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C. Persons Participating in Maritime Commerce

1. Ship owners and ship agents

Arts. 586 to 608; 618

ARTICLE 586. The owner of a vessel and the agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein.By agent is understood the person intrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be.

ARTICLE 587. The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage.

ARTICLE 588. Neither the owner of the vessel nor the agent shall be liable for the obligations contracted by the captain if the latter exceeds his powers and privileges which are his by reason of his position or have been conferred upon him by the former.However, if the amounts claimed were made use of for the benefit of the vessel, the owner or agent shall be liable.

ARTICLE 589. If two or more persons should be part owners of a merchant vessel, an association shall be presumed as established by the part owners.This association shall be governed by the resolutions of a majority of the members.A majority shall be the relative majority of the voting members.

If there should be only two part owners, in case of disagreement the vote of the member having the largest interest shall be decisive. If the interests are equal, it shall be decided by lot.The representation of the smallest part in the ownership shall have one vote; and proportionately the other part owners as many votes as they have parts equal to the smallest one. aisadc

A vessel can not be detained, attached or levied upon execution in her entirety for the private debts of a part owner, but the proceedings shall be limited to the interest the debtor may have in the vessel, without interfering with her navigation.

ARTICLE 590. The owners of a vessel shall be civilly liable in the proportion of their contribution to the common fund, for the results of the acts of the captain, referred to in Article 587.

Each part owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel belonging to him.

ARTICLE 591. All the part owners shall be liable, in proportion to their respective ownership, for the expenses of repairs to the vessel, and for other expenses which are incurred by virtue of a resolution of the majority.

They shall likewise be liable in the same proportion for the expenses of maintenance, equipment, and provisioning of the vessel, necessary for navigation.

ARTICLE 592. The resolutions of the majority with regard to the repair, equipment, and provisioning of the vessel in the port of departure shall bind the majority unless the partners in the minority renounce their participation therein, which must be acquired by the other part owners after a judicial appraisement of the value of the portion or portions assigned.The resolutions of the majority relating to the dissolution of the association and sale of the vessel shall also be binding on the minority.

The sale of the vessel must take place at a public auction, subject to the provisions of the law of civil procedure unless the part owners unanimously agree otherwise, the right of option to purchase and to withdraw mentioned in Article 575 being always reserved in favor of said part owners.

ARTICLE 593. The owners of a vessel shall have preference in her charter to other persons, offering equal conditions and price. If two or more of the former should claim said right the one having greater interest shall be preferred, and should they have an equal interest it shall be decided by lot.

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ARTICLE 594. The part owners shall elect the manager who is to represent them in the capacity of agent.The appointment of director or agent shall be revocable at the will of the members.

ARTICLE 595. The agent, be he at the same time an owner of a vessel or a manager for an owner or for an association of co-owners, must be qualified to trade and must be recorded in the merchant's registry of the province.

The agent shall represent the ownership of the vessel, and may in his own name and in such capacity take judicial and extrajudicial steps in all that relates to commerce.

ARTICLE 596. The agent may discharge the duties of captain of the vessel, subject, in every case, to the provisions contained in Article 609.If two or more co-owners request the position of captain, the disagreement shall be decided by a vote of the members; and if the vote should result in a tie, the position shall be given to the part owner having the larger interest in the vessel.If the interest of the petitioners should be the same, and there should be a tie, the matter shall be decided by lot.

ARTICLE 597. The agent shall select and come to an agreement with the captain, and shall contract in the name of the owners, who shall be bound in all that refers to repairs, details of equipment, armament, provisions, fuel, and freight of the vessel, and, in general, in all that relates to the requirements of navigation.

ARTICLE 598. The agent can not order a new voyage, nor make contracts for a new charter, nor insure the vessel, without the authority of her owner or by virtue of a resolution of the majority of the co-owners, unless these privileges were granted him in the certificate of his appointment.

If he should insure the vessel without authority therefor he shall be secondarily liable for the solvency of the underwriter.

ARTICLE 599. The managing agent of an association, shall give his co-owners an account of the results of each voyage of the

vessel, without prejudice to always having the books and correspondence relating to the vessel and to its voyages at the disposal of the same.

ARTICLE 600. After the account of the managing agent has been approved by a relative majority, the co-owners shall satisfy the expenses in proportion to their interest, without prejudice to the civil or criminal actions which the minority may deem fit to institute afterwards.In order to enforce the payment, the managing agent shall have a right of action to secure execution, which shall be instituted by virtue of a resolution of the majority, and without further proceedings than the acknowledgment of the signatures of the persons who voted the resolution.

ARTICLE 601. Should there be any profits, the co-owners may demand of the managing agent the amount due them, by means of an executory action without further requisites than the acknowledgment of the signatures of the instrument approving the account.

ARTICLE 602. The agent shall indemnify the captain for all the expenses he may have incurred from his own funds or from those of other persons, for the benefit of the vessel.

ARTICLE 603. Before a vessel goes out to sea the agent shall have at his discretion, a right to discharge the captain and members of the crew whose contract did not state a definite period nor a definite voyage, paying them the salaries earned according to their contracts, and without any indemnity whatsoever, unless there is a special and specific agreement in respect thereto.

ARTICLE 604. If the captain or any other member of the crew should be discharged during the voyage, they shall receive their salary until the return to the place where the contract was made, unless there are good reasons for the discharge, all in accordance with Articles 636 et seq. of this Code.

ARTICLE 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they can not be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters,

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robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence.

ARTICLE 606. If the captain should be a part owner in the vessel, he can not be discharged without the agent returning him the amount of his interest therein, which, in the absence of an agreement between the parties, shall be appraised by experts appointed in the manner established in the law of civil procedure.

ARTICLE 607. If the captain who is a part owner should have obtained the command of the vessel by virtue of a special agreement contained in the articles of co-partnership, he can not be deprived thereof except for the reasons mentioned in Article 605.

ARTICLE 608. In case of the voluntary sale of the vessel, all contracts between the agent and captain shall terminate, the right to proper indemnity being reserved in favor of the captain, according to the agreements made with the agent.They vessel sold shall remain subject to the security of the payment of said indemnity if, after the action against the vendor has been instituted, the latter should be insolvent.

ARTICLE 618. The captain shall be civilly liable to the agent, and the latter to the third persons who may have made contracts with the former —1. For all the damages suffered by the vessel and his cargo by reason of want of skill or negligence on his part. If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code. cda2. For all the thefts committed by the crew, reserving his right of action against the guilty parties.3. For the losses, fines, and confiscations imposed an account of violation of the laws and regulations of customs, police, health, and navigation.4. For the losses and damages caused by mutinies on board the vessel, or by reason of faults committed by the crew in the service and defense of the same, if he does not prove that he made full use of his authority to prevent or avoid them.5. For those arising by reason of an undue use of powers and non-fulfillment of the obligations which are his in accordance with Articles 610 and 612.

6. For those arising by reason of his going out of his course or taking a course which he should not have taken without sufficient cause, in the opinion of the officers of the vessel, at a meeting with the shippers or supercargoes who may be on board.

No exception whatsoever shall exempt him from this obligation.7. For those arising by reason of his voluntarily entering a port other than his destination, with the exception of the cases or without the formalities referred to in Article 612.8. For those arising by reason of the non-observance of the provisions contained in the regulations for lights and evolutions for the purpose of preventing collisions.

Standard Oil v. Castelo, 42 Phil 256

FIRST DIVISION[G.R. No. 13695. October 18, 1921.]STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee, vs. MANUEL LOPEZ CASTELO, defendant-appellant.Gabriel La O for appellant.Lawrence & Ross for appellee.

SYLLABUS

1. GENERAL AVERAGE; COASTWISE TRADE; JETTISON OF DECK CARGO — When, in conformity with marine regulations, cargo is carried on the deck of a steamer engaged in coastwise trade, the jettison of such cargo upon occasion of peril makes a case for general average.2. JETTISON; LIQUIDATION OF GENERAL AVERAGE; OMISSION OF CAPTAIN TO DISTRIBUTE LOSS. — When jettison of cargo occurs it is the duty of the captain to effect the adjustment, liquidation, and distribution of the general average; and his omission to take these steps constitutes an actionable dereliction of duty.3. ID.; ID.; ID.; LIABILITY OF SHIPOWNERS. — For this omission not only is the captain personally liable to the shipper of the jettisoned goods, but the latter may go at once upon the owner, since the captain of the ship is the representative of the owner, and the latter is civilly liable for the acts of the former.

D E C I S I O N

STREET, J p:

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By contract of charter dated February 8, 1915, Manuel Lopez Castelo, as owner, let the small interisland steamer Batangueño for the term of one year to Jose Lim Chumbuque for use in the conveying of cargo between certain ports of the Philippine Islands In this contract it was stipulated that the officers and crew of the Batangueño should be supplied by the owner, and that the charterer should have no other control over the captain, pilot, and engineers than to specify the voyages that they should make and to require the owner to discipline or relieve them as soon as possible in case they should fail to perform the duties respectively assigned to them.While the boat was being thus used by the charterer in the interisland trade, the Standard Oil Company delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed to the port of Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of the usual form was delivered, with the stipulation that freight should be paid at the destination. Said bill of lading contained no provision with respect to the storage of the petroleum, but it was in fact placed upon the deck of the ship and not in the hold.While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, a violent typhoon passed over that region, and while the storm was at its height the captain was compelled for the safety of all to jettison the entire consignment of petroleum consisting of two hundred cases. When the storm abated the ship made port, and thirteen cases of the petroleum were recovered, but the remainder was wholly lost.To recover the value of the petroleum thus jettisoned but not recovered, the present action was instituted by the Standard Oil Company against the owner of the ship in the Court of First Instance of Manila, where judgment was rendered in favor of the plaintiff. From this judgment the defendant appealed.No question is made upon the point that the captain exercised proper discretion in casting this petroleum overboard, as a step necessary to the salvation of the ship; and in fact it appears that even after the vessel was thus eased, the was with difficulty prevented from capsizing, so great was the intensity of the storm.The first question for discussion is whether the loss of this petroleum was a general average loss or a particular loss to be borne solely by the owner of the cargo. Upon this point it will be observed that the cargo was carried upon deck; and it is a general rule, both under the Spanish Commercial Code and under the

doctrines prevailing in the courts of admiralty of England and America, as well as in other countries, that ordinarily the loss of cargo carried on deck shall not be considered a general average loss. This is clearly expressed in Rule I of the York-Antwerp Rules, as follows: "No jettison of deck cargo shall be made good as general average." The reason for this rule is found in the fact that deck cargo is in an extra hazardous position and, if on a sailing vessel, its presence is likely to obstruct the free action of the crew in managing the ship. Moreover, especially in the case of small vessels, it renders the boat top-heavy and thus may have to be cast overboard sooner than would be necessary if it were in the hold; and naturally it is always the first cargo to go over in case of emergency. Indeed, in subsection 1 of article 815 of the Code of Commerce, it is expressly declared that deck cargo shall be cast overboard before cargo stowed in the hold.But this rule, denying deck cargo the right to contribution by way of general average in case of jettison, was first made in the days of sailing vessels; and with the advent of the steamship as the principal conveyer of cargo by sea, it has been felt that the reason for the rule has become less weighty, especially with reference to coastwise trade; and it is now generally held that jettisoned goods carried on deck, according to the custom of trade, by steam vessels navigating coastwise and inland waters, are entitled to contribution as a general average loss (24 R. C. L., 1419).Recognition is given to this idea in two different articles in the Spanish Code of Commerce. In the first it is in effect declared that, if the marine ordinances allow cargo to be laden on deck in coastwise navigation, the damages suffered by such merchandise shall not be dealt with as particular average (art. 809 [3], Comm. Code); and in the other it is stated that merchandise laden on the upper deck of the vessel shall contribute in the general average if it should be saved; but that there shall be no right to indemnity if it should be lost by reason of being jettisoned for the general safety, except when the marine ordinances allow its shipment in this manner in coastwise navigation (art 855, Comm. Code).The Marine Regulations now in force in these Islands contain provisions recognizing the right of vessels engaged in the interisland trade to carry deck cargo; and express provision is made as to the manner in which it shall be bestowed and protected from the elements (Phil. Mar. Reg. [1913], par. 23) . Indeed, there is one commodity, namely, gasoline, which from its inflammable nature is not permitted to be carried in the hold of any passenger vessel, though it may be carried on the deck if certain precautions

