persons having interest in the
cargoes damaged
SIMPLE AVERAGE vessel or cargoes
This includes all the expenses and damages caused to the vessel or to her
cargo which have not inured to the common benefit and profit of all the EFFECT OF PRESENCE OF NEGLIGENCE
persons interested in the vessel and her cargo. If damage cause is not a
general average, the same can be considered particular average. AMERICAN HOME ASSURANCE vs. CA
The law on averages in the Code of Commerce cannot be applied in
Since this type of average does not inure to the common benefit, the owner determining liability where there is negligence.
of the goods that suffered the damage bears the loss.
There is negligence here because the shipowner proceeded with the voyage
GENERAL AVERAGE despite warning from PAG-ASA of a storm. This is the case where almost
Includes all damages and expenses which are deliberately caused in order to 10,000 televisions were loaded on a vessel. The issue on negligence must
save the vessel, its cargo or both at the same time, from real and known risk first be resolved before provisions on Code of Commerce may be applied.
PILOTAGE NDC vs. COURT OF APPEALS

Two vessels collided because of negligence of the captain. When the
They are ordinary expenses. They are not averages unless stipulated. shipowner and ship agent were sued, they interposed the defense that the
law on averages must apply, so the loss must be proportionately spread.
ORDINARY VS. EXTRAORDINARY EXPENSES
However, the Supreme Court said that the law on averages finds no
application where there is negligence and where the cargoes are not
Note: before determining whether the averages are particular or general, jettisoned.
determine first whether expenses are ordinary or extraordinary. Because if
they are mere ordinary expenses, the rules on average will not apply. During the medieval times, the concept of averages was limited to instances
However, if they are extraordinary expenses, the rules on averages will apply. where cargoes are jettisoned. At present, there can still be averages even if
the cargoes are not jettisoned.
ORDINARY EXPENSES
Ordinary expenses are not averages because they are foreseeable (as Note: The common carriers cannot limit their liability for injury or loss of
opposed to extraordinary, they are foreseeable), unless the parties agree goods when such injury or loss was caused by its own negligence. The law on
that averages will cover ordinary expenses. The Code of Commerce does not average under the Code of Commerce cannot be applied in determining
prohibit the inclusion of other expenses under averages. liability where there is negligence.

EXPENSES TO REFLOAT A VESSEL get into such dangerous proximity as to cause inevitable harm and confusion,
and a collision results as a consequence.
MAGSAYSAY vs. AGAAN
The steamer having a far greater fault in allowing such proximity to be
FACTS: brought about is chargeable with all the damages resulting from the collision;
A vessel, while unintentionally stranded inside a port, ran aground at the and the act of the vessel sailing having been done in extremis, even if wrong,
mouth of the Cagayan River. Expenses were incurred in hiring a company to is not responsible for the result.
refloat the vessel. The shipowner claims that the expenses constitute general
averages and thus the losses should be borne proportionately. ZONES IN COLLISION
ISSUE: In collisions between vessels, there exist three division of time or zones:
Whether the expenses constitute general averages. 1. The first division covers all the time up to the moment when the
risk applicable may be said to have begun.
RULING: - Within this zone, no rule is applicable because none is
No. For expenses for refloating a vessel to constitute general averages, the necessary
vessel must be intentionally stranded and the expenses were incurred for the - Each vessel is free to direct its course as it deems best
purpose of saving both the vessel and the cargo. without reference to the movements of the other vessel
Here, the stranding of the vessel was not intentional. Moreso, the expenses 2. The second division covers the time between the moment when
were not incurred for the common safety of the vessel and the cargo, since the risk of collision begins and the moment when it has become a
they, or at least the cargo, were not in imminent peril. The cargoes could practical certainty.
have been unloaded without need of an expensive salvage operation.
3. The third division covers the time of actual contract
In sum, where the expense sought to be recovered does not show that it is
intended to save the vessel or cargo from common danger, it cannot be LIABILITY RULES
considered a general average.
Although the liability with respect to collision is not governed by quasi-delict,
Note: There is no proof that the vessel had to be put afloat to save it from liability in collision cases is still negligence based. Collision cases are still
imminent danger. From the testimony of the shipowner, the vessel had to be governed by the provisions of the Code of Commerce on Collision.
salvaged in order to enable it to proceed to its port of destination. It is
important to note that the true foundation of general averages is the safety In other words, courts are still called upon to determine the negligence of
of the property and not of the voyage. the persons involved in order to impose liability. The person who causes
the injury is both civilly and criminally liable.
IX. COLLISIONS
Note: in determination of negligence, the same test of a reasonable man in
An impact or sudden contact of a vessel with another whether both are in the position of an expert that applies in quasi-delict should also be applied
motion or one stationary. although with due consideration to the expertise of the persons involved
including the carrier itself, the captain, officers and crew of the vessels. Thus
If one vessel is moving while the other is stationary, the same is more it still relevant to determine if the collision is sufficiently foreseeable such
appropriately called ‘allision’. that a reasonable man with the same expertise could have avoided the
impact
DOCTRINE OF ERROR IN EXTREMIS
Contributory negligence and last clear chance is not applicable to collision
In the first zone, no rules apply. In the second, the burden is on the vessel cases because of Art. 827 of the Code of Commerce.
required to keep away and avoid the danger. The third zone covers the Thus, if both vessels were negligently operated, it does not matter if the
period in which errors in extremis occur; and the rule is that the vessel which other has the clear chance of avoiding the injury because under Art. 827 -
has forced the privileged vessel into danger is responsible even if the each must suffer its own damage if both of them are negligent.
privileged vessel has committed an error within that zone. Thus, if it was
during the time when the sail vessel was passing through the third zone that Although the negligence on the part of the mate of the incoming vessel
it changed its course to port in order to avoid, if possible, the collision, the preceded the negligence on the part of the mate of the outgoing vessel by an
act may be said to have been done in extremis, and, even if wrong, the appreciable interval of time, the first vessel cannot on that account be
sailing vessel is not responsible for the result. absolved from responsibility.
Urrutia & Co. Case Note: proof that the plaintiff was negligent will bar recovery from the
This pertains to a collision between a steamer and a sail vessel. The two defendant in collision cases even if the plaintiff’s negligence can be classified
watched each other for some time before the collision. The sailing vessel as merely contributory.
kept her course until in extermis when she made a wrong maneuver.
SPECIFIC LIABILITY RULES
If a vessel having a right of way suddenly changes its course during the 3rd The liability of the carriers would depend if only one is at fault, if both vessels
zone (time between the moment when collision has become a practical are at fault or if the entity at fault cannot be determined.
certainty and the moment of actual contact), in an effort to avoid an
imminent collision due to the fault of another vessel, such act may be said to One vessel at fault
be done in extremis, and even if wrong, cannot create responsibility on the If a vessel should collide with another, through or the fault, negligence, or
part of said vessel with the right of way. lack of skill of the captain, sailing mate, or any other member of the
complement, the owner of the vessel at fault shall indemnify the losses and
Thus, it has been held that fault on the part of the sailing vessel at the damages suffered, after an expert appraisal. (Art. 826 of the Code of
moment preceding a collision, that is, during the 3rd division of time, does Commerce)
not absolve the steamship which has suffered herself and a sailing vessel to

