TRANSPORTATION LAWS TSN

From the lectures of Atty. Jocelyn Valencia

Ateneo de Davao College of Law | 2-SR SY 2016 2017

JANUARY 11 passenger is injured by a collision of vehicles. Or a culpa

criminal.
ACTIONS AND DAMAGES IN CASE OF BREACH
 So if a passenger were to elect whether to file an
action either for culpa contractual or culpa
ACTIONS aquiliana, what would be the difference? What
would be the advantage in a culpa contractual
So under the Civil Code, from where shall obligations arise? action which is not per se in a culpa aquiliana?

Art. 1157. Obligations arise from: In a culpa contractual, the law already establishes a
(1) Law; presumption of negligence on the part of the common
(2) Contracts; carrier, in case of breach of contract and the passenger dies
(3) Quasi-contracts; or suffers injuries.
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. In a culpa aquiliana, there is no such presumption. The
burden of proving the negligence of the common carrier
rests on the claiming party.
 What would be the remedies available to the passenger
whose cause of action is being injured during a vehicular
In a culpa criminal, the prosecution must prove beyond
accident?
reasonable doubt that the common carrier is guilty of
reckless imprudence resulting to death or physical injuries.
The passenger in a culpa contractual is entitled to file an
action for breach of contract against the common carrier for
 In the case of culpa criminal, against whom should the case
failure to deliver the passenger safely.
be filed? And what will be the liability?
 What would be the quantum of evidence required?
The action shall be filed against the driver, whose liability is
Preponderance of evidence.
primary and direct.
 And what would be the liability of the common carrier?
 And what will be the liability of the common carrier?
Primary liability.
The common carrier will be subsidiarily liable in case the
driver cannot pay for the claims or in case he will be
 Who has the burden of proof?
declared insolvent.
The passenger.
 What would be the document or evidence that the driver is
 What does the passenger have to prove? insolvent?

That the common carrier failed to carry the passenger Insolvent by Sheriff’s Return of Judgment in Execution.
safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due  What is the basis of the common carrier’s subsidiary
liability?
regard for all the circumstances.

 In case of death or injury to the passenger, what does the Art. 103. Subsidiary civil liability of other persons. — The
common carrier have to prove? subsidiary liability established in the next preceding article shall
also apply to employers, teachers, persons, and corporations
That it exercised extraordinary diligence and the accident engaged in any kind of industry for felonies committed by their
resulted from negligence on the part of the passenger, or a servants, pupils, workmen, apprentices, or employees in the
third person, or a fortuitous event, and it is the proximate discharge of their duties.
and only cause of the accident.
 Where will you file an action to invoke the common carrier’s
 Can a common carrier in a culpa contractual use the subsidiary liability?
defense of extraordinary diligence in the selection and
supervision of its employees? In the same court.

Yes, but it is not a complete defense. It will only mitigate  What would be your basis in running after civil damages?
the liability of the common carrier. The only exculpatory
circumstances are those mentioned in Art. 1734. Art. 100. Civil liability of a person guilty of felony. — Every
person criminally liable for a felony is also civilly liable.
We said that as a result of the accident, we have what you
call culpa contractual, and we may also have culpa
aquiliana, for example when a person who is not a
DAMAGES

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Art. 2224. Temperate or moderate damages, which are more

Art. 2197. Damages may be: (MENTAL) than nominal but less than compensatory damages, may be
(1) Actual or compensatory; recovered when the court finds that some pecuniary loss has
(2) Moral; been suffered but its amount can not, from the nature of the
(3) Nominal; case, be provided with certainty.
(4) Temperate or moderate;
(5) Liquidated; or Art. 2225. Temperate damages must be reasonable under the
(6) Exemplary or corrective. circumstances.
MORAL DAMAGES
LIQUIDATED DAMAGES
Art. 2217. Moral damages include:
1. physical suffering Art. 2226. Liquidated damages are those agreed upon by the
2. mental anguish parties to a contract, to be paid in case of breach thereof.
3. fright
4. serious anxiety Art. 2227. Liquidated damages, whether intended as an
5. besmirched reputation indemnity or a penalty, shall be equitably reduced if they are
6. wounded feelings iniquitous or unconscionable.
7. moral shock
8. social humiliation, and Art. 2228. When the breach of the contract committed by the
9. similar injury. defendant is not the one contemplated by the parties in agreeing
upon the liquidated damages, the law shall determine the
Though incapable of pecuniary computation, moral damages measure of damages, and not the stipulation.
may be recovered if they are the proximate result of the
defendant's wrongful act for omission. EXEMPLARY DAMAGES

Art. 2219. Moral damages may be recovered in the following Art. 2229. Exemplary or corrective damages are imposed, by
and analogous cases: way of example or correction for the public good, in addition to
(1) A criminal offense resulting in physical injuries; the moral, temperate, liquidated or compensatory damages.
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts; In the computation of the indemnification for damages, what
(4) Adultery or concubinage; are the two factors that need to be determined?
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
Fortune Express vs CA
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
Facts: Petitioner is a bus company in northern Mindanao.
(9) Acts mentioned in Article 309;
Private respondents are the widow of Atty. Caorong and their
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
children.
30, 32, 34, and 35.
On November 18, 1989, a bus of petitioner figured in an accident
The parents of the female seduced, abducted, raped, or abused, with a jeepney in Kauswagan, Lanao del Norte, resulting in the
referred to in No. 3 of this article, may also recover moral
death of several passengers of the jeepney, including two
damages. Maranaos. During investigation it was discovered that the owner
of the jeepney was a Maranao and that certain Maranaos were
The spouse, descendants, ascendants, and brothers and sisters planning to take revenge on the petitioner by burning some of
may bring the action mentioned in No. 9 of this article, in the
its buses. Upon the instruction of Sgt. Bastasa, the officer went
order named.
to see Diosdado Bravo, operations manager of petitioner, at its
main office. Bravo assured him that the necessary precautions
NOMINAL DAMAGES to insure the safety of lives and property would be taken.

Art. 2221. Nominal damages are adjudicated in order that a Four days thereafter, three armed Maranaos who pretended to
right of the plaintiff, which has been violated or invaded by the be passengers, seized a bus of petitioner at Linamon, Lanao del
defendant, may be vindicated or recognized, and not for the Norte while on its way to Iligan City. Among the passengers of
purpose of indemnifying the plaintiff for any loss suffered by the bus was Atty. Caorong. The leader of the Maranaos,
him. Mananggolo, ordered the driver, Cabatuan, to stop the bus on
the side of the highway. Then one of the companions of
Note: This may be awarded even if no actual and exemplary Mananggolo started pouring gasoline inside the bus, as the
damages is awarded as long as there is a showing that the right other held the passengers at bay with a handgun. Mananggolo
of the passenger has been violated. then ordered the passengers to get off the bus. The passengers,
including Atty. Caorong, stepped out of the bus and went behind
TEMPERATE OR MODERATE DAMAGES the bushes in a field some distance from the highway.

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

However, Atty. Caorong returned to the bus to retrieve From the foregoing, it is evident that petitioner’s employees
something from the overhead rack. At that time, one of the failed to prevent the attack on one of petitioners buses because
armed men was pouring gasoline on the head of the driver. they did not exercise the diligence of a good father of a family.
Cabatuan heard Atty. Caorong pleading with the armed men to Hence, petitioner should be held liable for the death of Atty.
spare the driver as he was innocent of any wrong doing and was Caorong.
only trying to make a living. The armed men were, however,
adamant as they repeated their warning that they were going 2. NO.
to burn the bus along with its driver. During this exchange
between Atty. Caorong and the assailants, Cabatuan climbed Art. 1174 of the Civil Code defines a fortuitous even as an
out of the left window of the bus and crawled to the canal on occurrence which could not be foreseen or which though
the opposite side of the highway. He heard shots from inside foreseen, is inevitable. In Yobido v. Court of Appeals, we held
the bus. Larry de la Cruz, one of the passengers, saw that Atty. that to be considered as force majeure, it is necessary that: (1)
Caorong was hit. Then the bus was set on fire. Some of the the cause of the breach of the obligation must be independent
passengers were able to pull Atty. Caorong out of the burning of the human will; (2) the event must be either unforeseeable
bus and rush him to the Mercy Community Hospital in Iligan or unavoidable; (3) the occurrence must be such as to render it
City, but he died while undergoing operation. impossible for the debtor to fulfill the obligation in a normal
manner; and (4) the obligor must be free of participation in, or
The private respondents brought this suit for breach of contract aggravation of, the injury to the creditor. The absence of any of
of carriage. the requisites mentioned above would prevent the obligor from
being excused from liability.
Issues: Art. 1755 of the Civil Code provides that a common carrier is
bound to carry the passengers as far as human care and
1. WON there was breach of contract of carriage on the part foresight can provide, using the utmost diligence of very
of petitioner cautious person, with due regard for all the circumstances.
2. WON the seizure of petitioner’s bus was a fortuitious event Thus, we held in Pilapil and De Guzman that the respondents
for which petitioner could not be held liable therein were not negligent in failing to take special precautions
3. WON the deceased is guilty of contributory negligence against threats to the safety of passengers which could not be
4. WON the petitioner is liable to private respondent for foreseen, such as tortious or criminal acts of third persons. In
damages the present case, this factor of unforeseeablility (the second
requisite for an event to be considered force majeure) is lacking.
Held: As already stated, despit e the report of PC agent Generalao that
the Maranaos were planning to burn some of petitioners buses
1. YES. and the assurance of petitioner’s operations manager (Diosdado
Bravo) that the necessary precautions would be taken, nothing
Art. 1763 of the Civil Code provides that a common carrier is was really done by petitioner to protect the safety of
responsible for injuries suffered by a passenger on account of passengers.
the wilful acts of other passengers, if the employees of the
common carrier could have prevented the act the exercise of 3. NO.
the diligence of a good father of a family. In the present case,
it is clear that because of the negligence of petitioner’s The petitioner contends that Atty. Caorong was guilty of
employees, the seizure of the bus by Mananggolo and his men contributory negligence in returning to the bus to retrieve
was made possible. something. But Atty. Caorong did not act recklessly. It should
be pointed out that the intended targets of the violence were
Despite warning by the Philippine Constabulary at Cagayan de petitioner and its employees, not its passengers. The assailants
Oro that the Maranaos were planning to take revenge on the motive was to retaliate for the loss of life of two Maranaos as a
petitioner by burning some of its buses and the assurance of result of the collision between petitioner’s bus and the jeepney
petitioners operation manager, Diosdado Bravo, that the in which the two Maranaos were riding. Mananggolo, the leader
necessary precautions would be taken, petitioner did nothing to of the group which had hijacked the bus, ordered the
protect the safety of its passengers. passengers to get off the bus as they intended to burn it and its
driver. The armed men actually allowed Atty. Caorong to
Had petitioner and its employees been vigilant they would not retrieve something from the bus. What apparently angered
have failed to see that the malefactors had a large quantity of them was his attempt to help the driver of the bus by pleading
gasoline with them. Under the circumstances, simple for his life. He was playing the role of the good Samaritan.
precautionary measures to protect the safety of passengers, Certainly, this act cannot be considered an act of negligence, let
such as frisking passengers and inspecting their baggages, alone recklessness.
preferably with non-intrusive gadgets such as metal detectors,
before allowing them on board could have been employed 4. YES.
without violating the passengers constitutional rights. As this
Court intimated in Gacal v. Philippine Air Lines, Inc., a common Indemnity for Death. Art. 1764 of the Civil Code, in relation to
carrier can be held liable for failing to prevent a hijacking by Art. 2206 thereof, provides for the payment of indemnity for the
frisking passengers and inspecting their baggages. death of passengers caused by the breached of contract of

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

carriage by a common carrier. Initially fixed in Art. 2206 at Life expectancy is equivalent to two thirds (2/3) multiplied by
P3,000.00, the amount of the said indemnity for death has the difference of eighty (80) and the age of the deceased. Since
through the years been gradually increased in view of the Atty. Caorong was 37 years old at the time of his death, he had
declining value of the peso. It is presently fixed at P50,000.00. a life expectancy of 28 2/3 more years. His projected gross
Private respondents are entitled to this amount. annual income, computed based on his monthly salary of
P11,385.00 as a lawyer in the Department of Agrarian Reform
Actual damages. Art. 2199 provides that Except as provided by at the time of his death, was P148,005.00. allowing for
law or by stipulation, one is entitled to an adequate necessary living expenses of fifty percent (50%) of his projected
compensation only for such pecuniary loss suffered by him as gross annual income, his total earning capacity amounts to
he has duly proved. The trial court found that the private P2,121,404.90. Hence, the petitioner is liable to the private
respondents spent P30,000.00 for the wake and burial of Atty. respondents in the said amount as compensation for loss of
Caorong. Since petitioner does not question this finding of the earning capacity.
trial court, it is liable to private respondents in the said amount
as actual damages.
JANUARY 25
Moral Damages. Under Art. 2206, the spouse, legitimate and
illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the The extent of damages that may be recoverable in case of a
death of the deceased. The trial court found that private contractual breach is provided under Article 2201.
respondent Paulie Caorong suffered pain from the death of her
husband and worry on how to provide support for their minor Art. 2201. In contracts and quasi-contracts, the damages for
children, private respondents Yasser King, Rose Heinni, and which the obligor who acted in good faith is liable shall be those
Prince Alexander. The petitioner likewise does not question this that are the natural and probable consequences of the breach
finding of the trial court. Thus, in accordance with recent of the obligation, and which the parties have foreseen or could
decisions of this Court, we hold that the petitioner is liable to have reasonably foreseen at the time the obligation was
the private respondents in t he amount of P100,000.00 as moral constituted.
damages for the death of Atty. Caorong. In case of fraud, bad faith, malice or wanton attitude, the obligor
shall be responsible for all damages which may be reasonably
Exemplary Damages. Art. 2232 provides that in contracts and attributed to the non-performance of the obligation. (1107a)
quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, Atty. Valencia: So again, applying it to common carriers with
or malevolent manner. In the present case, the petitioner acted respect to the first paragraph, how do you understand it? What
in a wanton and reckless manner. Despite warning that the would be the extent of the recovery of a common carrier?
Maranaos were planning to take revenge against the petitioner
by burning some of its buses, and contrary to the assurance Student: With respect to the recovery, Ma’am, as regards the
made by its operations manager that the necessary precautions first paragraph, the common carrier is liable only if there is no
would be taken, the petitioner and its employees did nothing to bad faith. The liability is also limited to the natural and
protect the safety of passengers. Under the circumstances, we probable consequences of the breach of the obligation,
deem it reasonable to award private respondents exemplary Ma’am.
damages in the amount of P100,000.00.
Atty. Valencia: So first, the common carrier must be in good
Attorneys Fees. Pursuant to Art. 2208, attorneys fees may be faith. If he is in good faith, the extent of the liability of the
recovered w hen, as in the instant case, exemplary damages are common carrier is only to the extent of the natural and probable
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of consequences of the breach. So kung ano lang yung result, that
Appeals, we held an award of P50,000.00 as attorneys fees to which the parties have foreseen or could have reasonably
be reasonable. Hence, the private respondents are entitled to foreseen at the time the obligation was constituted. With regard
attorneys fees in that amount. to the second paragraph? If there is fraud, bad faith or wanton
attitude? What is the extent of the liability of the shipper?
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil
Code, in relation to Art. 2206 thereof, provides that in addition Student: In this case, Ma’am, the shipper shall be responsible
to the indemnity for death arising from the breach of contract for all damages which may be reasonably attributed to the non-
of carriage by a common carrier, the defendant shall be liable performance of its obligation, Ma’am. So if there is bad faith,
for the loss of the earning capacity of the deceased, and the Ma’am, the common carrier is liable for damages such as
indemnity shall be paid to the heirs of the latter. The formula moral…. yung mental Ma’am. (Lels)
established in decided cases for computing net earning capacity
is as follows: Atty. Valencia: So yung beyond the probable consequences of
the loss, destruction or injury sustained. So, therefore, based on
Gross Necessary 2201, we still have to determine the manner by which the cargo
Net earning = Life x Annual - Living was shipped. Was there good faith or bad faith on the part of
Capacity Expectancy Income Expenses the common carrier? So the carrier may be compelled to pay for
damages. The owner of the goods or the passenger may have
a recourse to the common carrier who committed the negligent

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

or fraudulent act. But while the common carrier may be held Continue, Article 2205.
liable, the common carrier also have a re course against the Article 2205. Damages may be recovered:
negligent employee. (1) For loss or impairment of earning capacity in cases of
temporary or permanent personal injury;
You said that the damages are provided for under Article 2197. (2) For injury to the plaintiff's business standing or commercial
credit.
Art. 2197. Damages may be:
(1) Actual or compensatory; Atty. Valencia: Based on what? Based on the claim for actual
(2) Moral; and compensatory damages. So based on this, damages cannot
(3) Nominal; be presumed. And the courts, in giving an award, must point
(4) Temperate or moderate; out the specific act that will afford the court grounds for
(5) Liquidated; or awarding damages. With respect t o actual or compensatory
(6) Exemplary or corrective. damages, there must be proof. Halimbawa, you are hospitalized,
so what would be the proof that you will show to the court?
Atty. Valencia: Now, Article 2216 provides that: Hospital bills, doctor’s fee, etc. You need to prove that, actual
and compensatory damages.
Art. 2216. No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages, With respect to goods, what would be the basis for the claim for
may be adjudicated. The assessment of such damages, except the value of the goods with respect to actual damages? To what
liquidated ones, is left to the discretion of the court, according is the plaintiff entitled to in case of valuation of the goods? Of
to the circumst ances of each case. course, it should always be based on the value of the goods or
property at the time of destruction. If there’s a bill of lading, the
common carrier is liable for the value indicated in the bill of
Atty. Valencia: So, how is the damage assessed here? Except
lading. But there are instances where the value of the cargo is
of course as to liquidated damages because it is left to the
based on the value of that cargo at the time of destruct ion. It
agreement of the parties. It is left to whom? To the discretion
will also depend on the place where the goods are to be
of the court and depends on the circumstances of each case.
delivered, that will be taken into consideration with regards to
Meaning, it is not automatic. There must be proof (e.g.
the value of the cargo in terms of damages to be awarded.
testimonies) as to the injuries sustained by the passenger, that
Again, there must be proof because the shipper is entitled to a
he suffered some kind of injury in so far as the damage to the
profit, it is for business purposes. For example binebenta nya ng
goods or damage to the person is concerned.
P2,000 tapos tag P1,000 ang cost. So he is entitled to the P1,000
na dapat nya ma-earn. That will be taken into consideration in
Can we read Article 2199 and 2200?
computing the damages.

Art. 2199. Except as provided by law or by stipulation, one is Usually, in the claim for damages, there is usually a demand. A
entitled to an adequate compensation only for such pecuniary demand from the common carrier that this is the value. It is only
loss suffered by him as he has duly proved. Such compensation when the common carrier does not pay the value that the
is referred to as actual or compensatory damages. shipper is forced to go to court to claim for damages. So in the
hearing of the case, this is one of the pieces of evidence to be
Art. 2200. Indemnification for damages shall comprehend not considered.
only the value of the loss suffered, but also t hat of the profits
which the obligee failed to obtain. (1106) So, damages in personal injury cases. Personal injury and even
Atty. Valencia: So what are the damages that may be awarded death entitles claimant to all medical expenses as well as other
reasonable expenses that may be incurred for treatment, after-
under this provision? What are the two (2) kinds of actual or
compensatory damages here? treatment (e.g. Rehab), kasama yun . With respect to death, the
funeral expenses are also included. Pero di na kasali yung 9
Student: Under 2199, Ma’am, one is entitled to the actual days, 40 days and 1 year anniversary (Lels). So funeral
expenses, yung food served UNTIL the burial. Kung POST burial,
damages that he incurred by virtue of the breach of contract of
the other party, Ma’am. Under 2200, he is also entitled to lost di mo na yan ma claim.
profits, Ma’am due to the loss suffered by the other party,
Ma’am. Can you read Article 2206 as regards to who can be the heirs?
Art. 2206. The amount of damages for death caused by a crime
Atty. Valencia: So there are two (2) kinds of losses. You or quasi-delict shall be at least three thousand pesos, even
remember in your Civil Code? (Ma’am mentions two latin terms though there may have been mitigating circumstances. In
I really cannot understand maski unsa nakog balik balik sa addition:
recording. Sorry ) . Meaning to say: (1) The defendant shall be liable for the loss of the earning
1. The loss in relation to what a person already possesses. capacity of the deceased, and the indemnity shall be paid to the
Naputol, nawala, namatay, naputol ang paa (Lels), you heirs of the latter; such indemnity shall in every case be
have to be compensated. assessed and awarded by the court, unless the deceased on
2. The failure to receive the benefit that would have account of permanent physical disabilit y not caused by the
pertained to him. defendant, had no earning capacity at the time of his death;

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

(2) If the deceased was obliged to give support according to the (1) When exemplary damages are awarded;
provisions of Article 291, the recipient who is not an heir called (2) When the defendant's act or omission has compelled the
to the decedent's inheritance by the law of testate or intestate plaintiff to litigate w ith third persons or to incur expenses to
succession, may demand support from the person causing the protect his interest;
death, for a period not exceeding five years, the exact duration (3) In criminal cases of malicious prosecution against the
to be fixed by the court; plaintiff;
(3) The spouse, legitimate and illegitimate descendants and (4) In case of a clearly unfounded civil action or proceeding
ascendants of the deceased may demand moral damages for against the plaintiff;
mental anguish by reason of the death of the deceased. (5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
Atty. Valencia: So what is the fixed amount of damages in
(6) In actions for legal support;
case there is death? Based on Article 2206, it is only P3,000. So
(7) In actions for the recovery of wages of household helpers,
ang value ng buhay nyo is only P3,000 (Lels). However, the
laborers and skilled workers;
court has increased the amount in cases (i.e. through
(8) In actions for indemnity under workmen's compensation and
jurisprudence). So ngayon P50,000 na. At least ang halaga ng
employer's liability laws;
buhay nyo P50,000 na (Lels). That is in the case of Escaño vs.
(9) In a separate civil action to recover civil liability arising from
Spouses Paz 346 SCRA 270.
a crime;
(10) When at least double judicial costs are awarded;
So, part of the damage is loss of earning capacity. We have
(11) In any other case where the court deems it just and
discussed that earlier that the amount of loss of earning capacity
equitable that attorney's fees and expenses of litigation should
that should be awarded in accordance with par. 1 of Article 2206
be recovered.
is to be determined on the basis of this formula:
In all cases, the attorney's fees and expenses of litigation must
be reasonable.
Net Earning Capacity = Life Expectancy x (Gross Annual
Income-Necessary Living Expenses)
Atty. Valencia: So based on this, the court must give a factual
and legal justification for the award of attorney’s fees. The court
With respect to the 1 st factor, how is life expectancy computed? said in the case of PAL vs. CA (2008), it cannot just be stated
This is the basis, another formula: by the court in its dispositive portion without stating in the body
of the decision the basis for the award of such attorney’s fees.
Life Expectancy = 2/3 x 80 – Age at the Time of Death So attorney’s fees, in contracts of carriage, may be awarded in
cases of Nos. 1,3,4,5,7,8 of Article 2208. So yung interest, In a
What is the basis of this formula? It is based on the American case for damages in case of breach, can interest be claimed?
Expectancy Table of Mortality.
Moral damages provided under 2217.
With respect to the rate (I think Ma’am is referring to the 2 nd
factor in the formula), we take into consideration the Art. 2217. Moral damages include physical suffering, mental
expectancy. The proper computation should be based on the anguish, fright, serious anxiety, besmirched reputation,
gross income of the victim minus the necessary and incidental wounded feelings, moral shock, social humiliation, and similar
living expenses which the victim would have incurred if he were injury. Though incapable of pecuniary computation, moral
alive. So that’s why the age is computed based on the time of damages may be recovered if t hey are the proximate result of
death. For example, we anticipate that he will still live for thirty the defendant's wrongful act for omission.
(30) years, then his earning capacity for the next 30 years will
be determined by the court kung magkano. So in the case of  When is moral damages awarded? Are moral
Atty. Cauro (?), P150,00 a year times 38 years more minus the damages recoverable in actions for breach of
50% that will be what will be awarded to the heirs because they contract?
are entitled to the 50% of the income that was supposed to be
given to the deceased. General rule: No, in view of Articles 2219.