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are taken. There is no express provision declaring that petroleum shall be carried on deck in any case; but having regard to its inflammable nature and the known practices of the interisland boats, it cannot be denied that this commodity also, as well as gasoline, may be lawfully carried on deck in our coastwise trade.The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the coastwise trade than upon those used for ordinary ocean borne traffic is to be found of course in the circumstance that in the coastwise trade the boats are small and voyages are short, with the result that the coasting vessel can use more circumspection about the condition of the weather at the time of departure; and if threatening weather arises, she can often reach a port of safety before disaster overtakes her. Another consideration is that the coastwise trade must as a matter of public policy be encouraged, and domestic traffic must be permitted under such conditions as are practically possible, even if not altogether ideal.From what has been said it is evident that the loss of this petroleum is a general and not a special average, with the result that the plaintiff is entitled to recover in some way and from somebody an amount bearing such proportion to its total loss as the value of both the ship and the saved cargo bears to the value of the ship and entire cargo before the jettison was effected. Who is the person, or persons, who are liable to make good this loss, and what are the conditions under which the action can be maintained?That the owner of the ship is a person to whom the plaintiff in this case may immediately look for reimbursement to the extent above stated is deducible not only from the general doctrines of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the case. It is universally recognized that the captain is primarily the representative of the owner; and article 586 of the Code of Commerce expressly declares that both the owner of the vessel and the naviero, or charterer, shall be civilly liable for the acts of the master. In this connection, it may be noted that there is a discrepancy between the meaning of naviero, in article 586 of the Code of Commerce, where the word is used in contradistinction to the term "owner of the vessel" (propietario), and in article 587 where it is used alone, and apparently in a sense broad enough to include the owner. Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage, who in one case may be the owner and in another the charterer. But this is not vital to the present discussion. The real point to which we direct attention is that, by the express provision of the Code, the owner of

the vessel is civilly liable for the acts of the captain; and he can only escape from this civil liability by abandoning his property in the ship and any freight that he may have earned on the voyage (arts. 587, 588, Code of Comm.).Now, by article 852 of the Code of Commerce-the captain is required to initiate the proceedings for the adjustment, liquidation, and distribution of any gross average to which the circumstances of the voyage may have given origin; and it is therefore his duty to take the proper steps to protect any shipper whose goods may have been jettisoned for the general safety. In ordinary practice this, we suppose, would be primarily accomplished by requiring the consignees of other cargo, as a condition precedent to the delivery of their goods to them, to give a sufficient bond to respond for their proportion of the general average. But it is not necessary here to inquire into details. It is sufficient to say that the captain is required to take the necessary steps to effect the adjustment, liquidation, and distribution of the general average. In the case before us the captain of the vessel did not take those steps; and we are of the opinion that the failure of the captain to take those steps gave rise to a liability for which the owner of the ship must answer.But it is said — and the entire defense seems to be planted upon this proposition — that the liquidation of the general average is, under article 852 and related provisions, a condition precedent to the liability of the defendant, and that at any rate the defendant, as owner of the ship, should only be held liable for his proportion of the general average. It is also suggested that if the plaintiff has any right of action at all upon the state of facts here presented, it is against the captain, who has been delinquent in performing the duty which the law imposes on him.This argument involves, we think, a misconception of the true import of the provisions relating to the adjustment and liquidation of general average. Clearly, for one thing, those provisions are intended to supply the shipowner, acting of course in the person of the captain, with a means whereby he may escape bearing the entire burden of the loss and may distribute it among all the persons who ought to participate in sharing it; but the making of the liquidation is not a condition precedent to the liability of the shipowner to the shipper whose property has been jettisoned.It is true that if the captain does not comply with the article relating to the adjustment, liquidation, and distribution of the general average, the next article (852) gives to those concerned — whether shipowner (naviero) or shipper — the right to maintain an action against the captain for indemnification for the loss; but the

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recognition of this right of action does not by any means involve the suppression of the right of action which is elsewhere recognized in the shipper against the ship's owner. The shipper may in our opinion go at once upon the owner and the latter, if so minded, may have his recourse for indemnization against his captain.In considering the question now before us it is important to remember that the owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the voyage. It is therefore proper that any person whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. To adopt the interpretation of the law for which the appellant contends would place the shipowner in a position to escape all responsibility for a general average of this character by means of the delinquency of his own captain. This cannot be permitted. The evident intention of the Code, taken in all of its provisions, is to place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the venture as shippers.It results that the plaintiff is entitled to recover in this action; and the only additional point to be inquired into is the amount that should be awarded. In this connection it appears that the total value of the jettisoned cargo, belonging partly to the plaintiff and partly to another shipper, was P880.35, of which P719.95 represented the value of the plaintiff's petroleum. Upon the apportionment of this total loss among the different interests involved, to wit, value of ship, value of cargo, and the earned but lost freight, it appears that the amount of the loss apportionable to the plaintiff is P11.28. Deducting this from the value of the petroleum, we have as a result, the amount of P708.67, which is the amount for which judgment should be given.Accordingly, modifying the judgment appealed from to this extent, we affirm the same, with costs. So ordered.Johnson, and Villamor, JJ., concur.Mapa, C.J., concurs in the result.Separate Opinions

ARAULLO, J., with whom concurs AVANCEÑA, J., dissenting:As the loss of the petroleum shipped by the plaintiff company on board the vessel Batangueño, which belongs to the defendant, constitutes gross average and, as the latter, being, according to the law, an agent, all of which is admitted in the foregoing decision, the provisions applicable to the case and which should be taken into consideration in deciding the appeal before this court are those of various articles in sections 1 of title 4 and sections 1, 2, and 3, of title 5, of Book 3 of the Code of Commerce.Article 811 defines gross or general averages as damages and expenses which are deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk, and particularly, such as goods jettisoned to lighten the vessel, whether they belong to the vessel, to the cargo, or to the crew, and the damage suffered through said act by the goods on board; the damage caused to the vessel by scuttling or entering her hold in order to save the cargo; and the expenses of the liquidation of the average. Article 812 provides that in order to satisfy the amount of the gross or general average, all persons having an interest in the vessel and cargo at the time of the occurrence of the average shall contribute. Article 846 provides that the persons interested in the proof and liquidation of averages may mutually agree and bind themselves at any time with regard to the liability, liquidation and payment thereof, and that, in the absence of agreements, the proof of the average shall take place in the port where the repairs are made, should any be necessary, or in the port of unloading; that the liquidation shall take place in the port of unloading should it be a Spanish port (now Filipino); that should the average have occurred outside of the jurisdictional waters of the Philippines or should the cargo have been sold in a foreign port by reason of the arrival of the vessel under stress in said port, liquidation shall be made in the port of arrival; and, finally, if the average should have occurred near the port of destination, and that port is made, the proceedings for the proof and liquidation above-mentioned shall be had there.Article 847 provides that when the liquidation of the averages is made privately by virtue of agreement, as well as when a judicial authority takes part therein at the request of any of the parties interested who do not agree thereto, all of them shall be cited and heard, should they not have renounced this right; that should they not be present or not have a legitimate representative, the liquidation shall be made by the consul in said port, and where there is none, by the judge or court of competent jurisdiction,

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according to the laws of the country, and for the account of the proper person; and, finally, desiring to furnish all possible means to effect the liquidation, the legislator provides in the last part of said article that, when the representative is a person well-known in the place where the liquidation takes place, his intervention shall be admitted and will produce legal effect, even though he be authorized only by a letter of the shipowner, freighter, or underwriter; and as to general or gross averages, he lays down concrete and conclusive rules in articles 853, 854, and 858, with respect to the form and mode in which the experts appointed by the interested parties or by the court shall fulfill their duties, as to the examination of the vessel, the repairs and the appraisement of their cost, as well as to the appraisement of the goods which are to contribute to the gross average and those which constitute the average, likewise providing in article 857 that, after the appraisement by the experts of the goods saved, lost, and those which constitute the gross average, and after the repairs have been made to the vessel, should any be necessary, and in such case, after the approval of the accounts by the persons interested or by the court, the entire record shall be turned over to the liquidator appointed, in order that he may proceed with the pro rata distribution of the average among the contributing values, after fixing the amount mentioned in said article of the contributing capital: (1) By the value of the cargo, according to the rules established in article 854; (2) by the value of the vessel in her actual condition, according to a statement of experts; (3) by 50 per cent of the amount of the freight, deducting the remaining 50 per cent for wages and maintenance of the crew.Lastly, in relation to said provisions, article 851 authorizes the captain to proceed privately, upon the agreement of the parties interested, in the adjustment, liquidation, and distribution of the gross average, and for this purpose, it is his duty to call, within forty hours following the arrival of the vessel at the port, the persons interested in order that they may decide whether the adjustment or liquidation of the gross average is to be made by experts and liquidators appointed by themselves, in which case this shall be done should the persons interested agree, and said article also provides that should an agreement not be possible, the captain shall apply to the judge or court of Competent jurisdiction, who shall be the one of the port where the proceedings are to be held in accordance with the provisions of the Code of Commerce, to the consul of Spain (now of the United States), should there be one, or otherwise to the local authority when the proceedings are to be

held in a foreign port. And finally, the next article, 852, says: "If the captain should not comply with the provisions contained in the foregoing article, the shipowner or agent or the freighters shall demand the liquidation, without prejudice to the action they may bring to demand indemnity from him."It is therefore beyond question that the action of the plaintiff to recover indemnity for the damages which it claims to have suffered by reason of the failure of the captain of the vessel Batangueño to proceed with the liquidation and distribution of the gross average in which it was a contributor, and by reason of his act in delivering to the other shippers their respective goods, without first requiring them to give bond, should have been brought not against the shipowner or agent, who is the defendant in this case, but against the captain himself of the vessel Batangueño.Although in the preceding decision it is clearly recognized that the captain should have begun the proceedings for the adjustment, liquidation, and distribution of the gross average in question, and that it was his duty to take the proper steps to protect any shipper whose goods may have been jettisoned for the common security, it is also stated that in ordinary practice this is supposed to be complied with by requiring the consignees of the other cargoes, as a condition precedent to the delivery thereof, to give a sufficient bond to answer proportionally for the gross average, and, lastly, that the failure of the captain to take the necessary steps to effect the adjustment, liquidation, and distribution of said average gave rise to the responsibility which should be enforced against the defendant shipowner, against whom the shipper may immediately institute his action, the former having in turn, if he so desires, the right to bring suit against the captain. The majority opinion attempts to support the last proposition and invokes articles 586, 587, and 588.First of all, according to articles 866, 867, and 888 of the same Code, a bond should be required of the shippers by the captain after the liquidation is already approved, if the contributors should fail to pay the amount of the quota by the third day after having been required to do so, and before delivering to them the goods saved, — the captain having the right, upon failure to give the bond, to delay the delivery of the goods until the shippers pay their part of the gross average corresponding to each of them — and not before proceeding with the liquidation, for the simple reason that the amount of the bond may only be fixed after the determination of the amount which each of the shippers may be obliged to contribute to the payment of the average, and this is so clear and

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evident that in article 867 the captain is authorized to attach the goods saved until the shippers should pay the amount, if they should fail to do so by the third day after demand upon them. And since the captain may require bond, he may delay the delivery of the goods saved to the shippers until they make the payment. In the case at bar, no step having as yet been taken for the adjustment and liquidation of the gross average in question, the fact that the captain of the Batangueño delivered the respective cargoes of the other shippers without previously requiring a bond, can not constitute the basis for making the captain responsible, much less the owner of the vessel, as the trial court has erroneously held in the judgment appealed from and as this court is given to understand in referring to said filing of the bond as a prerequisite to the delivery of the cargo. This is because the time was not opportune when the captain should and could exact the bond and the law neither requires such bond to be filed before proceeding with the liquidation, inasmuch as the shipowner or agent, as well as the shippers, being interested in proceeding with the liquidation, the Code authorizes them, first, to demand it from the captain and later to institute the action corresponding to them against him to recover indemnity if he should not comply with the provisions upon the subject, that is, if he should fail to effect the liquidation, or if, in lieu thereof, he should deliver the respective cargoes to the shippers or permit them to dispose of the same, in which case the responsibility may be fixed upon the captain and not upon the agent upon this ground, and for not requiring the shippers to give said bond.In the second place, although it is true that the captain is, as stated in the decision, primarily the representative of the shipowner or agent, it cannot in all cases, as the decision gives us to understand, be deduced that the ship. owner must be civilly responsible for all the acts of the captain.The Code of Commerce clearly and positively specifies the cases in which such responsibility is demandable from the agent or shipowner, and the cases in which he is not responsible, the responsibility attaching only to the captain. These cases can not be confused in view of the clear and positive provisions of said Code, in relation to the method adopted in the exposition thereof and following the order of the subjects contained in this law.Articles 586, 587, and 588, invoked in the decision in question in order to maintain that theory, are found in title 2 of Book 3 of said Code which treats of the persons who intervene in maritime commerce, that is, as may be seen in sections 1, 2, and 3 thereof,

the shipowners and agents, the captains and masters of vessels and the officers and crew thereof, respectively. Articles 806 to 818 and 846 to 849, and consequently, article 862, invoked in said decision and which refer to the gross or general average and to the simple or particular average, are found in titles 4 and 5 of the same Book 3 which, respectively, deal with the risks, damages, and accidents of maritime commerce and with the proof and liquidation of the averages; and they contain all the provisions of the law relative to said subjects and to the rights and obligations which arise from the averages.There is no relation whatever between said articles 586, 587, and 588, invoked in the decision, and those which treat of averages. The first of said articles establishes the civil responsibility of the shipowner and agent for the acts of the captain and the obligations incurred by the latter for the repair, equipment, and provisioning of the vessel. The second, that is, article 587, establishes the same responsibility of the agent for indemnities, in favor of third persons. which may arise from the conduct of the captain in the care of the goods which the vessel may carry, from which he may exempt himself by abandoning the vessel with all her equipment and the freight he may have earned during the voyage. In the present case it is not the conduct of the captain in the care of the goods which has given rise to the right to exact the corresponding civil responsibility, but, according to article 862, the failure of the captain to comply with the provisions of article 851, with respect to the adjustment, liquidation, and distribution of the gross average and the failure to attend to the claims which the agent or the shippers may or should have made, inasmuch as said article 852 clearly so declares, in referring to the agent or the shippers in the following words: "Without prejudice to the action they may bring to demand indemnity from him." The care of the goods to which article 857 refers consists in the placing of the goods in the proper and adequate place for their transportation and due preservation during the voyage, in such manner that they may not suffer damages or deterioration nor be taken away, for, according to article 618, which bears some relation to said article 587, the captain is civilly responsible to the agent and the latter to third persons, who may have contracted with him, for all damages which may have occurred to the vessel and the cargoes due to lack of skill or to negligence on his part and for the substraction or theft committed by the crew, reserving his right to proceed against the guilty Parties; and, according to article 619, he shall be liable for the cargo from the time it is turned over to him at the deck or