Both vessels at fault Thus, the charterer becomes the owner “pro hac vice” of the vessel since he
If the collision is imputable to both vessels, each one shall suffer its own mans the vessel with his own set of master and crew, effectively becoming
damages, and both shall be solidarily responsible for the losses and damages the owner for the voyage or service stipulated, subject however to any
occasioned to their cargoes. liability for damages arising from negligence.
No apportionment of liability.
Moreover, the bareboat charterer assumes, to a large extent, the customary
Party at fault cannot be determined rights and liabilities of the shipowner in relation to third persons who may
Each party shall bear his own damage in cases in which it cannot be have dealt with him or with the vessel. In this latter instance, the master of
determined which of the two vessels has caused the collision. They are the vessel is the agent of the charterer, and not of the shipowner, and
solidarily responsible for the losses and damages occasioned to their cargoes. therefore, it is the charterer or owner pro hac vice, and not the general
owner of the vessel, who is liable for the expenses of the voyage including
Cause is fortuitous event the wages of the seamen.
Each vessel and its cargo shall bear its own damages. If, by reason of storm or
other cause of force majeure, a vessel which is properly anchored and MARITIME PROTEST – WHEN NOT REQUIRED?
moored should collide with vessels nearby, causing the latter vessels
damage, the injury occasioned shall be considered as particular average of General Rule: It is necessary in collision cases - must be presented within 24
the vessel run into. hours
Third person at fault Exception: If the collision involves small boats engaged in reiver and bay
If a vessel should be forced by a third vessel to collide with another, the traffic and inland navigation because this requirement applies only to ships
owner of the third vessel shall indemnify the losses and damages cause, the and sea-going vessels
captain being civilly liable to said owner.
DOCTRINE OF INSCRUTABLE FAULT
Sinking on the way to port
A vessel which, upon being run into, sinks immediately, as well as that which,
having been obliged to make a port to repair the damages caused by the This is applicable where it cannot be determined which between the two
collision, is lost during the voyage or is obliged to be stranded in order to be vessels was at fault, both shall bear their respective damage, but both should
saved shall be presumed as lost by reason of collision. be solidarily liable for damage to the cargo of both vessels.
IS A CHARTERER LIABLE UNDER MARITIME LAW? RULE 18, INTERNATIONAL RULES OF THE ROAD
It depends if the charter party is a contract of affreightment or a When two power-driven vessels are meeting end on, or nearly end on, so as
bareboat/demise charter. to involve risk of collision, each shall alter her course to starboard, so that
each may pass on the port side of the other.
A. Contract of affreightment
Note: This is actually Rule 14 the International Rules of the Road. However,
The use of shipping space on vessels is leased in part or as a whole, to the Supreme Court, in the case of Smith Bell v. Go Thong, referred to this as
carry goods for others. Consequently, the voyage remains under the Rule 18. Maybe it was Rule 18 before and was repealed, I don’t know. Tried
responsibility of the carrier and it is answerable for the loss of goods my best to figure out why, but failed. But it would seem that this is the rule
received for transportation. The charterer is free from liability to third referred to by Sir as per his discussion.
persons in respect of the ship.
When applicable and when not applicable
B. Bareboat charter or charter by demise This Rule only applies to cases where vessels are meeting end on or nearly
end on, in such a manner as to involve risk of collision, and does not apply to
The whole vessel is let to the charterer with a transfer to him of its two vessels which must, if both keep on their respective course, pass clear of
entire command and possession and consequent control over its each other.
navigation, including the master and the crew, who are his servants.
The charterer becomes the owner for the voyage or service stipulated SMITH BELL vs. GO THONG (1991)
and hence liable for damages or loss sustained by the goods Go Thong was held responsible for collision in this case for violation of Rule
transported. 18 of the International Rules of the Road. This is because of the following:
Note: It is only in bareboat or demise charter where the charterer is liable for 1. It turned to portside (left), instead of turning to starboard (right)
damages or losses sustained. 2. There was no proper look-out
3. The second mate was the one in command of the vessel even if there
was a captain on board.
OWNER PRO HAC VICE OR OWNER FOR THIS OCCASION
MECENAS vs. COURT OF APPEALS (1989)
Charterer is the owner pro hac vice in a bareboat charter This is a peculiar case because the Supreme Court did not apply international
rules. Instead, it applied the presumption of gross negligence under the New
HEUNG-A SHIPPING vs. PHILAM INSURANCE CO. Civil Code.
In a bareboat or demise charter, the shipowner leases to the charterer the
whole vessel, transferring to the latter the entire command, possession and FACTS:
consequent control over the vessel’s navigation, including the master and M/T Tacloban (barge-type oil tanker) and the M/V Don Juan (passenger
crew, who thereby become the charterer’s “servant.” 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
As the shipowner is not normally required to provide for a crew, the and hundreds of its passengers perished.
charterer gains possession of the vessel “bare,” hence, the term “bareboat.”
M/V Don Juan claimed that it should not be liable as it complied with Rule 18
of the International Rules of the Road, while M/T Tacloban City did not. It

appears that when the two vessels were only three-tenths (0.3) of a mile 4. When malice, negligence, want of foresight or lack of skill on the part of
apart, M/T Tacloban turned to port side (in violation of Rule 18, while the the captain exists in the act causing the damage.
M/V Don Juan veered hard to starboard.
LIABILITY OF SHIPOWNER
RULING:
The “Route observance” of the International Rules of the Road will not If AUS is proper – shipowner and ship agent is liably only for the expenses for
relieve a vessel from responsibility if the collision could have been avoided by the same arrival. The shipowner and ship agent will be liable for the same
proper care and skill on her part or even by a departure from the rules. expenses and, in addition, they shall be solidarily liable for damages caused
to the cargoes by such AUS.
Rule 18 like all other International Rules of the Road, are not to be obeyed
and construed without regard to all the circumstances surrounding a Note: this presupposes that exercise of extraordinary diligence is exercised
particular encounter between two vessels. by the carrier
In ordinary circumstances, a vessel discharges her duty to another by a SUMMARY:

faithful and literal observance of the Rules of Navigation, and she cannot be The shipowner will always be liable for the expenses of an arrival under
held at fault for so doing even though a different course would have stress, whether lawful or unlawful. The only difference lies in the liability for
prevented the collision. This rule, however, is not to be applied where it is damages caused to the shipper’s cargoes:
apparent, as in the instant case, that her captain was guilty of negligence or
of a want of seamanship in not perceiving the necessity for, or in so acting as  If AUS is lawful – not liable
to create such necessity for, a departure from the rule and acting  Is AUS is unlawful – liable (here, shipowner is liable for both the
accordingly. expenses of arrival under stress and damages caused to the
shipper)
X. ARRIVAL UNDER STRESS (AUS) AND SHIPWRECKS
ARTICLE 825, CODE OF COMMERCE
The arrival of a vessel at the nearest and most convenient port which was The captain shall be liable for damages caused by his delay, if after the cause
decided upon after determining that there is well-founded fear of seizure, of the arrival under stress has ceased, he should not continue the voyage.
privateers, or pirates or by reason of any accident of the sea disabling it to
navigate. XI. SALVAGE
RIGHT TO SALVAGE AWARD
LEGITIMATE AUS - GROUNDS
Salvage is founded on the equity of remunerating private and individual

