Hizon Notes - Transportation Laws (Jarodelyn Mabalot_s Conflicted Copy)

NOTES ON LAW ON TRANSPORTATION

Kenneth & King Hizon (2A)- UST Faculty of Civil Law UNIVERSITY OF SANTO TOMAS Faculty of Civil Law A.Y. 2011-2012 Second Semester

LAW ON TRANSPORTATION

SOURCES OF LAW ON TRANSPORTATION UNDER PHILIPPINE JURISDICTION

c.

Shipper- the owner of the goods Characteristics of Bill of Lading

Q: What are the different sources of transportation laws in the Philippines?

Q: What are the 3 characteristics of Bill of Lading?

A:

A: 1. 2. 3. 4. 5. 6.

Civil Code provisions on common carriers (Art. 17321764) Code of Commerce on Common Carriers Carriage of Goods by Sea Act (COGSA) Ship Mortgage Decree of 1521 Salvage law Public Service Act as amended Warshaw Convention INTRODUCTORY MATTER: IMPORTANT TERMS AND CONCEPTS

1. 2. 3. §

Good evidence of contract of carriage Evidence of receipt Evidence title to the goods by the shipper

It is not really a contract of carriage, only a good evidence of such contract KINDS OF BILL OF LADING

Q: What are the different kinds of Bill of Lading? A:

I. BILL OF LADING 1. Q: What is a “bill of lading”? A: It is a document that is prepared by the sea carrier which is to be concurred by the shipper of the goods. Under the bill of lading, the carrier assumes responsibility to transport goods for compensation from port of loading to port of destination. § § §

Contract issued by carrier to shipper of goods with provision that the carriage shall be transmitted There is a freight to be paid, essentially It is not indispensable for the creation of a contract of carriage. (Compania Maritima vs. Insurance Company of North America, 12 SCRA 213) Parties to a BOL

Q: Who are the essential parties to a bill of lading? A: a. b.

Consignee- the party who will receive the goods at the port of destination Carrier- the party who will transport the goods

2.

3.

Ordinary Bill of Lading- document issued by a carrier or shipping line to shipper of the goods prior the loading of goods on board the carrier; it is issued by the shipping line to shipper. Shipping line may have stored the goods. The goods are in possession of the shipping line but not necessarily loaded on board. Ship Bill of Lading- designates the fact that the goods have been loaded on board the carrier; once issued, it means the cargo has been shipped on board. True of Bill of Lading or Transshipment Bill of Lading – issued at a foreign port for transport of goods to our local port-à alternative port. It may contain provision that the goods has to be loaded at the territory without our jurisdiction (delivered in an alternative route). Ex:

New Yorrkà Manila à Cebu

*Inter-Island- Domestic Bill of Lading -receipt of goods and evidence of title but not the real contract of carriage

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Kenneth & King Hizon (2A)- UST Faculty of Civil Law II. MATES RECEIPT

§ §

Q: What is “mates receipt”? § A: It is a document issued by master of vessel to the shipper of the goods prior to the transfer. It is an evidence that the master of vessel has received goods for purpose of transportation. It is not an evidence that the goods have been loaded

§ §

Q: What is the counterpart of the bill of lading? A: Charter party. § III. CHARTER PARTY

In this case, there is a temporary transfer of ownership In the event of maritime disaster, the party liable for the incident is the pro hac owner who is the bare-boat owner; In this case, there is a change in the character of the vessel from common carrier to private carrier Bareboat is use by the Americans while Demise is use by the British The charterer becomes the owner of the vessel pro hac vice, just for that one particular purpose only. Because the charterer is treated as owner pro hac vice, the charterer assumes the customary rights and liabilities of the shipowner to third persons and is held liable for the expense of the voyage and the wages of the seamen. Demise Charter is an exception to Art. 1745 (enumerating different void stipulations) because in this case, there is no public interest involved. Time & Voyage Charter Party- Contracts of Affreightment

Q: What is a “charter party”?

§

A: It is a document of lease of a particular vessel executed between the owner of the vessel and the charterer. It is a contract of lease of the vessel.

NOTE: Contract of affreightment- a common carrier is always involved (Home Insurance & Planters Product cases) Q: Compare the 3 kinds of charter party.

Q: What is the purpose of charter party? A: A: The purpose is to indicate that the carrier is under charter to the charterer for the purpose of transporting the goods. A contract by which an entire ship, or some principal part thereof is let/leased by the owner to another person for a specified time or use. (Planters Products, Inc. vs. CA, 226 SCRA 476) Q: Who are the parties in a charter-party? A: a. Ship owner or ship agent b. Charterer THREE FORMS OF CHARTER PARTY Q: What are the 3 forms of Charter Party? A: 1.

2. 3.

§ §

TIME The vessel is hired for a specific amount of time. Also, owner still manages the vessel but the charterer gives orders for the employment of the vessel, and may sub-charter the vessel on a time charter or voyage charter basis

VOYAGE The charterer hires the vessel for a single voyage

BAREBOAT The charterer takes responsibility for the crewing and maintenance of the ship during the time of the charter, assuming the legal responsibilities of the owner and is known as a disponent owner.

Time – transport of goods though the charter vessel is for particular period of time agreed upon by the parties Voyage – the period is based on the voyage to be undertaken Demise Charter Party or Bareboat Charter Party – there is a pro hac transfer of ownership from the owner of the vessel to the charterer.

There is yet no crew, no provisions or banker fuel to operate the vessel. The vessel is bear on board without the banker fuel.

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Kenneth & King Hizon (2A)- UST Faculty of Civil Law IV. PARAMOUNT CLAUSE Q: What is “Primage”? Q: What is a “Paramount Clause”? A: It is a stipulation or clause either on the bill of lading or charter party stipulating the laws that the parties agreed to be used of that particular transport. In the event that there will be a breach, parties shall follow the law stipulated in the paramount clause. Q: What is the limitation to a paramount clause? A: As long as it is not contrary to laws, it is reasonable, fair, and not against public policy. §

In our jurisdiction, the party should prove first that the law is valid and reasonable. V. DEMURRAGE

Q: What is “demurrage”? A: It is a penalty imposed on carrier, shipper, or consignee of goods as stipulated in the bill of lading or charter party for not being able to load or unload on the vessel the goods. It usually involves a huge amount

A: It is the amount stipulated as reward for taking good care of the cargo on board the vessel. It is a Reward for having let the cargo be on the same condition it arrived. VIII. SHIP AGENT Q: Who is a “ship agent”? A: A party who is actually designated by the owner of the vessel to take good care of the vessel. In our jurisdiction, under Art. 586 of the Code of Commerce, he is solidarily liable with the ship owner for any damage or loss to the cargo or injuries caused to the passengers or death of passengers. The owner of a vessel and the agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein. By agent is understood the person entrusted with the provisioning of a vessel or who represents her in the port in which she happens to be. (Art. 586.) IX. MARITIME PROTEST

Ex: $10,000 per day VI. LAY-TIME PERIOD v. EXTRA-LAY PERIOD Q: What is “Lay time period”? A: The free time which allows the shipper to load within the period without any worry that he will be penalized or any penalty for demurrage Q: What is “Extra-lay Period”? A: Additional time. Days which follow after the lay days have elapsed VII. DISPATCH MONEY v. PRIMAGE Q: What is “Dispatch money”? A: Sum of money stipulated in the bill of lading or charter party which provides that the amount is given as a reward to the master of the ship for loading or unloading the cargo within the terms of the contract.

Q: What is a “Maritime protest”? A: It is a requirement under Art. 835 of the Code of Commerce in case of collision which compels the filing of protest within the period of 24 hours when the vessel enters on a port, domestic or foreign. A disclaimer of liability. It is to claim that the collision did not happen because of the negligence of the master of the ship. Condition precedent or prerequisite to recovery of damages arising from collisions and other maritime accidents. The action for the recovery of loss and damages arising from collisions can not be admitted if a sworn statement or declaration is not presented within twenty-four hours to competent authority of the point where the collision took place, or that of the first port of arrival of the vessel." (Art. 835) §

§ §

If no protest is filed, despite collision, there could be no right on the part of the owner to recover “collision damage” from the other party The non-filing may also cause the dismissal of actions A condition sine qua non to recover the so-called collision damage


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law HIERARCHY OF LAWS ON TRANSPORTATION Q: State the hierarchy of laws on transportation. A:

A: If the vessel is built sufficiently and equipped to carry a particular kind of cargo which it contracted to carry and the same is loaded safely. NOTE: The rule is: a common carrier must always be seaworthy and cargo-worthy.

1. 2.

Provisions of the Civil Code Code of Commerce

Q: What are the instances when a common carrier may refuse the service?

Q: What are the other special laws applicable? A: A: 1. 2. 3. 4.

1. 2.

Tariffs and Customs Code Civil Aeronautics Act Public Service Act COGSA

No space in the vessel No capacity to carry the cargo COMMON CARRIER

Q: What or who is a common carrier? APPLICABLE LAWS Q: What provision of law applies in the event of transport of goods from foreign port to the Philippines?

A: Persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public (Art. 1732, Civil Code).

A: Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.

Art. 1732 of the New Civil Code avoids any distinction between one whose principal business activity is the carrying of persons or goods or both and one who does such carrying only as an ancillary activity (sideline).

Q: What specific provision under the Civil Code dictates that it is the provisions of the civil code that will apply, or in its absence, the code of commerce, special laws, and COGSA in suppletory character?

It also avoids a distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.

A:

Neither does the law distinguish between a carrier offering its services to the general public that is the general community or population and one who offers services or solicits business only from a narrow segment of the general population.

Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. X. SEA-WORTHINESS Sea-worthy Q: What do you mean by “Sea-worthy?” A: It refers to a vessel that has a degree of fitness which an ordinary, careful, and prudent man/owner would require to have at the commencement of the voyage having regard to all probable circumstances of it.

A person or entity is a common carrier even if he did not secure a Certificate of Public Convenience The law makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation should be by motor vehicle. One is a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets (Asia Lighterage Shipping, Inc. vs. CA). Q: What are the characteristics of a common carrier?

It is the fitness adjudged by an ordinary prudent man. A: Cargo-worthy 1. Q: What is “Cargo-worthy”?

Undertakes to carry for all people indifferently and thus is liable for refusal without sufficient reason


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 2. Cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in these goods; 3. No monopoly is favored 4. Provides public convenience.

Exempting circumstance Prove extraordinary caso fortuito, Art. 1174 diligence and Art. 1733, NCC NCC Presumption of negligence There is a presumption of No presumption of fault fault or negligence or negligence Governing law Law on common carriers Law on obligations and contracts

Private Carrier Q: Who or what is a “Private Carrier”? A: One which, without being engaged in the business of carrying as a public employment, undertakes to deliver goods or passengers for compensation. (Home Insurance Co. vs. American Steamship Agency, 23 SCRA 24)

CIVIL CODE PROVISIONS ON COMMON CARRIER Articles 1733 to 1766 REQUIREMENT OF EXTRAORDINARY DILIGENCE

TESTS WHETHER CARRIER IS COMMON OR PRIVATE 1.

2. 3. 4.

It must be engaged in the business of carrying goods for others as a public employment and must hold itself out as ready to engage in the transportation of goods generally as a business and not as a casual occupation; It must undertake to carry goods of the kind to which its business in confined; It must undertake to carry by the method by which his business is conducted and over its established roads; and The transportation must be for hire.

The SC held that the true test of a common carrier is the carriage of goods or passengers provided it has space for all who opt to avail themselves of its transportation for a fee.

Q: What is the rationale behind the “extra-ordinary diligence?” A: 1. 2. 3. 4. 5.

NOTE: A common carrier is not an absolute insurer of all risks of travel. Q: What is the coverage of the requirement of extraordinary diligence?

COMMON CARRIER v. PRIVATE CARRIER Q: Give the distinctions between common and private carrier.

A: 1. 2.

A:

COMMON CARRIER PRIVATE CARRIER As to availability Holds himself out for all Contracts with particular people indiscriminately individuals or groups only As to required diligence Extraordinary diligence is Ordinary diligence required required As to regulation Subject to State regulation Not subject regulation

to

From the nature of the business and for reasons of public policy (Art. 1733) Relationship of trust Business is impressed with a special public duty Possession of the goods Preciousness of human life

Q: What are the reasons for the exercise of extra-ordinary diligence? A: 1.

is

State

Stipulation limiting liability Parties may not agree on Parties may limit the limiting the carrier’s carrier’s liability, provided liability except when it is not contrary to law, provided by law morals or good customs

Vigilance over goods (Arts. 1734-1754); and Safety of passengers (Arts. 1755-1763).

2.

Nature of the business of common carrier which is public service Public policy, the common carriers are supposed to serve the public interest and therefore, they have to exercise extra-ordinary diligence. PASSENGER

Q: Who is a “passenger”? A: A person who has entered into a contract of carriage, express or implied, with the carrier. They are entitled to extraordinary diligence from the common carrier.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law The following are not considered passengers, and are entitled to ordinary diligence only: 1.

2.

3. 4.

5.

6. 7.

One who has not yet boarded any part of a vehicle regardless of whether or not he has purchased a ticket; One who remains on a carrier for an unreasonable length of time after he has been afforded every safe opportunity to alight; One who has boarded by fraud, stealth, or deceit; One who attempts to board a moving vehicle, although he has a ticket, unless the attempt be with the knowledge and consent of the carrier; One who has boarded a wrong vehicle, has been properly informed of such fact, and on alighting, is injured by the carrier; Invited guests and accommodation passengers. One who rides any part of the vehicle which is unsuitable or dangerous or which he knows is not designed or intended for passengers.

Q: What do you mean by the statement “unconditionally placed in the possession of and received by the common carrier”? A: The shipper has already made up his mind, and there are no conditions attached. Q: When will the shipper or charterer pay the total amount of goods?

GOODS When goods were placed in good order condition but was received in bad order

PASSENGERS In case of death of passengers, upon presentation of a death certificate

DEFENSES OF COMMON CARRIER IN CASE OF CARRIAGE OF GOODS Q: What are the defenses of a common carrier in case of carriage of goods? A: 1. 2. 3.

Fortuitous event (Art. 1734), natural disaster Exercise of extra-ordinary diligence There was a valid stipulation

NOTE: Civil Code provisions on common carrier should not apply where the common carrier is not acting as such but as a private carrrier. As a private carrier a stipulation exempting the owner from liability for negligence of its agent is valid for it is not contrary to public policy since the public is not involved. Q: Why did the Code Commission and the Congress incorporated the duty of the common carrier to observe extra-ordinary diligence? A: Due to the recklessness of their drivers which is the common sight even in crowded areas, and particularly, on the highways throughout the country.

A: 1. 2.

Declaration of value on the face of the bill of exchange Payment of additional freight if carrier so demands

Q: What are the 3 options of the common carrier in case the defect is apparent in the packing of goods? A:

PRESUMPTIONS APPLICABLE TO COMMON CARRIERS

1.

Q: What are the “deterrence or presumptions” applicable to common carriers?

2. 3.

Inform the shipper to preparew the packing of the goods Pack the goods itself and ask the shipper for payment Refuse to accept package

A: SUBSECTION 2. - VIGILANCE OVER GOODS 1. 2.

Exercise of Extra-ordinary diligence In cases of lost, destruction, and deterioration of the goods and that the passengers were not safely transported, the common carrier is presumed to be at fault or negligent. NOTE: These presumptions are rebuttable.

Q: What are the exemptions on liability of common carrier? A: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

Q: What are the evidence of negligence? A:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law (2) Act of the public enemy in war, whether international or civil; (3) Act of omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority CASO FORTUITO/FORCE MAJEURE Q: What are the requisites for a fortuitous event to be considered as such? A: 1. 2. 3.

4.

§

Must be the proximate and only cause of the loss Exercise of due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster (Art. 1739) Carrier has not negligently incurred in delay in transporting the goods (Art. 1740)

Fire is not considered a natural disaster or calamity as it arises almost invariably from some act of man. (Eastern Shipping Lines Inc. vs. IAC) Mechanical defects are not force majeure if the same was discoverable by regular and adequate inspections.

§

ACTS OF PUBLIC ENEMY Q: What are the requisites under this defense? A: 1. 2.

Must be the proximate and only cause of the loss Exercise of due diligence to prevent or minimize the loss before, during or after the act causing the loss, deterioration or destruction of the goods (Art. 1739)

The carrier which, knowing the fact of improper packing of the goods upon ordinary observation, still accepts the goods notwithstanding such condition, is not relieved of liability or loss or injury resulting therefrom. ORDER OR ACT OF PUBLIC AUTHORITY Said public authority must have the power to issue the order (Art. 1743). Consequently, where the officer acts without legal process, the common carrier will be held liable. Even if the carrier is in good faith, that the public authority has the power to issue such order and it resulted to loss or destruction of the goods, the common carrier is still liable (no mitigation) for he must have fully exercise extra-ordinary diligence. Diligence in the selection and supervision of employees under Article 2180 of the Civil Code cannot be interposed as a defense by the common carrier because the liability of the carriers arises from the breach of the contract of carriage. The defense under said articles is applicable to negligence in quasi-delicts under Art. 2176. Q: What if the goods arrived in damage condition, what is the consequence under Art. 1735? A: Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. The presumption of negligence on the part of the common carrier in cases of loss, destruction, or deterioration of the goods that the common carrier failed to exercise extraordinary diligence, thus, he is held liable for damages.

NEGLIGENCE OF THE SHIPPER OR OWNER Q: What are the requisites under this defense?

Q: What are the 2 provisions which are preventive measures recommended by the Code Commission to Congress to be passed to curbe the negligent acts of common carriers?

A: A: a. Sole and proximate cause: absolute defense b. Contributory: partial defense. (Art. 1741) CHARACTER OF THE GOODS OR DEFECTS IN THE PACKING OR IN THE CONTAINER Even if the damage should be caused by the inherent defect/character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. (Art. 1742);

1.

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law for the safety of the passengers is further set forth in Articles 1755 and 1756.

Q: Who declares the condition of the cargo? A: The shipper

2.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.

Q: If a common carrier is given Certificate of Public Convenience to operate on a particular line, can that be interfered with by another common carrier?

Q: Who determines that the condition was true as declared by the shipper? A: The carrier Q: What would the common carrier issue to the shipper if he determines that the goods were in that good order condition? A: Through the contract of carriage.

A: No. CHARACTERISTICS OF A COMMON CARRIER Q: What are the characteristics or elements of a common carrier (According to Atty. Palacios)?

Q: What is the period of responsibility of the common carrier if he issued the bill of lading? When is he supposed to maintain that condition? When does the responsibility begin and when does it end? A:

A: 1.

2. 3.

It has been serving public interest. The Certificate of Public Convenience has been issued so that it can serve public interest. There must be public necessity to be observed by the common carrier No complaint coming from the public questioning that service coming from the common carrier.

Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. Q: Can it be conditional?

Q: If there is a complaint, could that be a ground for a competitior to come in and operate on the line already served by the first common carrier?

A: No. EXTENT OF RESPONSIBILITY (CIVIL CODE V. COGSA)

A: Yes. RUINOUS COMPETITION

Q: Has the common carrier have the right to open boxes, the luggage of the passengers?

COGSA The responsibility of the carrier does not begin from the time when the goods are delivered, for purposes of transport, but when the goods have crossed the side of the vessel

A: No, generally. The common carrier has no right as a general rule. They can only inquire.

Also known as the “Tackleto-tackle Principle”

Q: What is “ruinous competition”? A:

Q: What is the exception? A: If it has serious ground to suspect that the contents are against the interest of the passesngers and the cargoes on board as well as the interest of the common carrier. They must pose danger to the passengers and to the common carrier.

CIVIL CODE PROVISIONS The responsibility of the common carrier begins from the time it was delivered to a shipping line.

SHIPPING LINE The obligation is to transport the goods in accordance with the instruction to transport made by shipper

COMMON CARRIER BY SEA The responsibility of the commin carrier by sea will not run unitl the goods have crossed one side of the vessel for purposes of loading up to the time that the goods have crossed the


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law other side of the port of discharge.

A: 1. 2.

VOID STIPULATIONS IN THE BILL OF LADING Q: If the bill of lading contains a provision excluding libility on the part of the common carrier, if the goods would suffer loss or damage due to the fault of the crew members or agents of the common carrier. Is this valid? A: As a rule, that is unjust, against public policy, and it is null and void. (Art. 1745)

1 Charterer 1 shipment belonging to the charterer DEMISE OR BAREBOAT CHARTER

Q: Who is supposed to appoint the crew? A: The charterer Q: Who is supposed to navigate the vessel?

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Q: What is the exception?

A: The charterer Q: Who is supposed to furnish the fuel, and provisions to the vessel? A: The charterer Q: Who has the full control and supervision of the vessel? A: Charterer Q: If there will be loss, destruction, or damage caused by the navigation of the vessel by the charterer, who is liable? A: Charterer Q: In case of bareboat or demise charter, what kind of diligence must it exercise? A: Ordinary diligence Q: Does the princple of presumption of fault or negligence apply in this case? A: No. The presumption under Art. 1736 applies only to common carriers. The moment you convert or change the complexion, the presumption will no longer apply.

A: If the common carrier acts as a private carrier (in case of bareboats.

Q: What are the 2 sides of the carrier vessel?

Q: What is the excpetion to the exception?

A:

A: When there are several shippers and consignees. Thus, it returns to the complexion of a common carrier. Q: Why? A: There is a pro hac vice transfer in case of a demise charter. The owner is no longer the common carrier. There is already a change of complexion as enunciated in the Planters case Q: What are the 2 conditions apparent in the Home Insurance case?

1. 2.

Port side of the vessel which is the left side Star board side which is the right side RIGHT OF STOPPAGE IN TRANSITU

Art. 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: Suppose the cargo was damaged in the possession of the warehouseman, placed by the carrier, while the repair of the carriage was going on, will that hold the common carrier liable?

destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.

A: Yes.

Q: Even if the goods had been kept in a bonded warehouse chosen by the carrier?

Q: What is the exception?

A: Yes.

A: The shipper or owner has made use of the right of stoppage in transitu.

Q: Is limiting the performance of extra-ordinary diligence of common carrier for loss, destruction or damage, valid?

Q: Why did the shipper instruct the carrier to stop?

A: Yes., subject to the conditions of Art. 1744:

A: The buyer becomes insolvent.

Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

Art. 1530. Subject to the provisions of this Title, when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. (n)

(1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy.

Q: What is the legal effect of the instruction of stoppage?

Q: Who gives a valuable consideration?

A: It terminates the contract of carriage between the carrier and the shipper. The carrier becomes a warehouseman/bailee

A: The common carrier. Example: reduction of fair in exchange for the exercise of lesser diligence to that which is required

Q: How is it exercised? Q: State the stipulations that are null and void. A: By giving notice to the captain. Or, if by land, instruction must be given to the office then to the common carrier. Q: What are the elements of the right of stoppage in transitu?

A: Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

A: 1. 2. 3.

Notice to the common carrier that there is a stoppage because the consignee is insolvent; Contract of carriage ceases upon acceptance of notice; At the time of the notice, the goods must still be in the possession of the carrier and not yet delivered to the consignee.

Q: Is there a liability on the part of the carrier prior to the notice to the consignee that the goods have arrived? A: Yes, by express provision of the law Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of

(1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished;


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Q: Can the parties limit the liability of common carrier? Under what instances? A: 1. In case of riots or strikes 2. Shipper declares a greater value of the goods and pays additional amount of freight 3. Parties fix the sum or amount of liability equivalent to the value of the goods Pertinent Provisions Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation.

2.

Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation. Under Art. 1746, when the common carriage refuses to carry the goods, the shipper should first annul the contract before he can sue. If he does not annul, he cannot sue and ask for damages and the validity of the contract is still presumed.

When the carrier refuses to transport or carry the goods, it is tantamount to BREACH OF CONTRACT OF CARRIAGE Q: What are the proofs needed? A: 1. 2.

Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid. Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Art. 1750. A contract fixing the sum that may be recovered. by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Q: How can the 3 limitations be frustrated? A: 1. 2.

If the common carrier incurred UNJUST DELAY in shipping of goods When it changes the stipulated usual route of the common carrier and it results to the loss of the goods.

Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods.

Payment of damage to its full value.

Ticket Death certificate SUBSECTION 3. - SAFETY OF PASSENGERS

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Q: What are the principles governing the liability of the common carriage? A: (1) The liability of the common-carrier is contractual and arises upon the breach of its obligations and there is breach if it fails to exercise extraordinary diligence according to all the circumstances of each case. (2) A carrier is obliges to carry its passengers with utmost diligence of very cautious persons, having due regard for all the circumstances. (3) A carrier is presumed to be at fault or have acted negligently in case if death of, or injury to passengers, it being its duty to prove that it exercised extra-ordinary diligence. (4) A carrier is not an insurer of all risks of travel because the common-carrier’s liability rests on negligence only. (5) The carrier is not responsible for events which could not be foreseen, or which, though foreseen, are inevitable.

Q: What are the effects of the 2 events? A: 1.

Cannot avail of the limitations stipulated

If the proximate cause is the negligence of the shipper and the contributory negligence was made by the common carrier, the shipper cannot recover damages because the law


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law raises a presumption that the common carrier has exercised extra-ordinary diligence. Q: What is the effect of fortuitous event? A: Then the common-carrier cannot be held liable when it is the primary result for it prevented the former from performing his normal duty. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for willful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability. Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise. Art. 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself. Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the

diligence of a good father of a family could have prevented or stopped the act or omission. LIABILITY OF A COMMON CARRIER for DEATH OR INJURIES TO PASSENGERS DUE TO ACTS OF ITS EMPLOYEES AND OTHER PASSENGERS OR STRANGERS FOR ACTS OF OTHER FOR ACTS OF ITS PASSENGERS OR EMPLOYEES STRANGERS Required diligence and defense Extraordinary diligence Ordinary diligence Nature of liability Tort; however, Not absolute; limited by The employee must be on Art. 1763 duty at the time of the act. (Maranan v. Perez) The carrier is liable when its personnel allowed a passenger to drive the vehicle causing it to collide with another vehicle resulting to the injuries suffered by the other passengers. SUBSECTION 4. - COMMON PROVISIONS Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Art. 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section. Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. RULES ON PASSENGERS’ BAGGAGE IN THE CUSTODY OF THE IN THE CUSTODY OF THE PASSENGERS COMMON CARRIER (HAND-CARRIED) (CHECKED-IN) Legal nature of the baggage Necessary deposit Considered as “goods” Required diligence by the common carrier Diligence of a depositary Extraordinary diligence (ordinary diligence) Applicable rules Arts. 1998 and 2000-2003

Arts. 1733-1753


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law DECISIVE CASE OF LA MALLORCA Q: According to the La Mallorca case, what are the elements in order to consider that the passesnger has been delivered safely to his place of destination?

CHARTER PARTY An entire or complete contract.

BILL OF LADING More like a private receipt which the captain gives to accredit goods received from persons

Consensual contract

Real contract

A: (1) When the carrier had reached the point of destination (2) Passenger has alighted safely, upon direction by the conductor to alight, from the carrier (3) The engine should be stopped (4) Safe distance from the common carrier The complainants, in case of a collision, should be the passengers of the common carrier, not the heirs. Police report will establish the accident.

BAREBOAT v. CONTRACT OF AFREIGHTMENT Q: Differentiate Bareboat from Contract of Affreightment (Time and Voyage charter). A: BAREBOAT OR DEMISE CHARTER

CONTRACT OF AFFREIGHTMENT (TIME OR VOYAGE CHARTER)

Charterer becomes liable to others caused by its negligence

Owner remains liable as carrier and must answer for any breach of duty

Charterer regarded as owner pro hac vice for the voyage Owner of vessel relinquishes possession, command and navigation to charterer

Charterer is not regarded as owner.

Common carrier is converted to private carrier.

Common carrier is not converted to a private carrier.

Q: In case of death? A: The passenger or his heirs must present: 1. 2. 3.

Ticket Police report Death certificate

Q: In case of culpa contractual, will the defense of exercise of due diligence apply? A: No. Q: In case of culpa aquiliana or quasi-delict? A: Yes. Q: What is a Charter Party? A: A contract by virtue of which the owner or agent binds himself to transport merchandise or persons for a fixed price. A contract by which an entire ship, or some principal part thereof is let/leased by the owner to another person for a specified time or use. (Planters Products, Inc. vs. CA, 226 SCRA 476) Q: Who are the essential parties in a charter party? A: 1. 2.

Ship owner or ship agent Charterer CHARTER PARTY v. BILL OF LADING

Q: Differentiate Charter party from Bill of lading. A:

The vessel owner retains possession, command and navigation of the ship

Q: What law will apply in case the passenger’s baggage is NOT in his personal custody? A: Arts. 1733 to 1753 shall apply. Thus, Arts. 1733-1753 shall apply to baggage not in the possession of the passenger. Otherwise, the Civil Code provisions on Common Carriage shall not apply but Arts. 1998, 200 to 2003. In his of baggage and personal effects with the passenger, the latter must follow instructions from the common carrier to prevent loss and to protect his personal effects, otherwise, he will not be able to recover. The so-called Rule on Necessary Deposit shall apply in this case. RULE ON NECESSARY DEPOSIT Art. 1998. The deposit of effects made by the travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. (1783) Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. (1784a) Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. (n)

A: It is based on the contract since there exists a contractual relation. Thus, there is a breach of contract. Q: However, it is said that there is a demarcation line as to the liability. What is it? A: The common carrier is not considered as insurer of all risks. FORTUITOUS EVENT Q: What is fortuitous event? A: That which could not be foreseen, or which though foreseen, is inevitable (Civil Code, Art. 1174). An event is considered fortuitous if the following elements concur:

Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. (n)

(a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n) TRANSPORT OF PASSENGERS Q: How is the common carrier supposed to transport passengers?

Q: What is the effect when a passenger is carried gratuitously?

A: With HUMAN CARE and FORESIGHT. The presumption of fault or negligence usually is the basis of the court in holding the common carrier liable. This presumption applies to both:

A:

a. Passengers b. Cargoes

Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for wilful acts or gross negligence.

Q: What is the effect of absolute liability for the defect of the parts of the engines of the common carrier?

The reduction of fare does not justify any limitation of the common carrier's liability.

A: The common carrier will still be held liable

Q: What is the effect if there is a stipulation that there will be non-liability in case of damage not caused by the gross negligent act of the common carrier?

Q: How about negligence of the manufacturer? A: In that case, the manufacturer will be considered as the agent of the common carrier, thus, he will still be held liable. This is in the light of the Doctrine of Respondeat Superior. The user of the object is held liable. Q: What is the basis of the liability of the common carrier?

A: The stipulation is valid if the damage is not due to the willful act of the common carrier. Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law have acted beyond the scope of their authority or in violation of the orders of the common carriers.

which case what is provided in Article 2176 shall be applicable.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.

The common carrier will still be held liable to the passenger if the act of the employee was done within the course of the employment because the common carrier is bound by its contractual obligation.

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. (1903a)

If it was done outside, it cannot be held liable. Ex: A, driver of a bus, after delivering the bus to the station/garage, he stabbed B, a passenger. Note that the bus is already placed in the garage. Thus, the common carrier can no longer be held liable since the damage was made outside the course of the employment.

LIABILITY OF COMMON CARRIER FOR AN EMPLOYEE WHO ACTED BEYOND THE SCOPE Q: What is the liability of a common carrier acting beyond the scope? A: It depends:

It is said that Art. 1759 is dependent highly on evidence. 1. Q: What if the common carrier bumped with a private carrier? What is his best defense? 2. A: His principal defense can be the exercise of due diligence. To be able to avoid liability, there should be a good quantum of evidence. This is also related to Art. 2180 Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

If the act occurred prior to the new civil code, he is not liable. The act of employee is considered as a fortuitous event If after the new civil code, he is liable.

NOTE: "Last clear chance" rule not applicable to contracts of carriage.-- The principle of last clear chance applies only in a suit between the owners and drivers of two colliding vehicles; it does not apply where a passenger demands responsibility from the common carrier to enforce its contractual obligation; it would be iniquitous to exempt the driver and his employer on the ground that the other driver was also negligent.

The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.

TERMINATION OF CARRIER-PASSENGER RELATIONSHIP

Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company.

A: The relation of common carrier and passenger does not cease at the moment that the passenger alights from the common carrier's vehicle at a place selected by the common carrier at the point of destination, but continues until the passenger had reasonable time or a reasonable opportunity to leave the common carrier's premises. What is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in

Q: When relationship of carrier and passenger terminates?

ACCOMODATION PASSENGER Q: Who are “accommodation passengers”? A: They are passengers who are normally given the privilege of ride by a private vehicle and the latter will not be held liable. However, the act should not be due to the willful act in order to avoid liability.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law NOTE: The common carrier is still liable whether the accommodation passenger paid or not since there is no distinction between a regular passenger and an accommodation passenger as to responsibility. There exists a contractual obligation Q: What is the liability of the common carrier in case of acts of a co-passenger or stranger? A: There is always liability if the common carrier could have exercised due diligence to prevent the occurrence. Q: What if a force majeure prevented him against the act of the passenger? A: He will not be liable according to Art. 1763. Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.

REPUBLIC ACT NO. 6235 AN ACT PROHIBITING CERTAIN ACTS INIMICAL TO CIVIL AVIATION, AND FOR OTHER PURPOSES.

Section 1. It shall be unlawful for any person to compel a change in the course or destination of an aircraft of Philippine registry, or to seize or usurp the control thereof, while it is in flight. An aircraft is in flight from the moment all its external doors are closed following embarkation until any of such doors is opened for disembarkation. It shall likewise be unlawful for any person to compel an aircraft of foreign registry to land in Philippine territory or to seize or usurp the control thereof while it is within the said territory. Sec. 2. Any person violating any provision of the foregoing section shall be punished by an imprisonment of not less than twelve years but not more than twenty years, or by a fine of not less than twenty thousand pesos but not more than forty thousand pesos. The penalty of imprisonment of fifteen years to death, or a fine of not less than twenty-five thousand pesos but not more than fifty thousand pesos shall be imposed upon any person committing such violation under any of the following circumstances: 1.

Whenever he has fired upon the pilot, member of the crew or passenger of the aircraft;

2.

Whenever he has exploded or attempted to explode any bomb or explosive to destroy the aircraft; or

3.

Whenever the crime is accompanied by murder, homicide, serious physical injuries or rape.

Section 3. It shall be unlawful for any person, natural or juridical, to ship, load or carry in any passenger aircraft operating as a public utility within the Philippines, and explosive, flammable, corrosive or poisonous substance or material. Sec. 4. The shipping, loading or carrying of any substance or material mentioned in the preceding section in any cargo aircraft operating as a public utility within the Philippines shall be in accordance with regulations issued by the Civil Aeronautics Administration. Sec. 5. As used in this Act (1) "Explosive" shall mean any substance, either solid or liquid, mixture or single compound, which by chemical reaction liberates heat and gas at high speed and causes tremendous pressure resulting in explosion. The term shall include but not limited to dynamites, firecrackers, blasting caps, black powders, bursters, percussions, cartridges and other explosive materials, except bullets for firearm. (2) "Flammable" is any substance or material that is highly combustible and self-igniting by chemical reaction and shall include but not limited to acrolein, allene, aluminum dyethyl monochloride, and other aluminum compounds, ammonium chlorate and other ammonium mixtures and other similar substances or materials. (3) "Corrosive" is any substance or material, either liquid, solid or gaseous, which through chemical reaction wears away, impairs or consumes any object. It shall include but not limited to alkaline battery fluid packed with empty storage battery, allyl chloroformate, allytrichlorosilane, ammonium dinitro-orthocresolate and other similar materials and substances. (4) "Poisonous" is any substance or materials, except medicinal drug, either liquid, solid or gaseous, which through chemical reactions kills, injuries or impairs a living organism or person, and shall include but not limited to allyl isothiocyanate, ammunition (chemical, non-explosive but containing Class A, B or poison), aniline oil, arsine, bromobenzyle cyanide, bromoacetone and other similar substances or materials. Sec. 6. Any violation of Sec. three hereof shall be punishable by an imprisonment of at least five years but not more than ten years or by a fine of not less than ten thousand pesos but not more than twenty thousand pesos: Provided, That if the violation is committed by a juridical person, the penalty shall


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law be imposed upon the manager, representative, director, agent or employee who violated, or caused, directed, cooperated or participated in the violation thereof: Provided, further, That in case the violation is committed in the interest of a foreign corporation legally doing business in the Philippines, the penalty shall be imposed upon its resident agent, manager, representative or director responsible for such violation and in addition thereto, the license of said corporation to do business in the Philippines shall be revoked.

Q: What is the effect of passenger's contributory negligence? A: Contributory negligence on the part of the passenger does not justify the CC's exemption from liability. Where it is not the proximate cause of the death or injury, he or his heirs are not barred from recovery of damages, provided of course that the CC is the proximate cause of his death or injury Art. 2197. Damages may be: (1) (2) (3) (4) (5) (6)

Any violation of Sec. four hereof shall be an offense punishable with the minimum of the penalty provided in the next preceding paragraph. Sec. 7. For any death or injury to persons or damage to property resulting from a violation of Sections three and four hereof, the person responsible therefor may be held liable in accordance with the applicable provisions of the Revised Penal Code.

Actual or compensatory; Moral; Nominal; Temperate or moderate; Liquidated; Exemplary or corrective. 2 KINDS OF AIRCRAFT UNDER ART. 6235

Q: What are the 2 kinds of aircrafts referred to by Act. 6235? Sec. 8. Aircraft companies which operate as public utilities or operators of aircraft which are for hire are authorized to open and investigate suspicious packages and cargoes in the presence of the owner or shipper, or his authorized representatives if present; in order to help the authorities in the enforcement of the provisions of this Act: Provided, That if the owner, shipper or his representative refuses to have the same opened and inspected, the airline or air carrier is authorized to refuse the loading thereof. Sec. 9. Every ticket issued to a passenger by the airline or air carrier concerned shall contain among others the following condition printed thereon: "Holder hereof and his handcarried luggage(s) are subject to search for, and seizure of, prohibited materials or substances. Holder refusing to be searched shall not be allowed to board the aircraft," which shall constitute a part of the contract between the passenger and the air carrier.

A: 1. 2.

Philippine-Registered aircraft Foreign-Registered aircraft UNLAWFUL ACTS CONCERNING A PHIL-REGISTERED AIRCRAFT

Q: What are the unlawful acts concerning PhilippineRegistered aircraft? A: 1. 2.

Any act of a person to compel the aircraft to change its course or destination To seize or usurp control thereof while in flight

Q: What do you mean by “while in flight”? Sec. 10. The Civil Aeronautics Administration is hereby directed to promulgate within one month after the approval of this Act such regulations as are provided in Sec. four hereof and cause the publication of such rules and regulations in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks. Such regulations shall take effect fifteen days after publication in the Official Gazette. Sec. 11. This Act shall take effect after the publication mentioned in the preceding section.

A: An aircraft is in flight from the moment all its external doors are closed following embarkation until any of such doors is opened for disembarkation. If the aircraft was intentionally closed for particular passengers, it is not considered in flight. The aircraft will be considered closed from the time all its external doors are closed following embarkation despite the fact that it had not left the tarmac. UNLAWFUL ACTS CONCERNING A FOREIGN-REGISTERED AIRCRAFT

Q: What is the effect of negligence of passenger? A: Where the proximate cause of the death of or injury to the passenger is his own negligence, and not that of the CC, the CC is exempted from liability

Q: How about in case of a Foreign-Registered aircraft? A:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law (1) to compel an aircraft of foreign registry to land in Philippine territory or (2) to seize or usurp the control thereof while it is within the said territory Q: Why is there a difference in case of a PhilippineRegistered aircraft and a Foreign-Registered aircraft regarding the “in flight” requirement? A: There is emphasis to protect the safety of the aircraft and the passengers in case of Philippine-Registered aircraft against: (1) change in the course or destination of an aircraft of Philippine registry, (2) seizing or usurpation the control thereof In case of Philippine-Registered aircraft, the Act is supposed to protect the Philippine properties in its jurisdiction. AGGRAVATING CIRCUMSTANCES Q: What are the acts considered as aggravating circumstances under Act. 6235?

A: The presumption of negligence shall work against them since there was a failure to search and confiscate the object. absence of extraordinary diligence

DECISIVE CASE: NOCUM V. LAGUNA TAYABAS BUS CO. (GR L-23733, 31 October 1969) “Before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its “opening was folded and tied with abaca.” According to the judge of the lower court, “if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations.” Even it that may be true, the law does not require as much. Article 1733 is not as unbending, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be “according to all the circumstances of each case.” “In fact, Article 1755 repeats this same qualification: “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.”

A: 1. 2. 3.

Whenever he has fired upon the pilot, member of the crew or passenger of the aircraft; Whenever he has exploded or attempted to explode any bomb or explosive to destroy the aircraft; or Whenever the crime is accompanied by murder, homicide, serious physical injuries or rape.

Sec. 9. Every ticket issued to a passenger by the airline or air carrier concerned shall contain among others the following condition printed thereon: "Holder hereof and his handcarried luggage(s) are subject to search for, and seizure of, prohibited materials or substances. Holder refusing to be searched shall not be allowed to board the aircraft," which shall constitute a part of the contract between the passenger and the air carrier. This provision authorizes the common carrier to demand the opening of the baggage before the loading to the aircraft to check for any item which can be confiscated and seized. This provision applies only in case of aircrafts and not on land or sea carriers.

Q: What are the options of the aircraft if the passenger refuses to allow his luggage to be searched? A: 1. 2.

Prevent or refuse to board such passenger Allow the passenger board but will leave the package in the custody of the carrier.

REPUBLIC ACT NO. 521 CARRIAGE OF GOODS BY SEA ACT

Section 1. That the provisions of Public Act No. 521 of the 7th Congress of the United States, approved on April 16, 1936, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade: Provided, that nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application. Sec. 2. This Act shall take effect upon its approval. (Approved October 22, 1936).

This shall appear on the ticket as a notice to the passenger. TITLE I Q: What is the consequence of an aircraft which exploded and upon the investigation, it was found out that it was due to an object which was brought on board? need to be proven!

Sec. 1. When used in this Act —. (a) The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law (b) The term "contract of carriage" applies only to contracts of carriage by covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a character party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. . (c) The term "goods" includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.. (d) The term "ship" means any vessel used for the carriage of goods by sea. (e) The term "carriage of goods" covers the period from the time when the goods are loaded to the time when they are discharged from the ship. BACKGROUND OF THE ACT This act was enacted when the Philippines was still a territory of the United States. Q: To what contracts of carriage is COGSA applicable? A: It is applicable to all contracts for carriage of goods by sea to and from Philippine ports in foreign trade. §

§ § §

It does not however repeal or limit any provision of the Code of Commerce; it is only a suppletory law to the Code of Commerce. Art. 1753 Art.1766 Hence, the rights and obligations of carriers in all contracts for the carriage of goods by sea to the Philippine ports shall be governed by the provisions of the NCC, in default of such provisions, by that of the Code of Commerce and other special laws, and in the absence of both, by that of the COGSA. RISKS

Sec. 2. Subject to the provisions of Section 6, under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth. RESPONSIBILITIES AND LIABILITIES Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

(a) Make the ship seaworthy; (b) Properly man,equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation. (2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. (3) After receiving the goods into his carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things — (a) The loading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marksare stamped or otherwise shown clearly upon the goods if uncovered,in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity or weight, as the casemay be, as furnished in writing by the shipper. (c) The apparent order and conditions of the goods: Provided, that no carrier, master, or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the good actually received or which he has had no reasonable means of checking. (4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraphs (3) (a), (b), and (c), of this section: (The rest of the provision is not applicable to the Philippines). (5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity, and weight, as furnished by him; and the shipper shall indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.. (6) Unless notice or loss or damage and the general nature of such loss or damage by given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of 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 lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery..


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. 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 one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier to the shipper shall if the shipper so demands, be a "shipped" bill of lading: Provided, that if the shipper shall have previously taken up any document of title to such goods, he shall surrender the same as against the issue of the "shipped" bill of lading, but at the option of the carrier such document of title may be noted at the port of shipment by the carrier, master, or agent with the name or names of the ship or ships upon which the goods have been shipped and the date or dates of shipment, and when so noted the same shall for the purpose of this section be deemed to constitute a "shipped" bill of lading. (8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier of the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provide in this section or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect. A benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability. PRESCRIPTION OF ACTION Q: When a cargo from USA was unloaded at the port of Manila on February 26, 1947, a shortage was discovered prompting the consignee to make a written notice to the carrier. The action was commenced only on May 7, 1948. Has the action prescribed? A: Yes, it has already prescribed since it was commenced only after the lapse of 1 year, 2 months and 9 days.