The amount of living expenses, according to the court, must also

Art. 2219. Moral damages may be recovered in the following
be established, to determine the net earning. The court has
and analogous cases:
consistently ruled that the amount is 50% of the gross income
in the absence of any proof. 50% of the living expenses must
(1) A criminal offense resulting in physical injuries;
be given to the heirs (or 50% of the gross income is to be given
(2) Quasi-delicts causing physical injuries;
ata ang pasabot ni Ma’am).
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
What about attorney’s fees? Can attorney’s fees be
(5) Illegal or arbitrary detention or arrest;
automatically awarded? It is provided for under Article 2208.
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
Article 2208. In the absence of stipulation, attorney's fees and (8) Malicious prosecution;
expenses of litigation, other than judicial costs, cannot be (9) Acts mentioned in Article 309;
recovered, except:

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, Baco, Mindoro, 1 hour and 15 minutes after take -off. All
30, 32, 34, and 35. passengers and crew of the said plane died.

The parents of the female seduced, abducted, raped, or abused, The plaintiffs, parents of Pedro T. Davila, Jr., who was one of
referred to in No. 3 of this article, may also recover moral the passengers, had no definite news of what had happened to
damages. their son, getting what information they could only from
conflicting newspaper reports, until they received, on December
The spouse, descendants, ascendants, and brothers and sisters 19, 1960, a letter of condolence from the defendant's president
may bring the action mentioned in No. 9 of this article, in the Andres Soriano, informing them that their son had died in the
order named. crash. And it was only on December 29 that his body was
recovered and taken back to Iloilo.
 However, moral damages may be recovered in the
Parents of Davila filed a complaint against PAL for damages.
following cases:
Issues:
1. When death occurs: (Articles 1764 in relation to
1. Under the facts of the case, is PAL liable?
2206)
2. What is the extent of liability for lost earnings, gross or net
2. Even when death did not occur (Article 2220)
and for how many years?
3. Is PAL liable for exemplary damages? Why?
Art. 1764. Damages in cases comprised in this Section shall be 4. What is the total liability of PAL?
awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a Held:
passenger caused by the breach of contract by a common 1. Yes, there being no satisfactory explanation on the part of
carrier. the defendant as to how and why the accident occurred,
the presumption is that it was at fault, under Art 1756 NCC.
Art. 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even 2. The CCs liability for lost earnings of the deceased passenger
though there may have been mitigating circumstances. In are his net earnings during his expected length of life based
addition: on accepted morality tables. The deceased, Pedro Davila Jr,
was single and 30 years of age when he died. At that age
1. The defendant shall be liable for the loss of the earning one’s normal life expectancy is 33 1/3 years, according to
capacity of the deceased, and the indemnity shall be paid the formula (2/3 x [80-30]) adopted by this court in the
to the heirs of the latter; such indemnity shall in every case case of Villa Rey Transit v CA on the basis of the American
be assessed and awarded by the court, unless the deceased Expectancy table of Mortality. However, although the
on account of permanent physical disability not caused by deceased was in relatively good health, his medical history
the defendant, had no earning capacity at the time of his shows that he had complained of and been treated for such
death; ailments as backaches, chest pains and occasional feelings
of tiredness. It is reasonable to make an allowance for these
2. If the deceased was obliged to give support according to circumstances and consider, for purposes of this case , a
the provisions of Article 291, the recipient who is not an heir reduction of his life expectancy to 25 yrs.
called to the decedent's inheritance by the law of testate or
intestate succession, may demand support from the person 3. No, PAL is not liable for exemplary damages. According to
causing the death, for a period not exceeding five years, Art 2232 of the NCC, in contracts and quasi-contracts, the
the exact duration to be fixed by the court; court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive or
3. The spouse, legitimate and illegitimate descendants and malevolent manner. The failure of the defendant here to
ascendants of the deceased may demand moral damages exercise extraordinary diligence, as required by law, does
for mental anguish by reason of the death of the deceased, not amount to anyone of the circumstances contemplated
in the said provision.
Art. 2220. Willful injury to property may be a legal ground for
4. Total liability of PAL is P232,000 as follows:
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule a. lost earnings P195,000
applies to breaches of contract where t he defendant acted b. actual damages 3,500
fraudulently or in bad faith.
c. moral damages 10,000 (for the parent’s mental anguish)
d. atty’s fees P10,000
 What happened in the case of Davila vs PAL?

DAVILA VS. PAL CHINA AIRLINES VS. CA

Facts: There was a plane crash that involved PAL’s planes, the
route of which was from Iloilo-Romblon-Manila. It crashed at Mt. At issue in this case is the decision of the CA awarding damages
made by the trial court in favour of Salvador and Lao.

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

which the parties had foreseen or could have reasonably

Facts: Salvador and Lao here availed the services of a travel foreseen. In such a case, the liability would not include moral
agency to book their ticket. Manila-Taipei to Los Angeles. What damages. For this reason, not every case of mental anguish,
is the purpose of their travel? There was a program in Los fright or serious anxiety calls for the award of moral
Angeles. When they found out that Morella agenc y charged damages.
higher than the Amesco agency, they dropped the former and
engaged the services of Amesco because Lao was an Amesco As for exemplary damages, Article 2232 of the Civil Code
card holder. So Lao gave to Amesco their record booking para provides that in a contractual or quasi-contractual relationship,
sa confirmation of their booking, however, nasa kay Morella and exemplary damages may be awarded only if the defendant had
booking no. kasi mas mahal kaya they opted to engage Amesco. acted in "a wanton, fraudulent, reckless, oppressive or
But what they paid Amesco was what? The booking reference malevolent manner." China Airlines was not in bad faith and its
that china airlines issued to Morella which China Airline employees did not act in a wanton, fraudulent, reckless,
confirmed. When the confirmation of the booking, Amesco oppressive or malevolent manner. The award of exemplary
issued the passengers ticket . When they were at the airport, to damages is therefore unwarranted in this case.
board the airplane for their flight, Salvador and Lao were
prevented from boarding because their names were not in the Private respondents were also not entitled to actual damages.
passengers’ manifest because china airline revoke the However, private respondents did not shell out any money for
reservation which was made by Morella. So they were only able their CAL tickets. Amexco voided the CAL tickets when private
to board on the following day. Trial court rendered in favour of respondents requested Amexco to book them in another airline.
Salvador and Lao and they were ordered to pay 10,000 for moral
damages, 50,000 as exemplary damages and 50,000 by way of Moreover, the SC noted that, private respondents soldered some
attorneys fees. The CA adopted the lower court ruling. Now, the form of injury for the trouble, pasahe papunta sa airport, they
appeal to the SC. were awarded nominal damages. When plaintiff suffers
some species of injury not enough to warrant an award of actual
Issues: damages, the court may award nominal damages. The court
1) was there breach of the contract of carriage in cancelling the may award nominal damages purely to vindicate a right of a
booking of Salvador and Lao. plaintiff which defendant has violated and not to indemnify any
2) Was there bad faith on the part of China airlines? loss the plaintiff has suffered. The court may award nominal
damages in every obligation arising from any source
Held: enumerated in Article 1157 of the Civil Code, or in any case
1. China airline does not deny the confirmation of the where there is an invasion of any property right. So the SC
reservation made by Amesco. The ticket issued by Amesco awarded 5000 each as a reasonable amount of damages. Kasi
upon china airlines confirmation are undeniably are proof of diba ang gi-award ng trial court, 10,000, binabaan lang, nagging
the contract of carriage between china airline and Salvador 5,000.
and Lao. The nature of an airline's contract of carriage
partakes of two types, namely: With respect to the attorney’s fees, the SC held that the
fact that private respondents were compelled to litigate and
(a) a contract to deliver a cargo or merchandise to its incur expenses to protect and enforce their claim does not justify
destination, and the award of attorney's fees. The court may award attorney's
(b) a contract to transport passengers to their destination. fees only in the instances mentioned in Article 2208 of the Civil
Code, and this case is not one of them. Moreover, when there
What happens in this case? When china airline confirmed the is no basis to award moral and exemplary damages, there is also
reservation, it bound itself to transport private respondents on no basis to award attorney's fees.
its flight on 13 June 1990. The SC reiterated its ruling in the case
of Alitalia v CA, “when an airline issues a ticket to a passenger
confirmed for a particular flight on a certain date, a contract of
carriage arises. The passenger then has every right to expect FEBRUARY 1
that he would fly on that flight and on that date. If he does not,
then the carrier opens itself to a suit for breach of contract of CATHAY PACIFIC AIRWAYS VS. VASQUEZ
carriage.”
2. No bad faith. 1. Won the involuntary seat upgrading will constitute a
breach of contract
As to moral damages, while China airlines negligence caused 2. Was there a bad faith?
it to breach its contract of carriage. Its negligence is,
however, not so gross to amount to bad faith. Mere Just take note that in this case in the lower court they prayed
negligence, even if it causes the plaintiff to suffer mental for 1M pesos for moral damages but they were awarded 2M for
anguish or serious fright, is not a ground for awarding moral moral damages, 100K as nominal damages, 5M as exemplary
damages. The law distinguishes a contractual breach damages and 1M for attorney’s fees and litigation expenses
effected in good faith from one attended by bad faith. Absent which is even more than what they prayed for.
fraud or bad faith on defendant's part in breaching his
contract, his liability for damages is limited to the natural and The SC here was alarmed of the excessive award of damages.
probable consequences of the breach of the obligation, In the end, they were awarded 5K as damages. On the question

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

here resolved by the court is WON the involuntary seat evidence therefore any dispute that may arise on the basis of
upgrading of the seat of the passenger to a more superior class the contract, the court will determine what is
at no cost on the part of the passenger will constitute a breach incorporated/stated in the Bill of Lading.
of contract. The SC said NO.
Therefore, PAROL EVIDENCE is not admissible. Parol evidence
refers to evidence not incorporated or stated in the contract.
BILL OF LADING Under the Parol Evidence Rule, whatever you had discussed
prior to the execution of the Bill of Lading or any
contemporaneous agreement should have been incorporated in
Let’s go to CODE OF COMMERCE.
this Bill of Lading. Therefore, if there is dispute that may arise
(for example the goods were not delivered in the same condition
In the Code of Commerce the opening provision pertains to a
or there was shortage in the delivery) the Court will determine
Bill of Lading. So now we will now discuss what Bill of Lading is.
what is indicated in the Bill of Lading.
When you have read this because it is said that the contract is
usually the Bill of Lading which serves as the basis for the cargo.
EXCEPTION under Art. 353, it says “other than those of falsity
and material error in the drafting”
For example, Bill of Lading with respect to cargo, tickets with
1. Falsity; and
respect to passengers for fare.
2. Material error in the drafting
 What does it mean?
It is written acknowledgment, signed by the master of a vessel GENERAL RULE: The terms and conditions of the Bill of Lading
or other authorized agent of the carrier, that he has received will be considered in the disputes that may arise.
the described goods from the shipper, to be transported on the
expressed terms, to the described place of destination, and to EXCEPTION: When there is FALSITY and MATERIAL ERROR IN
be delivered there to the designated consignee or parties THE DRAFTING.

 What is the nature of a Bill of Lading? Hence, parol evidence is admissible meaning to say any verbal
Art. 353 says that a Bill of Lading is a legal evidence of the or other evidence aliunde or other evidence which is not
contract between the shipper and then carrier. It provides for incorporated in the Bill of Lading shall be considered.
the terms and conditions of the agreement between the parties.
It contains the names of the parties (consignor, consignee, and Be as it may, while the Bill of Lading is the best legal evidence
carrier), rates, freight charges, route, destination or other as the contract between the parties, Art. 354 provides that:
charges. It also st ipulates the rights and obligations of the
parties. ARTICLE 354. In the absence of a bill of lading, disputes shall
be determined by the legal proofs which the parties may present
ARTICLE 353. The legal evidence of the contract between the in support of their respective claims, according to the general
shipper and the carrier shall be the bills of lading, by the provisions established in this Code for commercial contracts.
contents of which the disputes which may arise regarding their
execution and performance shall be decided, no exceptions What is its implication? These documents (Bill of
being admissible other than those of falsity and material error Lading) are not necessary for the perfection of the contract
in the drafting. because there is already meeting of the minds. As long as there
is meeting of the minds, the contract exist even in the absence
After the contract has been complied with, the bill of lading of a Bill of Lading.
which the carrier has issued shall be returned to him, and by So a cargo can even be transported without it because
virtue of the exchange of this title with the thing transported, the common carrier received it, the shipper turned it over to
the respective obligations and actions shall be considered common carrier for shipment and accepted by the common
cancelled, unless in the same act the claim which the parties carrier. And the obligation of the common carrier to exercise
may wish to reserve be reduced to writing, with the exception extraordinary diligence, notwithstanding the absence of a Bill of
of that provided for in Article 366. Lading continued to exist. Similar to what we discussed under
the Civil Code provision, the extraordinary diligence exist.
In case the consignee, upon receiving the goods, cannot return However, there is modification based on what is provided under
the bill of lading subscribed by the carrier, because of its loss or the Civil Code.
of any other cause, he must give the latter a receipt for the Insofar as admissibility of evidence, the ELECTRONIC
goods delivered, this receipt producing the same effects as the COMMERCE ACT of 2000 or R.A. 8792 also provides for
return of the bill of lading. electronic commercial documents specifically Sec. 25-26 which
admits data messages or electronic documents to be used in lieu
Take note of Magellan Manufacturing vs CA (132 S 529) of transport documents in writing.

The Bill of Lading being the contract is the law between them Section 25. Actions Related to Contracts of Carriage of Goods.
and the parties here are bound by the terms and conditions as - Without derogating from the provisions of part two of this law,
incorporated in the Bill of Lading provided that the terms and this chapter applies to any action in connection with, or in
conditions are not contrary to law, morals, public policy and
public order. As provided in Art. 353, this is the best legal
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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

pursuance of, a contract of carriage of goods, including but not the use of electronic data message or electronic document has
limited to: been terminated and replaced by the used of paper documents.
A paper document issued in these circumstances shall contain a
(a) (i) furnishing the marks, number, quantity or statement of such termination. The replacement of the
weight of goods; electronic data messages or electronic documents by paper
documents shall not affect the rights or obligation of the parties
(ii) stating or declaring the nature or value of goods; involved.

(iii) issuing a receipt for goods; (6) If a rule of laws is compulsorily applicable to a
contract of carriage of goods which is in, or is evidenced by, a
(iv) confirming that goods have been loaded; paper document, that rule shall not be inapplicable to such a
contract of carriage of goods which is evidenced by one or more
(b) (i) notifying a person of terms and conditions of the electronic data messages or electronic documents by reason of
contract; the fact that the contract is evidenced by such electronic data
messages or electronic documents instead of by a paper
(ii) giving instructions to a carrier; document.

(c) (i) claiming delivery of goods;

FUNCTIONS OF BILL OF LADING
(ii) authorizing release of goods;
It is both a:
(iii) giving notice of loss of, or damage to goods; 1. RECEIPT of the goods; and
2. CONTRACT
(d) giving any other notice or statement in connection
with the performance of the contract; If there is a charter party, the charter party will stand as the
contract between the parties. The Bill of Lading serves as the
(e) undertaking to deliver goods to a named person or acknowledgment of the goods but the terms and conditions shall
a person authorized to claim delivery; still be governed by the charter party.

(f) granting, acquiring, renouncing, surrendering, In Telengtan Brothers & Sons, Inc. v. Court of Appeals
transferring or negotiating rights in goods; (236 S 617) and SALUDO VS CA (GR 95536 207), where
the SC reiterated with respect to the nature of a Bill of Lading
(g) acquiring or transferring rights and obligations being a written acknowledgment of the receipt of the goods and
under the contract. an agreement to transport and deliver them at a specific place
to a person named or on his order of acceptance.
Section 26. Transport Documents. - (1) Where the law requires
that any action referred to contract of carriage of goods be
carried out in writing or by using a paper document, that KINDS OF BILL OF LADING
requirement is met if the action is carried out by using one or
more data messages or electronic documents. 1. CLEAN BILL OF LADING AND FOUL BILL OF
LADING
(2) Paragraph (1) applies whether the requirement A clean bill of lading is one that does not contain any
there in is in the form of an obligation or whether the law simply notation indicating any defect in the goods. A foul bill
provides consequences for failing either to carry out the action of lading is one that contains such notation.
in writing or to use a paper document.
2. SPENT BILL OF LADING
(3) If a right is to be granted to, or an obligation is to Where the carrier already delivers the goods, the
be acquired by, one person and no person, and if the law carrier is supposed to have retrieved the covering bill
requires that, in order to effect this, the right or obligation must of lading that he issued for the goods. If the goods
be conveyed to that person by the transfer, or use of, a paper were already delivered but the bill of lading was not
document, that requirement is met if the right or obligation is retuned, the bill of lading is called a “spent bill of
conveyed by using one or more electronic data messages or lading.”
electronic documents unique;
3. THROUGH BILL OF LADING
(4) For the purposes of paragraph (3), the standard of A “through bill of lading” is one issued by a carrier who
reliability required shall be assessed in the light of the purpose is obliged to use the facilities of other carriers as well
for which the right or obligation was conveyed and in the light as his own facilities for the purpose of transporting the
of all the circumstances, including any relevant agreement. goods from city of the seller to the city of the buyer,
which bill of lading is honored by the second and other
(5) Where one or more data messages are used to interested carriers who do not issue their own lading.
effect any action in subparagraphs (f) and (g) of Section 25, no
paper document used to effect any such action is valid unless

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

4. ON BOARD BILL v. RECEIVED FOR SHIPMENT shipper or prefaced by the phrase (Said to Contain). The
BILL matter of the quantity, condition, and kind of goods
The Supreme Court explained the difference between inside the cargo is the sole responsibility of the shipper.
an “on board bill of lading” and a “received for However, the ruling of the Supreme Court in Lina Brokerage
shipment bill of lading” in once case in this wise: “An Inc. v Filipino Assurance Corp., the ruling was made an
on board bill of lading is one which it is stated that the exception to the doctrine in the United States. It was held that
goods have been received on board the vessel which is even if a said to contain bill of lading covering containers, where
to carry the goods, whereas a received for shipment it is additionally stated by the carrier that it is a receipt for the
bill of lading is one in which it is stated that the goods number of packages shown above, that phrase explicitly
have been received for shipment with or without admitted that the containerized shipment in the bill of lading and
specifying the vessel by which the goods are to be the carrier is liable for the shortage of the cargo delivered. Kasi
shipped. Received for shipment bills of lading are the common carrier admitted, in effect, that is his responsibility.
issued whenever conditions are not normal and there If he really wants to check it, then open it.
is insufficiency of shipping space. An on board bill of
lading is issued when the goods have been actually Take note also under Art. 706 of the Code of Commerce, as
placed aboard the ship with every reasonable reference, it also provides for the stipulations that must be
expectation that the shipment is as good as on its way. written in the bill of lading for maritime commerce.
It is, therefore, understandable that a party to a
maritime contract would require an on board bill of Art. 707- 718 provide for other rules that apply in the bill of
lading because of its apparent guaranty of certainty of lading in the absence of Civil Code provisions, because take note
shipping as well as the seaworthiness of the vessel that under Art. 1766- in all matters not regulated by the Civil
which is to carry the goods. (Magellan Mfg. Code, the provisions of the Code of Commerce shall apply.
Marketing Corp. v. CA GR. 95529) So these are additional provisions in a contract, for example in
a charter party, where the parties can enter into the contract,
5. CUSTODY BILL OF LADING the charter party enters based on what is provided in the Code
In this type of bill of lading, the good are already of Commerce, and the Civil Code provisions.
received by the carrier but the vessel indicated therein
has not yet arrived in the port. COGSA, the Carriage of Goods by Sea Act also provide for
the agreement that may be stipulated as between the parties in
6. PORT BILL OF LADING drafting a contract of carriage, and it provides that after
In a port of bill of lading, the vessel indicated in the bill receiving the goods, the carrier, or the master, or the agent of
of lading that will transport the goods is already in the the carrier shall, on demand of the shipper, issue to shipper a
port. bill of lading. This is provided under Sec. 3 (3) of COGSA.

7. SAID TO CONTAIN BILL OF LADING A bill of lading is also listed as one of the documents of title, if
Eto yung mga container vans… usually if the shipper by the terms, it is negotiable.
has cargoes and it’s difficult for the carrier to carry the
cargo, the carrier usually rents the container. the So take note also Art. 356, it is still operative. We already
container van is brought to the premises of the shipper. discussed 353, 354.
You call this CONTAINERIZED SYSTEM. Dinadala
yung container van sa shipper, and the shipper loads Art. 355 The liability of the carrier shall begin from the moment
whatever is inside the van. The carrier has no he receives the merchandise, in person or through a person
intervention to check whether tama ba, such as the entrusted thereto in the place indicated for receiving them.
quantity, because once the goods are delivered to the
shipper, naka-lock na yun.
So, similar to the civil code provisions that provide that
responsibility begins from the time the goods are unconditionally
In the bill of lading, as in the case of United States v
placed in the possession of the common carrier.
Commission of Customs, the carrier as we said, does not
participate in the counting of the merchandise for loading into
the container. Having no actual knowledge, what the carrier will Art. 356 Carrier may refuse to accept packages which are unfit
indicate in the bill of lading is “said to contain” - meaning to say for the transportation, and the common carrier does not have
ito yung sinabi ng shipper, without knowledge kung totoo ba the facilities required to preserve t he cargo; and if said
yung sinabi ng shipper, since the common carrier had no transportation is to be made over a railroad, and the shipment
participation, and it is only based on the declaration of the is insisted on, the company shall carry it, being exempt from all
shipper, that the shipper said it contains this quantity of boxes, liability if its objections are so stated in the bill of lading.
this quantitiy of sacks, etc. So, said to contain.
So, this is one of the exceptions when the carrier may refuse,
Having no actual knowledge of the kind, quantity, or condition because the general rule is that they cannot refuse.
of the contents of the container, the carrier issues the
corresponding bill of lading based on the declaration of ARTICLE 357. If by reason of well-founded suspicion of falsity
the shipper and the bill of lading simply states the in the declaration as to the contents of a package the carrier
contents of the container either as advised by the should decide to examine it, he shall proceed with his

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

investigation in the presence of witnesses, with the shipper or So if the carrier negligently delays the delivery, the natural
consignee in attendance. disaster shall not free the carrier from the responsibility, this is
If the shipper or consignee who has to be cited does not attend, under Art. 1740. This is the supplemental provision.
the examination shall be made before a notary, who shall  What if there is already delay in the delivery of the
prepare a memorandum of the result of the investigation, for goods, what are the options available to shipper or
such purposes as may be proper. consignee? If for example, they can no longer make use
If the declaration of the shipper should be true, the expense of the goods due to the delay, the remedy is to demand for
occasioned by the examination and that of carefully repacking conversion. What are the requirements?
the packages shall be for the account of the carrier and in a
contrary case for t he account of the shipper. 1. Demand to deliver
2. Carrier refused the delivery
Art. 357: (This is a right granted to the common carrier). If the
common carrier has suspicions in the falsity of the declaration Shipper can now file a case.
as to the contents of the package, and decides to examine it, he
shall proceed with the investigation with the presence of Conversion- the monetary form of the goods will be delivered
witnesses, w ith the shipper or the consignee. in lieu of the goods that cannot be used anymore because of
the delay in the delivery.
The carrier who wants to do the investigation must inform na
may duda siya sa laman. If carrier refuses, remedy is to file a case.