1. Lack of provisions
services performed in saving, in whole or in part, as ship or its cargo from
2. Well-founded fear of seizure
impending peril, or from recovering them form actual loss. It is compensation
3. Privateers or pirates
for actual services rendered to the property charge with it, and is allowed for
4. By reason of any accident of the sea disabling it to navigate
meritorious conduct of the salvor, and in consideration of a benefit conferred
upon the person whose the property he has saved.
STEPS TO BE TAKEN TO DETERMINE PROPRIETY OF AUS:
1. The captain should determine during the voyage if there is well-
founded fear of seizure, privateers and other valid grounds; WHO IS ENTITLED TO SALVAGE AWARD
2. The captain shall assemble the officers;
3. The captain shall summon the persons interested in the cargo The salvor is entitled to reward or compensation. The reward for salvage or
who may be present and who may attend but without right to for assistance shall be divided between the owner, the captain, and the
vote; remainder of the crew of the latter vessel, so as to give the owner the half,
4. The officers shall determine and agree if there is well-founded the captain a fourth, and all the remainder of the crew the other fourth, and
reason after examining the circumstances. The captain shall have all the remainder of the crew the other fourth of the reward, in proportion to
deciding vote; their respective salaries, in the absence of an agreement to the contrary. (Sec
5. The agreement shall be drafted and the proper minutes shall be 13, SL).
signed and entered in the log book;
6. Objections and protests shall likewise be entered in the minutes a) If two or more persons- divide between them in proportion to the
services which one may have rendered, and, in case of doubt, in
Note: Lawfulness of the arrival under stress determines if damages will be equal parts (Those who, in order to save the person, shall have
shouldered by the shipowner and the ship agent. The captain must make a been exposed to the same dangers shall also have a right to
protest participation in the reward.) (Sec. 12, SL)
WHEN NOT LAWFUL PERSONS NOT ENTITLED TO SALVAGE COMPENSATION

1. If the lack of provisions should arise from the failure to take the The salvor, under the Salvage Law, must have no compensation, contractual
necessary provisions for the voyage according to usage and customs, or or otherwise, upon the ship in distress. Thus under Section 8 of the law, the
if they should have been rendered useless or lost through bad stowage following persons shall have no right to reward, namely: 1) the crew of the
or negligence in their care. vessel shipwrecked or which was in danger of shipwreck 2) he who shall have
commenced the salvage in spite of the opposition of the captain or his
2. If the risk of enemies, privateers, or pirates should not have been well- representative; and 3) he who shall have failed to comply with the provision
known, manifest, and based on positive and provable facts. of section 3.
3. If the defect of the vessel should have arisen from the fact that it was TOWAGE vs. SALVAGE
not repaired, rigged, equipped, and prepared in a manner suitable for
the voyage, or from some erroneous order of the captain. TOWAGE
A contract whereby one vessel pulls another, whether loaded or not with
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 and 03/237/7CK/2, as being dented and broken. Thereafter, the cargoes were
voyage without reference to any circumstances of danger. stored for temporary safekeeping inside CFS Warehouse in Pier No. 5.
SALVAGE On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs
A service rendered by one to the owner of a ship or goods, by his own labor Brokerage, Inc., the authorized broker of Universal Motors, and delivered to
preserving the goods or the ship which the owner or those entrusted with the latter’s warehouse in Mandaluyong City. Upon the request of Universal
the care of them have either abandoned in distress at sea or are unable to Motors, a bad order survey was conducted on the cargoes and it was found
protect and secure. that one Frame Axle Sub without LWR was deeply dented on the buffle plate
while six Frame Assembly with Bush were deformed and misaligned. Owing
Kinds of salvage: to the extent of the damage to said cargoes, Universal Motors declared them
1. Voluntary – compensation is dependent upon success a total loss.
2. Rendered under a contract – payable at all events
On August 4, 1995, Universal Motors filed a formal claim for damages in the
3. Under a contract for a compensation – payable only in case of
amount of P643,963.84 against Westwind, ATI and R.F. Revilla Customs
success.
Brokerage, Inc. When Universal Motors’ demands remained unheeded, it
sought reparation from and was compensated in the sum of P633,957.15 by
XII. CARRIAGE OF GOODS BY SEA ACT (COGSA) Philam. Accordingly, Universal Motors issued a Subrogation Receipt dated
WHEN APPLICABLE November 15, 1995 in favor of Philam.
On January 18, 1996, Philam, as subrogee of Universal Motors, filed a

1. Applies suppletorily to the Civil Code if the goods are to be Complaint for damages against Westwind, ATI and R.F. Revilla Customs
shipped form a foreign port to the Philippines
Brokerage, Inc. before the Regional Trial Court of Makati City. The trial court
2. COGSA is applicable in international maritime commerce. rendered judgment in favour of Philam which ruling was affirmed by the
3. It can be applied in domestic sea transportation if agreed upon by Court of Appeals modifying the amount to be paid by Westwind and ATI.
the parties (paramount clause).
PETITIONER’S ARGUMENT:
ARTICLE 1753, NCC
The law of the country to which the goods are to be transported shall govern G.R. No. 181319
the liability of the common carrier for their loss, destruction or deterioration.
Petitioner Westwind denies joint liability with ATI for the value of the
deformed Frame Axle Sub without Lower in Case No. 03-245-42K/1.
BILL OF LADING NECESSARY FOR COGSA TO APPLY
Westwind argues that the evidence shows that ATI was already in actual
Bill of lading, or any other document, is needed for the application of COGSA.
custody of said case when the Frame Axle Sub without Lower inside it was
It can be an acknowledgement receipt, received or signed by the ship captain
misaligned from being compressed by the tight cable used to unload it.
involving the goods.
Accordingly, Westwind ceased to have responsibility over the cargoes as
provided in paragraph 4 of the Bill of Lading which provides that the
Reason: In international trade, other countries are also involved. A bill of
responsibility of the carrier shall cease when the goods are taken into the
lading is the contract between the shipper and the carrier. Being so,
custody of the arrastre.
regardless of country, it shall be governing law between the two.
Consequently, in case of suit, the law to be applied won’t be an issue Westwind contends that sole liability for the damage rests on ATI since it was
because it is the contract (bill of lading) that will govern. the latter’s stevedores who operated the ship’s gear to unload the cargoes.
Westwind reasons that ATI is an independent company, over whose
WHEN COGSA NOT APPLICABLE employees and operations it does not exercise control. Moreover, it was ATI’s
1. When liability is based on a contract of insurance employees who selected and used the wrong cable to lift the box containing
2. In cases of mis delivery of goods the cargo which was damaged.
DELIVERY TO ARRASTRE OPERATOR FOR PURPOSES OF SEC. 3 (6) Westwind likewise believes that ATI is bound by its acceptance of the goods
in good order despite a finding that Case No. 03-245-42K/1 was partly torn
SECTION 3 (6), COGSA and crumpled on one side. Westwind also notes that the discovery that a
Unless notice or loss or damage and the general nature of such loss or piece of Frame Axle Sub without Lower was completely deformed and
damage given in writing to the carrier or his agent at the port of discharge or misaligned came only on May 12, 1995 or 22 days after the cargoes were
at the time of the removal of the goods into the custody of the person turned over to ATI and after the same had been hauled by R.F. Revilla
entitled to delivery thereof under the contract of carriage, such removal shall Customs Brokerage, Inc.
be prima facie evidence of the delivery by the carrier of the goods as Westwind further argues that the CA erred in holding it liable considering
described in the bill of lading. that Philam’s cause of action has prescribed since the latter filed a formal
claim with it only on August 17, 1995 or four months after the cargoes
ASIAN TERMINALS vs. PHILAM INSURANCE arrived on April 20, 1995. Westwind stresses that according to the provisions
of clause 20, paragraph 2 of the Bill of Lading as well as Article 366 of the
FACTS: Code of Commerce, the consignee had until April 20, 1995 within which to
make a claim considering the readily apparent nature of the damage, or until
On April 15, 1995, Nichimen Corporation shipped to Universal Motors April 27, 1995 at the latest, if it is assumed that the damage is not readily
Corporation 219 packages containing 120 units of brand new Nissan Pickup apparent.
Truck Double Cab 4×2 model, without engine, tires and batteries, on board
the vessel S/S Calayan Iris from Japan to Manila. The shipment, which had a ISSUE:
declared value of US$81,368 or P29,400,000, was insured with Philam against
all risks under the marine Policy no. 708-8006717-4. Has Philam’s action for damages prescribed?
The carrying vessel arrived at the port of Manila on April 20, 1995, and when RULING:
the shipment was unloaded by the staff of ATI, it was found that the package
marked as 03-245-42K/1 was in bad order. The Turn Over Survey of bad order As to prescription
cargoes dated April 21, 1995 identified two packages, labelled 03-245-42K/1