An action for recovery of loss or damage in connection with certain cargo can only be brought against the carrier within 1 year after delivery to the said cargo, or the date when the goods should have been delivered. Q: On Feb.22, 1965 the insurer filed the complaint against Luzon Stevedoring Corp. and Barber Lines, Inc. for recovery of damages caused to cargo shipped to the consignee, the cargo being delivered on Feb 25, 1964. The complaint was amended and filed on April 7, 1965. Has the action against the new defendant prescribed? A: Yes, the one-year statutory and contractual prescriptive period had already expired when the insurance company filed on April 7 its action against Barber. Q: A certain cargo was shipped in New York aboard M/S Toreador of which the general agent in the Philippines is Macondray, with freight prepaid to Cebu City pursuant to the Bill of lading. However, the carrier transshipped the cargo after its discharge in Manila aboard the S/S Siquijor, an inter-island vessel. The shipment was finally discharged in Cebu City, short of 2 pieces of the cargo. Macondray alleged that the complaint should be dismissed on the ground that the action has already prescribed. Will COGSA apply? A: The action is based on the contract of carriage up to the final port of destination, which was Cebu for which the corresponding freight had been prepaid. The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray as the agent of Toreador. The fact that the transshipment was made via an interisland vessel did not operate as to remove the transaction from the operation of the COGSA. The provision applies to both damages and losses. It anticipates 2 possibilities: (a) That the delivery has been made—the action should be brought within 1 year after delivery of the goods; (b) If no delivery is made—the period should be computed from the date when the goods should have been delivered. If the carrier arrived on Nov. 2, 1962, and left on Nov.4, 1962—it was on the latter date that the carrier had the last opportunity to deliver goods. The period of 1 year within which the carrier should be sued shall commenced to run from Nov. 5 and expired on Nov. 4, 163. COMMENCEMENT OF ACTION IF DELIVERY WAS MADE TO ARRASTRE OPERATOR Q: When should the 1 year period within which the carrier should sue the carrier start to run, from delivery of the goods to consignee or to arrastre operator?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: It should be computed from the time of delivery to the arrastre operator. To use as basis for computing the 1 year period the delivery to the consignee would be unrealistic and might generate confusion between the loss or damage sustained by the goods while in the carrier’s custody and those occurring while in the arrastre operator’s possession. Q: Does the period also include or apply to the insurer of the goods?

time limited for the commencement of such action has, at the date of such failure, expired, the plaintiff may commence a new action within 1 year after such date. The action commenced on April 27, 1960 was dismissed on June 13, 1960, or over 20 days after the expiration of the period of 1 year, beginning from May 21, 1959, within which plaintiff’s action could be brought. The period within which plaintiff could initiate the present case was renewed for another year beginning from June 24, 1960.

A: Yes. Otherwise, what the Act prohibits after the lapse of the 1 year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of 1 year. As such, the 1 year limitation will be practically useless.

The provisions of the NCC on prescription should not be made to apply in a case governed by the COGSA.

Q: What does “loss” mean?

A: The notice in writing can be given to and the suit can be brought against the carrier by:

A: It contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown, or they cannot be recovered. It does not include a situation where there was indeed delivery but the same is made to the wrong person, or a misdelivery. NOTE: The 1 year period of prescription is not applicable to misdelivery or conversion of goods. Q: What is the period of prescription in case of misdelivery or conversion of goods? A: The applicable rule on prescription found in the NCC and not the rule under COGSA: 1. 2.

10 years-breach of a written contract; 4 years- for quasi-delict

Q: Does a written claim for loss or damage interrupt the period of prescription? A: No, in the case of Yek Tong Lin Fire and Maritime Insurance v. American President Lines, the Court has already rejected the contention that an extra-judicial demand tolled the prescriptive period provided for in the COGSA. The pendency of an extra-judicial claim for damages field with the carrier does not suspend the running if the prescriptive period of 1 year.

Q: Who are the persons who can give notice to and bring suit against the carrier?

a. b. c.

Shipper; or Consignee; or Any legal holder of the bill of lading like the indorsee or the subrogee (the insurer of the goods)

Q: Certain goods were shipped from US to Manila and were received by the consignee, except one case which was missing. The consignee failed to give notice of claim within 30 days after receipt of the cargo but brought suit against the carrier within 1 year after delivery of the shipment. Was the suit been properly brought notwithstanding the consignee’s failure to give notice as required by the bill of lading? A: The said clause in the bill of lading is null and void. According to COGSA, regardless of whether notice of loss or damage has been given, the shipper can still bring an action to recover said loss or damage within 1 year after the delivery of the goods. The obligation of the carrier to carry the goods includes the duty not to delay their transportation, so that if the goods are lost or damaged by reason of an unjustified delay, the carrier is liable therefor; and the action is still basically one for damage to the goods and must be filed within the period of 1 year from delivery of the goods or the date when the goods would have been delivered. Q: Does COGSA apply to an arrastre operator? A: No, it does not apply.

Q: When is the period of prescription suspended by law? RIGHTS AND IMMUNITIES A: Art. 1155 of NCC provides that prescription of actions is interrupted when they are filed before the court and Sec 49 of Act No. 190 provides that if, in an action filed in due time, the plaintiff fails otherwise that upon the merits, and the

Sec. 4. (1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law carrier to make the ship seaworthy and to secure that the ship is properly manned, equipped, and supplied, and to make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried fit and safe for their reception, carriage, and preservation, in accordance with the provisions of paragraph (1) of Section (3). Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this section.. (2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from — (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; (b) Fire, unless caused by the actual fault or privity of the carrier;. (c) Perils, dangers, and accidents of the sea or other navigable water;. (d) Act of God;. (d) Act of war;. (e) Act of public enemies; (f) Arrest or restraint of princes, rulers, or people, or seizure under legal process; (g) Quarantine restrictions;. (h) Act or omission of the shipper or owner of the goods, his agent or representative;. (i) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts;. (j) Riotsand civil commotions;. (k) Saving or attempting to save life or property at sea;. (l) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; (m) Insufficiency or packing; (n) Insufficiency or inadequacy of marks;. (o) Latent defects not discoverable by due diligence; and (p) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage. (3) The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, or neglect of the shipper, his agents, or his servants.. (4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be

deemed to be an infringement or breach or this Act or of the contract of carriage, and carrier shall not be liable for any loss or damage resulting therefrom: Provided, however, that if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable.. (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.. Neither the carrier nor the ship shall be responsible in any event for loss damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.. (6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof, the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment. If any such goods shipped with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average if any Q: Is a clause limiting the liability of the carrier for the loss of it to not more than 100 Sterling or its peso equivalent of P 1, 544.40 valid although the insurance company paid the consignee the amount of P 35,921.81? Can the subrogee recover from the carrier? A: Sec 4 (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. NOTE: This provision merely limits the maximum amount that may be recovered by the shipper in the absence of an agreement as to the nature and value of the goods shipped. Both the COGSA and the limitation in the bill of lading allow the payment beyond the respective maximum limit imposed therein, provided that the value of the goods have been declared in the Bill of Lading. By providing that $500.00 is the maximum liability, the law does not disallow an agreement for liability at a lesser amount. Eastern Shipping Lines v. IAC Under COGSA, the carrier’s liability will not exceed $500 per package or its peso equivalent, but in no case more than the amount of damage actually sustained.

Any agreement so entered into shall have full legal effect: Provided, that this section shall not apply to ordinary commercial shipments made in the ordinary course of trade but only to other shipments where the character or condition of the property to be carried or the circumstances, terms and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement. Sec. 7. Nothing contained in this Act shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation, or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea.. Sec. 8. The provisions of this Act shall not affect the rights and obligations of the carrier under the provisions of the Shipping Act, 1916, or under the provisions of Sections 4281 to 4292, inclusive, of the Revised Statutes of the United States, or of any amendments thereto, or under the provisions of any other enactment for the time being in force relating to the limitation of the liability of the owners of seagoing vessels..

SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF RESPONSIBILITIES AND LIABILITIES

TITLE II

Sec. 5. A carrier shall be at liberty to surrender in whole or in part all or any of his rights and immunities or to increase any of his responsibilities and liabilities under this Act, provided such surrender or increase shall be embodied in the bill of lading issued to the shipper. The provisions of this Act shall not be applicable to charter parties; but if bills of lading are issued in the case of a ship under a charter party, they shall comply with the terms of this Act. Nothing in this Act shall be held to prevent the insertion in a bill of lading of any lawful provisions regarding general average..chan robles virtual law library

Sec. 9. Nothing contained in this Act shall be construed as permitting a common carrier by water to discriminate between competing shippers similarly placed in time and circumstances, either (a) with respect to their right to demand and receive bills of lading subject to the provisions of this Act; or (b) when issuing such bills of lading either in the surrender of any of the carrier's rights and immunities or in the increase of any of the carrier's responsibilities and liabilities pursuant to Section 5, Title I, of this Act; (c) in any other way prohibited by the Shipping Act, 1916, as amended..chan robles virtual law library

SPECIAL CONDITIONS Sec. 6. Notwithstanding the provisions of the preceding section, a carrier, master or agent of the carrier, and a shipper shall, in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect to such goods, or his obligation to seaworthiness, (so far as the stipulation regarding seaworthiness is contrary to public policy), or the care or diligence of his servants or agents in regard to the loading, handling, stowage, carriage, custody, care and discharge of the goods carried by sea; provided, that in this case no bill of lading has been or shall be issued and that the terms agreed shall be a non-negotiable document and shall be marked as such.

Sec. 10. (Not applicable to the Philippines.). Sec. 11. When under the custom of any trade the weight of any bulk cargo inserted in the bill of lading is a weight ascertained or accepted by a third party other than the carrier or the shipper and the fact that the weight as ascertained or accepted is stated in the bill of lading, then notwithstanding anything in this Act, the bill of lading shall not be deemed to be prima facie evidence against the carrier of the receipt of goods of the weight so inserted in the bills of lading, and the accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the shipper.. Sec. 12. (Not applicable to the Philippines.). Sec. 13. This Act shall apply to all contracts for carriage of goods by seas to or from ports of the United States in foreign


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law trade. As used in this Act the term "United States" includes its districts, territories, and possessions: Provided, however, that the Philippine Legislature may by law exclude its application to transportation to or from ports of the Philippine Islands. The term "foreign trade" means the transportation of goods between the ports of the United States and ports of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States or its possessions and any other port of the United States or its possessions: Provided, however, that any bill of lading or similar document of the title which is evidence of a contract for the carriage of goods by sea between such ports, containing an express statement that it shall be subject to the provisions of this Act; shall be subjected hereto as fully as if subject hereto by the express provisions of this Act: Provided, further, that every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea from ports of the United States in foreign trade, shall contain a statement that it shall have effect subject to the provisions of this Act. . Sec. 14. Upon the certification of the Secretary of Commerce that the foreign commerce of the United States in its competition with that of foreign nations is prejudiced by the provisions, or any of them, of the Title I of this Act, or by the laws of any foreign country or countries relating to the carriage of goods by sea, the President of the United States may, from time to time by proclamation, suspend any or all provisions of Title I of this Act for such periods of time or indefinitely as may be designated in the proclamation. The President may at any time rescind such suspension of Title I hereof, and any provisions thereof which may have been suspended shall thereby be reinstated and again apply to contracts thereafter made for carriage of goods by sea. Any proclamation of suspension or rescission of any such suspension shall take effect on the date named therein, which date shall be not less than ten days from the issue of the proclamation. Any contract for the carriage of goods by sea, subject to the provisions of this Act, effective during any period when Title I hereof, or any part thereof, is suspended, shall be subject to all provisions of law now or hereafter applicable to that part of Title I which may have thus been suspended..chan robles virtual law library Sec. 15. This Act shall take effect ninety days after the date of its approval; but nothing in this Act shall apply during a period not to exceed one year following its approval to any contract for the carriage of goods by sea, made before the date on which this Act is approved nor to any bill of lading or similar document of title issued, whether before or after such date of approval in pursuance of any such contract as aforesaid..chan robles virtual law library

Approved: April 16, 1936 NOTES FROM LECTURE OF DR. PALACIOS HISTORY OF COGSA The COGSA of 1924 was enacted through Commonwealth Act 65. Under CA 65, the COGSA is introduced in our jurisdiction to cover foreign trade. It covers foreign trades of goods that are brought into the country from foreign jursidiction and the goods that are brought out of the country to a foreign destination. Q: What is the applicability of the Commonwealth Act 65 (COGSA)? A: The transportation must be: (a) Water/maritime transportation; (b) for the carriage of goods; and (c) overseas/international/foreign (from foreign port to Philippine port). It can be applied in domestic sea transportation if agreed upon by the parties in case of Clause paramount or paramount clause. This stipulation is valid since the parties agreed thereto. In this case the COGSA will apply as a matter of contract and not as a matter of law. NON-APPLICABILITY TO DOMESTIC SHIPPING Q: Can the COGSA apply in domestic shipping? A: Generally, NO. XPN: when parties agree to make it apply known as the Paramount Clause. Q: So what are the exceptions in the application of COGSA to our domestic trade? A: (a) In the event that there is a Paramount Clause in the contract of carriage (b) In the application of the Hierarchy of Laws in our jurisdiction Q: What laws shall apply in case of domestic trade? A: 1. 2.

Civil Code Code of Commerce

Sec. 16. This Act may be cited as the "Carriage of Goods by Sea Act.".chan robles virtual law library


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: What application does COGSA have in carriage of passengers? A: None. Applies only to carriage of goods.

A: The contract of carriage under COGSA refers to contract for the carriage of goods by sea. COGSA specifies that the contract of carriage must always be evidenced by a Bill of Lading or a similar document of title. Hence, if there is no bill of lading, that will not attract the application of the COGSA.

IMPORTANT FEATURES OF COGSA Q: What are the elements? 1. 2. 3.

Amount of carrier’s liability Notice of damage Prescriptive period

A: (a) (b) (c) (d)

CARRIER Q: Who is a carrier? A: It refers to the owner of a common carrier or the charterer of that carrier.

Q: In a charter party, what are the roles of a bill of lading?

Company that transports goods and/or people by air, land, or sea, in its own or chartered vessels orequipment, and is named as the carrier in the contract of carriage.

A:

Thus, there are 2 parties:

§

1. 2.

Owner Charterer

If there is no owner or there is no charterer, that carrier cannot be classified as CARRIER under COGSA. It must be owned by real owner, who may be registered owner or a charterer. Q: Who is a charterer? A: It refers to a bareboat or demise where there is transfer of ownership, hence, it becomes a private carrier (Planters’ Products case). A person or firm who enters into a contract with a shipowner for the transportation of cargo or passengers for a stipulated period of time, i.e. a shipowner's customer. Q: What is a Contract of Carriage? A: It refers to a contract where a bill of lading on a similar document or title is involved. Refers to a bill of lading to a similar document of title insofar as such document relates to the carriage of goods by sea, may be a contract of sale, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. Q: Explain the contract of carriage under COGSA?

A contract for the carriage of goods by sea It must be goods The goods are being carried by sea It must be covered by a Bill of Lading or a similar document

(a) Only an evidence of the title of the goods, and (b) Evidence of the receipt of the goods

§

§

It is not a contract because the contract is the CHARTER PARTY itself. rd However, if the said bill of lading is issued to a 3 party who is not a party in the charter party, the said bill of lading shall now become an evidence of the contract of carriage. From then, COGSA shall apply. As long as there is a promise to issue the BOL and nothing is issued, COGSA still applies.

Q: The goods have been delivered to an inter-island vessel at the port of Manila for delivery to Cebu or the goods were delivered to a vessel at the port of Manila for the delivery to another jurisdiction. The goods were received by carrier without issuing a BOL or similar document. The goods arrived at damage condition. A: The carrier could not be sued under COGSA. The remedy is to sue under the Civil Code or the Code of Commerce. The bill of lading is the principal document for the basis of the action of the consignee while the charter party is the document is the document for the owner’s basis of action. The charter party is a contract between the owner and the charterer as evidence of their contract of carriage. It is issued only upon demand of the shipper Q: Again, the rule is in the event of loss or damage, the basis will be the charter party agreement and not the bill of lading. When will the bill of lading be held as a separate contract? A: When the charter is endorsed the title to a third party, it now becomes a contract of sale.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law § In case of breach, there is joint liability. Q: What if vessel V which was chartered by A to Y to transport some goods to X, in case the goods arrived in damage condition, what is the remedy of Y? A: Y must file against A as charter party. Q: What is the role of the bill of lading issued by A to Y? A: (a) Only an evidence of the title of the goods, and (b) Evidence of the receipt of the goods The primary contract is the charter party and should be the basis of action of A and Y. Both of them entered into a charter party. Y is the owner of the carrier which he chartered to A. A is the owner of the goods that he shipped on board the vessel chartered to Y. If the goods of A arrived in damaged condition, or not delivered at all, he could only sue Y on the basis of charter party. But A can demand the issuance of bill of lading. Thus, if the goods arrived at damages condition, A may sue Y on the basis of bill of lading.

CIVIL CODE Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738

The owner of the goods may endorse the bill of lading to a buyer of the goods since it is a negotiable instrument. The moment the BOL is endorsed, the BOL becomes a contract between: (a) Owner of the goods (b) Buyer of the goods

CARRIER- the goods must have crossed one side of the vessel until the crossing of the other side of the vessel where the liability is terminated

The right side of the vessel is also known as the star board side, while the left side is the port side. Either sides can be the loading side under the Tackle-to-Tackle principle. Q: What if the shipper and the owner is the same? A:

Q: Since Y indorsed the bill of lading to X and sold the goods to the latter, it signifies the transfer of ownership. What is the consequence of such? A: The bill of lading now operates as a separate contract of carriage between Y and X. X, can sue on the basis of that new contract. X cannot sue on the basis of the charter party between A and Y since he is not a privy to it.

COGSA The liability of the carrier is different from the shipping line.

1. 2.

Carrier is liable when the goods have crossed the side of the ship (port side) Shipper is liable over the loss of the goods already on board

THINGS NOT CONSIDERED AS GOODS UNDER COGSA Q: What are the things not considered as “goods” under COGSA? A: 1. 2.

Live animals (they would die if not put on deck) Deck cargo which should be a. Agreed to be carried on deck b. Actually carried on deck

Q: If X wanted to recover damages against Y who sold the goods to M, what is his remedy?

Q: If live animals and deck cargo arrived at the port in damaged condition or lost, can you sue under COGSA?

A: If the proximate cause is negligence of the carrier, Y must file a third party complaint…

A: No, it is not covered by the goods that could be litigated under COGSA. They are exempted.

PERIOD OF RESPONSIBILITY CIVIL CODE v. COGSA

The provision that should govern the liability of the common carrier in that respect would be the provisions of the Civil Code and Code of Commerce.

Q: What is the period of responsibility of carrier under COGSA? A: The period is different from the Civil Code provision Art. 1736.

Q: What if the cargo is not carried on deck? A: If not carried on deck even though there’s an agreement to such, common carriage is liable for it constitutes a breach of contract.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: What kind of diligence is required under COGSA? Q: What are the reasons for the carrier not to issue a bill of lading without the loading or identify marks or statement of the conditions of the goods? A:

A: The COGSA says due diligence, this due diligence is extraordinary diligence in accordance with the hierarchy of laws.

Reasonable ground for suspecting inaccuracies made by the shipper When he has no reasonable means of checking

Under COGSA, as a rule, when the goods are loaded on board the common carrier by shipper or owner of the goods, the carrier is not mandatorily required to issue BOL, despite the request. But if the shipper requests, the carrier is mandatorily required to issue BOL.

Q: Why does the law does not compel the carrier to issue a bill of lading under the 2 circumstances?

Q: When the shipper requests for a BOL, what should the BOL contain?

A: When the 2 circumstances are present, the law protects the carrier for it will be held liable for issuing an inaccurate bill of lading.

A: The BOL must show all the identifying marks of the shipment supplied to him in writing by the shipper which would refer to:

1. 2.

When the inaccuracies have caused the damage, the carrier can limit its liability to the shipper as a consequence of the inaccuracies

1. 2. 3. 4.

Marks Quantity Weight Apparent good order condition of the shipment

RISKS ASSUMED BY THE CARRIER Q: What are the risks that are supposed to be assumed by the carrier if it would transfer the goods of the shipper? A: Any risk that would arise in the loading which includes: 1.

2.

3.

4.

5.

6.

7.

Loading- when the goods have been loaded and they are damaged, there is responsibility on the part of the carrier especially when the goods have crossed the side of the vessel Handling- there is responsibility on the part of the carrier if the goods are damaged on board in the handling of the cargo Stowage- when the goods are on board and they are placed in one side on board not properly protected, there is stowage and therefore, there is liability on the part of the carrier Carriage- when during the carriage of goods on board, the goods were rained on and they are not protected, there is responsibility Custody- when there is custody on board by carrier, any loss or damage to cargo, while the cargo is in the custody of the carrier on board, there is responsibility on the part of carrier. Care- if the goods are supposed to be kept in the holds, and refrigerated but they were stored on deck and they suffer damage, there is responsibility on the part of the carrier due to deficient care being given to the cargo Discharge of goods- when the goods are being discharged from carrier to the port docked, the goods are damaged, there is full responsibility on the part of carrier.

Q: What is the evidentiary value of BOL issued by carrier to shipper containing those identifying marks? A: Under COGSA, they simply establish prima facie the fact that those shipments were loaded on board together with identifying marks supplied by shipper to the carrier. Q: Is there a possibility to issue a BOL without necessarily stating the identifying marks? A: Yes, under COGSA: 1. 2.

If it has reasonable grounds for suspecting inaccuracies made by the shipper When he has no reasonable means of checking

Q: What is the consequence if the shipper supplied the carrier with those identifying marks of his shipment in writing? A: The shipper is deemed to have guaranteed the truthfulness of those information. There is a guarantee of the shipper and if they turn out to be untrue, and they caused damage to the carrier, the carrier has right of action against the shipper on the basis of breach of warranty. If the goods arrived in damage condition, and the carrier could prove that the damaged condition of cargo emanated from inaccurate description of the goods, the carrier can limit its liability to the owner of the shipment corresponding to the true value of the goods that have been guaranteed by shipper. Q: Thus, what does the shipper warrant?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

A: 1.

2.

Truthfulness of the identifying marks and the condition of the goods that have been turned over to the shipper Right (on the part of carrier) to limit the liability in the event the information was the proximate reason for any loss or damage to the cargo.

(a) Make the ship seaworthy; (b) Properly man,equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation.

NOTICE OF LOSS ARTICLE 366 v. SEC. 3, COGSA Q: When should the consignee give notice to the carrier in case of loss?

ARTICLE 366

A: It depends. 1. 2.

Upon receipt- when the loss is apparent (visible) Within 3 days from receipt- not apparent loss

Q: What is the conseqence of failure to give notice to the carrier? A: There is presumption that the goods have been delieverd and were delivered in good order condition to the consignee, but when the goods are delivered in damage condition, the presumption can be rebutted by presenting evidence proving the damage. Q: Can the consignee or shipper still file an action against the common carrier for damages owing to the damaged condition of the goods that he received or the goods were not all delivered to him? A: Yes, despite the fact that there is no notice of loss or damage under COGSA, the consignee or owner still has the right to file an action for recovery of damages against the carrier. The right is not removed from the shipper, this is the best part of the COGSA. The failure will only raise presumption that the goods have been delieverd and were delivered in good order condition to the consignee. Pertinent laws ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average be found therein upon opening the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.

1. Domestic/interisland/coastwise transportation 2. Land, water, transportation 3. Carriage of goods

COGSA Sec.3 (6) Applicability 1. International/ overseas/foreign (from foreign country to Phils.) air Note: subject to the rule on Paramount Clause 2. Water/maritime transportation 3. Carriage of goods

Notice of damage 1. Condition precedent 1. Not a condition 2. 24-hour period for precedent claiming latent damage 2. 3-day period for claiming latent damage *without this, claim is barred automatically *not barred, but the shipper shall have the defense because of the failure to give notice Notice should be in writing Prescriptive period None provided; Civil Code One year from the date of delivery (delivered but applies. damaged goods), or date when the vessel left port or from the date of delivery to the arrastre (non-delivery or loss). *the 1 year period may be extended upon express agreement for a reasonable period

Q: What if the carrier stops 5 times and commences voyage for 5 times? A: Since it stops 5 times, it presupposes that it will likewise


28


Kenneth & King Hizon (2A)- UST Faculty of Civil Law observe due diligence after said stopover and every commencement of the voyage. The carrier should exercise diligence 5 times. NOTICE OF LOSS NOT REQUIRED Q: In what instances notice is NOT needed? A: 1. 2. 3. 4.

No loss or damage to the goods Delay of delivery of the goods Misdelivery Joint survey or inspection INSTANCES WHEN CONSIGNEE IS BARRED FROM PRESENTING CLAIM FOR DAMAGES

2.

hours from delivery. For paying the transportation charges and expenses despite the filing of notice.

Q: What is the difference under COGSA? A: If the consignee did not file notice the only result is the presumption that the goods were delivered in the condition that they were received on board. And he can still file an action at all times. He could file action anytime for as long as the action is filed within the prescriptive period. Q: When will the issue of paying the transportation charges and expenses not apply under Art. 366?

Q: What are the instances when consignee is barred from presenting any claim or recover damages?

A: If the transportation charges and expenses were PREPAID by the shipper or the consignee at the port of loading of the cargo, the pre-payment of transportation charges and expenses will not preclude the consignee or the shipper from availing of the action against the carrier.

A:

Q: Why is he not precluded in such instance? 1. 2.

Failing to file notice Payment of freight charges after filing of notice

The consignee must have known of the condition of the goods to see whether it is in good order or condition or not. Law says that the filing of notice should be made on the last opportunity that the vessel should have delivered the goods

A: Art. 366 requires the consignee to view the condition of the goods before he pays the transportation charges. If they were prepaid, there was no occasion for the consignee to view the condition of the goods at the port of discharge. Under Art. 366, it speaks only of damage to cargo or condition of the goods. It does not extend to losses. COGSA, on the other hand, extends to both damage and losses.

Q: Who are the persons who can give notice or file notice? Q: What if the freight was paid first before the filing of notice?

A: 1. 2. 3.

Shipper Consignee Holder of the bill of lading

A: It will not be barred from claiming damage. The consignee should know the condition of the goods or there should be consignment first before he should pay the transportation charges and expenses.

ARTICLE 366 v. SEC. 3, COGSA Q: What is the consequence if after the filing of the required notices under Art. 366, the consignee paid the transportation charges and expenses to the carrier? A: If the transportation charges and expenses were paid, that would foreclose the right of consignee to file actions against the carrier. The shipper or the consignee is deemed to have abandoned his intent to file an action against the carrier despite the damages and the losses he suffered

Q: What if there is already pre-payment of transportation charges and expenses of freight? A: Art. 366 will not apply because the consignee was not given the time to check the condition of the goods. There should first be consignment Q: Again, when is the consignee or shipper not obligated to file notice under the COGSA? A:

Q: So, under Art. 366, the consignee is penalized and barred from filing action against the carrier for loss or damage in what instances? A: 1.

For not filing the notice immediately and within 24

1.

When there is joint survey or inspection- if the goods are discharged and the conditions are surveyed by the carrier, in the presence of consignee, that is a joint survey, there is no need of notice anymore because both parties have seen the conditions of the


29


Kenneth & King Hizon (2A)- UST Faculty of Civil Law goods 2. In case of delay 3. Misdelivery

A: 1.

Q: What if the ship left Manila in January 1, and it sank after 2 days, when will the 1 year period be counted from?

Art. 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. (1973a) NOTE: Extra-judicial demand shall not suspend the period of 1 year only the agreement of the parties can do so. Q: What events will not interrupt the period? A: 1. 2. 3.

rd

3 party complaint after an original complaint was filed; Amended complaint; and Subrogees, insurance companies.

Q: Is the prescriptive period under the COGSA interrupted from the time of the making of extra-judicial demand or filing of judicial action as provided in Art. 1155, NCC? A: No. 1 year period is a special prescriptive period, uniform worldwide

arising

or

resulting

from

Usually, unseaworthiness of the vessel is the liability of the owner of the vessel. The exception is under the COGSA. However, the carrier is still obliged to exercise due diligence otherwise, unseaworthiness is not a defense.

A: Jan. 1, because this is the time that the ship could have the opportunity to deliver the goods. NOTE: The rule is that the 1 year period cannot be extended. Art. 1155 will not apply unless the parties agree thereto.

loss or damage unseaworthiness.

2.

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from —

(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; The law provides that the act may either be on the navigation or management of the ship. The rule is that the carrier is not liable for the negligence of the crew when it is on voyage. However, this does not apply in the jurisdiction of the Philippines for being against public policy. When it is a transshipment, the carrier is liable the reason being that he is no longer in control of the acts of the crew. The exception to this is when said agreement is included in the bareboat or charter party because no public policy is involved, and the parties are free to agree for there is no public policy to consider. (b) Fire, unless caused by the actual fault or privity of the carrier; When the owner is not in privity with the cause of fire, it is an exempting circumstance

Q: What is the rationale behind the 3-day notice and relatively short prescriptive period? However, it will be held liable when it failed to exercise extraordinary diligence.

A: 1. 2. 3.

to provide carrier an opportunity to look for the lost goods to discover who was at fault in case of transshipment, to determine, when and where damage occurred IMMUNITIES AVAILABLE UNDER COGSA

Q: What is the importance of Sec. 4 of COGSA? A: It contains policy-based defenses in order to avoid liability. Q: Enumerate the immunities.

(c) Perils, dangers, and accidents of the sea or other navigable water; (d) Act of God;. (e) Act of war;. (f) Act of public enemies; (g) Arrest or restraint of princes, rulers, or people, or seizure under legal process; (h) Quarantine restrictions;. (i) Act or omission of the shipper or owner of the goods, his agent or representative;. (j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts;.


30


Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q:How do you classify Strikes or lock-outs? A: They may either be: 1. 2. 3.

legal illegal due to the fault of the carrier

(k) Riots and civil commotions;. (l) Saving or attempting to save life or property at sea; RATIO: The lives of the people are more important than the goods on board. (m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; (n) Insufficiency of packing; Q: What are the options of carrier in case of insufficiency of packing? A: 1. 2. 3.

accept and reject reject and ask the shipper to repack if there is apparent damage, yet the carrier accepts, he is liable

(o) Insufficiency or inadequacy of marks;. (p) Latent defects not discoverable by due diligence; and (q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage. 3. The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, or neglect of the shipper, his agents, or his servants.

A: As a general rule, yes. The exception is when it is reasonable. 5. Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.. Neither the carrier nor the ship shall be responsible in any event for loss damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.. 6. Goods of an inflammable, explosive, or dangerous nature to the shipment whereof, the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment. If any such goods shipped with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average if any (transport of dangerous goods and cargoes) Q: What is the extent of liability of carrier? A: As to the value of damages or general average

4. Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach or this Act or of the contract of carriage, and carrier shall not be liable for any loss or damage resulting therefrom: Provided, however, that if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable. (reasonable deviation) Q: Is deviation a breach of contract?

INSTANCES OF REASONABLE DEVIATION Q: Give instances of reasonable deviation. A: 1. 2. 3.

to save life to avoid an arrest from the port by reason of liberty to deviate under the provisions or stipulations in the contract (must be done for a valid purpose)


31


Kenneth & King Hizon (2A)- UST Faculty of Civil Law 4. by reason of existence of blockade or confirmed epidemic or interdiction of commerce

§

In such case where it is declared that commerce is prohibited as a matter between the country of destination and country of carrier

Q: Thus, what are the possible defenses of carrier in the event of an action for recovery of loss or damage under COGSA?

NOTE: Vessels which are licensed to engage in maritime commerce, or commerce by sea, whether in foreign or in coastwise trade, are no doubt regulated by Book III. Q: When the Mercantile Codes speak of “vessels” what does it cover? A: They refer solely and exclusively to those merchant ships which are engaged in the transportation of passengers and freight from one port to another or from one place to another.

A: 1. 2.

Exercise of due diligence The 18 immunities

BOOK III MARITIME COMMERCE TITLE I

Q: Is a minor craft used for the transportation of merchandise by sea and to make voyages from one port to another of these Islands, equipped and victualed for this purpose by its owner considered a vessel? A: Yes. REQUISITES TO BE A MARITIME VESSEL

VESSELS Q: What is a common carrier under this title?

Q: What are the requisites in order to be a “maritime” or “merchant” vessel? A:

A: A general ship carrying goods for hire, whether employed in internal, in coasting, or in foreign commerce is a common carrier. Thus, it includes even those engaged in maritime commerce; hence, all matters not regulated by the new Civil Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws ARTICLE 573 Merchant vessels constitute property which may be acquired and transferred by any of the means recognized by law. The acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if not recorded in the registry of vessels. The ownership of a vessel shall also be acquired by the possession thereof in good faith for three years, with a good title duly recorded. In the absence of any of these requisites, uninterrupted possession for ten years shall be necessary in order to acquire ownership. A captain cannot acquire by prescription the ship of which he is in command. PURPOSE OF BOOK 3 OF CODE OF COMMERCE Q: What is the purpose of Book 3 of the Code of Commerce? A: It is intended to define the law relative to vessels, and the vessels, and the vessels intended in that book are as such as the run by masters having special training, with the elaborate apparatus of crew and equipment indicated in the Code.

1. 2. 3.

The vessel being not an accessory to another vessel Must be licensed to engage in the transportation of passengers and/or freight By sea (not merely in rivers, inlets, lakes, coves or bays), whether in foreign or in coastwise trade NON-INCLUSION FROM WORD VESSEL

Q: What are not included in the term “vessels” under the Code of Commerce? A: 1. 2.

Warships Those accessory to another as in the kinds of lifeboats, launches, etc. 3. Pleasure crafts 4. Pontoons (flat-bottomed boat) 5. Health service and harbor police vessels 6. Floating storehouse, warships, or patrol vessels 7. Coastguard vessels 8. Fishing vessels 9. Tow boats 10. Any other aircraft destined to other causes: a. Coast and geodetic survey b. Scientific research and exploration c. Craft engaged in loading and discharge of vessels from ship to shore or docks or in transshipment


32


Kenneth & King Hizon (2A)- UST Faculty of Civil Law d. Small crafts which in harbors, along shore, bays, inlets, coves, and anchorages are engaged in trasnporting passengers and baggages Q: What is the Spanish term for “vessel”? A: “buque” Q: Does it include ships, crafts or floating structures of minor craft engaged only in river or bay traffic, or other vessels of minor nature not engaged in maritime commerce? A: No. Q: What does “vessels” mean for purposes of registration under the Tariff and Customs Code”? A: Vessels include every sort of boat, or other artificial contriviance used, or capable of being used, as means of transportation on water. Q: What is the requisite in order to acquire vessel on 3 years possession?

It is essential that a record of documents affecting title to a vessel be entered in the record of the Collector Customs at the port of entry NOTE: The Chattel Mortgage Law requires an affidavit of good faith appended to the mortgage and recorded therewith. Q: What if there is no affidavit? A: It vitiates a mortgage as against creditors and subsequent encumbrances. Thus, the chattel mortgage of a vessel, wherein the affidavit of good faith required by Chattel Mortgage Law is lacking, is unenforceable against third persons. Q: What is the force of certificate of ownership of vessels? A: The person in whose name a vessel is registered and to whom is issued a certificate of ownership is presumed to have the legal title thereto but said documents issued relating to the proprietorship of a vessel are not conclusive proof against the real owner. They are mere prima facie evidence.

A: RULE ON SALE OF VESSEL 1. 2.

The ownership of vessel may be acquired by the continuous possession thereof for 3 years Possession must be based upon good faith

Q: What kind of property are vessels? A: Although vessels or ships, whether moved by steam or by sail, partake to a certain extent of the nature and conditions of real property, on account of their value and importance in world of commerce, yet vessels shall be considered as personal property under the Civil Code and the common law. Q: Are vessels required to be registered under the Tariff and Customs Code?

Q: What is the rule on sale of vessel? A: In absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. NOTE: There is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. IMPORTANCE OF REGISTRATION Q: Why is registration in the registry important?

A: Since vessels are considered personal property, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law. Q: What is the difference between chattel mortgage of a vessel and chattel mortgage of other personalty?

A: It is indispensable in order that the purchaser’s right may rd be maintained against a claim filed by 3 person. In other words, it is important to determine the conflicting rigths over the vessel. Q: Why can’t the captain acquire the vessel by prescription?

A: Chattel mortgage of a vessel It is not necessary for a chattel mortgage of a vessel to be noted in the Register of Deeds

Chattel mortgage of other personalty

A: Because of the nature of possession of the captain is such that he is only an agent of the owner, a depositary of the vessel, and a depositary can never acquire the thing deposited by prescription.


33


Kenneth & King Hizon (2A)- UST Faculty of Civil Law The vendor shall be under the obligation to deliver to the purchaser a certified copy of the record sheet of the vessel in the registry up to the date of sale.

MODES OF ACQUISITION Q: What are the modes of acquisition?

ART. 577 If the sale of the vessel should take place while she is on voyage, all the freightage she earns from the time it receives its last cargo shall belong to the buyer, and the latter shall pay of the crew and other persons who go to make up its complement for the said voyage.

A: 1. 2. 3. 4. 5. 6. 7.

purchase and sale, prescription, construction, capture, donation, succession, and other means, such as barter

If the sale should take place after the arrival of the vessel at the port of her destination, the freightage shall belong to the seller, and the latter shall pay the crew and other persons who go to make up her complement, unless there is an agreement to the contrary in either case.

NOTE: Possession in GF will ripen into ownership in 3 years; if the possession is otherwise, it will ripen into ownership in 10 years. The acquisition of a vessel must appear in a written instrument and such instrument must be registered in order that the transfer may affect third persons

Art. 574. Builders of vessels may employ the material and follow with regard to their construction and rigging the systems most suitable to their interest. Ship owners and seamen shall be subject to the provisions of the laws and regulations of the public administration on navigation, customs, health, safety of vessels, and other similar matters. NOTE: The business of constructing and repairing vessels or parts thereof shall not be considered a public utility and no CPC shall be required thereof This has been amended by R.A. 1407 and R.A. 6106. ART. 575 Part owners of the vessels shall enjoy the right of preemption and redemption in sales made to strangers, but they can only exercise it within the 90 days following the registration of the sale in the registry and by delivering the price at once. Q: What if the documents are not recorded in the registry? rd

A: They do not produce any legal effect against 3 persons; hence, the time does not run except from the same date in which the corresponding inscription is made.

ART. 578 If the vessel while on a voyage or in a foreign port, her owner or owners should voluntarily sell her, either to Filipinos or to foreigners domiciled in the capital or in a port of another country, the bill of sale shall be executed before the consul of the Philippines at the port where she terminates her voyage and said instrument shall have no effect with respect to third persons if it is not registered in the registry of the consulate. The consul shall immediately forward a true copy of the instrument of purchase and sale of the vessel to the registry of vessels of the port where said vessel is entered and registered. In every case the sale of the vessel must be made to appear with a statement of whether the seller receives the full price or part thereof, or whether he retains any interest in said vessel in whole or in part. In case the sale is made to a Filipino, this fact shall be stated in the certificate of navigation. When a vessel, while in a voyage, should become useless for navigation, the captain shall report the matter to the judge or court of competent jurisdiction of the port of arrival, should she be in the Philippines; and should she be in a foreign port, to the Filipino consul should there be one, or to the judge or court or local authority in the absence of the former; and the consul, or the judge or court, or in their absence, the local authority shall order an examination of the vessel to be made. If the consignee or the insurer should reside at said port, or should have representatives there, they must be cited in order to take part in the proceedings on account of whom it may concern.

ART. 576 The rigging, masts, stores and engine of a steamer of the vessel shall always be understood as included in the sale thereof if at the time of the sale, they are owned by the vendor.

Q: Give the instance where the sale can be made by the captain.

The arms, munitions of war, provisions and fuel shall not be considered as included in the sale.

A: The sale of the vessel solicited by the captain must not be affected or consented to, unless the said vessel is in the condition of being useless for navigation, nor can it be sold in an amount less than ¾ of its approved value.


34


Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: What if the vessel while on voyage becomes useless for navigation but there is a possibility of her being repaired, shall the judicial sale of said vessel if solicited by her captain be granted?

5.

6. A: No, the damage of the vessel and the impossibility of her being repaired in order to continue the voyage must be proven. Q: Supposing that a vessel is judicially sold was appraised at P400,000, may she be sold for P250,000? 7. A: No, the vessel cannot be sold in the amount of less than ¾ of her appraised value. ART. 579 After the damage of the vessel and the impossibility of her being repaired, in order to continue the voyage, having been proven,her sale at public auction shall be ord, subject to the following rules: 1. The hull of the vessel, her rigging, engines, stores, and other articles shall be appraised by means of an inventory, said proceedings being brought to the notice of the persons who may wish to take part in the auction. 2. The order or decree ordering the public auction shall be posted in the usual places, and shall be advertised in the newspapers of the port where the auction is to be held, should there be any, and in other newspapers which the court may determine. The period which may be fixed for the auction shall not be less than 20 days 3. These advertisements shall be repeated every ten days, and their publication shall be recorded in the proceedings. 4. The auction shall be held on the day fixed, with the formalities prescribed in the common law for judicial sales. 5. If the sale should take place when the vessel is in a foreign country, the special provisions governing such cases shall be observed. ART. 580 [In all judicial sales of vessels for the payment of creditors, the following shall be preferred in the order named: 1. The credits in favor of the public treasury proven by means of an official certificate of the competent authority 2. The judicial costs of the proceedings according to an appraisement approved by the judge or court. 3. The pilotage charge, tonnage dues, and the other sea or port charges, proven by means of proper certificates of the officers entrusted with the collection. 4. The salaries of the caretakes and watchmen of the vessel and any other expenses connected with the preservation of said vessel, from the time of arrival in the port until her sale, which appear to have

8.

been paid or to be due by virrue of a true account approved by the judge or court The rent of the warehouse where the rigging and stores of the vessel have been taken cared of, according to contract The salaries due to the captain and crew during their last voyage, which shall be verified by means of the liquidation based on the rolls of the crew and the account books of the vessel, approved by the chief of the bureau of merchant marine where there is one, and in his absence, by the consul, judge, or court. The reimnursement for the goods transported which the captain may have sold in order to repair the vessel, provided the sale has been ordered by a judicial instrument executed with the formalities required in such cases, and recorded in the certificate of the registry of the vessel. The part of the price which has not been paid to the last seller, the credits pending for the payment of materials and work in the construction of the vessel when she has not navigated, and those arising from the repair and equipment of the vessel and her provisioning with victuals and fuel during her last voyage.

In order that said credits may enjoy the preference provided for in this subdivision, they must appear by means of contracts recorded in the registry of vessels, or if they were contracted for the vessel while on voyage and said vessel has not returned to the port of her registry, they must be made under the authority required for such cases and entered in the certificate of the record of the vessel. 9.

The amounts borrowed on bottomry loans before the departure of the vessel, proven by means of the contracts executed according to law and recorded in the registry of vessels, the amounts borrowed during the voyage with the authority mentioned in the foregoing subdivision, complying with the same requisites, and the insurance premium, proven by the policy of the contract or certificate taken from the books of the broker. 10. The indemnity due to the shippers for value of the goods transported which were not delivered to the consignee, or for averages suffered for which the vessel is liable, provided either shall appear in a judicial or arbitration decision.

NOTE: Repealed by R.A. 6106.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law REPUBLIC ACT NO. 6106 REPUBLIC ACT NO. 6106 - AN ACT AMENDING REPUBLIC ACT NUMBERED ONE THOUSAND FOUR HUNDRED SEVEN, AS AMENDED, TO PRESCRIBE THE RULES FOR FINANCING THE ACQUISITION OR CONSTRUCTION OF VESSELS TO BE USED FOR OVERSEAS SHIPPING, TO ALLOW THE CREATION OF A MARITIME LIEN THEREON, AND FOR OTHER PURPOSES SECTION 1. Republic Act Numbered One thousand four hundred seven, as amended, is hereby further amended to include a new provision known as Section 11 ½, which shall read as follows: "Sec. 11 ½. a. Any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines, at least seventy-five per cent of the capital of which is owned by citizens of the Philippines, engaged or which shall engage exclusively in the overseas shipping business, may, for the purpose of financing the construction, acquisition or purchase of vessels for use in overseas shipping, freely constitute a mortgage or any other lien or encumbrance on such vessels and its equipment with any bank or other financial institutions, domestic or foreign. "b. The instrument of mortgage, lien or encumbrance shall be recorded in the registry of vessels in the order of their reception and shall show: 1. 2. 3. 4. 5.

The name of the vessels; The name of the parties; The time and date of reception of the instrument; The interest in the vessel transferred or affected; and The amount and date of maturity of any mortgage.