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afloat alongside the vessel at the port of loading until he delivers it on the shore or on the discharging wharf of the port of unloading, unless the contrary has been expressly agreed upon; and, finally, according to No. 5 of the same article 618, he shall be liable for those damages arising from an undue use of the powers and nonfulfillment of the obligations which are his in accordance with articles 610 and 612, one of which, the fifth mentioned in the last article, is to remain constantly on board the vessel during the time the freight is taken on board and carefully watch the stowage thereof, which acts, as is well-known, constitute the means for the effective custody of the goods which may be shipped on board.In the present case, if the consignees or owners of the cargo on board the vessel Batangueño took away with them their respective cargoes or disposed of them upon arriving at port, after part thereof, which included the petroleum boxes belonging to the plaintiff, had been jettisoned, it was not because the captain of said vessel had not fulfilled his duty with respect to the care of the cargo, but because he did not proceed in accordance with the provision of article 851 already cited, in the adjustment, liquidation, and distribution of the gross average caused by that accident, and did not, as he should have done, according to article 852, require the liquidation either of the agent or the shippers. Therefore to them alone, including the plaintiff, and not to the conduct of the captain in the custody of the cargo, is the fact attributable that the shippers were able to carry away and dispose of the cargo saved upon the arrival of the vessel at port.The third of said articles, that is, 588, cited also in the same decision, far from making the shipowner or the agent responsible for the obligations incurred by the captain, exempts them from all responsibility, if the captain should have exceeded the powers and privileges which are his by reason of his position or have been conferred upon him by the former, excepting the case, which bears no relation whatever to that in question, in which the amounts claimed were made use of for the benefit of the vessel.Lastly, although this point has not been touched at all in the decision now under discussion, according to article 618, No. 5, the captain shall be civilly liable to the agent, and the latter to third persons with whom he may have contracted, for the damages arising from an undue use of his powers and the nonfulfillment of his obligations, but it adds that such liability shall be "in accordance with articles 610 and 612." These articles, as may be seen, refer to the powers and obligations inherent in the position of captain with respect to the appointment, contract, and command of the crew,

direction of the vessel to the port of destination, the imposition of punishments for crimes committed on board, contracts for the charter of the vessel, its preservation and repair, the supplying of books of navigation, and others, which are mentioned in said last article, the equipping of the vessel and the receiving of the cargo, etc., among which obligations there is none which bears the slightest relation to those which the same Code imposes upon the captain with respect to the adjustment, liquidation, and distribution of the gross average.On the other hand, in the various sections of title 4 of Book 3, and in section 1 of title 5, the Code, in treating of the risks, damages, and accidents of maritime commerce, specifically indicates the cases in which the responsibility of the captain is enforcible, those in which that of the agent or shipowner is demandable and those in which that responsibility is joint among them, as well as those cases in which no responsibility may be demanded of the agent or shipowner but only of the captain.In effect, article 841 of section 3 of said title 4 provides that if the wreck or stranding should arise through the malice, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and prepared, the captain shall be responsible for the indemnification of damages caused to the vessel or the cargo by the accident, Which liability may be demanded by the agent or the shippers; but there is in said section no provision whatever by which the agent or shipowner is made responsible.In article 826 of section 3 of the same title, which deals with collisions, it is provided that the agent of the vessel at fault shall indemnify the losses and damages suffered after an expert appraisal, if a vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, and, according to article 831, if a vessel should be forced to collide with another by a third vessel, the agent of the third vessel shall indemnify for the losses and damages caused, the captain being civilly liable to said agent, this liability being understood to be limited to the value of the vessel with all equipment and freight earned.In treating of arrivals under stress, section 2 of the same title, in article 821, declares that when such arrival is not legitimate, the agent and the captain shall be jointly liable for the expenses incurred.In treating averages, article 809, No. 8, in section 1 of the same title, which includes, in simple averages, the damage suffered by the vessel or cargo by reason of an impact or collision with another,

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declares that if the accident occurred through the fault or negligence of the captain, he shall be responsible for all the damages caused, and in No. 9 of the same article, that the owner of the cargo who is injured as a result of the fault, negligence, or barratry of the captain or the crew may demand indemnity from the captain, the vessel and freight, a rule which is based upon No. 1 of article 618, already mentioned, according to which the captain shall be civilly responsible to the agent and the latter to the third persons, for all damages suffered by the vessel and its cargo by reason of the want of skill or negligence on his part, a provision which, as is well known, cannot refer to the case in which the owners of the cargo, having the right to demand the adjustment, liquidation, and distribution of the gross aver age, upon the arrival of the vessel at port, should dispose of the cargo saved. Such case, as already stated, is the subject of the express and positive provisions of articles 861 and 852, in relation to articles 866, 867, and 868, included in section 2 of the same title, as is shown by the fact that the first of said articles declares that the captain is responsible to the owners of the goods averaged for the losses they may have suffered through his delay or negligence in collecting the amount of the contribution after the liquidation is approved, and by the fact that the last of said articles, that is, 868, declares that the captain may exact from the shippers a bond sufficient to answer for the amount corresponding to the gross average for the purpose of delaying the delivery to them of the goods saved until they pay said amount.It is by these special provisions and not by the general provisions contained in sections 1, 2, and 3, of title 2, of Book 3 of said Code, that we must be governed when dealing with the risks, damages, and accidents of maritime commerce; and gross average being among them, then, for the failure of the captain of the vessel Batangueño to comply with the provisions relating to the adjustment, liquidation, and distribution, the defendant owner of the vessel can not and should not be made liable, but only the captain, for article 852, already cited, is clear and positive to the effect that in said case the agent or the shippers shall demand of the captain the liquidation and may exercise against him the action to recover the proper indemnity, a provision which excludes in such case all responsibility of the agent or owner of the vessel, for the reason that, the latter being, according to the same article, one of those who, jointly with the shippers, may ask the captain for the liquidation and institute against him the corresponding action for indemnification, it would be absurd to pretend and maintain that

the shippers may also institute the same action against the agent or owner of the vessel, in this manner converting him from plaintiff into defendant.But, as if it is still possible to put under discussion and interpret so clear and positive a provision as that of said article 852, and those related to it which, as has already been mentioned, are also of the same character, it is argued in the decision of this court that as "the owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo, and more over, as the owner of the ship, in the person of the captain, has complete and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the voyage, the evident intention of the Code, taken in all of its provisions, is to place the primary liability upon . . . the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the venture as shippers, for, to adopt another interpretation of the law would place the shipowner in a position to escape all responsibility for a general average of this character by means of the delinquency of his own captain. And it is therefore proper that any person whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo."Such reasoning, however, is not convincing. In the first place, it is not true that the average in question was occasioned by the fault of the captain of the vessel Batangueño, for on this point there is no evidence in the record, but because of the necessity of throwing overboard part of the cargo of said vessel to save it from the danger then threatening it; secondly, the purpose of the adjustment and liquidation of the gross average is to secure contribution from the parties interested in the vessel and cargo 'existing at the time of the occurrence thereof in order to pay the amount of such average (art. 812, Code of Commerce), for which purpose article 858 defines the procedure for the distribution of the value of the average, stating that there must be taken into consideration, as already stated by us, when we were discussing this article, the contributing capital determined by the value of the cargo, that of the vessel in her actual condition and the percentage of the amount of the freight reduced by 50 percent for wages and maintenance of the crew, and further declaring that after the determination of the amount of the average, it shall be distributed pro rata among the contributing values and then paid to the proper

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parties, after the persons interested therein, that is, the agent or owner of the vessel and the shippers have consented thereto, or in default thereof, after the liquidation is duly approved; and, lastly, as repeatedly stated by us, according to the same articles, the owner of the vessel, or the agent, is also one of the interested parties and coparticipants in the adjudication of the average and its pro rata distribution among the contributing values. From what has just been said it results that no purpose is served by considering whether or not he has put in the voyage or undertaking a capital greater than that of any individual shipper for the purpose of making him principally liable, that is compelling him to pay to the shippers what each of the latter as well as he himself has the right to be paid for in proportion to the amount of the respective capital fixed according to the rules already stated in the distribution of the average. This is because, however great the value of the vessel may be, there cannot be conceded to the shippers in the adjudication a greater value than that corresponding to them in the adjudication and distribution of the average, according to the capital determined by the value of the cargo of each, in conformity with the rules established in article 854 for the assessment of the same cargo and of the goods which have to contribute to said average, nor can there be conceded to the owner of the vessel a value greater than that which may correspond to him in said adjudication and distribution, based upon the value of the vessel in its actual condition, according to a statement of experts and the rules for assessment thereof found in Nos. 6 and 7 of said article 854, from which it is necessarily inferred that it is notoriously unjust, — because the law does not authorize it and it would be a violation of its positive provisions — to compel the owner of the vessel, by the mere fact of having put a greater capital in the undertaking, to pay to the shippers the quota which corresponds to each of them which, in this case, according to the majority opinion, is that which should correspond, without a previous liquidation, to the plaintiff, Standard Oil Company, saving to him, however, the right afterwards to bring action or proceed against the other shippers, as expressed in the same decision. In short, it would amount to absolutely ignoring the provisions of the law, which are so clear, express, and positive with respect not only to the adjustment, liquidation, and distribution of the gross average, but also to the procedure for effecting the same and the rights and obligations of those who should contribute to the average. And it is very clear that error has been committed, because in the same decision, two paragraphs before that in which the theory already

discussed is made, it is stated that there has been "a misconception of the true import of the provisions relating to the adjustment and liquidation of general average," in arguing that the right of action should be "against the captain, who has been delinquent in performing the duty which the law imposes on him," for "clearly," says the same decision, "those provisions are intended to supply the shipowner, acting of course in the person of the captain, with a means whereby he may escape bearing the entire burden of the loss and may distribute it among all the persons who ought to participate in sharing it; but the making of the liquidation is not a condition precedent to the liability of the shipowner to the shipper whose property has been jettisoned."As is clearly seen, what has just been stated gives us to understand that the owner of the vessel must suffer all the loss in case of gross average, and that the provisions relating to the adjustment, liquidation, and distribution thereof are for the purpose of furnishing him the means for evading and enabling himself to distribute it between the persons who should participate in the average. This is erroneous, because these provisions, which intentionally are extensively mentioned in this opinion, do not have that object, for the reason that the shipowner is not the person who should suffer all the loss in case of gross average, but it should be partitioned and distributed between the shipowner or agent and the shippers, in proportion to their interests and the respective value of the cargo and vessel, which should be fixed according to article 850 and the rules for their assessment, stated in article 854 previously cited, after the liquidation and approval thereof, and after hearing the interested parties or their representatives; and all of these proceedings would surely be useless and unnecessary if the shipowner or the agent should have to suffer all loss but may afterwards distribute it among those participants therein, or, what is the same thing, if he should be compelled by law to pay the total value of the average and then partition it among the shippers or owners of the cargo, as is maintained in said decision. And there is no doubt that this is what is maintained in the decision, as the basis of the pronouncements made therein, because, as already stated, in the paragraph now under discussion, it is clearly stated that the liquidation is not a condition precedent to the enforcement of the liability of the shipowner to the shipper, whose goods may have been jettisoned. And this is not what the law says just as it does not say that the shipowner shall be liable to the shipper or owner of the goods, but that, on the contrary, it says that the shipowner or agent as well as the shippers may demand liquidation from the