Should the shipper or consignee to be cited does not appear,  However, if prior to the filing of the case, the carrier
the examination shall be made before a notary, who shall draft delivers, can the shipper refuse to accept the goods?
a certificate of the result of the examination, for the proper
purposes. No. If the goods were safely kept by the common carrier
and the tender or delivery of the goods should be made
The effect: If the declaration of the shipper should be correct, before the suit is filed.
the expenses caused by the examination and those of carefully
repacking the packages shall be defrayed by the carrier, and in Example: Fondant cake for a birthday party, and it was safely
the contrary case by the shipper. kept, shipper cannot refuse so long as it was delivered before
the suit was filed.
Art. 361 is already superseded by Art. 1745 of the Civil Code.
ARTICLE 358. If there is no period fixed for the delivery of the
goods the carrier shall be bound to forward them in the first
PARTIAL DELIVERY
shipment of the same or similar goods which he may make point
where he must deliver them; and should he not do so, the
damages caused by the delay should be for his account. ARTICLE 363. There is partial delivery if the goods cannot be
used. The consignee may refuse to accept to refuse the partial
delivery, IF he proves that he can no longer make use of the
Art. 358 provides when there is no period fixed for the delivery
goods apart from the other.
of the goods. Should no period within which goods are to be
delivered be previously fixed, the carrier shall be under the
obligation to forward them in the first shipment of the same or Example: Statue of Liberty (kalahati lang na-deliver, wala ang
similar merchandise which he may make to the point of delivery; paa. Huehuehue)
and should he not do so, the damages occasioned by the delay
shall be suffered by him. Going back to Bill of Lading

The issuance of a bill of lading carries the presumption that

Art. 370 If a period has been fixed for the delivery of the goods,
the goods were delivered to the carrier for immediate shipment,
it must be made within the same; otherwise the carrier shall pay
and that it shall be prima facie evidence of the receipt of the
the indemnity agreed upon in the bill of lading, neither the
carrier.
shipper nor consignee being entitled to anything else.
If no indemnity has been stipulated and the delay exceeds the
 Saludo Jr. v CA – that in the absence of convincing
time fixed in the bill of lading, the carrier shall be liable for the
testimonies establishing mistake, the recitals in the bill of
damages which the delay may have caused.
lading shall be controlling between the parties. Whatever
disputes may arise, the stipulations made in the bill of lading
However, under the Civil Code, the damages shall be paid if the shall be followed.
carrier refuses to pay the stipulated indemnity or is guilty of
fraud in the fulfillment of his obligation.  Unsworth Transport International v CA – the bill of
Should no indemnity have been agreed upon and the delay lading operates both as a receipt and a contract.
exceeds the time fixed in the bill of lading, the carrier shall be
liable for the damages which may have been caused by the Malayan Insurance v Jardine Davies Transport . Just
delay. review that. WON Bill of Lading is a contract of adhesion.
Majority of the cases say that the bill is a contract of adhesion
since only the carrier prepares it.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

However, in the case of Maersk Lines v CA. A bill of lading,  What are the functions of these shipment terms?
although contracts of adhesion, are not prohibited, and the
terms thereof binding to the parties since the other party is free 1. To determine the point of which the risk of loss passes
to reject it. But the terms in the bill of lading, as in this case, from seller to buyer. Because basic is the fact that
which create an absurd situation as having the effect of delivery is made to the consignee to whom it is
determining the arrival of the shipment to the sole determination required to be delivered and there are certain instances
of the carrier, such bill of lading cannot be enforced. where delivery to the carrier is delivery to the buyer,
and the buyer thereafter assumes the risk from the
Read also the ff. cases: time that the goods or cargoes are received by the
 MOF Company v Shin Yang Brokerage Corporation 600 common carrier.
S 521
 Philippine Charter v Unknown Owner of the Vessel M/V 2. They determine what performance by the seller
National Honor 463 S 202 amounts to a tender which will put the buyer, if he
 Belgian Overseas Charter vs Philippine First Insurance, thereafter refuses to accept delivery, in breach of
supra contract.
 Federal Express v American Home Assurance 437 S 50
 UCPB General Insurance Inc., v Aboitiz Shipping Feb. 3. They are used for quoting the price.
10, 2009 GR No. 168433
 Phil Charter Insurance vs Chem Oil Lighterage GR No. 4. They are also used to determine where taxes should
136888 be paid.
 Dole Phils. v Maritime Company 148 S 118
 So what is FOB or freight on board? What is the
*Dapat Manalo kayo sa conflicts.  significance of FOB?

It refers to the risk. The risk is passed to the buyer at the FOB
FEBRUARY 15 point. So what is the FOB point? It is usually FOB Davao, or FOB
Manila. Therefore, the FOB point of destination means that the
And we were discussing the functions, nature, and kinds of bill seller shall assume the risk until the goods reach the point of
of lading. And we said that the bill of lading can incorporate destination.
terms and can be regarded as a contract of adhesion, and it can
also be an enforceable instrument if by the terms, as provided For example, if the goods are shipped from abroad and in the
in the bill of lading, it is negotiable. bill of lading it provides FOB Davao, the place of delivery is
Davao and the point of destination is Davao. In which case the
It is a contract of adhesion in the sense that if the party agrees buyer assumes the risk only upon arrival of the goods at the
to it, then he is bound by it. place of destination. Meanwhile, it is the seller.

There are also shipment terms, because as you would note, in In FAS, it is a variant of FOB. Freight alongside board, or freight
Art. 1766 it states that: alongside the vessel, which means that the seller relinquishes
the risk the moment the goods are delivered alongside the
Art. 1766. In all matters not regulated by this Code, the rights vessel, which means in the port, unless we have this on-board
and obligations of common carriers shall be governed by the bill of lading. When we say on-board, if there is already an on-
Code of Commerce and by special laws. board bill of lading, this means that the cargoes are already on-
board the vessel which will carry the cargoes.
There are few terms and conditions in the Code of Commerce
that is wanting in so far as the bill of lading is concerned, or the  So what is the difference between FAS vessel and
obligations and responsibilities of the parties in a contract of FOB?
carriage.
It should be noted that in FAS vessel, the seller here is under
Because based on Art. 1523 of the Civil Code, to whom should no obligation to see to the loading of the cargo, and all that is
delivery be made? Art. 1523 provides that ownership is required of the seller is to deliver the cargo to the wharf. Unlike
transferred by tradition or delivery in the contract of sale. This if it is FOB vessel, the seller here must see to it that the goods
is the general provision. But sometimes there are things that are are loaded and the responsibility of the seller here does not
not incorporated or provided in the Code of Commerce or Civil cease until the loading of t he cargo on the vessel is completed.
Code provisions. An on-board bill of lading signifies the completion of the loading
of the cargo.
That’s why certain shipment terms have been made such as in
determining the point of destination, the point of sale, the taxes  What is CIF?
that should be paid, and where the shipment is consummated.
That’s why we have shipment terms such as FOB or freight on Cost Insurance Freight indicates here that the price quoted
board, freight alongside board, cost insurance freight or CIF, or by the seller includes the invoice price, plus the insurance, and
cost and freight lang, walang insurance. the freight. And the seller completes his performance by
procuring the necessary documents such as bill of lading,

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

insurance policy, sales invoice or what else is required for the the common carrier is barred. So which means that the claim
particular contract. And the seller forwards it to the buyer for against the common carrier under Art. 366 is a condition
this purpose. In the meantime, the insurance in this situation is precedent for the filing of an action in court. So if no claim was
payable to the buyer, and therefore the buyer bears the risk of made, no action can be filed in court.
loss when the goods are in transit. It means that only the seller
acquires depending on the agreement, the seller procures the If a claim is made and the common carrier refuses to
insurance policy covering the goods but it is charged to the acknowledge because of the damage being claimed by the
buyer. consignee or the shipper, then within what period should the
case be filed? After a claim is filed to the common carrier and
If the buyer would like to get his own insurance, the term is Cost after which it is refused, so if there is a contract, within what
and Freight, wala nang Insurance. So only cost and freight period? 10 years. If it is verbal? 6 years. So you can file within
minus the insurance because the insurance, as per agreement, the period of 10 years or 6 years, as the case may be. But the
is taken by the buyer himself. condition precedent is, there must be a claim filed pursuant to
Article 366.
The Civil Code does not provide a prescriptive period with
respect to the claim. So in the event of delivery, in the event And it is clear that the non-filing of the claim bars recovery. And
there is delivery, the cargos were delivered not in the provision the filing of the claim against the carrier within the time period
as it was delivered to the carrier, there are periods within which under Art. 366 constitutes a condition precedent to the accrual
a claim should be made by the buyer. of the right of action against the carrier for damages caused by
the consignor.
So this is provided under Art. 366 of the Code of Commerce:
So to what extent may the parties agree? The period of 24
ARTICLE 366. Within the twenty-four hours following the hours, depending on the agreement of the parties. So if there is
receipt of the merchandise, the claim against the carrier for no agreement with respect to the claim, then the provision of
damage or average be found therein upon opening the Art. 366 shall govern.
packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be  Why do you think is this condition for a claim
ascertained from the outside part of such packages, in which important? In whose favor or benefit would that be?
case the claim shall be admitted only at the time of receipt.
Federal Express Corporation vs American Home
After the periods mentioned have elapsed, or the transportation Assurance Company
charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods Facts: SMITHKLINE Beecham (SMITHKLINE for brevity) of
transported were delivered. Nebraska, USA delivered to Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal Express
With respect to the notice of claim and prescriptive period, of Corporation, a shipment of 109 cartons of veterinary biologicals
course it is basic under Civil law that those in the performance for delivery to consignee SMITHKLINE and French Overseas
of their obligation, if they are guilty of fraud or negligence or Company in Makati City, Metro Manila. The shipment was
delay and those who contravene the terms of the contract, shall covered by Burlington Airway Bill No. 11263825 with the words,
be liable for damages. And in an action for damages due to 'REFRIGERATE WHEN NOT IN TRANSIT' and 'PERISHABLE'
breach of contract, what is essential or required on the stamp marked on its face. Burlington insured the cargoes in the
part of the claimant to establish in order to recover his amount of $39,339.00 with American Home Assurance Company
claim for damages? (AHAC). The following day, Burlington turned over the custody
of said cargoes to Federal Express which transported the same
1. The existence of the perfected contract; to Manila and were immediately stored at Cargohaus' warehouse
2. What is the breach and who breached the contract; upon arrival.
and
-Is it the common carrier or the shipper? Twelve (12) days after the cargoes arrived in Manila, while the
3. There was damage suffered due to the breach by cargoes were about to be released, it was discovered that the
the carrier or by the shipper. same [were] stored only in a room with two (2) air conditioners
running, to cool the place instead of a refrigerator. According to
Notice, of course, is an essential element in order to determine an employee, the cartons where the vaccines were contained
a claim for damages. So based on Art. 366, if the cargoes were specifically indicated therein that it should not be subjected to
delivered and t he damage are apparent at the external of the hot or cold temperature. Thereafter, samples of the same were
cargo, when should the claim be made? It should be made taken and brought to the Bureau of Animal Industry of the
immediately. So the consignee may not receive the goods Department of Agriculture in the Philippines by SMITHKLINE for
because of the damage or indicate that there is damage. examination wherein it was discovered that the 'ELISA reading
of vaccinates sera are below the positive reference serum.
If the damage is internal and cannot be ascertained at the
external of the cargo, when should the claim of damages be As a consequence of the foregoing result of the veterinary
filed? It should be filed within 24 hours from receipt of the cargo. biologics test, SMITHKLINE abandoned the shipment and,
So if there is no claim within that period, then the claim against declaring 'total loss' for the unusable shipment, filed a claim with

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

AHAC through its representative in the Philippines, the Philam determine upon whom the cause of the damage should be
Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE charged against.
for the whole insured amount of THIRTY NINE THOUSAND
THREE HUNDRED THIRTY NINE DOLLARS ($39,339.00). It was explained in the case of UCPB General Insurance
Thereafter, [respondents] filed an action for damages against Company vs Aboitiz Shipping Corporation with regards to
the [petitioner] imputing negligence on either or both of them the notice of claim which must be strictly complied with.
in the handling of the cargo.
UCPB General Insurance Company vs Aboitiz Shipping
The RTC held the [petitioner] solidarily liable for the loss. The Corporation
appellate court held that the shipping Receipts were a prima
facie proof that the goods had indeed been delivered to the Facts: On June 18, 1991, three (3) units of waste water
carrier in good condition. treatment plant with accessories were purchased by San Miguel
Corporation (SMC for brevity) from Super Max Engineering
Issue: WON the petitioner should be held liable despite absence Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from
of notice Charleston, U.S.A. and arrived at the port of Manila on board MV
"SCANDUTCH STAR". The same were then transported to Cebu
Ruling: NO. on board MV "ABOITIZ SUPERCON II". After its arrival at the
port of Cebu and clearance from the Bureau of Customs, the
In this jurisdiction, the filing of a claim with the carrier within goods were delivered to and received by SMC at its plant site on
the time limitation therefor actually constitutes a condition August 2, 1991. It was then discovered that one electrical motor
precedent to the accrual of a right of action against a carrier for of DBS Drive Unit Model DE-30-7 was damaged.
loss of or damage to the goods. The shipper or consignee must
allege and prove the fulfillment of the condition. If it fails to do Pursuant to an insurance agreement, plaintiff-appellee paid SMC
so, no right of action against the carrier can accrue in favor of the amount of P1,703,381.40 representing the value of the
the former. The aforementioned requirement is a reasonable damaged unit. In turn, SMC executed a Subrogation Form dated
condition precedent; it does not constitute a limitation of action. March 31, 1992 in favor of plaintiff-appellee.

The requirement of giving notice of loss of or injury to the goods Consequently, plaintiff-appellee filed a Complaint on July 21,
is not an empty formalism. The fundamental reasons for such a 1992 as subrogee of SMC seeking to recover from defendants
stipulation are (1) to inform the carrier that the cargo has been the amount it had paid SMC.
damaged, and that it is being charged with liability therefor; and
(2) to give it an opportunity to examine the nature and extent Issues: WON the claim was filed within the time required
of the injury. "This protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter Held: NO.
is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims." The requirement to give notice of loss or damage to the goods
is not an empty formalism. The fundamental reason or purpose
When an airway bill -- or any contract of carriage for that matter of such a stipulation is not to relieve the carrier from just liability,
-- has a stipulation that requires a notice of claim for loss of or but reasonably to inform it that the shipment has been damaged
damage to goods shipped and the stipulation is not complied and that it is charged with liability therefor, and to give it an
with, its enforcement can be prevented and the liability cannot opportunity to examine the nature and extent of the injury. This
be imposed on the carrier. To stress, notice is a condition protects the carrier by affording it an opportunity to make an
precedent, and the carrier is not liable if notice is not given in investigation of a claim while the matter is still fresh and easily
accordance with the stipulation. Failure to comply with such a investigated so as to safeguard itself from false and fraudulent
stipulation bars recovery for the loss or damage suffered. claims.

Being a condition precedent, the notice must precede a suit for We have construed the 24-hour claim requirement as a
enforcement. In the present case, there is neither an allegation condition precedent to the accrual of a right of action against a
nor a showing of respondents' compliance with this requirement carrier for loss of, or damage to, the goods. The shipper or
within the prescribed period. While respondents may have had consignee must allege and prove the fulfillment of the condition.
a cause of action then, they cannot now enforce it for their Otherwise, no right of action against the carrier can accrue in
failure to comply with the aforesaid condition precedent. favor of the former.

So it is actually for the benefit of the carrier, because this will The shipment in this case was received by SMC on August 2,
enable the carrier to immediately investigate while the situation 1991. However, as found by the Court of Appeals, the claims
is still fresh (recent) in order for the carrier to be able to pinpoint were dated October 30, 1991, more than three (3) months from
who should be held accountable for the damage, whether receipt of the shipment and, at that, even after the extent of the
external or internal. Because if you would know, usually, the loss had already been determined by SMC’s surveyor. The claim
common carrier gets insurance and they need to determine their was, therefore, clearly filed beyond the 24-hour time frame
liability, at least, in the particular vessel. So again, the condition prescribed by Art. 366 of the Code of Commerce.
is for the benefit of the common carrier, to provide them the
opportunity to immediately investigate the situation and to

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Take note of the restriction that Art. 366 shall not begin to run 1971. The corresponding claim for the damages sustained by
until the cargoes have been delivered to the consignee. So Art. the cargo was filed by the plaintiff with the defendant vessel on
366 does not apply to misdelivery, meaning to say nagkamali May 4, 1972. On June 11, 1973 the plaintiff filed a complaint in
yung delivery. So what is important is the requirement that the the Court of First Instance of Manila, docketed therein as Civil
24-hour period shall commence at the time actual delivery is Case No. 91043, embodying three (3) causes of action involving
made. three (3) separate and different shipments. The third cause of
action therein involved the cargo now subject of this present
Also, the Civil Code provisions on extinctive prescription applies litigation.
to overland transportation and coastwise shipping because there
are no special rules with respect to the contract of carriage of Issue: WON Article 1155 of the Civil Code providing that the
overland transportation and coastwise shipping. As I’ve said, the prescription of actions is interrupted by the making of an
prescriptive period is 6 years if there is no written contract, and extrajudicial written demand by the creditor is applicable to
10 years if there is a written contract. Consequently, an action actions brought under the Carriage of Goods by Sea Act
for damages for breach of contract of carriage prescribes within
6 years if no bill of lading is made or any contract that may issue. Held: NO.
Otherwise, 10 years.
In a case governed by the Carriage of Goods by Sea Act, the
However, in the International Carriage of Goods, sa general provisions of the Code of Civil Procedure on prescription
COGSA, which is governed by Sec. 3(6). should not be made to apply. Similarly, we now hold that in such
a case the general provisions of the new Civil Code (Art. 1155)
Sec. 3(6) of the COGSA provides a similar claim mechanism as cannot be made to apply, as such application would have the
the Code of Commerce but prescribes a period of three (3) days effect of extending the one-year period of prescription fixed in
within which notice of claim must be given if t he loss or damage the law. It is desirable that matters affecting transportation of
is not apparent. It states: goods by sea be decided in as short a time as possible; the
application of the provisions of Article 1155 of the new Civil Code
Sec. 3(6). Unless notice of loss or damage and the general would unnecessarily extend the period and permit delays in the
nature of such loss or damage be given in writing to the carrier settlement of questions affecting transportation, contrary to the
or his agent at the port of discharge or at the time of the removal clear intent and purpose of the law.
of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be Moreover, no different result would obtain even if the Court
prima facie evidence of the delivery by the carrier of the goods were to accept the proposition that a written extrajudicial
as described in the bill of lading. If the loss or damage is not demand does toll prescription under the Carriage of Goods by
apparent, the notice must be given within three days of the Sea Act. The demand in this instance would be the claim for
delivery. damage-filed by Dole with Maritime on May 4, 1972. The effect
of that demand would have been to renew the one - year
Said notice of loss or damage may be endorsed upon the receipt prescriptive period from the date of its making. Stated
of the goods given by the person taking delivery thereof. otherwise, under Dole's theory, when its claim was received by
Maritime, the one-year prescriptive period was interrupted —
The notice in writing need not be given if the state of the goods "tolled" would be the more precise term — and began to run
has at the time of their receipt been the subject of joint survey anew from May 4, 1972, affording Dole another period of one
or inspection. (1) year counted from that date within which to institute action
on its claim for damage. Unfortunately, Dole let the new period
lapse without filing action. It instituted Civil Case No. 91043 only
The difference between the Code of Commerce and COGSA is
on June 11, 1973, more than one month after that period has
that the period is not mandatory under COGSA. Failure to file a
expired and its right of action had prescribed.
notice of claim within the given period does not discharge the
carrier because the consignee still has a period of one year
within which to file the claim. If no claim is filed within one year, The prescriptive period of one year under COGSA also applies to
then the claim is forever barred. the insurer of the goods. Usually the insurer pays the consignee
and the insurer also has a period of one year to file a claim
In the case of DOLE Philippines vs Maritime Company, the court against the common carrier.
ruled that the period is not suspended by an extrajudicial
demand. So Art. 1155 of the Civil Code cannot be applied In Maritime Law, there are 5 CASES OF ABANDONMENT.
because matters affecting transportation of goods by sea should Take note:
be decided in the shortest time possible. So the application of
Art. 1155 of the Civil Code would unnecessarily extend the 1. Art. 365
period and permit delays in the settlement of questions affecting
transportation, contrary to the clear intent and purpose of the ARTICLE 365. If, in consequence of the damage, the
law. goods are rendered useless for sale and consumption
for the purposes for which they are properly destined,
DOLE Philippines vs Maritime Company the consignee shall not be bound to receive them, and
Facts: The cargo subject of the instant case was discharged in he may have them in the hands of the carrier,
Dadiangas unto the custody of the consignee on December 18,
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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

demanding of the latter their value at the current price ARTICLE 370. If a period has been fixed for the
on that day. delivery of the goods, it must be made within such
time, and, for failure to do so, the carrier shall pay the
If among the damaged goods there should be some indemnity stipulated in the bill of lading, neither the
pieces in good condition and without any defect, the shipper nor the consignee being entitled to anything
foregoing provision shall be applicable with respect to else.
those damaged and the consignee shall receive those
which are sound, this segregation to be made by If no indemnity has been stipulated and the delay
distinct and separate pieces and without dividing a exceeds the time fixed in the bill of lading, the carrier
single object, unless the consignee proves the shall be liable for the damages which the delay may
impossibility of conveniently making use of them in this have caused.
form.