5. Costs of repair and equipment of the vessel, and provisioning of food, supplies and fuel during the last voyage; and 6. Preferred mortgages registered prior in time. "e. The lien of a preferred mortgage may be enforced by suit in term or otherwise in the Philippines, or in any foreign country in which the vessel shall be found pursuant to the procedure of said country for the enforcement of ship mortgages constituting maritime liens on vessels documented under the laws of said country. "f. After the bill of judicial sale at public auction has been executed, all claims against the vessel in favor of the creditors shall be considered extinguished, and such claim shall thereafter attach, in like amount and in accordance with their respective priorities to the proceeds of the sale.f the proceeds of the judicial sale should not be sufficient to pay all the creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially, shall subsist as ordinary credits enforceable by personal action against the debtor. The record of the judicial sale shall be inscribed in the registry of vessels." SECTION 2. The provisions of Commonwealth Act Numbered Six hundred six, as amended by Republic Act Numbered Nine hundred thirteen; the Code of Commerce, particularly Articles 580 and 584 thereof; and all other Acts, Executive Orders and regulations inconsistent herewith are hereby repealed or modified accordingly.

A copy of the instrument of mortgage shall be furnished the Central Bank of the Philippines.

ART. 581. If the proceeds of the sale are not sufficient to pay all the creditors included in one number or grade, the amount shall be divided among them pro rata.

"c. Any mortgage, lien or encumbrance constituted in accordance with this Act is a preferred mortgage and shall constitute a maritime lien upon the mortgaged vessel in the amount of the outstanding mortgage indebtedness secured by such vessel.

ART. 582. After the bill of judicial sale at public auction has been executed and recorded in the registry of vessels, all other liabilities of the vessel in favor of the creditors shall be considered cancelled.

"d. A preferred mortgage shall have priority over all claims against the vessel, except the following preferences in the order stated:

But if the sale should have been voluntary, and made while the vessel was on voyage, the creditors shall retain their rights againts the vessels until her return to the port of her registry, and 3 months after the record sale in the registry of vessels, or after her arrival.

1. Judicial costs of the proceedings; 2. Taxes due the Philippine Government; 3. Salaries and wages of the Captain and Crew of the vessel during its last voyage; 4. General average or salvage including contract salvage; bottomry loans; and indemnity due shippers for the value of goods transported but which were not delivered to the consignee;

Art. 583. If the ship being on a voyage the captain should find it necessary to contract one or more of the obligations mentioned in subdivisions 8 and 9 of article 580, he shall apply to the judge or court if he is in the Philippine territory, and otherwise to the Filipino consul, should there be one, and in his absence, to the judge or court or proper local authority, presenting the certificate of the registry of the vessel by virtue of a declaration of unseaworthiness.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law The judge or court, the consul, or the local authority, as the case may be, in view of the result of the proceedings instituted, shall make a temporary memorandum in the certificate of their result, in order that it may be recorded in the registry when the vessel returns to the port of her registry, or so that it can be admitted as a legal and preferred obligation in case of sale before its return, by reason of the sale of the vessel by virtue of a declaration of unseaworthiness.

NOTE: However, an action brought against the captain and the vessel at the same time may be maintained, but not againts the vessel alone as defendant. Although in an action against the ship, the owner happened to procure its release from an order of seizure by giving bond, he did not thereby waive his right to object to the irregular procedure followed in instituting the action and obtaining the order of seizure. ART. 585. For all purposes of law not modified or restricted by the provisions of this Code, vessels shall continue to be considered personal property.

The omission of this formality shall make the captain personally liable for the credits prejudiced through his fault. Q: What is the reason of the law under this provision? A: Generally, the captain of the vessel is not its real owner, but a person of confidence of the shipowner, possessing further the technical requisites in which in his duties are required. The captain, once in a voyage, is the supreme chief of the embarkation, and for this reason he would be prejudicing seriously the creditors of the vessel should he incur unjustifiable indebtedness. In order that this abuse may be avoided, the Code establishes the limitation in the above article

Ssimilarities between vessels and real properties Q: What are the similarities between vessels and real properties? A: 1. 2.

That the ownership of both is evidenced by a certificate of ownership That any conveyance of both, to be effective against third persons, must be registered in their respective property registry.

PERSONS WHO TAKE PART IN MARITIME COMMERCE ART. 584. The vessels subject to the liability for the credits mentioned in Art. 580 may be attached and judicially sold in the manner prescribed in Art. 579, in the port in which they may be found, at the instance of any of the creditors; but if they should be loaded and ready to sail, the attachment cannot take place except for debts contracted by reason of the preparation and provisioning of the vessel for the voyage, and even then the attachment shall be dissolved if any person interested in her sailing should give bond for the return of the vessel within the period fixed in the certificate of navigation, binding himself to pay the debt, in so far as it may be legal, should the vessel fail to do so, even if his failure may have been caused by fortuitous events. For debts of any other kind whatsoever not included in the said Art. 580, the vessel may only be attached in the port of her registry. NOTE: This has been repealed by R.A. 6106. Q: Can an action be brought against the ship? A: No, the ship being neither a natural nor a juridical person. It was absolutely indispensable for the maintenance of contentious action in the courts of justice to have as defendant some natural or juridical person. A suit against the ship, such as is permitted in thw English and American Admiralty Courts, was unknown to the Spanish Law. The Rules of Court does not authorize such action.

Art. 586. The owner of a vessel and ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditors proves that the amount claimed was invested therein. By agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be. Q: Who are the persons who participate in the Code of Commerce? A: 1. 2. 3. 4.

5. 6.

Shipowners- “propietario” in Spanish but sometimes comprehended in the term “naviero” Ship-agent- “naviero” in Spanish Captain of master of the vessel Officers other than the captain or master of the vessel a. Sailing or first mate b. Quartermaster or second mate c. Engineers Seamen or sailors or crew Other persons who make up the complement of the vessels, including the stockers and supercargoes.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Naviero or ship agent

The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.

Q: Who is a Naviero or ship agent? A: Art. 586 provides that both the owner of the vessel (propietario) and the naviero or characterer shall be civilly liable for the act of the master. It refers to the person undertaking the voyage who is in one case may be the owner and in another the charterer. Q: What is the liability of a ship owner and ship agent for acts of the captain in culpa contractual? A: Both the owner of the vessel and the naviero or charterer shall be civilly liable for acts of the master. Hence, any person whose property has been cast overboard by order of the captain should have a right of action directly against the ship owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. NOTE: a.

b.

c.

Similarly, they will be liable for the acts of the captain who without any cause or reason and without any unforeseen accident or stress of weather, willfully abandoned the lorcha under contract of towage from Manila to Iloilo; or For the loss occasioned by the gross negligence of the captain with respect to the care of the potatoes on board the lorcha; or In case of voyage to a particular place which was interrupted by the captain, said interruption was not due to fortuitous event or force majeure, not to disability of the vessel. Hence, being caused by the captain, the passenger’s right to indemnify is evident. The owner of the vessel and the ship agent shall be civilly liable for the acts of the captain.

Q: What is the liability of the ship owner and the ship agent for acts of the captain in culpa aquiliana or tort?

Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable. Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. (1903a) Q: In such case, what is the defense which the owner may raise to avoid liability? A: The defense that the owner exercised the care and diligence as a good father of a family in selecting the captain. Q: What is the liability of the ship-owner and ship agent for obligations contracted by the captain?

A: It shall be govern by Arts. 2176 and 2180. Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (1902a) Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

A: The owner of the vessel and the agent shall be civilly liable for the obligations contracted by the captain to repair, equip, and provision the vessel, although he contracted it in his own name. G.R.: When the agents buy in their own names, but really for the account of their principal, the seller has an option to look either for payment. EXPNS: 1. 2.

Unless he trusted the agent exclusively; or Unless by the usage and understanding of the business, the agent only is held; or


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 3. Unless the special circumstances of the case show that only the agent was intended to be bound and the seller knew it or was chargeable with knowledge of it; Q: Is the destruction of the vessel a valid defense? A: It is not a defense that the vessel has been totally destroyed. Naturally, the total destruction of the vessel extinguishes a maritime lien, as there is no longer any res to which it can attach. Yet, the total destruction of the vessel does not affect the liability of the owners for the repairs on the vessel completed before its loss. Yet, the liability of the owner for damages arising out of a collision is extinguished by the loss of the vessel. Q: Is the ship-agent solidarily liable with the ship owner in case of insolvency of the latter? A: The ship agent is solidarily liable with its principal. Insolvency of the principal has no bearing on the liability of the ship agent. But abandonment is allowed. The ship agent may exempt itself by abandoning the vessel with all the equipment and freightage earned during the voyage. Concept of a husbanding agent Q: Explain the concept of a “husbanding agent.” A: It is the general agent of the owner in relation to the ship with powers to engage the vessel for general freight and the usual conditions, and settles for freight and adjusts averages with the merchant. Q: What is its liability for the tax on transportation business of its principal? A: A shipping company that holds itself to the public and to the government as the ship owner’s local agent, and in fact renders services as such, is under obligation to pay, for and in behalf of its principal, whatever tax is due from the latter, especially where the principal is a nonresident corporation beyond the jurisdiction of the Philippines. Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freightage he may have earned during the voyage. There is a discrepancy between the meaning of naviero in Art. 586 of the Code of Commerce, where the word is used in contradistinction to the tern “owner of the vessel” and in Art. 587 where is used alone, and apparently in a sense broad enough to include the owner.

Q: What is the liability of the owner or agent of the vessel for the breach of contract of marine transportation by the acts of the captain? A: Although Art. 587 appears to deal only with the limitation of ship owner’s or agent for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, the consensus of authority is to the effect that notwithstanding the language of the aforequoted provision, the benefit of the limited liability therein provided for applies in all cases wherein the said owner or ship agent can be properly held liable for negligent or illicit acts of action. Hence, said owner or agent is liable for the loss of life of passengers for the negligent acts of the captain. Q: Are the Civil Code provisions on common carriers and Art. 587 of Code of Commerce applicable to common carrier where the latter acted as private carrier? A: No. Under American jurisprudence, from which our Civil Code provisions on common carriers are taken, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy and is deemed valid. LIMITATION OF LIABILITY; ABANDONMENT Q: What is necessary in order to limit the liability of the agent or owner of the vessel? A: By the express provision of this Code, the owner of the vessel is civilly liable for the acts of the captain, and he can only escape from this civil liability by abandoning his property in the ship and any freight that he may have earned on the voyage; this abandonment would have had amounted to an offer of the value of the vessel, of her equipment and freight money earned. And could not have been refused. NOTE: The shipowner’s liability is co-extensive with his interest in the vessel and its freight, and ceases by his abandonment and surrender of these to the parties sustaining loss, and if no abandonment is made, the liability of the owner or agent is not limited nor extinguished. Q: Who can make the abandonment? A: Only the shipper and the ship-agent can make abandonment of a vessel, but in cases of co-ownership of a vessel, its part owner may exempt himself from liability by the abandonment of the part of the vessel belonging to him. However, an abandonment cannot be made by the charterer of the ship who has only the right to indicate the ports or places to which the ship shall call or enter but who has no jurisdiction or control over the acts of the captain since said


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law rd charterer can at no time be regarded by the 3 parties as being in the place of the owners or agents in matters relating to the responsibility pertaining to the ownership and possession of the vessel. INSTANCES OF VALID ABANDONMENT Q: What are the instances in which abandonment is allowed? A: The Principle of Limited Liability of a shipowner or shipagent is provided for in but 3 articles of the Code of Commerce: a.

b.

c.

Art. 587-civil liability for the indemnities in favor of the captain in the vigilance over the goods and for the safety of the passengers in maritime transportation. Art. 590- civil liability of the co-owners of the vessel in the proportion of their contribution to the common fund for the results of the acts of the captain in the vigilance over the goods and for the safety of passengers in maritime transportation. Art. 837- civil liability incurred by the shipowners in cases of maritime collisions.

with losses related to maritime contracts is confined to the vessel, which stands as the guaranty for their settlement. REAL AND HYPOTHECARY RULE IN MARITIME LAW Q: Explain the real and hypothecary rule in Maritime law. A: To offset against the innumerable hazards and perils in sea voyages and to encourage ship building and marine commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of the ship to the vessel, equipment and freight, or insurance if any, so that if shipowner or agent abandon the ship, equipment and freight, his liability would be extinguished. By abandonment, the agent or owner exempts himself from liability, thus, avoiding the possibility of risking his whole fortune in the business. Q: The liability of shipowner and ship agent is limited to the amount of interest in said vessel such that where vessel is entirely lost, the obligation is extinguished. The interest extends to what object? A:

MARITIME OR ADMIRALTY LAW

a. b. c. d.

Q: What is maritime/admiralty law? A: It is the system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and to maritime conveyance of persons and property. Maritime laws apply only to maritime trade and sea voyages. NOTE: Arrastre service is not maritime in character. It refers to a contract for the unloading of goods from a vessel. CHARACTERISTICS OF MARITIME TRANSACTION Q: What are the characteristics of maritime transaction? 1.

2.

Real - similar to transactions over real property with respect to effectively against third persons which is done through registration. The evidence of real nature is shown by: 1) The limitation of the liability of the agents to the actual value of the vessel and the freight money; and 2) The right to retain the cargo and embargo and detention of the vessel Hypothecary - the liability of the owner of the value of the vessel is limited to the vessel itself (Doctrine of Limited Liability).

NOTE: The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection

the vessel itself; equipments; freightage; and insurance proceeds

Q: Explain: the shipowner or agent has the right of abandonment. A: By implication, his liability is confined to that to which he is entitled as of a right to abandon—“the vessel with all her equipments and the freight it may have earned during the voyage,”—and if they are lost, it suffices for his discharge to surrender all claims in respect of the ship and its freight, such as insurance, etc., and any act of abandonment of the vessel would be an idle ceremony, since whether the abandonment of the vessel was in accordance with law or not is immaterial in such a case. NOTE: The total destruction of the vessel extinguishes a maritime lien as there is no longer any res to which it can attach. Q: What are the exceptions to the real and hypothecary rule? A: 1. 2.

In case the voyage is not maritime, but only in river, bay or gulf In the case of the expenses for equipping, repairing, or provisioning of the vessel


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 3. In case the vessel is not a common, but special carrier 4. In case the vessel would totally sink or be a total loss, due to shipowner’s or shipagent’s own fault. ABANDONMENT IN MARITIME COMMERCE v. ABANDONMENT IN MARINE INSURANCE Q: Distinguish abandonment in maritime commerce and abandonment in marine insurance.

the notice be done orally, a written notice of such abandonment shall be submitted within 7 days from such oral notices Art. 588. Neither the owner of the vessel nor the agent shall be liable for the obligations contracted by the captain if the latter exceeds his powers and privileges inherent in his position or those which may have been conferred upon him by the former. However, if the amounts claimed were made use of for the benefit of the vessel, the owner or agent shall be liable.

A: ABANDONMENT IN ABANDONMENT IN MARINE MARITIME COMMERCE INSURANCE Who makes the abandonment Abandonment is made by the Abandonment is made by the shipowner or ship agent insured, not necessarily the shipowner or ship agent What is abandoned? The thing abandoned is the The things insured, not vessel, with her necessarily the vessel are appurtenances and freight abandoned Basis of the breach of maritime contract The basis of the breach of Constructive total loss in maritime contract arising which the loss, injury, from the conduct of the expenses to be suffered captain in the vigilance over more than ¾ of the value of the goods and for the safety the thing insured which is of passengers abandoned Purpose To limit the civil liability of To recover from the insurer the shipowner or ship agent indemnity for a total loss, rd to 3 persons to the value of although the thing insured the vessel with her does not suffer actual total appurtenances and freight loss Requisites in abandonment in marine insurance Q: What are the requisites in abandonment in marine insurance? A: 1. 2.

3. 4.

5.

There must be an actual relinquishment of claim of ownership of the thing abandoned There must be constructive total loss, in which the loss, injury or expenses to be suffered be more than ¾ of the value of the thing abandoned Abandonment must be neither partial nor conditional Abandonment must be made within reasonable time after receipt of reliable information of constructive total loss Notice of abandonment to insurer, whether oral or in writing, must be explicit, and must specify the particular cause of abandonment; provided that if

NOTE: Under 588, the shipowner and the shipagent are not liable for the obligations contracted by the captain if he exceeds his authority, unless the amounts claimed were invested for the benefit of the vessel. However, under Art. 1759, NCC, the ship owner is liable for the death of or injuries to the passengers which are caused by the negligence or willful acts of his EEs although such EEs may have acted beyond the scope of their authority or in violation of the orders of the shipowner Art. 589. If two or more persons should be part owners of a merchant vessel, an association shall be presumed as established by the part owners. This association shall be governed by the resolutions of a majority of the members. A majority shall be the relative majority of the voting members. If there should be only two part owners, in case of disagreement the vote of the member having the largest interest shall be decisive. If the interests are equal, it shall be decided by lot. The representation of the smallest part in the ownership shall have one vote; and proportionately the other part owners as many votes as they have parts equal to the smallest one. A vessel cannot be detained, attached or levied upon execution in her entirety for the private debts of a part owner, but the proceedings shall be limited to the interest the debtor may have in the vessel, without interfering with her navigation. NOTE: If there should be only 2 part owners whose interest are equal, in case of disagreement, the management of a merchant ship shall be decided by lot. But if one owns ¼ interest and the other ¾ interest in the vessel, then the vote of the member having the largest interest shall be decisive. Art. 590. The co-owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund,


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law for the results of the acts of the captain, referred to in Article 587. Each part owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel belonging to him. Q: Explain the effect of this provision. A: The liability of the owner or agent of the vessel extends for breach of contracr of maritime transportation by the acts of the captain, and in collision of vessels, but to limit the liability of the agent or the ship owner, abandonment of the vessel is necessary; however, the loss of the vessel would extinguish the liability of the owner or agent, except when the insurance is collected by the owner, the insurance susbtitutes the vessel and the owner becomes responsible to the extent of the insurance collected. Art. 591. All the part owners shall be liable, in proportion to their respective ownership, for the expenses which are incurred by virtue of a resolution of the majority. They shall likewise be liable in the same proportion for the expenses of maintenance, equipment, and provisioning of the vessel, necessary for navigation. Q: Can the abandonment or loss of the vessel limit or extinguish the liability of the owners? A: No. From the language of this provision, there is nothing to denote that the liability of the owners of a vessel is wiped out by the loss of the vessel. Q: Why? A: The liabilities under this article is essentially contractual in character incurred by virtue of a resolution of the majority of the co-owners and different from those incurred under Art. 590. which are considered as maritime liens, thus, it cannot be considered limited by the abandonment of the vessel nor are extinguished by the loss of the ship. NOTE: As a general rule, the owners of the vessel and the vessel itself are liable for the necessary repairs. Naturally the total destruction of the vessel extinguishes the maritime liens, as there is no longer any res to which it can attach. But the total destruction of the vessel does not affect the liability of the owners for repairs on the vessel completed before its loss. Art. 592. The resolutions of the majority with regard to the repair, equipment, and provisioning of the vessel in the port of departure shall bind the minority, unless they renounce their participation therein, which must be acquired by the other part owners after a judicial appraisement of the value of the portion or portions assigned.

The resolutions of the majority relating to the dissolution of the association and sale of the vessel shall also be binding on the minority. The sale of the vessel shall be made at a public auction, subject to the provisions of the law of civil procedure unless the part owners unanimously agree otherwise, subject always to the right of pre-emption and redemption mentioned in Article 575. RIGHT OF MAJORITY Q: Is the right of the majority sanctioned by this article? A: Yes. The right of the majority is sanctioned by this article to impose upon the minority a resolution with regard to the repair, equipment, and provisioning of the vessel, dissolution of the partnership, and sale of the vessel. Art. 593. The owners of a vessel shall have preference in her charter over other persons, offering equal conditions and price. If two or more of the former should claim said right the one having greater interest shall be preferred, and should they have an equal interest it shall be decided by lot. Art. 594. The part owners shall elect the manager who is to represent them in the capacity of agent. The appointment of director or agent shall be revocable at the will of the partners. Art. 595. The agent, be he at the same time an owner of a vessel or a manager for an owner or for an association of coowners, must be qualified to trade and must be recorded in the merchant's registry of the province. The agent shall represent the ownership of the vessel, and may in his own name and in such capacity take judicial and extrajudicial steps in all that relates to commerce. REQUISITES TO BE A SHIP AGENT Q: What are the conditions in order that a person may discharge the duty of a ship agent? A: 1. 2.

To possess legal capacity to engage in commerce To be recorded in the commercial registry of the province

NOTE: His representation is limited and cannot be transferred to other persons nor his powers to exceed those conferred upon him. When powers are assumed without due authorization, he must be liable for the damage which may have occurred.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Art. 596. The agent may discharge the duties of captain of the vessel, subject, in every case, to the provisions contained in Article 609. If two or more co-owners request the position of captain, the disagreement shall be decided by a vote of the members; and if the vote should result in a tie, the position shall be given to the part owner having the larger interest in the vessel. If the interest of the petitioners should be the same, and there should be a tie, the matter shall be decided by lot. QUALIFICATIONS OF A SHIP CAPTAIN

5. 6.

Supply, equip, and provision the vessel; and Order repair of vessel to enable it to continue its voyage. (Art. 610)

Art. 597. The agent shall select and enter into an agreement with the captain, and shall contract in the name of the owners, who shall be bound in all that refers to repairs, details of equipment, armament, provisions, fuel, and freight of the vessel, and, in general, in all that relates to the requirements of navigation. Art. 598. The agent cannot order a new voyage, nor make contracts for a new charter, nor insure the vessel, without the authority of her owner or by virtue of a resolution of the majority of the co-owners, unless these powers were granted him in the certificate of his appointment.

Q: What are the qualifications of a captain of a vessel? If he should insure the vessel without authority therefor he shall be subsidiarily liable for the solvency of the underwriter.

A: 1. 2. 3.

Filipino citizen; Legal capacity to contract; Must have passed the required physical and mental examinations required for licensing him as such. (Art. 609)

NOTE: If the ship agent possesses such qualifications, he may perform the duties of both ship agent and captain simultaneously. As to the co-owners applying for the position of captain, it is perfectly understood that the candidates must possess the qualifications required of a captain.

Art. 599. The managing agent of an association, shall give his co-owners an account of the results of each voyage of the vessel, without prejudice to always having the books and correspondence relating to the vessel and to its voyages at their disposal. Art. 600. After the account of the managing agent has been approved by a relative majority, the co-owners shall satisfy the expenses in proportion to their interest, without prejudice to the civil or criminal actions which the minority may deem fit to institute afterwards.

THREEFOLD CHARACTER OF THE CAPTAIN Q: What is the nature of position or the 3-fold character? A: 1. 2. 3.

General agent of the shipowner; Technical director of the vessel; Representative of the government of the country under whose flag he navigates.

In order to enforce the payment, the managing agents shall be entitled to an executory action, which shall be instituted by virtue of a resolution of the majority, and without further proceedings than the acknowledgment of the signatures of the persons who voted for the resolution. Q: What is the effect of the Rules of Court in this provision? A: The executory action (accion ejecutiva) has been rendered obsolete by the Civil Procedure and by the Rules of Court.

INHERENT POWERS OF A CAPTAIN Q: What are his inherent powers? A: 1. 2. 3.

4.

Appoint crew in the absence of ship agent; Command the crew and direct the vessel to its port of destination; Impose correctional punishment on those who, while on board vessel, fail to comply with his orders or are wanting in discipline; Make contracts for the charter of vessel in the absence of ship agent.

Art. 601. Should there be any profits, the co-owners may demand of the managing agent the amount due them, by means of an executory action without further requisite than the acknowledgment of the signatures in the instrument approving the account. Art. 602. The agent shall indemnify the captain for all the expenses he may have made from his own funds or from those of other persons, for the benefit of the vessel. Q: In order that expenses may be reimbursed, what must be done?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: They must be recorded in the account of the voyage. Art. 603. Before a vessel goes out to sea the agent may at his discretion, discharge the captain and members of the crew whose contract did not state a definite period nor a definite voyage, paying them the salaries earned according to their contracts, and without any indemnity whatsoever, unless there is an expressed and specific agreement in respect thereto. WHEN SHIP AGENT MAY DISCHARGE HIS CAPTAIN Q: May the ship agent discharge his ship captain? A: The ship agent may at his discretion discharge the captain provided, however, that the contract for services of the captain did not state fixed period or voyage. The ship agent is liable to pay the salaries earned according to their contract, but without indemnity whatsoever. The captain shall continue to receive his salary until his return to the port where the contract was made unless there should be just motive for the discharge. Art. 604. If the captain or any other member of the crew should be discharged during the voyage, they shall receive their salary until their return to the place where the contract was made, unless there are good reasons for the discharge, all in accordance with Art. 636 et seq. of this Code. A captain of a steamer, discharged without legal cause at a port other than that in which his services were contracted for, may recover salary up to the latter place.

experts appointed in the manner established in the law of civil procedure. Art. 607. If the captain who is a part owners should have obtained the command of the vessel by virtue of a special agreement contained in the articles of copartnership, he cannot be deprived thereof except for the reasons mentioned in Article 605. Q: A, a part owner and who at the same time is the captain of the vessel, by virtue of a special agreement in the Articles of Co-partnership, was discharged for insubordination in serious matters. Is this discharge lawful? A: Yes. Under Art. 607, he will not be deprived of his office as captain except for such causes as are comprised under Art. 605. in mentioning the causes for the lawful discharge includes insubordination in serious matters. What right can he demand from the ship agent before being discharged? A: A, being a part owner, may not be discharged without the ship agent returning to him the amount of his interest therein. Q: How shall his right be appraised in the absence of an agreement? A: In the absence of any agreement by the parties, the amount of interest which A may demand to be returned to him by the ship agent, shall be appraised by the experts appointed in the manner established in the Rules of Court.

Art. 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence.

Art. 608. In case of the voluntary sale of the vessel, all contracts between the agent and captain shall terminate, reserving to the latter his right to the indemnity which may be proper, according to the agreements made with the agent.

Where a contract is for a definite period or voyage, the members of the crew may not be discharged until after the fulfillment of their contract, except:

The vessel sold shall remain subject to the security of the payment of said indemnity if, after the action against the vendor has been instituted, the latter should be insolvent.

a. b. c. d. e.

For reasons of insubordination in serious matters Robbery Theft Habitual drunkenness Damage caused to vessel or to her cargo by malice or manifest or proven negligence

Art. 606. If the captain should be a part owner in the vessel, he may not be discharged unless the agent returns to him the amount of his interest therein, which, in the absence of an agreement between the parties, shall be appraised by

RULES ON VOLUNTARY SALE OF VESSEL a.

One of the liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obligated to respect and recognize is the indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner. b. In case of voluntary sale of the vessel, all contracts between the ship agent and captain shall terminate,


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law the right to proper indemnity being reserved in favor of the captain, according to the agreement made with the ship agent c. If after the action against the seller has been instituted, the latter should be insolvent, the vessel sold shall remain subject to the securing of the payment of said indemnity, although the vessel is already in the possession of the buyer.

1.

2.

Art. 609. Captains, masters or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill, capacity, and qualifications necessary to command and direct the vessel, as established by marine or navigation laws, ordinances, or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. If the owner of a vessel desires to be the captain thereof, without having the legal qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall intrust the navigation to a person possessing the qualifications required by said ordinances and regulations.

3.

4.

Q: What are the qualifications of an applicant for certificate or license as master, mate or patron? 5. A: 1. 2. 3.

Citizen of the Philippines Applicant shall be examined physically Examination into moral and technical qualifications

6.

CAPTAIN v. MASTER Q: What is the difference between “captain” and “master”? A: The name of “captain” or “master” is given according to the kind of vessel, to the person in charge of it.

To appoint or make contracts with the crew in the absence of the ship agent and propose said crew, should said agent be present; but the agent may not employ any member against the captain's express refusal. To command the crew and direct the vessel to the port to its destination, in accordance with the instructions he may have received from the ship agent. To impose, in accordance with the contracts and the laws and regulations of the merchants marine, on board the vessel, correctional punishment upon those who do not comply with his orders or who conduct themselves against discipline, holding a preliminary investigation on the crimes committed on board the vessel on the high seas, which he shall turn over to the authorities, who are to take cognizance thereof, at the first port touched. To make contracts for the charter of the vessel in the absence of the ship agent or of the consignee, acting in accordance with the instructions received and protecting the interests of the owner with utmost care. To adopt all the measures which may be necessary to keep the vessel well supplied and equipped, purchasing all that may be necessary for the purpose, provided there is no time to request instructions of the agent. To provide in similar urgent cases and on a voyage, for the repairs to the hull and engines of the vessel and to her rigging and equipment which are absolutely necessary in order for her to be able to continue and conclude her voyage; but if she should arrive at a point where there is a consignee of the vessel, he shall act in concurrence with the latter. INHERENT POWERS OF CAPTAINS

CAPTAIN MASTER Applied to those who govern Those who command smaller vessels that navigate the high ships engaged exclusively in seas or ships of large the coastwise commerce dimensions and importance, although they be engaged in coastwise trading The chiefs or commanders of ships

Q: What are the Inherent powers of captains and masters? A: 1. 2. 3.

Q: What are the triple characteristics of a captain’s position? 4.

A: 1. 2. 3.

As a general agent of the shipowner As technical director of the vessel As representative of the government of the country under whose flag he navigates

Art. 610. The following powers are inherent in the position of captain or master of a vessel:

5. 6.

Appoint crew in the absence of ship agent; Command the crew and direct the vessel to its port of destination; Impose correctional punishment on those who, while on board vessel, fail to comply with his orders or are wanting in discipline; Make contracts for the charter of vessel in the absence of ship agent. Supply, equip, and provision the vessel; and Order repair of vessel to enable it to continue its voyage. (Art. 610)

Art. 611. In order to comply with the obligations mentioned in the foregoing article, and when he has no funds and does


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law not expect to receive any from the agent, the captain shall procure the same in the successive order stated below: 1. 2. 3. 4. 5.

By requesting said funds of the consignees of the vessel or the correspondents of the ship agent. By applying to the consignees of the cargo or to the persons interested therein. By drawing on the ship agent. By borrowing the amount required by means of a bottomry loan. By selling a sufficient amount of the cargo to cover the amount absolutely necessary to repair the vessel and to equip her to pursue the voyage.

In the two last cases he must apply to the judicial authority of the port, if in the Philippines and to the Filipino consul, if in a foreign country; and where there should be none, to the local authority, proceeding in accordance with the prescriptions of Article 583, and with the provisions of the law of civil procedure. SOURCES OF FUNDS Q: What are the sources of funds to comply with the inherent powers of the captain (in successive order)? A: 1. 2. 3. 4. 5.

From the consignee of the vessel; From the consignee of the cargo; By drawing on the ship agent; By a loan on bottomry; By sale of part of the cargo. (Art. 611)

Art. 612. The following duties are inherent in the office of captain: 1. To have on board before starting on a voyage a detailed inventory of the hull, engines, rigging, tackle, stores, and other equipments of the vessel; the navigation certificate; the roll of the persons who make up the crew of the vessel, and the contracts entered into with the crew; the list of passengers; the health certificate; the certificate of the registry proving the ownership of the vessel; and all the obligations which encumber the same up to that date; the charters or authenticated copies thereof; the invoices or manifest of the cargo, and the instrument of the expert visit or inspection, should it have been made at the port of departure. 2. To have a copy of this Code on board. 3. To have three folioed and stamped books, placing at the beginning of each one a note of the number of folios it contains, signed by the marine official, and in his absence by the competent authority. a.

In the first book, which shall be called "log book," he shall enter every day the condition of the

atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of the engines, the distance covered, the maneuvers executed, and other incidents of navigation. He shall also enter the damage suffered by the vessel in her hull engines, rigging, and tackle, no matter what is its cause, as well as the imperfections and averages of the cargo, and the effects and consequence of the jettison, should there be any; and in cases of grave resolutions which require the advice or a meeting of the officers of the vessel, or even of the passengers and crew, he shall record the decision adopted. For the informations indicated he shall make use of the binnacle book, and of the steam or engine book kept by the engineer. b. In the second book, called the "accounting book", he shall enter all the amounts collected and paid for the account of the vessel, entering specifically article by article, the sources of the collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel, outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on accounts, either directly or by delivery to their families. c. In the third book, called "freight book," he shall record the entry and exit of all the goods, stating their marks and packages, names of the shippers and of the consignees, ports of loading and unloading, and the freight earned. In the same book he shall record the names and places of sailing of the passengers and the number of packages of which their baggage consists, and the price of the passage. 4. To make, before receiving the freight, with the officers of the crew, and the two experts, if required by the shippers and passengers, an examination of the vessel, in order to ascertain whether she is watertight, and whether the rigging and engines are in good condition; and if she has the equipment required for good navigation, preserving a certificate of the memorandum of this inspection, signed by all the persons who may have taken part therein, under their liability. d. The experts shall be appointed one by the captain of the vessel and the other one by the persons who request the examination, and in case of disagreement a third shall be appointed by the marine authority of the port. 5. To remain constantly on board the vessel with the crew during the time the freight is taken on board and carefully watch the stowage thereof; not to consent to any merchandise or goods of a dangerous character to be taken on, such as inflammable or explosive substances, without the precautions which are recommended for their packing, management and isolation; not to permit that any freight be


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law carried on deck which by reason of its disposition, volume, or weight makes the work of the sailors difficult, and which might endanger the safety of the vessel; and if, on account of the nature of the merchandise, the special character of the shipment, and principally the favorable season it takes place, he allows merchandise to be carried on deck, he must hear the opinion of the officers of the vessel, and have the consent of the shippers and of the agent. 6. To demand a pilot at the expense of the vessel whenever required by navigation, and principally when a port, canal, or river, or a roadstead or anchoring place is to be entered with which neither he, the officers nor the crew are acquainted. 7. To be on deck at the time of sighting land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He shall not spend the night away from the vessel except for serious causes or by reason of official business. 8. To present himself, when making a port in distress, to the maritime authority if in the Philippines and to the Filipino consul if in a foreign country, before twentyfour hours have elapsed, and make a statement of the name, registry, and port of departure of the vessel, of its cargo, and reason of arrival, which declaration shall be vised by the authority of by the consul if after examining the same it is found to be acceptable, giving the captain the proper certificate in order to show his arrival under stress and the reasons therefore. In the absence of marine officials or of the consul, the declaration must be made before the local authority. 9. To take the steps necessary before the competent authority in order to enter in the certificate of the vessel in the registry of the vessels, the obligations which he may contract in accordance with Article 583. 10. To put in a safe place and keep all the papers and belongings of any members of the crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as witnesses, and, in their absence, of members of the crew. 11. To conduct himself according to the rules and precepts contained in the instructions of the agent, being liable for all that he may do in violation thereof. 12. To give an account to the agent from the port where the vessel arrives, of the reason therefore, taking advantage of the semaphore, telegraph, mail, etc., according to the cases; notify him the freight he may have received, stating the name and domicile of the shippers, freight earned, and amounts borrowed on bottomry bond, advise him of his departure, and give him any information and date which may be of interest.

13. To observe the rules on the situation of lights and evolutions to prevent collisions. 14. To remain on board in case of danger to the vessel, until all hope to save her is lost, and before abandoning her to hear the officers of the crew, abiding by the decision of the majority; and if he should have to take a boat he shall take with him, before anything else, the books and papers, and then the articles of most value, being obliged to prove in case of the loss of the books and papers that he did all he could to save them. 15. In case of wreck he shall make the proper protest in due form at the first port reached, before the competent authority or Filipino consul, within twenty-four hours, stating therein all the incidents of the wreck, in accordance with case 8 of this article. 16. To comply with the obligations imposed by the laws and rules of navigation, customs, health, and others. NOTE: Although the duties in Art. 612 are inherent in the captain, the civil liability arising from the non-fulfillment thereof is not limited to the captain, since while the captain is liable to the shipagent, the shipagent is liable to third persons (Art. 618). INHERENT DUTIES OF CAPTAIN Q: What are the duties of a captain or master? A: 1.

Bring on board the proper certificate and documents and a copy of the Code of Commerce; 2. Keep a Log Book, Accounting Book and Freight Book; 3. Examine the ship before the voyage; 4. Stay on board during the loading and unloading of the cargo; 5. Be on deck while leaving or entering the port; 6. Protest arrivals under stress and in case of shipwreck; 7. Follow instructions of and render an accounting to the ship agent; 8. Leave the vessel last in case of wreck; 9. Hold in custody properties left by deceased passengers and crew members; 10. Comply with the requirements of customs, health, etc. at the port of arrival; 11. Observe rules to avoid collision; 12. Demand a pilot while entering or leaving a port. (Art. 612)

A ship’s captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: What is the purpose of the law under this provision? Maritime Protest Q: What is a maritime protest? A: It is a written statement by the master of the vessel, attested by a proper judicial officer or a notary, to the effect that damage suffered by the ship on her voyage was caused by storms or other perils of the sea, without any negligence or misconduct on his part.

A: It is that in these cases the captain should be prohibited to make any separate business which will surely produce something to the prejudice of others. Art. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being prevented by fortuitous event or force majeure, shall indemnify all the losses which his failure may cause, without prejudice to criminal penalties which may be proper.

Q: What is the probative value of the logbook? Q: What is the purpose of the law under this provision? A: It is a prima facie evidence of the facts stated therein. The veseel’s logbook is an official record and entries made by a person in the person in the performance of a duty required by law are prima facie evidence of facts stated therein. Q: What is the extent of the application of the Tariff and Customs Laws of the Philippines? A: The Tariff and Customs Laws of the Philippines applies suppletorily, for administrative purposes, regarding the duty of the Insular Collector of Custom to cause adequate technical inspection of the hulls, engines, boilers, and other mechanical and constructural features of all Philippine vessels. Q: Discuss the civil liability of the ship agent towards third personsn for nun-fulfillment of the inherent duties of the master of a ship? A: Although the duties of enumerated in Art. 612 of the Code of Commerce are inherent in the master, the civil liability arising from the non-fulfillment thereof is not limited to him, since while the master is responsible to ship agent, the latter, in turn, is liable to third persons, as clearly provided in Art. 618 of the said Code expressly mentions such duties enumerated in Art. 612. RESPONSIBILITY OF MASTER WHEN THERE ARE PILOTS Q: What is the extent of the responsibility of the master of a vessel when there are pilots?

A: The captain cannot be compelled to discharge his duties against his will. It is not wise, knowing the too delicate duty as that of captain of a vessel, to compel him to continue discharging the duties of a captain against his will; for this reason, the Code does not impose upon him such exigency, but it compels him to indemnify all damages which may occur, without prejudice to criminal penalties which may be proper. Art. 615. Without the consent of the ship agent, the captain may not have himself substituted by another person; and should he do so, besides being liable for all the acts of the substitute and bound to pay the indemnities mentioned in the foregoing article, the substitute as well as the captain may be discharged by the ship agent. Q: What is the purpose of the law under this provision? A: The duties of a captain of the vessel is essentially personal due to the confidence given to him arising from the fact that he possesses the required technical ability and that he is the man worthy of the trust of the shipowner. Art. 616. If the provisions and the fuel of the vessel are consumed before arriving at the port of destination, the captain shall order, with the consent of the offficers of the same, to make the nearest port to get a supply of either, but if there are persons on board who gave provisions of their own, he may compel them to turn over said provisions for the common consumption of all persons on board, paying the price thereof at the same time, or, at the latest, at the first port where the vessel may arrive.

A: Pilots are responsible for full knowledge of the channel and of the navigation only so far as they can accomplish it through the officers and crew of the ship and cannot be held responsible for damage when the evidence shows that the officers and crew of the ship failed to obey their orders.

Art. 617. The captain may not contract loans on respondentia secured by the cargo, and should he do so the contract shall be void.

Art. 613. A captain who navigates for freight in common or on shares may not make any separate transaction for his own account, and should he do so the profits shall belong to the other persons interested, and the losses shall be borne by him alone.

Neither may he borrow money on bottomry for his own transactions, except on the portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and provided there does not exist any other kind of lien or obligation chargeable against the vessel. When


48


Kenneth & King Hizon (2A)- UST Faculty of Civil Law he is permitted to do so, he must necessarily state what interest he has in the vessel. In case of violation of this article the principal, interest, and costs shall be charged to the private account of the captain, and the ship agent may furthermore discharge him.

NOTE: Art. 618 provides for the direct responsibility of the shipowner and shipagent to third persons; the captain shall be civilly liable to the ship agent and the latter is the one liable to third persons. This article applies to: a. b.

breaches of contract and tortious negligence of the captain

Q: What is the reason of the law under this provision? Q: What is the effect if the vessel is under a charter? A: The reason is that the vessel is not the property of the captain, neither does the cargo belong to him. DIRECT CIVIL LIABILITY OF SHIP CAPTAIN TO SHIP AGENT Art. 618. The captain shall be civilly liable to the ship agent and the latter to the third persons who may have made contracts with the former 1.

2.

3.

4.

5.

6.

For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part. If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code. For all the thefts and robberies committed by the crew, reserving his right of action against the guilty parties. For the losses, fines, and confiscations imposed on account of violation of the laws and regulations of customs, police, health, and navigation. For the losses and damages caused by mutinies on board the vessel, or by reason of faults committed by the crew in the service and defense of the same, if he does not prove that he made full use of his authority to prevent or avoid them. For those arising by reason of a misuse of powers and nonfulfillment of the duties which pertain to him in accordance with Articles 610 and 612. For those arising by reason of his going out of his course or taking a course which, in the opinion of the officers of the vessel, at a meeting attended by the shippers or supercargoes who may be on board, he should not have taken without sufficient cause. No exception whatsoever shall exempt him from his obligation.

7.

8.

For those arising by reason of his voluntarily entering a port other than his destination, with the exception of the cases or without the formalities referred to in Article 612. For those arising by reason of the nonobservance of the provisions contained in the regulations for lights and maneuvers for the purpose of preventing collisions.

A: But where the vessel is totally chartered for use of a single party, the ship owner and that party may validly stipulate that the latter shall be exempt from liability for the negligence of the captain and crew Q: Is the ship owner liable for crimes and quasi-crimes? A: It is well and good that the shipowner be not held criminally liable for such crimes or quasi-crimes. However, he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the rd 3 parties who contracted with the captain, in his double capacity agent and subordinate of the ship owner himself. Q: What is the reason for imposition of liability on owner for damages suffered by third persons occasioned by the acts of the captain? A: To place the primary liability upon the person who has actual control over the conduct of the voyage and who has the most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, from other individuals who have been drawn into the venture as shippers. The shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him. They presume that the owner made a most careful investigation before appointing him. Besides, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. Q: State the distinction between liability for lawful and unlawful acts? A: The lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent/owner for the reason that such obligations arise from the contract of agency (provided that the captain does not exceed his authority). On the other hand, as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily liable. EXTENT OF LIABILITY OF CAPTAIN Q: Explain the extent of the liabilities of captain.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: The responsibility of the captain extends to every fraudulent or negligent act of any person in the complement, in the execution of his employment. He does not respond for personal injuries of the crew arising from personal quarrels but he is liable for damages to persons or property occasioned by: a. b. c.

a maneuvering of the vessel, for failure to follow international rules and regulations, for failure to take the precautions to prevent every damage possible to the vessel which has suffered an average

Art. 1737. The common carrier's duty to observe extraordinary diligence in the vigilance over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu. Art. 1738. The extra-ordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination until the consignee has been advised of the arrival of the goods and has reasonable opportunity thereafter to remove them or otherwise dispose of them. TERMINATION OF CAPTAIN’S LIABILITY

The master liable to the ship agent and the latter towards rd 3 persons for damages resulting from non-fulfillment of the duties Although the duties of enumerated in Art. 612 of the Code of Commerce are inherent in the master, the civil liability arising from the non-fulfillment thereof is not limited to him, since while the master is responsible to ship agent, the latter, in turn, is liable to third persons, as clearly provided in Art. 618 of the said Code expressly mentions such duties enumerated in Art. 612. Thus, the captain is responsible to the agent, who in turn is rd responsible to 3 party prejudiced or damaged for: a. b.

c. d. e.

the loss or damage occasioned by the lack of skill, negligence, fault, either of the captain or the crew for theft on board which does not seem to appear to have been committed by a person not belonging to the craft for administrative for the violation of the customsrevenue laws for improper navigation of the vessel resulting to the loss of life, injury to persons, or damage to property. For unlawful refusal of the master of a ship to deliver the cargo to the owner.

Art. 619. The captain shall be liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless otherwise expressly agreed on. This has been amended by: Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Art. 1738.