The prescriptive period for filing an action for the loss or damage of the To avoid confusion as to when and in whose hands the damage was caused,
goods under the COGSA is found in paragraph (6), Section 3, thus: delivery shall mean delivery to the arrastre operator, and not to the
consignee. However, in cases of ports not covered by arrastre operators,
(6) Unless notice of loss or damage and the general delivery shall mean delivery to consignee.
nature of such loss or damage be given in writing to
the carrier or his agent at the port of discharge before
NOTICE OF CLAIM
or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof
SECTION 3 (6), COGSA
under the contract of carriage, such removal shall be
prima facie evidence of the delivery by the carrier of If the loss or damage is not apparent, the notice must be given within three
the goods as described in the bill of lading. If the loss (3) days of the delivery. Said notice of loss or damage may be endorsed upon
or damage is not apparent, the notice must be given the receipt of the goods given by the person taking delivery thereof. The
within three days of the delivery. notice in writing need not be given if the state of the goods has at the time of
their receipt been the subject of joint survey or inspection.
Said notice of loss or damage maybe endorsed upon
the receipt for the goods given by the person taking In any event, carrier and the ship shall be discharged from all liability in
delivery thereof. respect 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 notice in writing need not be given if the state of Provided, that, if a notice of loss or damage, either apparent or concealed, is
the goods has at the time of their receipt been the not given as provided for in this section, that fact shall not affect or prejudice
subject of joint survey or inspection. 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 been delivered.
In any event the carrier and the ship shall be
discharged from all liability in respect of loss or
NOTICE OF CLAIM
damage unless suit is brought within one year after
1. If loss or damage is apparent – notice must be given immediately
delivery of the goods or the date when the goods
2. If loss or damage is not apparent – notice must be given within 3
should have been delivered: Provided, That if a notice
days from delivery.
of loss or damage, either apparent or concealed, is not
given as provided for in this section, that fact shall not
Non-compliance with the notice requirement shall not prejudice the right of
affect or prejudice the right of the shipper to bring suit
the shipper to bring suit within 1 year from delivery of the goods or the date
within one year after the delivery of the goods or the
when the goods should have been delivered.
date when the goods should have been delivered.
S/S “Calayan Iris” arrived at the port of Manila on April 20, 1995, and the PACKAGE LIABILITY LIMITATION
subject cargoes were discharged to the custody of ATI the next day. The PHILAM INSURANCE vs. HEAUNG-A
goods were then withdrawn from the CFS Warehouse on May 11, 1995 and
the last of the packages delivered to Universal Motors on May 17, 1995. Prior
“The liability of HEUNG-A is limited to $500 per package or pallet because in
to this, the latter filed a Request for Bad Order Survey on May 12, 1995
case of the shipper’s failure to declare the value of the goods in the bill of
following a joint inspection where it was discovered that six pieces of Chassis
lading, Section 4, paragraph 5 of the COGSA provides that neither the carrier
Frame Assembly from two bundles were deformed and one Front Axle Sub
nor the ship shall in any event be or become liable for any loss or damage to
without Lower from a steel case was dented. Yet, it was not until August 4,
or in connection with the transportation of goods in an amount exceeding
1995 that Universal Motors filed a formal claim for damages against
$500 per package.”
petitioner Westwind.
Even so, we have held in Insurance Company of North America v. Asian FACTS:
Terminals, Inc. that a request for, and the result of a bad order examination,
done within the reglementary period for furnishing notice of loss or damage NOVARTIS imported from Jinsuk pallets of roll of Ovaltine Power Glaminated
to the carrier or its agent, serves the purpose of a claim. A claim is required plastic packaging material. JINSUK engaged the services of Protop Shipping
to be filed within the reglementary period to afford the carrier or depositary Corporation to forward the goods to their consignee, NOVARTIS. Based on
reasonable opportunity and facilities to check the validity of the claims while Bill of Lading issued by PROTOP, the cargo was on freight prepaid basis and
facts are still fresh in the minds of the persons who took part in the on "shipper’s load and count" which means that the "container [was] packed
transaction and documents are still available. with cargo by one shipper where the quantity, description and condition of
the cargo is the sole responsibility of the shipper." Likewise stated in the bill
Here, Universal Motors filed a request for bad order survey on May 12, 1995, of lading is the name Sagawa Express designated as the entity in the
even before all the packages could be unloaded to its warehouse. Philippines which will obtain the delivery contract.
Moreover, paragraph (6), Section 3 of the COGSA clearly states that failure to PROTOP shipped the cargo through Dongnama Shipping which in turn loaded
comply with the notice requirement shall not affect or prejudice the right of the same on M/V Heung-A Bangkok owned and operated by Heung-A
the shipper to bring suit within one year after delivery of the goods. Shipping Corporation pursuant to a ‘slot charter agreement’ whereby a space
Petitioner Philam, as subrogee of Universal Motors, filed the Complaint for in the latter’s vessel was reserved for the exclusive use of the former.
damages on January 18, 1996, just eight months after all the packages were Wallem Philippines is the ship agent of HEUNG-A in the Philippines.
delivered to its possession on May 17, 1995. Evidently, petitioner Philam’s NOVARTIS insured the shipment with Philam Insurance Company under All
action against petitioners Westwind and ATI was seasonably filed. Risk Marine Open Insurance Policy. The vessel arrived at the port of Manila.
UNION CARBIDE PHILS vs. MANILA RAILROAD It was found that the boxes of the shipment were wet and damp. Since the
“Delivery” within the meaning of Section 3 (6) of COGSA means delivery to damaged packaging materials might contaminate the product they were
the arrastre operator. That delivery is evidenced by tally sheets which show meant to hold, the inspector of NAVORTIS rejected the entire shipment.
whether the goods were landed in good order or in bad order, a fact which
the consignee or shipper can easily ascertain through the customs broker. NOVARTIS demanded indemnification for the lost/damaged shipment from
PROTOP, SAGAWA, ATI and STEPHANIE but was denied. Insurance claims
which were granted. Philam subrogated to the rights of NOVARTIS.
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied liability 1) Whether the shipment sustained damage while in the possession
for the lost/damaged shipment and custody of HEUNG-A, and if so, whether HEUNG-A's liability
can be limited to US$500 per package pursuant to the COGSA;
SAGAWA: denied that it is the ship agent of PROTOP and argued that a ship 2) Whether or not NOVARTIS/PHILAM failed to file a timely claim
agent represents the owner of the vessel and not a mere freight forwarder against HEUNG-A and/or WALLEM.
like PROTOP. SAGAWA averred that its only role with respect to the shipment
was to inform NOVARTIS of its arrival in the Philippines and facilitate the RULING:
surrender of the original bill of lading issued by PROTOP.
Common carriers, as a general rule, are presumed to have been at fault or
ATI: baseless complaint. ATI averred that it exercised due care and diligence negligent if the goods they transported deteriorated or got lost or destroyed.
in handling the subject container. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or
STEPHANIE: its only role with respect to the shipment was its physical damage, therefore, they have the burden of proving that they observed such
retrieval from ATI and thereafter its delivery to NOVARTIS. That entire time, diligence. As the carrier of the subject shipment, HEUNG-A was bound to
the sealwas intact and not broken. exercise extraordinary diligence in conveying the same and its slot charter
agreement with DONGNAMA did not divest it of such characterization nor
WALLEM: alleged that the damage and shortages in the shipment were the relieve it of any accountability for the shipment. However, the liability of
responsibility of the shipper, JINSUK, because it was taken on board on a HEUNG-A is limited to $500 per package or pallet because in case of the
"shipper’s load and count" basis which means that it was the shipper that shipper’s failure to declare the value of the goods in the bill of lading, Section
packed, contained and stuffed the shipment in the container van without the 4, paragraph 5 of the COGSA provides that neither the carrier nor the ship
carrier’s participation. The container van was already sealed when it was shall in any event be or become liable for any loss or damage to or in
loadedon the vessel and hence, the carrier was in no position to verify the connection with the transportation of goods in an amount exceeding $500
condition and other particulars of the shipment. WALLEM claimed to per package.
haveexercised due care and diligence in handling the shipment. Any liability
which may be imputed to it is limited only to US$8,500.00 pursuant to the PRESCRIPTION – WHERE TO RECKON?
Carriage of Goods by Sea Act (COGSA).
SECTION 3 (6), COGSA
HEUNG-A: it is not the carrier insofar as NOVARTIS is concerned. The carrier The carrier and the ship shall be discharged from all liability in respect of loss
was either PROTOP, a freight forwarder considered as a non-vessel operating or damage unless suit is brought within one year after delivery of the goods
common carrier or DONGNAMA which provided the container van to or the date when the goods should have been delivered: Provided, that, if a
PROTOP. HEUNG-A denied being the carrier of the subject shipment. Is only notice of loss or damage, either apparent or concealed, is not given as
obligation was to provide DONGNAMA a space on board M/V Heung-A provided for in this section, that fact shall not affect or prejudice the right of
Bangkok V-019. the shipper to bring suit within one year after the delivery of the goods or
the date when the goods should have been delivered.
RULING OF THE RTC:
Prescriptive period
The damage to the shipment occurred onboard the vessel while in transit Suit for loss or damage to the cargo must be brought within 1 year from:
from Korea to the Philippines. HEUNG-A was the common carrier of the 1. Delivery of the goods, or
subject shipment by virtue of the admissions of WALLEM's witness, Ronald 2. The date when the goods should be delivered.
Gonzales (Gonzales) that despite the slot charter agreement with
DONGNAMA, it was still the obligation of HEUNG-A to transport the cargo The one-year prescriptive period does not apply to cases of misdelivery or
from Busan, Korea to Manila and thus any damage to the shipment is the conversion.
responsibility of the carrier to the consignee. Moreover, HEUNG-A failed to
present evidence showing that it exercised the diligence required of a SUSPENSION OF PRESCRIPTIVE PERIOD BY PARTIES
common carrier in ensuring the safety of the shipment.
WALLEM was held liable as HEUNG-A's ship agent in the Philippines while
1. Modification in the prescriptive period
PROTOP was adjudged liable because the damage sustained by the shipment
was due to the bad condition of the container van. Also, based on the
THE HAMBURG RULES
statement at the back of the bill of lading, it assumed responsibility for loss
and damage as freight forwarder.
Article 20(4) – Agreement of the parties
The person against whom a claim is made may at any time during the
RULING OF THE CA:
running of the limitation period extend that period by a declaration in writing
to the claimant. This period may be further extended by another declaration
The CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are liable
or declarations.
for the damaged shipment. Moreover, the proximate cause of the damage
was the failure of HEUNG-A to inspect and examine the actual condition of
2. Exchange of correspondence
the sea van before loading it on the vessel. Also, proper measures in handling
and stowage should have been adopted to prevent seepage of sea water into
UNIVERSAL SHIPPING vs. IAC
the sea van.
This provision under Section 3 (6) of COGSA admits of an exception, that is, if
the one-year period is suspended by express agreement of the parties for in
The CA limited the liability of PROTOP, WALLEM and HEUNG-A to
such a case, their agreement becomes the law for them.
US$8,500.00 pursuant to the liability limitation under the COGSA since the
shipper failed to declare the value of the subject cargo in the bill of lading
In this case, the period was suspended because of the exchange of
and since they could not be made answerable for the two (2) unaccounted
communication by the parties. It was considered by the court that they have
pallets because the shipment was on a "shipper's load, count and seal" basis.
mutual agreed to extend the time to file the suit.
ISSUE:
TN: The circumstances in this are peculiar and cannot be applied in all cases.