The same rule shall be applied to merchandise in bales ARTICLE 374. The consignees to whom the shipment
or packages, separating those parcels which appear was made may not defer the payment of the expenses
sound. and transportation charges of the goods they receive
after the lapse of twenty-four hours following their
delivery; and in case of delay in this payment, the
2. Art. 371
carrier may demand the judicial sale of the goods
transported in an amount necessary to cover the cost
ARTICLE 371. In case of delay through the fault of of transportation and the expenses incurred.
the carrier, referred to in the preceding articles, the
consignee may leave the goods transported in the The right of abandonment is also granted under Art. 370
hands of the former, advising him thereof in writing
and Art. 374 as we discussed last time. If the goods
before their arrival at the point of destination. were delayed due to the fault of the common carrier the
consignee refused to receive the goods by filing a notice
When this abandonment takes place, the carrier shall BEFORE THE ARRIVAL OF THE GOODS. So that is
pay the full value of the goods as if they had been lost
the right of abandonment. And just claim for the value
or mislaid.
of the cargoes that was delayed. However, we said if
there was a tender, if there was a demand and delivery
If the abandonment is not made, the indemnification
was not made then the consignee may file a case for
for losses and damages by reason of the delay cannot
breach of contract because of the delay. However, if
exceed the current price which the goods transported
there was tender PRIOR TO THE FILING OF THE
would have had on the day and at the place in which
SUIT, and the goods were safely kept then the
they should have been delivered; this same rule is to
consignee cannot refuse to receive the goods and
be observed in all other cases in which this indemnity
proceed to file a case.
may be due.

ARTICLE 368. The carrier must deliver to the consignee,

3. Art. 587. This is under Vessels. without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill
Art. 587. The ship agent shall also be civilly liable for of lading to receive them; and if he does not do so, he shall
the indemnities in favor of third persons which arise be liable for the damages which may be caused thereby.
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 ARTICLE 369. If the consignee cannot be found at the
equipment and the freightage he may have earned residence indicated in the bill of lading, or if he refuses to
during the voyage. pay the transportation charges and expenses, or if he
refuses to receive the goods, the municipal judge, where
there is none of the first instance, shall provide for their
4. Art. 687
deposit at the disposal of the shipper, this deposit
producing all the effects of delivery without prejudice to
Art. 687. The charterers and shippers cannot abandon third parties with a better right.
merchandise damaged on account of its own inherent
defect or fortuitous event for the payment of the
Art. 368 and Art. 369 provide to whom the goods shall be
freightage and other expenses.
delivered.
 Art.368. Delivery should be made to whom? To the
The abandonment shall be proper, however, if the
person who is indicated in the bill of lading.
cargo should consist of liquids and should they have
leaked out, there remaining in the containers not more
 Art.369. This is a case when goods may be deposited. A
than one-quarter of their contents.
situation wherein the consignee cannot be bound or if the
consignee refuses to pay the transportation charges or if
5. Art. 370 and Art. 374. he refuses to receive the goods. So what is the remedy
here of the common carrier? The remedy is to consign
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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

or to deposit it at the Municipal Trial Court in the to the general provisions established in this Code for
place where the goods are supposed to be commercial contracts.
delivered. Why is that important? Because it will
discharge the liability of the common carrier and Art. 353-354. As we have discussed, the bill of lading as the
extinguish now the responsibility to exercise best evidence to prove the cargos on board and it is said
extraordinary diligence. Consignment or the deposit of the parol evidence in case of dispute that may arise in the
the goods with the court will constitute as delivery of the delivery of the goods then the bill of lading will be used as
goods. an evidence and parol evidence is not be admissible
EXCEPT only in so far as to the issue with respect to
ARTICLE 351. In transportation made by railroads or the falsity and material error in the drafting.
other enterprises subject to regulation rate and time
schedules, it shall be sufficient for the bills of lading or the ARTICLE 355. The responsibility of the carrier shall
declaration of shipment furnished by the shipper to refer, commence from the moment he receives the merchandise,
with respect to the cost, time and special conditions of the personally or through a person charged for the purpose, at
carriage, to the schedules and regulations the application the place indicated for receiving them.
of which he requests; and if the shipper does not determine
the schedule, the carrier must apply the rate of those which
appear to be the lowest, with the conditions inherent Article 1736. The extraordinary responsibility of the
thereto, always including a statement or reference to in the common carrier lasts from the time the goods are
bill of lading which he delivers to the shipper. 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,
ARTICLE 352. The bills of lading, or tickets in cases of or to the person who has a right to receive them, without
transportation of passengers, may be diverse, some for prejudice to the provisions of article 1738.
persons and others for baggage; but all of them shall bear
the name of the carrier, the date of shipment, the points of
Art. 355 should be read together with Art. 1736 of the Civil
departure and arrival, the cost, and, with respect to the
Code. The liability of the carrier for the care of cargo begins
baggage, the number and weight of the packages, with
from the moment it is unconditionally delivered by the
such other manifestations which may be considered
shipper to the carrier for purposes of carriage.
necessary for their easy identification.

ARTICLE 356. Carriers may refuse packages which appear

In summary of the provisions of the Civil Code, we unfit for transportation; and if the carriage is to be made by
mentioned Art. 351 only refers to the schedule that carrier
railway, and the shipment is insisted upon, the company
must keep. Art 352 refers to passengers are both carriage shall transport them, being exempt from all responsibility if
of passengers and cargo. Art. 352 not only refers to cargo
its objections, is made to appear in the bill of lading.
but also to passengers.

ARTICLE 353. The legal evidence of the contract between ARTICLE 357. If by reason of well-founded suspicion of
the shipper and the carrier shall be the bills of lading, by falsity in the declaration as to the contents of a package the
the contents of which the disputes which may arise carrier should decide to examine it, he shall proceed with
regarding their execution and performance shall be his investigation in the presence of witnesses, with the
decided, no exceptions being admissible other than those shipper or consignee in attendance .
of falsity and material error in the drafting.
If the shipper or consignee who has to be cited does not
After the contract has been complied with, the bill of lading attend, the examination shall be made before a notary, who
which the carrier has issued shall be returned to him, and shall prepare a memorandum of the result of the
by virtue of the exchange of this title with the thing investigation, for such purposes as may be proper.
transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim If the declaration of the shipper should be true, the expense
which the parties may wish to reserve be reduced to occasioned by the examination and that of carefully
writing, with the exception of that provided for in Article repacking the packages shall be for the account of the
366. carrier and in a contrary case for the account of the shipper.

In case the consignee, upon receiving the goods, cannot Art. 356 and Art. 357 these provisions authorize a carrier to
return the bill of lading subscribed by the carrier, because examine a cargo should a carrier suspect that such cargo
of its loss or of any other cause, he must give the latter a may be suspicious in nature. The right is important today
receipt for the goods delivered, this receipt producing the especially with the danger of explosive, high jacking,
same effects as the return of the bill of lading. terrorism and attempts smuggling under the Tariffs and
Customs Code.
ARTICLE 354. In the absence of a bill of lading, disputes ARTICLE 358. If there is no period fixed for the delivery
shall be determined by the legal proofs which the parties of the goods the carrier shall be bound to forward them in
may present in support of their respective claims, according the first shipment of the same or similar goods which he

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

may make point where he must deliver them; and should If those not delivered form part of the goods transported,
he not do so, the damages caused by the delay should be the consignee may refuse to receive the latter, when he
for his account. proves that he cannot make use of them independently of
the others.
Article 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the Art.363. The cargo must be delivered in the condition it was
stipulated or usual route, the contract limiting the common received.
carrier's liability cannot be availed of in case of the loss,
destruction, or deterioration of the goods. ARTICLE 364. If the effect of the damage referred to in
Article 361 is merely a diminution in the value of the goods,
Art. 358 and Art. 325 should be read with Art. 1747 of the the obligation of the carrier shall be reduced to the payment
Civil Code. The occurrence of a fortuitous event will not of the amount which, in the judgment of experts,
extinguish the liability of a carrier where the fortuitous constitutes such difference in value.
event occurs with either due delay in starting the trip or
unjustified deviation. The unjustified deviation is the Art. 364 pertains to measure of damages to cargoes based
change of route. As a general rule, common carrier should on the MARKET VALUE OF THE CARGO AT THE POINT
stick to the route that is required under the bill of lading. OF DESTINATION. This will apply in the event there is
But if he deviates from the route and the common carrier abandonment if the consignee opts to exercise the right to
encounters a storm, then the common carrier can be held abandonment in view of the delay of the common carrier
liable for damages. and instead demand for conversion of the cargo. This will
be applied to the measure of the amount to be paid which
ARTICLE 360. The shipper, without changing the place shall be based on the market value of the cargo AT THE
where the delivery is to be made, may change the POINT OF DESTINATON.
consignment of the goods which he delivered to the carrier,
provided that at the time of ordering the change of ARTICLE 368. The carrier must deliver to the consignee,
consignee the bill of lading signed by the carrier, if one has without any delay or obstruction, the goods which he may
been issued, be returned to him, in exchange for another have received, by the mere fact of being named in the bill
wherein the novation of the contract appears. of lading to receive them; and if he does not do so, he shall
be liable for the damages which may be caused thereby.
The expenses which this change of consignment occasions
shall be for the account of the shipper.  Art. 368 obligation of the vessel to deliver to consignee
who has been designated by the shipper.
Art.360 refers to the contracting parties. Shipper has the
right to change the name of the consignee at any time and ARTICLE 369. If the consignee cannot be found at the
the carrier must respect this change of designation. residence indicated in the bill of lading, or if he refuses to
pay the transportation charges and expenses, or if he
Article 1746. An agreement limiting the common carrier's refuses to receive the goods, t he municipal judge, where
liability may be annulled by the shipper or owner if the there is none of the first instance, shall provide for their
common carrier refused to carry the goods unless the deposit at the disposal of the shipper, this deposit
former agreed to such stipulation. producing all the effects of delivery without prejudice to
third parties with a better right.
Article 1752. Even when there is an agreement limiting
the liability of the common carrier in the vigilance over the Art. 369 pertains to consignation. Consignation is allowed
goods, the common carrier is disputably presumed to have under the following cases:
been negligent in case of their loss, destruction or 1. If the consignee cannot be found at the residence
deterioration. indicated in the bill of lading, or
2. If he refuses to pay the transportation charges and
expenses, or
 Art. 361 is repealed by Art. 1746. Art. 362 is repealed
3. If he refuses to receive the goods
by 1752.

ARTICLE 370. If a period has been fixed for the delivery

ARTICLE 363. Outside of the cases mentioned in the
of the goods, it must be made within such time, and, for
second paragraph of Article 361, the carrier shall be obliged
failure to do so, the carrier shall pay the indemnity
to deliver the goods shipped in the same condition in which,
stipulated in the bill of lading, neither the shipper nor the
according to the bill of lading, they were found at the time
consignee being entitled t o anything else.
they were received, without any damage or impairment,
and failing to do so, to pay the value which those not
If no indemnity has been stipulated and the delay exceeds
delivered may have at the point and at the time at which
the time fixed in the bill of lading, the carrier shall be liable
their delivery should have been made.
for the damages which the delay may have caused.

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

ARTICLE 371. In case of delay through the fault of the damages caused by its connecting carriers. This is a case
carrier, referred to in the preceding articles, the consignee wherein a cargo is transshipped by a connecting carrier.
may leave the goods transported in the hands of the
former, advising him thereof in writing before their arrival For example: A cargo is shipped from abroad to Manila,
at the point of destination. before it is delivered to Surigao, another vessel will carry it
to Cebu then Davao then Surigao.
When this abandonment takes place, the carrier shall pay
the full value of the goods as if they had been lost or In those case of interconnecting vessel, IT WOULD STILL
mislaid. BE THE COMMON CARRIER FIRST WHO ENTERED A
CONTRACT with the shipper that will be liable. It is not the
If the abandonment is not made, the indemnification for inter-connecting carriers to be held liable when it happens
losses and damages by reason of the delay cannot exceed to damage the goods. IT IS STILL THE COMMON
the current price which the goods transported would have CARRIER WITH WHOM THE BILL OF LADING WAS
had on the day and at the place in which they should have EXECUTED. It would be the responsibility of the common
been delivered; this same rule is to be observed in all other carrier to run after that inter-connecting vessel.
cases in which this indemnity may be due.
ARTICLE 374. The consignees to whom the shipment was
Art.370-371. These provisions cover the agreement made may not defer the payment of the expenses and
between the common carrier and the shipper for the transportation charges of the goods they receive after the
delivery of goods on certain date and consequent right of lapse of twenty-four hours following their delivery; and in
abandonment which we discussed earlier which means that case of delay in this payment, the carrier may demand the
if there is a period fixed, then the common carrier should judicial sale of the goods transported in an amount
deliver the cargos on the date as agreed upon. Art.371 necessary to cover the cost of transportation and the
provides if the period does not provide period for the expenses incurred.
delivery. When should the cargo be transported? ON THE
FIRST VESSEL that will carry the cargoes. ARTICLE 375. The goods transported shall be especially
bound to answer for the cost of transportation and for the
Article 1749. A stipulation that the common carrier's expenses and fees incurred for them during their
liability is limited to the value of the goods appearing in the conveyance and until the moment of their delivery.
bill of lading, unless the shipper or owner declares a greater This special right shall prescribe eight days after the
value, is binding. delivery has been made, and once prescribed, the carrier
shall have no other action than that corresponding to him
Art. 372 is repealed by Art. 1749 which pertains that subject as an ordinary creditor.
matter is the validity of the carrier to stipulate in the bill of
lading for the reduction of tis liability for damages. ARTICLE 376. The preference of the carrier to the
payment of what is owed him for the transportation and
ARTICLE 373. The carrier who makes the delivery of the expenses of the goods delivered to the consignee shall not
merchandise to the consignee by virtue of combined be cut off by the bankruptcy of the latter, provided it is
agreements or services with other carriers shall assume the claimed within the eight days mentioned in the preceding
obligations of those who preceded him in the conveyance, article.
reserving his right to proceed against the latter if he was
not the party directly responsible for the fault which gave Art. 374, Art. 375 and Art. 376. These are the provisions
rise to the claim of the shipper or consignee. that give carriers several remedies under the Code of
Commerce for collection for freightage.
The carrier who makes the delivery shall likewise acquire all
the actions and rights of those who preceded him in the 1. RETAINING LIEN. The carrier cannot be
conveyance. compelled to deliver or surrender until the freight is
paid.
The shipper and the consignee shall have an immediate
right of action against the carrier who executed the 2. CARRIER’S LIEN. The carrier may deliver the
transportation contract, or against the other carriers who cargo and waive the retaining lien but with a RIGHT
may have received the goods transported without OF PREFERENCE over the cargo for a period of 30
reservation. days. This has been amended by Art. 2241 of the
Civil Code. Art. 2241 provides for the..yung credits..
However, the reservation made by the latter shall not who shall be the first priority in case of insolvency.
relieve them from the responsibilities which they may have Preference of credit is enumerated there. In this
incurred by their own acts. case, the carrier’s lien can be considered as a
preferential creditor but within the period of 30 days,
Art. 373 provides that the original carrier that enters into if he, the common carrier, delivers the cargo without
an inter-connecting contract of carriage shall be liable for the freightage being paid the debt/freight that has

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

not been paid can be considered among the as a means of transportation either as a common contract
preference of credit under Art.2241. carrier, including vessels covered under PD 43.

3. CONSIGNATION. Under Art.369. So of course these vessels in order to be considered for maritime
purposes, it could either be operating as a common carrier,c
ARTICLE 377. The carrier shall be liable for all the ontract carrier (which also incldues fishing vessels (PD 43)), but
consequences which may arise from his failure to comply there are exceptions that are not considered vessels for
with the formalities prescribed by the laws and regulations purposes of rules and regulations concerning common carrriers:
of the public administration, during the whole course of the 1. Those owned or operated by the Armed Forces of the
trip and upon arrival at the point of destination, except Philippines and foreign governments for military
when his failure arises from having been led into error by purposes
falsehood on the part of the shipper in the declaration of
the merchandise. If the carrier has acted by virtue of a 2. Banka/sailboats or other water-borne contrivance of
formal order of the shipper or consignee of the less than 3tons gross capacity and not motorized. So,
merchandise, both shall become responsible. non-merchant vessels are not subject to maritime
law.
Art. 377. The liability of carrier for damages arising from
Why is this definition of vessel important?
failure to comply with rules and regulations on the delivery
of the cargo. It provides for the liability of the carrier. The
We have to know what vessels are covered for the purpose of
carrier shall be liable for the consequences which may arise
applying the laws and regulations implemented by MARINA
from his failure to comply with the formalities prescribe by
(Maritime Industry Authority).
laws and regulations.
Under the domestic shipping development act of 2004 (RA
ARTICLE 379. The provisions contained in Articles 349 9295), "ships" and "vessels" may be used interchangeably. Also,
and following shall be understood as equally applicable to it shall meet any kind, class or type of craft or artificial
those who, although they do not personally effect the contrivance capable in floating in water, and for what purpose?
transportation of the merchandise, contract to do so To be used as means of water transport in domestic trade for
through others, either as contractors for a part icular and either carriage of passengers, cargo or both.
definite operation, or as agents for transportations and
conveyances. What are the kinds of vessels? SOLAS (Safety of Life at
Sea) provides:
In either case they shall be subrogated in the place of the 1. Passenger ship- carries more than 12 passengers
carriers themselves, with respect to the obligations and
responsibility of the latter, as well as with regard to t heir 2. Cargo ship
rights.
3. Tanker- a cargo ship adapted for the carriage in
Art. 379. It refers to the provisions of the Code of bulk of liquid cargos of inflammable nature
Commerce on Transportation are equally applicable to
persons who, although they do not personally affect the 4. Fishing vessel- used to catch living resources at
transportation of objects contract to do so for others. sea

5. Nuclear ship- ship provided with a nuclear power

FEBRUARY 20 plant

6. New ship- still under construction and

VESSELS unregistered after the date of the effectivity of
SOLAS
DEFINITION OF VESSEL
7. Existing ship- contrary to new ship; used and
When we say vessel that is subject to registration, it includes registered
every sort of boat, or other artificial contrivance used or capable
of being used as a means of transportation on water. What is the objective of convention? It standardizes minimum
requirement as to construction, equipment and inspection in
respect of engineering safety.
PD 474 provided for the re-ogranization of maritime functions in
the Philippines. It also created the Maritime Industry Authority
The necessity for granting a maritime safety treaty was brought
and other purposes.
to the intention of the international community after 1912 after
titanic (bc there were no life boats).
Section 3 Par 3 defines a vessel, for purposes of falling within
the jurisdiction of MARINA, as ‘any barge, lighter, carrier,
Who are the regulatory agencies in vessels?
passenger ship, freighter, tanker, container ship, fishing boat or
pother artifical contrivance, utilizing any source of motive
1. MARINA (Maritime Industry Authority)
power, motor power, designed, used or capable of being used

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

-formulates policies rules for the growth of shipping Vessels are considered personal or movable property under Art.
enterprises and concerned with the purchase, lease and 585. Under the Civil Code, they are also considered as
amangement of the operation of vessels. So if you have personalty, often referred to as a particular kind of personal
a client who wants to buy a vessel, you go to MARINA for things. For all purposes of law not modified by CoC, vessels still
registration to approve the deed of sale. But the sale of considered personal property. So there are rules not applicable
public auction to Rubizo was recorded. to common carriers, similar to rules that apply to real estate with
respect to matter of real estate.
2. PRC (Professional Regulation Commission)
As explained by SC in several cases, ships or vessels whether
-administers and supervises the examination of licensing moved by steam or sail, pertain to an extent of the nature and
of marine officers and crew condition of realty on account of their value and importance in
the commerce. So a purchaser of a vessel in a public auction of
VESSEL REGISTRATION a vessel (so there is a judicial foreclosure) whose certificate of
sale was registered in a registry shall prevail over an earlier
Under Section 806 of PD 34 (Tariff and Customs code amended purchase of the vessel by another person who did not register
by PD 761), the law requires that a vessel of more than 3 tons his purchase.
owned by Filipino citizens or corporations and associations, at
least the 60% of the capital of which is owned by such citizen  What happened in Rubizo?
shall be registered at the Philippine Coast Guard under PD 1064.
The registration of vessels 3 tons or less is optional. SC characterized maritime transactions as having a real nature
(similar to registration of real property) with respect to
If the vessel is more than 15 tons gross it shall be issued a effectivity against 3rd persons. In this case, defendant acquired
certificate of Philippine Registry. The taking of certificates for by purchase the pilot boat on date prior to the purchase and
vessels 15 tons or less is optional. However in a domestic vessel adjudication by plaintiff Rubizo. But the sale to Rubizo was
weighing less than 5 tons will not be issued a Certificate of recorded in the office of collector of customs in January 7 and
Philippine Registry, but a Certificate of OwnershipIf it is optional, the commercial registry in March 17. As ruled, the requisite of
the owner can still register it and he is issued a Certificate of registration is a necessary and indispensable in order for the
Ownership. The Certificate of Phil. Registry is usually used if the purchaser’s right be maintained against third persons (Art 573).
vessel is to be used in international trade.
Under Article 573, vessels are personal/movable property, or a
A foreign-owned vessel under charter or leased by a Filipino chattel, so until the enactment of the Ship Mortgage Decree of
national may be issued a temporary Certificate of Registration 1978, ships are covered by the provisions of Chattel Mortgage
under the following conditions (as provided by law): Law. Since ships are valuable movable property dealt within
1. The charter or lease must be with the approval of commerce, they may be dealt and bought and sold or chartered
the MARINA or hired out for long periods. These operations of vessels are
generally through agents which are called ship brokers.
2. The duration is not less than one year
Ship brokers are commonly used when vessels are to be built,
3. The vessel shall be used exclusively in coastwise
or when shipyards are to be contracted with. These are being
trade unless permitted by MARINA to be used for
undertaken by ship brokers. They are professional experts in
overseas trade. shipping, specializing in particular types of tonnage/damage (?)
or particular transactions.
So you have to clarify. If it is coastwise (coastwise is within the
territory of the Philippines), but if the vessel is qualified to be
ACQUISITIONS OF VESSELS
used internationally, it has to secure a permit from the MARINA,
not only a permit but approval to operate in overseas trad e.
Vessels may be acquired or transferred by means recognized by
law.
A certiifcate of registration is need for the purpose of renting
1. In complete and outright ownership by purchase,
the vessel out or for business. A certificate of ownership is if
private and vessel not for vessels. on cash payments or deferred payment subject to
mortgage as provided in Arts. 576 or 578.
Several points of authority for vessels:
2. It can be acquired through foreclosure of
1. Philippine Coast Guard- regulation, documentation
mortgage, either judicial or extrajudicial
and licensing of vessels
foreclosure.
2. BMI (under the Coast Guard)- investigates
3. Ownership may also be acquired through donation
consudct of crew members and officers in terms of
or by inheritance; testate or intestate succession
casualties, and recommends to the commndant for
penalties in cases of violations 4. Ownership through prescription, construction,
barter or time or bareboat charter basis without
VESSELS AS PROPERTY ownership, acquiring only the use of vessels.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Title of ownership is thru delivery. As earlier discussed, delivery Article 575 grants a right of pre -emption and a right of
may be actual or constructive. Real or actual delivery takes place redemption to co-owners in sales made to strangers.
when the vessel sold is placed in the control and possession of Redemption arises after the sale is made, while preemption,
the vendee. Crossreference it to Article 1477 of the Civil Code before making the sale. Redemption dissolves a perfected and
consummated sale while pre-emption prevents the sale to third
Art. 1477. The ownership of the thing sold shall be transferred parties. In redemption, the action is against the purchaser, while
to the vendee upon the actual or constructive delivery thereof. in that of pre-emption, it is against the seller.
(n)
Illustration: If A wants to sell his share to X, he must first offer
the same to his co-owners. This is the right of preemption. If A
Constructive delivery may be through legal formalities or
does not do so and sell to X, B and C have the right to buy back
traditional symbolica. The Civil Code that when the sale is made
such share from X. This is the right of redemption which must
through a public instrument, the execution thereof is equivalent
be exercised within nine days following the inscription of the
to the delivery of the thing which is the subject of the contract.
sale in the registry, and by depositing the price at the same time.
With regard to immovable property in general, it may be made
through delivery of keys. For ships, it may likewise be made by
mere consent of the agreement of the parties. So if the thing ARTICLE 577.If the alienation of the vessel should be made
sold cannot be transferred to the possession of a party to the while it is on a voyage, the freightage which it earns from the
vendee at the time of the sale. time it receives its last cargo shall pertain entirely to the
purchaser, and the payment of the crew and other persons who
In order to be binding to third parties, it must be in a written make up its complement for the same voyage shall be for his
instrument (Art 573) and recorded in the MARINA. The requisite account. If the sale is made after the vessel has arrived at the
of registration is not to validate the sale, but it is indispensable port of its destination, the freightage shall pertain to the vendor,
in order that the purchaser's rights against the third persons and the payment of the crew and other individuals who make
may be maintained. For example, placing a near-defunct vessel up its complement shall before his account, unless the contrary
in a public auction, the purchaser whose certifcate of sale must is stipulated in either case.
register will prevail over an earlier purchase of a purchaser who
did not register his purchase (Rubizo) Article 577 states who shall be entitled to the freightage and
who shall be obliged to pay the crew and other persons who
But as between the parties, ownership is parties upon execution make up the complement of the vessel, depending upon the
of the Deed of Sale and delivery of the vessel. time of the sale.