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captain and institute against him the corresponding action to recover indemnity, that is, that he has the same right as the shippers to demand liquidation from the captain and, in default thereof, to recover indemnification, from which it is clearly inferred that the liquidation is a condition precedent, not to the liability of the shipowner to the shipper whose goods may have been jettisoned, as stated in the decision in question, but to the partition which must be made between the agent or shipowner and the shippers of the respective amount of the average. This partition, and not that the shipowner should suffer all loss but may afterwards evade and distribute it among all persons who should share in the average, is the real interpretation of the provisions to which reference is made in the same decision.Neither is it true that. as stated in said decision, the shipowner has, through the captain, the complete and exclusive control of the crew and the sailing of the vessel, as well as of the destination of the cargo at the end of the voyage, and that, for this reason, the principal liability for the payment of the gross average must fall upon the shipowner.That he does not have the complete and exclusive control of the crew is shown, among other provisions of the same Code of Commerce, by the following articles: First, article 610, according to which, among others, it is an inherent power in the captain to appoint or make contracts with the crew in the absence of the agent and to propose said crew if said agent be present, but without any right on the part of the latter to employ any individual against the captain's express refusal. This provision necessarily implies the absolute power of the captain to take on and contract the crew, and article 634 confirms it, according to which the captain may make up his crew with the number he may consider advisable, taking on resident foreigners, in the absence of nationals, their number not to exceed one-fifth of the total crew, and may even, with the consent of the consul or marine authorities, complete his crew with foreigners in foreign ports if he should not find sufficient number of nationals, the captain being obliged to execute the contract with said members of the crew and others who compose the complement of the vessel; and finally, article 637 which empowers the captain, for sufficient cause, to discharge a sailor during the time of his contract and to refuse, before setting out on a voyage without giving any reason whatever, to permit a sailor he may have engaged from going on board, in which case he will be obliged to pay him his wages as if he had rendered services, this indemnity to be paid from the funds of the vessel only if the

captain had acted for reasons of prudence and in the interests of safety and good service of the vessel; but, should this not be the case, says said article, it shall be paid by the captain personally. And, if in all that has just been stated the captain may act independently, it is obvious that the owner of the vessel or the agent does not have, through the captain, complete and exclusive control of the crew. In short, the captain directly exercises exclusively personal powers with respect to the crew and, for this reason, he is personally and particularly responsible for his acts, except in the only case already mentioned, in which he may have acted for the benefit of the vessel.Another power inherent in the position of captain, according to article 610, is that of directing the vessel to the port of its destination, according to the instructions he may have received from the agent, but from this it cannot be inferred that the shipowner or agent has, through the captain, complete and exclusive control of the navigation of the vessel, for the simple reason that the captain may not obey said instructions and may act freely adjusting his decisions according to the circumstances of each case, as would occur in the case of risks, damages, and accidents which we have previously discussed, cases in which the law imposes upon the captain the obligations to which titles 4 and 5 of Book 3 refer and indicates those cases which we have heretofore minutely discussed, in some of which he is personally responsible, in others the agent or shipowner, or the latter jointly with the captain, and still in others, in which the agent is not responsible but only the captain.Nor is it true that the shipowner, through the captain, has the complete and exclusive control of the destination of the cargo at the end of the voyage, for article 619 says textually that the captain shall be liable for the cargo from the time it is turned over to him at the dock, or afloat alongside the ship, at the port of loading, until he delivers it on the shore or on the discharging wharf, of the port of unloading, unless the contrary has been expressly agreed upon, and that, according to article 620, he is not liable for the damages caused to the vessel or to the cargo by reason of force majeure, and article 625 adds that the captain, under his personal liability, as soon as he arrives at t he port of destination, upon obtaining the necessary permission from the health and customs officers and fulfilling the other formalities required by the regulations of the administration, shall turn over the cargo, without any defalcation, to the consignees and, in a proper case, the vessel, rigging, and freights to the agent. And if

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the captain is personally responsible, according to the clear and positive text of said article, for the delivery of the cargo to the consignees and, of the vessel, rigging, and freight, to the agent or shipowner, it is clear that the latter does not have complete and exclusive control of the destination of the cargo at the end of the voyage, because the obligation to deliver is a personal obligation of the captain, and the agent or shipowner, just as any of the consignees, may demand said liability with respect to the vessel, rigging, and freight from the captain. And that responsibility of the captain cannot be confused with the provision contained in article 618 of the same Code in favor of the agent, and that of the latter in favor of third persons who may have contracted with him, because in said article 618 are specifically mentioned the cases of responsibility to which the same article refers, and the responsibility of the captain from the moment the cargo is delivered to him until its unloading is specially declared in article 619 and even more particularly in article 625 which says that said responsibility is a personal responsibility of the captain.It cannot, therefore, be inferred from all the provisions of the Code. that the evident intention thereof is to impose the principal responsibility upon the shipowner, as stated in the decision of the majority; and, if the law is to be complied with, it is useless effort to show its truth, by invoking the general provisions of the Code of Commerce, which govern the relations between the captain and the shipowner or the agent and those of one or the other or both with third persons who may have contracted with either of them, or by invoking those which deal with gross averages, as one of the damages and accidents of maritime commerce, because, in the first, there is no declaration expressly made upon the subject, and, in the second, what is established and declared is precisely the contrary, for the shipowner or agent has, just as the shippers, the right of action against the captain to enforce his responsibility and to be indemnified by him for the damages occasioned to them by reason of the failure of the captain to comply with the obligations imposed upon him by law with respect to the adjustment, liquidation, and distribution of the average, and with respect to the disposition and delivery of the goods saved to the shippers, before the payment by the latter of their aliquot part in the partition of the average, or without their having filed a sufficient bond to answer for the cargo, for the reason that, according to article 619, he is responsible for the cargo from the moment he takes charge thereof at the port of loading until its delivery at the port of unloading and, according to article 625, he is, under his personal liability, obliged

to deliver the cargo, without defalcation, to the consignees or shippers and, in the proper case, the vessel, rigging, and freight to the agent upon the arrival at the port of destination. This shows, in relation to the provisions of articles 866 and 868, already cited, that the captain of the vessel should be personally liable to the owners of the goods averaged for the damages which were incurred by them, by reason of his delay or negligence in requiring a bond of the shippers before delivery to them of the goods saved, — this supposing that they are obliged to do so, — instead of proceeding to the adjustment, liquidation, and distribution of the gross average, inasmuch as the purpose of the law is to exact said personal responsibility for the due delivery to the consignees or shippers of the cargo.The plaintiff, therefore, should have brought said action, if he had any, for the recovery of the amount claimed in the complaint, not against the defendant, owner of the vessel Batangueño, but against the captain thereof, and said defendant cannot and should not be sentenced to pay to the plaintiff the sum stated in the decision of this court which, with some modification as to the amount thereof, affirms the judgment of the trial court; and there is more reason for this assertion because that sum is, according to said decision, what the plaintiff should receive in the partition and distribution of the gross average in question and, yet, it does not appear that the corresponding liquidation, and, consequently, the division and distribution of said average, has already been made, as required by the provisions of the Code of Commerce in the articles mentioned at the beginning.Regretting that I have to dissent from the respectable opinion of the majority, I am of the opinion, for the reasons above stated, that the judgment appealed from should be reversed and the defendant should be absolved from the complaint.

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(a) Responsibilities and liabilities

Yu Con v. Ipil, 41 Phil 770

EN BANC[G.R. No. 10195. December 29, 1916.]YU CON, plaintiff-appellee, vs. GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants.Felix Sevilla y Macam for appellants.Juan Singson and Dionisio Jakosalem for appellee.

SYLLABUS

1. SHIPPING; LIABILITY OF MASTER AND SUPERCARGO OF VESSEL FOR LOSS OF MONEY ENTRUSTED TO THEIR CARE. — A certain sum of money was delivered by Y to G and J, master and supercargo, respectively, of a small craft engaged in the coastwise trade in the waters of the Philippine Islands, to be carried together with various merchandise from the port of Cebu to the town of Catmon of the Province of Cebu, upon payment of a fixed sum. This money disappeared from said craft, and it was not proven nor was there any indication that it was stolen by persons not belonging to the boat, nor that its disappearance or loss was due to a fortuitous cause or to force majeure. Held: That, as G and J, the carriers of said sum received from Y for its delivery to a shop in the town of Catmon where it had been consigned, were vested with the character of depositories of the same, and as they failed to exercise, in its safe-keeping, the diligence required by the nature of the obligation assumed by them and required by the circumstances of the time and the place, they are liable, pursuant to the provisions of articles 1601 and 1602, in relation to articles 1783, 1784, and 1770 of the Civil Code, for its loss or misplacement, and are obliged to deliver it to Y, with the corresponding interest thereon as an indemnity for the damage caused him through loss of the same.2. ID.; WHAT CONSTITUTES A VESSEL. — A minor craft used for the transportation of merchandise by sea and to make voyages from one port to another of these Islands, equipped and victualed for this purpose by its owner, is a vessel, within the purview of the law and for the determination of the character and effect of the relations created between the owners of the merchandise laden on it and its owner, according to the meaning and construction given

to the word vessel by the Mercantile Code in treating of maritime commerce under Title 1, Book 3.3. ID.; LIABILITY OF SHIPOWNER FOR LOSSES CAUSED BY CAPTAIN. — The owner of a minor craft who has equipped and victualed it for the purpose of using it in the transportation of merchandise from one port to another of these Islands is under the law a shipowner, and the master of the craft is to be considered as its captain in the legal acceptation of this word, and the former must be held civilly liable for indemnities in favor of third parties to which the conduct of the latter of them may give rise in the custody of the effects laden on the craft, and for all losses which, through his fault or negligence, may occur to the merchandise or effects delivered to him for that transportation as well as for the damages suffered by their transportation, as those who contracted with him, in consequence of misdemeanors and crimes committed by him or by the members of the crew of the craft.

D E C I S I O N

ARAULLO, J p:

The purpose of the action brought in these proceedings is to enable the plaintiff to recover from the defendants jointly and severally the sum of P450, which had been delivered by the plaintiff to the first and third of the above-named defendants, master and supercargo, respectively, of a banca named Maria belonging to the second defendant, to be carried, together with various merchandise belonging to the plaintiff, from the port of Cebu to the town of Catmon of the Province of Cebu. By virtue of the contract executed between the said second defendant and the plaintiff, the money and merchandise were to be transported by the said craft between the points above-named in consideration of the payment of a certain sum for each voyage. The money disappeared from said craft during the night of October 18, 1911, while it was anchored in the port of Cebu and ready to sail for its destination, Catmon, and was not afterwards found. The plaintiff based his action on the charge that the disappearance of said sum was due to the abandonment, negligence, or voluntary breach, on the part of the defendants, of the duty they had in respect to the safe-keeping of the aforementioned sum.The defendants, besides denying the allegations of the complaint, pleaded in special defense that the plaintiff, at his own expense and under his exclusive responsibility, chartered the said banca,

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the property of the defendant Lauron, for the fixed period of three days, at the price of P10 per diem, and that, through the misfortune, negligence, or abandonment of the plaintiff himself, the loss complained of occurred, while said banca was at anchor in the port of Cebu, and was caused by theft committed by unknown thieves. They further alleged that said defendant Lauron, the owner of the banca merely placed this craft at the disposal of the plaintiff for the price and period agreed upon, and did not go with the banca on its voyage from Catmon to Cebu. As a counterclaim, the defendants also asked that the plaintiff be ordered to pay the freight agreed upon, which had not yet been paid, amounting to P80, plus the sum of P70, as an indemnity for the losses and damages caused them by the attachment of the banca, issued at the instance of the plaintiff upon filing his complaint. They also prayed for the additional sum of P100, for the deterioration of the said banca, and also that of P200 for other deterioration suffered by the same since November, 1911, and which had not been paid for. Finally, the defendants asked to be absolved from the complaint.Before commencing the hearing of this case, the defendants made a verbal motion asking that the plaintiff be declared in default, with respect to the counterclaim filed by them in their answer. On the same date, the plaintiff presented his answer to said counterclaim, denying each and all of the allegations thereof and of the defendants' special defense. The aforementioned motion was overruled by the court, and the defendants excepted.At the termination of the trial, the court, in view of the evidence adduced, held that there was no room to doubt that the sole cause of the disappearance of the money from the said banca was the negligence of the master and the supercargo, the defendants Ipil and Solamo, respectively, and that the defendant Narciso Lauron was responsible for that negligence, as owner of the banca, pursuant to articles 586, 587, and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover the amount lost. Judgment was rendered on April 20, 1914, in favor of the plaintiff and against the defendants jointly and severally for the sum of P450, with interest thereon at the rate of 6 per cent per annum from the date of filing of the complaint, October 24, 1911, with costs. The plaintiff was absolved from the defendant's counterclaim. From this judgment the defendants excepted and at the same time moved for a new trial. Their motion was denied, to which ruling they also excepted, and, through the proper bill of exceptions, entered an appeal to this Supreme Court. In their brief they allege that the trial court erred:

1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;2. In overruling the motion for default presented by the defendants and in sentencing the defendants jointly and severally to pay the plaintiff the amount mentioned in the judgment; and3. In absolving the plaintiff from the defendants' counterclaim.The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a shop, or small store, situated in the town of Catmon, of said province, had several times chartered from the defendant Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil was master and Justo Solamo, supercargo, for the transportation of certain merchandise and some money to and from the said town and the port of Cebu, that, on or about the 17th of October, 1911, the plaintiff chartered the said banca from the defendant Lauron for the transportation of various merchandise from the port of Cebu to Catmon, at the price of P45 for the round trip, which merchandise was loaded on board the said craft which was then at anchor in front of one of the graded fills of the wharf of said port; that in the afternoon of the following day, he delivered to the other two defendants, Ipil, and Solamo, master and supercargo, respectively, of the aforenamed banca, the sum of P450, which was in a trunk belonging to the plaintiff and was taken charge of by said two defendants, who received this money from the plaintiff, for the purpose of its delivery to the latter's shop in Catmon for the purchase of corn in this town; that while the money was still in said trunk aboard the vessel, on the night of the said 18th of October, the time scheduled for the departure of the Maria from the port of Cebu, said master and said supercargo transferred the P450 from the plaintiff's trunk, where it was, to theirs, which was in a stateroom of the banca, from which stateroom both the trunk and the money disappeared during that same night, and that the investigations, made to ascertain their whereabouts, produced no result.The facts are also admitted by the aforementioned master and supercargo, two of the defendants, that they received from the plaintiff said P450, which sum was in the latter's own trunk which was placed outside the stateroom of the banca, for the reason, as they said, that there was no room for it inside the stateroom; that these defendants therefore transferred said money to their trunk, which was inside the stateroom, and that this trunk and the P450 therein contained disappeared from the boat during the night of