3. Implied admission In Ang v. American Steamship Agencies, Inc. the question was whether an
action for the value of goods which had been delivered to a party other than
CUA vs. WALLEM the consignee is for "loss or damage" within the meaning of §3(6) of the
In the allegations of his complaint, petitioner alleged that they have agreed COGSA. It was held that there was no loss because the goods had simply
to extend the prescriptive period. When the defendant answered, it was not been misdelivered. "Loss" refers to the deterioration or disappearance of
specifically denied. So the court said that it was a presumed admission. goods.
Therefore, there was no prescription. In the case at bar, there is neither deterioration nor disappearance nor
destruction of goods caused by the carrier's breach of contract. Whatever
4. Amended complaint reduction there may have been in the value of the goods is not due to their
deterioration or disappearance because they had been damaged in transit.
WALLEN PHILS vs. SR FARMS Indeed, what is in issue in this petition is not the liability of petitioner for its
The one year prescriptive period is reckoned not from the filing of the handling of goods as provided by Section 3(6) of the COGSA, but its liability
original complaint, but from the filing of the amended complaint. under its contract of carriage with private respondent as covered by laws of
more general application.
5. Fault attributable to insurer
Precisely, the question before the trial court is not the particular sense of
NEW WORLD vs. SEABOARD "damages" as it refers to the physical loss or damage of a shipper's goods as
In this case, the one year already prescribed. But the SC allowed the filing of specifically covered by Section 3(6) of COGSA but petitioner's potential
the action because there was fault on the part of the insurance company, the liability for the damages it has caused in the general sense and, as such, the
subrogee: matter is governed by the Civil Code, the Code of Commerce and COGSA, for
(a) The insurer did not answer the claim. the breach of its contract of carriage with private respondent. The Court
(b) The insurer asked for an itemized list of the goods which were concluded by holding that as the suit is not for "loss or damage" to goods
damaged. contemplated in §3(6), the question of prescription of action is governed not
(c) There was no rejection of the claim by the COGSA but by Art. 1144 of the Civil Code which provides for a
prescriptive period of ten years.
The Supreme Court said that the insurer cannot ask for an itemized list
because the claim was for total loss. So there’s no need for a list of the goods LIAO vs. APL
damaged since the claim is total.
“..the suit must be brought “within one year after delivery of the goods or the
MEANING OF DELIVERY UNDER SECTION 3(6) ON PRESCRIPTION date when the goods should have been delivered.”
MITSUI V. COURT OF APPEALS
FACTS:
FACTS: Plaintiff on July 30 1946, entered into a contract for the importation of 2,000
cases of fresh hen eggs with Kent Sales Co. Inc, through the latter’s agent in
Mitsui O.S.K Lines is a foreign corporation represented by its agent, Manila (People’s Trading). It was to be shipped on the S.S “Marine Leopard”
Magsaysay Agencies. It entered into a contract of carriage with private sailing from New York on August 7, 1946.
respondent Lavine Mfg. Co. to transport goods of the latter from Manila to
France. Petitioner failed in its undertaking to transport the goods in 28 days Upon notification and payment, the Kent Sales Co., Inc. issued on August 6,
from initial loading, hence, private respondent filed a case for the recovery of 1946 Invoice No. 5070 in favor of plaintiff, and on the same day contracted
damages before the RTC. with the defendant shipping company to have the eggs shipped to Manila on
the vessel S.S “Marine Leopard. On same day, the defendant through its
Petitioner moved for the dismissal of the complaint alleging that private captain received at the pork of New York 2,000 cases of eggs and loaded
respondent cause of action had prescribed under the Carriage of Goods by them on the ship for delivery to plaintiff in Manila.
Sea Act (COGSA). It was denied by the RTC.
Upon arrival in San Francisco, California, on August 30, 1946, the defendant
On petition for certiorari, the Court of Appeals sustained the trial court's unloaded the 2,000 cases of eggs from the S.S. "Marine Leopard", which
order. Hence this petition resumed its voyage, arriving in Singapore in September, 1946.
ISSUE: The eggs were later shipped on another of defendant's ships, the S.S.
"General Meigs"on November 27, 1946, which arrived in Manila on
WON private respondent's action is for "loss or damage" to goods shipped, December 26, 1946.
within the meaning of COGSA
Plaintiff claimed that the discharge of the cargo at the Port of San Francisco
RULING: was wrongful and unjustified and a violation of the bill of lading which
provided that the eggs would be shipped to Manila on the S.S “Marine
NO. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 Leopard”;
of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation
where no delivery at all was made by the shipper of the goods because the Plaintiff further claimed that the eggs were exposed to the hot summer
same has perished, gone out of commerce, or disappeared in such a way that weather without having placed in refrigeration and that because of the delay
their existence is unknown or they cannot be recovered. in the shipment and the careless and repeated handling of the cases of eggs
by mechanical devices, a substantial number of them arrived broken and
Conformably with this concept of what constitutes "loss" or "damage," the damaged; 587 were broken, with the eggs contained therein in leaking
Court held in another case that the deterioration of goods due to delay in condition; while the rest of the eggs in 1,413 cases were in a state of
their transportation constitutes "loss" or "damage" within the meaning of deterioration.
Section 3(6), so that as suit was not brought within one year the action was
barred.