Q: When is the liability of the captain terminated? A: It is the delivery of the cargo at the port of discharge that terminates the captain’s responsibility as to the cargo. When the merchandise is lost on account of sinking of the dock, it had not yet been delivered and consequently, it was under the responsibility of the captain. Q: What is the extent of the applicability of Art. 366? A: Art. 366 of the Code of Commerce applies not only to river and land transportation, but also maritime transportation. Art. 620. The captain shall not be liable for the damage caused to the vessel or to the cargo by reason of force majeure, but shall always be so—no agreement to the contrary being valid—for those arising through his own fault. Neither shall he be personally liable for the obligation he may have contracted for the repair, equipment, and provisioning of the vessel, which shall be incurred by the ship agent, unless the former has expressly bound himself personally or signed a bill of exchange or promissory note in his name. NOTE: Amended by Arts. 1733-1763 PRESUMPTION OF NEGLIGENCE ON THE PART OF COMMON CARRIERS Q: When are the common carriers presumed to be negligent? A: Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law they prove that they observed extraordinary diligence as required in Article 1733. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755 FORCE MAJEURE Q: What is force majeure? A: Broadly speaking, it applies to natural accidents, such as those caused by lightning, earthquake, tempests, public enemy, etc. §

§

Winds of 11 miles per hour, although stronger than the average 4-6 miles per hour then prevailing in the port where the lighter sank on the night in question, cannot be classified as storm. Accoriding to PAG-ASA, the winds should have a velocity from 55 to 74 miles per hour

Q: What are the requisites for force majeure be an exempting circumstance? A: 1. That the natural disaster must have been the proximate and only cause of the loss NOTE: The carrier must have provided the vessel in all respects adequate for the purpose, with a captain and crew of required skill and ability, otherwise failing in these particulars, though the loss be occassioned by an act of God, the carrier may not set up force majeure to protect himself against what may have arisen due to lack of proper equipment of the boat or lack of proper equipment of the boat or lack of due skill and diligence by the patron and crew 2. The common carrier must have exercised due diligence to prevent or minimize loss before, duiring and after the occurrence of a natural disaster 3. The common carrier must have not negligently incurred delay in the transportation. 4. The captain must have made a protest before the competent authority at the first port he touched within the 24 hours following his arrival, and should have ratified it within the same period when he arrived at the point of her destination, proceeding immediately with the proof of the facts without opening the hatches not until after this has been done. Q: When should the claims be made? A:

1. 2.

Until the time or receipt of the goods if delivered uncovered or in packages of its freight charges; During the 24 hours following the delivery of the goods if the average or damage can only be ascertained by opening the packages. VENUE OF ACTION

Q: Where should the action be brought? A: Irrespective of the amount of damages involved, the action must be filed in the Court of First Instance since this is an admiralty case in which the Justice of the Peace of Court or the Municipal Court has no jurisdiction. Art. 621. A captain who borrows money on the hull, engine, rigging, or tackle of the vessel, or who pledges or sells merchandise or provisions outside of the cases and without the formalities prescribed in this Code, shall be liable for the principal, interest, and costs, and shall indemnify for the damages he may cause. He who commits fraud in his accounts shall reimburse the amount defrauded, and shall be subject to the provisions of the Penal Code. Art. 622. If when on a voyage the captain should receive news of the appearance of privateers or men of war against his flag, he shall be obliged to make the nearest neutral port, inform his agents or shippers, and await an occasion to sail under convoy or until the danger is over or to receive final orders from the ship agent or shippers. NOTE: This has been amended: Article 1734 of the New Civil Code provides that: “Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (2) Act of the public enemy in war, whether international or civil; Article 1739. “In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2.” LIABILITY OF CAPTAIN IN CASE OF WAR


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: What should the captain do during the voyage? Q: What is the liability of the captain in case of war? A: The outbreak of war absolves the ship from its obligation to carry the cargo to the port absolves the ship from its obligation to carry the cargo to the port of destination. However, it was nevertheless liable for the cost of forwarding the cargo by another line, if the full freight had been received by the ship at the commencement of the voyage. Art. 623. If he should be attacked by a corsair and after having tried to avoid the encounter and having resisted the delivery of the effects of the vessel or of her cargo, they should be forcibly taken away from him, or he should be obliged to deliver them, he shall make an entry of that fact in his freight book and shall prove it before the competent authority at the first port he touches. After the force majeure has been proven, he shall be exempted from liability. NOTE: This has been amended by Art. 1732 (2) and Art. 1739 of the New Civil Code.

A: In cases where an unforeseen accident or stress of weather is alleged as constituting an exemption in favor of the party responsible for the property, it is his duty to prove the existence of such circumstances, Art. 624 imposes on a captain, in case he has been wrecked or the cargo of his vessel damaged, the duty of making the corresponding protest before the proper authority at the first port where the vessel touches within 24 hours following his arrival. Q: What are the required actions to be taken by any Philippine vessel in case of injuries or accidents? A: The managing owner, agent, or master of such vessel shall by the first available mail send to the Collector of the district within which such vessel belongs to or of that which such accident or damage occurred, a report thereof, stating the name of the vessel, the port to which she belongs and the place where she was, the nature and probable occasion of the casualty, the number and names of those lost, and the estimated amount of the loss or damage to the vessel or cargo; and shall furnish such other information as shall be called for.

Art. 624. A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered damages or averages, shall make a protest thereon before the competent authority at the first port he touches within the twenty-four hours following his arrival, and shall ratify it within the same period when he arrives at the place of his destination, immediately proceeding with the proof of the facts, it not being permitted to open the hatches until after this has been done.

Q: What if the managing owner has reason to believe that it has been lost?

The captain shall proceed in the same manner if, the vessel having been wrecked, he is saved alone or with part of his crew, in which case he shall appear before the nearest authority, and make a sworn statement of the facts.

Art. 625. Upon arrival at the port of destination, the captain shall, under his personal liability, turn over the cargo, without any defalcation, to the consignees, and, in a proper case, the vessel, rigging, and freights to the agent, after having obtained the necessary permission from the health and customs officers and fulfilled the other formalities required by the regulations of the administration.

The authority or the consul abroad shall verify the said facts, receiving sworn statements of the members of the crew and passengers who may have been saved, and taking such other steps as may help in arriving at the facts, he shall make a statement of the result of the proceedings in the log book and in that of the sailing mate, and shall deliver the original records of the proceedings to the captain, stamped and folioed, with a memorandum of the folios, which he must rubricate, for their presentation to the judge or court of the port of destination. The statement of the captain shall be believed if it is in accordance with those of the crew and passengers; if they disagreed, the latter shall be accepted, unless there is proof to the contrary. DUTY OF CAPTAIN DURING VOYAGE

A: He shall promptly send notice in writing to the Collector of her home port giving advice of such loss and the probable occasion therefor, stating the name of the vessel and the names of all the persons on board, so far as the same can be ascertained, and shall furnish, upon request of the collector, such additional information shall be required.

[If, by reason of the absence of the consignee or on account of the nonappearance of a legal holder of the invoices, the captain does not know to whom he is to make the legal delivery of the cargo, he shall place it at the disposal of the proper judge or court or authority, in order that he may decide with regard to its deposit, preservation, and custody.] NOTE: The first paragraph has been amended by Arts. 17361738, and 1753 of the Civil Code. The second paragraph is repealed by the Rules of Court. MANIFEST Q: What is manifest?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: All vessels whether private or government owned, including ships of the Philippines navy, coming from a foreign port, with the possible exception of war vessels or vessels employed by any foreign government, not engaged in the transportation of merchandise in the way of trade, are required to prepare and present a manifest to the customs authorities upon arrival at any Philippine port. HARBOR FEES

A: Yes. The imposition of wharfage dues on goods loaded or unloaded at private wharves has been resolved in the affirmative by the Court. Q: May wharfage dues be collected even though no wharf is used? A: Yes, such as when the loading or unloading takes place offshore or in midstream by using ligfhters (meaning shipside).

Q: What are harbor fees? WHARFAGE v. BERTHING CHARGES A: They are paid for the entrance into or departure from a port of entry. TONNAGE FEES Q: What are tonnage fees? A: They are paid for coming into the Philippines from a foreign port or for going to a foreign port from the Philippines WHARFAGE DUES Q: What are wharfage dues? A: They are dues assessed against the cargo discharged by the vessel engaged in foreign trade.

Q: Distinguish wharfage from berthing charges. A: WHARFAGE Assessed against the cargo

BERTHING Assessed against a vessel for mooring or berthing at a pier, wharf, bulkhead wharf, river or channel, marginal wharf, or making fast to a vessel bethed; or coming or mooring within any slip, channel, basin, river, or canal under the jurisdiction of any port of the Philippines Imposed upon the wharf regardless of the ownership thereof

BERTHING CHARGES Q: What are berthing charges? A: They are levied on a vessel coming or mooring within specified places or waters of a port Q: What are the reasons for the charges levied on the vessels and cargoes? A: A vessel ordinarily enters a harbor and lays anchor or moors in a port to load, or unload or both. In doing so, the vessel derives benefit from port facilities provided and maintained by the government.

Q: What is the basis for the government’s right to collect berthing charges? A: It is not planted upon the condition that the pier be publicly owned. The charge is based on the fact that port facilities afford benefits to the vessels and the maintenance and development of the port, and the purchase, conditioning, and replacement of the equipment thereof--all to enable such vessels to make use of pier of wharfage the concern of the government. CUSTOMS HAS JURISDICTION OVER SMUGGLING Q: Who has jurisdiction over smuggling cases?

A vessel that anchors at Manila Bay to seek protection from a storm is not charged with wharfage dues by the Bureau of Customs. But when a vessel anchors in the Bay and discharges or unloads cargo, wharfage dues are forthwith collected. Wharfage dues assessment are based on the quantity, weight, measure of the cargo received by the importer and/or discharged by such vessel.

A: It is the Collector of Customs, not the Regional Trial Court. It is well-settled that the exclusive jurisdiction over seizure and forfeiture cases vested in the Collector of Customs precludes the RTC from assuming cognizance over such cases. Forfeiture proceedings are in the nature of proceedings in rem and are directed against the res. The fact that private respondent allegedly has no actually knowledge that the vessel was used illegally does not render the vessel immune from forfeiture.

Q: May wharfages be collected even though the government pier is not used?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: Who has jurisdiction in case a tourist accused of bringing foreign currency into the country illegally? A: The jurisdiction is vested with the Regional Trial Court judge who may order the return to the tourist of the seiezed foreign currency. Q: In case of corporations, partnerships and associations, who shall suffer the penalties? A: The President, General Manager, or any other official in charge of the management thereof, as the case may be. If such officer is an alien, in addition to the penalty herein prescribed, he shall be deported without further proceedings on the part of the Commissioner of Immigration and Deportation. Art. 626. In order to be a sailing mate, it shall be necessary: 1. 2.

To possess the qualifications required by the marine or navigation laws or regulations Not to be disqualified in accordance therewith for the discharge of the position.

Art. 627. The sailing mate, as the second chief of the vessel and unless the ship agent does not order otherwise, shall take the place of the captain in case of absence, sickness or death, and shall then assume all his powers, obligations and liabilities. SAILING MATE Q: Who is a Sailing Mate/First Mate? A: He is the second chief of the vessel who takes the place of the captain in case of absence, sickness, or death and shall assume all of his duties, powers and responsibilities. (Art. 627).

A: The pilot who was in command and had complete control of a vessel, not the owner was held liable for an accident which was solely the result of the mistake of the pilot in not giving proper orders, and which did not result from the failure of the owners to equip the vessel with the most modern and improved machinery Art. 628. The sailing mate must provide himself with charts of the seas on which he will navigate, with the maps and quadrants or sextants which are in use and necessary for the discharge of his duties, being liable for the accidents which may arise by reason of his omission in this matter. Art. 629. The sailing mate shall particularly and personally keep a book folioed and stamped on all its pages, denominated “Binnacle Book,” with a memorandum at the beginning stating the number of folios it contains, signed by the competent authority, and shall enter therein daily the distance and course traveled, the variations of the needle, the leeway, the direction and force of the wind, the condition of the atmosphere and the sea, the rigging set, the lattitude and longitude observed, the number of furnaces with fire, the steam pressure, the number of revolutions, and under the name “Incidents,” the maneuvers made, the meetings with other vessels, and all the particular events and accidents which may occur during the navigation Art. 630. In order to change the course and to take the one most convenient for the good voyage of the vessel, the sailing mate shall come to an agreement with the captain. Should the latter oppose, the sailing mate shall explain to him his proper observations in the presence of other sea officers. Should the captain still insist in his negative decision, the sailing mate shall make the proper protest, signed by him and by other one of the officers in the Log book, and shall obey the captain who alone shall be liable for the consequences of his decision.

Q: What are the duties of a sailing mate? Q: How is the conflict between the captain and the sailing mate is solved?

A: a.

b. c.

d.

Provide himself with maps and charts with astronomical tables necessary for the discharge of his duties; Keep the Binnacle Book; Change the course of the voyage on consultation with the captain and the officers of the boat, following the decision of the captain in case of disagreement; Responsible for all the damages caused to the vessel and the cargo by reason of his negligence. (Arts. 628 - 631) LIABILITY OF PILOTS

Q: When are pilots liable and not the shipowner?

A: The captain may at conserve all times his authority on board, and the sailing mate may evade the consequences which the orders may bring, by making the proper protest. Art. 631. The sailing mate shall be liable for all the damage caused to the vessel and cargo by reason of his negligence or want of skill, without prejudice to the criminal liability which may arise, if a felony or misdemeanor has been committed. Q: What is the liability of the sailing mate or pilot? A: The damage caused on account of carelessness and want of skill of the sailing mate shall always be imputable to him; however, a pilot is responsible for a full knowledge of the


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law channel and of navigation only so far as he can accomplish it through the officers and crew of the ship and cannot be held responsible for damage when the evidence shows that the officers and crew of the ship failed to obey his orders. Art. 632. SECOND MATE Q: Who is a second mate? A: He takes command of the vessel in case of the inability or disqualification of the captain and the sailing mate, assuming in such case their powers and responsibilities. Thus, he is third in command. Q: What are the duties of a second mate? A: 1. 2. 3. 4. 5.

Preserve the hull and rigging of the vessel; Arrange well the cargo; Discipline the crew; Assign work to crew members; Inventory the rigging and equipment of the vessel, if laid up. (Art. 632) ENGINEERS

Q: Who are engineers? A: They are officers of the vessel but have no authority except in matters referring to the motor apparatus. When two or more are hired, one of them shall be the chief engineer. They are officers of the vessel and they can give orders and intervene only in cases pertaining to the engine motor apparatus of the vessel. Where the chief engineer on a steamer plying the Philippine waters, caused the manhole plate of the vessel’s boiler to be removed under his supervision was performed in the manner customary upon such vessels and with reasonable care, he is not guilty of reckless negligence for the death of a man who was scalded by water which splashed from the boiler through the said manhole. Q: What are the duties of an engineer? A: 1. 2. 3. 4.

In charge of the motor apparatus, spare parts, and other instruments pertaining to the engines; Keep the engines and boilers in good condition; Not to change or repair the engine without authority of the captain; Inform the captain of any damage to the motor apparatus;

5. 6.

Keep an Engine Book; Supervise all personnel maintaining the engine. (Art. 632)

The Revised Administrative Code and Tariff and Customs Code of the Philippines now govern the qualifications and licensing of engineers and other officers of the vessel in the Philippines. Art. 633. The second mate shall take the command of the vessel in case of the inability or disqualification of the captain and sailing mate, assuming therefore their powers and responsibilities. Art. 634. The captain may make up his crew with the number he may consider advisable, and in the absence of Filipino sailors he may ship foreigners residing in the country, the number thereof not to exceed one-fifth of the total crew. If in foreign ports the captain should not find a sufficient number of Filipino sailors, he may make up the crew with foreigners, with the consent of the consul or marine authorities. The agreements which the captain may make with the members of the crew and others who go to make up the complement of the vessels, to which reference is made in Article 612 (obligations inherent in the office of captain) must be reduced to writing in the account book without the intervention of a notary public or clerk of court, signed by the parties thereto, and vised by the marine authority if they are executed in Filipino territory, or by the consuls or consular agents of the Philippines if executed abroad, stating therein all the obligations which each one contracts and all the rights they acquire, said authorities taking care that these obligations and rights are recorded in a concise and clear manner, which will not give rise to doubts or claims. The captain shall take care to read to them the articles of this Code which concern them, stating in the said document that they were read. If the book includes the requisites prescribed in Article 612, and there should not appear any signs of alterations in its entries, it shall be admitted as evidence in questions which may arise between the captain and the crew with regard to the agreements contained therein and the amounts paid on account of the same. Every member of the crew may demand of the captain a copy, signed by the latter, of the agreement and of the liquidation of his wages, as they appear in the book. NOTE: The contract with a seaman has the nature of a lease of service, in virtue of which one person binds himself to perform or to do the services or works for which he has signed himself in the vessel in consideration of the compensation stipulated Q: What is a Crew?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: It is the aggregate of seamen who man a ship, or the ship’s company, including the master of the officers, or it may mean the ship’s company, exclusive of the master, or exclusive of the master and all other officers. He is hired by the ship agent, where he is present and in his absence, the captain hires them, preferring Filipinos, and in their absence, he may take in foreigners, but not exceeding 1/5 of the crew. (Art. 634).

A captain who, knowing that a sailor is in the service of another vessel, should have made a new agreement with him, without having requested the permission referred to in the foregoing paragraphs, shall be personally liable to the captain of the vessel to which the sailor first belonged for that part of the indemnity, referred to in the third paragraph of this article, which the sailor may not be able to pay. Art. 636. Should there be no fixed period for which a sailor has been contracted, he cannot be discharged until the end of the return voyage to the port where he enlisted.

CONTRACTS OF THE CREW Q: What are the kinds of contract of the crew?

Art. 637. Neither may the captain discharge a sailor during the time of his contract except for just cause, the following being considered as such:

A: 1. 1.

2.

3. 4.

For each voyage- the compensation is fixed to a certain sum for the entire voyage whatever may be its duration By the month- compensation is fixed to a certain sum of each month, during so many months the voyage may take. On shares- the seaman is promised to be paid a part of the resultant profits of the voyage On freight- compensation is determined by a part of the profits to be obtained from the obtained from the transportation of passengers and cargo.

2. 3. 4. 5.

Art. 644. A seaman who falls sick shall not lose his right to wages during the voyage, unless the sickness is the result of his own fault. At any rate, the costs of the attendance and cure shall be defrayed from the common funds, in the form of a loan.

CITIZENSHIP REQUIREMENT Q: State the citizenship requirement of personnel on board vessels. A: No Philippine vessel operating in the coastwise trade or on high seas shall employ any officer or any member of the crew who is not a citizen of the Philippines.

If the sickness should comee from an injury received in the service or defense of the vessel, the seaman shall be attended and cured at the expense of the common funds deducting, before anything else, from the proceeds of the freightage the cost of the attendance and cure.

Art. 635. A sailor who has been contracted to serve on a vessel cannot rescind his contract nor fail to comply therewith except by reason of a legitimate impediment which may have occurred. Neither can he pass from the service of one vessel to another without obtaining the written consent of the vessel on which he may be. If, without obtaining said permission, the sailor who has signed for one vessel should sign for another one, the second contract shall be void, and the captain may choose between forcing him to fulfill the service to which he first bound himself or look for a person to substitute him at his expense. Said sailor shall furthermore lose the wages earned on his first contract to the benefit of the vessel for which he may have signed.

The perpetration of a crime which disturbs order on the vessel. Repeated insubordination, want of discipline, or nonfulfillment of the service. Incapacity and repeated negligence in the fulfillment of the service which he should render. Habitual drunkenness. Any occurrence which incapacitates the sailor to perform the work entrusted to him, with the exception of that provided in Article 644.

6.

Desertion.

The captain may, however, before setting out on a voyage and without giving any reason whatsoever, refuse to permit a sailor whom he may have engaged to go on board, and may leave him on land, in which case his wages have to be paid as if he had rendered services. The indemnity shall be paid from the funds of the vessel if the captain should have acted for reasons of prudence and in the interest of the safety and good service of the vessel. Should this not be the case, it shall be paid by the captain personally.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law After the voyage has begun, and during the same and until the conclusion thereof, the captain may not abandon any member of his crew on land or on the sea, unless, as the accused of a crime, his imprisonment and delivery to the competent authority in the first port touched should be proper, which shall be obligatory to the captain.

3.

JUST CAUSES FOR THE DISCHARGE OF SEAMAN DURING CONTRACT SUBSISTENCE Q: What are the just Causes for the Discharge of Seaman While Contract Subsists? A: 4. 1. 2. 3. 4. 5. 6.

Perpetration of a crime; Repeated insubordination, want of discipline; Repeated incapacity and negligence; Habitual drunkenness; Physical incapacity; Desertion. (Art. 637)

month, the indemnity shall be fixed at fifteen days, discounting in all cases the sums advanced. If the revocation should take place after the vessel has put to sea, the sailors engaged for a fixed amount for the voyage shall receive the entire salary which may have been offered them if the voyage had terminated; and those engaged by the month shall receive the amount corresponding to the time they might have been on board and to the time they may require to arrive at the port of destination, the captain being obliged, furthermore, to pay said sailors in both cases the passage to the said port or to the port of sailing of the vessel, as may be convenient for them. If the ship agent or the charterers of the vessel should give it a destination different from that fixed in the agreement, and the members of the crew should not agree thereto, they shall be given by way of indemnity half the amount fixed in the first case, in addition to what may be due them for the part of the monthly wages corresponding to the days which may have elapsed from the date of their agreements.

PRODUCTION OF PHILIPPINE CREW The master of a Philippine vessel returning from abroad shall produce the entire crew listed in the vessel’s shipping articles; and if any member be missing, the master shall produce proof satisfactory to the Collector that such member has died, absconded, has been forcibly impressed into other service, or has been discharged; and in case of discharge in a foreign country, he shall produce a certificate from the consul, viceconsul or consular agent of the Philippines there residing, showing that such discharge was effected with the consent of the representative of the Philippines aforesaid. Art. 638. If, after the crew has been engaged, the voyage is revoked by the will of the ship agent or of the charterers, before or after the vessel has put to sea, or if the vessel is for the same reason given a different destination from that fixed in the agreement with the crew, the latter shall be indemnified on account of the rescission of the contract, according to the following cases: 1.

2.

If the revocation of the voyage should be decided before departure of the vessel from the port, each sailor engaged shall be given one month's salary, besides what may be due him, in accordance with his contract, for the services rendered to the vessel up to the date of the revocation. If the agreement should have been for a fixed amount for the whole voyage, what may be due for said month and days shall be determined in proportion to the approximate duration of the voyage, in the judgment of the experts, in the manner established by the law of civil procedure; and if the proposed voyage should be of such short duration that it is calculated at approximately one

If they accept the change, and the voyage, on account of greater distance or of other reasons, should give rise to an increase of wages, the latter shall be adjusted privately, or through friendly adjusters in case of disagreement. Even if the voyage should be shortened to a nearer point, this shall not give rise to a reduction in the wages agreed upon. Should the revocation or change of the voyage originate from the shippers or charterers, the ship agent shall have a right to demand of them the indemnity which may be justly due. Art. 639. Should the revocation of the voyage arise from a just cause independent of the will of the ship agent and the charterers, and the vessel should not have left the port, the members of the crew shall no other right than to collect the wages earned up to the day the revocation was made. Art. 640. The following shall be just causes for the revocation of the voyage: 1.

2. 3. 4.

5.

A declaration of war or interdiction of commerce with the power to whose territory the vessel was bound. The blockade of the port of its destination or the breaking out of an epidemic after the agreement. The prohibition to receive in said port the goods which make up the cargo of the vessel. The detention or embargo of the same by order of the government, or for any other reason independent of the will of the agent. The inability of the vessel to navigate.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law INTERDICTION OF COMMERCE Q: What is interdiction of commerce? A: Also known as interdiction of commercial intercourse between two countries. It is a governmental prohibition of commercial intercourse, intended to bring about an entire cessation for the time being of all trade whatever. BLOCKADE

Art. 642. If the crew has been engaged on shares it shall not be entitled, by reason of the revocation, delay, or greater extension of the voyage, to anything but the proportionate part of the indemnity which may be paid to the common funds by the persons responsible for said occurrences. Q: What is the reason for the law under this provision? A: The crew and the shipowner form a sort of partnership in which one shall share on the profits or losses of the business.

Q: What is blockade? A: It is a sort of circumvallation around a place by which all foreign connection and correspondence is, as far as human power can affect it, to be cut off. The actual investment of a port or place by hostile force fully competent, under ordinary circumstances, to cut off all communication therewith, so arranged or disposed as to be able to apply its force to every point of practicable access or approach to the port or place so invested. Art. 641. If, after a voyage has been begun, and any of the first three causes mentioned in the foregoing article should occur, the sailors shall be paid at the port which the captain may deem advisable to make for the benefit of the vessel and cargo, according to the time they may have served thereon; but if the vessel is to continue its voyage, the captain and the crew may mutually demand the enforcement of the contract. In case of the occurrence of the fourth cause, the crew shall continue to be paid half wages, if the agreement is by month; but if the detention should exceed three months, the contract shall be rescinded and the crew shall be paid what they should have earned according to the contact, as if the voyage had been made. And if the agreement should be for a fixed sum for the voyage, the contract must be complied with in the terms agreed upon. In the fifth case, the crew shall have no other right than to collect the wages earned; but if the disability of the vessel should have been caused by the negligence or lack of skill of the captain, engineer, or sailing mate, they shall indemnify the crew for the damages suffered, always without prejudice to the criminal liability which may be proper. EARNINGS OF CREW Q: To what extent the crew is entitled for their earnings in case of inability of the vessel to navigate? A: In case of the inability of the vessel to navigate, the crew is only entitled to recover the wages earned. The law does not compel the owner or the charterer of the vessel who has entered into contract for the services of the seamen to provide for the maintenance of the latter and their expenses necessary to the port of sailing of the vessel.

Art. 643. If the vessel and her cargo should be totally lost by reason of capture or shipwreck, all rights shall be extinguished, both as regards the right of the crew to demand any wages and as regards the right of the ship agent to recover the advances made. If a portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on wages, including the captain, shall retain their rights on the salvage, as far as possible, on the remainder of the vessel as well as on the value of the freightage or the cargo saved; but sailors who are engaged on shares shall have no right on the salvage of the hull, but only on the portion of the freightage saved. (If they should have worked to recover the remainder of the shipwrecked vessel, they shall be given from the amount of the salvage an award in proportion to the efforts made and to the risks encountered in order to accomplish the salvage.) TOTAL LOSS OF VESSEL Q: What is the effect of the total loss of the vessel? A: The total loss of the vessel, by reason of capture or wreck, extinguishes all contractual relations between the seamen and the owner of the vessel or the person who contracted for their services. The seamen in such case have not even the right to demand the payment of the wages earned as in the case of inability of the vessel to navigate; and likewise, the agent or charterer who contracted for the services of the seamen is not entitled to the recovery of the advances made by him. EFFECT OF WORKMEN’S COMPENSATION ACT Q: Does total loss of the vessel and her cargo have any effect on the Workmen’s Compensation Act (Act No. 3428)? A: No. Thus, if an accident is compensable under the Act No. 3428, it must be compensated even the when workman’s right is not recognized by other provisions of the Code of Commerce. The reason behind this is that the Act No. 3428 was enacted by the legislature in abrogation of other existing laws Art. 644. A sailor who falls sick shall not lose his right to wages during the voyage, unless his sickness is the result of his own fault. At any rate, the costs of medical attendance


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law and treatment shall be defrayed from the common funds, in the form of a loan. If the sickness should be caused by an injury received in the service or defense of the vessel, the sailor shall be attended and treated at the expense of the common funds, deducting, before anything else, from the proceeds of the freightage, the cost of the attendance and treatment. When an employee suffers personal injury from any accident arising out of or in the course of his employment, or contracts tuberculosis or other illness, directly caused by such employment or either aggravated by or the result of the nature of such employment.

ture of the vessel from the port, the heirs shall not be entitled to claim anything. If death occurred in the defense of the vessel, the sailor shall be considered as living, and his heirs shall be paid, at the end of the voyage, the full amount of wages or the entire part of the profits which may be due him as others of his class. The sailor shall likewise be considered as present if he was captured while defending the vessel, in order to enjoy the benefits as the rest; but should he have been captured on account of carelessness or other accident not related to the service, he shall only receive the wages due up to the day of his capture. RULES IN CASE OF DEATH OF A SEAMAN

The right to compensation shall not be defeated or impaired on the ground that death, injury or disease was due to the negligence of a fellow servant or employee, without prejudice to the right of the employer to proceed against the negligent employee.

Q: Discuss the Rules in case of Death of a Seaman. A: The seaman’s heirs are entitled to payment as follows: 1.

If death is natural:

Q: When is compensation not allowed? a. A: Compensation shall not be allowed for injuries caused: b. a. b. c.

By the voluntary intent of the employee to inflict such injury upon himself or another person. By drunkenness on the part of the laborer who had accident; By notorious negligence of the same

Q: What is the effect of Workmen’s Compensation Act on the provisions of the Code of Commerce? A: If an accident is compensable under the Act No. 3428, it must be compensated even the when workman’s right is not recognized by other provisions of the Code of Commerce. The reason behind this is that the Act No. 3428 was enacted by the legislature in abrogation of other existing laws.

c.

2. 3. 4.

compensation up to time of death if engaged on wage if by voyage - half of amount if death occurs on voyage out; and full, if on voyage in if by shares - none, if before departure; full, if after departure

if death is due to defense of vessel - full payment; if captured in defense of vessel - full payment; if captured due to carelessness - wages up to the date of the capture. (Art. 645)

Art. 646. The vessel with her engines, rigging, equipment, and freightage shall be liable for the wages earned by the crew engaged per month or for the trip, the liquidation and payment to take place between one voyage and the other. After a new voyage has been undertaken, credits of such kind pertaining to the preceding voyage shall lose the preference.

Art. 645. If a sailor should die during the voyage, his heirs shall be given the wages earned and not received, according to his contract and the cause of his death, namely ---

LIENS IN FAVOR OF THE CREW SUPERIOR TO SUBSEQUENT MORTGAGE OR SALE OF THE VESSEL

If he died a natural death and was engaged on wages, that which may have been earned up to the date of his death shall be paid.

This article creates a lien upon a ship in favor of the crew engaged in the operation of the same and this lien in favor of the crew takes certain preference in accordance with Art. 580.

If the contract was for a fixed sum for the whole voyage, half the amount earned shall be paid if the sailor died on the voyage out, and the whole amount if he died on the return voyage.

The crew, therefore, for their wages, etc, for the last voyage have prior lien upon ship, to the lien created in the present case by the chattel mortgage.

And if the contract was on shares and the death occurred after the voyage was begun, the heirs shall be paid the entire portion due the sailor; but if the latter died before the depar-

Art. 647. The officers and the crew of the vessel shall be exempted from all obligations contracted, if they deem if proper, in the following cases:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 1. If, before the beginning of the voyage, the captain attempts to change it, or there occurs a naval war with the power to which the vessel was destined. 2. If a disease should break out and be officially declared epidemic in the port of destination. 3. If the vessel should change owner or captain. 4. Supercargoes RESCISSION Q: When is rescission allowed?

brought back on the return voyage of the ship, and comes home with it Art. 650. All the provisions contained in the second section of Title III, Book II, with regard to qualifications, manner of making contracts, and liabilities of factors shall be applicable to supercargoes. NOTE: Now governed by the provisions on agency Art. 2270. The following laws and regulations are hereby repealed:

A: It is understood that rescission in any of the foregoing cases is allowable if the voyage has not yet started; after the voyage has commenced, the contract can no longer be rescinded.

(1) Those parts and provisions of the Civil Code of 1889 which are in force on the date when this new Civil Code becomes effective: (2) The provisions of the Code of Commerce governing sales, partnership, agency, loan, deposit and guaranty; (3) The provisions of the Code of Civil Procedure on prescription as far as inconsistent with this Code; and (4) All laws, Acts, parts of Acts, rules of court, executive orders, and administrative regulations which are inconsistent with this Code. (n)

Art. 648. By the complement of a vessel shall be understood all the persons embarked, from the captain to the cabin boy, necessary for the management, maneuvers, and service and therefore, in the complement shall be included the crew, sailing mates, engineers, stockers, and others working on board not having specific names; but it shall not include the passengers or the persons whom the vessel is only transporting. COMPLEMENT OF THE VESSEL Q: Who constitutes the Complement of the Vessel? A: All persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and service, thus including the crew, the sailing mates, engineers, stokers and other employees on board not having specific designations. It does not include the passengers or the persons whom the vessel is transporting. Art. 649. Supercargoes shall discharge on board the vessel the administrative duties which the agent or shippers may have assigned them; they shall keep an account and record of their transactions in a book which shall have the same conditions and requisites as required for the accounting book of the captain, and shall respect the latter in his duties as chief of the vessel.

Art. 651. Supercargoes cannot, without special authorization or agreement, make any transaction for their own account during the voyage, with the exception of the ventures which, in accordance with the custom of the port of destination, they are permitted to do. Neither shall they be permitted to invest in the return trip more than the profits from the ventures, unless there is a special authorization therefor from the principals. Q: May supercargoes make any transaction of their own account in the outgoing voyage? A: As a rule, supercargoes cannot make transactions for their own account during the voyage. Q: What are the exceptions? A:

The powers and liabilities of the captain shall cease, when there is a supercargo, with regard to that part of the administration legitimately conferred upon the latter, but shall continue in force for all acts which are inseparable from his authority and office. SUPERCARGO

1.

2.

If there is authorization or expressed agreement permitting supercargoes to make transactions for their own account If they make such kind of transactions involving ventures which in accordance with the custom of the port of destination they are permitted to do

Q: What is a Supercargo?

Q: May supercargoes invest in the return voyage?

A: An agent of the owner of the goods shipped as cargo on a vessel, who has charge of the cargo on board, sells the same to the best advantage in the foreign markets, buys cargo to be

A: Yes, they can invest in the return voyage but not more than the profit of the venture, unless there is an expressed authorization from the principal.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law TITLE III SPECIAL CONTRACTS OF MARITIME COMMERCE

REQUISITES FOR A CHARTER PARTY Q: What are the requisites for a charter party?

Q: What are the special contracts of maritime commerce? A: A: 1. 2. 3.

Section 1 CHARTER PARTIES I.

(a) Consent of the contracting parties; (b) Existence of the vessel which will be placed at the disposition of the shipper for the object of transportation; (c) The freight; (d) Requisites mentioned in Art. 652.

Charter parties, bills of lading, and contracts of transportation of passengers on sea voyages; Loans on bottomry and respondentia; and Marine insurance.

Forms and Effects of Charter Parties

Art. 652 A charter party must be drawn in duplicate and signed by the contracting parties, and when either does not know how or is not able to do so, by two witnesses at his request.

Yet the omission of some of the requisites in Art. 652 which may not give rise to the doubts as to the nature and scope of the contract will not invalidate the charter party. CLASSIFICATION OF CHARTER PARTY Q: What are the classes of charter party? A:

The charter party shall include, besides the condition stipulated, the following circumstances: The kind, name, and tonnage of the vessel. Her flag and port or registry. The name, surname, and domicile of the captain. The name, surname, and domicile of the agent, if the latter should make the charter party. 5. The name, surname, and domicile of the charterer, and if he states that he is acting by commission, that of the person for whose account he makes the contract. 6. The port of loading and unloading. 7. The capacity, number of tons or weight, or measure which they respectively bind themselves to load and transport, or whether it is the total cargo. 8. The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner whatsoever agreed upon. 9. The amount of primage to be paid the captain. 10. The days agreed upon for loading and unloading. 11. The lay days and extra lay days to be allowed and the rate of demurrage.

1.

1. 2. 3. 4.

a. b. 2.

b.

3.

Total-when the whole vessel is chartered; Partial-when only a portion of it.

As regards the time: a.

It may last up to a fixed day or for a determined number of days or months; or For a voyage, either an outward or return or a round trip.

As to the freight-it is entered for while voyage or so much per month during the period of navigation: a. b.

For a single amount for the whole cargo; or So much ton or volume.

Q: Can the captain enter into a charter contract? A: YES provided that he is authorized. Q: Can the charterer enter into a sub-charter contract? A: YES provided it is not prohibited. This is just like the rule in lease. KINDS OF CHARTER PARTY

Q: What is a charter party? A: It is a contract by virtue of which the owner or the agent of the vessel leases for a certain price of the whole or a portion of the vessel for the transportation of goods or persons from one port to another.

As to capacity of the vessel:

Q: What are the kinds of charter party? A:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 1. Bareboat or demise means the whole vessel is lend to the charterer which transfers to him its entire command and possession and consequent control over its navigation, including the master and crew who are his servants. The charterer is treated as owner pro hac vice of the vessel. In such case, a common carrier becomes a private carrier. Charterer means the vessel assumes all responsibilities of navigation and provides his own people. Shipowner is not liable to third person; it is the charterer who is liable to them. GR: The charterer is liable to the third person. XPN: Shipowner may still be held liable if the injury was caused by unseaworthiness or negligence of the shipowner beyond before the demise or bareboat took over. 2.

Contract of affreightment involves that use of shipping space leased by the owner in part or as a whole, to carry goods for others. The shipowner retains the possession, command and navigation of the ship, the charterer merely having use of the space in the vessel in return for his payment of the charter hired. The shipowner is liable to third person.

PRIMAGE Q: What is a primage? A: It is an amount stipulated in the charter party to be paid by the charter or shipper as compensation to the captain or master for his particular care of the goods. The law leaves to the discretion of the contracting parties to provide for the conditions of the charter. The manner in which the freight is to be paid as well as the person who is bound to unload the cargo at the port of the destination for delivery to the consignee are also left to the stipulation by the ship owner or his representative, captain, and the charterer. CONTRACT OF TOWAGE Q: What is a contract of towage? A: It is contract for the hire of services by virtue of which a steamer is engaged to tow it from one port another for consideration. It is neither a contract for the carriage of goods nor a charter party. It is a contract of services.

LAY DAYS TUGBOAT Q: What are lay days? Q: What is a tug or tugboat? A: They are days of detention or delay suffered by a vessel in a given port while waiting for the loading of the cargo. It refers to the days allowed to charter parties for loading and unloading the cargo

A: It refers to the towing vessel. TOW

Q: What are extra lay days?

Q: What is a tow?

A: They are days which follow after the lay days have elapsed.

A: It refers to the vessel towed or pulled.

DEMURRAGE Q: What is a demurrage? A: It is the amount stipulated in the charter party to be paid by the charterer or shipper to the ship owner for any delay in the sailing of his ship. Sum which is fixed by the contract of carriage, or which is allowed, as remuneration to the owner of a ship for the detention of his vessel beyond the number of days allowed by the charter party for loading and unloading or for sailing; it is an extended freight or reward to the vessel in compensation for the earnings she is improperly caused to lose

If the affreigtment was partial and not the charter of the entire vessel, the charterer does not acquire the right to fix the date for the departure of the vessel, unless stipulated in the contract. Art. 653. If the freight should be received without the charter party having been signed, the contract shall be understood as executed in accordance with what appears in the bill of lading, which shall be the only instrument with regard to the freight to determine the rights and obligations of the ship agent, of the captain, and of the charterer. CHARTER PARTY v. BILL OF LADING Q: What are the differences between the charter party and bill of lading?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: Charter party has for its object the fixing of the conditions for the lease of the vessel, while the bill of lading serves only to indicate the goods loaded for transportation and make the captain responsible for the objects he has received. Art. 654 The charter parties executed with the intervention of a broker, who certifies to the authenticity of the signatures of the contracting parties made in his presence, shall be full evidence in court; and, if they should be conflicting, that which agrees with the one which the broker must keep in his registry, if kept in accordance with law, shall govern. The contracts shall also be admitted as evidence, even though a broker has not taken part therein, if the contracting parties acknowledge the signatures of the same as their own. Should no broker have taken part in the charter party and the signatures be not acknowledged, doubts shall be decided by what is provided for in the bill of lading, and, in the absence thereof, by the proofs submitted by the parties. Art. 655. Charter parties executed by the captain in the absence of the ship agent shall be valid and effective, even though in executing them he should have acted in violation of the orders and instructions of the agent or shipowner; but the latter shall have a right of action against the captain to recover damages. Q: Suppose that the captain in the absence of the ship agent executes charter parties. 1. 2.

3.

What is the effect of such contract? How about the case where the captain acted in contravention of the orders and instructions of the ship agent or ship owner? In such case, for what may the captain be liable?

lay days and extra lay days which may have elapsed in loading and unloading. Art. 657. If during the voyage the vessel should be rendered unseaworthy the captain shall be obliged to charter at his expense another one in good condition, to carry the cargo to its destination, for which purpose he shall be obliged to look for a vessel not only at the port of arrival but also in the neighboring ports within a distance of 150 kilometers. If the captain, through indolence or malice, should not furnish a vessel to take the cargo to its destination, the shippers, after requesting the captain to charter a vessel within an unextendible period, may charter one and apply to the judicial authority for the summary approval of the charter party which they may have made. The same authority shall judicially compel the captain to carry out for his account and under his responsibility the charter made by the shippers. If the captain, notwithstanding his diligence, should not find a vessel to charter, he shall deposit the cargo at the disposal of the shippers, to whom he shall communicate the facts on the first opportunity, the freight being adjusted in such cases by the distance covered by the vessel, with no right to any indemnification whatsoever. NOTE: Articles 659 to 664 : Some of the goods being transported may : (1) be sold by the captain to pay for necessary repairs; (2) be jettisoned for the common safety; (3) be lost by reason of shipwreck or stranding; (4) be seized by pirates or enemies; (5) suffer deteriorations or dimunitions; or (6) increase by natural cause in weight or size GOODS EXEMPTED FROM FREIGHTAGE Q: What are the goods that shall not pay freightage? A:

A: 1. 1. 2. 3.

Charter parties executed by the captain shall be valid and effective. Such charter parties are nevertheless valid and effective. The ship owner and ship agent shall have a right of action against the captain for damages.

Art. 656. If in the charter party the time in which the loading and unloading are to take place is not stated, the usages of the port where these acts take place shall be observed. After the stipulated or customary period has passed, and should there not be in the freight contract an express provision fixing the indemnification for the delay, the captain shall be entitled to demand demurrage for the

2.

3.

Art. 660 - goods jettisoned for the common safety but the amount of freightage that should have been paid shall be considered as a general average and shall be computed in proportion to the distance covered when they were jettisoned. Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight had been paid in advance, it shall be returned. Art. 661 - goods seized by pirates or enemies; freight paid in advance shall be returned GOODS REQUIRED TO PAY FREIGHTAGE

Q: What are the goods required to pay freightage? A:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law a. 1.

2.

3.

Art. 659 - goods sold by the captain to pay for the necessary repairs to the hull, machinery or equipment or for unavoidable and urgent needs --> but the freight may not be required to be paid in full. Art. 663 - goods which suffer deterioration or dimunition on account of (a) inherent defects or bad quality of packing, or of (b) fortuitous event. Art. 644 - goods that increase in size or weight by natural cause.

EFFECT OF FAILURE TO CARRY GOODS TO DESTINATION ON THE PAYMENT OF FREIGHT Q: What is the effect of failure to carry goods to destination on the payment of freight? A: Where a master relinquishes the attempts either to carry on the goods on his own ship or to send them to their destination in another ship, he therby wholly abandons any claim for freight on respect to them, unless it has been made payable in advance or irrespective of delivery; where freight is only payable on delivery, no part is earned until it is delivered. Q: What is the effect of war on the obligation of the ship? A: While the outbreak of war absolved the ship carrying the flag of a belligerent nation from its obligation to carry the cargo belonging to a subject of a neutral power to the port of another belligerent nation, it was nevertheless liable for the cost of forwarding the cargo to another line, if the full freight had been received by the ship at the commencement of the voyage. Art. 658 The freight shall accrue to the conditions stipulated in the contract, and should they not be expressed, or should they be ambiguous, the ff. rules shall be observed: Should the vessel have been chartered by months or by days, the freight shall begin to run from the day the loading of the vessel is begun. b. In charters made for a fixed period, the freight shall begin from that very day. c. If the freight is charged according to weight, the payment shall be made according to gross weight, including the containers, such as barrels or any other objects in which the cargo is contained

Should the vessel arrive safely at the port of destination, the captain shall pay the price which the sale of goods of the same kind brings at the port. b. Should the vessel be lost, the captain shall pay the price said goods would have brought in the sale.

The same rule shall be observed in the payment of the freight which shall be in full if the vessel should reach her port of destination, and in proportion to the distance covered if she should be lost before arrival. Art. 660 Goods jettisoned for the common safety, shall not pay freight; but its latter amount (freight lost) shall be considered as general average, computing the same in proportion to the distance covered when they (goods) were jettisoned. Art. 661 Neither the goods lost by reason of shipwreck or standing, not those seized by pirates or enemies shall pay freight. Q: What are the instances in which goods carried on a vessel are not liable to pay the freight? A: a. b. c.

Goods jettisoned for the common safety and never recovered; Goods lost by reason of shipwreck or stranding; Goods seized by pirates or enemies.

Art. 662 Should the vessel or the goods be recovered or the effects of the shipwreck be salvaged, the freight corresponding to the distance covered by the vessel transporting the cargo shall be paid; and if the vessel, after being repaired, should transport the said cargo to the port of destination, the full freight shall be paid, without prejudice to what may be due by reason of the average.

a.