In the case of Froilan vs. Oriental Shipping (12 S 276), the The freight shall belong to the purchaser, and the payment of
SC ruled that: In the absence of stipulation to the contrary, the the crew shall be for his account. But if the sale was made after
ownership of the thing sold passes to the vendee upon the the vessel arrived at the port, freightage shall pertain to the
actual or constructive delivery thereof (Art. 1477, New Civil seller/vendor, who during the voyage shall any freight gained
Code). It is for this reason that Froilan was able to constitute a shall belong to the purchaser. But if the sale was consummated
mortgage on the vessel in favor of the Administration, to secure at the port of destination,
payment of the unpaid balance of the purchase price. This is
true if the sale has been made on credit or pyament and the ARTICLE 578. If the vessel being on a voyage or in a foreign
price is not essential to the trasnfer of ownership, as long as the port, its owner or owners should voluntarily alienate it, either to
property has been delivered. Filipinos or to foreigners domiciled in the capital or in a port of
another country, the bill of sale shall be executed before the
ARTICLE 576. In the sale of a vessel it shall always be consul of the Republic of the Philippines at the port where it
understood as included the rigging, masts, stores and engine of terminates its voyage and said instrument shall produce no
a streamer appurtenant thereto, which at the time belongs to effect with respect to third persons if it is not inscribed in the
the vendor. The arms, munitions of war, provisions and fuel shall registry of the consulate. The consul shall immediately forward
not be considered as included in the sale. The vendor shall be a true copy of the instrument of purchase and sale of the vessel
under the obligation to deliver to the purchaser a certified copy to the registry of vessels of the port where said vessel is
of the record sheet of the vessel in the registry up to the date inscribed and registered.
of the sale. In every case the alienation of the vessel must be made to
appear with a statement of whether the vendor receives its price
Article 576 states what are and what are not included in sale of in whole or in part, or whether he preserves in whole or in part
a vessel. any claim on said vessel. In case the sale is made to a Filipino ,
this fact shall be stated in the certificate of navigation.
ARTICLE 575. Co-owners of vessels shall have the right of
repurchase and redemption in sales made to strangers, but they The first and second paragraphs of Art. 578 prescribe the
may exercise the same only within the NINE DAYS following the FORMALITIES required for the voluntary sale of vessels abroad
inscription of the sale in the registry, and by depositing the price as follows:
at the same time. 1. Execution of the bill of sale before the consul of the
Philippines at the port where it terminates its voyage;

2. Inscription in the registry of its consulate;

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

3. Forwarding by the consul of a true copy of the 3. Forwarding by the consul of a true copy of the
instrument or purchase and sale to the registry of instrument or purchase and sale to the registry of
vessels of the port of registration; and vessels of the port of registration; and

4. A statement must be made to appear on said 4. A statement must be made to appear on said
instrument of whether the vendor receives its price in instrument of whether the vendor receives its price in
whole or in part, or whether he preserves in whole or whole or in part, or whether he preserves in whole or
in part, any claim on said vessel. in part, any claim on said vessel.

ARTICLE 579. After the damage to the vessel and the NB: Where the bill of sale is not inscribed in the consular
impossibility of her being repaired, in order to continue the registry, it shall produce no effect as to third persons.
voyage had been shown, its sale at public auction shall be
ordered. Article 578. When a vessel, being on a voyage, shall be
rendered useless for navigation, the captain shall apply to the
The third and fourth paragraphs Art. 578 and the first paragraph competent judge on court of the port of arrival, should it be in
of Att. 579 prescribe the formalities required to be observed for the Philippines; and should it be in a foreign country, to the
the sale of vessels when they are rendered useless for consul of the Republic of the Philippines, should there be one,
navigation as follows: or, where there is none, to the judge or court or to the local
1. Application by the captain for examination to the judge authority; and the consul, or the judge or court, shall order an
or court of the port of arrival if in the Philippines, or if examination of the vessel to be made.
If the consignee or the insurer should reside at said port, or
in a foreign country, to the consul of the Philippines,
should have representatives there, they must be cited in order
should there be one, or where there is none, to the
that they may take part in the proceedings on behalf of whoever
judge or court or to the local authority;
may be concerned.
2. Notification of the consignee or t he insurer should they
reside at said port or their representatives thereat; ARTICLE 579. After the damage to the vessel and the
impossibility of her being repaired, in order to continue the
3. Proof of damage and impossibility of the repair of the voyage had been shown, its sale at public auction shall be
vessel; and ordered.

4. Order for the sale of the vessel at public auction.

The third and fourth paragraphs Art. 578 and the first paragraph
The rules to be followed in the sale of a vessel at public auction of Att. 579 prescribe the formalities required to be observed for
after the damage to the vessel and the impossibility of her being the sale of vessels when they are rendered useless for
repaired in order to continue its voyage have been shown are navigation as follows:
enumerated in Article 579.
1. Application by the captain for examination to the judge
or court of the port of arrival if in the Philippines, or if
ARTICLE 578. If the vessel being on a voyage or in a foreign
port, its owner or owners should voluntarily alienate it, either to in a foreign country, to the consul of the Philippines,
Filipinos or to foreigners domiciled in the capital or in a port of should there be one, or where there is none, to the
another country, the bill of sale shall be executed before the judge or court or to the local authority;
consul of the Republic of the Philippines at the port where it
2. Notification of the consignee or the insurer should they
terminates its voyage and said instrument shall produce no
effect with respect to third persons if it is not inscribed in the reside at said port or their representatives thereat;
registry of the consulate. The consul shall immediately forward
3. Proof of damage and impossibility of the repair of the
a true copy of the instrument of purchase and sale of the vessel
vessel; and
to the registry of vessels of the port where said vessel is
inscribed and registered. 4. Order for the sale of the vessel at public auction.
In every case the alienation of the vessel must be made to
appear with a statement of whether the vendor receives its price
in whole or in part, or whether he preserves in whole or in part 5. The rules to be followed in the sale of a vessel at public
any claim on said vessel. In case the sale is made to a Filipino , auction after the damage to the vessel and the
this fact shall be stated in the certificate of navigation. impossibility of her being repaired in order to continue
The first and second paragraphs of Art. 578 prescribe the its voyage have been shown are enumerated in Article
FORMALITIES required for the voluntary sale of vessels abroad 579.
as follows:
1. Execution of the bill of sale before the consul of the
Philippines at the port where it terminates its voyage;

2. Inscription in the registry of its consulate;

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

liability of the ship owner or agent is liable only until to the

MARITIME LAW
value of the vessel. If it is more, it can no longer be held liable.
The limited liability statutes in other jurisdiction cover almost
What is the distinguishing characteristic of Maritime Law from all maritime casualties. As enumerated, it includes:
Civil Law? Mercantile Law (Code of Commerce) in general? - Shipwreck removal
- Fire claims
1. Exclusively real – The recognition that vessels are - Cargo lost
considered personal property. However, it has the nature
- Embezzlement
of real property because of their value and requirement
- Loss or destruction of any person or property
of registration. So you have to register and because of
value, it is in the nature of exclusively real. - Goods or merchandise shipped or put on board such
vessel
Recall that vessels are considered female, they are - For any loss or damage caused
referred to as ‘she.’ That is why the captains are
In other countries, lahat yan covered by the right of
considered the husbands of their ships, they cannot
leave their ship (Captain sinks with the ship, recall abandonment of the ship owner or agent. But under our
jurisdiction, tatlo lang yung cases where the limitation of
Titanic. Maiden voyage, trivia, etc).
liability will apply. The ship owner here may limit their liability
to the value of the vessel or the ship only in three instances
2. Hypothecary – The liability of the ship owner or the
(see enumerated above).
agent in connection with maritime contracts is confined However, the law provides an exception to the hypoth ecary
to the res, which refers to the vessel. nature in maritime transaction. The limited liability or right of
abandonment of the ship owner or agent or the right of the
The interest of the shipowner (SO) or the ship agent ship owner or agent to say that he cannot be made liable
(SA), the liability is confined to the vessel (res). This is beyond his interest in the vessel will not apply:
hypothecated for such obligations or as the guarantee
for their settlement. So the guarantee is the vessel itself. 1. If the ship owner is at fault
And as a rule subject to certain exceptions, if the vessel 2. If there is insurance
is lost, in relation to its hypothecary nature, the Meaning to say, the creditors or claimants can run after
shipowner and the ship agent have no more liability. the insurance. So the liability of the common carrier is
Because the interest of the shipowner/agent is co - only with respect to its interest in the vessels, then the
extensive with the value of the vessel. claimants can run after the insurance of the common
carrier or ship owner.
However, if the vessel is not lost, the shipowner/agent 3. If the liability of the ship owner or agent is under the
may abandon the vessel to the creditors in satisfaction Labor Code.
of their claim. The ship owner or agent cannot be held
Reason: because it is part of its operations. If there is
personally liable in excess of its interest in the vessel. illegal dismissal or claims for money from the workers,
In effect, what this means is, ‘no vessel, no
the carrier cannot say t hat its liability is limited
liability.’ This is the limited liability rule.
So if the vessel sank or is lost, then wala nang liability si 4. Ship chattel mortgage
ship owner/agent. If the vessel is not lost but the value Because this is a loan. Chattel mortgage, so this is an
of the cargo is more than the value of the vessel, then account to be paid. It is not covered by the limited
the ship owner/agent may abandon the vessel in favor liability. Example, if nasanla yung vessel and it is lost,
of their creditor. The ship owner/agent may not become can the ship owner say that he will no longer pay
liable more than the value of the vessel. because the vessel is lost? No, because it is a loan prior
to the loss of the vessel.
Limited liability rule: The Law of Limitation of Liability is an 5. If voyage is not maritime
important part in maritime law. The limited liability provisions
in our Code of Commerce are not identical to the limitation of So yung mga small time na bangka, hindi included.
liability statutes of other well-developed countries, such as 6. Expenses for equipping or repairing the conditions of the
England, US or Canada. The reason is because the Code of vessels completed before its loss
Commerce provision covers only the:
7. If the vessel is a private carrier
1. Liability of the ship owner or agent for collisions under
Article 837 What is the role of international conventions?
Because Maritime questions are not confined to one country,
2. Injuries to third parties under Article 587 Maritime Law has always had to adopt something of
international xxx. Otherwise, wide variations must occur in the
3. Acts of the captain under Article 590
practice of different maritime courts in different countries.
So meaning to say, the liability of the common carrier under
our jurisdiction in our Code of Commerce, is covered only under In historical times, this need was recognized by the use of
the three circumstances. In Articles 837, 587 and 590, the customary roles which were recognized in several countries. In

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

modern times, the more formal system of international system 6. International Convention on Tonnage Measurement of
and agreement is used. Ships
7. Special Trade Passenger Ship Agreement – Adopted in
An international convention is an agreement between states London in 1971 and in the Philippines in 1974
that the parties to it, to observe and enforce a common set and
principles on a particular subject or issue. As an agreement, it 8. Convention on the Prevention of Marine Collision by
is the law among the contracting parties. As such law, it forms Dumping Wastes and Other Matters – Open for
part of the municipal laws of the states of the contracting Signature in London, Boston, Mexico, Washington;
parties. entered into the Philippines in 1975
9. Agreement for the Facilitation of Search for Ships in
If you can remember, our international xxx is covered by the Distress and Rescue for Ships Accidents
WARSAW Convention. In transportation by sea, there are
several international conventions which govern.
MARCH 4
These international conventions are not part of the Philippine
laws. They only become part of the Philippines laws when they RIGHT OF ABANDONMENT
are put into effect by a properly act of the Congress and
approved by the President. Therefore, it is the law enacted by
In maritime commerce we have what you call
Congress or the Presidential Decree that the Court apply when
ABANDONMENT.
an issue arises and not the international convention.
 What do you mean by ABANDONMENT?
As to who may enter into international conventions, such is
determined by the municipal laws of the country who wants to
(It is the) Giving up of something for the vessel; the
contract in the IC. In the Philippines, the Constitution
authorizes both the Congress and the Philippines. owner gives up whatever interest; the ship owner gives
up his corresponding interest in the vessel
The international conventions, therefore, cannot enforce
obligations against states not a party to it. However, it is said 5 CASES OF ABANDONMENT UNDER THE MARITIME
to be conceivable that vessels flying the flag of a state which is LAW
not a party to a particular convention may be compelled to 1. ART 365 of the Code of Commerce
observe the terms of such convention when they enter into the 2. Art 371 of the Code of Commerce
port of a contracting state. This situation arises because the 3. Art. 587 of the Code of Commerce
international convention forms part of the municipal law of the 4. Art. 687 of the Code of Commerce
contracting state and applies within their territory. 5. Sec 138 of the Insurance Code
What are the lists of international conventions or
agreements to which the Philippines is a signatory?  In all these cases what are the CHARACTERISTICS OF
ABANDONMENT?
1. Carriage of Goods by Sea Act (COGSA) RA 521 –
Enacted by the 74 th Act of US Congress to give effect Abandonment under these circumstances has 2
to the Brussels Treaty CHARACTERISTICS:
This Act embodies the commonly known as the Hague 1. It is a unilateral right .
Laws. The right of a ship owner has a right of a consignee or a
2. SOLAS International Convention for the Safety of Life shipper
at Sea - Done in London, June 17, 1960; Entered into 2. It is perfected by mere notice.
PH: 1965.
The shipper who is to notify, so it does not require consent
This convention standardizes the minimum
of the vessel or common carrier.
requirements as to construction, equipment, and
inspection with respect to engineering safety,
masters, trails and radio methods. Take note that the  What is the EFFECT OF THE RIGHT OF
xxx in drafting maritime safety treaty was brought to ABANDONMENT?
the attention to the international community in 1912 Ownership passes, or the ownership over the damaged
by the sinking of the Titanic, which like most ships, did goods passes to the carrier
not carry enough number of life boats
3. International Conventions of Load Lines in 1966 – This  What is the OBLIGATION OF THE CARRIER?
pertains to tankers or vessels carrying tankers.
The carrier pays the market value of the goods
4. International Regulations for Preventing Collisions at
Sea
 Where?
5. International Convention for the Prevention of
At the point of destination
Collision at Sea by Oil – Adopted in London in May
1954 and entered into Philippines on 1964

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

1ST CASE OF ABANDONMENT: ARTICLE 365 OF notwithstanding the fact that that portion has
THE CODE OF COMMERCE: not been damaged?
o It is on the part of the shipper now to
ARTICLE 365. If, in consequence of the damage, the goods say/prove that he can no longer use that
are rendered useless for sale and consumption for the purposes portion even if it was not damaged and
for which they are properly destined, the consignee shall not be instead claim for the value of the entire thing.
bound to receive them, and he may have them in the hands of
the carrier, demanding of the latter their value at the current 2ND CASE OF ABANDONMENT: ARTICLE 371 OF
price on that day. THE CODE OF COMMERCE:
If among the damaged goods there should be some pieces in
good condition and without any defect, the foregoing provision
shall be applicable with respect to those damaged and the ARTICLE 371. In case of delay through the fault of the carrier,
consignee shall receive those which are sound, this segregation referred to in the preceding articles, the consignee may leave
to be made by distinct and separate pieces and without dividing the goods transported in the hands of the former, advising him
a single object, unless the consignee proves the impossibility of thereof in writing before their arrival at the point of destination.
conveniently making use of them in this form. When this abandonment takes place, the carrier shall pay the
The same rule shall be applied to merchandise in bales or full value of the goods as if they had been lost or mislaid.
packages, separating those parcels which appear sound. If the abandonment is not made, the indemnification for losses
and damages by reason of the delay cannot exceed the current
price which the goods transported would have had on the day
What are the CIRCUMSTANCES UNDER ARTICLE 365? The
and at the place in which they should have been delivered; this
goods arrived in what condition?
same rule is to be observed in all other cases in which this
1. It arrives in a condition that it becomes useless
indemnity may be due.
2. It is useless for sale or for consumption purposes.

What is the SITUATION here?

1. The shipper and the carrier agree in advance …that the
And the RIGHT OF THE CONSIGNEE?
cargo has (to arrive) at a certain date, however, the
 The consignee may not receive the goods, [and]
date arrived but the cargo has not (yet arrived) due to
abandon it, and instead give a notice to the common
the carrier’s fault - so, take note that it is not the fault of
carrier that he is exercising his right of abandonment:
the shipper.
o The ownership over the damaged goods passes
to the carrier, and the carrier is obligated to pay
2. The shipper here can exercise the right of abandonment
(? But sounds like sale*) the shipper the market
by notifying the carrier and once the shipper notifies the
value of the goods at the point of destination
carrier, ownership of the undelivered cargo passes to
Take note: that the right of abandonment is perfected by mere the carrier, and the carrier must pay the shipper the
notice; and on what basis? That the goods are [useless] or are market value of the goods at the point of destination.
[no longer fit] for consumption or for sale; or it can no longer
be used. So we have 2 articles with respect to a situation similar to Article
371
What are the OTHER CONSEQUENCES here?
 But it also said that if among the damaged goods there What is the DISTINCTION BETWEEN ART. 358 and ART. 351?
should be some pieces in good condition and without
any defect. ARTICLE 358. If there is no period fixed for the delivery
o The foregoing provision shall be applicable of the goods the carrier shall be bound to forward them in
the first shipment of the same or similar goods which he may
only with those damaged and
make point where he must deliver them; and should he not
o the consignee(s) shall receive those which are do so, the damages caused by the delay should be for his
sound. account.

 However the shipper, if the good portion can also no ARTICLE 371. In case of delay through the fault of the
longer be used for the purpose (merong pwedeng carrier, referred to in the preceding articles, the consignee
gamitin, but without the damaged part, still can not be may leave the goods transported in the hands of the former,
advising him thereof in writing before their arrival at the point
used.)
of destination.
o i.e., you ordered a st atue of liberty, When this abandonment takes place, the carrier shall pay the
dumating yung katawan, wala na! yung paa full value of the goods as if they had been lost or mislaid.
nalang… the leg portion was not If the abandonment is not made, the indemnification for
damaged…would this still apply? Can the losses and damages by reason of the delay cannot exceed
carrier force the shipper to receive it, the current price which the goods transported would have
had on the day and at the place in which they should have

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

been delivered; this same rule is to be observed in all other 3. in which case the shipper can now file a case against
cases in which this indemnity may be due. the common carrier.

Article 358 speaks of a situation where a period has not been But if ever before the filing of the suit the carrier can show that
fixed insofar as when the goods shall be delivered the goods received were kept and the carrier tendered to deliver
the goods prior to t he filing of the suit the shipper cannot
Article 371 speaks of a situation where there is a fixed date. proceed to claim for conversion of the goods under Article 358.
The shipper and the carrier agree that on a fixed date…
He will be forced to receive the goods if the carrier will be able
M: So what happens if, under Art. 358? What would be the to show that the goods received, were kept -na delay lang; the
consequences here? goods shipped were safely kept and that it was a tender to
deliver-- it must be prior to the filing of the suit.
S: Under Art 358 if there is no period fixed for the delivery, if
the carrier does not deliver, the damage caused by the delay Under 370, we speak of a situation where there was an
shall be for his account agreement as to when the delivery should be made

M: account of whom? M: So, what happens if there is an agreed date of delivery and
the carrier failed to deliver?
S: the carrier
The carrier shall pay for the indemnity stipulated in the bill of
M: so what would be the liability of the Common carrier here? lading. And the shipper or the consignee cannot be entitled to
anything else
S: the liability of the carrier would be, if there is an agreed
indemnity, so the carrier shall pay the indemnity as agreed M: However under the 2 nd par. what is the circumstance if there
upon… is no indemnity agreed upon?

Q: if there is no indemnity? If no indemnity has been stipulated and the delay exceeds the
time fixed in the bill of lading, the carrier shall be liable for the
S: if there is no indemnity, the carrier shall be liable for the damages which the delay may have caused.
damages which the delay may have caused
Article 371: In case of delay through the fault of the carrier,
M: If there is an agreed Indemnity, the shipper cannot be referred to Article 370, the consignee may leave (the goods).
entitled to receive more than what was agreed upon. So if the The consignee here is given the right to abandon.
indemnity agreed upon under Article 358 is ₱100,00, the shipper
cannot receive more than ₱100,00. However, if the carrier The consignee may leave the goods transported in the hands of
refuses to pay the indemnity of ₱100,00, as agreed upon, then the carrier advising him but there must be …what is the
that is the time the shipper can claim for damages in view of the REQUIREMENT?
refusal of the common carrier.
1. The shipper must give a notice. There must be a
M: So under article 371? demand and notice. A writing before-when?
2. Before the arrival of the goods at the point of
S: Under article 371, if the delay is through the fault of the
destination.
carrier, the consignee may exercise his right of abandonment so
here the liability of the carrier, if the shipper has exercised his
right of abandonment, would be for the value of the goods; if So when abandonment takes place the carrier shall pay the full
however, the shipper will not exercise his right of abandonment, value of goods as if they have been lost …
the liability of the carrier would be for the current price as of the
date the goods could have been delivered. M: if abandonment is not made, what happens?

