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TRANSPORTATION LAWS | ATTY.
CAPANAS | FINALS | SY 2018-2019

The Civil Code contains no provision regulating liability of
I. CONCEPTS
shipowners or agents in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce that governs.
DOCTRINE OF LIMITED LIABILITY
WHEN APPLICABLE
“NO VESSEL, NO LIABILITY”
Shipowner’s liability or agent’s liability is merely co-extensive with Liability of the shipowner or agent is limited to the value of the
his interest in the vessel such that a total loss thereof results in its vessel with all her equivalent and freight earned during the vessel if
extinction. The total destruction of the vessel extinguishes maritime the shipowner or agent abandoned the ship with all the equipment
liens because there is no longer any res to which it can attach. and freight.
It was designed to offset adverse conditions and to encourage SHIPOWNER ENTITLED TO LIMITED LIABILITY
people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding. Thus, the liability of The shipowner is the very person for whom the Limited Liability
the vessel owner and agent arising from operation of such vessel Rule (LLR) has been conceived to protect.
were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into ABANDONMENT
effectively wagering their resources against the consideration of
large profits attainable in the trade. Abandonment of the vessel, its appurtenances and freightage is an
INDISPENSABLE requirement before the shipowner or ship agent
The real and hypothecary nature of maritime law simply means that can enjoy the benefits of the LLR. If the carrier does not want to
the liability of the carrier in connection with losses related to abandon the vessel, then he is still liable even beyond the value of
maritime contracts is confined with the vessel. the vessel.
CODE OF COMMERCE The only instance where such abandonment is dispensed with is
when the vessel was entirely lost. In such case, the obligation is
Liability to 3rd persons thereby extinguished.
Art. 587. The ship agent shall also be civilly liable for the indemnities Additional notes:
in favor of third persons which arise from the conduct of the captain
in the vigilance over the goods which the vessel carried; but he may The shipowner’s or ship agent’s liability is limited to the value of the
exempt himself therefrom by abandoning the vessel with all her vessel if the damage was caused by the unseaworthiness of the
equipment and the freight he may have earned during the voyage. vessel caused by the negligence of the captain or crew during the
voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the
proportion of their contribution to the common fund for the results Civil liability for collision is merely co-existent with his interest in the
of the acts of the captain, referred to in Article 587. Each co-owner vessel; since there was total loss, his liability is also extinguished.
may exempt himself from this liability by the abandonment, before
a notary, of that part of the vessel belonging to him. WHEN INAPPLICABLE
Collisions
LLR IS NOT APPLICABLE UNDER THE FOLLOWING INSTANCES:
Art. 643. If the vessel and her cargo should be totally lost, by reason
of capture or wreck, all rights shall be extinguished, both as regards 1. Where the injury or death to a passenger is due either to the fault
the crew to demand any wages whatsoever, and as regards the ship of the shipowner, or to the concurring negligence of the shipowner
agent to recover the advances made. and the captain.
2. Where the vessel is insured.
If a portion of the vessel or of the cargo, or of both, should be saved, 3. In the workmen’s compensation claims.
the crew engaged on wages, including the captain, shall retain their 4. Expenses for repairs and provisioning of the ship prior to the
rights on the salvage, so on the amount of the freightage of the departure thereof.
cargo saved; but sailors who are engaged on shares shall not have 5. The vessel is not abandoned.
any right whatsoever on the salvage of the hull, but only on the
portion of the freightage saved. If they should have worked to NOT APPLICABLE TO INSURANCE CLAIM
recover the remainder of the shipwrecked vessel, they shall be given
from the amount of the salvage an award in proportion of the The LLR does not apply to insurance claims. Thus in Vasquez v. CA,
efforts made and to the risks, encountered in order to accomplish the court held that total loss of the vessel did not extinguish the
the salvage. liability of the carrier’s insurer. Despite the loss of the vessel,
therefore, its insurance answers for the damages that a shipowner
Art. 837. The civil liability incurred by the shipowners in the cases or agent may be held liable for by reason of the death of its
prescribed in this section, shall be understood as limited to the passengers.
value of the vessel with all her appurtenances and freight earned
during the voyage. However, the LLR applies to the paying insurer when it exercises its
right of subrogation against the shipowner. The cause of action of
Note: Articles 837, 587 and 590 covers only: the insurer in the exercise of his subrogation is the same cause of
action of the shipper, hence, the insurer is subject to the defenses
(1) liability to 3rd persons available to the shipowner as if it were the shipper who directly
(2) acts of the captain; and sued the same insurer.
(3) collision.
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TRANSPORTATION LAWS | ATTY. CAPANAS | FINALS | SY 2018-2019
WORKMEN’S COMPENSATION In collisions, the maritime protest must be made within 24 hours
Even is the vessel is lost, the liability under the Workmen’s after a collision and circumstances of the collision are declared or
Compensation act is still enforceable against the shipowner or made known before a competent authority at the point of accident
employer. It must be noted that it is now administered by the or the first port of arrival if in the Philippines or the Philippine consul
Employees Compensation Commission (ECC) and governed by the in a foreign country.
Labor Code. It is not the employer who will be held liable but the
ECC. In a collision, between a shipper and passenger, the passenger is
expected to know the circumstances regarding the collision.
TN: If an accident is compensable under the Workmen’s Therefore, he cannot maintain an action if he did not file a maritime
Compensation Act, it must be compensated even when the protest as provided for under Article 863 or the Code of Commerce.
workman’s right is not recognized by or is in conflict with other
provisions of the Civil Code or of the Code of Commerce. WHEN APPLICABLE
When maritime protest applies?
REPAIRS BEFORE DEPARTURE
While the total loss of the vessel extinguished a maritime lien, as 1. When the vessel makes an arrival under stress
there is no longer any risk to which it can attach, the total 2. Where the vessel is shipwrecked
destruction of the vessel does not affect the liability of the owner 3. Where the vessel has gone through a hurricane or the captain
for repairs of the vessel completed before its loss. believes that the cargo has suffered damages or averages
4. Maritime collisions
Additional notes:
If the failure to maintain the seaworthiness of the vessel can be Who can file a maritime protest?
ascribed to the shipowner alone or the shipowner concurrently with 1. The captain, in cases of numbers 1 to 3
the captain then the limited liability principle CANNOT be invoked. 2. The passenger or other persons interested, in cases of maritime
collisions.
The carrier is liable for the damages to the full extent and not up to
the value of the vessel if it was established that the carrier was When protest not required?
guilty of negligence in allowing the captain and crew to play 1. When it does not fall under any of the four instances mentioned.
mah-jong during the voyage, in failing to maintain the ship as 2. When tort is involved.
seaworthy and in allowing the ship to carry more passengers than it 3. When no vessel is involved.
was allowed to carry. 4. Where the interested person is not on board the vessel.
Authorizing the voyage notwithstanding its knowledge of a typhoon

is tantamount to negligence that exempts the case from the APPLICATION OF LIMITED LIABILITY RULE TO
operation of the limited liability rule. CHARTERER
The shipowner is the very person for whom the Limited Liability
APPLICABILITY OF THE CIVIL CODE Rule (LLR) has been conceived to protect. The shipowner is the one
The primary law on the maritime commerce is the New Civil Code who is supposed to be encouraged to pursue maritime commerce.
provisions on common carriers. The Code of Commerce and special Hence, the charterer CANNOT invoke the LLR against the shipowner
laws only apply suppletorily. in a case filed by the shipowner against the former.
In connection with Article 587 of the Code of Commerce, the carrier Even if the contract is for bareboat or demise charter where
cannot invoke Articles 1733, 1735 of the NCC. While the primary law possession, free administration and even navigation are temporarily
in maritime commerce is the NCC, in all matters not regulated by surrendered to the charterer, dominion over the vessel remains
said Code, the Code of Commerce and other special laws shall with the shipowner. Therefore, the charterer or the sub-charterer,
govern. whose right cannot rise above that of the former, can never set up
the LLR against the very owner of the vessel.
Since the Civil Code contains no provision regulating the liability of
shipowners or agents in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce, particularly II. VESSELS
Article 587 that governs.
A vessel or watercraft is defined under PD No. 474 as “any barge,
Governing laws lighter, bulk carrier, passenger ship freighter, tanker, container ship,
fishing boats, or other artificial contrivance utilizing any source of
1. New Civil Code – Primary law on maritime commerce motive power, designed use or capable of being used as a means of
2. Book III Code of Commerce – Applied suppletorily transportation operating either as a common carrier, including
3. Special Laws fishing vessels covered under PD No. 43.
a) Salvage Law (Act no. 2616)
b) Carriage of Goods by Sea Act (CA no. 65) Except:
c) Ship Mortgage Decree of 1978 (PD 1521)
1. Those owned and/or operated by the Armed Forces of the
Philippines and by the Foreign Government for its Military purpose.
MARITIME PROTEST – WHEN APPLICABLE? 2. Bancas, sailboat and other waterborne contrivance of less than
three tons capacity and not motorized.
Protest is the written statement by the master of a vessel or any
authorized officer, attested by property officer or a notary, to the
effect that damages has been suffered by the ship.
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the purpose of financing the construction, acquisition, purchase of
MINOR CRAFT vessels or initial operation of vessels, freely constitute a mortgage
or any other lien or encumbrance on his or its vessels and its
Minor crafts like motorboats are not considered “vessels”. equipment with any bank or other financial institutions, domestic or
The word "vessel" was not intended to include all ships, craft or foreign.
floating structures of every kind without limitation. Thus, it should
not be held to include minor craft engaged only in river and bay SECTION 10 OF PD 1521
traffic. Consequently, a passenger, on board a motor boat is not A preferred mortgage shall constitute a lien upon the mortgaged
required to make a protest as a condition precedent to his right of vessel in the amount of the outstanding mortgage indebtedness
action for the injury suffered by him in the collision, as the Code of secured by such vessel. Upon the default of any term or condition of
Commerce does not apply. the mortgage such lien may be enforced by the mortgagee by suit in
remaining admiralty wherein the vessel itself may be made a party
Additional notes defendant and be arrested in the manner as provided in Section 11.
 When the Mercantile Code speaks of vessels, they refer solely
and exclusively to mercantile ships, as they do not include SECTION 4 OF PD 1521
warships, and furthermore, they almost always refer to craft Preferred Mortgages
which are not accessory to another as in the case of launches, a. A valid mortgage which at the time it is made includes the whole
lifeboats and etc. of any vessel of domestic ownership shall have, in respect to such
vessel and as of the date of recordation, the preferred status given
 They refer exclusively to those which are engaged in the by the provisions of Section 17 hereof, if
transportation of passengers and freight from one port to
another or from one place to another 1. The mortgage is recorded as provided in Section 3 hereof;
2. An affidavit is filed with the record of such mortgage to the
 They refer to merchant vessels and in no way can they or effect that the mortgage is made in good faith and without
should they be understood as referring to pleasure craft, any design to hinder, delay, or defraud any existing or future
yachts, pontoons, health service and harbor police vessels, etc. creditor of the mortgagor or any lien or of the mortgaged vessel;
3. The mortgage does not stipulate that the mortgagee waives
 Ships ought to be understood in the sense of vessel serving the preferred status thereof
the purpose of maritime navigation or seagoing vessel, and
not in the sense of vessel devoted to the navigation of rivers. b. Any mortgage which complies with the above conditions is
hereafter called a "preferred mortgage". For purposes of this Decree,
 Book III of the Code of Commerce, dealing with maritime a vessel holding a Provisional Certificate of Philippine Registry is
commerce, was evidently intended to define laws relative to considered a vessel of domestic ownership such that it can be
merchant vessels and maritime shipping; and as appears from subject of preferred mortgage. The Philippine Coast Guard is hereby
said code, the vessel intended in that book are such run by authorized to enter a vessel holding a Provisional Certificate of
masters having special training with elaborate apparatus of Philippine Registry in the Registry of Vessels and to record any
crew and equipment indicated in the code. mortgage executed thereon. Such mortgage shall have the
preferred status as of the date of recordation upon compliance with
Only vessels engaged in what is ordinarily known as maritime the above conditions.
commerce are within the provision of law conferring limited liability
on the owner in case of maritime disaster. c. There shall be endorsed upon the documents of a vessel covered
by a preferred mortgage
REQUIREMENT OF PROTEST 1. The names of the mortgagor and mortgagee;

2. The time and date the endorsement is made;
In relation to protest contemplated under Article 835 of the Code of 3. The amount and date of maturity of the mortgage; and
Commerce dealing with collisions, the vessels contemplated are 4. Any amount required to be endorsed by the provisions of
sea-going vessels. Therefore, it CANNOT be applied to small boats paragraphs (e) or (f) of this Section.
engaged in river and bay traffic.
d. Such endorsement shall be made (1) by the Coast Guard District
Vessels which are licensed to engage in maritime commerce, or or Station Commander of the port of documentation of the
commerce by sea, whether foreign or coastwise trade, are regulated mortgaged vessel, or (2) by the Coast Guard District or Station
by Book III of the Commerce of Code. Other vessels of a minor Commander of any port in which the vessel is found, if such Coast
nature not engaged in maritime commerce, such as river boats and Guard District or Station Commander is directed to make the
those carrying passengers from ship to shore, must be governed, as endorsement by the Coast Guard District or Station Commander of
to their liability to passengers, by the provisions of the Civil Code or the port of documentation. The Coast Guard District or Station
other appropriate special provisions of law. Commander of the port of documentation shall give such direction
by wire of letter at the request of the mortgagee and upon the
tender of the cost of communication of such direction. Whenever
III. SHIP MORTGAGE any new document is issued for the vessel, such endorsement shall
be transferred to and endorsed upon the new document by the
PREFERRED MORTGAGE Coast Guard District or Station Commander.
SECTION 2 OF PD 1521 (SHIP MORTGAGE DECREE) In the case of a vessel holding a provincial certificate of Philippine
Who may constitute a Ship Mortgage Registry, the endorsement shall be made by the Philippine consul
Any citizen of the Philippines, or any association or corporation abroad upon direction by wire or letter from the Maritime Industry
organized under the laws of the Philippines, at least sixty per cent of Authority at the request of the mortgagee and upon tender of the
the capital of which is owned by citizens of the Philippines may, for cost of communication of such direction. A certificate of such
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endorsement, giving the place, time and description of the
endorsement, shall be recorded with the records of registration to The claims are not based on possession. Possession of the vessel is
be maintained at the Philippine Consulate. not necessary for the maritime liens under Section 17 to attach to
the vessel. In other words, the nature of the claims does not
e. A mortgage which includes property other than a vessel shall not presuppose nor originate in possession.
be held a preferred mortgage unless the mortgage provides for the
separate discharge of such property by the payment of a The provision of PD 1521 on the order of preference in the
specified portion of the mortgage indebtedness. If a preferred satisfaction of the claims against the vessel is the more applicable
mortgage so provides for the separate discharge, the amount of compared to the Civil Code provisions on the concurrence and
the portion of such payment shall be endorsed upon the documents preference of credit. General legislation must give way to special
of the vessel. legislation on the same subject, and generally be so interpreted as
to embrace only cases in which the special provisions are not
f. A preferred mortgage includes more than one vessel and provides applicable.
for the separate discharge of each vessel by the payment of a
portion of mortgage indebtedness, the amount of such portion of The Statute of Frauds under Article 1403 (2) of the Civil Code is
such payment shall be endorsed upon the documents of the vessel. inapplicable. The claim on the maritime lien is based on law, PD
In case such mortgage does not provide for the separate discharge 1521, and not on any contract or agreement.
of a vessel and the vessel is to be sold upon the order of a district
court of the Philippines in a suit in rem in admiralty, the court shall Note: Section 17 of PD 1521 refers to preferred claims and Section 4
determine the portion of the mortgage indebtedness increased by of PD 1521 refers to preferred mortgages. Thus, if a vessel will be
20 per centum (1) which, in the opinion of the court, the sold on auction, and there are preferred claims, proceeds of the sale
approximate value of all the vessels covered by the mortgage, and shall first be applied to the preferred claims before they are applied
(2) upon the payment of which the vessel shall be discharged from to preferred mortgages.
the mortgage.
PRESCRIPTIVE PERIOD
Note: The preference is not absolute because there are other claims
that prevail over ship mortgage. 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 accrues. Hence, enforcement of a maritime lien
PREFERRED MARITIME LIEN imposed by special law prescribes in 10 years.
A maritime lien is a privileged claim on a vessel for some service Laches may also lie if there was unreasonable delay on the part of
rendered to it to facilitate its use in navigation. It is a special claimant in asserting its rights. The protection against 3rd person
property right in a ship given to a creditor by law as security for a accorded to the maritime lienor is narrowly circumscribed by the
debt or claim subsisting from the moment the debt arises with right requirement that he must act promptly to assert his rights.
to have the ship sold and debt paid out of the proceeds.
MARITIME LIENS
It is akin to a mortgage lien in that in spite of the transfer of
ownership, the lien is not extinguished. The maritime lien is MARITIME LIENS FOR NECESSARIES
inseparable from the vessel and until discharged, it follows the
vessel. Hence, enforcement of a maritime lien is in the nature and The maritime liens that are superior to the preferred mortgage
character of a proceeding quasi in rem. includes maritime lien for necessaries.
PREFERRED CLAIMS SECTION 21 OF PD 1521