Art. 659 The goods sold by the captain to pay for the necessary repairs of the hull, machinery or equipment, or for unavoidable and urgent needs, shall pay freight. The price of these goods shall be fixed according to the result of the voyage, namely:

Art. 663 The goods which suffer deterioration or damage caused by inherent defects or bad quality and condition of the packing, or fortuitous event, shall pay freight in full and as stipulated in charter party. Art. 664 The natural increase in weight or in size of the goods loaded on the vessel, shall accrue to the benefit of the owner and shall pay the corresponding freight fixed in the contract for the same. Art. 665 The cargo shall be especially liable for the payment of freight, for expenses and duties arising therefrom which must be reimbursed by the shippers, as well as for the part of the general average which may correspond to it; but it shall not be legal for the captain to delay the unloading by reason of fear that the said obligation may not be complied with.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law EXPENDITURES FOR WHICH THE CARGO IS LIABLE Q: What are the expenditures for which the cargo is liable? A: a. b. c.

Payment of freight; For expenses and duties arising there from which must be reimbursed by the shippers; and For the part of the general average which they correspond to it.

Q: A shipment of rice arrives in Manila from Thailand. The agreement between the supper and ship owner is that freight was to be paid upon the discharge of the cargo. Shipper however does not pay the freight but instead, offers a bond. Yet, the owner of the vessel refuses to deliver the rice. May the charterer be ordered to deliver the rice upon furnishing of the bond by the shipper.

the contract and incidental expenses, until their delivery and for 30 days thereafter. Art. 668 Should the consignee be not found or should refuse to receive the cargo, the judge or court, at the instance of the captain, must order its deposit and the sale of what may be necessary to pay the freight and other expenses on the same. The sale should likewise take place when the goods deposited run the risk of deteriorating or, on account of their condition or for other reasons, the expenses of the preservation and custody should be disproportionate to the value thereof. SALE OF CARGO BY THE CAPTAIN Q: What are the cases where the captain may request the sale of the cargo? A:

A: No, the fact that a bond has been given for the payment of such freight does not make it compulsory for the carrier to deliver the cargo before freight has actually been paid.

1. 2. 3. 4.

The fact that the freight was already included in the purchase price of the goods did not free the cargo of rice from the carrier’s lien, if the freight has not yet been fully paid by the charterer. STEVEDORING

5.

Q: What is a stevedoring? A: It refers to the carriage of goods from the warehouse or pier to the holds of the vessel. II. Art. 666 The captain may request the sale of the cargo to the amount necessary to pay the freight, expenses, and averages due him, reserving the right to demand the balance due him therefor, if the proceeds of the sale should not be enough to cover his credit. Art. 667 The goods loaded shall be liable in the first place for the freight and expenses thereof during 20 days, to be counted from the date of their delivery or deposit. During this period, the sale of the same may be requested, even though there should be other creditors and the case of insolvency of the shipper or consignee should occur. The right, however, cannot be made use of on the goods rd which, after being delivered were turned over to a 3 person without malice on the part of the latter by onerous title. Amended by Art. 2241 of Civil Code which provides: Credits for transportation upon the goods carried, for the price of

To pay the freight; To pay the expenses and duties due to the cargo; To pay the expenses and averages due to the cargo; When the goods deposited run the risk of deteriorating or an account of their condition or for other reasons, the expenses of preservation and custody should be disproportionate to the value thereof; Should the consignee be not found or should refuse to receive the cargo, in which case the judge or court at the instance of the captain, must order its deposit and the sale of what may be necessary to pay freight and other expenses on the sale. Rights and obligations of owners

Art. 669. The shipowner of the captain shall observe in charter parties the capacity of the vessel or that expressly designated in its registry, a difference greater than 2 per cent between that registered and her true capacity not being permissible. If the shipowner or the captain should contract to carry a greater amount of cargo than the vessel can carry, in view of her tonnage, they shall indemnify the shippers whose contracts they do not fulfill for the losses they may have caused them by reason of their default, according to the cases, viz: If the vessel has been chartered by one shipper only, and there should appear to be an error or fraud in her capacity, and the charterer should not wish to rescind the contract, when he has a right to do so, the freightage shall be reduced in proportion to the cargo the vessel cannot receive, the person from whom the vessel is chartered being


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law furthermore obliged to indemnify the charterer for the losses he may have caused him. If, on the contrary, there should be several charter parties, and by reason of the want of space all the cargo contracted for cannot be received, and none of the charterers desires to rescind the contract, preference shall be given to the person who has already loaded and arranged the cargo in the vessel, and the rest shall take the place corresponding to them in the order of the dates of their contracts. Should there be no priority, the charterers may load, if they wish, in proportion to the weight or space they may have engaged, and the person from whom the vessel was chartered shall be obliged to indemnify them for losses and damages. Art. 670. If the person from whom the vessel is chartered, after receiving a part of the cargo, should not find sufficient to make up at least three fifths of the amount the vessel can hold, at the price he may have fixed, he may substitute for that transportation another vessel inspected and declared suitable for the same voyage, the expenses of transfer, and the increase in the price of the charter, should there be any, being for his account. Should he not be able to make this change, the voyage shall be undertaken at the time agreed upon; and should no time have been fixed, within fifteen days from the time the loading began, should nothing to the contrary have been stipulated. If the owner of the part of the cargo already loaded should procure some more at the same price and under similar or proportionate conditions to those accepted for the freight received, the person from whom the vessel is chartered or the captain may not refuse to accept the rest of the cargo; and should he do so, the charterer shall have a right to demand that the vessel put to sea with the cargo she may have on board. Art. 671. After three-fifths of the vessel is loaded, the person from whom she is chartered may not, without the consent of the charterers or shippers, substitute the vessel designated in the charter party with another one, under the penalty of making himself thereby liable for all the losses and damages occurring during the voyage to the cargo of those who did not consent to the change.

requested to put to sea at the proper time through a notary or judicially. Art. 674. If the charterer should carry to the vessel more cargo than that contracted for, the excess may be admitted in accordance with the price stipulated in the contract if it can be well stowed without incurring the other shippers, but if in order to stow said cargo it should be necessary to stow it in such manner as to throw the vessel out of trim the captain must refuse it or unload it at the expense of its owner. The captain may likewise, before leaving the port, unload the merchandise clandestinely placed on board, or transport it, it he can do so and keep the vessel in trim, demanding by way of freightage the highest price which may have been stipulated for said voyage. Art. 675. If the vessel has been chartered to receive the cargo in another port, the captain shall appear before the consignee designated in the charter party, and should the latter not deliver the cargo to him, he shall inform the charterer and await his instructions, the lay days agreed upon, or those allowed by custom in the port, beginning to run in the meantime, unless there is an express agreement to the contrary. Should the captain not receive an answer within the time necessary therefore, he shall make efforts to find cargo; and should he not find any after the lay days and extra lay days have elapsed, he shall make a protest and return to the port where the charter was made. The charterer shall pay the freightage in full, discounting that which may have been earned on the merchandise which may have been carried on the voyage out or on the return trip, if carried for the account of third persons. The same shall be done if a vessel, having been chartered for the round trip, should not be given any cargo for her return. Art. 676. The captain shall lose the freightage and shall indemnify the charterers if the latter should prove, even against the certificate of inspection, if one has been made at the port of departure, that the vessel was not in a condition to navigate at the time of receiving the cargo.

Art. 672. If the vessel has been chartered in whole, the captain may not, without the consent of the person chartering her, accept cargo from any other person; and should he do so, said charterer may oblige him to unload it and to indemnify him for the losses suffered thereby.

Art. 677. The charter party shall subsist if the captain should not have any instructions from the charterer, and a declaration of war or a blockade should take place during the voyage.

Art. 673. The person from whom the vessel is chartered shall be liable for all the losses caused the charterer by reason of the voluntary delay of the captain in putting to sea, according to the rules prescribed, provided he has been

In such case the captain must proceed to the nearest safe and neutral port, requesting and awaiting orders from the shipper; and the expenses and salaries accruing during the detention shall be paid as general average.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law captain to proceed to the nearest safe and neutral port, requesting and awaiting orders from the shippers.

If, by orders of the shipper, the cargo should be discharged at the port of arrival, the freightage for the voyage out shall be paid in full.

RIGHTS OF SHIPOWNER Agricultural machinery on board a merchant vessel carrying the flag of a belligerent nation, and belonging to a subject of a neutral power is not subject of general average to satisfy the costs and expenses, incident to the internment of the ship in a neutral port.

Q: What are the Rights of Ship owner? A: 1.

In such case, there is no common danger to vessel and cargo, and hence no case for general average. Art. 678. If the time necessary, in the opinion of the judge or court, to receive orders from the shippers should have elapsed without the captain having received any instructions, the cargo shall be deposited, and it shall be liable for the payment of the freightage and expenses incurred by reason of the delay, which shall be paid from the proceeds of the part first sold.

2.

3. 4.

OBLIGATIONS OF SHIP OWNER Q: What are the obligations of ship owner?

5.

A: 1.

2.

3.

4.

5.

6. 7. 8.

Art. 669 - to observe in the charter parties, the capacity of the vessel, and to indemnify the shippers whose contracts are not fulfilled for the losses they may have suffered by the failure of the shipowner to observe the capacity of the vessel; Art. 670 - to undertake a voyage at the time agreed upon or within 15 days from loading if no time is stipulated, even if the shipowner should not find cargo sufficient to make up at least 3/5 of the amount which the vessel may hold, where he fails to exercise his right to change vessel; Art. 670 - where the shipowner should not find cargo sufficient to make up at least 3/5 of the amount which the vessel may hold, to accept other cargo procured by the owner of the freight already loaded under the same price and conditions; Art. 671- not to change the vessel after 3/5 of the vessel has been loaded, without the consent of the charterers or shippers; Art. 672 - if the vessel has been chartered in whole, not to accept cargo from any other person without the consent of the charterer; Art. 673 - to answer for losses arising from delay in putting to sea; Art. 676 - to have the vessel in a condition to navigate at the time of receiving the cargo; Art. 677 - in case of declaration of war or blockade during the voyage, where the captain has not received any instructions from the charterer, for the

6.

7.

III.

Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the amount which the vessel may hold, he may substitute anohter vessel inspected and declared suitable for the voyage --> expenses of transfer and increase in price of the charter shall be paid by him; Art. 674 - to collect the freight in accordance with the price stipulated for cargo in excess of that agreed upon is such excess can be properly stowed; Art. 674 - to refuse and unload at the expense of the owner excess cargo that cannot be properly stowed; Art. 674 - to unload merchandise clandestinely placed on board, or to transport them if he can do so, demanding the highest freightage; Art. 675- to find freight to take place of freight not received, if the vessel has been chartered to receive cargo in another port, after he receives no cargo from the consignee and after he receives no answer from the charterer; Art. 675 - to receive freight in full, discounting that which may have been earned on the merchandise carried as substitute; Art. 677 - to have the charter party subsist notwithstanding the declaration of war or a blockade during the voyage, and to receive in such cases, the freightage in full where the shipper orders that the cargo should be discharged at the port of arrival. Obligations of Charterers

Art. 679. The charterer of an entire vessel may subcharter the whole or part thereof for the amounts he may consider most convenient, the captain not being allowed to refuse to receive on board the cargo delivered by the second charterers, provided the conditions of the first charter are not changed, and that the price agreed upon is paid in full, even though the full cargo is not loaded, with the limitation established in the next article. Art. 680. A charterer who does not complete the full cargo he bound himself to ship shall pay the freightage of the amount he fails to load, if the captain does not take other freight to complete the load of the vessel, in which case he shall pay the first charterer the difference should there be any.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Art. 681. If the charterer should ship goods different from those indicated at the time of executing the charter party, without the knowledge of the person from whom the vessel was chartered or of the captain, and should thereby give rise to losses, by reason of confiscation, embargo, detention, or other causes, to the person from whom the vessel was chartered or to the shippers, the person giving rise thereto shall be liable with the value of his shipment and furthermore with his property, for the full indemnity to all those injured through his fault.

4.

5.

6.

Art. 682 - in case of making a port to repair the hull, machinery or equipment of the vessel, to wait until the vessel is repaired or to pay for the expenses of unloading should the charterer choose to unload; Art. 684 - where the charterer unloads goods before arriving at port of destination without any force majeure occurring, to pay (1) expenses of arrival, (2) full freight and (3) for the damages and losses caused to other shippers, if any; Art. 685 - where the charterer unloads before the beginning of the voyage, (1) to pay 1/2 of the freight, (2) to pay for the expenses of stowing and restowing the cargo, (3) to pay any other damage which he may have caused other shippers; Art. 686 - to pay for freight, other expenses and the primage after the vessel has been unloaded and the cargo placed at the disposal of the consignee; Art. 687 - not to abandon merchandise damaged on account of inherent defect or fortuitous event, for the payment of the freight and other expenses

Art. 682. If the merchandise should have been shipped for the purpose of illicit commerce, and was taken on board with the knowledge of the person from whom the vessel 7. was chartered or of the captain, the latter, jointly with the owner of the merchandise, shall be liable for all the losses which may be caused to other shippers, and even though it 8. may have been agreed, they cannot demand any indemnity whatsoever from the charterer for the damage caused the vessel. Art. 683. In case of making a port to repair the hull, OBLIGATIONS OF SHIPOWNER or SHIP AGENT v. machinery, or equipment of the vessel, the shippers must OBLIGATIONS OF CHARTERER wait until the vessel is repaired, being permitted to unload her at their own expense should they deem it advisable. If, for the benefit of cargo which runs the risk of deterioration, the shippers or Shipowner or Ship agent Charterer Art. 684. If the charterer, without the occurrence of any of If the vessel is chartered To pay the agreed charter the cases of force majeure mentioned in the foregoing wholly, not to accept cargo price article, should wish to unload his merchandise before from others arriving at the port of destination, he shall pay the full To observe represented To pay freightage on freightage, the expenses of the arrival made at his request, capacity unboarded cargo and the losses and damages caused the other shippers, To unload cargo To pay losses to others for should there be any. clandestinely placed loading uncontracted cargo or illicit cargo Art. 685. In charters for transportation of general freight To substitute another vessel To wait if the vessel needs any of the shippers may unload the merchandise before the if load is less than 3/5 of repair beginning of the voyage, paying one half the freightage, the capacity expense of stowing and restoring the cargo, and any other To leave the port if the To pay expenses for damage which may be caused the other shippers. charterer does not bring the deviation cargo within the lay days and Q: What are the obligations of the charterer? extra lay days allowed To place in a vessel in a A: condition to navigate; to bring cargo to nearest 1. Art. 680 - to pay the freight in full even if the neutral port in case of war or charterer does not complete the full cargo he bound blockade himself to ship; 2. Art. 681- to answer with the value of his shipment Q: What is the status of a contract made in foreign lands? and other property for the losses suffered by the shipowner, captain or other shippers arising from A: It will be enforceable in the Philippines provided hat it is confiscation, embargo, detention, or other causes, not in violation of our law or public policy. where the charterer loads goods different from those stated at the time of the execution of the A contract made in Hong Kong will be construed according to charter party; its law, provided it is not in violation of a law or public policy 3. Art. 682 - to be jointly liable with the captain for in the Philippines. losses which may be caused to the other shippers where the charterer ships goods for illicit commerce But when it is proposed to invoke the laws of a foreign with the knowledge of the shipowner or captain; country as supplying the proper rules for the interpretation of


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law a contract, the law upon which reliance is placed must be pleaded and proved. Otherwise, it will be presumed that the law prevailing in the foreign country is the same as that which prevail in this jurisdiction. Art. 686. After the vessel has been unloaded and the cargo placed at the disposal of the consignee, the latter must immediately pay the captain the freightage due and the other expenses for which the cargo may be liable. The primage must be paid in the same proportion and at the same time as the freightage, all the changes and modifications to which the latter should be subject also governing the former. Art. 687. The charterers and shippers may not abandon merchandise damaged on account of its own inherent defect or of fortuitous event for the payment of the freightage and other expenses.

(From one port to another of the Peninsula (Philippines) and adjacent islands, the freightage for one month only shall be paid.) If a vessel should make a port during the voyage in order to make urgent repairs and the charterers should prefer to dispose of the merchandise. When the delay does not exceed thirty days, the shippers shall pay the full freightage for the voyage out. Should the delay exceed thirty days, they shall pay the freight in proportion to the distance covered by the vessel. Art. 689. At the request of the person from whom the vessel is chartered the charter party may be rescinded: 1. 2.

The abandonment shall be proper, however, if the cargo should consist of liquids which may have leaked out, there remaining in the containers not more than one-fourth of their contents. IV.

3.

Total and Partial Rescissions of Charter parties

Art. 688. A charter party may be annulled at the request of the charterer: 1. 2.

3.

4.

If before loading the vessel he should abandon the charter, paying half the freightage agreed upon; If the capacity of the vessel should not agree with that stated in the certificate of tonnage, or if there be an error in the statement of the flag under which she sails; If the vessel should not be placed at the disposal of the charterer within the period and in the manner agreed upon; If, after the vessel has put to sea, she should return to the port of departure, on account of risk from pirates, enemies, or bad weather, and the shippers should agree to unload her.

In such case the vendor shall indemnify the charterer for the losses he may suffer. If the new owner of the vessel should not load it for his own account the charter party shall be respected, and the vendor shall indemnify the purchaser if the former did not inform him of the charter pending at the time of making the sale. Art. 690. The charter party shall be rescinded and all action arising therefrom shall be extinguished if, before the vessel puts to sea from the port of departure, any of the following cases should occur: 1.

2. In the second and third cases the person from whom the vessel was chartered shall indemnify the charterer for the losses he may suffer.

If the charterer at the termination of the extra lay days does not place the cargo alongside the vessel. In such case the charterer must pay half of the freightage stipulated besides the demurrage due for the lay days and extra lay days. If the person from whom the vessel was chartered should sell it before the charterer has begun to load it and the purchaser should load it for his own account

3.

In the fourth case the person from whom the vessel was chartered shall have a right to the freightage in full for the voyage out.

4.

If the charter should have been made by the month, the charterers shall pay the full freightage for one month, if the voyage is for a port in the same waters; and two months, if for a port in different waters.

5.

A declaration of war or interdiction of commerce with the power to whose ports the vessel was to make its voyage. A condition of blockage of the port of destination of said vessel, or the breaking out of an epidemic after the contract was executed. The prohibition to receive at the said port the merchandise constituting the cargo of the vessel. An indefinite detention, by reason of an embargo of the vessel by order of the government, or for any other reason independent of the will of the ship agent. The inability of the vessel to navigate, without fault of the captain or ship agent.

The unloading shall be made for the account of the charterer.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Art. 691. If the vessel cannot put to sea on account of the closing of the port of departure, or any other temporary cause, the charter shall remain in force without right of either of the contracting parties to claim damages. The subsistence and wages of the crew shall be considered as general average. During the interruption the charterer may, at the proper timer and for his own account, unload and load the merchandise, paying demurrage if the reloading should continue after the cause for the detention has ceased. Art. 692. A charter party shall be partially rescinded, unless there is an agreement to the contrary, and the captain shall only be entitled to the freightage for the voyage out, if, by reason of a declaration of war, closing of ports, or interdiction of commercial relations during the voyage, the vessel should make the port designated for such a case in the instructions of the charterer. V.

passengers shall only be entitled to the return of the passage fare. Art. 698 In case of interruption of a voyage already begun, the passengers shall only be obliged to pay for the fare in proportion to the distance covered, without right to recover damages, if the interruption is due to fortuitous event or force majeure, but with a right to indemnity, if the interruption should have been caused by the disability of the vessel, and the passenger should agree to wait for her repairs, he may not be required to pay any increased fare of passage, but his living expenses during the delay shall be for his own account. In case of delay in the departure of the vessel, the passengers have the right to remain on board and to be furnished with food for the account of the vessel, unless the delay is due to fortuitous event or to force majeure. If the delay should exceed 10 days, the passengers have the right to request the return of the fare, and if it is due to the captain or ship agent exclusively, they may also demand indemnity for damages.

Passengers on Sea voyages

Art. 693 Should the passage fare have not been agreed upon, the judge or court shall summarily fix it, after a declaration of experts. Art. 694 Should the passenger not arrive on board at the time previously fixed, or should leave the vessel without permission from the captain when she is ready to leave the port, the captain may continue the voyage and demand the full passage fare. Art. 695 The right of passage, if issued to a specified person, may not be transferred without the consent of the captain or consignee Art. 696 If, before starting the voyage, the passenger should die, his heirs shall be obliged only to pay half of the fare agreed upon. If, in the fare stipulated, the expenses of subsistence should be included, the judge or court, after hearing the experts if he considers it necessary, shall fix the amount to be left for the benefit of the vessels. Should another passenger be received in the place of the deceased, no payment shall be made by the said heirs. Art. 697 If before starting the voyage it should be suspended through the exclusive fault of the captain or ship agent, the passengers shall have the right to a refund of their fares and to recover damages; but if the suspension is due to fortuitous event, or to force majeure, or to any other cause beyond the control of the captain or ship agent, the

A vessel exclusively devoted to the transportation of passengers must carry them directly to the ports or ports of destination, no matter what the number of passengers may be, making all the stops indicated in their itinerary. PUBLICATION OF SCHEDULE OF ARRIVALS AND DEPARTURES Q: Is the ship owner required to publish schedule of arrivals and departures of the vessel? A: There is no law which requires ship owners to publish a schedule of the arrivals and departures of their vessels in the different port of calls, and holds them liable for damages to passengers for any deviation from said schedule. Although the Public Service Commission has no authority to require steamship boats, motorboats, or motor vessels to obtain certificates of public convenience or prescribe their definite route or line, the PSC has authority to prescribe the schedule of trips and the rates to be charged. Art. 699Should the contract be rescinded before or after starting the voyage, the captain shall have right to claim payment for what he may have furnished to the passengers. Art. 700 In all that relates to the preservation of order and discipline on board the vessel, the passengers shall be under the control of the captain, without any distinction whatsoever. Art. 701The convenience or the interest of the passengers shall not obligate or empower the captain to stand in shore or enter places which may take the vessel out of her course,


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law or to remain in ports which he must or is under necessity to touch for a period longer than that required by the needs of navigation. Art. 702 In the absence of agreement to the contrary, the subsistence of the passengers during the voyage shall be considered included in the transportation fare; but should it be for the account of the passengers, the captain shall be under obligation, in case of necessity, to supply the food necessary for their subsistence at a reasonable price. Art. 703A passenger shall be considered a shipper as to the effect which he carries on board, and the captain shall not be liable for what the former may keep under his immediate and special custody, unless the damage arises from the act of the captain or of the crew. Art. 704 The captain, in order to collect the transportation fares and expenses of sustenance, may retain the effects belonging to the passenger, and in case of their sale, he shall be given preference over the other creditors, acting in the same way in the collection of the freight. Art. 705 In case of the death of a passenger during the voyage, the captain shall be authorized, with regard to the body, to take steps required by the circumstances, and shall carefully take care of the papers and effects which may be found on board belonging to the deceased, observing the previsions of case No. 10 of Art. 612 with regard to members of the crew. Art. 612. The following duties are inherent in the office of captain: xxx 10. To put in a safe place and keep all the papers and belongings of any members of the crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as witnesses, and, in their absence, of members of the crew. xxxx VI.

The bill of lading may be issued to bearer, to order, or in the name of a specified person, and must be signed within twenty- four hours after the cargo has been received on board, the shipper being entitled to demand the unloading at the expense of the captain should the latter not sign it, and, in any case, the losses and damages suffered thereby. Bill of Lading Q: What is a Bill of Lading? A: B/L operates both as a receipt and as a contract; it is a receipt for the goods shipped and a contract to transport and deliver the same as stipulated A stipulation that a CC's liability is limited to the value of the goods appearing in the B/L, unless the owner declares a greater value, is valid and binding BILL OF LADING v. CHARTER PARTY Q: State the difference between a Bill of Lading and a Charter party? A: Bill of Lading Private receipt which the captain gives to accredit that such goods belong to such persons; It is a real contract; it exists only after delivery of the goods to be transported is made 1.

2.

Bills of Lading

Art. 706. The captain and the shipper shall have the obligation of drawing up the bill of lading, in which shall be stated: 1. 2. 3. 4. 5. 6. 7.

The name, registry, and tonnage of the vessel. The name of the captain and his domicile. The port of loading and that of unloading. The name of the shipper. The name of the consignee, if the bill of lading is issued in the name of a specified person. The quantity, quality, number of packages, and marks of the merchandise. The freightage and the primage stipulated.

3.

Charter Party Entire or complete contract

It is a consensual contract which can be dissolved by means of indemnity for losses and damages

Each bill of lading is a contract and the parties thereto are bound by its terms but subject to the provisions of Art. 1733 to 1759 of the new civil code. The shipper has the sole responsibility for the quantity, description and condition of the cargoes shipped in container vans, each container van considered as a unit of transport. Containerization is in line with the government policy, resulting in the laudable decongestion of ports of entry. Containerization was devised to facilitate the expeditious and economic loading, carriage, and unloading of cargoes. Under this system, the shipper loads his cargoes in a specially designed container, seals the container and delivers it to the carrier for transportation. The carrier does not participate in the counting of the merchandise for loading into the container, the actual loading thereof nor the sealing of the container. Having no actual knowledge of the kind, quantity or condition of the contents of the container, the carrier issues the corresponding bill of lading based on the declaration of the shipper.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 4. The bill of lading describes the cargo as a container simply and states the contents of the container either as advised by the shipper or prefaced by the phrase “said container.” f. Q: What is the status of a stipulation that the carrier’s liability for loss or damage from any cause or for any reason is limited to a specified sum? A: It is invalid being contrary to public policy unless the carrier could prove that it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Q: Can a defective and irregular bill of lading be cured by other complementary documents? A: If the bill of lading was defective and irregular upon its face in that it did not describe the weight or measurement of the merchandise covered by it, such deficiency or defect was cured by the insurance policy and the commercial invoice wherein the missing details appeared with exactness, it being understood that such documents formed a group of complementary documents, that defect of one of which being deemed supplied by the other. Q: What is the status of a stipulation limiting jurisdiction of courts of the Philippines? A: A stipulation in a BOL emitted in a foreign country to the effect that all disposition arising under the contract shall be decided exclusively in the courts of the country wherein the contract is made cannot have the effect of defeating the jurisdiction of the courts of the Philippines. a.

b.

c.

d.

e.

A breach of contract of affreightment, whether evidenced by a bill of lading or a charter party is a case of admiralty. Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever, they were executed or are to be performed, but not over non-maritime contracts. Cases of admiralty falls within the original jurisdiction of the CFI to which the jurisdiction of the justice of peace courts (including municipal courts) does not extend and if the latter courts take cognizance of such cases, they may be restrained by the writ of prohibition. All admiralty and maritime actions, where the demand or claim exceeds P20,000.00 shall be under the exclusive original jurisdiction of the RTC. To give admiralty jurisdiction over a contract as maritime, such contract must relate to the trade and business of the sea, it must be essentially and fully maritime in its character; it must provide for maritime services, maritime transactions or maritime casualties. The admiralty jurisdiction of a CFI extend over all maritime contracts in whatever form entered into,

whether executed or still to be performed. As long as the subject matter thereof is maritime service or a maritime transaction, then it is embraced within such a concept. An action based upon an oral contract for the transportation of goods by water, the same is an action in admiralty which comes within the original jurisdiction of the CFI irrespective of the value of the cargo. Admiralty jurisdiction extends to all maritime torts.

Q: Is an action based on oral contract of transportation of goods by sea an action on admiralty, under the jurisdiction of the CFI or RTC? A: It is an action in admiralty which comes under the original and exclusive jurisdiction of the RTC irrespective of the value of the cargo. Q: Is an action brought for the enforcement of a maritime lien, on cargoes due to non-payment of a charter hire fee an action “quasi in rem”? A: Since the action is brought principally for the enforcement of maritime lien against the property of defendants, in the nature and character of a proceeding “quasi in rem,” jurisdiction over one of the defendants is not essential. As such, properties allegedly owned by him are primarily made liable. WHEN ACTION NOT IN ADMIRALTY Q: When is an action not admiralty? A: A suit to recover amount not exceeding P2000 on account of shortages and damages alleged to have arisen after the goods, which were shipped to the Philippines from the US, has been unloaded at the port, does not involve admiralty jurisdiction of the CFI. A shipper may be held liable for freightage on BOL signed by another person where the shipper appears as shipper or consignee, BOL where persons other than the former appear as shipper, and bills of lading not signed by the shipper where the testimonial evidence shows that the goods shipped actually belong to him as shipper. Art. 707 Four true copies of the original bill of lading shall be made, and all of them shall be signed by the captain and by the shipper. Of these copies the shipper shall keep one and send another to the consignee; the captain shall take two, one for himself and the other for the ship agent. There may also be drawn as many copies of the bill of lading as may be considered necessary by the parties; but, when they are issued to order or to bearer, there shall be stated in all the copies, be they the first four or the subsequent ones,


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law the destination of each one, stating whether it is for the ship agent, for the captain, for the shipper, or for the consignee. If the copy sent to the latter should have a duplicate, this circumstance and the fact that it is not valid except in default of the first one must be stated therein. Art. 708 Bills of lading issued to bearer and sent to the consignee shall be transferable by actual delivery of the instrument; and those issued to order, by virtue of an indorsement. In either case, the person to whom the bill of lading is transferred shall acquire all the rights and actions of the transferor or indorser with regard to the goods mentioned in the same. Q: Is a BOL issued to a specified person negotiable? Can it be negotiated by indorsement? A: Title to the goods described in the BOL running to the consignee and not to his order nor to bearer cannot be transferred by means of a mere indorsement by the consignee directing a delivery of the goods and not purporting to convey the property but may be transferred by the holder by delivery to a purchaser or done subject to the provisions of Art. 1514 of NCC.

a.

b. c.

d.

Art. 711 The legitimate holder of a bill of lading, who fails to present it to the captain of the vessel before the unloading, obliging the latter by such omission to unload the cargo and place it in deposit, shall be responsible for the expenses of the warehousing and other expenses arising therefrom. The above article refers to the duty of the holder of the BOL to present it to the captain before the unloading of the cargo commenced. Art. 707 and 711 authorize the inference that the carrier is not expected to give notice of the arrival of the goods because: 1.

2. The rightful holder of BOL drawn to the order of the shipper, with drafts attached for collection, all of them properly indorsed, has the legal title to the shipment covered by the said documents and is entitled to maintain an action as real party in interest to recover the same. C.I.F. PRICE Q: Explain a C.I.F. price A: Under an ordinary C.I.F. agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and tender of the shipping and other documents required by the contract and the insurance policy taken in the buyer’s behalf. Art. 709 A bill of lading drawn up in accordance with the provisions of this title shall be proof as between those interested in the cargo and between the latter and the insurers, evidence to the contrary being reserved by the latter. Art. 710 If the bills of lading do not agree, and no change or erasure appears in any of them, those in the possession of the shipper or consignee signed by the captain shall be proof against the latter or ship agent in favor of the consignee or the shipper; and those possessed by the captain or ship agent signed by the shipper shall be proof against the shipper or consignee in favor of the captain or ship agent.

A BOL is nothing more than the contract between the parties and prima facie evidence of the receipt of the merchandise by carrier or his agent. B/L - proof of the agreement between the parties; Issuance of B/L is merely prima facie evidence of the receipt of the merchandise by the carrier or his agent; not conclusive evidence; Defective and irregular B/L may be cured by other complementary documents

Requiring the shipper to send to the consignee a copy of a BOL, implies that notice of the shipment shall come that way to the latter; Presuming that the consignee has been so notified tacitly, imposes on him the duty to watch for the arrival of the goods and compels him to take delivery therof before are unloaded under the penalty of having to pay storage charges.

Art. 706, specifying the data to be written on the BOL, does not require the address of the consignee to be set further therein. Hence, it would be absurd to impose the obligation to notify where the address of the person to be notified is not known but not until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them, the extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination. Art. 712 The captain may not himself change the destination of the goods. In admitting this change at the instance of the shipper he must first take up the bills of lading he may have issued, under penalty of being liable for the cargo to the legitimate holder of the same. The article has for its objection the prevention of frauds which the captain of the vessel may commit by changing the destination of the goods. CHANGE OF DESTINATION OF GOODS Q: Can the destination of the goods be changed without surrendering all the copies of the BOL to the captain?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: The destination of the goods cannot be changed without the shipper returning to the captain all the copies signed by him, otherwise the latter will be liable for the goods to the legitimate holder of the BOL.

Art. 718 After the cargo has been delivered, the bills of lading signed by the captain, or at least the copy under which the delivery is made, shall be returned to him with the receipt for the goods mentioned therein.

Art. 713 If before the delivery of the cargo a new bill of lading should be demanded of the captain, on the allegation that the failure to present the previous ones is on account of their loss or for any other just cause, he shall be obliged to issue it, provided that security for the value of the cargo is given to his satisfaction; but without changing the consignment and stating therein the circumstances prescribed in the last paragraph of Article 707, when dealing with the bills of lading referred to therein, under penalty, should he not do so, of being liable for said cargo if improperly delivered through his fault.

The delay on the party of the consignee shall make him liable for damages which such delay may cause the captain.

Art. 714 If before the vessel puts to sea the captain should die or should cease to hold his position through any cause, the shipper shall have the right to demand of the new captain the ratification of the first bills of lading, and the latter must do so, provided that all the copies previously issued be presented or returned to him, and it should appear from an examination of the cargo that they are correct.

In as much as it is not easy to collect all the copies of the BOL issued and to avoid this inconvenience, it will be sufficient to return to the captain only one of the copies thereof but with receipt for the goods made by the consignee. Section I LOANS ON BOTTOMRY AND RESPONDENTIA Art. 719. A loan in which, under any condition whatever, the repayment of the sum loaned and of the premium stipulated depends upon the safe arrival in port of the goods on which it is made, or of the price they may receive in case of accident, shall be considered a loan on bottomry or respondentia. loan on bottomry Q: What is a loan on bottomry?

The expenses arising from the examination of the cargo shall be for the account of the ship agent, without prejudice to his right of action against the first captain, if he ceased to be such through his own fault. Should said examination not be made, it shall be understood that the new captain accepts the cargo as it appears from the bills of lading. Art. 715 Bills of lading will give rise to a most summary action or judicial compulsion, according to the case, for the delivery of the cargo and the payment of the freight and the expenses thereby incurred. Art. 716 If several persons should present bills of lading issued to bearer or to order, indorsed in their favor, demanding the same goods, the captain shall prefer, in making delivery, the person presenting the copy first issued, except when the subsequent one was issued on proof of the loss of the first one, and both are presented by different persons. In such case, as well as when only second or subsequent copies, issued without that proof, are presented, the captain shall apply to the judge or court, so that he may order the deposit of the goods, and their delivery, through his mediation, to the proper person. Art. 717 The delivery of the bill of lading shall produce the cancellation of all the provisional receipts of prior date issued by the captain or his subordinates for partial deliveries of the cargo which may have been made.

A: A contract in the nature of a mortgage, by which the owner of the ship borrows money for the use, equipment and repair of the vessel and for a definite term, and pledges the ship (or the keel or bottom of the ship) as a security for its repayment, with maritime or extraordinary interest on account of the maritime risks to be borne by the lender, it being stipulated that if the ship be lost in the course of the specific voyage or during the limited time, by any of the perils enumerated in the contract, the lender shall also lose his money. loan on respondentia Q: What is a loan on respondentia? A: When the loan is not made upon the ship, but on the goods laden on board, and which are to be sold, or exhanged in the course of the voyage, the borrower’s personal responsibilty is deemed the principal security for the performance of the contract which is therefore called respondentia. And in a loan upon respondentia, the lender must be paid his principal and interest, thought the ship perishes, provided that the goods are saved. In most other respects, the contracts of bottomry and of respondentia stand substantially upon the same footing. LOAN ON BOTTOMRY v. LOAN ON RESPONDENTIA


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: Distinguish between loan on bottomry and loan on respondentia. A: LOAN ON BOTTOMRY LOAN ON RESPONDENTIA Definition Loan made by shipowner or Loan taken on security of the ship agent guaranteed by cargo laden on a vessel, and vessel itself and repayable repayable upon safe arrival upon arrival of vessel at of cargo at destination. (Art. destination. (Art. 719) 719) Who may contract Shipowner or ship agent. Shipowner or ship agent. Outside of the residence of Outside of the residence of the owners - the captain. the owners - the captain. Common elements: 1. 2.

1. 2. 3.

1. 2. 3. 4. 5. 6. 7.

Exposure of security to marine peril; Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination. Forms: Public instrument Policy signed by the contracting parties and the broker taking part therein Private instrument (Art. 720 Contents: Kind, name and registry of the vessel; Name, surname and domicile of the captain; Names, surnames and domiciles of the borrower and the lender; Amount of the loan and the premium stipulated; Time for repayment; Goods pledged to secure repayment; Voyage during which the risk is run (Art.721) MARINE INSURANCE v. LOAN ON BOTTOMRY AND RESPONDENTIA

Q: Distinguish marine insurance from loan on bottomry or respondentia. A: MARINE INSURANCE Consensual contract

If the marine perils to be avoided should take place,

LOANS ON BOTTOMRY OR RESPONDENTIA Real contract: not perfected unless the money loaned is delivered to the borrower The amount loaned with the interest or premium agreed

the value of the loss or damage of subject matter as insured is to be paid by the insurer to the assured Indemnity is paid after the loss has occurred

upon shall not be paid by borrower to lender

Indemnity is paid in advance by way of a loan

Q: Are the premiums or ineterest on bottomry and respondentia loans subject to usury law? A: No. In usury law, being intended to prohibit certain extortionate gains from the lending of money, it is essential to constitute usury that the sum be repayable absolutely and at all events. Therefore, usury statute has no application to those uncertain transactions in which the amount repayable is contingent upon conditions beyond the control of the parties since the person who furnishes the money incurs the risk of losing in whole or in part of the principal sum loaned thus, the perils of marine navigation have always been always considered sufficient to take bottomry bonds and respondentia loans out of the ordinary usury laws. In such cases, there is a real risk of the principal and more than the ordinary legal rate of interest may be lawfully charges. LOAN ON BOTTOMRY AND RESPONDENTIA v. SIMPLE LOANS Q: Distinguish loan on bottomry or respodentia and simple loans. A: LOAN ON BOTTOMRY OR RESPONDENTIA The rate of interest although beyond the lawful rate of interest is not subject to usury law There must necessarily exist a bona fide marine risk When the loan is made during the voyage the lender has preference over the previous one: the reason for this exception is that the last loan contributes in the preservation of the things pledged The contarct must be reduced at least to writing to give rise to judicial action The action pertaining to the lender is extinguished by the absolute loss of the effects on which the loan is made The loan should be recorded

SIMPLE LOANS The rate of interest is subject to Usury law

The existence of a marine risk or uncertainty of transactions is not necessary The prior lender has a right of preference on the security over the subsequent ones

The said requisite is not always necessary Not extinguished; the lender being reduced merely to unsecured creditor Registration is not necesary


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law in the Registry of Vessels to be effective to third persons Art. 720. Loans on bottomry or respondentia may be executed:

4. 5. 6. 7.

The amount of the loan and the premium stipulated. The time for repayment. The goods pledged to secure repayment. The voyage during which the risk is run.

By means of a public instrument. By means of a policy signed by the contracting parties and the broker taking part therein. By means of a private instrument.

The majority of the commentators opine that the requisites mentioned in the above article are indispensable under penalty of being void, excepting those indicated in Nos. 1 and 5, as to them the opinions are divided.

Under whichever of these forms the contract is executed, it shall be entered in the certificate of the registry of the vessel and shall be recorded in the registry of vessels, without which requisites the credits of this kind shall not have, with regard to other credits, the preference which, according to their nature, they should have, although the obligation shall be valid between the contracting parties.

But the doubts would have been avoided, if in the article another paragraph is added providing that the instrument lacking any of those requisites will be considered a simple loan of money with the current interest, without any lien on the effects for which it is given.

1. 2. 3.

The contracts made during a voyage shall be governed by the provisions of Articles 583 and 611, and shall be effective with regard to third persons from the date of their execution, if they should be recorded in the registry of vessels of the port of registry of the vessel before the lapse of eight days following its arrival. If said eight days should elapse without the record having been made in the registry of vessels, the contracts made during the voyage of a vessel shall produce no effect with regard to third persons, except from the day and date of their inscription. In order that the policy of the contracts executed in accordance with No.2 may have binding force, they must conform to the registry of the broker who took part therein. With respect to those executed in accordance with No. 3 the acknowledgment of the signature shall be required. Contracts which are not reduced in writing shall not give rise to judicial action.

Art. 722. The contracts may be made to order, in which case they shall be transferable by indorsement, and the indorsee shall acquire all the rights and shall incur all the risks corresponding to the indorser. Art. 723. Loans may be made in effects and in goods, by fixing their value in order to determine the principal of the loan. Art. 724. The loans may be constituted jointly or separately: 1. 2. 3. 4. 5.

On the hull of the vessel. On the rigging. On the equipment, provisions, and fuel. On the engine, if the vessel is a steamer. On the merchandise loaded.

If the loan is constituted on the hull of the vessel, the rigging, equipment and other goods, provisions, fuel, steam engines, and the freightage earned during the voyage on which the loan is made, shall also be considered as included in the liability for the loan.

Q: What are the effects of registration? A: 1.

2.

the loan shall have, with regard to other credits, the preference which, according to its nature, it should have (Art. 580 - 8th in the order of preference) effective against third persons from the time of execution/registration

Art. 721. In a contract on bottomry or respondentia the following must be stated: 1. 2. 3.

The kind, name, and registry of the vessel. The name, surname, and domicile of the captain. The names, surnames, and domiciles of the person giving and the person receiving the loan.

If the loan is made on the cargo, all that which constitutes the same shall be subject to the repayment; and if on a particular object of the vessel or of the cargo, only the object concretely and specifically mentioned shall be liable. Art. 725. No loans on bottomry may be made on the salaries of the crew or on the profits expected. Q: What is the reason for the above rule? A: The salaries of the crew are not capital of the shipowner, nor are future profits commercial effects. ject Art. 726. If the lender should prove that he loaned an amount larger than the value of the object liable for the bottomry loan, on account of fraudulent measures


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law employed by the borrower, the loan shall be valid only for the amount at which said object is appraised by experts.

return the principal and interest at the legal rate, if that agreed upon should not be lower.

The surplus principal shall be returned with legal interest for the entire time required for repayment.

INSTANCES WHEN LOAN ON BOTTOMRY OR RESPONDENTIA IS CONSIDERED AS SIMPLE LOAN

Q: A, shipowner, entered into a contract of loan on bottomry, with B for the amount of P500,000.00. It was proven by B that the value of the lost vessel is P300,000.00 on appraisal by experts and A employed fraudulent means in borrowing money. Is the contract of bottomry valid? May B still recover from A in spite of the total loss of the vessel?

Q: What are the instances in which a loan on bottomry or respondentia may be considered a simple loan only? A: a.

A: Yes, the contract of loan on bottomry is valid but only for the amount of P300,000.00 which is the appraised value of the vessel loan. b. B can still recover the amount of P200,000.00, the surplus principal from A, with legal interest for the entire time required for the payment. Art. 727. If the full amount of the loan contracted in order to load the vessel should not be used for the cargo, the balance shall be returned before clearing. The same procedure shall be observed with regard to the goods taken as loan, if they were not loaded. Q: What is the reason for the law? A: The rule of this article is reasonable because the amount to which it refers has not been applied, voluntarily or involuntarily, for the purpose of the contract, and because by this way other contracts of different nature are avoided in being included under the name of loan on bottomry. Art. 728. The loan which the captain takes at the point of residence of the owners of the vessel shall only affect that part thereof which belongs to the captain, if the other owners or their agents should not have given their express authorization therefor or should not have taken part in the transaction. If one or more of the owners should be requested to furnish the amount necessary to repair or provision the vessel, and they should not do so within twenty-four hours, the interest which the parties in default may have in the vessel shall be liable for the loan in the proper proportion. Outside of the residence of the owners, the captain may contract loans in accordance with the provisions of Articles 583 and 611. Art. 729. Should the goods on which money is taken not be subjected to risk, the contract shall be considered a simple loan, with the obligation on the part of the borrower to

c.

If the amount loaned is proved to be a larger than the value of the object liable for the loan on account of fraudulent means employed by the borrower, the surplus principal is considered as simple loan to be returned with legal interest. If the full amount of the loan given in order to load the vessel should not be used for the cargo, or given on the goods if all of them could not have been loaded, the balance is considered as simple loan to be returned before starting the voyage. It the effects on which the loan is taken be not subjected to risk, the principal shall be considered loan to be returned with legal interest.