CONVERSION Indemnification, or losses and damages by reason of the delay

cannot exceed the current price which the goods transported
Take note that under Art. 358, there is what we call the amount would have had on the day and at the place in which they should
of conversion. have been delivered.

So what do we understand when delay amounts to conversion And this same rule shall be observed in all cases in which the
indemnity may be due.
WHAT IS CONVERSION?

We say earlier that conversion can only be made:

1. if there was a demand and
2. the delivery was refused

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

3RD CASE OF ABANDONMENT: ARTICLE 587 OF damaged vessel passes to the insurer and the insurer must
THE CODE OF COMMERCE pay the insured as if it were an actual loss of the vessel.

LIMITED LIABILITY RULE

ARTICLE 587. The ship agent shall also be civilly liable for the  When is limited liability rule applicable?
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded
The nature of limited liability rule is that “no vessel, no
on the vessel; but he may exempt himself therefrom by liability”; and the total destruction of the vessel now
abandoning the vessel w ith al her equipment and freight it may
extinguishes the maritime lien as there is no other res to which
have earned during the voyage. it can be attached. However, this is subject to certain exception.

The HYPOTHECARY NATURE of the maritime transaction. What are the EXCEPTIONS, wherein the limited liability rule is
 What is the CHARACTERISTIC OF A VESSEL? not applicable? It is based on Article 587.

We say that it is real in nature and hypothecary. Article 587. The ship agent shall also be civilly liable for the
1. It is REAL- means, it has a similarity to real estate indemnities in favor of third persons which may arise from the
because it requires registration in order to affect 3 rd conduct of the captain in the care of the goods which he loaded
person. on the vessel; but he may exempt himself therefrom by
2. When we say HYPOTHECARY, which means that if abandoning the vessel with al her equipment and freight it may
the vessel is lost, the carrier’s obligation is have earned during the voyage.
extinguished: “no vessel, no liability.” So that is what
is meant by the limited liability rule- because the The limited liability is applicable to what under art 587?
 For any civil liability for indemnity in favor of whom?
liability of the common carrier is only coextensive to
-In favor of 3 rd person
the value of the vessel, or to his interest in the vessel.

 Which arises from what?

4TH CASE OF ABANDONMENT: ARTICLE 687 OF 1. The conduct of the captain in the care of the goods
THE CODE OF COMMERCE which the vessel carry
2. if it was due to the fault of the captain, that the
goods were damaged, then the limited liability will
ARTICLE 687. The charterers and shippers may not abandon
merchandise damaged on account of inherent defect or apply as provided.
fortuitous event, for the payment of the freightage and other
expenses. So that is the liability. Which means if it is covered by limited
liability rule, the carrier can exercise the right of abandonment.
The abandonment shall be proper, however if the cargo should Another is under article 837
consist of liquids and they have leaked out, nothing remaining
in the containers but one-fourth part of their contents. Art. 837 The civil liability incurred by the ship owners in the
case prescribed in this section, shall be understood as limited to
With respect to charters, the charterers in charter party, or the the value of the vessel with all its appurtenances and the
lease of the vessel, the charterers and the shipper may abandon freightage earned during the voyage.
the merchandise damaged if the cargo should consist of liquids
and they have leaked out nothing remaining in the containers So this refers to COLLISION:
but 1/4 of their contents on the account of an inherent defect This covers what the carrier can abandon, however these are
or fortuitous event. subject to certain EXCEPTIONS.
1. When the injury or death of passenger is due either
5TH CASE OF ABANDONMENT: SECTION 138 OF to the fault of the ship owner or to the concurring
THE CODE OF COMMERCE negligence of the ship owner and the captain. (It is
not covered by limited liability rule, which means
SECTION. 138 Abandonment, in marine insurance, is the act that the ship owner cannot say that his liability is
of the insured by which, after a constructive total loss, he extinguished upon the loss of the vessel.)
declares the relinquishment to the insurer of his interest in the 2. When the vessel is insured, the insur[ed] portion can
thing insured. now be claimed by the shippers. (It is not covered
 Which pertains to the right of abandonment for constructive by limited liability rule. So the insurance proceeds
loss. insofar as the amount is concerned, cannot be
 Which takes place when the vessel suffers damage in abandoned by the carrier. So the shippers and the
excess of ¾ of its insured value. consignees can run after the insurance proceeds.)
 So the insured then exercises the right of abandonment by 3. The workmen’s compensation claim – so whatever is
notifying the insurer and therefore the ownership over the due to the workers shall not be covered by the

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

limited liability rule because that is part of the any time without cause as reasonably established in an
operations or the administrative calls of the carrier. appropriate investigation.
It part of his business.
So these employees are also entitled to security of tenure.
Because the constitution provides that no person shall be
deprived of life, liberty, and property without due process
PARTIES INVOLVED IN MARITIME COMMERCE of law. (Your work is your property)

 So who are the parties who take part in the maritime  WHO IS THE CAPTAIN; NATURE AND ROLE OF A
commerce? CAPTAIN
1. The ship owner,
2. The ship agent That is answered in the case of:
INTER-ORIENT V. NLRC
*just read what are their duties and liabilities… G.R. No. 115286 August 11, 1994

1. SHIP AGENT DOCTRINE:

 So who is a SHIP AGENT? It is well settled in this jurisdiction that confidential and
managerial employees cannot be arbitrarily dismissed at any
A ship agent as provided, is a person particularly entrusted time, and without cause as reasonably established in an
with the provisioning of the vessel or who represents the appropriate investigation. Such employees, too, are entitled
vessel in the port where it may be found to security of tenure, fair standards of employment and the
protection of labor laws.
Art. 586 (2nd par) By ship agent is understood the person
The captain of a vessel is a confidential and managerial
entrusted with provisioning or representing the vessel in the port
employee within the meaning of the above doctrine.
in which it may be found.
A master or captain, for purposes of maritime commerce, is
Art. 595 (2nd par.) The ship agent shall represent the one who has command of a vessel.
ownership of the vessel, and may, in his own name and in such
capacity, take judicial and extrajudicial steps in matters relating (Note: this answers the question of ma’am as to who the
to commerce. captian is)

Liability: A captain commonly performs three (3) distinct roles:

So the ship agent is SOLIDARILY LIABLE with the ship 1.) he is a general agent of the shipowner;
owner, or to his principal for any loss, or damage to the cargo 2.) he is also commander and technical director of the
which the vessel is responsible without prejudice to his rights vessel; and
over to run after the ship owner. 3.) he is a representative of the country under whose
flag he navigates.
2. COMPLEMENTS:
FACTS:
 So who are the Complements of the vessel?
Tayong, a licensed Master Mariner , was employed by
petitioners Trenda World Shipping (Manila), Inc. and Sea
[Who are we] referring to?
Horse Ship Management, Inc. through Inter-Orient Maritime
It is understood as all persons on board (the vessel) from Enterprises, Inc. as Master of the vessel M/V Oceanic
the captain to the cabin boy, necessary for the
Mindoro, for a period of one (1) year (on 6 July 1989)
management, maneuver, and service, and therefore the
complement shall include the crew, the sailing mates, the
Captain Tayong assumed command of petitioners' vessel at
engineers, stokers, and other employees on board not the port of Hongkong.
having specific designations; but it shall not include the
passengers or the persons whom the vessel is transporting While the vessel was en route to Singapore, Captain Tayong
(Black’s Law Dict.)
reported that the vessel had stopped in mid-ocean for six (6)
hours and forty-five (45) minutes due to a leaking
3. CAPTAIN:
economizer. He was instructed to shut down the economizer
and use the auxiliary boiler instead.
Who is the Captain, what is the nature of the role of
captain? Mr. Clark received a call from Captain Tayong informing him
that the vessel cannot sail without the oxygen and acetylene
A captain is a confidential and managerial employee, for safety reasons due to the problems with the turbo charger
within the meaning of the doctrine that confidential and
and economizer. Mr. Clark responded that by shutting off the
managerial employees cannot be arbitrarily dismissed at water to the turbo chargers and using the auxiliary boiler,
there should be no further problems.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

such role (which, to our mind, is analogous to that of "Chief

According to Captain Tayong, however, he communicated to Executive Officer" [CEO] of a present -day corporate
Sea Horse his reservations regarding proceeding to South enterprise) has to do with the operation and preservation of
Africa without the requested supplies, and was advised by the vessel during its voyage and the protection of the
Sea Horse to wait for the supplies at 0800 hrs. of 1 August passengers (if any) and crew and cargo.
1989, which Sea Horse had arranged to be delivered on
board the Oceanic Mindoro. 12 At 0800 hours on 1 August A CAPTAIN IS THE GENERAL AGENT OF THE SHIPOWNER
1989, the requisitioned supplies were delivered and Captain
Tayong immediately sailed for Richard Bay. In his role as general agent of the shipowner, the captain has
authority to sign bills of lading, carry goods aboard and deal
When the vessel arrived at the port of Richard Bay, South with the freight earned, agree upon rates and decide whether
Africa on 16 August 1989, Captain Tayong was instructed to to take cargo. The ship captain, as agent of the shipowner,
turn-over his post to the new captain. He was thereafter has legal authority to enter into contracts with respect to the
repatriated to the Philippines, after serving petitioners for a vessel and the trading of the vessel, subject to applicable
little more than two weeks. He was not informed of the limitations established by statute, contract or instructions
charges against him. and regulations of the shipowner. To the captain is
committed the governance, care and management of the
Captain Tayong instituted a complaint for illegal dismissal vessel. Clearly, the captain is vested with both management
before the Philippine Overseas Employment Administration and fiduciary functions.
("POEA"), claiming his unpaid salary for the unexpired
portion of the written employment contract. CAPTAIN TAYONG WAS NOT VALIDLY DISMISSED

Petitioners, in their answer to the complaint, denied that they It is plain from the records of the present petition that
had illegally dismissed Captain Tayong. Petitioners alleged Captain Tayong was denied any opportunity to defend
that he had refused to sail immediately to South Africa to the himself. Petitioners curtly dismissed him from his command
prejudice and damage of petitioners. According to and summarily ordered his repatriation to the Philippines
petitioners, as a direct result of Captain Tayong's delay, without informing him of the charge or charges levelled
petitioners' vessel was placed "off-hire" by the charterers for against him, and much less giving him a chance to refute any
twelve (12) hours. This meant that the charterers refused to such charge. In fact, it was only on 26 October 1989 that
pay the charter hire or compensation corresponding to Captain Tayong received a telegram dated 24 October 1989
twelve (12) hours, amounting to US$15,500.00, due to time from Inter-Orient requiring him to explain why he delayed
lost in the voyage. They stated that they had dismissed sailing to South Africa.
private respondent for loss of trust and confidence.
CAPTAIN TAYONG’S ACTION-JUSTIFIED
ISSUE:
Was Captain Tayong validly dismissed in his post as captain? respondent Captain did not arbitrarily and maliciously delay
the voyage to South Africa. There had been, Mr. Clark stated,
Held: No. a disruption in the normal functioning of the vessel's turbo -
charger 19 and economizer and that had prevented the full
A CAPTAIN IS A CONFIDENTIAL AND MANAGERIAL or regular operation of the vessel.
EMPLOYEE
PRINCIPLE: THE CAPTAIN HAS CONTROL OF ALL
It is well settled in this jurisdiction that confidential and DEPARTMENTS OF SERVICE IN THE VESSEL, AND
managerial employees cannot be arbitrarily dismissed at any REASONABLE DISCRETION AS TO ITS NAVIGATION.
time, and without cause as reasonably established in an
appropriate investigation. Such employees, too, are entitled a ship's captain must be accorded a reasonable measure of
to security of tenure, fair standards of employment and the discretionary authority to decide what the safety of the ship
protection of labor laws. and of its crew and cargo specifically requires on a stipulated
ocean voyage. The captain is held responsible, and properly
The captain of a vessel is a confidential and managerial so, for such safety. He is right there on the vessel, in
employee within the meaning of the above doctrine. A master command of it and (it must be presumed) knowledgeable as
or captain, for purposes of maritime commerce, is one who to the specific requirements of seaworthiness and the
has command of a vessel. A captain commonly performs particular risks and perils of the voyage he is to embark upon.
three (3) distinct roles: (1) he is a general agent of the The applicable principle is that the captain has control of all
shipowner; (2) he is also commander and technical director departments of service in the vessel, and reasonable
of the vessel; and (3) he is a representative of the country discretion as to its navigation. 20 It is the right and duty of
under whose flag he navigates. the captain, in the exercise of sound discretion and in good
faith, to do all things with respect to the vessel and its
A CAPTAIN IS THE COMMANDER OF A VESSEL equipment and conduct of the voyage which are reasonably
necessary for the protection and preservation of the interests
Of these roles, by far the most important is the role under his charge, whether those be of the shipowners,
performed by the captain as commander of the vessel; for charterers, cargo owners or of underwriters.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

is provided under their employment contract., unless there is

THE MASTER MUST BE LEFT FREE TO EXERCISE HIS OWN contrary agreement.
BEST JUDGMENT.
M: So, if during the voyage, what would be the result if the
It is a basic principle of admiralty law that in navigating a captain and the members of the crew are discharged during the
merchantman, the master must be left free to exercise his voyage?
own best judgment. The requirements of safe navigation
compel us to reject any suggestion that the judgment and The consequence shall be they shall continue to receive their
discretion of the captain of a vessel may be confined within salaries until they return to the port where the contract was
a straitjacket, even in this age of electronic communications. made, unless there should be just motive for their discharge, in
Indeed, if the ship captain is convinced, as a reasonably accordance with Art. 636,
prudent and competent mariner acting in good faith that the
shipowner's or ship agent's instructions (insisted upon by But the provisions of Article 603, and Article 604 shall apply only
radio or telefax from their offices thousands of miles away) if the captain is not a co-owner. Meaning if the captain is
will result, in the very specific circumstances facing him, in discharged during the voyage, and the captain is a co -owner of
imposing unacceptable risks of loss or serious danger to ship the vessel- he cannot be discharged, in which case, under Article
or crew, he cannot casually seek absolution from his 606:
responsibility, if a marine casualty occurs, in such
instructions. ARTICLE 606 if the captain should be a co-owner of the vessel
he may not be discharged unless the ship agent returns to him
CAPTAIN TAYONG’S ACTION: NOT ARBITRARY the amount of his interest therein, which in the absence of an
agreement between the parties, shall be appraised by experts
We are unable to hold that Captain Tayong's decision (arrived appointed in the manner established in t he law of civil
at after consultation with the vessel's Chief Engineer) to wait procedure.
seven (7) hours in Singapore for the delivery on board the
Oceanic Mindoro of the requisitioned supplies needed for the
ARTICLE 607 If the captain who is a co-owner should have
welding-repair, on board the ship, of the turbo-charger and
obtained the command of the vessel by virtue of a special
the economizer equipment of the vessel, constituted me rely
agreement contained in the articles of association , he may not
arbitrary, capricious or grossly insubordinate behavior on his
be deprived of his office except for the causes mentioned in Art.
part. In the view of the NLRC, that decision of Captain
605
Tayong did not constitute a legal basis for the summary
dismissal of Captain Tayong and for termination of his
contract with petitioners prior to the expiration of the term “A journey of a thousand miles begins with a sing step.”
thereof. -Lao-tzu (604 BC-531BC)

So, if during the voyage what would be the result if the captain
DISMISSAL and the members of the crew were discharged during the
 When may a captain or crew be validly dismissed? voyage? The consequence would be they shall receive their
salaries until they return to the court until their contract was
ART. 603 Before the vessel set out to sea the ship agent may made, unless there should be just motive for their discharge in
at his discretion discharge the captain and members of the crew accordance with Article 636.
whose contracts are not for a definite period or voyage, paying
them the salaries earned according to their contracts, and But the provisions of 603 and 604 shall apply only when the
without any indemnity whatsoever, unless there is an express caption is not a co-owner. Meaning to say if the captain is a co-
and specific agreement is respect thereto. owner of the vessel, he cannot be discharged during the voyage.
In which case, under Article 606, if the captain should be a co -
M: So when can they be discharged? owner, he may not be discharged without the ship agent
Prior to the sailing of the vessel returning to him the amount of the interest in the vessel, which
in the absence of the agreement between the parties shall be
M: If ship owner discharges the captain and the crew, what
appraised by experts appointed in the manner established under
should be paid to them?
the law of civil procedure. And if the captain who is a co-owner
They should be paid with the salaries they have earned should have obtained the command of the vessel by virtue of a
according to their contracts, and without indemnity whatsoever special agreement, contained in the articles of co -partnership,
unless there is expressed and specific agreement with respect the captain cannot be deprived of his office except for just
thereto. causes: insubordination, serious matters, robbery, theft,
habitual drunkenness, or damages caused to the vessels or to
i.e., they are covered by an employment contract, but before
her cargoes by malice or manifest or total (?) negligence under
the vessel sets out to sea and the ship owner changed his mind,
changed the captain and crew, they can be discharged prior to 607 in connection to Article 605.
the sailing of the vessel but the shipper should pay them what

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

In the case of 5. For damages in case of collision due to the fault,

negligence, or want of skill of the captain, sailing-
MADRIGAL SHIPPING COMPANY, INC. v. JESUS G. mate or any other member of the complement
OGILVIE, SALVADOR ORTILE, MIGUEL M. FERMIN,
under Article 826.
ANTONIO C. MILITAR and THE COURT OF APPEALS
G.R. No. L-8431 October 30, 1958 6. However, the law provides that the agent, although
not the ship-owner, is liable to the shippers and
FACTS: Respondents Ogilvie et. al. were contracted by
cargo owner for losses and damages occasioned to
Madrigal Shipping Company to be part of a crew of a vessel
such cargo without prejudice to his right against
bound for Japan to Manila. The contract was to expire on the
the ship-owner, as to the extent of the value of the
arrival of the port of Manila. They then left Japan, and upon
vessel, its equipment and freight.
reaching Hong Kong, said crew members were dismissed and
replaced on March 16. They were not paid of their salaries of
the period from March 17 until September 30, when the vessel
In the case of
arrived at the port of Manila
ALEJANDRO ARADA, doing business under the name
ISSUE: May the dismissed crew members recover damages?
and style "SOUTH NEGROS ENTERPRISES" vs.
RULING: Yes, their contact was for a definite voyage, and HONORABLE COURT OF APPEALS
therefore they cannot be discharged until after the fulfilment G.R. No. 98243 July 1, 1992
of their contract except under the reasons provided for under
Article 607. FACTS: Sometime in March 24, 182, petitioner through its
crew master applied for a clearance with the Philippine coast
But since there is no showing in the particular case that they
guard for M/L Maya to leave the port of San Carlos City. But
should be discharged for any of the reason or the grounds
due to a typhoon, it was denied.
provided for under the code, they are entitled to salaries until
September 30, when they arrived at the port where the On march 25, M/L Maya was already given clearance as there
contract was executed (Manila). was no more storm and the sea was already calm. So, he said
vessel left for Mandaue City.

While it was navigating towards Cebu, a typhoon developed,

LIABILITY OF THE SHIP OWNER AND THE SHIP AGENT
and said vessel was buffeted on all its sides by big waves. Its
We mentioned earlier the liability of the ship owner and the ship rudder was destroyed and it drifted for 16 hours, although its
agent. engine was running.

1. Under 587, the ship owner and the ship agent shall Two days after, on March 2, at about 4 am, the vessel sank
be liable for the acts of the captain; with whatever was left of its cargoes. The crew was rescued
by a passing pump boat and was brought to Leyte, where a
2. For the contracts entered into by the captain to
marine protest was filed (Why? Because a marine test is a
repair equip, provision the ode of commerce. Had
requirement to be able to claim for damages).
vessel, provided that the amount claim was
invested for the benefit of the vessel under 587. On the basis of such marine protest, the board of Marine
Meaning to say, if the captain borrowed money, the Inquiry conducted a hearing of the sinking of M/L Maya. The
purpose must to equip or for the provision the Board found that the owner, operator, officers and crew of
vessel. The ship owner and the ship agent will be M/L Maya were exonerated or absolved from any
liable for the loan. But if he contracted the loan not administrative liability on account of the incident. The Board’s
for the provisioning of the vessel but for his own report containing its findings and recommendation was then
consumption, that is not covered by the liability of forwarded to the Philippine Coast Guard, for appropriate
the ship owner or the ship agent; action.

3. For indemnities in favour of a third person which On the basis of the report, the commander of the Philippine
may arise from the contract of the captain in the Coast Guard rendered a decision exonerating the from any
care of the goods transported as well as for the administrative liability of the account of the said incident.
safety of the passengers transported;
ISSUE: Whether petitioner is liable for the loss of the cargoes
4. For damages to thirds persons; for torts or quasi- considering that the BMI exonerated them administratively.
delict committed by the captain except if collision
Petitioner contends that it was not in the exercise of its
with another vessel;
function as a common carrier when it entered into a contract
with San Miguel, but was then acting as a private carrier

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

under its charter not bound by its requirement of TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND
extraordinary diligence and the factual findings pf the BMI are RUBEN REYES vs. HONORABLE COURT OF APPEALS
binding and conclusive on the court. AND COMPANIA MARITIMA
G.R. No. L-51165 June 21, 1990
Private respondent contends that M/L Maya was in the
exercise of its functions as a common carrier and its failure to
This is a case where the vessel is made liable by despite the
observed extraordinary diligence over the cargo makes
loss of the vessel.
petitioner liable of the value of the said cargoes.
FACTS: A vessel of Compania Maritima was crowded with
RULING: Respondent’s argument is supported by evidence. It
passengers and loaded with cargo. Although the vessel was
was noted here that the Babao knew of the impending
clear for departure by the coast guard at 2am, its departure
typhoon on March 24, when the PCG denied the clearance for
was delayed for four hours.
the same. Less than 24 hours since the denial and the time
when the clearance was finally issued, it was shown that During the delay, there were unmanifested cargoes and
Babao did not ascertain where the typhoon was headed by passengers that were loaded, resulting to the overloading of
the use of his barometer and radio. the vessel. The typhoon sunk due to the typhoon, causing the
drowning of several passengers.
Neither did the captain monitor the weather conditions
everyday as required by Article 612 of the Code of Commerce. After the investigation, the Board of Marine Investigation
found that the Captain and officers were negligent in
Had he done so while navigating for 31 hours, he could have
operating the vessel.
anticipated the strong winds and big waves and should have
taken shelter. The report ruled that since the vessel sunk, the Compania
Maritima cannot be liable on the principle of limited liability of
The exoneration of the BMI but was with respect to the
the ship owner and the ship agent.
administrative liability of the owner, operator, officers, and
crew of the M/L Maya. It could not have meant the ISSUE: Whether Compania Maritima can raise the defense of
exoneration of the petitioner from its liability as a common limited liability.
carrier for his failure to observe extraordinary diligence in the
RULING: The Supreme Court ruled that the limited liability
vigilance over the goods it was transporting and for the
does not apply in the case.
negligent acts of its employees. Such is the function for the
court, not the BMI. The ship owner was equally liable with the captain’s
negligence. While the vessel was delayed for four hours,
So, what is the difference if they were exonerated for Maritima cannot be excused for the delay, because it did not
administrative liability? That is only in so far as the employer- check the reason for the delay. It was during this period of
employee relationship, because if they were at fault, they could the delay that unmanifested passengers and cargo were
be held liable for the damages caused tot the carrier. loaded and boarded.
Considering that they were exonerated, there was no negligence
on their part so there is no basis for any disciplinary actions A close supervision by Maritima could have prevented the
against the members of the crew. effects of the typhoon.