Section 17 of PD 1521 Maritime Lien for Necessaries; person entitled to such lien - Any
person furnishing repairs, supplies, towage, use of dry-dock or
Preferred mortgage lien should have PRIORITY over all claims marine railway, or other necessaries, to nay vessel, whether foreign
against the vessel, EXCEPT the following claims in the order stated: or domestic, upon the order of the owner of such vessel, or of a
person authorized by the owner, shall have a maritime lien on the
1. Expenses and fees allowed and costs taxed by the court and taxes vessel, which may be enforced by suit in rem, and it shall be
due to the Government necessary to allege or prove that credit was given to the
2. Crew's wages vessel.
3. General average
4. Salvage; including contract salvage Requirement for a maritime lien for necessaries which is
5. Maritime liens arising prior in time to the recording of the enforceable by suit in rem:
preferred mortgage
6. Damages arising out of tort, and 1. The “necessaries” must have been furnished to and for the
7. Preferred mortgage registered prior in time. benefit of the vessel
2. The “necessaries” must have been necessary for the continuation
MARITIME LIENS ARE CREATED BY OPERATION OF LAW of the voyage of the vessel
Abovementioned are maritime liens that attaches to the vessel. 3. The credit must have been extended to the vessel
Notice of their existence is not necessary. These maritime liens do 4. There must be necessity for the extension of the credit, and
not arise from specific agreement. Although they may arise out of
contract or in the absence of contract, they are imposed even in the A necessity of credit will be presumed where it appears that the
absence of specific contractual provisions providing a lien. Similarly, repairs and supplies were necessary for the ship and that they
the parties may not impose a maritime lien by agreement if one is were ordered by the master. Hence, this presumption does not
not provided by law. In other words, the claim must be one of those arise in a case where it was established that the master did not
enumerated under Section 17. order the fuels and there was no proof of necessity of supplies.
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2. The person is tortuously or unlawfully in possession or charge of a
5. The necessaries must be ordered by persons authorized to vessel.
contract on behalf of the vessel
Two concepts of maritime lien on necessaries: PERSONAL ACTION AGAINST DEBTOR

SECTION 17 OF PD 1521
1. Maritime lien on necessaries
Preferred Maritime Lien, Priorities, Other Liens
Necessaries include those items required to facilitate the use of the a) Upon the sale of any mortgaged vessel in any extra-judicial sale or
ship, save her from danger and enable her to perform those acts by order of a district court of the Philippines in any suit in rem in
currently demanded of her. Ex: Supply of Fuel (use of the ship or to admiralty for the enforcement of a preferred mortgage lien thereon,
save her from danger) all pre-existing claims in the vessel, including any possessory
common-law lien of which a lienor is deprived under the provisions
2. Maritime lien on other necessaries of Section 16 of this Decree, shall be held terminated and shall
thereafter attach in like amount and in accordance with the
Ex: Expense incurred by travel agency for the transportation of crew priorities established herein to the proceeds of the sale. The
not directly related to the ship but indirectly necessary for the ship. preferred mortgage lien shall have priority over all claims against
Situation: One of the crew will have to disembark in Japan while the the vessel, except the following claims in the order stated: (1)
vessel is in Japan and they need a new crew. The expense incurred expenses and fees allowed and costs taxed by the court and taxes
for transportation in flying to Japan by the new is considered other due to the Government; (2) crew's wages; (3) general average; (4)
necessaries. salvage; including contract salvage; (5) maritime liens arising prior in
time to the recording of the preferred mortgage; (6) damages
Examples of maritime liens for necessaries arising out of tort; and (7) preferred mortgage registered prior in
time.
1. Claims with respect to expenses for the payment of bunker
oil/fuel, unused stores and oil, bonded stores, provisions and repair b) If the proceeds of the sale should not be sufficient to pay all
and docking of the vessel. creditors included in one number or grade, the residue shall be
2. Ship modification cost. divided among them pro rata. All credits not paid, whether fully or
How to enforce maritime lien: partially shall subsist as ordinary credits enforceable by personal
action against the debtor. The record of judicial sale or sale by
1. Collection of sum of money public auction shall be recorded in the Record of Transfers and
2. To nullify a foreclosure, intervene Encumbrances of Vessels in the port of documentation.
3. Collection suit with attachment
WHEN PROCEEDS NOT SUFFICIENT
Note: Liquor, according to the Supreme Court, is not considered as
other necessaries. As long as an expense on the vessel is If the proceeds of the sale should not be sufficient to pay all
indispensable to the maintenance and navigation of vessel, it may creditors included in one number or grade, the residue shall be
properly be treated as a maritime lien for necessaries under Section divided among them pro rata. All credits not paid, whether fully or
21 of PD 1521 partially shall subsist as ordinary credits enforceable by personal
action against the debtor.
PERSONS AUTHORIZED TO PROCURE NECESSARIES
SECTION 22 OF PD 1521 IV. PERSONS WHO TAKE PART
Persons Authorized to Procure Repairs, Supplies, and Necessaries.

SHIP AGENT
The following persons shall be presumed to have authority from the
owner to procure repairs, supplies, towage, use of dry dock or
marine railway, and other necessaries for the vessel: A “ship agent” is defined in the Code of Commerce as the person
entrusted with provisioning of the vessel, or who represents her in
1. The managing owner, the port in which she happens to be (Article 595, first paragraph,
2. ship's husband, master or Code of Commerce)
3. any person to whom the management of the vessel at the port of
supply is entrusted. Powers of Ship Agent
 The ship agent can enter into contracts to provision the ship.
No person tortuously or unlawfully in possession or charge of a Hence, he can purchase necessary supplies and fuel that are
vessel shall have authority to bind the vessel. necessary for a particular voyage.
 Representation of a vessel, includes the right to represent the
The officers and agents of a vessel shall be taken to include such vessel in any action in a court or tribunal.
officers and agents when appointed by a character, by owner pro  Art. 595 of the Code of Commerce provides that the ship
hac vice, or by an agreed purchaser in possession of the vessel. agent shall represent the ownership of the vessel, and may, in
his own name and in such capacity, take judicial and
No lien is conferred when: extrajudicial steps in matters relating to commerce.
 Whether acting as agent of the owner of the vessel or as agent
1. The furnisher knows, or by exercise of reasonable diligence could of the charterer, petitioner will be considered as the ship
have ascertained, that because of the terms of a charter party, agent and may be held liable as such, as long as the latter is
agreement for sale of the vessel, or for any other reason, the person the one that provisions or represents the vessel.
ordering the repairs, supplies, or other necessaries was without
authority to bind the vessel therefor.
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WHAT IF THE OBLIGATION OF A PERSON IS LIMITED TO Liability of the Ship Agent, General Agent and Tramp Agent
INFORMING THE CONSIGNEE ON THE ARRIVAL OF THE
GOODS? The responsibility or liability, if any, of the ship agent, general agent
and tramp agent shall continue to be governed by the pertinent
ACE NAVIGATION CO., INC. vs. FGU INSURANCE CORPORATION provisions of the Code of Commerce: Provided, that in the case of
the tramp agent, his liability shall not extend to the obligations
The Court ruled that an agent is not a ship agent if its only function assumed by the ship owner, charterer or carrier with the shipper or
is limited to informing the consignee of the arrival of the vessel in receiver for the goods carried by the ship: Provided, further, That it
order for the latter to immediately take possession of the cargoes. is the duty of the tramp agent, however, to assist the shipper or
An agent is not a ship agent if there’s no hand in the provisioning of receiver in making cargo liability claims against the ship owner,
the vessel. The responsibilities of such agent is not covered by the charterer or carrier: Provided, finally, That failure or inaction to
Code of Commerce but by the provisions of the New Civil Code, perform the aforesaid duty shall subject the tramp agent to
including Art. 1897. Article 1897 of the same code provides that an applicable administrative sanctions based on the Implementing
agent is not personally liable to the party with whom he contracts, Rules and Regulations (IRR) to be formulated thereon by the
unless he expressly binds himself or exceeds the limits of his Maritime Industry Authority (MARINA) under the Depatment of
authority without giving such party sufficient notice of his powers. Transportation and Communication (DOTC) and by the Philippine
Shippers Bureau (PSB) under the Department of Trade and Industry
The Court ruled in Ace Navigation Co. Inc., v. FGU Insurance (DTI).
Corporation that both exceptions do not obtain in the case. Records
show that the obligation of ACENAV was limited to informing the TRIPLE ROLES OF CAPTAIN
consignee HEINDRICH of the arrival of the vessel in order for the
latter to immediately take possession of the goods. No evidence was CAPTAIN
offered to establish that ACENAV had a hand in the provisioning of The captain of a vessel is a confidential and managerial employee
the vessel or that it represented the carrier, its charterers, or the within the meaning of the above doctrine. A master or captain, for
vessel at any time during the unloading of the goods. the purposes of maritime commerce, is one who has command of
the vessel.
Records are bereft of any showing that ACENAV, the agent,
exceeded its authority in the discharge of its duties as a mere agent A captain commonly performs 3 distinct roles:
of CARDIA. Neither was it alleged, much less proved, that ACENAV’s
limited obligation as agent of the shipper, CARDIA, was not known 1. He is a general agent of the ship owner
to HEINDRICH. Furthermore, since CARDIA was not impleaded as a 2. He is also commander and technical director of the vessel
party in the suit, the liability attributed upon it by the Court of 3. He is a representative of the country under whose flag he
Appeals on the basis of its finding that the damage sustained by the navigates
cargo was due to improper packing cannot be borne by ACENAV. As
a mere agent, ACENAV cannot be made responsible or held As commander of the vessel
accountable for the damage supposedly caused by its principal. Of these three roles, the most important is the role performed by
the captain as commander of the vessel; for such role (which is
TRAMP SERVICE analogous to that of “Chief Executive Officer” of a present-day
corporate enterprise) has to do with the operation and preservation
RA NO. 9515 (AN ACT DEFINING THE LIABILITY OF SHIP AGENTS IN of the vessel during its voyage and the protection of the passengers
THE TRAMP SERVICE AND FOR OTHER PURPOSES) (if any) and crew and cargo.
"Tramp Service" shall mean the operation of a contract carrier As general agent of the ship owner
which has no regular and fixed routes and schedules but accepts Captain has authority to sign bills of lading, carry goods aboard and
cargo wherever and whenever the shipper desires, is hired on a deal with the freight earned, agree upon rates and decide whether
contractual basis, or chartered by any one or few shippers under to take cargo. The captain also has legal authority to enter into
mutually agreed terms and usually carries bulk or break bulk contracts with respect to the vessel and the trading of the vessel,
cargoes subject to applicable limitations established by the statute, contract
or instructions an regulations of the ship owner. The captain is
"Tramp Agent" shall mean a ship agent appointed by the ship owner, committed the governance, care and management of the vessel. He
charterer or carrier iti the tramp service for one particular voyage is vested with both management and fiduciary functions.
whose authority is limited to the customary and usual procedures
and formalities required for the facilitation of the vessel’s entry, stay
DISCRETION OF CAPTAIN OR MASTER
and departure in the port and does not include the assumption of
the ship owner’s, charterer’s, or carrier’s obligations with the INTER-ORIENT MARITIME ENTERPRISES vs. CA
shipper or receiver for the goods carried by the ship;
“A ship's captain must be accorded a reasonable measure of
"Ship Agent" shall mean the person entrusted with the provisioning discretionary authority to decide what the safety of the ship and of
or representing the vessel in the port in which it may be found; its crew and cargo specifically requires on a stipulated ocean voyage.
The captain is held responsible, and properly so, for such safety. He
"General Agent" shall mean a ship agent appointed by the ship is right there on the vessel, in command of it and (it must be
owner or carrier in the liner service for all voyages and covered by a presumed) knowledgeable as to the specific requirements of
General Agency Agreement whereby the agent assumes the role seaworthiness and the particular risks and perils of the voyage he is
and responsibility of its principal within the Philippine territory to embark upon.
including but not limited to solicitation of cargo and freight,
payment of discharging or loading expenses, collection of shipping The applicable principle is that the captain has control of all
charges and issuing/releasing bills of lading and cargo manifest; departments of service in the vessel, and reasonable discretion as to
hyaaltar Page 6
its navigation. It is the right and duty of the captain, in the exercise
of sound discretion and in good faith, to do all things with respect to ROLE OF CAPTAIN V. ROLE OF MARITIME PILOT
the vessel and its equipment and conduct of the voyage which are
reasonably necessary for the protection and preservation of the Captain or Master Maritime Pilot
interests under his charge, whether those be of the shipowners, For purposes of maritime A pilot, in maritime law, is a
charterers, cargo owners or of underwriters. It is a basic principle of commerce, is one who has person duly qualified, and
admiralty law that in navigating a merchantman, the master must command of a vessel. licensed to conduct a vessel into
be left free to exercise his own best judgment. or out of ports, or in certain
waters.
The requirements of safe navigation compel us to reject any
suggestion that the judgment and discretion of the captain of a “pilot” includes those whose
vessel may be confined within a straitjacket, even in this age of duty is to guide vessels into or
electronic communications. Indeed, if the ship captain is convinced, out of ports, or in particular
as a reasonably prudent and competent mariner acting in good faith waters and those entrusted with
that the shipowner's or ship agent's instructions (insisted upon by the navigation of vessels on high
radio or telefax from their offices thousands of miles away) will seas.
result, in the very specific circumstances facing him, in imposing On compulsory pilotage grounds
unacceptable risks of loss or serious danger to ship or crew, he The Harbor Pilot providing the The Master shall retain overall
cannot casually seek absolution from his responsibility, if a marine service to a vessel shall be command of the vessel even on
casualty occurs, in responsible for the damage to a pilotage grounds whereby he
such instructions.” vessel or to life and property at can countermand or overrule
ports due to his negligence or the order or command of the
fault. Harbor Pilot on board. In such
MASTER PRO HAC VICE He can only be absolved form event, any damage caused to a
liability if the accident is caused vessel or to life or property at
Pilot is the master pro hac vice by force majeure or natural ports by reason of the fault or
calamities provided he has negligence of the Master shall
Under English and American authorities, generally speaking, the exercised prudence and extra be the responsibility and liability
pilot supersedes the master for the time being in the command and diligence to prevent or minimize of the registered owner of the
navigation of the ship, and his orders must be obeyed in all matters damage. vessel concerned without
connected with her navigation. He becomes the MASTER PRO HAC prejudice to recourse against
VICE and should give all directions as to speed, course, stopping and said Master.
reversing, anchoring, towing and the like. And when a licensed pilot Compulsory Pilotage
is employed in a place where pilotage is compulsory, it is his duty to  For entering a harbor and anchoring thereat, or passing
insist on having control if the vessel or to decline to act as pilot.
through rivers or straits within a pilotage district, as well as
Under the certain systems of foreign law, the pilot does not take docking and undocking at any pier/wharf, or shifting from one
entire charge of the vessel, but is deemed merely the adviser of the
berth or another, every vessel engaged in coastwise and
master, who retains command and control of the navigation even foreign trade shall be under compulsory pilotage.
localities where pilotage is compulsory.
 Implemented in the Port of Manila.
In general, a pilot is personally liable for damages caused by his own
negligence or default to the owners of the vessel, and to third V. CHARTER PARTIES
parties for damages sustained in a collision. Such negligence of the
pilot in the performance of duty constitutes a maritime tort.
TWO MAIN CATEGORIES
The fact that the law compelled the master to take the pilot does
A. Bareboat or Demise Charter
not exonerate the vessel from liability. The parties who suffer are Ship owner leases to the charterer the whole vessel, transferring to
entitled to have their remedy against the vessel that occasioned the
the latter the entire command, possession and consequent control
damage, and are not under necessity to look to the pilot from whom over the vessel’s navigation, including the master and the crew, who
redress is not always had for compensation. The owners of the
becomes the charterer’s “servants”.
vessel are responsible to the injured party for the acts of the pilot,
and they must be left to recover the amount as well as they can
The charterer takes over the ship, lock, stock and barrel. As the
against him.
shipowner is not normally required to provide for a crew; the
charterer gains possession of the vessel “bare”, hence, the term
Where a compulsory pilot is in charge of a ship, the master being
“bareboat”.
required to permit him to navigate it, if the master observes that
the pilot is incompetent or physically incapable, then it is the duty of
B. Contract of Affreightment
the master tor refuse to permit the pilot to act. But if no such The charterer hires the vessel only, either for a determinate period
reasons are present, then the master is justified in relying upon the
of time or for a single or consecutive voyage, with the ship owner
pilot, but not blindly. Under the circumstances of this case, if a providing for the provisions of the ship, the wages of the master and
situation arose where the master, exercising that reasonable
crew, and the expenses for the maintenance of the vessel.
vigilance which the master of a ship should exercise, observed, or
should have observed, that the pilot was so navigating the vessel a. Time Charter – use of a vessel for a specified period of timeor for
that she was going, or was likely to go, into danger, and there was in
the duration of one or more specified voyages. Owner of a time
the exercise of reasonable care and vigilance an opportunity for the chartered vessel retains possession and control through the master
master to intervene so as to save the ship from danger, the master
and crew who remains employees. What the time charterer
should have acted accordingly. The master of a vessel must exercise acquires is the right to utilize the carrying capacity and facilities of
a degree of vigilance commensurate with the circumstances.
hyaaltar Page 7
the vessel and to designate her destinations during the term of the notwithstanding the charter of the whole or portion of a vessel by
charter. one or more persons, provided the charter is limited to the ship only,
as in the case of a time-charter or voyage charter. It is only when
b. Voyage Charter or Trip Charter – contract for the carriage of the charter includes both the vessel and its crew, as in a bareboat or
goods from one or more ports of loading to one or more ports of demise that a common carrier becomes private, at least insofar as
unloading, on one or on a series of voyages. In a voyage charter, the the particular voyage covering the charter-party is concerned.
master and crew remain in the employ of the owner of the vessel. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the
c. Slot Charter Party – Shipper leases one or more “slots” aboard a moment, be the property of the charterer."
container ship. Here, a space in the vessel is reserved for the use of
the charterer. A slot or space charter agreement is in the nature of a The charterer of a vessel has no obligation before transporting its
contract of affreightment. Hence, the Curt observed in one case the cargo to ensure that the vessel it chartered complied with all legal
slot charter agreement did not divest the carrier of such requirements. The duty rests upon the common carrier simply for
characterization as a carrier not relieved it of any accountability for being engaged in "public service." The Civil Code demands diligence
the shipment. which is required by the nature of the obligation and that which
corresponds with the circumstances of the persons, the time and
the place. Hence, considering the nature of the obligation between
SLOT CHARTER PARTY AND ITS EFFECT ON DILIGENCE
Caltex and MT Vector, the liability as found by the Court of Appeals
OF COMMON CARRIER
is without basis.
The carrier is bound to exercise extraordinary diligence in conveying
its slot charter agreement. Being a contract of affreightment, it is OWNER PRO HAC VICE
the carrier and not the charterer, who is liable for damages or losses
sustained by the goods transported. The bareboat charterer becomes the owner “pro hac vice” of the
vessel since he mans the vessel with his own set of master and crew,
HEUNG-A SHIPPING vs. PHILAM INSURANCE CO. effectively becoming the owner for the voyage or service stipulated,
subject however to any liability for damages arising from negligence.
“As the carrier of the subject shipment, Heung-A was bound to
exercise extraordinary diligence in conveying the same and its slot The bareboat charterer assumes, to a large extent, the customary
charter agreement with Dongmana did not divest it to such rights and liabilities of the shipowner in relation to third persons
characterization nor relieve it of any accountability for shipment. who may have dealt with him or with the vessel. In this latter
instance, the master of the vessel is the agent of the charterer, and
The slot charter was in fact a contract of affreightment which means not of the shipowner, and this, it is the charterer or owner pro hac
that the use of shipping space on vessel is leased in part or as a vice, and not the general owner of the vessel, who is liable for the
whole, to the carry for the good of others. The voyage remains expense of the voyage including the wages of seamen.
under the responsibility of the carrier and it is answerable for the
loss of goods received for transportation.”
VI. LOANS ON BOTTOMRY AND RESPONDENTIA
EFFECT OF CHARTER PARTY ON CARRIER
CHARACTERISTICS OF BOTTOMRY AND
A charter party may transform a common carrier into a private RESPONDENTIA
carrier.
However, it must be a bareboat or demise charter where the LOAN ON BOTTOMRY
charterer means the vessel with his own people and becomes, in In maritime law, is a contract whereby the owner of a ship borrows
effect, the owner for the voyage or service stipulated. for the use, equipment or repair of the vessel, for a definite term,
and pledges the ship (or the keel or bottom of the ship pars pro toto)
The common carrier is not transformed into a private carrier if the as security, with the stipulation that id the ship is lost during the
charter party is a contract of affreightment like a voyage charter or a voyage or during the limited time on account of the perils
time charter. enumerated, the lender shall lose his money.
LIABILITY OF CHARTERER UNDER A CONTRACT OF LOAN ON RESPONDENTIA