Art. 730. Loans made during the voyage shall have preference over those made before the clearing of the vessel, and they shall be graduated in the inverse order of their dates. The loans for the last voyage shall have preference over prior ones. Should several loans have been made at the same port of arrival under stress and for the same purpose, all of them shall be paid pro rata. Q: What is the reason for the rule? A: By virtue of these subsequent loans, the provisions ones could exist and subsist, and without the former, the loans with the vessel and its effects would have gone into the bottom of the sea. Q: The shipagent of S/S “Panay” which is making voyage from Manila to Zamboanga contracted loan on the ship in the ff. order: at Manila before clearing the vessel, P20,000.00; Iloilo, the next port of embarkation, P10,000; at Cebu, the port of embarkation preceding the final destination of the vessel, P100,000.00, form A,B, and C for repair of the vessel to continue its voyage. Upon arrival at Zamboanga, the vessel which was badly damaged and unable to make return was sold for P110,000.00. State the disposition of the proceeds of the sale.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: Out of the proceeds of the sale of the vessel after expenses have been deducted, the P100,000.00 will be paid to A,B, and C in full satisfaction of the loan, and whatever may be left will be paid to the lender in Iloilo. The lender at Manila gets nothing out of the proceeds of the sale. The Code of Commerce provides that the loans made during the voyage shall have preference over those made before the clearing of the vessel, and they shall be graduated by the inverse order to their dates. The loans for the last voyage shall have preference over prior loans. Should several loans have been made at a port made under stress and for the same purpose, all of them shall be paid pro rata. Q: The S/S “Pimen” of Manila, leaves this port of Jolo, calling in several others. On arriving at Romblon, the captain gets a bottomry loan on the merchandise on board. On arriving in Iloilo, he gets another one on the hull of the vessel; and finally another one on the engine in Zamboanga. What shall be the order of the preference in these contracts? A: The bottomry taken at Zamboanga shall have priority of preference of loans made during the voyage shall be graudated, in the inverse order of their dates. But the loan taken at Romblon on merchandise although named bottomry loan is not in fact a loan bottomry but a loan on respondentia, and it stands on its sole preferential right on the merchandise independent of the bottomry loans taken at Zamboanga and Iloilo. In the contract made in Iloilo, being constituted on the hull of the loan, rigging, equipment, and other effects, provisions, fuel, steam engines, and the freight earned during the voyage on which the loan is made. Art. 731. The actions pertaining to the lender shall be extinguished by the absolute loss of the goods on which the loan was made, if it arose from an accident of the sea at the time and during the voyage designated in the contract, and it is proven that the cargo was on board; but this shall not take place if the loss was caused by the inherent defect of the thing, or through the fault or malice, of the borrower, or barratry on the part of the captain, or if it was caused by damages suffered by the vessel as a consequence of being engaged in contraband, or if it arose from having loaded the merchandise on a vessel different from that designated in the contract, unless this change should have been made by reason of force majeure. Proof of the loss as well as of the existence of the vessel of the goods declared to the lender as the object of the loan is incumbent upon him who received the loan.

Art. 732. Lenders on bottomry or respondentia shall suffer, in proportion to their respective interest, the general average which may take place in the goods on which the loan is made. In particular averages, in the absence of an express agreement between the contracting parties, the lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of risks excepted in the foregoing article. Art. 733. Should the period during which the lender shall run the risk not have been stated in the contract, it shall last, with regard to the vessel, engines, rigging, and equipment, from the moment said vessel puts to sea until she drops anchor in the port of destination; and with regard to the goods, from the time they are loaded on the shore or wharf of the port of shipment, until they are unloaded in the port of consignment. Art. 734. In case of shipwreck, the amount for the payment of the loan shall be reduced to the reduced to the proceeds of the effects saved, after deducting the costs of the salvage If the loan should be on the vessel or any of her parts, the freight earned during the voyage for which said loan was contracted shall also be liable for its payment, as far as it may reach. Art. 735. If the same vessel or cargo should be the object of a loan on bottomry or respondentia and marine insurance, the value of what may be saved in case of shipwreck shall be divided between the lender and the insurerm in proportion to the legitimate interest of each one, taking into consideration, for this purpose only, the principal with respect to the loan, and without prejudice to the right of preference of other creditors in accordance with Art. 580. Art. 736. If there should be delay in the repayment of the principal and premiums of the loan, only the former shall bear legal interest. SECTION III MARINE INSURANCE NOTE: Arts. 737 to 805 of the Code of Commerce have been repealed by the “Insurance Act.”

Q: What is the reason for the law? A: Under this article, the money lender has agreed to run the proper risks of the sea, but not those caused by the captain or by the crew. The simple barratry of the captain having been not distinguished from the fraudulent one, it must be understood that the exception includes both of them.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law TITLE IV RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE

1.

Q: What are the risks, damages, and accidents of maritime commerce? 2. A: 1. 2. 3. 4.

Averages Arrivals under stress Collisions Shiprecks

3.

Section I AVERAGES

4.

Art. 806. For the purposes of this Code the following shall be considered averages: 1.

2.

5.

All extraordinary or accidental expenses which may be incurred during the voyage for the preservation of the vessel or cargo, or both. All damages or deterioration which the vessel may suffer from the time it puts to sea at the port of departure until it casts anchor at the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment.

6.

7. 8.

Art. 807. The petty and ordinary expenses incident to navigation, such as those of pilotage of coasts and ports, lighterage and towage, anchorage, inspection, health, quarantine lazaretto, and other so-called port expenses, costs of barges, and unloading, until the merchandise is placed on the wharf, and other usual expenses of navigation shall be considered ordinary expenses to be defrayed by the shipowner, unless there is an express agreement to the contrary. Exception The foregoing enumerated expenses may be considered also as averages when there is an express agreement including them as averages Art. 808. Averages shall be: 1. 2.

9.

AVERAGE Q: What is an average? A: An extraordinary or accidental expense incurred during the voyage in order to preserve the cargo, vessel or both, and all damages or deterioration suffered by the vessel from departure to the port of destination, and to the cargo from the port of loading to the port of consignment. SIMPLE v. GROSS AVERAGE

Simple or particular. General or gross.

Art. 809. As a general rule, simple or particular averages include all the expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo, especially the following:

The losses suffered by the cargo from the time of its embarkation until it is unloaded, either on account of the inherent defect of the goods or by reason of a marine accident or force majeure, and the expenses incurred to avoid and repair the same. The losses and expenses suffered by the vessel in its hull, rigging, arms, and equipments, for the same causes and reasons, from the time it puts to sea from the port of departure until it anchors in the port of destination. The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it. The wages and victuals of the crew when the vessel is detained or embargoed by a legitimate order or force majeure, if the charter has been contracted for a fixed sum for the voyage. The necessary expenses on arrival at port, in order to make repairs or secure provisions. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and to save the crew, to meet any other need of the vessel against which the proper amount shall be charged. The victuals and wages of the crew while the vessel is in quarantine. The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the damage caused. Any loss suffered by the cargo through the faults, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freight.

Q: Distinguish simple or particular average from gross or general average. A:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law PARTICULAR OR SIMPLE GROSS OR GENERAL Definition Damages or expenses caused Damages or expenses to the vessel or cargo that did deliberately caused in not inure to the common order to save the benefit, and borne by vessel, its cargo or respective owners. (Art. 809) both from real and known risk. (Art. 811) Requisites 1. common danger; 2. deliberate

sacrifice; 3. 4.

success; proper formalities and legal steps.

Liability The owner of the goods All the persons having which gave rise to the an interest in the expense or suffered the vessel and the cargo damage shall bear this therein at the time of average. (Art. 810) the occurrence of the average shall contribute to satisfy this average. (Art. 812) -The insurers (Art.859) and lenders on bottomry and respondentia shall likewise contribute. (Art.732). Number of interests involved Several interests Only one interest involved involved Share in the damage or expense In proportion to the 100% share value of the owner’s property saved Right to recover There may be reimbursement Kinds (not exclusive) Art. 811 Procedure for recovery 1. Assembly and deliberation 2. Resolution of the captain

No reimbursement

Art. 809

authority of the first port, within 24 hours from arrival, 5. Ratification by captain under oath. (Arts. 813-814) Q: Upon whom does the loss fall, if a box of merchandise, constituting a part of the cargo of a merchant ship, is wet by sea water, so that the merchandise is damaged to the extent of 2/3 of its value? A: The loss falls upon the owner of the goods damaged. The owner of the goods which suffered the damage shall bear the simple or particular because it is a damage caused to the cargo, not redounding to the benefit and the common profit of all the persons interested in the vessel and her cargo. A vessel which upon the outbreak if a war took refuge in a neutral port, it appearing that her cargo was aggriculutural machinery belonging to the subject of a neutral power is absolutely secure from danger of or confiscation in the event of capture by the enemies of ship’s flag, and flight of the vessel is a measure of precaution adopted solely and exclusively for the preservation of the vessel, and therefore, the resultant damages and expenses incurred by the ship do not constitute a general average to which the cargo is liable, but a particular average to be borne by the vessel alone. Expenses or damages incurred not for common safety of the ship and cargo constitute a particular and not general average. Art. 810. The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular averages. Art. 811. As a general rule, general or gross averages shall include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk, and particularly the following: 1.

2.

Entry of the resolution in the logbook 3. 3. Detailed minutes 4. Delivery of the minutes to the maritime judicial

The goods or cash invested in the redemption of the vessel or of the cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the settlement or redemption is being made. The goods jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to the crew, and the damage suffered through said act by the goods which are kept on board. The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned, in order to save the cargo, the vessel, or both.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place it in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or transferred. 5. The damage suffered by the goods of the cargo by the opening made in the vessel in order to drain it and prevent its sinking. 6. The expenses caused in order to float a vessel intentionally stranded for the purpose of saving it. 7. The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo. 8. The expenses for the treatment and subsistence of the members of the crew who may have been wounded or crippled in defending or saving the vessel. 9. The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it. 10. The wages and victuals of the crew of a vessel chartered by the month, during the time that it is embargoed or detained by force majeure or by order of the Government, or in order to repair the damage caused for the common benefit. 11. The depreciation resulting in the value of the goods sold at arrivals under stress in order to repair the vessel by reason of gross average. 12. The expenses of the liquidation of the average

another shipping company at a compensation of P2,000.00. Does this expenditure constitute general average? A: No, said expenditure does not constitute a general average, the same not having any or all of the requisites of a general average. Q: What kind of average are the wages and victuals of the crew during the time she should be embargoed or detained by force majeure or by order of the Government? A: If the vessel is chartered by the month, the wages and victuals of the crew during the time the vessel should be embargoed or detained, are general or gross averages but if the vessel is chartered for a fixed sum of the voyage, they are simple or particular averages. Q: Give instances of gross or general averages. A: 1. 2.

3.

The expenses directly incurred in the salvage of a vessel and cargo from a real or known risk When in conformity of the maritime regulations cargo is carried on the deck of a steamer engaged in coastwise trade, the jettison of the cargo upon occasion of peril When a ship shall have entered a port or refuge in consequence of accident, sacrifice, or other extraordinary circumstance which renders that necessary for common safety, the expense of entering such port shall be admitted as general average.

REQUISITES FOR GENERAL AVERAGE Q: What are the requisites for general average? A: 1.

2. 3. 4.

There must be a common danger- both the ship and cargo are subject to the same danger whether during the voyage, or in the port of loading or unloading; that the danger arises from accidents of the sea, dispositions of the authority, or faults of men For the common safety, part of the vessel or cargo or both is sacrificed deliberately From the expenses or damages caused follows the successful saving of the vessel and cargo. The expenses or damages should have been incurred or inflicted after taking proper legal steps and authority.

Q: The vessel S/S Oriental left Manila bound for Cebu, with stop-over at Tacloban. Upon leaving the latter port but still within its waters, the ship ran aground and could not move by its own power; hence, the shipowner had it refloated by

Art. 812. In order to satisfy the amount of the gross or general averages, all the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute. Q: The steamer X en route from Masbate runs into a storm and the captain, as a measure of urgent necessity, jettisons a part of cargo to lighten the vessel. What kind of average is this? A: This is a kind of general or gross average. All the persons having an interest in the vessel and her cargo at the time of the occurrence of the average shall contribute. PROCEDURE FOR GROSS AVERAGE Art. 813. In order to incur the expenses and cause the damages corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law If the latter should object, and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider certain measures necessary, they may be executed under his responsibility, without prejudice to the right of the shippers to proceed against the captain before the competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence. If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable against the captain, unless the urgency of the case should be such that the time necessary for previous deliberation was wanting. Art. 814. The resolution adopted to cause the damages which constitute general average must necessarily be entered in the log book, stating the motives and reasons on which it is based, the votes against it and the reason for the dissent, should there be any, and the irresistible and urgent causes which impelled the captain if he acted of his own accord. In the first case the minutes shall be signed by all the persons present who could do so before taking action, if possible; and if not, at the first opportunity. In the second case, it shall be signed by the captain and by the officers of the vessel. In the minutes, and after the resolution, shall be stated in detail all the goods jettisoned, and mention shall be made of the injuries caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he may make, within twenty- four hours after his arrival, and to ratify it immediately under oath. Art. 815. The captain shall direct the jettison, and shall order the goods cast overboard in the following order: 1.

2.

Those which are on deck, beginning with those which embarrass the maneuver or damage the vessel, preferring, if possible, the heaviest ones with the least utility and value. Those which are below the upper deck, always beginning with those of the greatest weight and smallest value, to the amount and number absolutely indispensable. SIMPLE v. GROSS AVERAGE

Q: Distinguish general average and simple or particular average. A:

GENERAL OR SIMPLE AVERAGE Both the ship and the cargo are subject to the same danger which is real and known Part of the vessel or the cargo is sacrificed deliberately

From the expenses or damage caused follows the successful saving of the vessel or her cargo All the persons having an interest in the vessel and cargo saved shall contribute to indemnify the expenses and damage caused

SIMPLE OR GROSS AVERAGE There is no such common danger to both the vessel and the cargo The expenses and damage caused to the vessel of her cargo are neither deliberately made nor subject to any legal step or authority The expenses or damage suffered have not inured to such common benefit The owner of the things which give rise to the expenses or suffered the damages shall bear the same.

Art. 816. In order that the goods jettisoned may be included in the gross average and the owners thereof be entitled to indemnity, it shall be necessary in so far as the cargo is concerned that their existence on board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory prepared before the departure, in accordance with the first paragraph of Article 612. Art. 816. In order that the goods jettisoned may be included in the gross average and the owners thereof be entitled to indemnity, it shall be necessary in so far as the cargo is concerned that their existence on board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory prepared before the departure, in accordance with the first paragraph of Article 612. Art. 817. If in the lightening a vessel on account of a storm, in order to facilitate its entry into a port or roadstead, part of her cargo should be transferred to lighters or barges and be lost, the owner of said part shall be entitled to indemnity, as if the loss had originated from a gross average, the amount thereof being distributed between the vessel and cargo from which it came. If, on the contrary, the merchandise transferred should be saved and the vessel should be lost, no liability may be demanded of the salvage. Art. 818. If, as a necessary measure to extinguish a fire in port, roadstead, creek, or bay, it should be decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Section II ARRIVALS UNDER STRESS

A: 1.

Art. 819. If during the voyage the captain should believe that the vessel cannot continue the trip to the port of destination on account of the lack of provisions, wellfounded fear of seizure, privateers, or pirates, or by reason of any accident of the sea disabling it to navigate, he shall assemble the officers and shall summon the persons interested in the cargo who may be present, and who may attend the meeting without the right to vote; and if, after examining the circumstances of the case, the reason should be considered well-founded, the arrival at the nearest and most convenient port shall be agreed upon, drafting and entering the proper minutes, which shall be signed by all, in the log book. The captain shall have the deciding vote, and the persons interested in the cargo may make the objections and protests they may deem proper, which shall be entered in the minutes in order that they may make use thereof in the manner they may consider advisable. Arrival under stress

2.

3.

4.

5.

LAWFUL ARRIVAL UNDER STRESS Art. 820. An arrival shall not be considered lawful in the following cases: 1.

Q: What is arrival under stress? A: Also known as “ARRIBADA.” It is the arrival of a vessel at the nearest and most convenient port, if during the voyage the vessel cannot continue the trip to the port of destination on account of lack of provisions, well-founded fear of seizure, privateers or pirates, or by reason of any accident of the sea disabling it to navigate.

2.

3.

Q: What are the legitimate causes for such arrival? 4. A: 1. 2. 3.

Lack of provisions Well-founded fear of seizure, privateers or pirate By reason of any accident of the sea disabling it to navigate

Captain should determine during the voyage if there is well founded fear of seizure, privateers and other valid grounds; Captain shall assemble the officers and summon the persons interested in the cargo who may attend the meeting but without a right to vote; The officers shall determine and agree if there is well-founded reason after examining the circumstances. The captain shall have the deciding vote; The agreement shall be drafted and the proper minutes shall be signed and entered in the log book; Objections and protests shall likewise be entered in the minutes.

If the lack of provisions should arise from the failure to take the necessary provisions for the voyage according to usage and custom, or if they should have been rendered useless or lost through bad stowage or negligence in their care. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and provable facts. If the defector the vessel should have arisen from the fact that it was not repaired, rigged, equipped, and prepared in a manner suitable for the voyage, or from some erroneous order of the captain. Whenever malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the damage.

NOTE: This article enumerates the instances when arrival under stress is improper.

NOTE: The protest to be made by the captain should be made within 24 hours before maritime authority or Filipino consul in case of a foreign country It is the duty of the captain to continue the voyage without delay after the cause of the arrival under stress has ceased failing in such duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly before departure. (Art. 825) PROCEDURE FOR ARRIVAL UNDER STRESS Q: What are the procedural steps for an arrival under stress?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: 1.

LAWFUL v. UNLAWFUL ARRIVAL UNDER STRESS When lawful

When unlawful

Who expenses:

bears

The inability to continue voyage is due to lack of provisions, wellfounded fear of seizure, privateers, pirates, or accidents of the sea disabling it to navigate. (Art. 819)

Lack of provisions due to negligence to carry according to usage and customs; Risk of enemy not well known or manifest Defect of vessel due to improper repair; and Malice, negligence, lack of foresight or skill of captain. (Art. 820)

The shipowner or ship agent is liable in case of unlawful arrival under stress. But they shall not be liable for the damages caused by reason of a lawful arrival. (Art. 821)

Art. 821. The expenses of an arrival under stress shall always be for the account of the shipowner or agent, but they shall not be liable for the damages which may be caused the shippers by reason of the arrival, provided the latter is legitimate. Otherwise, the ship agent and the captain shall be jointly liable. Art. 822. If in order to make repairs to the vessel or because there is danger that the cargo may suffer damage, it should be necessary to unload, the captain must request authorization from the competent judge or court for the removal, and carry it out with the knowledge of the person interested in the cargo, or his representative, should there be any.

2.

The unloading must be necessary to make repairs or there must be danger that the cargo may suffer damage The captain must be authorized by either a competent court or the Phil. consul, depending on the port of arrival

Art. 823. The custody and preservation of the cargo which has been unloaded shall be entrusted to the captain, who shall be responsible for the same, except in cases of force majeure. Art. 824. If the entire cargo or part thereof should appear to be damaged, or there should be imminent danger of its being damaged, the captain may request of the competent judge or court, or of the consul in a proper case, the sale of all or of part of the former, and the person taking cognizance of the matter shall authorize it, after an examination and declaration of experts, advertisements, and other formalities required by the case, and an entry in the book, in accordance with the provisions of Article 624. The captain shall, in a proper case, justify the legality of his conduct, under the penalty of answering to the shipper for the price the merchandise would have brought if it had arrived in good condition at the port of destination. Art. 825. The captain shall be responsible for the damages caused by his delay, if after the cause of the arrival under stress has ceased, he should not continue the voyage. If the cause of the arrival should have been the fear of enemies, privateers, or pirates, a deliberation and resolution in a meeting of the officers of the vessel and persons interested in the cargo who may be present, in accordance with the provisions contained in Article 819, shall precede the departure.

In a foreign port, it shall be the duty of the Filipino consul, where there is one, to give the authorization.

SECTION III COLLISIONS

In the first case, the expenses shall be for the account of the ship agent or owner, and in the second, they shall be chargeable against the owners of the merchandise for whose benefit the act was performed.

Art. 826. If a vessel should collide with another, through the fault, 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 indemnify the losses and damages suffered, after an expert appraisal.

If the unloading should take place for both reasons, the expenses shall be divided proportionately between the value of the vessel and that of the cargo.

Q: What is collision?

REQUISITES FOR UNLOADING OF CARGO Q: What are the requisites for the captain to unload the cargo arriving under stress?

A: In its strict sense, collision means the impact of 2 vessels both moving and is distinguished from allusion, which designates the striking of a moving vessel against one that is stationary.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law But collision is used in a broad sense to include allusion, and perhaps another species of encounters between vessels. COLLUSION v. ALLUSION 3. Q: Distinguish collision from allusion. A: COLLISION Impact of two vessels both of which are moving.

ALLUSION Impact between a moving vessel and a stationary one.

VESSEL; NAVIERO Q: What does the word “vessel” under this section mean? A: The word “vessel” means “maritime” vessel, and in order to be such, the vessel being not an accessory to another vessel, must be licensed to engage in the transportation of passengers and/or freight by sea (not merely in rivers, inlets, covers or bays), whether in foreign or in coastwise trade. Q: How about “naviero”? A: It means the owner and is further to be inferred from Art. 837, which limits the civil liability expressed in Art. 826 to the value of the vessel with all her appurtenances and all the freight earned during voyage. There would have been no propriety in limiting the liability of the vessel unless the owner were understood to be the person liable. In the term naviero, both the shipowner and the ship agent are liable solidarily for collisions, being tortuous act. We are of the opinion that both owner and agent can be held liable where both are impleaded together.

the highest degree of diligence her course and movements so as to be able to adopt such timely means of precaution as will prevent the 2 boats from coming into contact. The third division covers the time between the moment when collision has become a practical certainty and the moment of actual contract. The vessel which has forced the privileged vessel into danger is responsible even if the privileged vessel has committed an error within that zone. Thus, the fault on the part of the sailing vessel at the rd moment preceding a collision, that is during the 3 division of time, does not absolve the steamship which has suffered herself and a sailing vessel to get into such dangerous proximity as to cause inevitable alarm and confusion and a collision results as consequence.

Q: What is the effect of fault of privileged vessel during third zone? A: If a vessel having a right of way suddenly changes its course during the third zone, in an effort to avoid an imminent collision due to the fault of another vessel, 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 of way. Thus, it has been held that fault on the part of the sailing vessel at the moment preceding a collission, that is, during the third division of time, does not absolve the steamship which has suffered herself and a sailing vessel to get into such dangerous proximity as to cause inevitable harm and confusion, and a collision results as a consequence. The steamer having a far greater fault in allowing such proximity to be brought about is chargeable with all the damages resulting from the collission; and the act of the sailing vessel having been done in extremis and even wrong, is not responsible for the result.

ZONES OF TIME IN COLLISION ERROR IN EXTREMIS Q: What are the zones of time in collision of vessels? Q: What is an error in extermis? A: 1.

2.

The first division covers all the time up to the moment when the risk of collision may be said to have begun. Each vessel is free to direct its course as it deems best without reference to the movements of the other vessel. The second division covers the time between the moment when the risk of collision begins and the moment when it has become a practicable certainty. The burden is on the vessel required to keep away and avoid the danger. Thus, where a steamship and sailing vessel are approaching each other from opposite directions, the steamship, from the moment the sailing vessel is seen shall watch with

A: A vessel must not approach so near a privileged vessel and in such a course as to alarm a man of ordinary skill and prudence. If the man on the privileged vessel makes an improper maneuver, he is not responsible. Q: What are the instances where the evidence of negligence is not sufficient? A: The opinion of a witness that the accident was caused by the negligence of defendant, when he does not testify to any facts upon which such opinion is bases, does not prove such negligence


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: Can a foreign corp. not engaged in business or not registered in the Philippines maintain action for damages on collision?

1.

A: Yes. Q: Are the passengers allowed to intervene in action between vessels in collision? 2. A: No. He has no legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both. LIABILITY OF SHIP-OWNER AND SHIP AGENT FOR ACTS OF CAPTAIN Q: When is the shipowner and ship-agent liable for the acts of the captain? A: 1.

2.

3.

4.

5.

For the obligation contracted by the captain to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein For damages arising from the conduct of the captain and for safety of passengers, transported by the vessel For those enumerated in Art. 618 of the Code of Commerce, including the captain’s misuse of powers and non-fulfillment of his duties For damages to third persons for culpa aquiliana or tort committed by the captain except collision with another vessel, unless the shipowner or ship-agent proved that they observed all diligence of a good father of a family to prevent damage. For damages if the vessel should collide with another, through fault, negligence, or want of skill of the captain, sailing mate, or other member of the complement.

3.

If A and B collided with each other and is not shown by proof which of the 2 is blame-worthy, each owner of the respective vessel shall suffer his own damage but both shall be solidarily liable for the damage occasioned to their cargoes. This case is deemed as if the collision is imputable to both vessels, since it cannot be determined which one of the 2 vessels was the cause of the collision. Under the 2 preceding articles combined, the rule of liability announced in Art. 827 is applicable not only to the case where both vessels may be shown to be actually blame-worthy but also to case where it is obvious that only one was at fault but the proof does not show it. Thus, under Arts. 827 and 828, in case of collision between 2 vessels at sea, both are solidarily liable for the loss of cargo carried by either to the full extent of the value thereof, not only in the case where both vessels may be shown to be actually blame-worthy but also in the case where it is obvious that only one was at fault but the proof does not show it.

DOCTRINES OF LAST CLEAR CHANCE AND CONTRIBUTORY NEGLIGENCE NOT APPLICABLE Q: Is the doctrine of last clear chance applicable in collision of vessels? A: The doctrine of last clear chance does not apply in collision of vessels. Q: How about doctrine of contributory negligence? A: It is also not applicable to collision of vessels at sea under the Code of Commerce, hence, such case is deemed as if the collision is imputable to both vessels. Art. 829. In the cases above mentioned the civil action of the owner against the person causing the injury as well as the criminal liabilities, which may be proper, are reserved.

WHEN COLLISION IMPUTABLE TO BOTH VESSELS

COLLISION DUE TO FORTUITOUS EVENT

Art. 827. If the collision is imputable to both vessels, each one shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes.

Art. 830. If a vessel should collide with another through fortuitous event or force majeure, each vessel and its cargo shall bear its own damages.

If vessels A and B collided with each other through the fault of their respective captains, each owner of the respective vessel shall suffer his own damage but both shall be solidarily liable for the damage occasioned to their cargoes Art. 828. The provisions of the preceding article are applicable to the case in which it cannot be determined which of the two vessels has caused the collision.

If A collided with B because of strong hurricane which caused the collision, each owner of the respective vessel and his cargo shall suffer their respective damage Art.831. 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 damages caused, the captain thereof being civilly liable to said owner.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law If A collided with B through the fault of the captain of vessel rd C, the shipowner of the 3 vessesl C shall indemnify the rd damage caused. The captain of the 3 vessel shall be civilly liable to the owner thereof.

1.

2. Art. 832. If, by reasons of a storm or other cause of force majeure, a vessel which is propely anchored and moored should collide with those nearby, causing them damages, the injury occasioned shall be considered as particular average of the vessel run into. If A which was properly anchored at the port collided with and caused damage to vessel B, because of storm or force majeure, vessels A and B shall suffer their own respective damage. The injury occasioned in this case shall be considered as a particular average of the vessel run into. Art. 833. A vessel which, upon being run into, sinks immediately, as well as that which, having been obliged to make a port to repair the damages caused by the collision, is lost during the voyage or is obliged to be stranded in order to be saved, shall be presumed as lost by reason of collision. Art. 834. If the vessels colliding with each other should have pilots on board discharging their duties at the time of the collision, their presence shall not exempt the captains from the liabilities they incur, but the latter shall have the right to be indemnified by the pilots, without prejudice to the criminal liability which the latter may incur. Art. 835. The action for the recovery of losses and damages arising from collisions cannot be admitted if a protest or declaration is not presented within twenty-four hours before the competent authority of the point where the collision took place, or that of the first port of arrival of the vessel, if in Philippine territory and to the consul of the Philippines, if it occurred in a foreign country. WHEN PROTEST IS A CONDITION PRECEDENT Q: What are the cases where protest within 24 hours is required as condition precedent? A:

COMPETENT PERSONS WHO CAN ADMIT THE PROTEST Q: Who are the competent persons who can admit protest? A: 1. 2.

Justice of Peace, and in his absence Auxiliary justice of peace

In case of an auxiliary justice of peace the ff. are the presumptions: a. b.

The justice of peace was absent Auxillary had authority to act

Art. 836. With respect to damages caused to persons or to the cargo, the absence of a protest may not prejudice the persons interested who were not on board or were not in a condition to make known their wishes. EXCUSABLE CONDITION OF A PERSON FOR MAKING PROTEST A person who on account of a collision has suffered physical injuries sufficient to keep him in a hospital for many months is excused from the requirement to make protest within 24 hours from collision. Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage earned during the voyage. Q: What are the instances in which the total loss of vessel will exempt shipowner or agent from civil liability?

1. 2. 3.

4.

When the vessel makes arrival under stress In case of shipwreck In case the vessel has gone through a hurricane or when the captain believes that the cargo has suffered damages or averages Maritime collisions of vessels.

Q: When is it not required? A:

3.

It is not necessary to preserve the rights of a person aboard a motor boat engaged in conveying passengers between ship and shore who is injured in a collision between the motor boat and the larger vessel. Recovery of damages suffered by a group of fisherman as a result of collision between the boats manned by them and a steamer, occasioned by the negligence of the latter. Maintenance of civil action under Arts. 2176 and 2180 of the Civil Code to recover damages for tort.

A: a.

b.

Extinction of civil liability for the indemnities which arises from the conduct of the captain in te vigilance over the goods and for the safety of passengers in maritime transportation Extinction of rights both as regards the right of the crew including the captain to demand wages and the right of the shipowner or agent to recover advances made, if the vessel and her cargo should be totally lost by reason of capture or shipwreck


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law c. Extinction of civil liability incurred by the shipowner or agent in cases of maritime collisions. Q: Is these rules where the total loss of the vessel with all her equipment and the freight which will exempt the shipowner or the agent from civil liability applicable to river and bay traffic? A: No because: a. b.

They are provisions found only under the Maritime Commerce of the Code They were adopted to offset the adverse conditions of innumerable hazards and perils attending maritime trade and sea voyage which conditions are not present under river and bay traffic.

LIMITED LIABILITY OF THE SHIPOWNER OR SHIP-AGENT They are not liable beyond the vessel itself causing the collision and other things pertaining thereto. EFFECT OF LOSS OF THE VESSEL WITH REGARD TO LIABILITY IF NO INSURANCE OR FREIGHT Q: What is the effect of loss of the vessel with regard to liability if no insurance or freight. A: The responsibility of the owner or agent of a vessel for the damage caused by collision is extinguished where the said vessel is sunk and totally lost by reason of the collusion. Where, however, such vessel is insured and the insurance is collected by the owner, the insurance substitutes the vessel and the owner becomes responsible for the injuries caused to the extent of the insurance collected. If the vessel was not insured, then the freights earned shall answer for the civil liability of the ship-owner. Q: If the vessel at fault has been sunk and its owner collected insurance thereron, would this fact make any difference in his liability?

A: The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of shipowner’s liability does not apply to cases where the injury or the average is due to the shipowner’s own fault. WORKMEN’S COMPENSATION ACT Q: Explain: The shipowner or the ship-agent may still be held liable under the Workmen’s Compensation Act inspite loss of vessel. A: It has been repeatedly stated that the Workmen’s Compensation Act was enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the employer need not be guilty or neglect or fault, in order that responsibility may attach to him; and the shipowner was liable to pay compensation provided for in the Workman’s Compensation Act, notwithstanding the fact the motorboat was totally lost. If an accident is compensable under the Workman’s Compensation Act, it must be compensated even when the workman’s right is not recognized by or is in conflict with other provisions of the Civil Code or Code of Commerce. The reason for this rule is that the Workmen’s Compensation Act was enacted by the legislature in abrogation of the existing laws. Art. 838. When the value of the vessel and her appurtenances should not be sufficient to cover all the liabilities, the indemnity due by reason of the death or injury of persons shall have preference.

Art. 839. If the collision should take place between Philippine vessels in foreign waters, of if having taken place in the open seas, and the vessels should make a foreign port, the Filipino consul in said port shall hold a summary investigation of the accident, forwarding the proceedings to the Secretary of the Department of Foreign Affairs for continuation and conclusion.

A: No. The insurance substitutes the vessel and the owner becomes responsible to the extent of the insurance collected. SECTION IV SHIPWRECKS

Q: Explain the liability of the shipowner or shipagent for collision in connection with their contract of carriage. Q: What is shipwreck? A: If the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-existent with his interest in the vessel such that a total loss thereof results in its extinction.

A: In its popular sense, it means a ship which has received injuries rendering her incapable of navigation. It is also defined as the loss of a vessel at sea, either by being swallowed up by the waves, by running against a thing at sea, or on the coast.

Q: What is the exception to the above rule? Art. 840. The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding shall be


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law individually for the account of the owners, the part which may be saved belonging to them in the same proportion. Art. 841. If the wreck or standing should be caused by the malice,e negligence, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and equipped, the ship agent or the shippers may demand indemnity of the captain for the damages caused to the vessel or to the cargo by the accident, in accordance with the provisions contained in Articles 610, 612, 614, and 621. WHO BEARS THE LOSSES IN SHIPWRECK

shipwreck shall be divided between the lender and the insurer, in proportion to the legitimate interest of each one, taking into consideration for this purpose only, the principal with respect to te loan and without prejudice to the right of preference of other creditors in accordance with Art. 580. Art. 842. The goods saved from the wreck shall be specially bound for the payment of the expenses of the respective salvage, and the amount thereof must be paid by the owners of the former before they are delivered to them, and with preference over any other obligation if the merchandise should be sold.

Q: Who bears the losses in shipwreck? A: The loss of a ship or cargo in wreck due to accident or force majeure must, as a general rule, fall upon their respective owners, except in cases where the wrecking or standing of the vessel occurred through: a. b. c.

Malice Carelessness or lack of skill on the part of the captain Art. 841 of Code of Commerce

Under which the captain shall be responsible for the wreck or strading of the vessel, and there is in said article no provision whatever by which the agent or shipowner is made responsible. OTHER EFFECTS OF SHIPWRECK

Q: What are the respective obligations of the ship and cargo as to the salvage expenses? A: Where a ship and her cargo are saved together, the salvage allowance should be charged against the ship and cargo in the proportion of their respective values, the same as in the case of general average; and neither is liable for the salvage due from the other. Therefore, where a personal action is brought by the salvor against the owner of the ship, the liability of the latter is limited to such part of the salvage compensation due for the entire service as is proportionate to the value of the ship. Art. 843. If several vessels sail under convoy, and any of them should be wrecked, the cargos saved shall be distributed among the rest in proportion to the amount which each one is able to take.

Q: What are the other effects of shipwreck? A: a.

b.

c.

d.

e.

The captain shall make the proper protest in due form at the first port reached before the competent authority or Filipino consul within 24 hours, specifying therein all incidents of the wreck If the vessel and her cargo should be totally lost, by reason of capture, or shipwreck, all rights shall be extinguished both as regards the right of the crew to demand wages and the right of the shipowner ot agent of the shipowner or agent to recover advances made. Neither the goods lost by reason of shipwreck or stranding or seized by pirates or enemies, shall pay freight, if the freight should have been paid in advance, it shall be returned, unless there is an agreement to the contrary. The amount liable for the payment of the loan (bottomry or respondentia) shall be reduced to the proceeds or the effects saved, after deducting the costs of the salvage. If the same vessel or cargo should be the object of a loan on bottomry or respondentia and marine insurance, the value of what may be saved in case of

If any captain should refuse, without sufficient cause, to receive what may correspond to him, the captain of the wrecked vessels shall enter a protest against him, before two sea officials, of the losses and damages resulting therefrom, ratifying the protest within twenty-four hours after arrival at the first port, and including it in the proceedings he must institute in accordance with the provisions contained in Article 612. If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the goods of the highest value and smallest volume shall be saved first, the designation thereof to be made by the captain with the concurrence of the officers of his vessel. Art. 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port of destination, and on arrival shall deposit the same, with judicial intervention, at the disposal of their legitimate owners. In case he changes his course, if he can unload them at the port of which they were consigned, the captain may make said port if the shippers or supercargoes present and the officers and passengers of the vessel consent thereto; but


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law he may not do so, even with said consent, in time of war or when the port is difficult and dangerous to make. The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freightage which, after taking into consideration the circumstances of the case, may be fixed by agreement or by a judicial decision. Art. 845. If on the vessel there should be no person interested in the cargo who can pay the expenses and freightage corresponding to the salvage, the competent judge or court may order the sale of the part necessary to cover the same. This shall also be done when its preservation is dangerous, or when in a period of one year it should not have been possible to ascertain who are its legitimate owners. In both cases the proceedings shall be with the publicity and formalities prescribed in Article 579, and the net proceeds of the sale shall be safely deposited, in the discretion of the judge or court, so that they may be delivered to the legitimate owner thereof. TITLE V PROVISIONS COMMON TO ALL KINDS OF AVERAGES SECTION I PROOF OF LIQIIDATION OF AVERAGES Art. 846. Those interested in the proof and liquidation of averages may mutually agree and bind themselves at any time with regard to the liability, liquidation and payment thereof: In the absence of agreements, the following rules shall be observed: 1.

2. 3.

4.

The proof of the average shall take place in the port where the repairs are made, should any be necessary, or in the port of unloading. The liquidation shall be made in the port of unloading, if it is a Philippine port. If the average occurred outside of the jurisdictional waters of the Philippines, or the cargo has been sold in a foreign port by reason of an arrival under stress, the liquidation shall be made in the port of arrival. If the average has occurred near the port of destination, so that said port can be made, the proceedings mentioned in rules 1 and 2 shall be held there.

shall be cited and heard, should they not have renounced this right. Should they not be present or should they have no legal representative, the liquidation shall be made by the consul in a foreign port, and where there is none, by the competent judge or court, according to the laws of the country and for the account of the proper party. When the representative is a person well known in the place where the liquidation is made, his intervention shall be admitted and shall produce legal effects, even though he be authorized only by a letter of the ship agent, the shipper, or the insurer. Art. 848. Claims for averages shall not be admitted if they do not exceed 5 per cent of the interest which the claimant may have in the vessel or in the cargo if it be gross average, and 1 per cent of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary. Art. 849. The damages, averages, loans on bottomry and respondentia and their premiums, and any other losses, shall not earn interest by reason of delay until after the lapse of the period of 3 days, to be counted from the day on which the liquidation may have been concluded and communicated to the persons interested in the vessel, in the cargo, or in both at the same time. Art. 850. If by reason of one or more accidents of the sea, particular and gross averages of the vessel, of the cargo, or of both, should take place on the same voyage, the expenses and damages corresponding to each average shall be determined separately in the port where the repairs are made, or where the merchandise is discharged, sold, or utilized. For this purpose the captains shall be obliged to demand of the expert appraisers and of the contractors making the repairs, as well as of those appraising and taking part in the unloading, repair, sale, or utilization of the merchandise, that in their appraisements or estimates and accounts they set down separately and accurately the expenses and damages pertaining to each average, and in those of each average those corresponding to the vessel and to the cargo, also stating separately whether or not there are damages proceeding from inherent defect of the thing and not from accident of the sea; and in case there should be expenses common to the different averages and to the vessel and its cargo, the amount corresponding to each must be estimated and stated distinctly.

Art. 847. In the case where the liquidation of the averages is made privately by virtue of agreement, as well as when a judicial authority intervenes at the request of any of the parties interested who do not agree thereto, all of them


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law SECTION II LIQUIDATION OF GROSS AVERAGES Art. 851. At the instance of the captain, the adjustment, liquidation, and distribution of gross averages shall be held privately, with the consent of all the parties in interest. For this purpose, within forty-eight hours, following the arrival of the vessel at the port, the captain shall convene all the persons interested in order that they may decide as to whether the adjustment or liquidation of the gross average is to be made by experts and liquidators appointed by themselves, in which case did shall be so done if the interested parties agree. If an agreement is not possible, the captain shall apply to the competent judge or court, who shall be the one in the port where these proceedings are to be held in accordance with the provisions of this Code, or to the consul of the Philippines should there be one, and should there be none, to the local authority when they are to be held in a foreign port.

means involve the suppression of the right of action which is elsewhere recognized in the shipper against the shipowner. WHEN SHIPOWNER OR SHIP-AGENT NOT LIABLE FOR THE ACTS OF THE CAPTAIN Q: What are the cases in maritime transportation where the shipowner or ship-agent will not be liable for the acts of the captain? A: 1.

2.

REQUIREMENTS UNDER SEC. 851 Q: What is the requirement under Sec. 851? 3. A: The captain is required to initiate the proceeding for adjustment, liquidation, and distribution of any gross average to which the circumstances of the voyage may have given origin; and it is therefore his duty to take the proper steps to protect any shipper whose goods may have been jettisoned for the general safety.

4.

Art. 852. If the captain does not comply with the provisions of the preceding article, the ship agent or the shippers shall demand the liquidation, without prejudice to the action they may bring to demand indemnity from him. PURPOSE OF ARTS. 851 AND 852 Q: State the purpose of Arts. 851 and 852. A: They are intended to supply the shipowner, acting of course in the person of the captain, with a means whereby he may escape bearing the entire burden of the loss and may distribute it among all the persons who ought to participate in sharing it; but the making of the liquidation is not a condition precedent to the liability of the shipowner to the shipper whose property has been jettisoned. If the captain does not comply with the article relating to the adjustment, liquidation and distribution of the general average, the next article (852), gives to those concerned the right to maintain an action against the captain for indemnification for the loss, but the recognition of this right of action does not by any

5.

For the damage caused to the vessel or to the cargo due to shipwreck or stranding of the vessel caused by the malice, negligence, or lack of skill of the captain, or because the vessel put to sea was insufficiently repaired and equipped. For the contracts made during the voyage referring to one or more of the obligations mentioned in nos. 8 and 9 of Art. 580 of the Code of Commerce, the omission of the captain to take the formality of applying to the judge or court if he is in Philippine territory and otherwise to the Filipino consul, should there be any, and his absence to the judge or court, or to the proper local authority, shall make the captain personally liable to the creditors who may be prejudiced through his fault. For his obligations contracted by the captain if the latter exceeds his powers and privileges pertaining to him by reason of his position or conferred upon him by the shipowner or shio-agent and the amounts claimed are not used for the benefit of the vessel. For the subsidiarily liability of the captains who knowing that a sailor is in the service of another vessel, should have made a new agreement with him, without requiring of him the written permission of the captain of the other vessel in which he may be, for that part of the indemnity which the sailor could not pay. For the loan which the captain takes at the point or residence of the owners of the vessel and which shall only affect that part of the vessel which belongs to the captain, if the owners or their agents should not have given their express authorization thereto or should not have taken part in the transaction

Art. 853. After the experts have been appointed by the persons interested, or by the court, and after the acceptance, they shall proceed to the examination of the vessel and of the repairs required and to the appraisal of their cost, separating these losses and damages from those arising from the inherent defect of the things. The experts shall also declare whether the repairs may be made immediately, or whether it is necessary to unload the vessel in order to examine and repair it.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law With regard to the merchandise, if the average should be visible at a mere glance, the examination thereof must be made before they are delivered. Should it not be visible at the time of unloading, said examination may be made after the delivery, provided that it is done within forty-eight hours from the unloading, and without prejudice to the other proofs which the experts may deem proper. Art. 854. The valuation of the objects which are to contribute to the gross average, and that of those which constitute the average, shall be subject to the following rules: 1.

2.

3. 4.

5.

6.

7. 8.

The merchandise saved which is to contribute to the payment of the gross average shall be valued at the current price at the port of unloading, deducting the freightage, customs duties, and expenses of unloading, as may appear from a material inspection of the same, without taking the bills of lading into consideration, unless there is an agreement to the contrary. If the liquidation is to be made in the port of departure, the value of the merchandise loaded shall be determined by the purchase price, including the expenses until they are placed on board, the insurance premium excluded. If the merchandise should be damaged, it shall be appraised at its true value. If the voyage having been interrupted, the merchandise should have been sold in a foreign port, and the average cannot be estimated, the value of the merchandise in the port of arrival, or the net proceeds obtained at the sale thereof, shall be taken as the contributing capital. Merchandise lost, which constitutes the gross average, shall be appraised at the value which merchandise of its kind may have in the port of unloading, provided that its kind and quality appear in the bill of lading; and should they not appear, the value shall be that stated in the invoices of the purchase issued in the port of shipment, adding thereto the expenses and freightage subsequently arising. The masts cut down, the sails, cables, and other equipment of the vessel rendered useless for the purpose of saving it, shall be appraised at the current value, deducting one-third by reason of the difference between new and old. This deduction shall not be made with respect to anchors and chains. The vessel shall be appraised at its true value in the condition in which it is found. The freightage shall represent 50 per cent by way of contributing capital.