Upon recommendation of the surveyors, plaintiff immediately disposed of We see no difference. Whatever damage or injury is suffered by the goods
the eggs, realizing from the sale only the amount of P27,300. He argued that while in transit would result in loss or damage to either the shipper or
had there been no delay, plaintiff would have been able to sell each case of consignee.
egg for P60, or the entire shipment for the total sum of P120,000 thereby
realizing a profit of P92,755 on his total investment. As long as it is claimed, therefore, as it is done here, that the losses or
damages suffered by the shipper or consignee were due to the arrival of the
Having sold it only for P27,300, he suffered a loss of 92,700 plus the sum of goods in damaged or deteriorated condition, the action is still basically one
P55 which he paid the marine surveyors who inspected the cargo. for damage to the goods, and must be filed within the period of one year
from delivery or receipt, under the above-quoted provision of the Carriage of
Defendant, upon the other hand, alleged in defense that under the terms of Goods by Sea Act.
the Bill of Lading Exhibit B, it was at liberty to tranship the cargo in question
on any other vessel. Lastly, the appellant argues that assuming that his action against the
defendant prescribes in one year, it accrued not upon the receipt of his
It also claimed that when the eggs were discharged in San Francisco, they goods, but upon denial of his claim for damages by the defendant on
were immediately brought to the storage plant of the National Ice and Cold February 16, 1498.
Storage. Hence, if they arrived in Manila in deteriorated condition, it was
because of the inherent nature or defect of the eggs. On the issue of delay in This claim is clearly without merit, for the law in question clearly requires
the transshipment of the cargo, it raised that was due to the strike of the that the suit must be brought “within one year after delivery of the goods or
union of longshoremen in the western coast of the United States from the date when the goods should have been delivered.”
September to November, 1947, although when the goods were unloaded in
San Francisco, there was yet no threat of a strike; and that immediately after Decision is affirmed.
the strike, the cargo was loaded and transported on the S.S. "General Meigs."
INVOCATION OF ARRASTRE OPERATOR OF PRESCRIPTION
The defendant also alleged by special defense while plaintiff received the
goods in question on December 26, 1946, he filed a claim with defendant for SECTION 3 (6), COGSA
damages only on July 25, 1947 (denied on February 16, 1948), and brought “In any event, carrier and the ship shall be discharged from all liability in
suit on May 25, 1948 which is more than a year from the receipt of the respect of loss or damage unless suit is brought within one year after delivery
goods. Being filed more than a year from the time the plaintiff received the of the goods or the date when the goods should have been delivered.”
goods, the defendant argues that plaintiff's action had prescribed under
section 3, paragraph 6 of the Carriage of Goods by Sea Act. INSURANCE CO. OF NA vs. ASIAN
COGSA does not apply to arrastre operators. Section 3 (6) of COGSA applies
The trial court found that the plaintiff suffered a loss of P25,896.81 by reason only to carriers. Carrier under Section 1 of COGSA includes the owner or the
of the delayed arrival of his cargo of eggs. The court however found charterer who enters into a contract of carriage with a shipper.
defendant’s defense of prescription meritorious and so dismissed the case. Consequently, not being a common carrier, an arrastre operator cannot
From the dismissal, plaintiff appealed to this Court. invoke the prescriptive period of one year.
ISSUE:
XIII. PUBLIC UTILITIES
Whether or not the present case does not fall within the prescriptive period WHAT IS A PUBLIC UTILITY? PUBLIC SERVICE?
provided in Section 3 of the Carriage of the Goods by Sea Act
PUBLIC UTILITY
RULING: A “public utility” is a business service engage in regular supplying the public
with some commodity or service of public consequence such as electricity,
Appellant argues that section 3 of COGSA only applies to a suit or action for gas, water, transportation, telephone or telegraph service. The term implies
loss or damage, either apparent or concealed and does not apply for a public use and service, e.g. the Water District is public utility.
breach of contract of carriage on the part of the carrier, as in this case, where
it is guilty of delay in the shipment of the goods, causing losses or damages PUBLIC SERVICE
to the consignee The term “public service” (Sec 13 of the Public service Act) includes every
person that may own, operate, manage or control in the Philippines, for hire
The distinction drawn is more apparent than real. Any and all injury or or for compensation, with general or limited clientele, whether permanent,
damages suffered by the goods, while in transit and in the custody of the occasional/ accidental, & done with general business purposes, any common
carrier amounts to a breach of the contract of carriage, unless due to carrier, etc; will not only refer to land transpo. but also include
fortuitous event. Thus the carrier is bound to transport the goods safely and telecommunications, railroads, vessels etc.
so breaches its contract if it neglects such duty.
WHAT IS A FRANCHISE? CPC? CPCN?
Appellant furthermore urges that the action or suit referred to in the
provision in question refers only to loss or damage to the goods in relation to FRANCHISE
their "loading, handling, storage, carriage, custody, care, and discharge" The term “franchise” includes not only authorization issuing directly from
Congress in the form of a Statute, but also those granted by administrative
The argument is equally untenable. The obligation of the carrier to carry the agencies to which the power to grant franchise has been delegated by
goods naturally includes the duty not to delay their transportation, so Congress.
unjustified delay, the carrier is held liable therefore liable.
CERTIFICATEOF PUBLIC CONVENIENCE (CPC)
The appellant also argues by making a distinction between damage to the An authorization issued for the operation of public services for which no
goods and damages to the shipper or consignee, and claims that while the franchise, either municipal or legislative, is required by law, such as a
former falls within the prescriptive period in question, the latter is governed common carrier.
by the provisions of the Code of Commerce on limitation of actions.