AFFREIGHTMENT Where the goods, or some part thereof, are hypothecated as
security for a loan, the repayment of which is dependent upon
Generally, the character of the common carrier is not affected by maritime risks
the charter party if the same is a contract of affreightment.
Usual form is that of a bond. In this kind of maritime loan, it is the
If the charter is a contract of affreightment, which leaves the borrower’s personal responsibility which is deemed to be the
general owner in possession of the ship as owner for the voyage, principal security for the performance of a contract, hence the term
the rights and the responsibilities of ownership rest on the owner. “respondentia”
The charterer is free from liability to third persons in respect of the
ship.
In this case, the charter party agreement did not convert the
common carrier into a private carrier. The parties entered into a
voyager charter, which retains the character of the vessel as a
common carrier.
In Planters Products, Inc. vs. Court of Appeals, we said: "It is

therefore imperative that a public carrier shall remain as such,
hyaaltar Page 8
GENERAL AVERAGE
BOTTOMRY RESPONDENTIA Includes all damages and expenses which are deliberately caused in
Pledges the ship or the keel or Goods, or some part thereof, order to save the vessel, its cargo or both at the same time, from
bottom of the ship pars pro toto are hypothecated as security real and known risk
Lender loses his capital should Lender does not lose his capital
the ship perish due to marine should the ship perish due to PILOTAGE
peril marine peril, so long as the
goods subject of the loan They are ordinary expenses. They are not averages unless
survive or are saved; but where stipulated.
the ship and the cargo on board
should disappear due to perils of ORDINARY VS. EXTRAORDINARY EXPENSES
the sea, the lender on
respondentia shall suffer loss of Note: before determining whether the averages are particular or
his capital general, determine first whether expenses are ordinary or
Ship owner has authority to The cargo owner shall have the extraordinary. Because if they are mere ordinary expenses, the rules
constitute loan on bottomry. A right to enter into a loan on on average will not apply. However, if they are extraordinary
part respondentia involving his expenses, the rules on averages will apply.
owner shall be limited to loan cargo.
only up to the extent of his ORDINARY EXPENSES
share. The captain, being a mere agent Ordinary expenses are not averages because they are foreseeable
of the ship owner and not of the (as opposed to extraordinary, they are foreseeable), unless the
A ship captain, who is a part cargo owner, may not contract a parties agree that averages will cover ordinary expenses. The Code
owner, may obtain a loan on loan on respondentia. If he does of Commerce does not prohibit the inclusion of other expenses
bottomry only to the extent of so, it would be void. under averages.
his interest.
Note: Petty and ordinary expenses incident to navigation, such as
A ship captain, who is not an those pilotage of coasts and ports, those of lighterage and towage,
owner, may enter into a loan on anchorage, inspection, health, quarantine, lazaretto, and other
bottomry on account of extreme so-called oirt expenses, costs of barges and unloading until the
necessity. merchandise is placed on the wharf, and any other usual expenses
of navigation, shall be considered ordinary expenses to be defrayed
by the shipowner, unless there is an express agreement to the
Important: There must be a marine risk upon which the loan is
predicated. Thus, there is no bottomry nor respondentia if the contrary.
money borrowed is subject to repayment in any event.
You have a vessel at present, we say present, because the book
makes a distinction about vessels during the medieval times and
now. If at present, your vessel is caught by fire, and to extinguish
VII. AVERAGES
the fire, a certain equipment was used, the owner of that
equipment will have to be paid for rescuing. The ship owner would
WHAT ARE AVERAGES
have to pay the expense. This is not an ordinary expense because it
does not normally happen in a voyage.
1. All extraordinary expenses or accidental expenses which may be
incurred during the voyage in order to preserve the cargo, the cargo
or both. GENERAL AVERAGE
2. Any damages or deteriorations which the vessel may suffer from General average - includes all damages and expenses which are
deliberately caused in order to save the vessel, its cargo or both at
the time it puts to sea from the port of departure until it casts
anchor in the port of destination, and those suffered by the the same time, from real and known risk.
merchandise from the time they are loaded in the port of shipment
until they are unloaded in the port of their consignment Requisites:
1. There must be a common danger
It is classified into two: simple or particular; and general or gross 2. For the common safety part of the vessel or of the cargo or both
is sacrificed deliberately
average.
3. From the expenses or damages caused follows the successful
SIMPLE AVERAGE saving of the vessel and cargo
4. Expenses or damages should have been incurred or inflicted after
This includes all the expenses and damages caused to the vessel or
to her cargo which have not inured to the common benefit and taking the proper legal steps and authority
profit of all the persons interested in the vessel and her cargo. If
Particular/Simple Average Gross/General Average
damage cause is not a general average, the same can be considered
Have not inured to the common Caused for the benefit of those
particular average.
benefit of all persons interested interested in the vessel or
in the vessel or cargoes cargoes
Since this type of average does not inure to the common benefit,
the owner of the goods that suffered the damage bears the loss. May be due to causes other Deliberately caused in order to
than deliberate acts save the vessel or the cargoes
Borne by the owner of thing Borne proportionately by the
vessel or cargoes damaged persons having interest in the
vessel or cargoes
hyaaltar Page 9
EFFECT OF PRESENCE OF NEGLIGENCE DOCTRINE OF ERROR IN EXTREMIS

In the first zone, no rules apply. In the second, the burden is on the
AMERICAN HOME ASSURANCE vs. CA vessel required to keep away and avoid the danger. The third zone
The law on averages in the Code of Commerce cannot be applied in covers the period in which errors in extremis occur; and the rule is
determining liability where there is negligence. that the vessel which has forced the privileged vessel into danger is
responsible even if the privileged vessel has committed an error
There is negligence here because the shipowner proceeded with the within that zone. Thus, if it was during the time when the sail vessel
voyage despite warning from PAG-ASA of a storm. This is the case was passing through the third zone that it changed its course to port
where almost 10,000 televisions were loaded on a vessel. The issue in order to avoid, if possible, the collision, the act may be said to
on negligence must first be resolved before provisions on Code of have been done in extremis, and, even if wrong, the sailing vessel is
Commerce may be applied. not responsible for the result.
NDC vs. COURT OF APPEALS A. Urrutia & Co. Case