Art. 855. The merchandise loaded on the upper deck of the vessel shall contribute to the gross average should it be saved; but there shall be no right to indemnify if it should be lost by reason of having been jettisoned for common safety, except when the marine ordinances allow its shipment in this manner in coastwise navigation. The same shall take place with that which is on board and is not included in the bills of lading or inventories, according to the cases. In any case the shipowner and the captain shall be liable to the shippers for the damages from the jettison, if the storage on the upper deck was made without the consent of the latter. RULES AS TO LOSS OR DAMAGE OF CARGOES ON UPPER DECK Q: What are the rules as to loss or damage of cargoes on upper deck? A: As to the liability for the loss or damage of the cargoes loaded on the upper deck of the vessel, distinction shall be made between the case of sea-going vessels or ocean borne traffic, and the coastwise or interisland vessels, as hereunder explained. Q: Rules in the case of sea-going vessels or ocean borne traffic? A: There are 2 rules apply: a.

The rule as to the storage of goods on the upper deck made without the consent of the shipper and -In this case, the master who carries goods on deck without the consent of the shipper does it at its own risk; if they are damaged or loss in consequence of their being thus exposed, he cannot protect himself from responsibility by showing that they are damaged or lost by the dangers of the sea. b. The rule with the consent of the shpper -when the shipper consents to his goods being carried on deck, he takes the risk upon himself of these peculiar perls; any damage, such as those caused by rain or splashing aboard of sea water, or where said goods were jettisoned or lost during storm at sea, will be borne by the owner of the goods, and will be considered as particular average. RULES IN THE CASE OF COASTWISE OR INTERISLAND VESSELS Q: What are the rules in the case of coastwise or interisland vessels? A: There are 2 rules applicable:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law a. The rule as to storage of goods on the upper deck withoout the consent of the shipper and - the master who carries goods on deck without the consent of the shipper does it at its own risk; if they are damaged or loss in consequence of their being thus exposed, he cannot protect himself from responsibility by showing that they are damaged or lost by the dangers of the sea. b. The rule with the consent of the shipper - if the marine ordinances allow the cargo to be laden on deck in coastwise navigation, then the loss or damage sufferred by such goods will be dealt with as general average, and if otherwise, said loss or damage will be considered as particular average only. Art. 856. Provisions and ammunitions of war which the vessel may have on board, and the clothing used by the captain, officers, and crew, shall not contribute to the gross average. The clothing used by the shippers, supercargoes, and passengers who may be on board at the time of the jettison shall also be excepted. Neither shall the goods jettisoned contribute to the payment of the gross averages which may occur to the goods saved in a different and subsequent risk Art. 857. After the appraisement of the goods saved and of those lost which constitute the gross average, has been concluded by the experts, the repairs, if any, made on the vessel, and in this case, the accounts of the same approved by the persons interested or by the judge or court, the entire record shall be turned over to the liquidator appointed, in order that he may proceed with the distribution of the average. Art. 858. In order to effect the liquidation, the liquidator shall examine the protest of the captain, comparing it, if necessary, with the logbook, and all the contracts which may have been made among the persons interested in the average, the appraisement, expert examinations, and accounts of repairs made. If as a result of this examination, he should find any defect in the procedure which might injure the rights of the persons interested or affect the liability of the captain, he shall call attention thereto in order it may be corrected, if possible, and otherwise he shall include it in the exordial of the liquidation. Immediately thereafter he shall proceed with the distribution of the amount of the average, for which purpose he shall fix: 1.

The contributing capital, which shall be determined by the value of the cargo, in accordance with the rules established in Art. 854.

2. 3.

That of the vessel in her actual condition, according to a statement of experts The 50 per cent of the amount of the freight, deducting the remaining 50 per cent for wages and maintenance of the crew

After the amount of the gross average has been determined in accordance with the provisions of this code, it shall be distributed pro rata among the goods which are to cover the same. Art. 859. The insurers of the vessel, of the freight, and of the cargo shall be obliged to pay for the indemnification of the gross average, in so far as is required of each one of these objects respectively Q: What is precisely the character of this article? A: It is mandatory in its terms, and the insurer, whether for the vessel or for the freight or for the cargo, are bound to contribute to the indemnity of the general average. This provision simply places the insurer on the same footing as other persons who have interest in the vessel, or the cargo therein, at the time of the occurrence of the general average and who are compelled to contribute. Art. 860. If notwithstanding the jettison of goods, breakage of masts, ropes and equipment, the vessels should be lost running the same risk, no contribution whatsoever by reason of gross average shall be proper. Art. 861. If after the vessel has been saved from the risj which gave rise to the jettison, she should be lost through another accident taking place during the voyage, the goods saved and existing from the first risk shall continue liable to contribution by reason of the gross average according to their value in the condition in which they may be found, deducting the expenses incurred in saving them. Art. 862. If in spite of having saved the vessel and the cargo in consequence of the cutting down of masts or of any damage deliberately done to the vessel for said purpose, the goods should subsequently be lost or stolen, the captain cannot demand of the shippers or consignees that they contribute to the indemnity for the average, unless the loss should occur by reason of an act of the owner or consignee himself. Art. 863. If the owner of the jettisoned goods should recover them after having received the indemnity for gross average, he shall be obliged to return to the captain and to the other persons interested in the cargo the amount he may have received, deducting the amount of the damage caused by the jettison and of the expenses incurred in their recovery. In this case, the amount returned shall be distributed among the vessel and the persons interested in


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law the cargo in the same proportion in which they contributed to the payment of the average. 2. Art. 864. If the owner of the goods jettisoned should recover them without having demanded any indemnity, he shall not be obliged to contribute to the payment of the gross average which may have been suffered by the rest of the cargo after the jettison. Art. 865. The distribution of the gross average shall not be final until it has been agreed to, or in the absence thereof, until it has been approved by the judge or court, after an examination of the liquidation and a hearing of the persons interested who may be present or of their representatives Art. 866. After the liquidation has been approved, it shall be the duty of the captain to collect the amount of the contribution, and he shall be liable to the owners of the goods averaged for the damage they may suffer through his delay or negligence.

3.

Art. 867. If the persons contributing should not pay the rd amount of the contribution at the end of the 3 day after having been required to do so, the goods saved shall be proceded against, at the request of the captain, until payment has been made from their proceeds.

Art. 868. If the person interested in receiving the goods saved should not give security sufficient to answer for the amount corresponding to the gross average, the captain may defer the delivery thereof until payment has been made. Section III LIQUIDATION OF ORDINARY AVERAGES

Article 2 1.

2.

Art. 869. The experts whom the court or the persons interested may appoint, as the case may be, shall proceed with the examination and appraisement of the averages in the manner prescribed in Arts. 853 and 854, Rules 2 to 7, insofar as they are applicable.

CHAPTER I SCOPE – DEFINITIONS Article 1 1.

This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for

This Convention applies to carriage performed by the State or by legally constituted public bodies provided it falls within the conditions laid down in Article 1. This Convention does not apply to carriage performed under theterms of any international postal Convention. CHAPTER II DOCUMENTS OF CARRIAGE Section I - Passenger Ticket Article 3

1. CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING TO INTERNATIONAL CARRIAGE BY AIR, SIGNED AT WARSAW ON 12 OCTOBER 1929 (WARSAW CONVENTION)

reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking. For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention. A carriage to be performed by several successive air carriers is deemed, for the purposes of this Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it does not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party.

For the carriage of passengers the carrier must deliver an passenger ticket which shall contain the following particulars:(a) the place and date of issue; (b) the place of departure and of destination;(c) the agreed stopping places, provided that the carrier may reserve the right to alter the stopping places in case of necessity, and that if he exercises that right, the alteration shall not have the effect of depriving the carriage of its international character; (c) the name and address of the carrier or carriers; (d) a statement that the carriage is subject to the rules relating to liability established by this Convention.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law 2. The absence, irregularity or loss of the passenger ticket does not affect the existence or the validity of the contract of carriage, which shall none the less be subject to the rules of this Convention. Nevertheless, if the carrier accepts a passenger without a passenger ticket having been delivered he shall not be entitled to avail himself of those provisions of this Convention which exclude or limit his liability. Section II - Luggage Ticket Article 4 1.

For the carriage of luggage, other than small personal objects of which the passenger takes charge himself, the carrier must deliver a luggage ticket. 2. The luggage ticket shall be made out in duplicate, one part for the passenger and the other part for the carrier. 3. The luggage ticket shall contain the following particulars:(a) the place and date of issue; (b) the place of departure and of destination; (c) the name and address of the carrier or carriers; (d) the number of the passenger ticket; (e) a statement that delivery of the luggage will be made to the bearer of the luggage ticket; (f) the number and weight of the packages; (g) the amount of the value declared in accordance with Article 22(2); (h) a statement that the carriage is subject to the rules relating to liability established by this Convention. 4. The absence, irregularity or loss of the luggage ticket does not affect the existence or the validity of the contract of carriage, which shall none the less be subject to the rules of this Convention. Nevertheless, if the carrier accepts luggage without a luggage ticket having been delivered, or if the luggage ticket does not contain the particulars set out at (d), (f) and (h) above, the carrier shall not be entitled to avail himself of those provisions of the Convention which exclude or limit his liability. Section III - Air Consignment Note Article 5 1.

2.

Every carrier of goods has the right to require the consignor to make out and hand over to him a document called an "air consignment note"; every consignor has the right to require the carrier to accept this document. The absence, irregularity or loss of this document does not affect the existence or the validity of the contract of carriage which shall, subject to the provisions of Article 9, be none the less governed by the rules of this Convention.

Article 6 1. The air consignment note shall be made out by the consignor in three original parts and be handed over with the goods. 2. The first part shall be marked "for the carrier," and shall be signed by the consignor. The second part shall be marked "for the consignee"; it shall be signed by the consignor and by the carrier and shall accompany the goods. The third part shall be signed by the carrier and handed by him to the consignor after the goods have been accepted. 3. The carrier shall sign on acceptance of the goods. 4. The signature of the carrier may be stamped; that of the consignor may be printed or stamped. 5. If, at the request of the consignor, the carrier makes out the air consignment note, he shall be deemed, subject to proof to the contrary, to have done so on behalf of the consignor. Article 7 The carrier of goods has the right to require the consignor to make out separate consignment notes when there is more than one package. Article 8 The air consignment note shall contain the following particulars:(a) the place and date of its execution; (b) the place of departure and of destination; (c) the agreed stopping places, provided that the carrier may reserve the right to alter the stopping places in case of necessity, and that if he exercises that right the alteration shall not have the effect of depriving the carriage of its international character; (d) the name and address of the consignor; (e) the name and address of the first carrier; (f) the name and address of the consignee, if the case so requires; (g) the nature of the goods; (h) the number of the packages, the method of packing and the particular marks or numbers upon them; (i) the weight, the quantity and the volume or dimensions of the goods; (j) the apparent condition of the goods and of the packing; (k) the freight, if it has been agreed upon, the date and place of payment, and the person who is to pay it; (l) if the goods are sent for payment on delivery, the price of the goods, and, if the case so requires, the amount of the expenses incurred; (m) the amount of the value declared in accordance with Article 22 (2);


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law (n) the number of parts of the air consignment note; (o) the documents handed to the carrier to accompany the air consignment note; (p) the time fixed for the completion of the carriage and a brief note of the route to be followed, if these matters have been agreed upon; (q) a statement that the carriage is subject to the rules relating to liability established by this Convention.

2. 3.

Article 9 If the carrier accepts goods without an air consignment note having been made out, or if the air consignment note does not contain all the particulars set out in Article 8(a) to (i) inclusive and (q), the carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability.

4.

Article 10 1.

2.

The consignor is responsible for the correctness of the particulars and statements relating to the goods which he inserts in the air consignment note. The consignor will be liable for all damage suffered by the carrier or any other person by reason of the irregularity, incorrectness or incompleteness of the said particulars and statements.

Article 13 1.

2. Article 11 1.

2.

The air consignment note is prima facie evidence of the conclusion of the contract, of the receipt of the goods and of the conditions of carriage. The statements in the air consignment note relating to the weight, dimensions and packing of the goods, as well as those relating to the number of packages, are prima facie evidence of the facts stated; those relating to the quantity, volume and condition of the goods do not constitute evidence against the carrier except so far as they both have been, and are stated in the air consignment note to have been, checked by him in the presence of the consignor, or relate to the apparent condition of the goods.

3.

Subject to his liability to carry out all his obligations under the contract of carriage, the consignor has the right to dispose of the goods by withdrawing them at the aerodrome of departure or destination, or by stopping them in the course of the journey on any landing, or by calling for them to be delivered at the place of destination or in the course of the journey to a person other than the consignee named in the air consignment note, or by requiring them to be returned to the aerodrome of departure. He must not exercise this right of disposition in such a way as to prejudice the carrier or

Except in the circumstances set out in the preceding Article, the consignee is entitled, on arrival of the goods at the place of destination, to require the carrier to hand over to him the air consignment note and to deliver the goods to him, on payment of the charges due and on complying with the conditions of carriage set out in the air consignment note. Unless it is otherwise agreed, it is the duty of the carrier to give notice to the consignee as soon as the goods arrive. If the carrier admits the loss of the goods, or if the goods have not arrived at the expiration of seven days after the date on which they ought to have arrived, the consignee is entitled to put into force against the carrier the rights which flow from the contract of carriage. Article 14

The consignor and the consignee can respectively enforce all the rights given them by Articles 12 and 13, each in his own name, whether he is acting in his own interest or in the interest of another, provided that he carries out the obligations imposed by the contract.

Article 12 1.

other consignors and he must repay any expenses occasioned by the exercise of this right. If it is impossible to carry out the orders of the consignor the carrier must so inform him forthwith. If the carrier obeys the orders of the consignor for the disposition of the goods without requiring the production of the part of the air consignment note delivered to the latter, he will be liable, without prejudice to his right of recovery from the consignor, for any damage which may be caused thereby to any person who is lawfully in possession of that part of the air consignment note. The right conferred on the consignor ceases at the moment when that of the consignee begins in accordance with Article 13. Nevertheless, if the consignee declines to accept the consignment note or the goods, or if he cannot be communicated with, the consignor resumes his right of disposition.

Article 15 1.

2.

Articles 12, 13 and 14 do not affect either the relations of theconsignor or the consignee with each other or the mutual relations of third parties whose rights are derived either from the consignor or from the consignee. The provisions of Articles 12, 13 and 14 can only be varied byexpress provision in the air consignment note. Article 16

1.

The consignor must furnish such information and attach to theair consignment note such documents as


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law are necessary to meet the formalities of customs, octroi or police before the goods can be delivered to the consignee. The consignor is liable to the carrier for any damage occasioned by the absence, insufficiency or irregularity of any such information or documents, unless the damage is due to the fault of the carrier or his agents. 2. The carrier is under no obligation to enquire into the correctness or sufficiency of such information or documents.

and his agents have taken all necessary measures to avoid the damage. Article 21 If the carrier proves that the damage was caused by or contributed to by the negligence of the injured person the Court may, in accordance with the provisions of its own law, exonerate the carrier wholly or partly from his liability. Article 22

CHAPTER III LIABILITY OF THE CARRIER

1.

Article 17 The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

2.

Article 18 1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place during the carriage by air. 2. The carriage by air within the meaning of the preceding paragraph comprises the period during which the luggage or goods are in charge of the carrier, whether in an aerodrome or on board an aircraft, or, in the case of a landing outside an aerodrome, in any place whatsoever. 3. The period of the carriage by air does not extend to any carriage by land, by sea or by river performed outside an aerodrome. If, however, such a carriage takes place in the performance of a contract for carriage by air, for the purpose of loading, delivery or transshipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the carriage by air. Article 19

3.

4.

Article 23 Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.

The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage or goods. Article 20 1.

2.

The carrier is not liable if he proves that he and his agents havetaken all necessary measures to avoid the damage or that it was impossible for him or them to take such measures. In the carriage of goods and luggage the carrier is not liable ifhe proves that the damage was occasioned by negligent pilotage or negligence in the handling of the aircraft or in navigation and that, in all other respects, he

In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 125,000 francs. Where, in accordance with the law of the Court seised of the case, damages may be awarded in the form of periodical payments, the equivalent capital value of the said payments shall not exceed 125,000 francs. Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the actual value to the consignor at delivery. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5,000 francs per passenger. The sums mentioned above shall be deemed to refer to the French franc consisting of 65 ½ milligrams gold of millesimal fineness 900. These sums may be converted into any national currency in round figures.

Article 24 1.

2.

In the cases covered by Articles 18 and 19 any action for damages, however founded, can only be brought subject to the conditions and limits set out in this Convention. In the cases covered by Article 17 the provisions of the preceding paragraph also apply, without prejudice to the questions as to who are the persons who have the right to bring suit and what are their respective rights.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped.

Article 25 1.

2.

The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the Court seised of the case, is considered to be equivalent to wilful misconduct. Similarly the carrier shall not be entitled to avail himself of thesaid provisions, if the damage is caused as aforesaid by any agent of the carrier acting within the scope of his employment.

2.

Article 30 1.

Article 26 1.

2.

3.

4.

Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that the same have been delivered in good condition and in accordance with the document of carriage. In the case of damage, the person entitled to delivery mustcomplain to the carrier forthwith after the discovery of the damage, and, at the latest, within three days from the date of receipt in the case of luggage and seven days from the date of receipt in the case of goods. In the case of delay the complaint must be made at the latest within fourteen days from the date on which the luggage or goods have been placed at his disposal. Every complaint must be made in writing upon the document of carriage or by separate notice in writing despatched within the times aforesaid. Failing complaint within the times aforesaid, no action shall lieagainst the carrier, save in the case of fraud on his part.

The method of calculating the period of limitation shall bedetermined by the law of the Court seised of the case.

2.

3.

In the case of carriage to be performed by various successive carriers and falling within the definition set out in the third paragraph of Article 1, each carrier who accepts passengers, luggage or goods is subjected to the rules set out in this Convention, and is deemed to be one of the contracting parties to the contract of carriage in so far as the contract deals with that part of the carriage which is performed under his supervision. In the case of carriage of this nature, the passenger or his representative can take action only against the carrier who performed the carriage during which the accident or the delay occurred, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. As regards luggage or goods, the passenger or consignor will have a right of action against the first carrier, and the passenger or consignee who is entitled to delivery will have a right of action against the last carrier, and further, each may take action against the carrier who performed the carriage during which the destruction, loss, damage or delay took place. These carriers will be jointly and severally liable to the passenger or to the consignor or consignee. CHAPTER IV PROVISIONS RELATING TO COMBINED CARRIAGE

Article 27 Article 31 In the case of the death of the person liable, an action for damages lies in accordance with the terms of this Convention against those legally representing his estate.

1.

Article 28 1.

2.

An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the Court having jurisdiction where the carrier is ordinarily resident, or has his principal place of business, or has an establishment by which the contract has been made or before the Court having jurisdiction at the place of destination. Questions of procedure shall be governed by the law of the Court seised of the case.

2.

In the case of combined carriage performed partly by air andpartly by any other mode of carriage, the provisions of this Convention apply only to the carriage by air, provided that the carriage by air falls within the terms of Article 1. Nothing in this Convention shall prevent the parties in the case of combined carriage from inserting in the document of air carriage conditions relating to other modes of carriage, provided that the provisions of this Convention are observed as regards the carriage by air. CHAPTER V GENERAL AND FINAL PROVISIONS Article 32

Article 29 1.

The right to damages shall be extinguished if an action is not brought within two years, reckoned from the date of

Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to infringe the rules laid down by


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law this Convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and void. Nevertheless for the carriage of goods arbitration clauses are allowed, subject to this Convention, if the arbitration is to take place within one of the jurisdictions referred to in the first paragraph of Article 28.

Article 38 1. 2.

Article 33 3. Nothing contained in this Convention shall prevent the carrier either from refusing to enter into any contract of carriage, or from making regulations which do not conflict with the provisions of this Convention. Article 34 This Convention does not apply to international carriage by air performed by way of experimental trial by air navigation undertakings with the view to the establishment of a regular line of air navigation, nor does it apply to carriage performed in extraordinary circumstances outside the normal scope of an air carrier's business.

This Convention shall, after it has come into force, remain open for accession by any State. The accession shall be effected by a notification addressed to the Government of the Republic of Poland, which will inform the Government of each of the High Contracting Parties thereof. The accession shall take effect as from the ninetieth day after the notification made to the Government of the Republic of Poland. Article 39

1.

2.

Any one of the High Contracting Parties may denounce this Convention by a notification addressed to the Government of the Republic of Poland, which will at once inform the Government of each of the High Contracting Parties. Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the Party who shall have proceeded to denunciation.

Article 35 Article 40 The expression "days" when used in this Convention means current days not working days.

1.

Article 36 The Convention is drawn up in French in a single copy which shall remain deposited in the archives of the Ministry for Foreign Affairs of Poland and of which one duly certified copy shall be sent by the Polish Government to the Government of each of the High Contracting Parties.

2.

Article 37 1.

2.

3.

This Convention shall be ratified. The instruments of ratification shall be deposited in the archives of the Ministry for Foreign Affairs of Poland, which will notify the deposit to the Government of each of the High Contracting Parties. As soon as this Convention shall have been ratified by five of the High Contracting Parties it shall come into force as between them on the ninetieth day after the deposit of the fifth ratification. Thereafter it shall come into force between the High Contracting Parties who shall have ratified and the High Contracting Party who deposits his instrument of ratification on the ninetieth day after the deposit. It shall be the duty of the Government of the Republic of Poland to notify to the Government of each of the High Contracting Parties the date on which this Convention comes into force as well as the date of the deposit of each ratification.

3.

Any High Contracting Party may, at the time of signature or ofdeposit of ratification or of accession declare that the acceptance which he gives to this Convention does not apply to all or any of his colonies, protectorates, territories under mandate, or any other territory subject to his sovereignty or his authority, or any territory under his suzerainty. Accordingly any High Contracting Party may subsequently accede separately in the name of all or any of his colonies, protectorates, territories under mandate or any other territory subject to his sovereignty or to his authority or any territory under his suzerainty which has been thus excluded by his original declaration. Any High Contracting Party may denounce this Convention, in accordance with its provisions, separately or for all or any of his colonies, protectorates, territories under mandate or any other territory subject to his sovereignty or to his authority, or any other territory under his suzerainty. Article 41

Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this Convention to call for the assembling of a new international Conference in order to consider any improvements which may be made in this Convention. To this end he will communicate with the Government of the French Republic which will take the necessary measures to make preparations for such Conference.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law This Convention done at Warsaw on the 12th October, 1929, shall remain open for signature until the 31st January, 1930. ADDITIONAL PROTOCOL (With reference to Article 2) The High Contracting Parties reserve to themselves the right to declare at the time of ratification or of accession that the first paragraph of Article 2 of this Convention shall not apply to international carriage by air performed directly by the State, its colonies, protectorates or mandated territories or by any other territory under its sovereignty, suzerainty or authority." PURPOSE OF THE WARSAW CONVENTION

2.

Enumeration of causes of action as abovestated is not an exclusive list. Transportation to be performed by several successive air carriers shall be deemed to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party. (Art. 1 Sec.3)

To protect the emerging air transportation industry and to secure the uniformity of recovery by the passengers. APPLICATION OF WARSAW Q: WHEN IS THE WARSAW CONVENTION APPLICABLE?

TRANSPORT BY AIR It is the period during which the baggage or goods are in the charge of the carrier, whether in an airport or on board an aircraft, or in the case of landing outside an airport, in any place whatsoever

The Convention is applicable to: 1. International transport by air 2. Transport of persons, baggage, or goods §

The WC shall also apply to fortuitous transportation by aircraft performed by an air transportation enterprise.

Loss or damage to any check baggage or goods sustained during the transport by air 3. Delay in the transport by air of passengers, baggage, or goods

PERIOD FOR CLAIM FOR DAMAGES Q: When must an Action for damages be brought at the option of the plaintiff? A: It must be brought, either:

“INTERNATIONAL TRANSPORTATION BY AIR” UNDER THE WARSAW CONVENTION

1. 2. 3.

Under the Warsaw Convention, there are two categories of “international transportation by air”:

4. 1.

2.

That where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and That where the place of departure and the place of destination are within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though the power is not a party to the Convention.

Before the court of the domicile of the carrier; Court of principal place of business of carrier; Court where he has a place of business through which the contract has been made; Before the court at the place of destination LIMITATIONS IN LIABILITY UNDER THE CONVENTION

The Convention provides for a limitation of liability: 1. 2. 3.

For each passenger - limited to 250,000 francs For goods and checked in baggage – limited to 250 francs per kilogram For hand carry - limited to 5,000 francs per passenger

LIABILITIES UNDER THE CONVENTION Q: When can a common carrier not avail of this limitation? Q: What are the liabilities under the convention? A: A: The liabilities are: 1.

Damage sustained in the event of the death or wounding of a passenger taking place on board the aircraft or in the course of any of the operations of embarking or disembarking

1. Willful misconduct 2. Default amounting to willful misconduct 3. Accepting passengers without ticket 4. Accepting goods without airway bill or baggage without baggage check


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Q: When is a Right to Damages extinguished? A: The right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped. NOTICE REQUIREMENT Q: What is the Notice requirement? A: a. b. c.

damage to baggage: within 3 days from receipt damage to goods: within 7 days from receipt delay: within 21 days from receipt

Failure to file written notice, no action shall lie against the carrier, save in the case of fraud on his part. The Warsaw Convention has the force and effect of a law in the Philippines, being a treaty commitment assumed by the Philippine government. However, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. Even the Warsaw Convention declares the carrier liable for damages in the enumerated cases and certain conditions. It must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of the passengers under the contract of carriage, especially if willful misconduct on the part of the carrier’s employees is found or established. NOTE: COGSA/ Warsaw- applies to foreign vessels or air plane/ international travel. § Code of Commerce – applies to inter-island /domestic travel

IMPORTANT CONCEPTS: 1. Transportation documents a. Passenger ticket b. Baggage check c. Air way bill 2. Liability of the carrier for damages a. Death or injury to passengers b. Loss or damage to baggage or goods c. Delay 3. Successive carrier agreement 4. Jurisdiction 5. Combined transportation agreement

PASSENGER TICKET Passenger

BAGGAGE CHECK

AIR WAYBILL

Checked-in baggage

Goods to be shipped

LIABILITY OF CARRIER FOR DAMAGES 1. Death or injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations of embarking or disembarking; (Art. 17) 2. Destruction, loss or damage to any baggage or goods, if it took place during the “transportation by air”; (Art. 18) and TRANSPORTATION BY AIR Q: What is transportation by air? A: The period during which the baggage or goods are in the charge of the carrier, whether in an airport or on board an aircraft, or, in case of a landing outside an airport, in any place whatsoever. It includes any transportation by land or water outside an airport if such takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transshipment. 3. Delay in the transportation of passengers, baggage or goods. (Art. 19) EFFECT OF HAGUE PROTOCOL The Hague Protocol amended the WC by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely (Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9) LIMIT OF LIABILITY (Art. 22, as amended by Guatemala Protocol, 1971; Alitalia vs. IAC) 1. Passengers GENERAL RULE: $100,000 per passenger EXCEPTION: Agreement to a higher limit 2. Checked-in baggage GENERAL RULE: $20 per kilogram EXCEPTION: In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable to not more than the declared sum unless it proves the sum is greater than actual value. 3. Hand-carried baggage § $1000/passenger 4. Goods to be shipped


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law GENERAL RULE: $20 per kilogram EXCEPTION: In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable to not more than the declared sum unless it proves the sum is greater than actual value. a. b.

c.

d.

e.

An agreement relieving the carrier from liability or fixing a lower limit is null and void. (Art. 23) Carrier is not entitled to the foregoing limit if the damage is caused by willful misconduct or default on its part. (Art. 25) Thus, the WC does not operate as an exclusive enumeration of the instances of an absolute limit of the extent of liability. It does not preclude the application of the Civil Code and other pertinent local laws. It does not regulate or exclude liability for other breaches of contract by the carrier, or misconduct of its employees, or for some particular or exceptional type of damage. (Alitalia vs. CA) In PanAm v. IAC, the WC was applied as regards the limitation on the carrier’s liability, there being a simple loss of baggage without any improper conduct on the part of the officials or employees of the airline or other special injury sustained by the passenger. In KLM Royal v. Tuller, the WC has invariably been held inapplicable, or as not restrictive of the carrier’s liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees. ACTION FOR DAMAGES Notice of Claim

1.

Notice of claim- A written complaint must me made within: a. b. c.

3 days from receipt of baggage 7 days from receipt of goods In case of delay, 14 days from receipt of baggage/goods

NOTE: The complaint is a condition precedent. Without the complaint, the action is barred except in case of fraud on the part of the carrier. (Art. 26)

RULE IN CASE OF VARIOUS SUCCESSIVE CARRIERS 1.

GENERAL RULE: Action is filed only against the carrier in which the accident or delay occurred. EXCEPTION: Agreement or contract whereby the first carrier assumed liability for the whole journey. 2.

b.

date of arrival at the destination date of expected arrival date on which the transportation stopped. (Art. 29)

Passenger or consignor can file an action against the first carrier and the carrier in which the damage occurred Passenger or consignee can file an action against the last carrier and the carrier in which the damage occurred.

These carriers are jointly and severally liable. (Art. 30) A contract of international carriage by air, although performed by different carriers under a series of airline tickets constitutes a single operation. Members of the International Air Transportation Association (IATA) are under a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Under a general pool partnership agreement, the ticketissuing airline is the principal in a contract of carriage while the endorsee-airline is the agent. The obligation of the former remained and did not cease even when the breach occurred not on its own flight but on that of another airline which had undertaken to carry the passengers to one of their destinations. JURISDICTION Q: Which court has jurisdiction over actions for damages? A: At the option of the plaintiff, the action for damages may be filed in the: a. b. c.

Prescriptive period- Action must be filed within 2 years from: a. b. c.

Carriage of baggage or goods: a.

Prescriptive Period 2.

Carriage of passengers

d. §

§

Court of domicile of the carrier; Court of its principal place of business; Court where it has a place of business through which the contract has been made; or Court of the place of destination. (Art. 28(1))

It is the passenger’s “ultimate destination” not “an agreed stopping place” that determines the country where suit is to be filed. The forum of action provided in Art. 28(1) is a matter of jurisdiction rather than of venue. (Santos III vs.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Northwest; 2A C.J.S.)

PRESIDENTIAL DECREE No. 1521 THE SHIP MORTGAGE DECREE OF 1978

Section 1. Title. This Decree shall be known as "The Ship Mortgage Decree of 1978." Section 2. Who may Constitute a Ship Mortgage. Any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines, at least sixty per cent of the capital of which is owned by citizens of the Philippines may, for the purpose of financing the construction, acquisition, purchase of vessels or initial operation of vessels, freely constitute a mortgage or any other lien or encumbrance on his or its vessels and its equipment with any bank or other financial institutions, domestic or foreign. Section 3. Mortgage of Vessel of Domestic Ownership; records. (a) No mortgage, which at the time such mortgage is made includes a vessel of domestic ownership as this term is defined in Presidential Decree No. 761, or any portion thereof, as the whole or any part of the property mortgaged, shall be valid, in respect to such vessel, against any person other than the mortgagor, his heir or assign, and a person having actual notice thereof, until such mortgage is recorded in the office of the Philippine Coast Guard of the port of documentation of such vessel. (b) The Coast Guard District or Station Commander shall record mortgages delivered to him, in the order of their reception, in books to be kept for that purpose and indexed to show 1. The name of the vessel; 2. The names of the parties tot he mortgage; 3. The time and date of reception of the instrument; 4. The interest in the vessel so mortgaged; 5. The amount and date of maturity of the mortgage; 6. Name, citizenship, nationality and residence of owner, and 7. Any material change of condition in respect to any of the preceding items. A copy of the instrument or mortgage shall be furnished the Central Bank of the Philippines. Section 4. Preferred Mortgages (a) A valid mortgage which at the time it is made includes the whole of any vessel of domestic ownership shall have, in respect to such vessel and

as of the date of recordation, the preferred status given by the provisions of Section 17 hereof, if 1. The mortgage is recorded as provided in Section 3 hereof; 2. An affidavit is filed with the record of such mortgage to the effect that the mortgage is made in good faith and without any design to hinder, delay, or defraud any existing or future creditor of the mortgagor or any lien or of the mortgaged vessel; 3. The mortgage does not stipulate that the mortgagee waives the preferred status thereof; (b) Any mortgage which complies with the above conditions is hereafter called a "preferred mortgage". For purposes of this Decree, a vessel holding a Provisional Certificate of Philippine Registry is considered a vessel of domestic ownership such that it can be subject of preferred mortgage. The Philippine Coast Guard is hereby authorized to enter a vessel holding a Provisional Certificate of Philippine Registry in the Registry of Vessels and to record any mortgage executed thereon. Such mortgage shall have the preferred status as of the date of recordation upon compliance with the above conditions. (c) There shall be endorsed upon the documents of a vessel covered by a preferred mortgage 1. The names of the mortgagor and mortgagee; 2. The time and date the endorsement is made; 3. The amount and date of maturity of the mortgage; and 4. Any amount required to be endorsed by the provisions of paragraphs (e) or (f) of this Section. (d) Such endorsement shall be made (1) by the Coast Guard District or Station Commander of the port of documentation of the mortgaged vessel, or (2) by the Coast Guard District or Station Commander of any port in which the vessel is found, if such Coast Guard District or Station Commander is directed to make the endorsement by the Coast Guard District or Station Commander of the port of documentation. The Coast Guard District or Station 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 any new document is issued for the vessel, such endorsement shall be transferred to and endorsed upon the new document by the Coast Guard District or Station Commander.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law In the case of a vessel holding a provincial certificate of Philippine Registry, the endorsement shall be made by the Philippine consul abroad upon direction by wire or letter from the Maritime Industry Authority at the request of the mortgagee and upon tender of the cost of communication of such direction. A certificate of such endorsement, giving the place, time and description of the endorsement, shall be recorded with the records of registration to be maintained at the Philippine Consulate. (e) A mortgage which includes property other than a vessel shall not be held a preferred mortgage unless the mortgage provides for the separate discharge of such property by the payment of a specified portion of the mortgage indebtedness. If a preferred mortgage so provides for the separate discharge, the amount of the portion of such payment shall be endorsed upon the documents of the vessel. (f) A preferred mortgage includes more than one vessel and provides for the separate discharge of each vessel by the payment of a portion of mortgage indebtedness, the amount of such portion of such payment shall be endorsed upon the documents of the vessel. In case such mortgage does not provide for the separate discharge 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 determine the portion of the mortgage indebtedness increased by 20 per centum (1) which, in the opinion of the court, the approximate value of all the vessels covered by the mortgage, and (2) upon the payment of which the vessel shall be discharged from the mortgage. Section 5. Certified Copies of Mortgage; exhibition. The Coast Guard District or Station Commander upon the recording of a preferred mortgage shall deliver two certified copies thereof to the mortgagor who shall place, and use due diligence to retain, one copy on board the mortgaged vessel notice of which shall be posted in a conspicuous place thereat and cause such copy and the documents of the vessel to be exhibited by the master to any person having business with the vessel, which give rise to a maritime lien upon the vessel or to the sale, conveyance, or mortgage thereof. The master of the vessel shall upon the request of any such person, exhibit to him the documents of the vessel placed on board thereof. The requirement of this Section that a copy of a preferred mortgage be placed and retained on board the mortgaged vessel shall not apply in the case of a mortgaged vessel which is not self-propelled (including but not limited to, barges, scors, lighters, and car floats). If the master of the vessel willfully fails to exhibit the documents of the vessel or the copy of any preferred mortgage thereof, the Philippine Coast Guard may suspend or cancel the master's license.

Section 6. Prior and Subsequent Maritime Liens on Mortgaged Vessel. The mortgagor (1) shall, upon request of the mortgagee, disclose in writing to him prior to the execution of any preferred mortgage, the existence of any maritime lien, prior mortgage, or other obligation or liability upon the vessel to be mortgaged, that is known to the mortgagor, and (2) without the consent of the mortgagee, shall not incur, after the execution of such mortgage and before the mortgagee has had a reasonable time in which to record the mortgage and have indorsements in respect thereto made upon the documents of the vessel, any contractual obligation creating a lien upon the vessel other than a lien for wages of stevedores when employed directly by the owner, operator, master, ship's husband, or agent of the vessel, for wages of the crew of the vessel, for general average, or for salvage, including contract salvage, in respect to the vessel, tonnage dues and all other charges (not to exceed P20,000) of the Philippine Government in respect to the vessel. A mortgagor, who, with intent to defraud, violates the above provision and if the mortgagor is a corporation or association, the president or other principal executive officer of the corporation or association, shall be punished by a fine of not, more than P5,000 or imprisonment of not more than two years, or both. The mortgage indebtedness shall thereupon become immediately due and payable at the election of the mortgagee. Section 7. Record of Notice of Claim of Lien on Mortgaged Vessel; discharge of lien (a) The Coast Guard District or Station Commander of the port of documentation shall, upon the request of any person, record notice of his claim of a lien upon a vessel covered by a preferred mortgage, together with the nature, date of creation, and amount of the lien, and the name and address of the person. Any person who has caused notice of his claim of lien to be so recorded shall, upon a discharge in whole or in part of the indebtedness, forthwith file with the Coast Guard District or Station Commander a certificate of such discharge. The Coast Guard District or Station Commander shall thereupon record the certificate. (b) The mortgagor upon a discharge in whole or in part of the mortgage indebtedness, shall forthwith file with the Coast Guard District or Station Commander for the port of documentation of the vessel, a certificate of such discharge duly executed by the mortgagee. Such Coast Guard District or Station Commander shall there upon record the certificate. In case of a vessel covered by a preferred mortgage, the Coast Guard District or Station Commander at the port of documentation shall endorse upon the documents of the vessel, or direct the Coast Guard District or Station


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Commander at any port in which the vessel is found, to so endorse, the fact of such discharge. A certificate of such endorsement, giving the time, place and description of the endorsement, shall be recorded with the Philippine Coast Guard. Where the endorsement is made by a person other than the Coast Guard District or Station Commander such certificate shall be promptly forwarded to the Philippine Coast Guard. Section 8. Conditions Precedent to Record; interest on Preferred Mortgage (a) No mortgage shall be recorded unless it states the interest of the mortgagor in the vessel, and the interest so mortgaged. (b) No mortgage, notice of claim of lien, or certificate of discharge thereof, shall be recorded unless previously acknowledged before the Coast Guard District or Station Commander of the port of documentation or a notary public or other officer authorized by a law of the Philippines to take acknowledgment of deeds or before a Philippine consul or consular agent. (c) In case of a change in the port of documentation of a vessel of the Philippines, no mortgage shall be recorded at the new port of documentation unless there is furnished to the Coast Guard District or Station Commander of such port, together with the copy of the mortgage to be recorded, a certified copy of the record of the vessel at the former port of documentation furnished by the Coast Guard District or Station Commander of such port. The Coast Guard District or Station Commander at the new port of documentation is authorized and directed to record such certified copy. Section 9. Inspection of the Copies for Records; fees. Each Coast Guard District or Station Commander shall permit records made under the provisions of this decree to be inspected during office hours, under such reasonable regulation as the Philippine Coast Guard may establish. Upon the request of any person the Coast Guard District or Station Commander shall furnish him from the records of the Coast Guard's office (1) a certificate setting forth the names of the owners of any vessel, the interest held by each owner, and the material facts as to any mortgage covering, or any lien or other encumbrance upon, a specified vessel, (2) a certified copy of any mortgage, notice of claim of lien, or certified copy discharge in respect to such vessel, or (3) a certified copy as required by subsection (c) of Section 8 hereof. The Philippine Coast Guard shall collect the fees as provided for under existing laws and regulations for any mortgage recorded, or any certificate or certified copy furnished by it. Section 10. Lien of preferred Mortgage; foreclosure; jurisdiction; procedure A preferred mortgage shall constitute a lien upon the mortgaged vessel in the amount

of the outstanding mortgage indebtedness secured by such vessel. Upon the default of any term or condition of the mortgage such lien may be enforced by the mortgagee by suit in remaining admiralty, wherein the vessel itself may be made a partly defendant and be arrested in the manner as provided in Section 11 hereof. Original jurisdiction of all such suits is granted to the Court of First Instance of the Philippines exclusively. In addition to any notice by publication, actual notice of commencement of any such suit shall direct, to (1) the master, other ranking officer, or caretaker of the vessel, and (2) any person who has recorded a notice of claim of an undischarged lien upon the vessel, as provided in Section 7 hereof, unless after search by the mortgage satisfactory to the court, such mortgagor, master, other ranking officer, caretaker, or claimant is not found within the Philippines. Failure to give notice to any such person, as required by this Section, shall be liable to such person for damages in the amount of his interest in the vessel terminated by the suit. In case of judicial foreclosure as provided herein, the provisions of Rule 68 of the New Rules of Court, if not inconsistent herewith, shall apply. The lien of a preferred ship mortgage may also be enforced by a suit in rem in admiralty or otherwise in any foreign country in which the vessel may be found pursuant to the procedure of said country for the enforcement of ship mortgages constituting maritime liens on vessels documented under the laws of said country. Section 11. Arrest of Vessels Upon the filing of the petition for the judicial foreclosure of a Preferred Ship Mortgage, or immediately thereafter, the applicant may apply ex-parte for an order for the arrest of the mortgaged vessel or vessels and the judge shall immediately issue the same, provided that it is made to appear by affidavit of the applicant, or of some other person who personally knows the facts that a default in the mortgage has occurred and that applicant files a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of such arrest, if the court shall finally adjudge that the applicant was not entitled thereto. Section 12. Discharge of Order of Arrest; Counterbond At any time after an order of arrest has been granted, the party whose vessel or vessels had been arrested, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the order of arrest. That judge shall order the discharge of the arrest if a cash deposit is made, or counterbond executed to the creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made in an amount double the value of the claim to secure the payment of any judgment that the creditor may recover in the action. Upon the filing of such


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law counterbond, copy thereof shall forthwith be served on the creditor or his lawyer. Upon discharge of the order of arrest, the property arrested or seized shall be delivered to the party making the deposit or giving the counterbond, or the person appearing in his behalf, the deposit or counterbond aforesaid standing in place of the vessel or vessels released. Should such deposit or counterbond for any reason be found to be, or become insufficient, and the party furnishing the same fails to file an additional co-counterbond, the attaching creditor may apply for a new order of arrest or seizure. Section 13. Discharge of Order of Arrest for Improper or Irregular Issuance The party whose vessel/s has been arrested may also, at any time either before or after the release of the arrested vessel, or before any arrest or seizure has been effected, upon reasonable notice to the creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the order of arrest or seizure on the ground that the same improperly or irregularly issued. After hearing, the judge shall order the discharge of the order of arrest or seizure if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. Section 14. Extrajudicial Foreclosure The provisions of the Chattel Mortgage Law on the remedy of extra-judicial foreclosure of mortgages in so far as they are not inconsistent herewith shall still apply. For the purpose of taking possession of the vessel or vessels, the foreclosing creditor may secure from a judge of the Court of First Instance of the province where the vessel may be found or where the creditor or debtor resides an order for the arrest or seizure of the vessel. Upon such order of seizure or arrest being issued, the sheriff shall immediately take possession of the vessel or vessels for the purpose of foreclosure and sale. The vessel may only be released in accordance with the provisions of Section 13 of this Act, or when the debtor pays the outstanding obligation. Section 15. Foreign Ship Mortgages As used in Sections 10 to 18 hereof, the term "preferred mortgage" shall include, in addition to a preferred mortgage made pursuant to the provisions of this Decree, any mortgage, hypothecation, or similar charge created as security upon any documented foreign vessel if such mortgage, hypothecation, or similar charge has been duly and validly executed in accordance with the laws of the foreign nation under the laws of which the vessel is documented and has been duly registered in accordance with such laws in a public register either at the port of registry of the vessel or at a central office; and the term "preferred mortgage lien" shall also include the lien of such mortgage, hypothecation, or similar charge: Provided, however, That such "preferred mortgage lien" in the case of a foreign vessel shall be subordinate to maritime liens for repairs, supplies, towage, use of drydock or marine railway,

or other necessaries, performed or supplied in the Philippines. Section 16. Receiver in Foreclosure; possession by sheriff In any suit in rem in admiralty for the enforcement of the preferred mortgage lien, the court may appoint a receiver and, in its discretion, authorize the receiver to operate the mortgaged vessel. The sheriff may be authorized and directed by the court to take possession of the mortgaged vessel notwithstanding the fact that the vessel is in the possession or under the control of any person claiming a possessory common law lien. Section 17. Preferred Maritime Lien, Priorities, Other Liens (a) Upon the sale of any mortgaged vessel in any extrajudicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon, all pre-existing claims in the vessel, including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree, shall be held terminated and shall thereafter attach in like amount and in accordance with the priorities established herein to the proceeds of the sale. The preferred mortgage lien shall have priority over all claims against the vessel, except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the Government; (2) crew's wages; (3) general average; (4) salvage; including contract salvage; (5) maritime liens arising prior in time to the recording of the preferred mortgage; (6) damages arising out of tort; and (7) preferred mortgage registered prior in time. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers and Encumbrances of Vessels in the port of documentation. Section 18. Suit in Personam in Admiralty on Default (a) Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee may, in addition to all other remedies granted by this Decree, bring suit in personal in admiralty in a district court of the Philippines, against the mortgagor for the amount of the outstanding mortgage indebtedness secured by such vessel or any deficiency in the full payment thereof. (b) This Decree shall not be construed, in the case of a mortgage covering, in addition to vessels, realty or personality other than vessels, or both, to authorize the enforcement by suit in rem in admiralty of the rights of the mortgage in respect to such realty or personality other than vessels.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Section 19. Surrender of Documents; termination of mortgagee's interest; sale of mortgaged vessel (a) The documents of a vessel of the Philippines covered by a preferred mortgaged may not be surrendered (except in the case of the forfeiture of the vessel or its sale by the order of any court of the Philippines or any foreign country) without the approval of the Maritime Industry Authority. The Administrator shall not grant such approval without the mortgagee's consent. (b) The interest of the mortgage in a vessel of the Philippines covered by a mortgage, shall not be terminated by the forfeiture of the vessel for a violation of any law of the Philippines, unless the mortgage authorized, consented, or conspired to effect the illegal act, failure, or omission which constituted such violation. Neither shall the chance by the shipowner in the use or character of the vessel or in the business of the mortgagor, without the consent of the mortgagee, nor the failure by the mortgagor to comply with the provisions of Section 5 hereof affect the validity or preference of the preferred ship mortgage as against third persons. (c) Upon the sale of any vessel of the Philippines covered by a preferred mortgage in any extrajudicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a maritime lien other than a preferred maritime lien, the vessel shall be sold free from all pre-existing claims thereon; but the court shall, upon the request of the mortgagee, the plaintiff, or any intervenor, require the purchase at such sale to give and the mortgagee to accept a new mortgage of the vessel for the balance of the term of the original mortgage. The conditions of such new mortgage shall be the same, so far as practicable, as those of the original mortgage and shall be subject to the approval of the court. If such new mortgage is given, the mortgagee shall not be paid from the proceeds of the sale and the amount payable as the purchase price shall be held diminished in the amount of the new mortgage indebtedness. (d) No vessel of domestic ownership shall be mortgaged, nor, any rights under said mortgage shall be assigned, to any person not a citizen of the Philippines without the approval of the Maritime Industry Authority. The penalties and sanctions provided for under Commonwealth Act No. 606 shall apply in case of any violation hereof. (e) The foreclosure sale of vessels mortgaged under the provisions of this Decree, whether judicially or extra- judicially, shall not require the approval of the Maritime Industry Authority.