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that same day; that said sum had not been found or returned to the plaintiff; that the plaintiff, being on the banca in the afternoon of that day, when his trunk containing the P450 was carried aboard, and seeing that said two defendants, who had the key of the trunk, had removed said sum to their trunk inside the stateroom, charged them to take special care of the money; that the master Ipil assured the plaintiff that there was no danger of the money being lost; and that, finally, during the night in question, both the master and the supercargo and four cabin-boys were aboard the banca.It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and the cabin-boys of said vessel, Juan Quiamco and Gabriel Basang, before the provincial fiscal of Cebu on the day following the commission of the theft, which affidavits were presented at the trial as Exhibits A, 3, 4, and 5, and by the testimony given at the trial by the defendants Ipil and Solamo, that both said cabin-boys and the other two, Simeon Solamo, and Eulalio Quiamco, knew of the existence of the money in the trunk inside the stateroom and witnessed its removal to said trunk from the plaintiff's; that the last two cabin-boys above-named, in company with the master and the supercargo, conveyed the plaintiff's trunk, in which the money was previously contained, from the plaintiff's shop to the banca; and that no person not belonging to the vessel knew that the money was in the trunk inside said stateroom.According to the testimony of the master Ipil himself he slept outside the stateroom that night, but a cabin-boy named Gabriel slept inside. The latter, however, was not presented by the defendants to be examined in regard to this point, nor does it appear that he testified in respect thereto in his affidavit, Exhibit 5, before referred to, presented by the defendants' own counsel. The master Ipil and the supercargo Solamo also testified that they left the cabin-boy Simeon Solamo on guard that night; but this affirmation was not corroborated by Solamo at the trial, for he was not introduced as a witness, and only his affidavit Exhibit 2, taken before the fiscal of Cebu on the day following the commission of the crime, was presented by the defendants. This affidavit, which should have been admitted and not rejected, as was done by the court and excepted to by the defendants, shows that Simeon Solamo stated that he was not designated to do guard duty that night, but that on the morning of the said 19th of October, that is, the next day, all agreed that affiant should say that he was on guard, though it was not true that he was.

Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation in regard to the disappearance of the trunk and the money therein contained, from the stateroom in which the trunk was, nor as to who stole or might have stolen it. The master of the banca merely testified that they, he and the supercargo, did not know who the robbers were, for, when the robbery was committed, they were sound asleep, as they were tired, and that he believed that the guard Simeon also fell asleep because he, too, was tired. The second defendant gave the same testimony. Both of them testified that the small window of the stateroom had been broken, and the first of them, i. e., the master, stated that all the window-blinds had been removed from the windows, as well as part of the partition in which they were and that the trunk in which the money was contained could have been passed through said small window, because, as this witness himself had verified, the Chinaman's trunk, which differed but a little from the one stolen, could be passed through the same opening. The chief pilot of the harbor of Cebu, Placido Sepeda, who officially visited the said banca, also stated that the small wooden window of the stateroom was broken, and that he believed that in breaking it much noise must have been produced. However, no evidence whatever was offered by counsel for the defendants to prove that it might have been possible to remove the trunk from the stateroom through the opening made by the breaking of the small window, neither was the size of the trunk proven, in relation to the Chinaman's to which the defendant master referred in his testimony, so that it might be verified whether the statement made by the latter was true, viz., that it might have been possible to remove from the stateroom through said opening the trunk in which the P450 were contained, which sum, the same as the trunk, its container, had not been found, in spite of the investigation made for the purpose. Furthermore, it was not proven, nor is there any circumstantial evidence to show, that the robbery in question was committed by persons not belonging to the craft.It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the P450, the property of the plaintiff, which, were in the possession of the defendants, the master and the supercargo of the banca Maria, occurred through the manifest fault and negligence of said defendants, for, not only did they fail to take the necessary precautions in order that the stateroom containing the trunk in which they kept the money should be properly guarded by members of the crew and put in such condition that it would be impossible to steal the trunk from it or

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that persons not belonging to the vessel might force an entrance into the stateroom from the outside, but also they did not expressly station some person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not proven that the cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that the other cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted the statements made by the two defendants on this point. On the contrary, it was proven by the master's own statement that all the people on the vessel, including himself and the supercargo Solamo, slept soundly that night; which fact cannot, in any manner, serve them as an excuse, nor can it be accepted as an explanation of the statement that they were not aware of what was then occurring on board. if the trunk was actually stolen by outsiders and removed through the small window of the stateroom, a detail which also was not proven, but, on the contrary, increases their liability, because it is very strange that none of them who were six and were around or near the stateroom, should have heard the noise which the robbers must have made in breaking its window. All of these circumstances, together with that of its having been impossible to know who took the trunk and the money and the failure to recover the one or the other, make the conduct of the two defendants and of the other members of the crew of the banca, eminently suspicious and prevent our holding that the disappearance or loss of the money was due to a fortuitous event, to force majeure, or that it was an occurrence which could not have been foreseen, or which, if foreseen, was inevitable.It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the said P450 belonging to the plaintiff, and that they received this sum from the latter for the purpose of delivering it to the store of the town of Catmon, to which it had been consigned. Under such circumstances, said defendants were the depositories of the money.Manresa, in his Commentaries on the Civil Code (Vol. 10 p. 773), in treating of the provisions of the said code concerning transportation by sea and by land of both persons and things, says:''Liability of carriers. — In order that a thing may be transported, it must be delivered to the carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is received by the consignee, the carrier has it in his possession, as a necessary condition for its transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical that he should be responsible for it.

"The Code discovers in the relation of all these elements the factors which go to make up the conception of a trust. and, taking into account that the delivery of the thing on the part of the shipper is unavoidable, if the transportation is to take place, esteems that, at least in certain respects, such trusts are necessary."The said two defendants being the depositaries of the sum in question, and they having failed to exercise for its safe-keeping the diligence required by the nature of the obligation assumed by them and by the circumstances of the time and the place, it is evident that, in pursuance of the provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as prescribed in article 1770, of the Civil Code, they are liable for its loss or misplacement and must restore it to the plaintiff, together with the corresponding interest thereon as an indemnity for the losses and damages caused him through the loss of the said sum.With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which the loss or misplacement of the P450 occurred, of which vessel, as aforestated, Glicerio Ipil was master and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the positions they held, by the defendant himself, and, as the aforementioned sum was delivered to the said master, Ipil, and the merchandise to be transported by means of said vessel from the port of Cebu to the town of Catmon was laden by virtue of a contract executed by and between the plaintiff and the owner of the vessel, Narciso Lauron, it behooves us to examine whether the latter, also, should be held to be liable, as requested by the plaintiff in his complaint.Said vessel was engaged in the transportation of merchandise by sea and made voyages to and from the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its owner, Narciso Lauron, with whom, as aforesaid, the plaintiff contracted for the transportation of the merchandise which was to be carried, on the date hereinabove mentioned, from the port of Cebu to the town of Catmon.For legal purposes, that is, for the determination of the nature and effect of the relations created between that plaintiff, as owner of the merchandise laden on said craft and of the money that was delivered to the master, Ipil, and the defendant Lauron, as owner of the craft, the latter was a vessel, according to the meaning and construction given to the word vessel in the Mercantile Code, in treating of maritime commerce, under Title 1, Book 3."The word vessel serves to designate every kind of craft by whatever particular or technical name it may now be known or

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which nautical advancements may give it in the future." (Commentaries on the Code of Commerce, in the General Review of Legislation and Jurisprudence, founded by D. Jose Reus y Garcia, Vol. 2, p. 136.)According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft, considering solely the hull.Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the words "ship" and "vessels," says, in his work aforecited, that these terms designate every kind of craft, large or small, whether belonging to the merchant marine or to the navy. And referring to their juridical meaning, he adds: "This does not differ essentially from the grammatical meaning; the words 'ship' and 'vessel' also designate every craft, large or small, so long as it be not an accessory of another, such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for coastwise navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the service of an industry or in that of maritime commerce. . . ." (Vol. 1, p. 389.)According to the foregoing definitions, then, we hold that the banca called Maria, chartered by the plaintiff Yu Con from the defendant Narciso Lauron, was a "vessel", pursuant to the meaning this word has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force.Glicerio Ipil, the master of the said banca, Maria, must also be considered as its captain, in the legal acceptation of this word.The same Code of Commerce in force in these Islands compares, in its article 609, masters with captains. It is co be noted that in the Code of Commerce of Spain the denomination of arraeces is not included in said article as equivalent to that of masters, as it is in the Code of these Islands.Commenting on said article, the aforementioned General Review of Legislation and Jurisprudence says:"The name of captain or master is given, according to the kind of vessel, to the person in charge of it."The first denomination is applied to those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they be engaged in the coastwise trade."Masters are those who command smaller ships engaged exclusively in the coastwise trade."For the purposes of maritime commerce, the words 'captain' and 'master' have the same meaning; both being the chiefs or commanders of ships." (Vol. 2, p. 168.)

Article 587 of the Code of Commerce in force provides:"The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself herefrom by abandoning the vessel with all her equipments and the freight he may have earned during the trip."Article 618 of the same Code also prescribes:"The captain shall be civilly liable to the agent and the latter to the third persons who may have made contracts with the former —"1. For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part, If a misdemeanor or crime has been committed he shall be liable in accordance with the Penal Code."2. For all the thefts committed by the crew, reserving his right of action against the guilty parties."The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, provided that the agent or shipowner should not be liable for any excesses which, during the navigation, might be committed by the captain and crew, and that, for the reason of such excesses it was only proper to bring action against the persons and property of those found guilty.Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following remarks, in referring to the exposition of reasons presented by the Code Commission which prepared and presented for approval the Code of Commerce now in force, in which exposition of reasons were set forth the fundamental differences between the provisions contained in both codes, with respect to the subject-matter now under discussion.. He says:"Another very important innovation introduced by the Code is that relative to the liability for misdemeanors and crimes committed by the captain or by members of the crew This is a matter of the greatest importance on which a variety of opinions has been expressed by different juris-consults."The old code declares the captain civilly liable for all damage sustained by the vessel or its cargo through lack of skill or care on his part, through violations of the law, or through unlawful acts committed by the crew. As regards the agent or shipowner, it declares in unmistakable terms that he shall in no wise be liable for any excesses which, during the navigation, may be committed by the captain and the crew."Upon an examination, in the light of the principles of modern law, of the standing legal doctrine on the nonliability of the shipowner for the unlawful acts, that is, the crimes or quasi crimes, committed

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by the captain and the crew, it is observed that it cannot by maintained in the absolute and categorical terms in which it is formulated."It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead."The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, yet, expressly or tacitly, he contributes to their appointment."On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom."Moreover, the Penal Code contains a general principle that resolves the question under consideration, for it declares that such persons as undertake and carry on any industry shall be civilly liable, in default of those who may be criminally liable, for the misdemeanors and crimes committed by their subordinates in the discharge of their duties."The Code of Commerce in force omits the declaration of non-liability contained in the old code, and clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the captain, in consequence of the misdemeanors and crimes committed by the latter or by the members of the crew."It is therefore evident that, in accordance with the provisions of the Code of Commerce in force, which are applicable to the instant case, the defendant Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master and in which, through the fault and negligence of the latter and of the supercargo Justo

Solamo, there occurred the loss, theft, or robbery of the P450 that belonged to the plaintiff and were delivered to said master and supercargo, a theft which, on the other hand, as shown by the evidence, does not appear to have been committed by a person not belonging to the craft, should, for said loss or theft, be held civilly liable to the plaintiff, who executed with said defendant Lauron the contract for the transportation of the merchandise and money aforementioned between the port of Cebu and the town of Catmon, by means of the said craft.Therefore, the trial court did not err in so holding in the judgment appealed from.The plaintiff having filed his answer to the cross-complaint as soon as the defendant presented their motion for a declaration of the plaintiff's default in connection with said cross-complaint, and it being optional with the court to make in such cases the declaration of default, as provided in section 129 of the Code of Civil Procedure, the said court did not incur the second error assigned by the appellants in their brief.Lastly, as the banca Maria did not make the trip she should have made from the port of Cebu to the town of Catmon, on the occasion in question, through causes chargeable, as has been seen, to the captain and the supercargo of said banca, to wit, because of the loss, theft or robbery of the P450 belonging to the plaintiff, and as a contract was made for the transportation of the said sum and the merchandise from one of said points to the other, for the round trip, and not through payment by the plaintiff of the wages due the crew for each day, as alleged by the defendants, for the proofs presented by the latter in regard to this point were insufficient, as the trial court so held, neither did the latter incur error in overruling the cross-complaint formulated by the defendants in their answer against the plaintiff.Therefore, and for all the reasons above set forth, we affirm the judgment appealed from, with the costs of this instance against the appellants. So ordered.Torres, Carson, Moreland and Trent, JJ., concur.