Two vessels collided because of negligence of the captain. When the This pertains to a collision between a steamer and a sail vessel. The
shipowner and ship agent were sued, they interposed the defense two watched each other for some time before the collision. The
that the law on averages must apply, so the loss must be sailing vessel kept her course until in extermis when she made a
proportionately spread. However, the Supreme Court said that the wrong maneuver.
law on averages finds no application where there is negligence and
where the cargoes are not jettisoned. If a vessel having a right of way suddenly changes its course during
the 3rd zone (time between the moment when collision has become
During the medieval times, the concept of averages was limited to a practical certainty and the moment of actual contact), in an effort
instances where cargoes are jettisoned. At present, there can still be to avoid an imminent collision due to the fault of another vessel,
averages even if the cargoes are not jettisoned. such act may be said to be done in extremis, and even if wrong,
cannot create responsibility on the part of said vessel with the right
Note: The common carriers cannot limit their liability for injury or of way.
loss of goods when such injury or loss was caused by its own
negligence. The law on average under the Code of Commerce Thus, it has been held that fault on the part of the sailing vessel at
cannot be applied in determining liability where there is negligence. the moment preceding a collision, that is, during the 3rd division of
time, does not absolve the steamship which has suffered herself and
EXPENSES TO REFLOAT A VESSEL a sailing vessel to get into such dangerous proximity as to cause
inevitable harm and confusion, and a collision results as a
A.MAGSAYSAY INC vs. AGAN consequence.
FACTS: A vessel, while unintentionally stranded inside a port, ran
aground at the mouth of the Cagayan River. Expenses were incurred The steamer having a far greater fault in allowing such proximity to
in hiring a company to refloat the vessel. The shipowner claims that be brought about is chargeable with all the damages resulting from
the expenses constitute general averages and thus the losses should the collision; and the act of the vessel sailing having been done in
be borne proportionately. extremis, even if wrong, is not responsible for the result.
ISSUE: Whether the expenses constitute general averages. ZONES IN COLLISION
RULING: No. For expenses for refloating a vessel to constitute In collisions between vessels, there exist three division of time or
general averages, the vessel must be intentionally stranded and the zones:
expenses were incurred for the purpose of saving both the vessel 1. The first division covers all the time up to the moment when the
and the cargo. risk applicable may be said to have begun.
- Within this zone, no rule is applicable because none is necessary
Here, the stranding of the vessel was not intentional. Moreso, the - Each vessel is free to direct its course as it deems best without
expenses were not incurred for the common safety of the vessel reference to the movements of the other vessel
and the cargo, since they, or at least the cargo, were not in 2. The second division covers the time between the moment when
imminent peril. The cargoes could have been unloaded without the risk of collision begins and the moment when it has become a
need of an expensive salvage operation. practical certainty.
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, LIABILITY RULES
it cannot be considered a general average. ZONES IN COLLISION
Although the liability with respect to collision is not governed by
Note: There is no proof that the vessel had to be put afloat to save it quasi-delict, liability in collision cases is still negligence based.
from imminent danger. From the testimony of the shipowner, the Collision cases are still governed by the provisions of the Code of
vessel had to be salvaged in order to enable it to proceed to its port Commerce on Collision.
of destination. It is important to note that the true foundation of
general averages is the safety of the property and not of the voyage. In other words, courts are still called upon to determine the
negligence of the persons involved in order to impose liability. The
VIII. COLLISIONS person who causes the injury is both civilly and criminally liable.
An impact or sudden contact of a vessel with another whether both
are in motion or one stationary. Note: in determination of negligence, the same test of a reasonable
man in the position of an expert that applies in quasi-delict should
If one vessel is moving while the other is stationary, the same is also be applied although with due consideration to the expertise of
more appropriately called ‘allision’. the persons involved including the carrier itself, the captain, officers
hyaaltar Page 10
and crew of the vessels. Thus it still relevant to determine if the
collision is sufficiently foreseeable such that a reasonable man with IS A CHARTERER LIABLE UNDER MARITIME LAW?
the same expertise could have avoided the impact
It depends if the charter party is a contract of affreightment or a
Contributory negligence and last clear chance is not applicable to bareboat/demise charter.
collision cases because of Art. 827 of the Code of Commerce.
A. Contract of affreightment
Thus, if both vessels were negligently operated, it does not matter if The use of shipping space on vessels is leased in part or as a whole,
the other has the clear chance of avoiding the injury because under to carry goods for others. Consequently, the voyage remains under
Art. 827 - each must suffer its own damage if both of them are the responsibility of the carrier and it is answerable for the loss of
negligent. goods received for transportation. The charterer is free from liability
to third persons in respect of the ship.
Although the negligence on the part of the mate of the incoming
vessel preceded the negligence on the part of the mate of the B. Bareboat charter or charter by demise
outgoing vessel by an appreciable interval of time, the first vessel The whole vessel is let to the charterer with a transfer to him of its
cannot on that account be absolved from responsibility. entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants.
Note: proof that the plaintiff was negligent will bar recovery from The charterer becomes the owner for the voyage or service
the defendant in collision cases even if the plaintiff’s negligence can stipulated and hence liable for damages or loss sustained by the
be classified as merely contributory. goods transported.
SPECIFIC LIABILITY RULES Note: It is only in bareboat or demise charter where the charterer is
The liability of the carriers would depend if only one is at fault, if liable for damages or losses sustained.
both vessels are at fault or if the entity at fault cannot be
determined. OWNER PRO HAC VICE OR OWNER FOR THIS
OCCASION
One vessel at fault
If a vessel should collide with another, through or the fault, Charterer is the owner pro hac vice in a bareboat charter
negligence, or lack of skill of the captain, sailing mate, or any other
member of the complement, the owner of the vessel at fault shall HEUNG-A SHIPPING vs. PHILAM INSURANCE CO.
indemnify the losses and damages suffered, after an expert In a bareboat or demise charter, the shipowner leases to the
appraisal. (Art. 826 of the Code of Commerce) charterer the whole vessel, transferring to the latter the entire
command, possession and consequent control over the vessel’s
Both vessels at fault navigation, including the master and crew, who thereby become the
If the collision is imputable to both vessels, each one shall suffer its charterer’s “servant.”
own damages, and both shall be solidarily responsible for the losses
and damages occasioned to their cargoes. As the shipowner is not normally required to provide for a crew, the
charterer gains possession of the vessel “bare,” hence, the term
No apportionment of liability. “bareboat.”
Party at fault cannot be determined Thus, the charterer becomes the owner “pro hac vice” of the vessel
Each party shall bear his own damage in cases in which it cannot be since he mans the vessel with his own set of master and crew,
determined which of the two vessels has caused the collision. They effectively becoming the owner for the voyage or service stipulated,
are solidarily responsible for the losses and damages occasioned to subject however to any liability for damages arising from negligence.
their cargoes.
Moreover, the bareboat charterer assumes, to a large extent, the
Cause is fortuitous event customary rights and liabilities of the shipowner in relation to third
Each vessel and its cargo shall bear its own damages. If, by reason of persons who may have dealt with him or with the vessel. In this
storm or other cause of force majeure, a vessel which is properly latter instance, the master of the vessel is the agent of the charterer,
anchored and moored should collide with vessels nearby, causing and not of the shipowner, and therefore, it is the charterer or owner
the latter vessels damage, the injury occasioned shall be considered pro hac vice, and not the general owner of the vessel, who is liable
as particular average of the vessel run into. for the expenses of the voyage including the wages of the seamen.
Third person at fault MARITIME PROTEST - WHEN NOT REQUIRED

If a vessel should be forced by a third vessel to collide with another,
the owner of the third vessel shall indemnify the losses and General Rule: It is necessary in collision cases - must be presented
damages cause, the captain being civilly liable to said owner. within 24 hours
Sinking on the way to port Exception: If the collision involves small boats engaged in reiver and
A vessel which, upon being run into, sinks immediately, as well as bay traffic and inland navigation because this requirement applies
that which, having been obliged to make a port to repair the only to ships and sea-going vessels
damages caused by the collision, is lost during the voyage or is
obliged to be stranded in order to be saved shall be presumed as DOCTRINE OF INSCRUTABLE FAULT
lost by reason of collision.
This is applicable where it cannot be determined which between the
two vessels was at fault, both shall bear their respective damage,
but both should be solidarily liable for damage to the cargo of both
vessels.
hyaaltar Page 11
RULE 18, INT’L RULES OF THE ROAD IX. ARRIVAL UNDER STRESS (AUS) AND SHIPWRECKS
When two power-driven vessels are meeting end on, or nearly end The arrival of a vessel at the nearest and most convenient port
on, so as to involve risk of collision, each shall alter her course to which was decided upon after determining that there is
starboard, so that each may pass on the port side of the other. well-founded fear of seizure, privateers, or pirates or by reason of
any accident of the sea disabling it to navigate.
Note: This is actually Rule 14 the International Rules of the Road.
However, the Supreme Court, in the case of Smith Bell v. Go Thong, LEGITIMATE AUS - GROUNDS
referred to this as Rule 18. Maybe it was Rule 18 before and was
repealed, I don’t know. Tried my best to figure out why, but failed. 1. Lack of provisions
But it would seem that this is the rule referred to by Sir as per his 2. Well-founded fear of seizure
discussion. 3. Privateers or pirates
4. By reason of any accident of the sea disabling it to navigate
When applicable and when not applicable
This Rule only applies to cases where vessels are meeting end on or STEPS TO BE TAKEN TO DETERMINE PROPRIETY OF AUS:
nearly end on, in such a manner as to involve risk of collision, and 1. The captain should determine during the voyage if there is
does not apply to two vessels which must, if both keep on their well-founded fear of seizure, privateers and other valid grounds;
respective course, pass clear of each other. 2. The captain shall assemble the officers;
3. The captain shall summon the persons interested in the cargo
SMITH BELL vs. GO THONG (1991) who may be present and who may attend but without right to vote;
4. The officers shall determine and agree if there is well-founded
Go Thong was held responsible for collision in this case for violation reason after examining the circumstances. The captain shall have
of Rule 18 of the International Rules of the Road. This is because of deciding vote;
the following: 5. The agreement shall be drafted and the proper minutes shall be
signed and entered in the log book;
1. It turned to portside (left), instead of turning to starboard (right) 6. Objections and protests shall likewise be entered in the minutes
2. There was no proper look-out
3. The second mate was the one in command of the vessel even if Note: Lawfulness of the arrival under stress determines if damages
there was a captain on board. will be shouldered by the shipowner and the ship agent. The captain
must make a protest
MECENAS vs. COURT OF APPEALS (1989)
WHEN NOT LAWFUL
This is a peculiar case because the Supreme Court did not apply 1. If the lack of provisions should arise from the failure to take the
international rules. Instead, it applied the presumption of gross necessary provisions for the voyage according to usage and customs,
negligence under the New Civil Code. or if they should have been rendered useless or lost through bad
stowage or negligence in their care.
FACTS: M/T Tacloban (barge-type oil tanker) and the M/V Don Juan 2. If the risk of enemies, privateers, or pirates should not have been
(passenger vessel) collided. When the collision occurred, the sea well-known, manifest, and based on positive and provable facts.
was calm, the weather fair and visibility good. As a result of this 3. If the defect of the vessel should have arisen from the fact that it
collision, the M/V "Don Juan" sank and hundreds of its passengers was not repaired, rigged, equipped, and prepared in a manner
perished. suitable for the voyage, or from some erroneous order of the
captain.
M/V Don Juan claimed that it should not be liable as it complied 4. When malice, negligence, want of foresight or lack of skill on the
with Rule 18 of the International Rules of the Road, while M/T part of the captain exists in the act causing the damage.
Tacloban City did not. It appears that when the two vessels were
only three-tenths (0.3) of a mile apart, M/T Tacloban turned to port LIABILITY OF SHIPOWNER
side (in violation of Rule 18, while the M/V Don Juan veered hard to
starboard. If AUS is proper – shipowner and ship agent is liably only for the
expenses for the same arrival. The shipowner and ship agent will be
RULING: The “Route observance” of the International Rules of the liable for the same expenses and, in addition, they shall be solidarily
Road will not relieve a vessel from responsibility if the collision liable for damages caused to the cargoes by such AUS.
could have been avoided by proper care and skill on her part or
even by a departure from the rules. Note: this presupposes that exercise of extraordinary diligence is
exercised by the carrier
Rule 18 like all other International Rules of the Road, are not to be SUMMARY:
obeyed and construed without regard to all the circumstances The shipowner will always be liable for the expenses of an arrival
surrounding a particular encounter between two vessels. under stress, whether lawful or unlawful. The only difference lies in
the liability for damages caused to the shipper’s cargoes:
In ordinary circumstances, a vessel discharges her duty to another  If AUS is lawful – not liable
by a faithful and literal observance of the Rules of Navigation, and  Is AUS is unlawful – liable (here, shipowner is liable for both
she cannot be held at fault for so doing even though a different the expenses of arrival under stress and damages caused to
course would have prevented the collision. This rule, however, is not the shipper)
to be applied where it is apparent, as in the instant case, that her
captain was guilty of negligence or ARTICLE 825, CODE OF COMMERCE
of a want of seamanship in not perceiving the necessity for, or in so The captain shall be liable for damages caused by his delay, if after
acting as to create such necessity for, a departure from the rule and the cause of the arrival under stress has ceased, he should not
acting accordingly. continue the voyage.
hyaaltar Page 12
TO WHAT CONTRACT DOES COGSA APPLY?