Under the Public Service Law, a certificate of public convenience can be sold Petitioners contend it destroys vested rights of petitioning public services to
by the holder thereof because it has considerable material value and is operate inside Manila and to proceed to their respective terminals located in
considered a valuable asset (Raymundo v. Luneta Motor Co., G.R. No. the City and impairs the vested rights of petitioning bus passengers to be
39902, Nov. 29, 1933). transported directly to downtown Manila. Contending that they possess valid
and subsisting certificates of public convenience, the petitioning public
Does the CPC confer upon the holder any proprietary right or interest in the services aver that they acquired a vested right to operate their public utility
route covered thereby? vehicles to and from Manila as appearing in their said respective certificates
No. (Luque v. Villegas, G.R. No. L-22545, Nov. 28, 1969). However, with of public convenience.
respect to other persons and other public utilities, a certificate of public
convenience as property, which represents the right and authority to operate ISSUE:
its facilities for public service, cannot be taken or interfered with without due
process of law. Appropriate actions may be maintained in courts by the Whether petitioners’ contention that they had already vested rights on
holder of the certificate against those who have not been authorized to public service is correct
operate in competition with the former and those who invade the rights
which the former has pursuant to the authority granted by the Public Service RULING:
Commission (A.L. Animen Transportation Co. v. Golingco, G.R. No. 17151,
Apr. 6, 1922) A certificate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege. New
What are the requirements for the grant of certificate of public and additional burdens, alteration of the certificate, and even revocation or
convenience? annulment thereof are reserved to the State.
1. Applicant must be a citizen of the Philippines. If the applicant is a
Corporation, 60% of its capital must be owned by Filipinos The Public Service Commission, a government agency vested by law with
2. Applicant must prove public necessity "jurisdiction, supervision, and control over all public services and their
3. Applicant must prove the operation of proposed public service franchises, equipment, and other properties" is empowered, upon proper
will promote public interest in a proper and suitable manner; and notice and hearing, amongst others: (1) "[t]o amend, modify or revoke at any
4. Applicant must have sufficient financial capability to undertake time a certificate issued under the provisions of this Act [Commonwealth Act
proposed services and meeting responsibilities incidental to its 146, as amended], whenever the facts and circumstances on the strength of
operation. (Kilusang Mayo Uno v. Garcia G.R. No. 108584, Dec. 22, which said certificate was issued have been misrepresented or materially
1994) changed"; and (2) "[t]o suspend or revoke any certificate issued under the
provisions of this Act whenever the holder thereof has violated or willfully
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN) and contumaciously refused to comply with any order, rule or regulation of
Certificate of Public Convenience (CPC) plus franchise the Commission or any provision of this Act: Provided, That the Commission,
for good cause, may prior to the hearing suspend for a period not to exceed
Difference between CPC and CPCN thirty days any certificate or the exercise of any right or authority issued or
CPC CPCN granted under this Act by order of the Commission, whenever such step shall
Does not need a franchise Needs a franchise in the judgment of the Commission be necessary to avoid serious and
Granted by delegates Granted by Congress irreparable damage or inconvenience to the public or to private interests."
Example: Electric, Jurisprudence echoes the rule that the Commission is authorized to make
Example: Vessels, taxis
Telecommunications reasonable rules and regulations for the operation of public services and to
enforce them. In reality, all certificates of public convenience issued are
LUQUE vs. VILLEGAS (1994) subject to the condition that all public services "shall observe and comply
[with] ... all the rules and regulations of the Commission relative to" the
service. To further emphasize the control imposed on public services, before
FACTS:
any public service can "adopt, maintain, or apply practices or measures,
rules, or regulations to which the public shall be subject in its relation with
Two ordinances were issued by the City of Manila and by the Commissioner
the public service," the Commission's approval must first be had.
of the Public Service Commission. The first ordinance (by City of Manila)
states that Provincial passenger buses and jeepneys (PUB and PUJ) shall be
It is the State’s right to exercise police power for the benefit of the many.
allowed to enter Manila, but only through the following entry points and
Reasonable restrictions have to be provided for the use of the thoroughfares.
routes, from 6:30 A.M. to 8:30 P.M. every day except Sundays and holidays.
The operation of public services may be subjected to restraints and burdens,
The other ordinance (issued by the Commissioner) provides that:
in order to secure the general comfort. No franchise or right can be availed of
to defeat the proper exercise of police power — the authority "to enact rules
All such vehicles marked "For Provincial
and regulations for the promotion of the general welfare. Public welfare, we
Operation" are authorized to operate outside the
have said, lies at the bottom of any regulatory measure designed "to relieve
perimeter of Greater Manila in accordance with
congestion of traffic, which is, to say the least, a menace to public safety." As
their respective certificates of public
a corollary, measures calculated to promote the safety and convenience of
convenience, and are not authorized to enter or
the people using the thoroughfares by the regulation of vehicular traffic,
to operate beyond the boundary line fixed in our
present a proper subject for the exercise of police power.
order of March 12, 1963 and July 22, 1963, with
the exception of those vehicles authorized to
Both Ordinance 4986 and the Commissioner's administrative orders fit into
carry their provincial passengers thru the
the concept of promotion of the general welfare. Expressive of the purpose
boundary line up to their Manila terminal which
of Ordinance 4986 is Section 1 thereof, thus — "As a positive measure to
shall be identified by a sticker signed and
relieve the critical traffic congestion in the City of Manila, which has grown to
furnished by the PSC and by the Mayors of the
alarming and emergency proportions, and in the best interest of public
affected Cities and municipalities, and which shall
welfare and convenience, the following traffic rules and regulations are
be carried on a prominent place of the vehicle
hereby promulgated." Along the same lines, the bus ban instituted by the
about the upper middle part of the windshield.
Commissioner has for its object "to minimize the 'traffic problem in the City
of Manila' and the 'traffic congestion, delays and even accidents' resulting
from the free entry into the streets of said City and the operation 'around
said streets, loading and unloading or picking up passengers and cargoes' of MCWD opposed such. Saying that: (1) petitioner's Board of Directors had not
PU buses in great 'number and size. consented to the issuance of the franchise applied for, such consent being a
mandatory condition pursuant to P.D. 198, (2) the proposed waterworks
Police power in both was properly exercised. would interfere with petitioner's water supply which it has the right to
protect, and (3) the water
KMU vs. GARCIA
NWRB dismissed MCWD’s opposition for lack of merit
FACTS:
ISSUE:
The Kilusang Mayo Uno Labor Center (KMU) assails the constitutionality and
validity of a memorandum which, among others, authorize provincial bus and Whether MCWD may validly oppose the petition of Adala
jeepney operators to increase or decrease the prescribed transportation
fares without application therefore with the LTFRB, and without hearing and RULING:
approval thereof by said agency.
MCWD relied on Section 47 of P.D. 198 which states:
ISSUE:
Sec. 47. Exclusive Franchise. — No franchise shall
1) WON the absence of notice and hearing and the delegation of be granted to any other person or agency for
authority in the increase or decrease of transportation fares to domestic, industrial or commercial water service
provincial bus and jeepney operators is illegal. within the district or any portion thereof unless
and except to the extent that the board of
2) WON the presumption of public need in favor of applicants for directors of said district consents thereto by
certificates of public convenience (CPC) is valid. resolution duly adopted, such resolution,
however, shall be subject to review by the
RULING: Administration. (Emphasis and underscoring
supplied)
(1) Under Section 16 (c) of the Public Service Act, as amended, the
legislature delegated to the defunct Public Service Commission (PSC) But the court ruled that such is unconstitutional.
the power of fixing the rates of public services. LTFRB, the existing
regulatory body today, is likewise vested with the same under Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the
Executive Order 202. The delegation of legislative power to an issuance of CPCs for the reasons discussed above, the same provision must
administrative agency is permitted in order to adopt to the increasing be deemed void ab initio for being irreconcilable with Article XIV Section 5 of
complexity of modern life. However, nowhere under the provisions of the 1973 Constitution which was ratified on January 17, 1973 — the
law are the regulatory bodies such as PSC and LTFRB are authorized to constitution in force when P.D. 198 was issued on May 25, 1973. Thus,
delegate that power to a common carrier, a transport operator or other Section 5 of Art. XIV of the 1973 Constitution reads:
public service.
SECTION 5. No franchise, certificate, or any other
The authority given by the LTFRB to the bus operators to set fares over form of authorization for the operation of a
and above the authorized existing fare is illegal and invalid, as it is public utility shall be granted except to citizens of
tantamount to undue delegation of legislative authority. Under the the Philippines or to corporations or associations
maxim potestas delegate non delegari potest “what has been delegated organized under the laws of the Philippines at
cannot be delegated.” The policy allowing provincial bus operators to least sixty per centum of the capital of which is
change and increase their fares would result not only to a chaotic owned by such citizens, nor shall such franchise,
situation but to an anarchic state of affairs. This would leave the riding certificate, or authorization be exclusive in
public at the mercy of transport operators who may increase fares, character or for a longer period than fifty years.
every hour, every day, every month or every year, whenever it pleases Neither shall any such franchise or right be
them or whenever they deem it necessary to do so. Furthermore, under granted except under the condition that it shall
the Section 16 (a) of Public Service Act, there must be proper notice be subject to amendment, alteration, or repeal
and hearing in the fixing of rates, to arrive at a just and reasonable rate by the Batasang Pambansa when the public
acceptable to both the public utility and the public. interest so requires. The State shall encourage
equity participation in public utilities by the
(2) No. As one of the basic requirements for the grant of CPC, public general public. The participation of foreign
convenience and necessity when the proposed facility/service meets a investors in the governing body of any public
reasonable want of the public and supply a need which the existing utility enterprise shall be limited to their
facilities do not adequately supply. The existence of existence or non- proportionate share in the capital thereof.
existence of public convenience and necessity is a question of fact that (Emphasis and underscoring supplied)
must be established by evidence. Also, an applicant must be required to
prove his capacity and capability to furnish service. All this will be Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public
possible only if a public hearing were conducted for that purpose. utilities, is clearly repugnant to Article XIV, Section 5 of the 1973
Constitution, it is unconstitutional and may not, therefore, be relied upon by
petitioner in support of its opposition against respondent's application for
MCWD vs. ADALA
CPC and the subsequent grant thereof by the NWRB.
FACTS: MCWD lost.
Adala filed with NWRB for issuance of a Certificate of Public Convenience
(CPC) to operate and maintain waterworks system in sitios San Vicente,
Fatima, and Sambag in Barangay Bulacao, Cebu City.