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Manila Steamship v. Abdulhaman, 100 Phil 32

EN BANC[G.R. No. L-9534. September 29, 1956.]MANILA STEAMSHIP CO., INC., petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG TO, respondents.Pacifico de Ocampo for the petitioner.Felix F. Catis, Fernando P. Blanco and Carlos Camins, Jr., for respondents.

SYLLABUS

1. COMMON CARRIERS; MARITIME TORTS; COLLISION IMPUTABLE TO BOTH VESSELS; LIABILITY OF SHIPOWNERS, SOLIDARILY. — In case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. (Article 827, Code of Commerce.)2. ID.; ID.; LIABILITY OF SHIPOWNERS. — The shipowner is directly and primarily responsible in tort resulting in a collision at sea, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the vessels's officer and crew.3. ID.; ID.; LIABILITY OF SHIPOWNER WHERE OFFICERS OF THE SHIP ARE UNLICENSED. — The owner of a vessel who had caused the same to sail without licensed officers is liable for the injuries caused by the collision over and beyond the value of his vessel; hence, he can not escape liability because of the sinking of the vessel.

D E C I S I O N

REYES, J. B. L., J p:

This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa Abdulhaman against the Manila Steamship Co., owner of the M/S "Bowline Knot", and Lim Hong To, owner of the M/L "Consuelo V", to recover damages for the death of his (plaintiff's) five children and loss of personal properties on board the M/L "Consuelo V" as a result of a maritime collision

between said vessel and the M/S "Bowline Knot" on May 4, 1948, a few kilometers distant from San Ramon Beach, Zamboanga City.On appeal, the Court of Appeals found the following facts to have been established:"From 7:00 to 8:00 o'clock in the evening of May 4, 1948, the M/L "Consuelo V", laden with cargoes and passengers left the port of Zamboanga City bound for Siokon under the command of Faustino Macrohon. She was then towing a kumpit, named "Sta. Maria Bay". The weather was good and fair. Among her passengers were the plaintiff Insa Abdulhaman, his wife Carimla Mora and their five children already mentioned. The plaintiff and his wife paid their fare before the voyage started.On that same night the M/S "Bowline Knot" was navigating from Maribojoc towards Zamboanga.Between 9:30 to 10:00 in the evening the dark clouds bloated with rain began to fall and the gushing strong wind began to blow steadily harder, lashing the waves into a choppy and roaring sea. Such weather lasted for about an hour and then it became fair although it was showering and the visibility was good enough.When some of the passengers of the M/L "Consuelo V" were then sleeping and some were lying down awake, all of a sudden they felt the shocking collision of the M/L "Consuelo V" and a big motorship, which later on was identified as the M/V "Bowline Knot".Because the M/L "Consuelo V" capsized, her crew and passengers, before realizing what had happened, found themselves swimming and floating on the crest of the waves and as a result of which nine (9) passengers were dead and missing and all the cargoes carried on said boat, including those of the plaintiff as appear in the list, Exhibit "A", were also lost.Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed Inasa, while the body of the child Abdula Inasa of 6 years of age was never recovered. Before the collision, none of the passengers were warned or informed of the impending danger as the collision was so sudden and unexpected. All those rescued at sea were brought by the M/V "Bowline Knot" to Zamboanga City." (Decision of C. A., pp. 5-6).As the cause of the collision, the Court of Appeals affirmed the findings of the Board of Marine Inquiry, that the commanding officer of the colliding vessels had both been negligent in operating their respective vessels. Wherefore, the Court held the owners of both vessels solidarily liable to plaintiff for the damages caused to him by the collision, under Article 827 of the Code of Commerce; but exempted defendant Lim Hong To from liability by reason of

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the sinking and total loss of his vessel, the M/L "Consuelo V", while the other defendant, the Manila Steamship Co., owner of the M/S "Bowline Knot", was ordered to pay all of plaintiff's damages in the amount of P20,784.00 plus one-half of the costs. It is from this judgment that defendant Manila Steamship Co. had appealed to this Court.Petitioner Manila Steamship Co. pleads that it is exempt from any liability to plaintiff under Article 1903 of the Civil Code because it had exercised the diligence of a good father of a family in the selection of its employees, particularly Third Mate Simplicio Ilagan, the officer in command of its vessels, the M/S "Bowline Knot", at the time of the collision. This defense is untenable. While it is true that plaintiff's action against petitioner is based on a tort or quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The characteristic language of the law in making the "vessels" solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third persons, as pointed out in the collision case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co., 12 Phil. 747, 753:"The responsibility involved in the present action is that derived from the management of the vessel, which was defective on account of lack of skill, negligence, or fault, either of the captain or of the crew, for which the captain is responsible to the agent, who in his turn is responsible to the third party prejudiced or damaged. (Article 618, Code of Commerce)."In fact, it is a general principle, well established maritime law and custom, that shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article 587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability,

moderated and limited by the owner's right of abandonment of the vessel and earned freight (Article 587), has been declared to exist, not only in case of breached contracts, but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515):"In the second assignment of error, the appellant contends that the defendant ought not to be held liable for the negligence of his agents and employees.It is proven that the agents and employees, through whose negligence the explosion and fire in question occurred, were agents, employees and mandatories of the defendant. Where the vessel is one of freight, a public concern or public utility, its owner or agents is liable for the tortious acts of his agents (Articles 587, 613, and 618 Code of Commerce; and Article 1902, 1903, 1908, Civil Code). This principle has been repeatedly upheld in various decisions of this court.The doctrines cited by the appellant in support of his theory have reference to the relations between principal and agent in general, but not to the relations between ship agent and his agents and employees; for this reason they cannot be applied in the present case."It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater protection of injured parties. Shipowners would be able to escape liability in practically every case, considering that the qualifications and licensing of ship masters and officers are determined by the State, and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for almost always its members are, from captains down, mere wage earners.We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of the Manila Steamship Co., that it is exempt from liability for the collision with the M/L "Consuelo V" due to absence of negligence on its parts in the selection and supervision of the officers and crew of the M/S "Bowline Knot".The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked by petitioner, is not the point. Said case treated of a civil tort, in that the vessel of the defendant, allegedly negligently managed by its captain in the course of its maneuvers to moor at plaintiff's wharf, struck the same and partially

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demolished it, causing damage to plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of the Civil Code were correctly applied. The present case, on the other hand, involves tortious conduct resulting in a maritime collision; wherefore, the liability of the shipowner is, as already stated, governed by the provisions of the Code of Commerce and not by the Civil Code.We agree, however, with petitioner-appellant, that the Court of Appeals was in error in declaring the respondent Lim Hong To, owner of the M/L "Consuelo V", exempt from liability to the original plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as a result of the collision. It is to be noted that both the master and the engineer of the motor launch "Consuelo V" were not duly licensed as such (Exh. 2). In applying for permission to operate, despite the lack of properly trained and experienced, crew, respondent Lim Hong To gave as a reason —"that the income derived from the vessel is insufficient to pay licensed officers who demand high salaries",and expressly declared:"That in case of any accident, damage or loss, I shall assume full risk and responsibility for all the consequences thereof." (Exhibit 2).His permit to operate, in fact, stipulated —"that in case of any accident, damage or loss, the registered owner thereof shall assume full risk and responsibility for all the consequences thereof, and that said vessel shall be held answerable for any negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising from such negligence, disregard or violations." (Exhibit 3.)The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3) contained any waiver of the right of respondent Lim Hong To to limit his liability to the value of his motor launch and that he did not lose the statutory right to limit his liability by abandonment of the vessel, as conferred by Article 587 of the Code of Commerce.We find the ruling untenable. Disregarding the question whether mere inability to meet the salary demands of duly licensed masters and engineers constitutes non-availability thereof that would excuse noncompliance with the law and authorize operation without licensed officers under Act 3553, the fact remains that by operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the passengers and shippers of cargo aboard the "Consuelo V" would be subjected. In his desire to reap greater benefits in the maritime trade, Lim Hong To willfully

augmented the dangers and hazards to his vessel's unwary passengers, who would normally assume that the launch officers possessed the necessary skill and experience to evade the perils of the sea. Hence, the liability of said respondent can not be the identical to that of a shipowner who bears in mind the safety of the passengers and cargo by employing duly licensed officers. To hold, as the Court of Appeals has done, that Lim Hong To may limit his liability to the value of his vessels, is to erase all difference between compliance with law and the deliberate disregard thereof. To such proposition we can not assent.The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or the average is due to shipowner's own fault. Fariña (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on the authority of judicial precedents from various nations, sets the rule to be as follows:"Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion legal de responsibilidad si los daños o averias que dan origen a la limitacion provienen de sus propias culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la limitacion en el caso de culpa personal en los accidentes o averías sobrevenidos (Art. 2°)."To the same effect, a noted French author states:"La limitacion de la responsabilidad maritima ha sido admitida para proteger a los armadores contra los actos abusivos de sus encargados y no dejar su patrimonio entero a la discrecion del personal de sus buques, porque este personal cumple sus obligaciones en condiciones especiales; pero los armadores no tienen por sobre los demas derecho a ser amparados contra ellos mismos ni a ser protegidos contra sus propios actos."(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)That Lim Hong To understood that he would incur greater liability than that normally borne by shipowners, is clear from his assumption of " full" risk and responsibility for all the consequences" of the operation of the M/L "Consuelo V"; a responsibility expressly assumed in his letter Exhibit 2, and imposed in his special permit, in addition to the vessel itself being held answerable. This express assumption of "full risk and responsibility" would be meaningless unless intended to broaden the liability of respondent Lim Hong To beyond the value of his vessel.

In resume, we hold:

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(1) That the Manila Steamship Co., owner of the M/S "Bowline Knot", is directly and primarily responsible in tort for the injuries caused to the plaintiff by the collision of said vessel with the launch "Consuelo V", through the negligence of the crews of both vessels, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the officers and crew of the "Bowline Knot";(2) That Lim Hong To, as owner of the motor launch "Consuelo V", having caused the same to sail without licensed officers, is liable for the injuries caused by the collision over and beyond the value of said launch;(3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to the plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce.In view of the foregoing, the decision of the Court of Appeals is modified, and that of the Court of First Instance affirmed, in the sense of declaring both original defendants solidarily liable to plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the litigation, without prejudice to the right of the one who should pay the judgment in full to demand contribution from his co-defendant.Paras, C. J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Felix, JJ., concur.

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(b) The doctrine of limited liability, Art. 587

Manila Steamship v. Abdulhaman, supra Yangco v. Lasena, 73 Phil 330

EN BANC[G.R. Nos. 47447-47449. October 29, 1941.]TEODORO R. YANGCO, ETC., petitioner, vs. MANUEL LASERNA, ET AL., respondents.Claro M. Recto, for petitioner.Powell & Vega, for respondents.

SYLLABUS

SHIPS AND SHIPPING; COLLISIONS OR SHIPWRECKS; CIVIL LIABILITY OF SHIPOWNER FOR INJURY TO OR DEATH OF PASSENGERS ARISING FROM NEGLIGENCE OF CAPTAIN. — If the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this conclusion, the fact is not ignored that the ill-fated S. S. Negros, as a vessel engaged in interisland trade, is a common carrier, and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured.

D E C I S I O N

MORAN, J p:

At about one o'clock in the afternoon of May 26, 1927, the steamer S. S. Negros, belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon on its return trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was duly advised and his attention thereto called by the passengers themselves before the

vessel set sail. The boat was overloaded as indicated by the loadline which was 6 to 7 inches below the surface of the water. Baggage, trunks and other equipments were heaped on the upper deck, the hold being packed to capacity. In addition, the vessel carried thirty sacks of crushed marble and about one hundred sacks of copra and some lumber. The passengers, numbering about 180, were overcrowded, the vessel's capacity being limited to only 123 passengers. After two hours of sailing, the boat encountered strong winds and rough seas between the islands of Banton and Simara, and as the waves splashed the ladies' dresses, the awnings were ordered lowered. As the sea became increasingly violent, the captain ordered the vessel to turn left, evidently to return to port, but in the maneuver, the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died in the mishap, among them being Antolin Aldaña and his son Victorioso, husband and son, respectively, of Emilia Bienvenida who, together with her other children and a brother- in-law, are respondents in G. R. No. 47447; Casiana Laserna, the daughter of respondents Manuel Laserna and P. A. de Laserna in G. R. No. 47448; and Genaro Basaña, son of Filomeno Basaña, respondent in G. R. No. 47449. These respondents instituted in the Court of First Instance of Capiz separate civil actions against petitioner here to recover damages for the death of the passengers aforementioned. The court awarded the heirs of Antolin and Victorioso Aldaña the sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basaña, also P590. After the rendition of the judgment to this effect, petitioner, by a verified pleading, sought to abandon the vessel to the plaintiffs in the three cases, together with all its equipments, without prejudice to his right to appeal. The abandonment having been denied, an appeal was taken to the Court of Appeals, wherein all the judgments were affirmed except that which awarded to the Aldañas the sum of P2,000, which sum was increased to P4,000. Petitioner, now deceased, appealed and is here represented by his legal representative.Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its passengers? We are of the opinion and so hold that this question is controlled by the provision of article 587 of the Code of Commerce. Said article reads:"The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the