X. SALVAGE
COGSA applies to contracts of carriage of goods evidenced by Bills of
RIGHT TO SALVAGE REWARD Lading.
Salvage is founded on the equity of remunerating private and Section 1(b) of COGSA provides that the term “contract of carriage”
individual services performed in saving, in whole or in part, as ship applies only to contracts of carriage by sea covered by a bill of lading
or its cargo from impending peril, or from recovering them form or any similar document of title, insofar as such document relates to
actual loss. It is compensation for actual services rendered to the the carriage of goods by sea, including any bill of lading or any
property charge with it, and is allowed for meritorious conduct of similar document as aforesaid issued under or pursuant to a charter
the salvor, and in consideration of a benefit conferred upon the party from the moment at which such bill of lading or similar
person whose the property he has saved. document of title regulates the relations between a carrier and a
holder of the same.
WHO ARE NOT ENTITLED TO REWARD
Reason: In international trade, other countries are also involved. A
The salvor, under the Salvage Law, must have no compensation, bill of lading is the contract between the shipper and the carrier.
contractual or otherwise, upon the ship in distress. Thus under Being so, regardless of country, it shall be governing law between
Section 8 of the law, the following persons shall have no right to the two.
reward, namely: 1) the crew of the vessel shipwrecked or which was Consequently, in case of suit, the law to be applied won’t be an
in danger of shipwreck issue because it is the contract (bill of lading) that will govern.
2) he who shall have commenced the salvage in spite of the
opposition of the captain or his representative; and
3) he who shall have failed to comply with the provision of section 3. MEANING OF FOREIGN TRADE
TOWAGE VS. SALVAGE Transportation of goods between the ports of the Philippines and
ports of foreign countries; “to and from” Philippine ports.
TOWAGE
A contract whereby one vessel pulls another, whether loaded or not PARTIES IN COGSA
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 1. Carrier
expediting her voyage without reference to any circumstances of - includes the charterer who enters into a contract of carriage
danger. with the shipper; charters a vessel and conducts his own business
for his own account.
SALVAGE 2. Shipper
A service rendered by one to the owner of a ship or goods, by his 3. Consignee becomes a party to the contract by reason of either:
own labor preserving the goods or the ship which the owner or a) When he accepted the bill of lading and is trying to
those entrusted with the care of them have either abandoned in enforce the agreement;
distress at sea or are unable to protect and secure. b) Relationship of agency between the consignee and the
shipper/consignor;
Kinds of salvage: c) Unequivocal acceptance of the of the bill of lading
1. Voluntary – compensation is dependent upon success delivered to the consignee with full knowledge of its
2. Rendered under a contract – payable at all events contents; or
3. Under a contract for a compensation – payable only in case of d) Availment of the stipulation pour autrui
success.
GOODS ARE DAMAGED DURING UNLOADING
XI. CARRIAGE OF GOODS BY SEA ACT (COGSA) PHILIPPINES FIRST vs. WALLEM
FACTS: October 2, 1995, Anhui Chemicals Import & Export Corp.
WHEN APPLICABLE loaded on board M/S Offshore Master a shipment consisting of
10,000 bags of sodium sulphate anhydrous, complete and in good
1. Applies suppletorily to the Civil Code if the goods are to be order for transportation to and delivery to the port of Manila for
shipped form a foreign port to the Philippines consignee, L.G. Atkimson Import-Export, covered by a Clean Bill of
2. COGSA is applicable in international maritime commerce. Lading. The BOL reflects the gross weight of the total cargo at
3. It can be applied in domestic sea transportation if agreed upon by 500,200 kilograms. The owner and/or charterer of M/V Offshore
the parties (paramount clause). Master is unknown while the shipper of the shipment is Shanghai
Fareast Ship Business Company. Both are foreign firms doing
ARTICLE 1753, NCC business in the Philippines, thru its local ship agent, respondent
The law of the country to which the goods are to be transported Wallem Philippines.
shall govern the liability of the common carrier for their loss,
destruction or deterioration. October 16, 1995, the shipment arrived at the port of Manila and
was subsequently discharged. It was disclosed during the discharge
WHEN COGSA NOT APPLICABLE that 2,426 bags were in bad order and condition, having sustained
1. When liability is based on a contract of insurance various degrees of spillages and losses. This is evidenced by the Turn
2. In cases of misdelivery of goods Over Survey of Bad Order Cargoes of the arrastre operator, Asian
Terminals. The bad state of the bags is also evinced by the arrastre
operator’s request for bad order survey.
hyaaltar Page 13
Asia Star Freight Services undertook the delivery of the shipment On the other hand, the functions of an arrastre operator involve the
from pier to consignee’s warehouse in Quezon City, while the final handling of cargo deposited on the wharf or between the
inspection was conducted jointly by the cargo surveyor and the establishment of the consignee or shipper and the ship’s tackle.
consignee’s representative. During unloading, it was found and Being the custodian of the goods discharged from a vessel, an
noted that the bags had been discharged in damaged and bad order arrastre operator’s duty is to take good care of the goods and to
condition. It was discovered that 63,065 kgs of the shipment had turn them over to the party entitled to their possession. Handling
sustained unrecovered spillages, while 58,235 kgs had been exposed cargo is mainly the arrastre operator’s principal work so its
and contaminated, resulting in losses due to depreciation and drivers/operators or employees should observe the standards and
downgrading. measures necessary to prevent losses and damage to shipments
under its custody.
April 26, 1996, the consignee filed a formal claim with Wallem for
the value of the damaged shipment, to no avail. Since the shipment It is settled in maritime law jurisprudence that cargoes while being
was insured with petitioner Philippines First Insurance against all unloaded generally remain under the custody of the carrier. In the
risks in the amount of P2,470,213.50, the consignee filed a formal instant case, the damage or losses were incurred during the
claim with petitioner for the damage and losses sustained by the discharge of the shipment while under the supervision of the carrier.
shipment. After evaluating the invoices, the turn-over survey, the Consequently, the carrier is liable for the damage or losses caused
bad order certificate and other documents, petitioner found the to the shipment.
claim to be in order and compensable under the marine insurance As for the 3rd issue, Wallem’s failure to respond to its demand letter
policy. Consequently, petitioner paid the consignee the sum of does not constitute an implied admission of liability. Accoridng to
P397,879.69 and the latter signed a subrogation receipt. Justice Oliver Wendell Holmes: “A failure to answer such adverse
assertions in the absence of further circumstances making an
Petitioner, in the exercise of its right of subrogation, sent a demand answer requisite or natural has no effect as an admission.”
letter to Wallem for recovery of the amount paid. However, despite
receipt of the letter, Wallem did not respond to the claim, thus DELIVERY TO ARRASTRE OPERATOR FOR PURPOSES OF
petitioner instituted an action for damages before the RTC. SEC. 3(6)
RTC ruled in favor of petitioners, ordering respondents to pay. The SECTION 3(6), COGSA
CA reversed and set aside the RTC’s decision. (RTC ruled that it was Unless notice or loss or damage and the general nature of such loss
arrastre operator’s fault, and that arrastre operator should be or damage given in writing to the carrier or his agent at the port of
solidarily liable with shipping company. CA held that there is no discharge or at the time of the removal of the goods into the
solidary liability because it was established that the damages were custody of the person entitled to delivery thereof under the
caused by the arrastre operator) contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of
ISSUE: 1. WON CA erred in not holding that as a common carrier, the lading.
carrier’s duties extend to the obligation to safely discharge the
cargo - YES ASIAN TERMINALS vs. PHILAM INSURANCE
2. WON the carrier should be held liable for the cost of the damaged FACTS: On April 15, 1995, Nichimen Corporation shipped to
shipment - YES Universal Motors Corporation 219 packages containing 120 units of
3. WON Wallem’s failure to answer the extra judicial demand by brand new Nissan Pickup Truck Double Cab 4×2 model, without
petitioner for the cost of the lost/damaged shipment is an implied engine, tires and batteries, on board the vessel S/S Calayan Iris from
admission of the former’s liability for said goods - NO Japan to Manila. The shipment, which had a declared value of
US$81,368 or P29,400,000, was insured with Philam against all risks
HELD: Common carriers, from the nature of their business and for under the marine Policy no. 708-8006717-4.
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods transported by them. The carrying vessel arrived at the port of Manila on April 20, 1995,
Subject to certain exceptions enumerated under Article 1734 of the and when the shipment was unloaded by the staff of ATI, it was
NCC, common carriers are responsible for the loss, destruction, or found that the package marked as 03-245-42K/1 was in bad order.
deterioration of the goods. The extraordinary responsibility of the The Turn Over Survey of bad order cargoes dated April 21, 1995
common carriers last from the time the goods are unconditionally identified two packages, labelled 03-245-42K/1 and 03/237/7CK/2,
placed in the possession of, and received by the carrier for as being dented and broken. Thereafter, the cargoes were stored for
transportation until the same are delivered, actually or temporary safekeeping inside CFS Warehouse in Pier No. 5.
constructively, by the carrier to the consignee, or to the person who
has a right to receive them. On May 11, 1995, the shipment was withdrawn by R.F. Revilla
Customs Brokerage, Inc., the authorized broker of Universal Motors,
For Marine vessels, Article 619 of the Code of Commerce provides and delivered to the latter’s warehouse in Mandaluyong City. Upon
that the ship captain is liable for the cargo from the time it is turned the request of Universal Motors, a bad order survey was conducted
over to him at the dock or afloat alongside the vessel at the port of on the cargoes and it was found that one Frame Axle Sub without
loading, until he delivers it on the shore or on the discharging wharf LWR was deeply dented on the buffle plate while six Frame
at the port of unloading, unless agree otherwise. Assembly with Bush were deformed and misaligned. Owing to the
extent of the damage to said cargoes, Universal Motors declared
Lastly, Section 2 of the COGSA provides that under every contract of them a total loss.
carriage of goods by sea, the carrier in relation to the loading,
handling, stowage, carriage, custody, care, and discharge of such On August 4, 1995, Universal Motors filed a formal claim for
goods, shall be subject to the responsibilities and liabilities and damages in the amount of P643,963.84 against Westwind, ATI and
entitled to the rights and immunities set forth in the Act. Section 3(2) R.F. Revilla Customs Brokerage, Inc. When Universal Motors’
thereof then states that among the carriers’ responsibilities are to demands remained unheeded, it sought reparation from and was
properly and carefully load, handle, stow, carry, keep, care for, compensated in the sum of P633,957.15 by Philam. Accordingly,
and discharge the goods carried.
hyaaltar Page 14
Universal Motors issued a Subrogation Receipt dated November 15, lading. If the loss or damage is not apparent, the notice must be
1995 in favor of Philam. given within three days of the delivery.
On January 18, 1996, Philam, as subrogee of Universal Motors, filed Said notice of loss or damage maybe endorsed upon the receipt for
a Complaint for damages against Westwind, ATI and R.F. Revilla the goods given by the person taking delivery thereof.
Customs Brokerage, Inc. before the Regional Trial Court of Makati
City. The trial court rendered judgment in favour of Philam which The notice in writing need not be given if the state of the goods has
ruling was affirmed by the Court of Appeals modifying the amount at the time of their receipt been the subject of joint survey or
to be paid by Westwind and ATI. inspection.
PETITIONER’S ARGUMENT: In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within
G.R. No. 181319 one year after delivery of the goods or the date when the goods
Petitioner Westwind denies joint liability with ATI for the value of should have been delivered: Provided, That if a notice of loss or
the deformed Frame Axle Sub without Lower in Case No. 03- damage, either apparent or concealed, is not given as provided for
245-42K/1. in this section, that fact shall not affect or prejudice the right of the
Westwind argues that the evidence shows that ATI was already in shipper to bring suit within one year after the delivery of the goods
actual custody of said case when the Frame Axle Sub without Lower or the date when the goods should have been delivered.
inside it was misaligned from being compressed by the tight cable
used to unload it. S/S “Calayan Iris” arrived at the port of Manila on April 20, 1995,
Accordingly, Westwind ceased to have responsibility over the and the subject cargoes were discharged to the custody of ATI the
cargoes as provided in paragraph 4 of the Bill of Lading which next day. The goods were then withdrawn from the CFS Warehouse
provides that the responsibility of the carrier shall cease when the on May 11, 1995 and the last of the packages delivered to Universal
goods are taken into the custody of the arrastre. Motors on May 17, 1995. Prior to this, the latter filed a Request for
Bad Order Survey on May 12, 1995 following a joint inspection
Westwind contends that sole liability for the damage rests on ATI where it was discovered that six pieces of Chassis Frame Assembly
since it was the latter’s stevedores who operated the ship’s gear to from two bundles were deformed and one Front Axle Sub without
unload the cargoes. Lower from a steel case was dented. Yet, it was not until August 4,
Westwind reasons that ATI is an independent company, over whose 1995 that Universal Motors filed a formal claim for damages against
employees and operations it does not exercise control. Moreover, it petitioner Westwind.
was ATI’s employees who selected and used the wrong cable to lift
the box containing the cargo which was damaged. Even so, we have held in Insurance Company of North America v.
Asian Terminals, Inc. that a request for, and the result of a bad order
Westwind likewise believes that ATI is bound by its acceptance of examination, done within the reglementary period for furnishing
the goods in good order despite a finding that Case No. 03- notice of loss or damage to the carrier or its agent, serves the
245-42K/1 was partly torn and crumpled on one side. Westwind also purpose of a claim. A claim is required to be filed within the
notes that the discovery that a piece of Frame Axle Sub without reglementary period to afford the carrier or depositary reasonable
Lower was completely deformed and misaligned came only on May opportunity and facilities to check the validity of the claims while
12, 1995 or 22 days after the cargoes were turned over to ATI and facts are still fresh in the minds of the persons who took part in the
after the same had been hauled by R.F. Revilla transaction and documents are still available.
Customs Brokerage, Inc.
Here, Universal Motors filed a request for bad order survey on May
Westwind further argues that the CA erred in holding it liable 12, 1995, even before all the packages could be unloaded to its
considering that Philam’s cause of action has prescribed since the warehouse.
latter filed a formal claim with it only on August 17, 1995 or four
months after the cargoes arrived on April 20, 1995. Westwind Moreover, paragraph (6), Section 3 of the COGSA clearly states that
stresses that according to the provisions of clause 20, paragraph 2 of failure to comply with the notice requirement shall not affect or
the Bill of Lading as well as Article 366 of the Code of Commerce, prejudice the right of the shipper to bring suit within one year after
the consignee had until April 20, 1995 within which to make a claim delivery of the goods.
considering the readily apparent nature of the damage, or until April
27, 1995 at the latest, if it is assumed that the damage is not readily Petitioner Philam, as subrogee of Universal Motors, filed the
apparent. Complaint for damages on January 18, 1996, just eight months after
all the packages were delivered to its possession on May 17, 1995.
ISSUE: Has Philam’s action for damages prescribed? Evidently, petitioner Philam’s action against petitioners Westwind
and ATI was seasonably filed.
RULING:
As to prescription NOTICE OF CLAIM
The prescriptive period for filing an action for the loss or damage of 1. If loss or damage is apparent – notice must be given immediately
the 2. If loss or damage is not apparent – notice must be given within 3
goods under the COGSA is found in paragraph (6), Section 3, thus: days from delivery.
(6) Unless notice of loss or damage and the general nature of such Non-compliance with the notice requirement shall not prejudice the
loss or damage be given in writing to the carrier or his agent at the right of the shipper to bring suit within 1 year from delivery of the
port of discharge before or at the time of the removal of the goods goods or the date when the goods should have been delivered.
into the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of
hyaaltar Page 15
which may be imputed to it is limited only to US$8,500.00 pursuant
PACKAGE LIABILITY LIMITATION to the Carriage of Goods by Sea Act (COGSA).
PHILAM INSURANCE vs. HEUNG-A HEUNG-A: it is not the carrier insofar as NOVARTIS is concerned. The
“The liability of HEUNG-A is limited to $500 per package or pallet carrier was either PROTOP, a freight forwarder considered as a
because in case of the shipper’s failure to declare the value of the non-vessel operating common carrier or DONGNAMA which
goods in the bill of lading, Section 4, paragraph 5 of the COGSA provided the container van to PROTOP. HEUNG-A denied being the
provides that neither the carrier nor the ship shall in any event be or carrier of the subject shipment. Is only obligation was to provide
become liable for any loss or damage to or in connection with the DONGNAMA a space on board M/V Heung-A Bangkok V-019.
transportation of goods in an amount exceeding $500 per package.”
RULING OF THE RTC: The damage to the shipment occurred onboard
FACTS: NOVARTIS imported from Jinsuk pallets of roll of Ovaltine the vessel while in transit from Korea to the Philippines. HEUNG-A
Power Glaminated plastic packaging material. JINSUK engaged the was the common carrier of the subject shipment by virtue of the
services of Protop Shipping Corporation to forward the goods to admissions of WALLEM's witness, Ronald Gonzales (Gonzales) that
their consignee, NOVARTIS. Based on Bill of Lading issued by despite the slot charter agreement with DONGNAMA, it was still the
PROTOP, the cargo was on freight prepaid basis and on "shipper’s obligation of HEUNG-A to transport the cargo from Busan, Korea to
load and count" which means that the "container [was] packed with Manila and thus any damage to the shipment is the responsibility of
cargo by one shipper where the quantity, description and condition the carrier to the consignee. Moreover, HEUNG-A failed to present
of the cargo is the sole responsibility of the shipper." Likewise stated evidence showing that it exercised the diligence required of a
in the bill of lading is the name Sagawa Express designated as the common carrier in ensuring the safety of the shipment.
entity in the Philippines which will obtain the delivery contract.
WALLEM was held liable as HEUNG-A's ship agent in the Philippines
PROTOP shipped the cargo through Dongnama Shipping which in while PROTOP was adjudged liable because the damage sustained
turn loaded the same on M/V Heung-A Bangkok owned and by the shipment was due to the bad condition of the container van.
operated by Heung-A Shipping Corporation pursuant to a ‘slot Also, based on the statement at the back of the bill of lading, it
charter agreement’ whereby a space in the latter’s vessel was assumed responsibility for loss and damage as freight forwarder.
reserved for the exclusive use of the former. Wallem Philippines is
the ship agent of HEUNG-A in the Philippines. NOVARTIS insured the RULING OF THE CA: The CA agreed with the RTC that PROTOP,
shipment with Philam Insurance Company under All HEUNG-A and WALLEM are liable for the damaged shipment.
Risk Marine Open Insurance Policy. The vessel arrived at the port of Moreover, the proximate cause of the damage was the failure of
Manila. HEUNG-A to inspect and examine the actual condition of the sea van
before loading it on the vessel. Also, proper measures in handling
It was found that the boxes of the shipment were wet and damp. and stowage should have been adopted to prevent seepage of sea
Since the damaged packaging materials might contaminate the water into the sea van.
product they were meant to hold, the inspector of NAVORTIS
rejected the entire shipment. The CA limited the liability of PROTOP, WALLEM and HEUNG-A to
US$8,500.00 pursuant to the liability limitation under the COGSA
NOVARTIS demanded indemnification for the lost/damaged since the shipper failed to declare the value of the subject cargo in
shipment from PROTOP, SAGAWA, ATI and STEPHANIE but was the bill of lading and since they could not be made answerable for
denied. Insurance claims which were granted. Philam subrogated to the two (2) unaccounted pallets because the shipment was on a
the rights of NOVARTIS. "shipper's load, count and seal" basis.
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied ISSUE:

liability for the lost/damaged shipment 1) Whether the shipment sustained damage while in the possession
and custody of HEUNG-A, and if so, whether HEUNG-A's liability can
SAGAWA: denied that it is the ship agent of PROTOP and argued be limited to US$500 per package pursuant to the COGSA;
that a ship agent represents the owner of the vessel and not a mere 2) Whether or not NOVARTIS/PHILAM failed to file a timely claim
freight forwarder like PROTOP. SAGAWA averred that its only role against HEUNG-A and/or WALLEM.
with respect to the shipment was to inform NOVARTIS of its arrival
in the Philippines and facilitate the surrender of the original bill of RULING: Common carriers, as a general rule, are presumed to have
lading issued by PROTOP. been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed.
ATI: baseless complaint. ATI averred that it exercised due care and That is, unless they prove that they exercised extraordinary
diligence in handling the subject container. diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving
STEPHANIE: its only role with respect to the shipment was its that they observed such diligence. As the carrier of the subject
physical retrieval from ATI and thereafter its delivery to NOVARTIS. shipment, HEUNG-A was bound to exercise extraordinary diligence
That entire time, the sealwas intact and not broken. in conveying the same and its slot charter agreement with
DONGNAMA did not divest it of such characterization nor relieve it
WALLEM: alleged that the damage and shortages in the shipment of any accountability for the shipment. However, the liability of
were the responsibility of the shipper, JINSUK, because it was taken HEUNG-A is limited to $500 per package or pallet because in case of
on board on a "shipper’s load and count" basis which means that it the shipper’s failure to declare the value of the goods in the bill of
was the shipper that packed, contained and stuffed the shipment in lading, Section 4, paragraph 5 of the COGSA provides that neither
the container van without the carrier’s participation. The container the carrier nor the ship shall in any event be or become liable for
van was already sealed when it was loaded on the vessel and hence, any loss or damage to or in connection with the transportation of
the carrier was in no position to verify the condition and other goods in an amount exceeding $500 per package.
particulars of the shipment. WALLEM claimed to have exercised due
care and diligence in handling the shipment. Any liability “Per steel drum”/”per pallet” = “per package”
hyaaltar Page 16
that when the said nine-month period is contrary to any law
PRESCRIPTION compulsory applicable, the period prescribed by the said law shall
apply. The present case involves lost or damaged cargo. It has long
Where to reckon? been settled that in case of loss or damage of cargoes, the one-year
SECTION 3 (6), COGSA prescriptive period under the COGSA applies. It is at this juncture
The carrier and the ship shall be discharged from all liability in where the parties are at odds, with Pioneer Insurance claiming that
respect of loss or damage unless suit is brought within one year the one-year prescriptive period under the COGSA governs; whereas
after delivery of the goods or the date when the goods should have APL insists that the nine-month prescriptive period under the Bill of
been delivered: Provided, that, if a notice of loss or damage, either Lading applies. A reading of the Bill of Lading between the parties
apparent or concealed, is not given as provided for in this section, reveals that the nine-month prescriptive period is not applicable in
that fact shall not affect or prejudice the right of the shipper to all actions or claims. As an exception, the nine-month period is
bring suit within one year after the delivery of the goods or the date inapplicable when there is a different period provided by a law for a
when the goods should have been delivered. particular claim or action. Thus, it is readily apparent that the
exception under the Bill of Lading became operative because there
Prescriptive period was a compulsory law applicable which provides for a different
Suit for loss or damage to the cargo must be brought within 1 year prescriptive period. Hence, strictly applying the terms of the Bill of
from: Lading, the one-year prescriptive period under the COGSA should
1. Delivery of the goods, or govern because the present case involves loss of goods or cargo.
2. The date when the goods should be delivered.
(tl;dr, the 9-month prescriptive period in the BoL is a valid
The one-year prescriptive period does not apply to cases of stipulation and would have applied if not for the qualification that
misdelivery or conversion. the 9-month period would not apply if there is a compulsory law
applicable. Since in this case there’s a compulsory law applicable
EFFECT OF TRANSSHIPMENT which is COGSA, that’s why COGSA was applied instead.)
THE AMERICAN INSURANCE COMPANY vs. COMPANIA MARITIMA
SC: According to paragraph 4 of the amended complaint the cargo SUSPENSION OF PRESCRIPTIVE PERIOD BY PARTIES
was loaded on board the "M/S TOREADOR" in New York, "freight
prepaid to Cebu City . . . pursuant to the bill of lading No. 13." In 1. Modification in the prescriptive period
other words, the action is based on the contract of carriage up to
the final port of destination, which was Cebu City, for which the THE HAMBURG RULES
corresponding freight had been prepaid. Article 20(4) – Agreement of the parties
The transshipment of the cargo from Manila to Cebu was not a The person against whom a claim is made may at any time during
separate transaction from that originally entered into by Macondray, the running of the limitation period extend that period by a
as general agent for the "M/S TOREADOR". It was part of declaration in writing to the claimant. This period may be further
Macondray's obligation under the contract of carriage and the fact extended by another declaration or declarations.
that the transshipment was made via an inter-island vessel did not
operate to remove the transaction from the operation of the 2. Exchange of correspondence
Carriage of Goods by Sea Act.
UNIVERSAL SHIPPING vs. IAC
The one-year period starts on the day of delivery to Cebu. 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
WHAT IF THERE IS A LETTER OF CREDIT? the parties for in such a case, their agreement becomes the law for
UNSWORTH TRANSPORT INTERNATIONAL vs. CA them.
SC rejected CA’s contention that COGSA limitation of $500 per
package should not apply considering that a higher value was In this case, the period was suspended because of the exchange of
declared pursuant to the letter of credit and the pro forma invoice. communication by the parties. It was considered by the court that
Insertion of the words "L/C No. LC No. 1-187-008394/ NY 69867 they have mutual agreed to extend the time to file the suit.
covering shipment of raw materials for pharmaceutical Mfg. x xx"
cannot be the basis of petitioner's liability and invoice number does TN: The circumstances in this are peculiar and cannot be applied in
not in itself sufficiently and convincingly show that petitioner had all cases.
knowledge of the value of the cargo.
3. Implied admission
In the present case, the shipper did not declare a higher valuation of
the goods to be shipped (meaning, letters of credit and letters of CUA vs. WALLEM
invoice are not enough to establish the value of the goods; it should In the allegations of his complaint, petitioner alleged that they have
be stated in the bill of lading). Petitioners liability should be limited agreed to extend the prescriptive period. When the defendant
to $500 per steel drum. In this case, as there was only one drum lost, answered, it was not specifically denied. So the court said that it
private respondent is entitled to receive only $500 as damages for was a presumed admission.
the loss.
Therefore, there was no prescription.
IS A STIPULATED SHORTER PRESCRIPTIVE PERIOD ALLOWED?
PIONEER INSURANCE vs. APL CO. PTE. LTD. 4. Amended complaint
SC: In the Bill of Lading, it was categorically stated that the carrier
shall in any event be discharged from all liability whatsoever in WALLEN PHILS vs. SR FARMS
respect of the goods, unless suit is brought in the proper forum The one year prescriptive period is reckoned not from the filing of
within nine (9) months after delivery of the goods or the date when the original complaint, but from the filing of the amended
they should have been delivered. The same, however, is qualified in complaint.
hyaaltar Page 17
Precisely, the question before the trial court is not the particular
5. Fault attributable to insurer sense of "damages" as it refers to the physical loss or damage of a
NEW WORLD vs. SEABOARD shipper's goods as specifically covered by Section 3(6) of COGSA but
petitioner's potential liability for the damages it has caused in the
In this case, the one year already prescribed. But the SC allowed the general sense and, as such, the matter is governed by the Civil Code,
filing of the action because there was fault on the part of the the Code of Commerce and COGSA, for the breach of its contract of
insurance company, the subrogee: carriage with private respondent. The Court concluded by holding
that as the suit is not for "loss or damage" to goods contemplated in
(a) The insurer did not answer the claim. §3(6), the question of prescription of action is governed not by the
(b) The insurer asked for an itemized list of the goods which were COGSA but by Art. 1144 of the Civil Code which provides for a
damaged. prescriptive period of ten years.
(c) There was no rejection of the claim
LIAO vs. APL
The Supreme Court said that the insurer cannot ask for an itemized “..the suit must be brought “within one year after delivery of the
list because the claim was for total loss. So there’s no need for a list goods or the date when the goods should have been delivered.”
of the goods damaged since the claim is total.
FACTS: Plaintiff on July 30 1946, entered into a contract for the
MEANING OF DELIVERY UNDER SECTION 3(6) ON importation of 2,000 cases of fresh hen eggs with Kent Sales Co. Inc,
PRESCRIPTION through the latter’s agent in Manila (People’s Trading). It was to be
shipped on the S.S “Marine Leopard” sailing from New York on
MITSUI V. COURT OF APPEALS August 7, 1946.
FACTS: Mitsui O.S.K Lines is a foreign corporation represented by its
agent, Magsaysay Agencies. It entered into a contract of carriage Upon notification and payment, the Kent Sales Co., Inc. issued on
with private respondent Lavine Mfg. Co. to transport goods of the August 6, 1946 Invoice No. 5070 in favor of plaintiff, and on the
latter from Manila to France. Petitioner failed in its undertaking to same day contracted with the defendant shipping company to have
transport the goods in 28 days from initial loading, hence, private the eggs shipped to Manila on the vessel S.S “Marine Leopard. On
respondent filed a case for the recovery of damages before the RTC. same day, the defendant through its captain received at the pork of
New York 2,000 cases of eggs and loaded them on the ship for
Petitioner moved for the dismissal of the complaint alleging that delivery to plaintiff in Manila.
private respondent cause of action had prescribed under the
Carriage of Goods by Sea Act (COGSA). It was denied by the RTC. Upon arrival in San Francisco, California, on August 30, 1946, the
defendant unloaded the 2,000 cases of eggs from the S.S. "Marine
On petition for certiorari, the Court of Appeals sustained the trial Leopard", which resumed its voyage, arriving in Singapore in
court's order. Hence this petition September, 1946.
ISSUE: WON private respondent's action is for "loss or damage" to The eggs were later shipped on another of defendant's ships, the S.S.
goods shipped, within the meaning of COGSA "General Meigs"on November 27, 1946, which arrived in Manila on
December 26, 1946.
RULING: NO. As defined in the Civil Code and as applied to Section
3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" Plaintiff claimed that the discharge of the cargo at the Port of San
contemplates merely a situation where no delivery at all was made Francisco was wrongful and unjustified and a violation of the bill of
by the shipper of the goods because the same has perished, gone lading which provided that the eggs would be shipped to Manila on
out of commerce, or disappeared in such a way that their existence the S.S “Marine Leopard”;
is unknown or they cannot be recovered.
Plaintiff further claimed that the eggs were exposed to the hot
Conformably with this concept of what constitutes "loss" or summer weather without having placed in refrigeration and that
"damage," the Court held in another case that the deterioration of because of the delay in the shipment and the careless and repeated
goods due to delay in their transportation constitutes "loss" or handling of the cases of eggs by mechanical devices, a substantial
"damage" within the meaning of Section 3(6), so that as suit was not number of them arrived broken and damaged; 587 were broken,
brought within one year the action was barred. with the eggs contained therein in leaking condition; while the rest
of the eggs in 1,413 cases were in a state of deterioration.
In Ang v. American Steamship Agencies, Inc. the question was
whether an action for the value of goods which had been delivered Upon recommendation of the surveyors, plaintiff immediately
to a party other than the consignee is for "loss or damage" within disposed of the eggs, realizing from the sale only the amount of
the meaning of §3(6) of the COGSA. It was held that there was no P27,300. He argued that had there been no delay, plaintiff would
loss because the goods had simply been misdelivered. "Loss" refers have been able to sell each case of egg for P60, or the entire
to the deterioration or disappearance of goods. shipment for the total sum of P120,000 thereby realizing a profit of
P92,755 on his total investment.
In the case at bar, there is neither deterioration nor disappearance
nor destruction of goods caused by the carrier's breach of contract. Having sold it only for P27,300, he suffered a loss of 92,700 plus the
Whatever reduction there may have been in the value of the goods sum of P55 which he paid the marine surveyors who inspected the
is not due to their deterioration or disappearance because they had cargo.
been damaged in transit. Indeed, what is in issue in this petition is
not the liability of petitioner for its handling of goods as provided by Defendant, upon the other hand, alleged in defense that under the
Section 3(6) of the COGSA, but its liability under its contract of terms of the Bill of Lading Exhibit B, it was at liberty to tranship the
carriage with private respondent as covered by laws of more cargo in question on any other vessel.
general application.
hyaaltar Page 18
It also claimed that when the eggs were discharged in San Francisco, filed within the period of one year from delivery or receipt, under
they were immediately brought to the storage plant of the National the above-quoted provision of the Carriage of Goods by Sea Act.
Ice and Cold Storage. Hence, if they arrived in Manila in deteriorated
condition, it was because of the inherent nature or defect of the Lastly, the appellant argues that assuming that his action against the
eggs. On the issue of delay in the transshipment of the cargo, it defendant prescribes in one year, it accrued not upon the receipt of
raised that was due to the strike of the union of longshoremen in his goods, but upon denial of his claim for damages by the
the western coast of the United States from September to defendant on February 16, 1498.
November, 1947, although when the goods were unloaded in San
Francisco, there was yet no threat of a strike; and that immediately This claim is clearly without merit, for the law in question clearly
after the strike, the cargo was loaded and transported on the S.S. requires that the suit must be brought “within one year after
"General Meigs." delivery of the goods or the date when the goods should have been
delivered.”
The defendant also alleged by special defense while plaintiff
received the goods in question on December 26, 1946, he filed a Decision is affirmed.
claim with defendant for damages only on July 25, 1947 (denied on
February 16, 1948), and brought suit on May 25, 1948 which is more INVOCATION OF ARRASTRE OPERATOR OF
than a year from the receipt of the goods. Being filed more than a PRESCRIPTION
year from the time the plaintiff received the goods, the defendant
argues that plaintiff's action had prescribed under section 3, INSURANCE CO. OF NA vs. ASIAN TERMINALS
paragraph 6 of the Carriage of Goods by Sea Act. COGSA does not apply to arrastre operators. Section 3 (6) of COGSA
applies only to carriers. “Carrier” under Section 1 of COGSA includes
The trial court found that the plaintiff suffered a loss of P25,896.81 the owner or the charterer who enters into a contract of carriage
by reason of the delayed arrival of his cargo of eggs. The court with a shipper. Consequently, not being a common carrier, an
however found defendant’s defense of prescription meritorious and arrastre operator cannot invoke the prescriptive period of one year.
so dismissed the case. From the dismissal, plaintiff appealed to this
Court. XII. PUBLIC UTILITIES
ISSUE: Whether or not the present case does not fall within the
PUBLIC UTILITY
prescriptive period provided in Section 3 of the Carriage of the
Goods by Sea Act
A “public utility” is a business service engage in regular supplying
RULING: Appellant argues that section 3 of COGSA only applies to a the public with some commodity or service of public consequence
suit or action for loss or damage, either apparent or concealed and such as electricity, gas, water, transportation, telephone or
does not apply for a breach of contract of carriage on the part of the telegraph service. The term implies public use and service, e.g. the
carrier, as in this case, where it is guilty of delay in the shipment of Water District is public utility.
the goods, causing losses or damages to the consignee