So, the finding of the BMI was only insofar as whether or no

they were negligent or whether they performed their functions
In the case of
as employees of the vessels.
THE PHILIPPINE AMERICAN GENERAL INSURANCE
As far as the values of the cargoes are concerned, that is
COMPANY, INC. vs. COURT OF APPEALS and FELMAN
between the shipper and the carrier, because the contract is SHIPPING LINES
entered into by the shipper and the carrier. If they were not G.R. No. 116940. June 11, 1997
exonerated from the administrative liability, the officers may
also be held liable by the carrier for the whatever the carrier has In this case, the Supreme Court ruled against the claim of
paid, or they can be terminated. That then is separate and limited liability of the ship owner and considered the incident
distinct from the liability of the shipper to the carrie r, under as exceptional circumstance wherein the ship owner or ship
contract of carriage. agent will still be held answerable despite the abandonment.

In the case of FACTS: Felman is the owner and operator of M/V Asilda,
contracted to load 7500 cases of one liter Coca-Cola bottles,
HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF which were found to have been improperly stowed on deck
ERNANIE DELOS SANTOS, HEIRS OF AMABELLA
for transport from Zamboanga to Cebu.
DELOS SANTOS, HEIRS OF LENNY DELOS SANTOS,
HEIRS OF MELANY DELOS SANTOS, HEIRS OF
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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Despite the fair weather, the vessel sunk and the cargoes G.R. No. L-42926 September 13, 1985
were lost, because of the inordinate loading of the vessel,
In this case, the sinking of the vessel due to a typhoon was not
making it top heavy, which resulted to its unstable condition.
considered by the Supreme Court as an exempting cause, as
Felman abandoned all his rights and interest over the vessel the captain was negligent in overloading the vessel and
for the purpose of limiting and extinguishing his liability. proceeding despite notice of bad weather.
ISSUE: Whether Felman is no longer liable for the loas of the However, since there was no negligence on the part of the ship
cargo. owner, the liability of the ship owner and the ship agent can
be extended only to the proceeds of the insurance .
RULING: The Supreme court found Felman equally liable for
the loss. FACTS: The MV "Pioneer Cebu" encountered typhoon "Klaring"
and struck a reef on the southern part of Malapascua Island,
Art. 587 of the Code of Commerce is not applicable to the
and subsequently sunk. The relatives of petitioners who were
case at bar. Simply put, t he ship agent is liable for the
passengers then were unheard from since then.
negligent acts of the captain in the care of goods loaded on
the vessel. This liability however can be limited through The petitioners sued Filipinas Pioneer for damages.
abandonment of the vessel, its equipment and freightage as
ISSUE: Whether the ship owner should be liable for the
provided in Art. 587. Nonetheless, there are e xceptional
damages.
circumstances wherein the ship agent could still be held
answerable despite the abandonment, as where the loss or RULING: No.
injury was due to the fault of the shipowner and the captain.
With respect to private respondent's submission that the total
The international rule is to the effect that the right of
loss of the vessel extinguished its liability pursuant to Article
abandonment of vessels, as a legal limitation of a shipowners
587 of the Code of Commerce, suffice it to state that the
liability, does not apply to cases where the injury or average
liability of a shipowner is limited to the value of the vessel or
was occasioned by the shipowners own fault. It must be
to the insurance thereon. Despite the total loss of the vessel
stressed at this point that Art. 587 speaks only of situations
therefore, its insurance answers for the damages that a
where the fault or negligence is committed solely by the
shipowner or agent may be held liable for by reason of the
captain. Where the shipowner is likewise to be blamed, Art.
death of its passengers.
587 will not apply, and such situation will be covered by the
provisions of the Civil Code on common carrier.

It was already established at the outset that the sinking of MV  How do we distinguish certain dues that are
Asilda was due to its unseaworthiness even at the time of its assessed unto a vessel from arrival of departing
departure from the port of Zamboanga. It was top-heavy as from a particular port? We call this tonnage dues,
an excessive amount of cargo was loaded on deck. Closer wharfage dues, hardboard fees, and berthing fees.
supervision on the part of the shipowner could have
1.BERTHING FEES – like parking fees. With respect
prevented this fatal miscalculation. As such, FELMAN was
to vessels, we call it birth. Park/ing is for cars.
equally negligent. It cannot therefore escape liability through
the expedient of filing a notice of abandonment of the vessel Parking of a vessel we refer to as berth/ing. They
are also levied on vessels coming or mooring with
by virtue of Art. 587 of the Code of Commerce.
specified places or waters of a port. Berthing
Under Art 1733 of the Civil Code, (c)ommon carriers, from the charges are assessed against a vessel for berthing
nature of their business and for reasons of public policy, are or mooring at a pier, in wharf, in bulkhead wharf,
bound to observe extraordinary diligence in the vigilance over river or channel, marginal wharf, or for mooring
the goods and for the safety of the passengers transported within any slip channel, basin, or river, or canal
by them, “according to all the circumstances of each case" In under the jurisdiction of any port of the Philippines.
the event of loss of goods, common carriers are presumed to Berthing charges are like wharfage dues, in the
have acted negligently. FELMAN, the shipowner, was not able sense that they are imposed for the use of the wharf
to rebut this presumption. regardless of the ownership thereof. The only
difference between berthing and wharfage dues is
that while berthing charges are assessed the
In the case of vessels, wharfage dues are assessed against the
cargo.
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B.
BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ 2.TONNAGE DUES - assessed for vessel coming to
and MAXIMINA CAINAY vs. THE COURT OF APPEALS the Philippine from a foreign port, or going to a
and FILIPINAS PIONEER LINES, INC., foreign port from the Philippines.
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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

3.HARDBOARD FEES – fees assessed for entrance Usually in the contract, they allow for laydays probably on
into or departure from a port of entry, the vessel is occasion of weather or availability of crew members.
assessed with.
9.DEAD FREIGHT – cargo not loaded, which covers the
4.WHARFAGE DUES – assessed against the cargo amount paid by or recoverable from the charterer for the
discharged by the vessel engaged in foreign trade. portion of the ship’s capacity the latter contracted for but
So, if a vessel is engaged in the foreign trade, so failed to occupy. Under 680 that the liability of the dead
yung cargo niya from foreign trade is unloaded in a freight is on the charterer.
Philippine port, they are charged with wharfage
dues.
PREFERRED CREDITORS
5.PRIMAGE – bonus paid to the captain after a
successful voyage Who are considered preferred creditors?
6.Demurrage – another name for a penal clause to
In case of an extrajudicial foreclosure of vessel, under PD 1521
compensate the owner of the vessel for its non-use. – the Ships Mortgage Decree – mortgage of vessel registered
It is a sum fixed in a charter party as a remuneration prior in time (because of the need or registration to affect third
to a ship owner for the detention of the vessel parties) becomes the preferred mortgage lien which shall have
beyond the number of days allowed by the charter priority over all claims against the vessel, except for:
party for loading or unloading or for sailing. The
liability for demurrage exist only when expressly 1. Expenses and fees allowed and costs taxed by the
court and taxes due to the Government;
stipulated in the contract ( NFA vs. CA ).
2. Payment of Crew’s wages;
So, if you draft a charter party, if you are the lawyer 3. General average;
of the carrier, possibly you will ask for the 4. Salvage, including contract salvage;
5. Maritime liens arising prior in time to the recording
demurrage fees. Kasi malulugi yung client ninyo if
of the preferred mortgage;
you will stay several days in the port. 6. Damages arising out of tort; and
In the NFA case, the shipper or charterer is liable for 7. Preferred mortgage registered prior in time.
the payment of demurrage fees if he exceeds the
CARGO NOT REQUIRED TO PAY FREIGHT
period of loading or unloading as agreed upon or the
agreed laydays. The period for such may or may not Article 660, Code of Commerce: No charter fees shall accrue
be stipulated in the contract. A charter party may on goods jettisoned due to common salvage; although their sum
either provide for fixed laydays or contain general or shall be considered as general average, this being calculated in
indefinite words such as “customary quick dispatch” proportion to the distance covered when jettisoned.
or “as fast as the steamer can go.”
Article 661, Code of Commerce: Nor shall carriage fees be
When we say customary “quick dispatch” this implies accrued on goods lost due to shipwreck or running aground, nor
that the loading and unloading of the cargo should those seized by pirates or enemies.
be within a reasonable period of time. Due diligence If the carriage fees have been charged in advance, they shall be
should be exercised according to the customs and returned, unless there is a clause to the contrary.
usages of a particular port or ports of call.
Cargoes not required to pay freight under Art. 660 & Art 661
The circumstances obtaining at the time of loading
and unloading are to be taken into account. When 1. Those jettisoned - tinatapon inorder to preserve the
the provision is for “demurrage”, “bar”, “dispatch” vessel and the crew and passengers; if the vessel is in
tapos may term na “none” it will be deemed a waiver danger of sinking, in order to lighten the vessel, they
will sank hard those needs to be jettisoned.
of the right to claim damages or demurrages.

7.LAYDAYS – period when the vessel will be delayed in port  Those jettisoned for the common safety, the
for loading and unloading. freight that should have been paid shall be
considered as general average and therefore
8.EXTRA LAYDAYS – days after the laydays. Meaning to computed accordingly. The shipper whose
say, the vessel is already overstaying. cargoes have been saved as a result of the
jettison of some cargoes, the onwers of cargoes
So, if you are overstaying for two or three days, you call that was saved will contribute to the general fund
that overstaying laydays, if it exceeds the laydays as the in proportion or pro rata to the value of their
laydays agreed upon. cargo and this is considered as general average
which shall be paid to those shippers whose
cargoes were jettisoned.

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Cargos which suffer deterioration or diminishing on account of

2. Those lost to ship wreck or stranding - if the freight inherent defects or bad quality of the packing or fortuitous
shall be paid in advance, it shall be returned unless there event, under 663, and cargoes that increase in size or weight by
was an agreement to the contrary. natural cause, then such cargo shall pay the proper freightage
fixed in the contract under 644.
3. Those seized by pirates or enemies - and if the
freightage shall have been paid in advance it shall also
be returned unless otherwise agreed upon. SPECIAL CONTRACTS FOR MARITIME COMMERCE

EFFECT OF REDEMPTION CHARTER PARTY

Article 662, Code of Commerce: If the ship or goods are  Definition: a written contract between the ship owner
salvaged, or if the goods are salvaged from the shipwreck, the or ship agent and charterer, whereby ship owner or the
relevant carriage shall be paid for the distance covered by the agent leases the vessel to transport passengers or
ship with the cargo on board; and if, once re paired, she carries cargoes for a fixed prize. It amounts to a lease of
the cargo to the destination port, the full carriage shall be paid, personal property, but with 2 distinctions provided
notwithstanding the relevant average claims. under 689 and 690.

If the vessel or the goods are redeemed or salvages, the Article 689, Code of Commerce: The charter contract may
freightage corresponding to the distance covered by the vessel be terminated at the request of the Shipper:
transporting the cargo shall be paid. Therefore if the agreed 1. If, on conclusion of the lay-days, the charterer does not
amount of freightage is 1000 and pirates seize the goods when deliver the cargo along side;
the vessel has gone halfway, no need to pay the half of the
freightage. He can pay only 500. In that event, the charterer must pay half the carriage agreed,
in addition to the lay-days and demurrage accrued.
If the cargoes were redeemed from the pirates, they must pay 2. If the Shipper were to sell the ship before the charterer has
the balance of the freightage, which was in proportion to the commenced her loading and the buyer loads the cargo on
distance covered by the vessel. his account.

In this case, the seller shall compensate the charterer for the
CARGOES REQUIRED TO TAKE FREIGHTAGE
damages caused.
If the new ship owner does not load the cargo on his account,
Article 659, Code of Commerce: The goods sold by the the charter contract shall be honoured, with the seller
Master to attend to the indispensable repair of the hull, engines compensating the buyer, if the former did not notify the latter
or rigging, or for unavoidable and urgent needs, shall accrue about the charter pending at the time of arranging the sale.
carriage fees.
The price of these goods shall be set according to the success Article 690, Code of Commerce: The charter contract shall
of the expedition, that is: be rescinded and all the action deriving therefrom extinguished
1. If the ship safely reaches the destination port, the Master if, before the ship sets sail from the port of departure, any of
shall pay them at the price obtained for those of the same the following events were to take place:
class as those sold; 1. Declaration of war or prohibition of commerce with the
2. If the ship is lost, at that which would have been obtained country to whose ports the ship must travel;
from sale of the goods. 2. State of blockade of the destination port or epidemic,
arising after the enrolment takes place;
Article 663, Code of Commerce: Goods that suffer
3. Prohibition for the freight loaded on the ship to be received
deterioration or shrinkage due to inherent flaws or bad quality
at that port;
and condition of the packaging, or for fortuitous causes, shall
4. Indefinite detention of the ship due to embargo by
accrue the full carriage fees, just as stipulated in the charter
Government order, or due to any other cause beyond the
contract.
control of the shipping agent;
Article 644, Code of Commerce: Natural increase in the
5. The ship being disabled and unable to sail, without the
weight or measurement of the freight loaded on the ship shall
Master or shipping agent being to blame.
inure to the benefit of the owner thereof and the relevant
carriage fees set in their contract shall accrue. Unloading shall be performed at the charterer’s expense.

Cargoes sold by the captain to pay for the necessary repairs to

A charter refers to a lease but under different circumstances as
the hull, machinery or equipment or for unavoidable or urgent an ordinary lease. If you lease a property, it is only for a specific
needs, but the freightage may or may not be required to be paid period. In charter, the parties of the charter may make
in full. When the vessel arrived at her destination, the freightage rescission.
shall be paid in proportion to the distance covered until the Rescission may be at the instance of the charterer, the ship
vessel is lost. That is 659.
owner by reason of causes independent of the will of the parties.
That sets it apart from an ordinary lease.

Page 37 of 44
 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

Planters Products, Inc. vs. CA 225 SCRA shipping agent or shipper; but they shall be entitled to take
A "charter-party" is defined as a contract by which an entire action against the Master to claim compensation for damages.
ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of EFFECT WHEN NO DATE OF LOADING OR UNLOADING
affreightment by which the owner of a ship or other vessel lets
the whole or a part of her to a merchant or other person for the Article 656, Code of Commerce: If the charter policy does
conveyance of goods, on a particular voyage, in consideration not state the periods of time within which loading and unloading
of the payment of freight. Contract of affreightment may either are to be performed, the practice in the port where the
be time charter, wherein the vessel is leased to the charterer for operations are performed shall apply. Once the period stipulated
a fixed period of time, or voyage charter, wherein the ship is or the usual one has elapsed, if the charter contract does not
leased for a single voyage. 22 In both cases, the charter-party contain a specific clause setting the compensation for delays,
provides for the hire of vessel only, either for a determinate the Master shall be entitled to claim the lay-days and demurrage
period of time or for a single or consecutive voyage, the ship - days elapsed in loading and unloading.
owner to supply the ship's stores, pay for the wages of the
master and the crew, and defray the expenses for the In the absence stipulation n the charter party, the customs or
maintenance of the ship. usages of the port shall be orserved.
KINDS OF CHARTER EFFECT IF THE VESSEL IS UNSEAWORTHY
1. Demise or bareboat charter - the charterer takes hold
Article 657, Code of Commerce: If the ship were to be
of the vessel, the owership is in the hands of the charterer
disabled during the voyage, the Master shall be obliged to
in the meantime for the period covering the charter party.
charter another one in a seaworthy condition at his expense, to
It is under the control of the charterer, as if the charterer
receive the cargo and to carry it to its destination, to which end
is the owner of the vessel.
he shall be obliged to seek a ship not only in the port into which
a. Obligation or liability:
he has put, but also in those around it up to a distance of 150
i. Ship owner or ship agent only assures
kilimetres.
confidently that the vessel is shipworthy;
If, due to indolence or malice, the Master does not provide a
ii. Charterer is the owner pro hac vise
ship to carry the cargo to its destination, the consignors,
(owner in the meantime)
following a demand issued to the Master requiring him to find a
2. Contract of affreightment – one by which the owner of
charter vessel within a non-extendible period of time, may then
a ship or other vessel lets the whole or a part of her to a
contract out the charter by resorting to the judicial authority to
merchant or other person for the conveyance of goods, on
apply for summary approval of the contract they have entered
a particular voyage, in consideration of the payment of
into.
freight.
That same authority shall urgently call on the Master to perform
the charter on the terms entered into by the consignors, on his
account and under his responsibility. If the Master, in spite of
National Freight Insurance v. 184 S 682
his diligence, does not find a ship to charter, he shall place the
in cases where a Bill of Lading has been issued by a carrier
cargo in deposit and available to the consignors, to whom he
covering goods shipped aboard a vessel under a charter party,
shall report what has happened at the first opportunity that
and the charterer is also the holder of the bill of lading, "the bill
arises and, in these cases, the charter shall be according to the
of lading operates as the receipt for the goods, and as document
distance the ship has covered, without entitlement to any
of title passing the property of the goods, but not as varying the
compensation whatsoever.
contract between the charterer and the shipowner". The Bill of
Lading becomes, therefore, only a receipt and not the contract
of carriage in a charter of the entire vessel, for the contract is WHEN SHOULD FREIGHT ACCRUE
the Charter Party, and is the law between the parties who are
bound by its terms and condition provided that these are not Article 658, Code of Commerce: The carriage fees shall be
contrary to law, morals, good customs, public order and public accrued according to the terms stipulated in the contract and, if
policy (Article 1306, Civil Code). there are not specific, or are doubtful, the following rules shall
In a charter party, if there is a bill of lading atached to the apply:
charter, the BOL merely represents as receipt for the goods 1. When the ship is chartered by months or days, the charter
received, the terms and conditions under the charter party fees shall begin to accrue from the date on which the ship
govern the rights and obligations of parties in case of disputes is loaded;
that may arise. 2. On charters for a specific period of time, the charter fees
shall begin to accrue from that same day;
EFFECT OF A CHARTER PARTY EXECUTED BY A CAPTAIN 3. If the carriage fees are by weight, payment shall be made
IN THE ABSENCE OF THE SHIP OWNER by gross weight, including the packaging, barrels or any
object in which the cargo is contained.
Article 655, Code of Commerce: The charter contracts
entered into by the Master in the absence of the shipping agent Just read loans on bottomry or respondentia, I don’t think it is
shall be valid and effective when, on entering into them, he may still observed now. Just go over that.
have acted in breach of the orders and instructions given by the

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Ateneo de Davao College of Law | 2-SR SY 2016 2017

BOTTOMRY AND RESPONDENTIA

Art. 810. The owner of the goods which gave rise to the
In LOANS ON BOTTOMRY, the collateral is the vessel. LOANS expense or suffered the damage shall bear the simple or
ON REPONDENTIA are a loan contracted by a carrier particular averages.
chargeable against the cargo. The common condition under
these two loans is that the security is exposed to marine peril, Art 810 is consistent with the maxim res perit domino (thing
which is an essential part of those loans. The obligation of the is lost to the owner).
debtor is conditioned only upon the safe arrival of the security
at the point of destination. But if it was not exposed to marine The shipowner would be liable if the cargo was lost due to his
peril, that is another thing. negligence and it did not inure to the benefit of the others. The
owner of the goods cannot claim the loss from the other cargo
owners because they did not benefit from it.
MARCH 8
Take note also of Article 732 of the Code of Commerce

SPECIAL CONTRACTS ON MARITIME Art. 732. Lenders on bottomry or respondentia shall suffer in
proportion to their respective interest, the general average
Definition of AVERAGES which may take place in the goods on which the loan was made.
In particular averages, in the absence of an express agreement
Art. 806. For the purposes of this code the following shall between the contracting parties, the lender on bottomry or
be considered averages: respondentia shall also contribute in proportion to his respective
interest, should it not belong to the kind of risks excepted in the
a) all extraordinary or accidental expenses which may be foregoing article.
incurred during the voyage in order to preserve the
vessel, the cargo, or both; BOTTOMRY is a contract whereby the owner of a ship borrows
for the use, equipment or repair of the vessel, for a definite
b) any damages or deteriorations which the vessel may term, and pledges the ship as security, with the stipulation that
suffer from the time it puts to sea from the port of if the ship is lost during the voyage or during the limited time
departure until it casts anchor in the port of destination, on account of perils enumerated, the lender shall lose his
and those suffered by the merchandise from the time money.
they loaded in the port of shipment until they are
unloaded in the port of their consignment. RESPONDENTIA is where the goods, or some part thereof, are
hypothecated as security for a loan, the payment of which is
Definition of PETTY AND ORDINARY EXPENSES dependent upon maritime risks.

Examples of SIMPLE AVERAGES are provided for under Art.