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care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage."The provision accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon - "the vessel with all her equipments and the freight it may have earned during the voyage." It is true that the article appears to deal only with the limited liability of shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability. The consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting on said article, said:"La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono, si se atiende a lo escrito, solo se refiere a las indemnizaciones a que diere lugar la conducta del Capitan en la custodia de los efectos que cargo en el buque."¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las responsabilidades nacidas de obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta copiar el siguiente parrafo de la Exposicion de motivos:" 'El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio maritimo, que quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o Capitan del buque, la garantia real del mismo, cualesquiera que sean las facultades o atribuciones de que se hallen investidos.'" (Echavarri, Codigo de Comercio, Tomo 4, 2.a ed., pags. 483-484.)A cursory examination will disclose that the principle of limited liability of a shipowner or agent is provided for in but three articles of the Code of Commerce - article 587 aforequoted and articles 590 and 837. Article 590 merely reiterates the principle embodied in article 587, where the vessel is owned by several persons. Article 837 applies the same principle in cases of collision, and it has been observed that said article is but "a necessary consequence of the right to abandon the vessel given to the shipowner in article 587 of the Code, and it is one of the many superfluities contained in the

Code." (Lorenzo Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil., 281, 282.) In effect, therefore, only articles 587 and 590 are the provisions contained in our Code of Commerce on the matter, and the framers of said code had intended those provisions to embody the universal principle of limited liability in all cases. Thus, in the "Exposicion de Motivos" of the Code of Commerce, we read:"The present code (1829) does not determine the juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed code, which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted with the provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only one who represents the vessel — that is to say, the only one who represents the interests of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the extent of the liability, both of the agent and of the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and other things appertaining thereto."In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in such a comprehensive manner as to leave no room for doubt on the applicability of our ratio decidendi not only to cases of collision but also to those of shipwrecks, etc. We said:"This is the difference which exists between the lawful acts and lawful obligations of the captain and the liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise from the contract of agency (provided, however, that the captain does not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the codes of the principal maritime nations provide, with the vessel, and not individually. Such is also the spirit of our Code."The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the following as the basis of this decision:

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"'That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real and hypothecary nature of the former, and the many securities of a real nature that maritime customs from time immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting interests which are ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs made to the vessel."'As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person."'This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal action lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of the crew cannot recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwreck, those who loan their money on the vessel and cargo lose all their rights and cannot claim reimbursement under the law."'There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed, and (2) the real nature of the maritime law, exclusively real, according to which the liability of the parties is limited to a thing which is at the mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through the accidents of navigation it is only just that the maritime creditor have some means to obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost."'The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to respect and recognize are — in addition

to those existing in favor of the State by virtue of the privileges which are granted to it by all the laws — pilot, tonnage, and port dues and other similar charges, the wages of the crew earned during the last voyage as provided in article 646 of the Code of Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as provided in article 608, and all other liabilities arising from collisions under articles 837 and 838.'"We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente y Gella, asserting, in his "Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-375), the like principle of limited liability of shipowners or agent in cases of accidents, collisions, shipwrecks, etc., said:"De las responsabilidades que pueden resultar como consequencia del comercio maritimo, y no solo por hechos propios sino tambien por las que se ocasionen por los del capitan y la tripulacion, responde frente a tercero el naviero que representa el buque; pero el derecho maritimo es sobre todo tradicional y siguiendo un viejo principio de la Edad Media la responsabilidad del naviero se organiza de un modo especifico y particularisimo que no encuentra similar en el derecho general de las obligaciones."Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era prestar un propietario su navio para que cargase en el mercancias determinada persona, y se hiciese a la mar, yendo al frente de la expedicion un patron del buque, que llegado al puerto de destino se encargaba de venderlas y retornaba al de salida despues de adquirir en aquel otros efectos que igualmente revendia a su regreso, verificado lo cual los beneficios de la expedicion se repartian entre el dueño del buque, el cargador y el capitan y tripulantes en la proporcion estipulada. El derecho maritimo empezo a considerar la asociacion asi formada como una verdadera sociedad mercantil, de responsabilidad limitada, y de acuerdo con los principios que gobiernan aquella en los casos de accidentes, abordajes, naufragios, etc., se resolvia que el dueño del buque perdia la nave, el cargador las mercancias embarcadas y el capitan y la tripulacion su trabajo, sin que en ningún caso el tercer acreedor pudiese reclamar mayor cantidad de ninguno de ellos, porque su responsabilidad quedaba limitada a lo que cada uno aporto a la sociedad. Recogidas estas ideas en el derecho comercial de tiempos posteriores, la responsabilidad del naviero se edifico sobre aquellos principios, y derogando la norma general civil de que del cumplimiento de sus obligaciones responde el

~ 27 ~

deudor con todos sus bienes presentes y futuros, la responsabilidad maritima se considero siempre limitada ipso jure al patrimonio de mar. Y este es el origen de la regla trascendental de derecho maritimo según la cual el naviero se libera de toda responsabilidad abandonado el buque y el flete a favor de los acreedores.".From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:"Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes pueden los acreedores resarcirse? Esta es otra especialidad del Derecho maritimo; en el Derecho común la responsabilidad es limitada; tambien lo era en el antiguo Derecho maritimo romano; se daba la actio exercitoria contra el exercitor navis sin ninguna restriccion, pero en la Edad Media una idea nueva se introdujo en los usos maritimos. Las cargas resultantes de las expediciones maritimas se consideraron limitadas por los propietarios de las naves a los valores comprometidos por ellos en cada expedicion; se separo ficticiamente el patrimonio de los navieros en dos partes que todavia se designan de una manera bastante exacta; fortuna de tierra y fortuna de mar o flotante; y se admitio la teoria de que esta era la que respondia solo de las deudas provinientes de los actos del capitan o de la tripulacion, es decir, que el conjunto del patrimonio del naviero escaparia a estas cargas desde el momento en que abandonara la nave y los fletes a los acreedores. . . .".Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:"La responsabilidad del naviero, en el caso expuesto, se funda en el principio de derecho común de ser responsable todo el que pone al frente de un establecimiento a una persona, de los daños o perjuicios que ocasionare esta desempeñando su cometido, y en que estando facultado el naviero para la eleccion de capitan de la nave, viene a tener indirectamente culpa en la negligencia o actos de este que o casionaron daños o perjuicios, puesto que no se aseguro de su pericia o buena fe. Limitase, sin embargo, la responsabilidad del naviero a la perdida de la nave, sus aparejos, y fletes devengados durante el viaje; porque no pudiendo vigilar de un modo directo e inmediato la conducta del capitan, hubiera sido duro hacerla extensiva a todos sus bienes que podria comprometer el capitan con sus faltas o delitos."The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol. 4, p. 259) and Supino (Derecho Mercantil, pp. 463-464), leave nothing to be desired and nothing to be doubted on the principle. It only remains to be noted that the rule of limited liability provided for in our Code of Commerce

reflects merely, or is but a restatement, imperfect though it is, of the almost universal principle on the subject. While previously under the civil or common law, the owner of a vessel was liable to the full amount for damages caused by the misconduct of the master, by the general maritime law of modern Europe, the liability of the shipowner was subsequently limited to his interest in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar limitation was placed by the British Parliament upon the liability of English shipowners through a series of statutes beginning in 1734 with the Act of 7 George II, chapter 15. The legislatures of Massachusetts and Maine followed suit in 1818 and 1821, and finally, Congress enacted the Limited Liability Act of March 3, 1851, embodying most of the provisions contained in the British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:"LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of the interest of such owner in such vessel, and her freight then pending."The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that the American courts construed the Limited Liability Act of Congress whereby the immunities of the Act were applied to claims not only for lost goods but also for injuries and "loss of life of passengers, whether arising under the general law of admiralty, or under Federal or State statutes." (The City of Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship Co., 32 Law. ed. 1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history of the principle, clinches our exposition of the supporting authorities:"The history of the limitation of liability of shipowners is matter of common knowledge. The learned opinion of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to be desired on the subject. He shows that it originated in the maritime law of modern

~ 28 ~

Europe; that whilst the civil, as well as the common law, made the owner responsible to the whole extent of damage caused by the wrongful act or negligence of the master or crew, the maritime law only made them liable (if personally free from blame) to the amount of their interest in the ship. So that, if they surrendered the ship, they were discharged."Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master and, therefore, in Holland, they had never observed the Roman Law on that subject, but had a regulation that the ship owners should be bound no farther than the value of their ship and freight. His words are: 'Navis et corum quare in navi sunt,' 'the ship and goods therein.' But he is speaking of the owner's interest; and this, as to the cargo, is the freight thereon, and in that sense he is understood by the commentators. Boulay Paty, Droit Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime law, as codified in the celebrated French Ordinance de la Marine, in 1681, expressed the rule thus: 'The proprietors of vessels shall be responsible for the acts of the master, but they shall be discharged by abandoning the ship and freight.' Valin, in his commentary on this passage, lib. 2, tit. 8, art. 2, after specifying certain engagements of the master which are binding on the owners, without any limit of responsibility, such as contracts for the benefit of the vessel, made during the voyage (except contracts of bottomry) says: 'With these exceptions it is just that the owner should not be bound for the acts of the master, except to the amount of the ship and freight. Otherwise he would run the risk of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the interests of navigation. It is quite sufficient that he be exposed to the loss of his ship and of the freight, to make it his interest, independently of any goods he may have on board to select a reliable captain.' Pardessus says: 'The owner is bound civilly for all delinquencies committed by the captain within the scope of his authority, but he may discharge himself therefrom by abandoning the ship and freight; and, if they are lost, it suffices for his discharge, to surrender all claims in respect of the ship and its freight,' such as insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec. 2."The same general doctrine is laid down by many other writers on maritime law. So that it is evident that, by this law, the owner's liability was coextensive with his interest in the vessel and its

freight, and ceased by his abandonment and surrender of these to the parties sustaining loss."In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this conclusion, we have not been unmindful of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanley, 32 Phil., 541), and that the as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanley, 32 Phil., 541), and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law or not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony.

Judgment is reversed and petitioner is hereby absolved of all the complaints, without costs.Avanceña, C.J., Abad Santos, Diaz, Laurel, Horrilleno and Ozaeta, JJ., concur.

Abueg v. San Diego, 77 Phil 730

EN BANC[CA-No. 773. December 17, 1946.]DIONISIA ABUEG, ET AL., plaintiffs-appellees, vs. BARTOLOME SAN DIEGO, defendant-appellant.[CA-No. 774. December 17, 1946.]MARCIANA DE SALVACION, ET AL., plaintiffs-appellees, vs. BARTOLOME SAN DIEGO, defendant-appellant.[CA-No. 775. December 17, 1946.]ROSARIO OCHING, ET AL., plaintiffs-appellees, vs. BARTOLOME SAN DIEGO, defendant-appellant.

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Lichauco, Picazo & Mejia, for appellant.Cecilio I. Lim and Roberto P. Ancog, for appellees.

SYLLABUS

1. MARITIME LAW; SHIPOWNER OR AGENT, ORIGIN OF REAL AND HYPOTHECARY NATURE OF LIABILITY OF. — The real and hypothecary nature of the liability of the shipowner or agent embodied in provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and freight, his liability was extinguished.

2. WORKMEN'S COMPENSATION ACT; PROVISIONS OF CODE OF COMMERCE REGARDING MARITIME COMMERCE WITHOUT EFFECT IN APPLICATION OF. — The provisions of the Code of Commerce regarding maritime commerce have no room in the application of the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees. Said Act creates a liability to compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged in the performance of their work or employment, or the heirs and dependents of such laborers and employees in the event of death caused by their employment.3. ID.; INDUSTRIAL EMPLOYEES; OFFICERS OF MOTOR SHIPS ENGAGED IN FISHING EXCEPTIONS. — The officers of motor ships engaged in fishing are industrial employees within the purview of section 39, paragraph (d), as amended, for industrial employment "includes all employment or work at a trade, occupation or profession exercised by an employer for the purpose of gain." The only exceptions recognized by the Workmen's Compensation Act are agriculture, charitable institutions and domestic service. Even employees engaged in agriculture for the operation of mechanical implements, are entitled to the benefits of the Workmen's Compensation Act.4. ID.; COASTWISE AND INTERISLAND TRADE, MEANING OF; FISHING, WHEN A TRADE . — The term "coastwise and interisland

trade" does not have such a narrow meaning as to confine it to the carriage for hire of passengers and/or merchandise on vessels between ports and places in the Philippines because while fishing is an industry, if the catch is brought to a port for sale, it is at the same time a trade.

D E C I S I O N

PADILLA, J p:

This is an appeal from a judgment rendered by the Court of First Instance of Manila in the above-entitled cases awarding plaintiffs the compensation provided for in the Workmen's Compensation Act.The record of the cases was forwarded the Court of Appeals for review, but as there was no question of fact involved in the appeal, said court forwarded the record to this Court. The appeal was pending when the Pacific War broke out, and continued pending until after liberation, because the record of the cases was destroyed as a result of the battle waged by the forces of liberation against the enemy. As provided by law, the record was reconstituted and we now proceed to dispose of the appeal.Appellant, who was the owner of the motor ships San Diego II and Bartolome S, states in his brief the following:There is no dispute as to the facts involved in these cases and they may be gathered from the pleadings and the decision of the trial Court. In case CA-G. R. No. 773, Dionisia Abueg is the widow of the deceased, Amado Nuñez; who was a machinist on board the M/S San Diego II belonging to the defendant-appellant. In case CA-G. R. NO. 774, plaintiff-appellee, Marciana S. dc Salvacion, is the widow of the deceased, Victoriano Salvacion, who was a machinist on board the M/S Bartolome S also belonging to the defendant-appellant. In case CA-G. R. NO. 775, the plaintiff-appellee, Rosario R. Oching is the widow of Francisco Oching who was captain or patron of the defendant-appellant's M/S Bartolome S.The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they were sunk and totally lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while acting in their capacities perished in the shipwreck(Appendix A, p. IV).It is also undisputed that the above-named vessels were not covered by any insurance. (Appendix A, p. IV.)