PUBLIC SERVICE
The distinction drawn is more apparent than real. Any and all injury
or damages suffered by the goods, while in transit and in the The term “public service” (Sec 13 of the Public Service Act) includes
custody of the carrier amounts to a breach of the contract of every person that may own, operate, manage or control in the
carriage, unless due to fortuitous event. Thus the carrier is bound to Philippines, for hire or for compensation, with general or limited
transport the goods safely and so breaches its contract if it neglects clientele, whether permanent, occasional/ accidental, & done with
such duty. general business purposes, any common carrier, etc; will not only
refer to land transpo. but also include telecommunications, railroads,
Appellant furthermore urges that the action or suit referred to in vessels etc.
the provision in question refers only to loss or damage to the goods
in relation to their "loading, handling, storage, carriage, custody, FRANCHISE
care, and discharge"
The term “franchise” includes not only authorization issuing directly
The argument is equally untenable. The obligation of the carrier to from Congress in the form of a Statute, but also those granted by
carry the goods naturally includes the duty not to delay their administrative agencies to which the power to grant franchise has
transportation, so unjustified delay, the carrier is held liable been delegated by Congress.
therefore liable.
CERTIFICATEOF PUBLIC CONVENIENCE (CPC)
The appellant also argues by making a distinction between damage
to the goods and damages to the shipper or consignee, and claims An authorization issued for the operation of public services for
that while the former falls within the prescriptive period in question, which no franchise, either municipal or legislative, is required by law,
the latter is governed by the provisions of the Code of Commerce on such as a common carrier.
limitation of actions.
Under the Public Service Law, a certificate of public convenience can
We see no difference. Whatever damage or injury is suffered by the be sold by the holder thereof because it has considerable material
goods while in transit would result in loss or damage to either the value and is considered a valuable asset (Raymundo v. Luneta Motor
shipper or consignee. Co., G.R. No. 39902, Nov. 29, 1933).
As long as it is claimed, therefore, as it is done here, that the losses Does the CPC confer upon the holder any proprietary right or
or damages suffered by the shipper or consignee were due to the interest in the route covered thereby?
arrival of the goods in damaged or deteriorated condition, the
action is still basically one for damage to the goods, and must be
hyaaltar Page 19
No. (Luque v. Villegas, G.R. No. L-22545, Nov. 28, 1969). However,
REGULATORY AGENCIES AND THEIR FUNCTIONS
with respect to other persons and other public utilities, a certificate
of public convenience as property, which represents the right and
authority to operate its facilities for public service, cannot be taken LAND TRANSPORTATION OFFICE (LTO)
or interfered with without due process of law. Appropriate actions
may be maintained in courts by the holder of the certificate against Functions:
those who have not been authorized to operate in competition with 1. Inspection and Registration of Motor Vehicles
the former and those who invade the rights which the former has 2. Issuance of Licenses and Permits
pursuant to the authority granted by the Public Service Commission 3. Enforcement of Land Transportation Rules and Regulations
(A.L. Animen Transportation Co. v. Golingco, G.R. No. 17151, Apr. 6, 4. Adjudication of Traffic Cases
1922)
LAND TRANSPORTATION FRANCHISING AND
What are the requirements for the grant of certificate of public REGULATORY BOARD (LTFRB)
convenience?
SEC. 5, EXECUTIVE ORDER NO. 202
1. Applicant must be a citizen of the Philippines. If the applicant is a
Corporation, 60% of its capital must be owned by Filipinos SEC. 5. Powers and Functions of the Land Transportation
2. Applicant must prove public necessity
Franchising and Regulatory Board. – The Board shall have the
3. Applicant must prove the operation of proposed public service
following
will promote public interest in a proper and suitable manner; and
4. Applicant must have sufficient financial capability to undertake powers and functions :
proposed services and meeting responsibilities incidental to its
operation. (Kilusang Mayo Uno v. Garcia G.R. No. 108584, Dec. 22, a. To prescribe and regulate routes of service, economically viable
1994) capacities and zones or areas of operation of public land
transportation services provided by motorized vehicles in
accordance with the public land transportation development plans
CERTIFICATEOF PUBLIC CONVENIENCE AND
and programs approved by the Department of Transportation and
NECESSITY (CPCN)
Communications;
Certificate of Public Convenience (CPC) plus franchise b. To issue , amend, revise, suspend or cancel Certificates of Public
Convenience or permits authorizing the operation of public Land
Difference between CPC and CPCN Transportation services provided by motorized vehicles, and to
CPC CPCN prescribe the appropriate terms and conditions therefore;
Does not need a franchise Needs a franchise
c. To determine, prescribe and approve and periodically review and
Granted by delegates Granted by Congress
adjust, reasonable fares, rates and other related charges, relative to
Example: Vessels, taxis Example: Electric,
the operation of public land transportation services provided by
Telecommunications
motorized vehicles;
RULES TO BE APPLIED BY THE REGULATORY AGENCIES d. To issue preliminary or permanent injunctions, whether
ASIDE FROM PUBLIC INTEREST prohibitory or Mandatory, in all cases in which it has jurisdiction,
and in which cases the pertinent provisions of the Rules of Court
While public interest, convenience and necessity is the controlling shall apply;
policy, the regulating administrative bodies previously applied
e. To punish for contempt of the Board, both direct and indirect, in
different policies and rules such as:
accordance with the pertinent provisions of, and the penalties
prescribe by, the Rules of Court;
1. The prior operator rule - the Public Service Commission will not
issue a certificate of public convenience to a second operator if f. To issue subpoena and subpoena duces tecum and to summon
there is a first operator who is rendering sufficient, adequate and witnesses to appear in any proceedings of the Board, to administer
satisfactory service, and who in all things and respects is complying oaths and affirmations;
with the rules and regulations of the Commission.
g. To conduct investigations and hearings of complaints for violation
2. Prior applicant rule - priority in the filing of the application for a
of the public service laws on land transportation and of the Board’s
certificate of public convenience is, other conditions being equal, an
rules and regulations, orders, decisions and/ or ruling and to impose
important factor in determining the rights of the public service
fines and/ or penalties for such violations;
companies.
3. Third operator rule - where two operators are more than serving h. To review motu propio the decisions/actions of the Regional
the public there is no reason to permit a third operator to engage in Franchising and Regulatory Office herein created;
competition with them.
4. Protection of investment rule - it is the duty of the government i. To promulgate rules and regulations governing proceedings before
to protect the investment of the operators of public utilities; to the Board and the Regional Franchising and Regulatory Office:
protect said operators from unfair, unjustified and ruinous Provided, That except with respect to paragraphs d,e,f and g hereof,
competition. the rules of procedure and evidence prevailing in the courts of law
should not be controlling and it is the spirit and intention of said
rules that the Board and the Regional Franchising and Regulatory
Offices shall use every and all reasonable means to ascertain facts in
its case speedily and objectively and without regard to technicalities
of law and procedures, all in the interest of due process;
j. To fix, impose and collect, and periodically review and adjust,
reasonable fees and other related charges for services rendered;
hyaaltar Page 20
k. To formulate. Promulgate, administer, implement and enforce (k) Establish and prescribe rules and regulations, standards and
rules and Regulations on land transportation public utilities, procedures for the efficient and effective discharge of the above
standard of measurements and/ or design, and rules and regulations functions;
requiring operators of any public land transportation service to
(l) Perform such other functions as may now or hereafter be
equip, install and provide in their stations such devices, equipment
provided by law.
facilities and operating procedures and techniques as may promote
safety, protection, comfort and convenience to persons and
property in their charges as well as the safety of persons and PHILIPPINE COAST GUARD (PCG)
property within their areas of operations;
SEC. 3, R.A. 9993
l. To coordinate and cooperate with other government agencies and
entities Concerned with any aspect involving public land
Section 3. Powers and Functions. - The PCG shall have the following
transportation
powers and functions:
services with the end in view of effecting continuing improvement
(a) To enforce regulations in accordance with all relevant maritime
of such services; and
international conventions, treaties or instruments and national laws
m. To perform such other functions and duties as may be provided for the promotion of safety of life property at sea within the
by law, as may be provided by law, as may be necessary, or proper maritime jurisdiction of the Philippines and conduct port state
or incidental to the purposes and objectives of this Executive Order. control implementation;
(b) To inspections on all merchant ships and vessels, including but
MARITIME INDUSTRY AUTHORITY (MARINA) shall not be limited to inspections prior to departure, to ensure and
enforce compliance with safety standards, rules and regulations;
SEC. 12, E.O. 125 AS AMENDED BY E.O. 125-A
(c) To detain, stop or prevent a ship or vessel which does not comply
with safety standards, rules and regulations from sailing or leaving
Sec. 12. Maritime Industry Authority. The Maritime Industry
port;
Authority is hereby retained and shall have the following functions:
(d) To conduct emergency readiness evaluation on merchant marine
(a) Develop and formulate plans, policies, programs, projects,
vessels;
standards, specifications and guidelines geared toward the
promotion and development of the maritime industry, the growth (e) Subject to the approval of the Secretary of the DOTC, to issue
and effective regulation of shipping enterprises, and for the national and enforce rules and regulation for the promotion of safety and life
security objectives of the country; and property at sea on all maritime-related activities;
(b) Establish, prescribe and regulate routes, zones and/or areas of (f) To coordinate, develop, establish, maintain and operate aids to
operation of particular operators of public water services; navigation, vessel traffic system, maritime communications and
search and rescue facilities within the maritime jurisdiction of the
(c) Issue Certificates of Public Convenience for the operation of
Philippines;
domestic and overseas water carriers;
(g) To remove, destroy or low to port, sunken or floating hazards to
(d) Register vessels as well as issue certificates, licenses or
navigation, including illegal fish and vessels, at or close to sea lanes
documents necessary or incident thereto;
which may cause hazards to the marine environment;
(e) Undertake the safety regulatory functions pertaining to vessel
(h) To issue permits for the salvage of vessels and to supervise all
construction and operation including the determination of manning
marine salvage operations, as well as prescribe and enforce rules
levels and issuance of certificates of competency to seamen;
and regulations governing the same;
(f) Enforce laws, prescribe and enforce rules and regulations,
(i) To render aid to persons and vessels in distress and conduct
including penalties for violations thereof, governing water
search rescue in marine accidents within the maritime jurisdiction of
transportation and the Philippine merchant marine, and deputize
the Philippines, including the high seas, in accordance with
the Philippine Coast Guard and other law enforcement agencies to
applicable international conventions. In the performance of this
effectively discharge these functions;
function, the PCG may enlist the services of other government
(g) Undertake the issuance of licenses to qualified seamen and agencies and the merchant marine fleet;
harbor, bay and river pilots;
(j) To investigate the inquire into the causes of all maritime
(h) Determine, fix and/or prescribe charges and/or rates pertinent accidents involving death, casualties and damage to properties;
to the operation of public water transport utilities, facilities and
(l) To assist in the enforcement of laws on fisheries, immigration,
services except in cases where charges or rates are established by
tariff and customs, forestry, firearms and explosives, human
international bodies or associations of which the Philippines is a
trafficking, dangerous drugs and controlled chemicals, transnational
participating member or by bodies or associations recognized by the
crimes and other applicable laws within the maritime jurisdiction of
Philippine Government as the proper arbiter of such charges or
the Philippines;
rates.
(m) To board and inspect all types of merchant ships and
(i) Accredit marine surveyors and maritime enterprises engaged in
watercrafts in the performance of this functions;
shipbuilding, shiprepair, shipbreaking, domestic and overseas
shipping ship management and agency; (n) To enforce laws and promulgated and administer rules and
regulations for the protection of marine environment and resources
(j) Issue and register the continuous discharge book of Filipino
from offshore sources or pollution within the maritime jurisdiction
seamen;
of the Philippines;
(o) To develop oil spill response, containment and recovery
capabilities against ship-based pollution;
hyaaltar Page 21
(p) To grant, within the capabilities and consistent with its mandate, authorized to grant any foreign airline increase in frequencies
requests for assistance of other government agencies in the and/or capacities on international routes when in its judgment the
performance of their functions; national interest requires it, provided that the utilization of the
increase frequencies and capacities is not more than thirty days. All
(q) To organize, train and supervise the PCG Auxiliary (PCGA) for the
grants of frequencies and/or capacities shall be subject to the
purpose of assisting the PCG in carrying out its mandated functions;
approval of the President.
and
(4) To approve or disapprove increase and/or decrease of capital,
(r) To perform such other functions that may be necessary in the
lease, purchase, sales of aircraft of air carrier engaged in air
attainment of the objectives of this Act.
commerce; consolidation, merger, purchase, lease and acquisition
and control of operating contracts between domestic foreign air
CIVIL AERONAUTICS BOARD (CAB) carriers, or between domestic air carriers or any person engaged in
any phase of aeronautics.
SEC. 10, R.A. 776
(5) To inquire into the management of the business of any air carrier
SECTION 10. Powers and duties of the Board. - (A) Except as
and, to the extent reasonably necessary for such inquiry, to obtain
otherwise provided herein, the Board shall have the power to
from such carrier, and from any person controlling, or controlled by,
regulate the economic aspect of air transportation, and shall have
or under common control with, such air carrier, full and complete
the general supervision and regulation of, the jurisdiction and
reports and other informations. Such reports shall be under oath
control over, air carriers, general sales agents, cargo sales agents,
whenever the Board so requires.
and airfreight forwarders as well as their property, property rights,
equipment, facilities, and franchise, in so far as may be necessary (6) To require annual, monthly, periodical, and special reports from
for the purpose of carrying out the provisions of this Act. any air carrier, to prescribe the manner and form in which such
reports shall be made, and to require from any air carrier specific
(B) The Board may perform such acts, conduct such investigations,
answers to all questions upon which the Board may deem
issue and amend such orders, and make and amend such general
information to be necessary. Such reports shall be under oath
and special rules, regulations, and procedures as it shall deem
whenever the Board so requires. The Board may also require any air
necessary to carry out the provisions of this Act.
carrier to file with it any contract, agreement, understanding or
(C) The Board shall have the following specific powers and duties: arrangement, or a true copy thereof, between such air carrier and
any other carrier or person, in relation to any traffic affected by the
(1) In accordance with the provisions of Chapter 4 of this Act, to provisions of this Act.
issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke,
in whole or in part, upon petition or complaint, or upon its own (7) To prescribe the forms of any and all accounts, records, and
initiative, any temporary operating permit or Certificate of Public memoranda of the movement of traffic, as well as of the receipts
Convenience and Necessity; Provided, however, That in the case of and expenditures of money, and the length of times such accounts,
foreign air carriers, the permit shall be issued with the approval of records and memoranda shall be preserved: Provided, that any air
the President of the Republic of the Philippines. carrier may keep additional accounts, records, or memoranda if