Art. 807. The petty and ordinary expenses of navigation, such
809.
as pilotage of coasts and ports, lighterage and towage,
anchorage dues, inspection, health, quarantine, lazaretto, and
other so-called port expenses, costs of barges, and unloading, Art. 809. Simple or particular averages shall be, as a general
until the merchandise is placed on the wharf, and any other rule, all the expenses and damages caused to the vessel or to
expenses common to navigation shall be considered ordinary her cargo which have not redounded to the benefit and common
expenses to be defrayed by the shipowner, unless there is a profit of all the persons interested in the vessel and her cargo,
special agreement to the contrary. and especially the following:
1. The damages suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of the nature
KINDS OF AVERAGES
of the goods or by reason of an accident at sea or force majeure,
and the expenses incurred to avoid and repair the same.
ART. 808. Averages shall be: 2. The damages suffered by the vessel in her hull, rigging, arms,
1. Simple or particular. and equipment, for the same causes and reasons, from the time
2. General or gross. she put to sea from the port of departure until she anchored in
the port of destination and the expenses arising therefrom.
SIMPLE AVERAGE shall include all expenses and damages 3. The damages suffered by the merchandise loaded on deck,
caused to the vessel or to her cargo which has not inured to the except in coast navigation, if the marine ordinances allow it.
common benefit and profit of all the persons interested in the 4. The wages and maintenance(food) of the crew when the
vessel and her cargo. If damage is not a general average, it is vessel should be detained or embargoed by a legitimate order
considered a simple or particular average. or force majeure, if the charter should have been for a fixed sum
An example of this is when you try to ship 100 kg of garlic and for the voyage.
when you reach the port of destination, it is now only 90 kg. So 5. The necessary expenses on arrival at a port, in order to make
that is a simple or particular average that is caused by the nature repairs or secure provisions.
of the cargo and be borne by the owner of the cargo. Article 810 6. The lowest value of the goods sold by the captain in arrivals
of the Code of Commerce provides: under stress for the payment of provisions and in order to save

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Ateneo de Davao College of Law | 2-SR SY 2016 2017

the crew, or to cover any other need of the vessel against which 12. The expenses of the liquidation of the average.
the proper amount shall be charged.
7. The victuals and wages of the crew during the time the ve ssel The REQUISITES OF GENERAL AVERAGE are as follows as
is in quarantine. per Tolentino in the case of Magsaysay Inc. vs Agan:
8. The damage suffered by the vessel or cargo by reason of an 1. First, there must be a common danger. This means,
impact or collision with another, if it were accidental and that both the ship and the cargo, after has been
unavoidable. If the accident should occur through the fault or loaded, are subject to the same danger, whether
negligence of the captain, the latter shall be liable for all the during the voyage, or in the port of loading or
damage caused. unloading; that the danger arises from the
9. Any damage suffered by the cargo through the faults, accidents of the sea, dispositions of the authority,
negligence, or barratry of the captain or of the crew, without or faults of men, provided that the circumstances
prejudice to the right of the owner to recover the corresponding producing the peril should be ascertained and
indemnity from the captain, the vessel, and the freightage. imminent or may rat ionally be said to be certain
and imminent. This last requirement excludes
Whatever losses that are suffered under the following measures undertaken against a distant peril.
circumstances enumerated shall only be borne by the owner of
the cargo or the shipowner. 2. Second, that for the common safety part of the
vessel or of the cargo or both is sacrificed
Now, a general average shall include ALL the damages and deliberately.
expenses which are deliberately caused in order to save the
vessel, the cargo, or both at the same time from a real and 3. Third, that from the expenses or damages caused
known risk. follows the successful saving of the vessel and
cargo.
Art. 811. General or gross averages shall be, as a general rule,
all the damages and expenses which are directly caused in order 4. Fourth, that the expenses or damages should have
to save the vessel, her cargo, or both at the same time, from a been incurred or inflicted after taking proper legal
real and known risk, and particularly the following: steps and authority.
1. The goods or cash invested in redemption of the vessel or
cargo captured by enemies, privateers, or pirates, and the In International Harvester Co. v. Hamburg-American
provisions, wages, and expenses of the vessel detained during Line (42 Phil. 845), International Harvester shipped its
the time the arrangement or redemption is taking place. agricultural machinery through a German vessel owned by
2. The goods jettisoned to lighten the vessel, even though they respondent. On its way to the destination, there was a war that
belong to the vessel, to the cargo, or to the crew, and the broke out in Europe and the vessel decided to seek refuge in
damage suffered through said act by the goods kept. Manila. The shipper demanded for the goods to be forwarded to
3. The cables or masts which are cut or rendered useless, the its destination in another vessel. The ship agent agreed only on
anchors and the chains which are abandoned in order to save the condition to consider the cost and expenses of the vessel‘s
the cargo, the vessel, or both. stay in manila as a general average. The shipper did not agree
4. The expenses of transferring or removing a portion of the to such condition and as such, the agent refused to deliver the
cargo in order to lighten the vessel and place her in condition to goods which in turn forced the shipper to file an action for
enter a port or roadstead, and the damage resulting therefrom recovery of the goods plus damages. Eventually, the Supreme
to the goods removed or transferred. Court rejected the argument of the ship agent that there was
5. The damage suffered by the goods of the cargo through the general average. The Court said that the agricultural machinery
opening made in the vessel in order to drain her and prevent was not contraband and was not subject to seizure or forfeiture
her sinking. even if the ship will be captured. So therefore, there is no
6. The expenses caused through floating a vessel intentionally common danger because the fact that the ship took refuge in
stranded for the purpose of saving her. Manila was exclusively for the protection or benefit of the ship
7. The damage caused to the vessel which it is necessary to owner.
break open, scuttle, or smash in order to save the cargo.
8. The expenses of curing and taking care of members of the In another case of Compagnie de Commerce, et al. vs.
crew who may have been wounded or crippled in defending or Hamburg Amerika, et. Al, which also involved a German
saving the vessel. vessel and took refuge in Manila during World War 1. The
9. The pay of any member of the crew detained as hostage by shipper was French who loaded the goods in Saigon. Saigon was
enemies, privateers, or pirates, and the necessary expenses then under the French. After the loading of the cargo, the vessel
which he may incur in his imprisonment, until he is returned to left Saigon to seek refuge in Manila at t he outbreak of the war.
the vessel or to his domicile, should he prefer it. The Supreme Court said that there was no general average
10. The pay and food of the crew of a vessel chartered by the because the French cargo was absolutely secure from danger of
month during the time it should be embargoed or detained by seizure or confiscation at the Saigon port as long as it remained
force majeure or by order of the Government, or in order to there. There is no question that the flight of the vessel was only
repair the damage caused for the common good. a measure of precaution adapted that is solely and exclusively
11. The loss suffered in the value of the goods sold at arrivals for the preservation of the vessel from danger of seizure or
under stress in order to repair the vessel because of gross capture.
average.

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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

It follows here that there is no general average if there is no So, no general contribution may be demanded if the vessel and
danger at all. The Court also said that there is no common the cargo that are sought to be saved is (inaudible) consistent
danger if the measure was undertaken against a distant peril. with Article 860.
Even if there is a common peril, as long as it is still distant or
not imminent, it cannot be justified as a voluntary sacrifice if it Art. 860 If, notwithstanding the jettison of merchandise,
can be avoided by the ship without such sacrifice. breakage of masts, ropes, and equipment, the vessel should be
lost running the same risk, no contribution whatsoever by
In the case of National Dev’t Company vs. CA, the Supreme reason of gross average shall be proper.
Court ruled here that the law on averages does not apply on
collision cases where the collision was caused by the negligence The owners of the goods saved shall not be liable for the
of the captains of the colliding vessels and the cargo was not indemnification of those jettisoned, lost, or damaged.
jettisoned to save some of the cargo and vessel. One of the
requisites of general averages is that there must be a deliberate So, for example. Si Mr. A may goods belonging him that was
sacrifice. But if it is unintentional, it cannot be considered as a
sacrificed from a ship because of a strong typhoon. There will
general average. be no general average contribution, if the ship sank because of
the same typhoon. Therefore, the sacrifice was not successful.
Normally, the sacrifice of the cargo could be done through
One of the requisites is not present in order to be entitled to a
jettison or throwing the cargo overboard.
general average.
For example, if there involves a jettison or casting away for the
So compliant with legal steps, the fourth requisite, expenses or
purpose of avoiding a common peril, it cannot involve in a
damages should have been incurred or inflicted after taking
damage which resulted beyond the control of the captain and
proper legal steps and authority. In this connection, the proper
crew or w ithout of any intention in their part.
steps and legal authority in making the sacrifice are prescribed
from Article 813-815.
There can also be general averages even if the sacrifices were
not made during the voyage under Article 816, 817 and 818 of
the Code of Commerce. (Please refer to 816 -818) Article 813. In order to incur the expenses and cause the
damages corresponding to gross average, there must be a
Take note under Art. 816 that it is not aut omatic that your cargo resolution of the captain, adopted after deliberation with the
that was jettisoned can be considered as a general average. It sailing mate and the other officers of the vessel, and after
is a requirement that in order for the owner of the saved cargo, hearing the persons interested in the cargo who may be present.
be entitled to gross average, this article requires that the owner
must prove it through a Bill of Lading. With those belonging to If the latter shall object, and the captain and officers or a
the vessel, it should be included with the inventory. In other majority of them, or the captain, if opposed to the majority,
words, if the equipment of the vessel was jettisoned, in order should consider certain measures necessary, they may be
for the shipowner to claim general average, the equipment executed under his responsibility, without prejudice to the right
should be part of the inventory of the vessel. of the shippers to proceed against the captain before the
competent judge or court, if they can prove that he acted with
It should be noted class that the goods can no longer be malice, lack of skill, or negligence.
considered as a general average if the thing is inevitably lost.
Consistently, under the York-Antwerp (YA) Rules, this refers If the persons interested in the cargo, being on board the vessel,
to a situation with respect to loading of cargoes on deck because have not been heard, they shall not contribute to the gross
for international overseas trade, cargoes on deck are not average, their share being chargeable against the captain,
allowed. Why? Kasi matagal yan i-travel. The cargoes will be unless the urgency of the case should be such that the time
exposed sa wind, sa sea, etc. necessary for the previous deliberations was wanting.

However, in domestic coast -wise trade, it depends on the Article 814. The resolution adopted to cause the damages
customs of the port if it is allowed kasi if the owner allows cargo which constitute general average must necessarily be entered in
to be placed on deck, it may be jettisoned but it may not be the log book, stating the motives and reasons for the dissent,
considered as a general average, if it is prohibited. Unlike sa should there be any, and the irresistible and urgent causes
coast-wise, diba tinapon yun on deck, the owner of the cargo is which impelled the captain if he acted of his own accord.
also liable for general average and can also be placed for general
average. Because hindi siya prohibited in coast -wise trade. That In the first case the minutes shall be signed by all the persons
is only one of the provisions of YA Rules. present who could do so before taking action, if possible; and if
not, at the first opportunity. In the second case, it shall be
Third, the sacrifice must be successful. We say that common signed by the captain and by the officers of the vessel.
danger, deliberate sacrifice and the sacrifice must be succe ssful.
Kasi if hindi siya successful at hinulog lang ang cargo, walang In the minutes, and after the resolution, shall be stated in detail
general average. 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 24 hours
after his arrival, and to ratify it immediately under oath.
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From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

to enter a port or roadstead, and the damage resulting

So, ang scenario here is nagmi.meeting pa kayo kung ano ang therefrom to the goods removed or transferred.
unahin kahit nalulubog na ang barko. But the law is the law. It 5. The damages suffered by the goods of the cargo by
may be harsh, but it is the law. You have to prove under the law the opening made in the vessel in order to drain it and prevent
that the requirement is satisfied. A formality that there must be its sinking
a resolution of the captain adopted when? After deliberation 6. The expenses caused in order to float a vessel
with the other officers, after hearing all the persons interested intentionally stranded for the purpose of saving it.
in the cargoes. So, if the interested parties disagree, what will 7. The damage caused to the vessel which had to be
happen? The decision of the captain shall prevail but the persons opened, scuttled or broken in order to save the cargo.
who disagree should record their objection. And the resolution 8. The expenses for the treatment and subsistence of the
must be entered into the logbook stating for the reasons and embers of the crew who may have been wounded or crippled in
motive for the dissent. Irresistible and urgent causes if he acted defending or saving the vessel.
on his own accord, it must be signed, in the first case by all 9. The wages of any member of the crew held as hostage
persons present in the hearing. So, in the second case, by the by enemies, privateers, or pirates, and the necessary expenses
captain and of all the officers in the vessel. In the minutes must which he may incur in his imprisonment, until he is returned to
also contain details all the goods jettisoned and injuries caused the vessel or to his domicile, should he prefer it.
to those on board. Ang hirap nito diba? But it is the law. 10. The wages and victuals of the crew of a vessel
chartered by the month, during the time that it is embargoed or
Article 815. The captain shall direct the jettison, and shall detained by force majeure or by order of the government, or in
order the goods cast overboard in the following order: order to repair the damage caused for the common benefit.
1. Those which are on deck, beginning with those which 11. The depreciation resulting in the value of the goods
embarrass the maneuver or damage of the vessel, preferring, if sold at arrival under stress in order to repair the vessel by reason
possible, the heaviest ones with the least utility and value. of gross average.
2. Those which are below the upper deck, always 12. The expenses of the liquidation of the average.
beginning with those of the greatest weight and smallest value,
to the amount and number absolutely indispensible. There is a provision here in the liquidation of averages, meaning
to say, it is a matter of computation or liquidation as to whose
Refers to the order of jettison. Yung embarrass, hindi yung cargo has been thrown or ano yung nasave. It is to determine
ikinahihiya kundi yung obstruct. how much or what is the value of the things jettisoned for the
purpose of liquidating it and pay it to the corresponding owners
So maisip mo, saan kaya nakalagay yung may greatest weight. of those cargoes which are jettisoned.
So tapun nalang kayo nang tapon . Nasusunod kaya ito? Of
course, life is more valuable. Who are liable for general average? Who shall bear it?

So with respect to general average, what are examples of it? It Article 812. In order to satisfy the amount of the gross or
is provide in Article 811. general averages, all the persons having an interest in the vessel
and cargo therein at the time of the occurrence of the average
Article 809, enumerates what are considered simple or shall contribute.
particular average because it did not inure to the public benefit.
This include the ship owner and the owners of the cargoes that
So what are considered as general average, it is provided in were saved and the contributions may be imposed on the
Article 811. The enumeration however is not exclusive. insurers of the vessel or the cargo that has been saved as well
as the lenders of bottomry or respondentia.
Article 811. As a general rule, general or gross averages shall
include all the damages and expenses which are deliberately  Who is entitled to the indemnity?
caused in order to save the vessel, its cargo, or bot h at the same
time, from a real and known risk, and particularly the following: The owner of the goods to which are sacrificed is en titled to
1. The goods or cash invested in the redemption of the receive the general average contribution. However, there are
vessel or of the cargo captured by enemies, privateers, or situations wherein the goods, even if deliberately sacrificed are
pirates, and the provisions, wages and expenses of the vessel not considered as a general average.
detained during the time the settlement or redemption is being
made. 1. Goods as carried on deck unless the rule of special law or
2. The goods jettisoned to lighten the vessel, whether customs of the place allows it. Under Article 855.
they belong to the cargo, to the vessel, or to the crew, and the 2. Goods that are not recorded in the books or records of
damage suffered through said act by the goods which are kept the vessel. Also in Article 855.
on board. 3. Fuel for the vessel if there is more sufficient fuel in the
3. The cables and masts which are cut or rendered voyage. So it is provided under the YA Rule.
useless, the anchors and the chains which are abandoned, in
order to save the cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of MAGSAYSAY INC. VS. AGAN
the cargo in order to lighten the vessel and place it in condition (GR L-6393, 31 January 1955)

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Ateneo de Davao College of Law | 2-SR SY 2016 2017

average, the said expenses do not fit into any of the specific
FACTS: The S S “San Antonio”, a vessel owned and operated cases of general average enumerated in article 811. Number 6
by A. Magsaysay Inc., left Manila on 6 October 1949, bound for of Article 811 does mention “expenses caused in order to float
Basco, Batanes, via Aparri, Cagayan, with general cargo a vessel,” but it specifically refers to “a vessel intentionally
belonging to different shippers, among them Anastacio Agan. stranded for the purpose of saving it” and would have no
The vessel reached Aparri on the 10th of that month, and after application where, as in the present case, the stranding was not
a day’s stopover in that port, weighed anchor to proceed to intentional.
Basco. But while still in port, it ran aground at the mouth of the
Cagayan river, and, attempts to refloat it under its own power There must be a common danger. This means, that both the
having failed, Magsaysay had it refloated by the Luzon ship and the cargo, after it has been loaded, are subject to the
Stevedoring Co. at an agreed compensation. The stranding of same danger, whether during the voyage, or in the port of
Magsaysay’s vessel was due to the sudden shifting of the loading or unloading; that the danger arises from accidents of
sandbars at the mouth of the river which the port pilot did not the sea, dispositions of the authority, or faults of men, provided,
anticipate. Once afloat, the vessel returned to Manila to refuel that the circumstance producing the peril should be ascertained
and then proceeded to Basco, the port of destination. There the and imminent - or may rationally be said to be certain and
cargoes were delivered to their respective owners or imminent. This last requirement excludes measures undertaken
consignees, who, with the exception of Agan, made a deposit or against a distant peril. (2) That for the common safety part of
signed a bond to answer for their contribution to the average. the vessel or of the cargo or both is sacrificed deliberately. (3)
That from the expenses or damages caused follows the
On the theory that the expenses incurred in floating the vessel successful saving of the vessel and cargo. (4) That the expenses
constitute general average to which both ship and cargo should or damages should have been incurred or inflicted after taking
contribute, Magsaysay brought the action in the CFI of Manila proper legal steps and authority.
to make Agan pay his contribut ion, which, as determined by the
average adjuster, amounts to P841.40. Agan, in his answer, Requisite 1 not present; Safety of property, not voyage,
denies liability for this amount, alleging, among other things, true foundation of general average
that the stranding of the vessel was due to the fault, negligence With respect to the first requisite, the evidence does not disclose
and lack of skill of its master, t hat the expenses incurred in that the expenses sought to be recovered from defendant were
putting it afloat did not constitute general average, and that the incurred to save vessel and cargo from a common danger. The
liquidation of the average was not made in accordance with law. vessel ran aground in fine weather inside the port at the mouth
After trial, the lower court found for Magsaysay and rendered of a river, a place described as “very shallow”. It would thus
judgment against Agan for the amount of the claim, with legal appear that vessel and cargo were at the time in no imminent
interests. From this judgment, Agan has appealed directly to the danger or a danger which might “rationally be sought to be
Supreme Court. certain and imminent.” It is conceivable that, if left indefinitely
at the mercy of the elements, they would run the risk of being
HELD: The Supreme Court reversed the decision appealed destroyed, but as stated, “this last requirement excludes
from, and dismissed Magsaysay’s complaint; with costs. measures undertaken against a distant peril.” It is the
deliverance from an immediate, impending peril, by a common
Law on averages sacrifice, that constitutes the essence of general average.
The law on averages is contained in the Code of Commerce. Herein, there is no proof that the vessel had to be put afloat to
Under that law, averages are classified into simple or particular save it from an imminent danger. The vessel had to be salvaged
and general or gross. Generally speaking, simple or particular in order to enable it “to proceed to its port of destination.” It is
averages include all expenses and damages caused to the vessel the safety of the property, and not of the voyage, which
or cargo which have not inured to the common benefit (Art. 809, constitutes the true foundation of general average.
and are, therefore, to be borne only by the owner of the
property which gave rise to the same (Art. 810); while general Requisite 2 not present; Cargo not in imminent peril
or gross averages include “all the damages and expenses which As to the second requisite, t he expenses in question were not
are deliberately caused in order to save the vessel, its cargo, or incurred for the common safety of vessel and cargo, since they,
both at the same time, from a real and known risk” (Art. 811). or at least the cargo, were not in imminent peril. The cargo
Being for the common benefit, gross averages are to be borne could, without need of expensive salvage operation, have been
by the owners of the articles saved (Art. 812). unloaded by the owners if they had been required to do so.

Expenses are of particular averages (Article 809 [2]), Requisite 3; Sacrifice for benefit of vessel and not
not general averages (not Article 811 [6]) purpose of saving cargo
With respect to the third requisite, the salvage operation was a
In classifying averages into simple or particular and general or success; however, as the sacrifice was for the benefit of the
gross and defining each class, the Code (Art. 809 and 811) at vessel — to enable it to proceed to destination — and not for
the same time enumerates certain specific cases as coming the purpose of saving the cargo, the cargo owners are not in
specially under one or the other denomination. Herein, while the law bound to contribute to the expenses.
expenses incurred in putting Magsaysay’s vessel afloat may well
come under number 2 of article 809 — which refers to expenses Requisite 4 need not be proved in light of circumstances
suffered by the vessel “by reason of an accident of the sea or
force majeure” — and should therefore be classified as particular

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 TRANSPORTATION LAWS TSN
From the lectures of Atty. Jocelyn Valencia
Ateneo de Davao College of Law | 2-SR SY 2016 2017

The final requisite has not been proved, for it does not appear
that the expenses in question were incurred after following the So what is the purpose? It is intended to show that the lost or
procedure laid down in articles 813 et seq. damage resulted from the peril of the sea or from some other
causes for which neither the master nor the owner was
responsible and concludes with the protestation against any
MAGSAYSAY INCORPORATED VS AGAN
liability of the owner of such loss or damage.
(Atty. V)
Upon the arrival at the point of destination, the captain must
FACTS: Plaintiff Vessel, SS Antonio, left Manila for Basco,
rectify the protest within 24 hours.
Batanes with general cargo owned by different shippers
including that of the defendant. Upon reaching Apparri, it
accidentally ran aground. Nasadsad siya sa shallow waters, hindi
 So, we mentioned earlier about the YA Rules. Why is it
na nakamove. Plaintiff had it refloated by LuzSteveCo for a
important?
compensation. Of course, i-afloat mo ba naman ang barko, so
there is a compensation. After the refueling, the vessel
It I important to determine the liability in the application of the
proceeded to Basco where the goods was delivered. So, on the
YA Rules which allows the cargo to coast -wise shipping and
theory that the expenses for refloating incurred thereto
prohibit the same to overseas trade. If t he deck cargo is located
constituted a general average to which both t he ship and the
with the consent of the shipper on overseas trade, it must
cargo should contribute, Magsaysay asked for the shipper’s
always contribute to general average but if the cargo was
deposit or bond to answer for the contribution to the average.
jettisoned it could not be entitled to reimbursement as the cargo
So all other shippers accepted except the defendant. So the
are loaded in the deck which is a violation of t he YA Rules.
court ruled in favor of Magsaysay. Agan appealed contending
that the floating of the vessel unintentionally stranded inside a
On the other hand, if the deck cargo is located is loaded with
port at the mouth of the river during a fine weather does not
the consent of the shipper on the coast -wise shipping, it must
constitute a general average expense.
always contribute to general average and the owner of the
cargoes which were jettisoned will be entitled to reimbursement.
So, in classifying the average, the Supreme Court said that the
average is classified into simple or particular and general or
Why is there a distinction between a cargoes loaded on deck in
gross average in the Code of Commerce at the same time
overseas and domestic trade?
enumerates certain specific cases as coming specially as to one
or the other class. So the court said that while the expenses
Usually, in overseas trade, it is more exposed to risk, that is why
incurred in putting the vessel afloat provided in Article 809 (2)
it not allowed.
referring to expenses suffered by the vessel due to accident of
the sea or force majeure. This expense do not mean to other
specifics under specification of general average enumerated
under Article 811.

So, no. 6 of 811 mentions expenses caused to afloat a vessel

BUT it specifically refers to a vessel intentionally stranded for
the purpose of saving it and would have no application where
the stranding was unintentional. But it may fall with general
average if the vessel was intentionally stranded for the purpose
of saving it. So, that can qualify as a general average.

The expenses incurred for the common safety of the vessel and
the cargo in this case did not arise from an imminent common
danger. The cargo should have been unloaded by the owner had
it been required to do so. And the refloating was a success but
as a sacrifice for the vessel’s benefit to enable it to proceed to
its destination and not for the purpose of saving the cargo. The
owners, in law, are not bound t o contribute to the expenses.
Similarly, if the procedure in Article 613 was not proved to have
been complied with which is the final requisite. So one of the
requisite was not considered.

The maritime protest, we mentioned earlier that after the

assembly the captain must report what transpired within 24
hours from the arrival of the vessel at the first port, not at
the point of destination. That is what we call maritime
protest. It is a written statement under oath made by the master
of the vessel after the occurrence of an accident or disaster in
which the vessel or cargo is lost with respect to the
circumstances attending such occurrence.

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