Section 20. Who May Bid in the Foreclosure Sale The following persons are qualified to bid in the foreclosure sale of the mortgaged vessel: (a) Citizens of the Philippines or corporations 60% of the capital of which is owned by Filipino citizens. (b) A foreign mortgagee or foreign national whose country has diplomatic relations with the Philippines or whose country grants reciprocal rights to Filipino citizens. In case the purchaser is a foreign individual or entity, the Philippine Coast Guard shall, upon presentation of the certificate of sale, cancel the registration of the vessel and issue a certificate to that effect upon request. Section 21. Maritime Lien for Necessaries; persons entitled to such lien Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign 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 vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Section 22. Persons Authorized to Procure Repairs, Supplies, and Necessaries 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: The managing owner, ship's husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel. Section 23. Notice to Person Furnishing Repairs, Supplies, and Necessaries The officers and agents of a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when appointed by a character, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher know, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel therefor. Section 24. Waiver of Right to Lien Nothing in this Decree shall be construed to prevent the furnisher of repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, or the mortgagee, from waiving his right to a lien, or in the case of a preferred mortgage lien, to the preferred status of such lien, at any time by agreement or otherwise. Section 25. Existing Mortgages Not Affected; exception This Decree shall not apply (1) to any existing mortgage, or (2) to any mortgage hereafter placed at any vessel under an


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law existing mortgage, so long as such existing mortgage remains undischarged. The Decree shall, however, apply to mortgages executed pursuant to Presidential Decree No. 214, provided, that no vested rights of third parties are affected thereby.

A: They are vessels which are registered under the Philippine law. Q: What is the purpose of P.D. 1521?

Section 26. Rules and Regulations by Philippine Coast Guard and the Maritime Industry Authority The Philippine Coast Guard and the Maritime Industry Authority are hereby authorized to make such rules and regulations within their respective spheres of jurisdiction, as they may deem necessary for the efficient execution of the provisions of this Decree.

A: To assist in the development of the maritime industry in the country by granting loan (Sec. 3). Its purpose is to allow any registered owner of vessel, whether he is domestic or foreign, to acquire a loan on that vessel registered under his name in order to be able to use the amount for purposes of acquiring another vessel, for purposes of constructing a vessel, for purposes of managing a vessel, or for purposes of managing a shipping line.

Section 27. Port of Documentation Whenever in the Ship Mortgage Decree of 1978 the words "port of documentation" are used, they shall be deemed to mean the port of registry of the vessel.

The purposes of PD 1521 are to accelerate the growth and development of the shipping industry in the Philippines and to finance the acquisition, construction, purchase or initial operation of vessels.

Section 28. Instruments and Acts Validated All mortgages of any vessel of any part thereof, and all documentations, recordations, indorsements and indexing thereof, and proceedings incidental thereto made or done, prior to the effectivity of this Decree are declared valid to the extent they would have been valid if the port or ports at which it should have been documented in accordance with law; and this Section is declared retroactive so as to accomplish such validations: Provided, That nothing herein contained shall be construed to deprive any person of any vested right.

Q: Who can be granted this assistance? A: 1. 2.

Filipino citizen Corporate entity, 60% of which belongs to Filipinos

Q: What is the requirement of the law in order to obtain a loan from a local bank? A:

Section 29. Repealing Clause The provisions of the New Civil Code, the Code of Commerce, the Chattel Mortgage Law, the Revised Rules of Court and of such other laws, decrees, executive orders, rules and regulations which are in conflict or inconsistent with the provisions of this Decree are hereby repealed, amended or modified accordingly. If for any reason, any section, subsection, sentence, clauses or term of this Decree is held to be unconstitutional such decision shall not affect the validity of the other provisions of this Decree. Section 30. Effectivity This Decree shall take a effect upon its approval. Done in the City of Manila, this 11th day of June, in the year of Our Lord, nineteen hundred and seventy-eight.

NATURE AND PURPOSE OF THE SHIP MORTGAGE DECREE OF 1978 Q: What is the nature of this law? A: It is law on an action in rem in admiralty cases. Q: What are Philippine Domestic vessels?

1. 2.

Natural person who is the owner of that vessel Juridical entity like a shipping line registered as a corporation, in which case, 60% of the ownership must belong to a Filipino PURPOSES FOR OBTAINING A LOAN

Q: Again, what may be the purpose for obtaining a loan? A: 1. 2. 3. 4.

Purchasing another vessel To acquire another vessel To construct another vessel To manage or operate a shipping line

Q: What if the amount loaned was used for another purpose? A: It will not fall under the Ship Mortgage Decree. It becomes a simple loan even if the vessel on which that loan was obtained was a registered commercial vessel. It is the purpose of the loan that determines the application of the ship mortgage decree. Q: What are the salient features of P.D. 1521?


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: PD 1521 recognizes the creation of preferred mortgage that must be satisfied prior to all other claims and it allows for the arrest of the vessel which in effect treats the vessel itself as the defendant in an action.

A: A preferred mortgage lien is one constituted for the financing of the acquisition, purchase, construction and initial operation of vessels under the provisions of PD 1521, and which complies with the following requisites:

Q: What if the vessel was subjected to a loan acquired under Sec. 1?

1. It is recorded in the MARINA/COASTGUARD 2. Affidavit of good faith with the record of such good faith and without any design to hinder, delay, or defraud any existing future creditor of the mortgagor or any lien or the mortgaged vessel; and 3. The mortgagee does not stipulate the waiver of the preferred status of his claim. 4. The mortgage must be valid. 5. The mortgage includes the whole vessel of domestic ownership.

A: The vessel is deemed to be covered by a mortgage Q: What kind of mortgage? A: Being a personal property, it becomes a chattel mortgage but chattel mortgage of a ship. However, if the chattel mortgage is registered with the Registry of Property or Registry of Record, it becomes a preferred mortgage under P.D. 1521 meaning, the preferred mortgage has the right to be respected and paid for with all priorities against all other claims against the vessel provided it is a registered mortgage subject under the line of preference or preference of credits under Sec. 17.

It enjoys the preference in the recovery of mortgage. It is the recording which makes it a preferred mortgage Q: What is a lien? A: It is an advantage.

ARREST OF VESSEL Q: What will happen once the loan is obtained and the vessel qualifies to have a preferred mortgage of her since the mortgage has been registered? A: The owner of the vessel is protected under P.D. 1521 if it is registered and becomes a preffered mortgage that particular vessel may be arrested and sold at public auction so the obligation of the vessel is paid off to the mortgagee. NOTE: 1. 2.

The vessel may be arrested, then The vessel can be sold

Q: What are the requirements to qualify an action to be able to obtain an order of arrest from the court? What court has jurisdiction? A: If the vessel is found, whether domestic or foreign, in Manila, then the motion for the arrest of the vessel must be filed in the RTC of Manila. If the vessel could not be found at the moment when the action is filed, then the action may be filed at the place of the plaintiff with the RTC or at the place of the defendant, if the vessel is represented by a shipping line. Q: Who has the preference?

Q: What is the rule on the arrest of a vessel?

A: The plaintiff

A: If the vessel is protected under P.D. 1521 and becomes a preferred mortgage, and the terms and conditions of the preferred mortgage have been violated, the mortgage may come to court by filing an action for the arrest of the vessel known as an ACTION IN REM

Q: What are the 2 grounds under which you can file an action in rem against the vessel? A: 1.

ACTION IN REM 2. Q: What is an action in rem?

Section 4- violation of the terms of the preferred mortgage Non-payment of necessaries that were supplied to the vessel under Section 21.

A: It is an action filed against the vessel only, it does not include the owner of the vessel for the comvenience of the creditor.

NOTE: This enumeration is exclusive

Q: What is a preferred mortgage lien? What are its requisites?

Q: What is a maritime lien for necessaries?

A maritime lien for necessaries


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: Any person furnishing repairs, supplies, towage, use of dry dock, of marine railway, or other necessaries to any vessel, whether foreign or domestic upon the order of the owner of such vessel or of a person authorized by owner, shall have a maritime lien on the vessel which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.

Q: Can there be foreclosure without the order of arrest? A: The order of arrest is not essential. It can be foreclosed without the order of arrest because the vessel may not be found. Q: Who can request the discharge of the order of arrest?

Q: Give examples of “necessaries”

A: The mortgagor, the owner of the vessel

A:

NOTE: He can file a petition for the discharge of the order of arrest prior to the sale by posting a bond double the value of the claim

1. 2. 3.

Supplies Fuels Goods REMEDIES WHEM GROUNDS ARE VIOLATED

Q: What may be done if any of the grounds is violated?

GROUNDS FOR THE DISCHARGE OF ORDER OF ARREST Q: What are the grounds for the discharge of the order of arrest?

A: A: 1. 2. 3.

An action may be filed for judicial foreclosure of the preferred mortgage Action for the recovery of the maritime liens Action for the arrest of the vessel for it to be sold and such proceeds be applied to it.

Q: Under the 2 grounds, what are the procedures to be fulfilled?

a. b.

c.

If properly arrested but you post a counterbond or cash deposit (double the amount) The order of arrest was improperly or irregularly issuedthis time there is no counterbond that is necessary because the vessel is not deemed to have been arrested There is no violation- in case the mortgagor can prove that he has not violated the terms and conditions of the mortgage

A: Q: What is the purpose of the counterbond? 1.

2. 3.

4.

Filed a petition for the judicial foreclosure of a Preferred Ship Mortgage. This is an action in rem in admiralty which is an action against the vessel itself Applicant may then apply ex parte for an order for the arrest of the mortgaged vessel or vessels Attach affidavits that the preferred mortgage or maritime liens were violated or unpaid and should also file a bond subject to the discretion of the court but not beyond the claimed amount. The court will issue an order of arrest against the vessel only

Q: What are the 2 kinds of bonds allowed to be posted? A: 1. 2.

Cash bond Security bond

Q: Is arrest limited to Filipino vessels only? A: No, the arrest may include foreign domestic vessels as long as it violated any of the 2 grounds.

A: To furnish another security other than vessel. This takes the place of the vessel. If it was posted by a fake insurance company, the vessel will be arrested. If it is insufficient to cover the amount, the mortgagor must be ordered to correct the deficiencies. Q: Can it be sold on public auction to any buyer? A: Yes, it could be a Filipino resident or a foreign buyer and the sale to any of them would be considered a valid sale and if the purchaser acquires the property free from all liens and encumbrances. NOTE: If there are pre-existing claims against the vessel, under Sec. 17, it is provided that the pre-existing claims now are removed from the vessel. Q: Who can bind in the foreclosure sale? A:


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law A: a. b.

Citizens of the Philippines or corporations 60% of capital of which is owned by Filipino citizens A foreign mortgagee or foreign national whose country grants reciprocal rights to Filipino citizens

Q: What do you mean by “remove”? A: Under P.D. 1521, those pre-existing claims are considered to be attached to the vessel as maritime liens. So upon sale, the existing pre-existing claims against the vessel are removed from the vessel and transferred to the proceeds and the provisions of Sec. 17 will operate.

(1) The mortgage, hypothecation or similar charge has been duly and validly executed in accordance with the laws of the country under which the vessel is documented (2) The mortgage, hypothecation or similar charge has been duly registered in accordance with such laws in a public register – either at the port of registry of the vessel or at a central office. PREFERRED CLAIMS OVER A PREFERRED MORTGAGE LIEN

Q: What will happen after the sale of that vessel if the preexisting claims have been satisfied?

Q: What are the claims preferred over a preferred mortgage lien?

A: All those pre-existing claims will be considered paid off and terminated.

A: The following claims are preferred over a preferred mortgage lien:

If they are not satisfied because the amount that resulted from the sale is not sufficient to pay all of them, if all of them fall under the same category, then they are going to be paid equally. If the claims are of different dates, the others will be paid in accordance with preference under Sec. 17. Q: There are only 2 grounds for the order of arrest, can you arrest the vessel for any other ground? A: No, if not, you will have to attach the vessel in accordance with the provision of the Rules of Court on Attachment. Q: If the claim is not fully paid, what happens to the balance? A: The balance will now qualify as personal claim against the owner of the vessel who owed you some money and this should be known as Maritime Action in Personam against the owner of the vessel that was sold on public auction after the arrest of the vessel.

1. 2. 3. 4. 5. 6. 7.

Taxes (expenses and fees allowed and cost taxed by the court and taxes due to the government) Crew’s wages General average Salvage, including contract salvage Prior maritime liens (maritime liens arising prior in time to the recording of the preferred mortgage Damages arising from tort Prior preferred mortgage lien (preferred mortgage prior in time)

The preferred mortgage lien or the amount of the mortgage will then be paid after the above items have already been complied with. If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor.

Q: Is there a security for that? A: None since the vessel has been sold. The only possibility of recovery is the direct payment of claim Q: Can you re-attach the vessel?

COMMONWEALTH ACT NO. 146 THE PUBLIC SERVICE LAW (As amended, and as modified particularly by PD No. 1, Integrated Reorganization Plan and EO 546)

A: No. RECOGNITION OF A FOREIGN VESSEL

CHAPTER I ORGANIZATION

Q: For a foreign vessel to be recognized, what are the requisites?

Section 1. This Act shall be known as the "Public Service Act."


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Sec. 2. There is created under the Department of Justice a commission which shall be designated and known as the Public Service Commission, composed of one Public Service Commissioner and five Associate Commissioners, and which shall be vested with the powers and duties hereafter specified. Whenever the word "Commission" is used in this Act, it shall be held to mean the Public Service Commission, and whenever the word "Commissioner" is used in this Act it shall be held to mean the Public Service Commissioner or anyone of the Associate Commissioners. The Public Service Commissioner and the Associate Public Service Commissioners shall be natural born citizens and residents of the Philippines, not under thirty years of age; members of the Bar of the Philippines, with at least five years of law practice or five years of employment in the government service requiring a lawyer's diploma; and shall be appointed by the President of the Philippines, with the consent of the Commission on Appointments of the Congress of the Philippines: Provided, however, That the present Commissioner and the personnel of the Commission shall continue in office without the necessity of re-appointment. The Commissioners shall have the rank and privilege of retirement of Judges of the Courts of First Instance. (As amended by Republic Act Nos. 178 and 2677)

banc and two Commissioners shall constitute a quorum for the sessions of a division. In the absence of a quorum, the session shall be adjourned until the requisite number is present. All the powers herein vested upon the Commission shall be considered vested upon any of the Commissioners, acting either individually or jointly as hereinafter provided. The Commissioners shall equitably divide among themselves all pending cases and those that may hereafter be submitted to the Commissioner, in such manner and form as they may determine, and shall proceed to hear and determine the case assigned to each or to their respective divisions, or to the Commission en banc as follows: uncontested cases, except those pertaining to the fixing of rates, shall be decided by one Commissioner; contested cases and all cases involving the fixing of rates shall be decided by the Commission in division and the concurrence of at least two Commissioners in the division shall be necessary for the promulgation of a decision or non-interlocutory order in these cases: Provided, however, That any motion for reconsideration of a decision or non-interlocutory order of any Commissioner or division shall be heard directly by the Commission en banc and the concurrence of at least four Commissioners shall be necessary for the promulgation of a final decision or order resolving such motion for reconsideration. (As amended by Republic Act Nos. 723 and 2677)

Sec. 3. The Commissioner and Associate Commissioners shall hold office until they reach the age of seventy years, or until removed in accordance with the procedures prescribed in section one hundred and seventy-three of Act Numbered Twenty-seven hundred and eleven, known as the Revised Administrative Code: Provided, however, That upon retirement any Commissioner of Associate Commissioner shall be entitled to all retirement benefits and privileges for Judges of the Courts of First Instance or under the retirement law to which he may be entitled on the date of his retirement. In case of the absence, for any reason, of the Public Service Commissioner, the Associate Commissioner with seniority of appointment shall act as Commissioner. If on account of absence, illness, or incapacity of any of three Commissioners, or whenever by reason of temporary disability of any Commissioner or of a vacancy occurring therein, the requisite number of Commissioners necessary to render a decision or issue an order in any case is not present, or in the event of a tie vote among the Commissioners, the Secretary of Justice may designate such number of Judges of the Courts of First Instance, or such number of attorneys of the legal division of the Commission, as may be necessary to sit temporarily as Commissioners in the Public Service Commission.

Sec. 4. The Public Service Commissioner shall receive an annual compensation of thirteen thousand pesos; and each of the Associate Commissioners an annual compensation of twelve thousand pesos. The Commissioners shall be assisted by one chief attorney, one finance and rate regulation officer, one chief utilities regulation engineer, one chief accountant, one transportation regulation chief, one secretary of the Public Service Commission, and three public utilities advisers who shall receive an annual compensation of not less than ten thousand eight hundred pesos each; five assistant chiefs of division who shall receive an annual compensation of not less than nine thousand six hundred pesos each; twelve attorneys who shall receive an annual compensation of not less than nine thousand pesos each; and a technical and confidential staff to be composed of two certified public accounts, two electrical engineers, two mechanical or communication engineers, and two special assistants who shall receive an annual compensation of not less than seven thousand two hundred pesos each. (As amended by Republic Act Nos. 723, 2677 and 3792)

The Public Service Commission shall sit individually or as a body en banc or in two divisions of three Commissioners each. The Public Service Commissioner shall preside when the Commission sits en banc and in one division. In the other division, the Associate Commissioner with seniority of appointment in that division shall preside. Five Commissioners shall constitute a quorum for sessions en

Sec. 5. The Public Service Commissioner, the Associate Public Service Commissioners, and all other officers and employees of the Public Service Commission shall enjoy the same privileges and rights as the officer and employees of the classified civil service of the Government of the Philippines. They shall also be entitled to receive from the Government of the Philippines their necessary traveling


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law expenses while traveling on the business of the Commission, which shall be paid on proper voucher therefor, approved by the Secretary of Justice, out of funds appropriated for the contingent expenses of the Commission.

Sec. 9. No member or employee of the Commission shall have any official or professional relation with any public service as herein defined, or hold any office of profit or trust with the Government of the Philippines.

When the exigency of the service so requires and with the approval of the Secretary of Justice, and subject to the provisions of Commonwealth Act Numbered Two hundred forty-six, as amended, funds may be set aside from the appropriations provided for the Commission and/or from the fees collected under Section forty of this Act to defray the expenses to be incurred by the Public Service Commissioner or any of the Associate Commissioners, officers or employees of the Commission to be designated by the Commissioner, with the approval of the Secretary of Justice, in the study of modern trends in supervision and regulation of public services. (As amended by Republic Act No. 3792)

Sec. 10. The Commission shall have its office in the City of Manila or at such other place as may be designated, and may hold hearings on any proceedings at such times and places, within the Philippines, as it may provide by order in writing: Provided, That during the months of April and May of each year, at least three Commissioners shall be on vacation in such manner that once every two years at least three of them shall be on duty during April and May: Provided, however, That in the interest of public service, the Secretary of Justice may require any or all the Commissioners not on duty to render services and perform their duties during the vacation months. (As amended by Republic Act Nos. 176 and 3792)

Sec. 6. The Secretary of Justice, upon recommendation of the Public Service Commissioner, shall appoint all subordinate officers and employees of the Commission as may be provided in the Appropriation Act. The Public Service Commissioner shall have general executive control, direction, and supervision over the work of the Commission and of its members, body and personnel, and over all administrative business. (As amended by Republic Act Nos. 178 and 3792)

Sec. 11. The Commission shall have the power to make needful rules for its Government and other proceedings not inconsistent with this Act and shall adopt a common seal, and judicial notice shall be taken for such seal. True copies of said rules and other amendments shall be promptly furnished to the Bureau of Printing and shall be forthwith published in the Official Gazette.

Sec. 7. The Secretary of the Commission, under the direction of the Commissioner, shall have charge of the administrative business of the Commission and shall perform such other duties as may be required of him. He shall be the recorder and official reporter of the proceedings of the Commission and shall have authority to administer oaths in all matters coming under the jurisdiction of the Commission. He shall be the custodian of the records, maps, profiles, tariffs, itineraries, reports, and any other documents and papers filed with the Commission or entrusted to his care and shall be responsible therefor to the Commission. He shall have authority to designate from time to time any of his delegates to perform the duties of Deputy Secretary with any of the Commissioners. Sec. 8. The Commission shall furnish the Secretary such of its findings and decisions as in its judgment may be of general public interest; the Secretary shall compile the same for the purpose of publication in a series of volumes to be designated "Reports of the Public Service Commission of the Philippines," which shall be published in such form and manner as may be best adapted for public information and use, and such authorized publications shall be competent evidence of the reports and decisions of the Commission therein contained without any further proof or authentication thereof.

Approved: November 07, 1936

PURPOSES OF THE PUBLIC SERVICE LAW Q: WHAT ARE THE PURPOSES OF C.A. 146? A: a. b. c. d.

To secure adequate, sustained service for the public at the least possible cost; To protect the public against unreasonable charges and poor, inefficient service; To protect and secure investments in public services; To prevent ruinous competition. AUTHORITY TO OPERATE PUBLIC SERVICES

GR: No public service shall operate without having been issued a certificate of public convenience or a certificate of public convenience and necessity. XPNS: a. b. c.

Warehouses; Animal drawn vehicles and bancas moved by oar or sail; Airships, except for the fixing of maximum rates for fare and freight;


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law d. Radio companies, except for rates fixing; e. Public services owned or operated by government, except as to rates fixing; f. Ice plants; and g. Public markets.

408) the It is a “property” and has a considerable value and can be the subject of sale or attachment. (Cogeo-Cubao Operators and Drivers Assn. vs. CA, 207 SCRA 343, Raymundo vs. Luneta Motor Co.)

PUBLIC SERVICE THE REQUREMENTS FOR GRANTING CPC OR CPCN Q: WHAT IS PUBLIC SERVICE? A: A person who owns, operates, manages or controls in the Philippines for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier or public utility, ice plants, power and water supplies, communication and similar public services. (Sec. 13b, CA 146) A casual or incidental service devoid of public character and interest is not brought within the category. The question depends on such factors as the extent of services, whether such person or company has held himself or itself out as ready to serve the public or a portion of the public generally. (Luzon Stevedoring vs. PSC) The Public Service Commission created under the Public Service Law has already been abolished under P.D. No. 1 and other issuances. It has been replaced by the following government agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and MIA.

Q: WHAT ARE THE REQUREMENTS FOR GRANTING CPC OR CPCN? A: a.

b. c.

d.

Applicant must be a citizen of the Philippines or a corporation or entity 60% of the capital of which is owned by such citizens; Applicant must prove public necessity; Applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest on a proper and suitable manner; Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibilities incident to its operation.

CERTIFICATE OF PUBLIC CONVENIENCE v. CER CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY CERTIFICATE OF PUBLIC CONVENIENCE (CPC)

CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN)

An authorization issued by the appropriate government agency for the operation of public services for which no franchise, either municipal or legislative, is required by law, e.g., common carriers.

An authorization issued by the appropriate government agency for the operation of public service for which a prior franchise is required by law; e.g. telephone and other services.

A CPC or a CPCN constitutes neither a franchise nor a contract, confers no property right, and is a mere license or a privilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any proprietary right or interest or franchise in the public highways. Revocation of this certificate deprives him of no vested right. New and additional burdens, alteration of the certificate, or even revocation or annulment thereof is reserved to the State. (Luque vs. Villegas, 30 SCRA


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law POWERS REQUIRING POWERS EXERCISABLE PRIOR NOTICE AND WITHOUT PRIOR NOTICE HEARING AND HEARING

1. Issuance of CPC or CPCN; 2. Fixing of rates, tolls, and charges; 3. Setting up of standards and classifications; 4. Establishment of rules to secure accuracy of all meters and all measuring appliances; 5. Issuance of orders requiring establishment or maintenance of extension of facilities; 6. Revocation, or modification of CPC or CPCN; 7. Suspension of CPC or CPCN, except when it is necessary to avoid serious and irreparable damage or inconvenience to the public or private interest, in which case, a suspension not more than 30 days may be ordered, prior to the hearing. (Soriano v. Medina, 164 SCRA 36)

1. Investigation any matter concerning public service; 2. Requiring operators to furnish safe, adequate, and proper service; 3. Requiring public services to pay expenses of investigation; 4. Valuation of properties of public utilities; 5. Examination and test of measuring appliances; 6. Grant of special permits to make extra or special trips in territories specified in the certificate; 7. Uniform accounting system and furnishing of annual reports; 8. Compelling compliance with the laws and regulations.

UNLAWFUL ACTS OF PUBLIC UTILITY Q: WHAT ARE THE UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES? A: a. b.

c.

d.

Engagement in public service business without first securing the proper certificate; Providing or maintaining unsafe, improper or inadequate service as determined by the proper authority; Committing any act of unreasonable and unjust preferential treatment to any particular person, corporation or entity as determined by the proper authority; Refusing or neglecting to carry public mail upon request. (Secs. 18 and 19)

Q: WHAT ARE THE ACTS REQUIRING PRIOR APPROVAL?

A: a. b. c. d. e. f.

Establish and maintain individual or joint rates; Establish and operate new units; Issue free tickets; Issue any stock or stock certificates representing an increase of capital; Capitalize any franchise in excess of the amount actually paid to the Government; Sell, alienate, mortgage or lease property, certificates or franchise.

Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be negotiated and completed before the approval by the proper authority. Its approval is not a condition precedent to the validity of the contract. The approval is necessary only to protect public interest. PRIOR OPERATOR OR OLD OPERATOR RULE Q: EXPLAIN THE PRIOR OPERATOR/OLD OPERATOR RULE? A: The rule allowing an existing franchised operator to invoke a preferential right within the authorized territory as long as he renders satisfactory and economical service. The policy is not to issue a certificate to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfactory service. The prior operator must first be given an opportunity to improve its service, if inadequate or deficient. Q: What is the purpose of the rule? A: To prevent ruinous and wasteful competition in order that the interests of the public would be conserved and preserved. It subordinates the prior applicant rule which gives the first applicant priority only if things and circumstances are equal. Where the operator either fails or neglects to make the improvement or effect the increase in services, especially when given the opportunity, new operators should be given the chance to give the services needed by the public. PRIOR APPLICANT RULE Q: EXPLAIN THE PRIOR APPLICANT RULE? A: Presupposes a situation when two interested persons apply for a certificate to operate a public utility in the same community over which no person has as yet granted any certificate. If it turns out, after the hearing, that the circumstances between the two applicants are more or less equal, then the applicant who applied ahead of the other, will be granted the certificate.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law RATE-FIXING POWER Q: What is the rule regarding RATE-FIXING POWER? A: The rate to be fixed must be just, founded upon conditions which are fair and reasonable to both the owner and the public.

The public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible, as a practical matter, for the public to enforce their rights of action that they may have for injuries inflicted by the vehicle if they should be required to prove who the actual owner is. a.

Q: When is a rate just and reasonable? A: A rate is just and reasonable if it conforms to the following requirements: a.

b.

The thrust of the law in enjoining the kabit system is to identify the person upon whom responsibility may be fixed with the end in view of protecting the riding public

b. The registered owner cannot recover from the actual owner and the latter cannot obtain transfer of the vehicle to himself, both being in pari delicto.

One which yields to the carrier a fair return upon the value of the property employed in performing the service; and One which is fair to the public for the service rendered.

c.

REGISTERED OWNER RULE

For the better protection of the public, both the registered owner and the actual owner are jointly and severally liable with the driver.

Q: What is the REGISTERED OWNER RULE? A: The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. The registered owner is not allowed to escape responsibility by proving that a third person is the actual and real owner Reason: It would be easy for him, by collusion with others or otherwise, to transfer the responsibility to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. KABIT SYSTEM Q: What is the KABIT SYSTEM?

ACT NO. 2616 ACT NO. 2616 - THE SALVAGE LAW Q: What is salvage? A: A service which one person renders to the owner of a ship or goods by his own labor, preserving the goods or ship which the owner or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and secure. A compensation allowed to persons by whose assistance a ship or its cargo has been saved, in whole or in part, from impending danger, or recovered from actual loss, in cases of shipwreck, derelict, or recapture. TWO CONCEPTS UNDER LAW ON SALVAGE

A: A system whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate under such license, for a fee or percentage of such earnings. It is void and inexistent under Art. 1409, Civil Code.

Q: What are the two concepts under this law? A: 1.

Q: What are the effects of a kabit system? A: a.

The transfer, sale, lease or assignment of the privilege granted is valid between the contracting parties but not upon the public or third persons.

b. The registered owner is primarily liable for all the consequences flowing from the operations of the carrier.

2.

Services one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect or secure. Compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from impending sea peril, or such property recovered from actual peril or loss, as in cases of shipwreck, derelict or recapture.

Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward.

simple towage Q: What are the 3 elements of valid salvage claim? A: a. b.

SHIPWRECK c. Q: What is shipwreck? A: It means a ship which has received injuries rendering her incapable by navigation.

Maritime peril Service voluntarily rendered when not required as an existing duty or from special contract Success, in whole or in part, or that the services rendered contributed to success.

Q: What are the requisites? A:

Or, it is also defined as loss of a vessel at sea, either by being swallowed up by the waves, running against a thing at sea, or on the coast.

a. b.

DERELICT

c.

Q: What is derelict?

d.

Valid object of salvage; Object must have been exposed to marine peril (not perils of the ship); Services rendered voluntarily (neither an existing duty nor out of a pre-existing contract); Services are successful, total or partial.

A: A ship or her cargo which is abandoned and deserted at sea by those who are in charge of it, without any hope of recovering it, or without any intention of returning to it. If those in charge of the property left it with the intention of finally leaving it, it is a derelict and the change of their intention and an attempt to return to it will not change its nature

Sec. 2. If the captain of the vessel, or the person acting in his stead, is present, no one shall take from the sea, or from the shores or coast merchandise or effects proceeding from a shipwreck or proceed to the salvage of the vessel, without the consent of such captain or person acting in his stead.

Example: a schooner which has capsized in the high seas, deserted by her captain with no intention to return, is a derelict

Q: What are the effects proceeding from a shipwreck?

Q: What is the rule in case the vessel or its cargo is beyond the control of the crew?

Jetsam- goods which are cast into the sea and there sink and remain under water Flotsam or flotsam- goods which float upon the sea when cast overboard; Ligan or Lagan – goods cast into the sea tied to a buoy, so that they may be found again by the owners

A: A vessel though not abandoned, may be the subject of salvage, if at the time the services were rendered there was a probable, threatening danger to the vessel or its cargo. If a vessel towed is by this means aided in escaping present or prospective danger, the service will be regarded as one of salvage, and the towage as merely incidental.

EFFECTS OF SHIPWRECK

A:

Q: What are the subjects of Salvage? A:

SERVICE OF TOWAGE v. SERVICE OF SALVAGE Q: Distinguish service of towage and service of salvage.

1. 2.

A:

3.

SERVICE OF TOWAGE If the towage is made not for the purpose of aiding the vessel from escaping present or prospective danger but taking it to some other place, then the service is one of

SERVICE OF SALVAGE If a vessel is aided by towing to escape present or prospective danger, the service shall be regarded as one of salvage and, the towage is merely incidental

4.

Ship itself; Jetsam – goods which are cast into the sea, and there sink and remain under water; Floatsam or Flotsam – goods which float upon the sea when cast overboard; Ligan or Lagan – goods cast into the sea tied to a buoy, so that they may be found again by the owners (p.173, Judge Diaz).

Sec. 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the vessel, owner, or


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law a representative of either of them, they being unknown, shall convey and deliver such vessel or merchandise, as soon as possible, to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or municipal mayor. Sec. 4. After the salvage is accomplished, the owner or his representative shall have a right to the delivery of the vessel or things saved, provided that he pays, or gives a bond to secure, the expenses and the proper reward. The amount and sufficiency of the bond, in the absence of agreement, shall be determined by the Collector of Customs or by the Judge of the Court of First Instance of the province in which the things saved may be found. SALVOR HAS LIEN ON PROPERTY SALVAGED The owner does abandon, temporarily his right of possession, which is transferred to the finder who becomes bound to preserve the property with good faith and bring it to a place of safety for the owner’s use; and he acquires a right to be paid for his services a reasonable and proper compensation out of the property itself. He is not bound to part with the possession out of the property itself. He is not bound to part with the possession until it is paid, or the property is taken into the possession of the law preparatory to the amount of salvage being legally ascertained. A salvor has an interest in the property; this is called a lien, but it never goes in the absence of a contract expressly made, upon the idea of a debt due by the owner to the salvor for services rendered, but upon the principle that the service creates a property in the thing saved. He is, at all intents and purposes, a joint owner and if the property is lost he must bear his share like the other joint owners. SALVAGE COMPENSATION DIVISIBLE AMONG AND PROPORTIONATE TO RESPECTIVE VALUES OF PROPERTY SAVED When a ship and its cargo are saved together, the salvage allowance should be charged against the ship and the cargo in the proportion of their respective values, the same as in the case of general average; and neither is liable for the salvage due from the other. Not only is the salvage charge a separate and divisible burden as between ship and cargo, but also as between portions of the cargo belonging to different owners. Thus, the value of the compensation to be paid is in proportion to the value of the vessel and the value of the cargo saved

OFFER TO PAY EXPENSES AND SALVAGES WITH AN IMPOSSIBLE CONDITION ATTACHED PRODUCES NO EFFECT A demand made on the salvors for the possession of such vessel together with an offer to pay all expenses and the salvage earned up to the time of the demand, to which a condition is attached with which it is impossible to comply produces no legal result. Sec. 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a salvage is reported, shall order: a. That the things saved be safeguard and inventoried. b. The sale at public auction of the things saved which may be in danger of immediate loss or of those whose conservation is evidently prejudicial to the interests of the owner, when no objection is made to such sale. c. The advertisement within the thirty days subsequent to the salvage, in one of the local newspapers or in the nearest newspaper published, of all the details of the disaster, with a statement of the mark and number of the effects requesting all interested persons to make their claims. Sec. 6. If, while the vessel or things saved are at the disposition of the authorities, the owner or his representative shall claim them, such authorities shall order their delivery to such owner or his representative, provided that there is no controversy over their value, and a bond is given by the owner or his representative to secure the payment of the expenses and the proper reward. Otherwise, the delivery shall nor be made until the matter is decided by the Court of First Instance of the province. Sec. 7. No claim being presented in the three months subsequent to the publication of the advertisement prescribed in sub-section (c) of Section five, the things save shall be sold at public auction, and their proceeds, after deducting the expenses and the proper reward shall be deposited in the insular treasury. If three years shall pass without anyone claiming it, one-half of the deposit shall be adjudged to him who saved the things, and the other half to the insular government. Sec. 8. The following shall have no right to a reward for salvage or assistance: a.

The crew of the vessel shipwrecked or which was is danger of shipwreck; b. He who shall have commenced the salvage in spite of opposition of the captain or his representative; and c. He who shall have failed to comply with the provisions of Section three.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law THE SALVOR MUST BE OTHER PERSON WITHOUT RELATION TO A SHIP IN DISTRESS The salvor shall be a person, who, without any particular relation to a ship in distress, proffers useful service and gives it as a volunteer adventurer without any preexisting covenant that connected him with the duty of employing himself for the preservation of that ship. Q: Who are the persons who have no right to a reward for salvage? A: 1. 2. 3.

Crew of the vessel saved; Person who commenced Salvage in spite of opposition of the Captain or his representative; In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a salvaged vessel or cargo to the Collector of Customs.

exorbitant, in view of the anticipated service and risk, and was agreed to only under circumstances amounting to compulion. Sec. 10. In a case coming under the last preceding section, as well as in the absence of an agreement, the reward for salvage or assistance shall be fixed by the Court of First Instance of the province where the things salvaged are found, taking into account principally the expenditures made to recover or save the vessel or the cargo or both, the zeal demonstrated, the time employed, the services rendered, the excessive express occasioned the number of persons who aided, the danger to which they and their vessels were exposed as well as that which menaced the things recovered or salvaged, and the value of such things after deducting the expenses. LIBERAL COMPENSATION IN SALVAGE Q: What is the purpose of liberal compensation in salvage?

Sec. 9. If, during the danger, an agreement is entered into concerning the amount of the reward for salvage or assistance, its validity may be impugned because it is excessive, and it may be required to be reduced to an amount proportionate to the circumstances.

A: Public policy encourages the hardy and adventurous mariner to engage in these laborious and sometimes dangerous enterprises, and with a view to withdraw from him every temptation to embezzlement and dishonesty, the law allows him, in case he is successful, a liberal compensation.

KINDS OF SALVAGE

CIRCUMSTANCES TO BE TAKEN TO DETERMINE THE AMOUNT OF THE COMPENSATION

Q: What are the kinds of salvage? Q: What are the circumstances to be taken to determine the amount of the compensation?

A: a. Voluntary- the compensation is dependent upon succes. this is the most ancient class which comprises the cases of pure salvage b. Rendered upon a contract for a per dien or per horam wage, payable at all events- the most common upon the Great Lakes c. Under a contract for a compensation payable only in case of success Where the stipulated compensation is dependent upon success, and particularly of success within the limited time, it may be very much larger than a mere quontum meruit. Such contracts will not be set aside unless corruptly entered into, or made under fraudulent representations, a clear mistake or suppression of important facts, in immediate danger to the ship, or under the circumstances amounting to compulsion, or with their enforcement would be contrary to equity and good conscience. INEQUITTABLE CONTRACT ENTERED INTO UNDER CIRCUMSTANCES AMOUNTING TO COMPULSION, NOT ENFORCEABLE While a contract for salvage services is presumable valid, it will notbe enforced, where the compensation is clearly

A: a.

The labor expended by the salvors in rendering the salvage b. The promptitude, skill and energy displayed in rendering the service and saving the property c. The value of the property employed by the salvors rendering the service and the danger to which the property was exposed. d. The risk incurred by the salvors in securing the property from the impending peril e. The value of the property saved f. The degree of danger from which the property was rescued Compensation as salvage is not viewed by the admiralty courts merely as pay, on the principle of quantum meruit, or as renumeration pro opera et labore, but as a reward given for the perilous services, voluntarily agreed and as an inducement to mariners to embark on such dangerous enterprise to save lives and property. The amount should be liberal enough to cover the expenses and to give an extra sum as a reward for the services rendered.


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Kenneth & King Hizon (2A)- UST Faculty of Civil Law Sec. 11. From the proceeds of the sale of the things saved shall be deducted, first, the expenses of their custody, conservation, advertisement, and auction, as well as whatever taxes or duties they should pay for their entrance; then there shall be deducted the expenses of salvage; and from the net amount remaining shall be taken the reward for the salvage or assistance which shall not exceed fifty per cent of such amount remaining. EXPENSES INCURRED MUST BE NECESSARY AND REASONABLE The expenses incurred must be shown to be necessary and reasonable in amount before they will be allowed to the salvors. Sec. 12. If in the salvage or in the rendering of assistance different persons shall have intervened the reward shall be divided between them in proportion to the services which each one may have rendered, and, in case of doubt, in equal parts. Those who, in order to save persons, shall have been exposed to the same dangers shall also have a right to participation in the reward. HOW TO ADJUST CONFLICTING RIGHTS OF DIFFERENT PARTIES OF SALVORS Parties taking possession of an abandoned vessel or cargo have a right to retain it until the salvage is completed, and no other person has the right to interfere with them provided they are able to effect the salvage and are conducting the business with fidelity and vigor. But if their own means are inadequate they are bound to accept additional assistance, if offered. Those beginning a salvage service, and in the successful prosecution of it, are entitled to be regarded as meritorious salvors of whatever is preserved, when wrongfully interrupted in the work by others who complete the salvage. WHEN SALVORS HAVE A RIGHT TO REWARD IN SAVING PERSONS Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a salvage service being a duty to humanity and not for reward. The Salvage Act contemplates a divided services were simultaneously imperiled and both are rescued about the same time.

neglect or refusal benefit the libellants by giving them any claim to a larger compensation, as the non-prosecution by one set of salvor inures not to the libellants prosecuting the claim, but the owners of the property saved. Sec. 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel, the reward for salvage or for assistance shall be divided between the owner, the captain, and the remainder of the crew of the latter vessel, so as to give the owner a half, the captain a fourth, and all the remainder of the crew the other fourth of the reward, in proportion to their respective salaries, in the absence of an agreement to the contrary. The express of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged on their value. Q: Are owners of the salving vessels entitled to salvage reward? A: The owners of the salving vessel has always been considered as entitled to salvage reward for the use of the vessel in rendering salvage vessels, though he was not present when the salvage service was rendered. Remuneration for salvage service is awarded to the owners of vessels, not because they are present or supposed to be present when the service is rendered but on account of the danger to which the service exposes their property and the risk which they run of loss in suffering their vessels engaged in such perilous undertaking. IN QUASI-CONTRACT OF TOWAGE THE CAPTAIN NOT ENTITLED TO PARTICIPATE IN THE TOWAGE SERVICE PAYMENT If there was no marine peril and the vessel was not a quasiderelict, as to warrant a valid salvage claim for towing the vessel. The plaintiff’s service to defendant in consenting to plaintiff’s offer to tow the vessel, defendant thereby impliedly entered into a juridical relation to towage with the owner of the towing vessel, captained by plaintiff. Where the contract is one for towage, only the owner of the towing vessel, to the exclusion of the crew of said vessel may be entitled to renumeration. As the vessel owner had expressly waived its claim for compensation, for the towage service rendered to defendant, it is clear that plaintiff, whose right if at all depends upon and not separate from interest of his employer is not entitled to payment for such towage service. Sec. 14. This Act shall take effect on its passage. Enacted: February 4, 1916

Q: Will the refusal of salvors to sue affect the co-salvors? A: Salvors are not deprived of a remedy because another set of salvors neglect or refuse to join in the suit, nor will such


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Hizon Notes - Transportation Laws (Jarodelyn Mabalot_s Conflicted Copy)

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