they do not impair the integrity of the accounts, records, or
(2) To fix and determine reasonable individual, joint or special rates, memoranda prescribed or approved by the Board and do not
charges or fares, which an air carrier may demand, collect or receive constitute an undue financial burden on such air carrier.
for any service in connection with air commerce. The Board may
adopt any original, amended, or new individual, joint or special rates, (8) To require each officer and director of any air carrier to transmit
charges or fares proposed by an air carrier if the proposed a report describing the shares of stock with any persons engaged in
individual, joint, or special rates, charges for fares are not unduly any phase or other interest held by such air carrier of aeronautics,
preferential or unduly discriminatory or unreasonable. The burden and the holding of the stock in and control of, other persons
of proof to show that the proposed individual, joint or special rates, engaged in any phase of aeronautics.
charges or fares are just and reasonable shall be upon the air carrier
(D) The Board may investigate, upon complaint or upon its own
proposing the same.
initiative whether any individual or air carrier, domestic or foreign,
In fixing rates, charges, fares under the provisions of this Act, the is violating any provision of this Act, or the rules and regulations
Board shall take into consideration, among other factors: issued thereunder, and shall take such action consistent with the
provisions of this Act, as may be necessary to prevent further
(a) The effect of such rates upon the movement of traffic; violation of such provision, or rules and regulations so issued.
(b) The need in the public interest of adequate and (E) The Board may issue subpoena or subpoena duces tecum require
efficient transportation of persons and property by air carriers at the attendance and testimony of witness in any matter or inquiry
the lowest cost consistent with the furnishing of such service. pending before the Board or its duly authorized representatives,
and require the production of books, papers, tariffs, contracts,
(c) Such standards respecting the character and quality of service to agreements and all other documents submitted for purposes of this
be rendered by air carriers as may be prescribed by or pursuant to section to be under oath and verified by the person in custody
law; thereof as to the truth and correctness of data appearing in such
(d) The inherent advantages of transportation by aircraft; and books, papers, tariffs, contracts, agreements and all other
documents.
(e) The need of each air carrier for revenues sufficient to enable
(F) The Board may review, revise, reverse, modify or affirm on
such air carrier, under honest, economical, and efficient appeal any administrative decision or order of the Administrator on
management, to provide adequate and efficient air carrier service. matter pertaining to:
(3) To authorize any type of charters whether domestic or (1) Grounding of airmen and aircraft or
international and special air services or flight under such terms and
conditions as in its judgment public interest requires. (2) Revocation of any certificate or the denial by the Administrator
Notwithstanding the existence of bilateral air agreement, the CAB is of issuance of any certificate; or
hyaaltar Page 22
(3) Imposition of civil penalty of fine in connection with the violation private business shall be considered in relation with the public
of any provision of this Act or rules and regulations issued service of such operator for the purpose of fixing the rates.
thereunder.
Public interest v. Return of Investment
(G) The Board shall have the power, either on its own initiative or
upon review on appeal from an order or decision of the
The rates prescribed by the State must be one that yields a fair
Administrator, to determine whether to impose, remit, mitigate,
return on the public utility upon the value of the property
increase, or compromise, such fines and civil penalties as the case
performing the service and one that is reasonable to the public for
may be.
the services rendered. The fixing of just and reasonable rates
(H) (1) The Civil Aeronautics Board shall be advised of, and shall involves a balancing of the investor and consumer interests.
consult with the Department of Foreign Affairs concerning the
negotiation of any air agreement with foreign governments for the
promotion, establishment, or development of foreign air LUQUE vs. VILLEGAS (1994)
transportation. FACTS: Two ordinances were issued by the City of Manila and by the
Commissioner of the Public Service Commission. The first ordinance
(2) In exercising and performing its powers and duties under the (by City of Manila) states that Provincial passenger buses and
provisions of this Act, the Civil Aeronautics Board shall take into jeepneys (PUB and PUJ) shall be allowed to enter Manila, but only
consideration the obligation assumed by the Republic of the through the following entry points and routes, from 6:30 A.M. to
Philippines in any treaty, convention or agreement with foreign 8:30 P.M. every day except Sundays and holidays.
countries on matters affecting civil aviation. The other ordinance (issued by the Commissioner) provides that:
CIVIL AVIATION AUTHORITY OF THE PHILIPPINES (CAAP) All such vehicles marked "For Provincial Operation" are
authorized to operate outside the perimeter of Greater
SEC. 2, R.A. 9497 Manila in accordance with their respective certificates of
Sec. 2 of R.A. 9497 provides that “it is hereby declared the policy of public convenience, and are not authorized to enter or to
the State to provide safe and efficient air transport and regulatory operate beyond the boundary line fixed in our order of
services in the Philippines by providing for the creation of a civil March 12, 1963 and July 22, 1963, with the exception of
aviation authority with jurisdiction over the restructuring of the civil those vehicles authorized to carry their provincial
aviation system, the promotion, development and regulation of the passengers thru the boundary line up to their Manila
technical, operational, safety, and aviation security functions under terminal which shall be identified by a sticker signed and
the civil aviation authority.” CAAP is mandated to perform the furnished by the PSC and by the Mayors of the affected
following pursuant to such declared policy: Cities and municipalities, and which shall be carried on a
1. To establish and prescribe rules and regulations for the inspection prominent place of the vehicle about the upper middle
and registration of all aircrafts owned and operated in the part of the windshield.
Philippines and all air facilities;
Petitioners contend it destroys vested rights of petitioning public
2. To establish and prescribe the corresponding rules and services to operate inside Manila and to proceed to their respective
regulations for the enforcement of laws governing air terminals located in the City and impairs the vested rights of
transportation; petitioning bus passengers to be transported directly to downtown
3. To determine, fix and/or prescribe charges and/or rates pertinent Manila. Contending that they possess valid and subsisting
to the operation of public air utility facilities and services; certificates of public convenience, the petitioning public services
aver that they acquired a vested right to operate their public utility
4. To administer and operate the Civil Aviation Training Center vehicles to and from Manila as appearing in their said respective
(CATC); certificates of public convenience.
5. To operate and maintain national airports, air navigation and
other similar facilities in compliance to ICAO; ISSUE: Whether petitioners’ contention that they had already vested
rights on public service is correct
6. To perform such other such other powers and functions as may
be prescribed by law. RULING: A certificate of public convenience constitutes neither a
franchise nor a contract, confers no property right, and is a mere
license or privilege. New and additional burdens, alteration of the
RATE-FIXING certificate, and even revocation or annulment thereof are reserved
to the State.
The regulation of public utilities includes the regulation of the rates
that they are charging the public. Sec. 15, par. (c) of the Public
The Public Service Commission, a government agency vested by law
Service Act provides that the PSC has the power to:
with "jurisdiction, supervision, and control over all public services
and their franchises, equipment, and other properties" is
(c) To fix and determine individual or joint rates, tolls, charges,
empowered, upon proper notice and hearing, amongst others: (1)
classifications, or schedules thereof, as well as commutation,
"[t]o amend, modify or revoke at any time a certificate issued under
mileage, kilometrage, and other special rates which shall be
the provisions of this Act [Commonwealth Act 146, as amended],
imposed, observed and followed thereafter by any public service:
whenever the facts and circumstances on the strength of which said
Provided, That the Commission may, in its discretion, approve rates
certificate was issued have been misrepresented or materially
proposed by public services provisionally and without necessity of
changed"; and (2) "[t]o suspend or revoke any certificate issued
any hearing; but it shall call a hearing thereon within thirty days,
under the provisions of this Act whenever the holder thereof has
thereafter, upon publication and notice to the concerns operating in
violated or willfully and contumaciously refused to comply with any
the territory affected: Provided, further, That in case the public
order, rule or regulation of the Commission or any provision of this
service equipment of an operator is used principally or secondarily
Act: Provided, That the Commission, for good cause, may prior to
for the promotion of a private business, the net profits of said
the hearing suspend for a period not to exceed thirty days any
hyaaltar Page 23
certificate or the exercise of any right or authority issued or granted regulatory body today, is likewise vested with the same under
under this Act by order of the Commission, whenever such step shall Executive Order 202. The delegation of legislative power to an
in the judgment of the Commission be necessary to avoid serious administrative agency is permitted in order to adopt to the
and irreparable damage or inconvenience to the public or to private increasing complexity of modern life. However, nowhere under the
interests." provisions of law are the regulatory bodies such as PSC and LTFRB
Jurisprudence echoes the rule that the Commission is authorized to are authorized to delegate that power to a common carrier, a
make reasonable rules and regulations for the operation of public transport operator or other public service.
services and to enforce them. In reality, all certificates of public
convenience issued are subject to the condition that all public The authority given by the LTFRB to the bus operators to set fares
services "shall observe and comply [with] ... all the rules and over and above the authorized existing fare is illegal and invalid, as
regulations of the Commission relative to" the service. To further it is tantamount to undue delegation of legislative authority. Under
emphasize the control imposed on public services, before any public the maxim potestas delegate non delegari potest “what has been
service can "adopt, maintain, or apply practices or measures, rules, delegated cannot be delegated.” The policy allowing provincial bus
or regulations to which the public shall be subject in its relation with operators to change and increase their fares would result not only
the public service," the Commission's approval must first be had. to a chaotic situation but to an anarchic state of affairs. This would
leave the riding public at the mercy of transport operators who may
It is the State’s right to exercise police power for the benefit of the increase fares, every hour, every day, every month or every year,
many. Reasonable restrictions have to be provided for the use of the whenever it pleases them or whenever they deem it necessary to do
thoroughfares. The operation of public services may be subjected to so. Furthermore, under the Section 16 (a) of Public Service Act,
restraints and burdens, in order to secure the general comfort. No there must be proper notice and hearing in the fixing of rates, to
franchise or right can be availed of to defeat the proper exercise of arrive at a just and reasonable rate acceptable to both the public
police power — the authority "to enact rules and regulations for the utility and the public.
promotion of the general welfare. Public welfare, we have said, lies
at the bottom of any regulatory measure designed "to relieve (2) No. As one of the basic requirements for the grant of CPC, public
congestion of traffic, which is, to say the least, a menace to public convenience and necessity when the proposed facility/service
safety." As a corollary, measures calculated to promote the safety meets a reasonable want of the public and supply a need which the
and convenience of the people using the thoroughfares by the existing facilities do not adequately supply. The existence of
regulation of vehicular traffic, present a proper subject for the existence or non-existence of public convenience and necessity is a
exercise of police power. question of fact that must be established by evidence. Also, an
applicant must be required to
Both Ordinance 4986 and the Commissioner's administrative orders prove his capacity and capability to furnish service. All this will be
fit into the concept of promotion of the general welfare. Expressive possible only if a public hearing were conducted for that purpose.
of the purpose of Ordinance 4986 is Section 1 thereof, thus — "As a
positive measure to relieve the critical traffic congestion in the City MCWD vs. ADALA
of Manila, which has grown to alarming and emergency proportions, FACTS: Adala filed with NWRB for issuance of a Certificate of Public
and in the best interest of public welfare and convenience, the Convenience (CPC) to operate and maintain waterworks system in
following traffic rules and regulations are hereby promulgated." sitios San Vicente, Fatima, and Sambag in Barangay Bulacao, Cebu
Along the same lines, the bus ban instituted by the Commissioner City.
has for its object "to minimize the 'traffic problem in the City of
Manila' and the 'traffic congestion, delays and even accidents' MCWD opposed such. Saying that: (1) petitioner's Board of Directors
resulting from the free entry into the streets of said City and the had not consented to the issuance of the franchise applied for, such
operation 'around consent being a mandatory condition pursuant to P.D. 198, (2) the
proposed waterworks would interfere with petitioner's water supply
said streets, loading and unloading or picking up passengers and which it has the right to protect, and (3) the water
cargoes' of PU buses in great 'number and size.
NWRB dismissed MCWD’s opposition for lack of merit
Police power in both was properly exercised.
ISSUE: Whether MCWD may validly oppose the petition of Adala
KMU vs. GARCIA
FACTS: The Kilusang Mayo Uno Labor Center (KMU) assails the RULING: MCWD relied on Section 47 of P.D. 198 which states:
constitutionality and validity of a memorandum which, among
others, authorize provincial bus and jeepney operators to increase Sec. 47. Exclusive Franchise. — No franchise shall be
or decrease the prescribed transportation fares without application granted to any other person or agency for domestic,
therefore with the LTFRB, and without hearing and industrial or commercial water service within the district
approval thereof by said agency. or any portion thereof unless and except to the extent
that the board of directors of said district consents
ISSUE: thereto by resolution duly adopted, such resolution,
1) WON the absence of notice and hearing and the delegation of however, shall be subject to review by the
authority in the increase or decrease of transportation fares to Administration.
provincial bus and jeepney operators is illegal.
But the court ruled that such is unconstitutional.
2) WON the presumption of public need in favor of applicants for
certificates of public convenience (CPC) is valid. Nonetheless, while the prohibition in Section 47 of P.D. 198 applies
to the issuance of CPCs for the reasons discussed above, the same
RULING: provision must be deemed void ab initio for being irreconcilable
(1) Under Section 16 (c) of the Public Service Act, as amended, the with Article XIV Section 5 of the 1973 Constitution which was
legislature delegated to the defunct Public Service Commission (PSC) ratified on January 17, 1973 — the constitution in force when P.D.
the power of fixing the rates of public services. LTFRB, the existing
hyaaltar Page 24
198 was issued on May 25, 1973. Thus, Section 5 of Art. XIV of the
1973 Constitution reads:
SECTION 5. No franchise, certificate, or any other form of

authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines at least sixty per centum of the capital of
which is owned by such citizens, nor shall such franchise,
certificate, or authorization be exclusive in character or
for a longer period than fifty years. Neither shall any such
franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or
repeal by the Batasang Pambansa when the public
interest so requires. The State shall encourage equity
participation in public utilities by the general public. The
participation of foreign investors in the governing body
of any public utility enterprise shall be limited to their
proportionate share in the capital thereof.
Since Section 47 of P.D. 198, which vests an "exclusive franchise"

upon public 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 CPC and the subsequent grant thereof
by the NWRB.
MCWD lost.
hyaaltar Page 25

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TRANSPORTATION LAWS | ATTY.

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