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TRANSPO | POINTERS FOR FINALS ANSWERED (2017) | ATTY.

Private respondent purchased from Singapore Airlines in Manila conjunction FACTS:

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 1

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 2

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 4

LIMIT OF LIABILITY Article 9

Article 3(2) 6. If the passenger or shipper declares a higher value

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 5

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 6

Article 29 “NO VESSEL, NO LIABILITY”

If a portion of the vessel or of the cargo, or of both, should be saved, the

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 8

APPLICATION OF LIMITED LIABILITY RULE TO CHARTERER REQUIREMENT OF PROTEST

III. VESSELS IV. SHIP MORTGAGE

2. The time and date the endorsement is made; PREFERRED CLAIMS

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 11

The requirements of safe navigation compel us to reject any suggestion that

If the charter is a contract of affreightment, which leaves the general owner

PILOTAGE NDC vs. COURT OF APPEALS

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 15

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 16

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 17

In ordinary circumstances, a vessel discharges her duty to another by a SUMMARY:

Salvage is founded on the equity of remunerating private and individual

WHEN NOT LAWFUL PERSONS NOT ENTITLED TO SALVAGE COMPENSATION

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 18

On January 18, 1996, Philam, as subrogee of Universal Motors, filed a

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 19

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 21

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 22

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 23

TRANSPO TEAM | ALEGADO LANGOMEZ GALLEGO SARUCAM SY | 25

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