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Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the vessel together with all her tackle and freight money earned during the voyage are abandoned, the agent's liability to third persons for tortuous acts of the captain in the care of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil., 330); article 837 of the same Code which provides that in cases of collision, the shipowners' liability is limited to the value of the vessel with all her equipment and freight during the voyage (Philippines Shipping Company vs. Garcia, 6 Phil., 281); and article 643 of the same Code which provides that if the vessels and freight are totally lost, the agent's liability for wages of the crew is extinguished. From these premises counsel draw the conclusion that appellant's liability, as owner of the two motor ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on October 1, 1941, was extinguished.The real and hypothecary nature of the liability of the shipower or agent embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. to offset against these adverse conditions and to encourage shipbuilding and maritime commerce it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and freight, his liability was extinguished.But the provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the liability for the loss of the ship as a result of collision; nor the responsibility for w ages of the crew, but a liability created by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged in the performance of their work or employment, or the heirs and dependents of such laborers and employees in the event of death caused by their employment Such Compensation has nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item in the costs of production which must be included in the budget of any well-managed industry.

Appellant's assertion that in the case of Francisco vs. Dy Liaco (57 Phil., 446), and Murillo vs. Mendoza (66 Phil., 689), the question of the extinction of the shipowner's liability due to abandonment of the ship by him was not fully discussed, as in the case of Yangco vs. Laserna, supra, is not entirely correct. In the last mentioned case, the limitation of the shipowner's liability to the value of the ship, equipment, freight, and insurance, if any, was the lis mota. In the case of Francisco vs. Dy-Liacco, supra, the application of the Workmen's Compensation Act to a master or patron who perished as a result of the sinking of the motorboat of which he was the master, was the controversy submitted to the court for decision. This Court held in that case that "It has been repeatedly stated that the Workmen's Compensation Act was enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the employer need not be guilty of neglect or fault, in order that responsibility may attach to him" (pp. 449-450); and that the shipowner was liable to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the fact that the motorboat was totally lost. In the case of Murillo vs. Mendoza, supra, this Court held that "The rights and responsibilities defined in said Act must be governed by its own peculiar provisions in complete disregard of other similar provisions of the civil as well as the mercantile law. If an accident is compensable under the Workmen's Compensation Act, it must be compensated even when the workman's right is not recognized by or is in conflict with other provisions of the Civil Code or of the Code of Commerce. The reason behind this principle is that the Workmen's Compensation Act was enacted by the Legislature in abrogation of the other existing laws." This quoted part of the decision is in answer to the contention that it was not the intention of the Legislature to repeal articles 643 and 837 of the Code of Commerce with the enactment of the Workmen's Compensation Act.In the memorandum filed by counsel for the appellant, a new point not relied upon in the court below is raised. They contend that the motorboats engaged in fishing could not be deemed to be in the coastwise and interisland trade, as contemplated in section 38 of the Workmen's Compensation Act (No. 3428), as amended by Act No. 3812, in as much as, according to counsel, a craft engaged in the coastwise and interisland trade is one that carries passengers and/or merchandise for hire between ports and places in the Philippine Islands.This new point raised by counsel for the appellant is inconsistent with the first, for, if the motor ships in question while engaged in

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fishing, were to be considered as not engaged in interisland and coastwise trade, the provisions or the Code of Commerce invoked by them regarding limitation of the shipowner's liability or extinction thereof when the shipowner abandons the ship, cannot be applied Lopez vs. Duruelo, 52 Phil., 229). Granting however, that the motor ships run and operated by the appellant were not engaged in the coastwise and interisland trade, as contemplated in section 38 of the Workmen's compensation Act, as amended, still the deceased officers of the motor ships in question were industrial employees within the purview of section 39, paragraph (d), as amended, for industrial employment "includes all employment or work at a trade, occupation or profession exercised by an employer for the purpose of gain." The only exceptions recognized by the Act are agriculture, charitable institutions and domestic service. Even employees engaged in agriculture for the operation of mechanical implements, are entitled to the benefits of the Workmen's Compensation Act Francisco vs. Consing, 63 Phil., 354). In Murillo vs. Mendoza, supra, this Court held that "our Legislature has deemed it advisable to include in the Workmen's Compensation Act all accidents that may occur to workmen or employees in factories, shops and other industrial and agricultural workplaces as well as in the interisland seas of the Archipelago." But we do not believe that the term "coastwise and interisland trade" has such a narrow meaning as to confine it to the carriage for hire of passengers and/or merchandise, on vessels between Ports and Places in the Philippines, because while fishing is an industry, if the catch is brought to a port for sale, it is at the same time a trade.Finding no merit in the appeal filed in these cases, we affirm the judgment of the lower court, with costs against the appellant.Moran, C.J., Feria, Pablo, Perfecto, Hilado Bengzon, Briones and Tuazon, JJ., concur.

Aboitiz Shipping v. General Accident Fire and Life Assurance Corporation, Ltd. 217 SCRA 359

THIRD DIVISION[G.R. No. 100446. January 21, 1993.]ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.Sycip, Salazar, Hernandez & Gatmaitan Law Office for petitioner.

Napoleon Rama collaborating counsel for petitioner.Dollete, Blanco, Ejercito & Associates for private respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; STAY OF EXECUTION OF JUDGMENT; GROUNDS THEREFOR. — This Court has always been consistent in its stand that the very purpose for its existence is to see to the accomplishment of the ends of justice. Consistent with this view, a number of decisions have originated herefrom, the tenor of which is that no procedural consideration is sacrosanct if such shall result in the subverting of substantial justice. The right to an execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled that: ". . . It is a truism that every court has the power 'to control, in the furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a case before it, in every manner appertaining thereto.' It has also been said that: '. . . every court having jurisdiction to render a particular judgment has inherent power to enforce it, and to exercise equitable control over such enforcement. The court has authority to inquire whether its judgment has been executed, and will remove obstructions to the enforcement thereof. Such authority extends not only to such orders and such writs as may be necessary to carry out the judgment into effect and render it binding and operative, but also to such orders and such writs as may be necessary to prevent an improper enforcement of the judgment. If a judgment is sought to be perverted and made a medium of consummating a wrong the court on proper application can prevent it.'" (at p. 359) and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court found that: "The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes the imperative in the higher interest of justice to direct the suspension of its execution (Vecine v. Geronimo, 59 OG 579); whenever it is necessary to accomplish the aims of justice (Pascual v. Tan, 85 Phil. 164); or when certain facts and circumstances transpired after the judgment became final which would render the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354)." (at p. 201)

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2. COMMERCIAL LAW; CODE OF COMMERCE; REAL AND HYPOTHECARY NATURE OF MARITIME LAW; MEANING; ORIGIN AND PURPOSE. — The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade. It might be noteworthy to add in passing that despite the modernization of the shipping industry and the development of high-technology safety devices designed to reduce the risks therein, the limitation has not only persisted, but is even practically absolute in well-developed maritime countries such as the United States and England where it covers almost all maritime casualties. Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both international maritime conventions and generally accepted practices relative to maritime trade and travel.3. ID.; ID.; LIMITED LIABILITY RULE; WHEN RULE NOT APPLICABLE; WHEN RULE PROPERLY INVOKED; CASE AT BAR. — In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very statute from which it originates. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto: "Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage. "Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. "Each co-owner may exempt himself

from this liability by the abandonment, before a notary, of the part of the vessel belonging to him" "Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on collisions), shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage." Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837). In view of the foregoing, this Court shall not take the application of such limited liability rule, which is a matter of near absolute application in other jurisdictions, so lightly as to merely "imply" its inapplicability, because as could be seen, the reasons for its being are still apparently much in existence and highly regarded. We now come to its applicability in the instant case. In the few instances when the matter was considered by this Court, we have been consistent in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when there is an actual finding of negligence on the part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]) . . . We must stress that the matter of the Limited Liability Rule as discussed was never in issue in all prior cases, including those before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" in issue before the trial courts referred to the package limitation clauses in the bills of lading and not the limited liability doctrine arising from the real and hypothecary nature of maritime trade. The latter rule was never made a matter of defense in any of the cases a quo, as properly it could not have been made so since it was not relevant in said cases. The only time it could come into play is when any of the cases involving the mishap were to be executed, as in this case. Then, and only then, could the matter have been raised, as it has now been brought before the Court.4. ID.; ID.; ID.; RIGHTS OF VESSEL OWNER OR AGENT AKIN TO RIGHTS OF SHAREHOLDERS TO LIMITED LIABILITY UNDER CORPORATION LAW; RIGHTS OF CLAIMANTS AGAINST VESSEL OWNER OR AGENT COMPARED TO RIGHTS OF CREDITORS AGAINST INSOLVENT CORPORATION WITH SUFFICIENT ASSETS. — The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders to limited liability under our corporation law. Both are privileges granted by statute, and while not absolute, must be swept aside only in the established existence of the most compelling of reasons. In the absence of such reasons,

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this Court chooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to do so, such incursion is definitely punitive in nature and must never be taken lightly. More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors against an insolvent corporation whose assets are not enough to satisfy the totality of claims as against it. While each individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who come later. In such an instance, such creditors too would not also be able to gain access to the assets of the individual shareholders, but must limit their recovery to what is left in the name of the corporation. Thus, in the case of Lipana v. Development Bank of Rizal earlier cited, We held that: "In the instant case, the stay of execution of judgment is warranted by the fact that respondent bank was placed under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA 114), after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or preference over another by an attachment, execution or otherwise." In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of the corporation left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the particular voyage.5. ID.; ID.; ID.; COLLATION OF ALL CLAIMS PREPARATORY TO SETTLEMENT OUT OF INSURANCE PROCEEDS ON VESSEL; NO CLAIMANT GIVEN PRECEDENCE OVER OTHERS; CASE AT BAR. — In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the others by the simple expedience of having filed or completed its action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already final and executory, must be

stayed pending completion of all cases occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims . . . In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should now be deposited in trust. Moreover, petitioner should institute the necessary limitation and distribution action before the proper admiralty court within 15 days from the finality of this decision, and thereafter deposit with it the proceeds from the insurance company and pending freightage in order to safeguard the same pending final resolution of all incidents, for final pro-rating and settlement thereof.D E C I S I O NMELO, J p:This refers to a petition for review which seeks to annul and set aside the decision of the Court of Appeals dated June 21, 1991, in CA G.R. SP No. 24918. The appellate court dismissed the petition for certiorari filed by herein petitioner, Aboitiz Shipping Corporation, questioning the Order of April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region (Manila, Branch IV) in its Civil Case No. 144425 granting private respondent's prayer for execution for the full amount of the judgment award. The trial court in so doing swept aside petitioner's opposition which was grounded on the real and hypothecary nature of petitioner's liability as ship owner. The application of this established principle of maritime law would necessarily result in a probable reduction of the amount to be recovered by private respondent, since it would have to share with a number of other parties similarly situated in the insurance proceeds on the vessel that sank.The basic facts are not disputed.Petitioner is a corporation organized and operating under Philippine laws and engaged in the business of maritime trade as a carrier. As such, it owned and operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a voyage from Hongkong to the Philippines on October 31, 1980. Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the other hand, is a foreign insurance company pursuing its remedies as a subrogee of several cargo consignees whose respective cargo sank with the said vessel and for which it has priorly paid.The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo either by the shippers, their successor-in-

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interest, or the cargo insurers like GAFLAC as subrogees. The sinking was initially investigated by the Board of Marine Inquiry (BMI Case No. 466, December 26, 1984), which found that such sinking was due to force majeure and that subject vessel, at the time of the sinking was seaworthy. This administrative finding notwithstanding, the trial court in said Civil Case No. 144425 found against the carrier on the basis that the loss subject matter therein did not occur as a result of force majeure. Thus, in said case, plaintiff GAFLAC was allowed to prove, and was later awarded, its claim. This decision in favor or GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188 SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering rough sailing. The attempted execution of the judgment award in said case in the amount of P1,072,611.20 plus legal interest has given rise to the instant petition.On the other hand, other cases have resulted in findings upholding the conclusion of the BMI that the vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure. One such ruling was likewise elevated to this Court in G.R. No. 100373, Country Bankers Insurance Corporation v. Court of Appeals, et al., August 28, 1991 and was sustained. Part of the task resting upon this Court, therefore, is to reconcile the resulting apparent contrary findings in cases originating out of a single set of facts.It is in this factual milieu that the instant petition seeks a pronouncement as to the applicability of the doctrine of limited liability on the totality of the claims vis a vis the losses brought about by the sinking of the vessel MV P. ABOITIZ, as based on the real and hypothecary nature of maritime law. This is an issue which begs to be resolved considering that a number of suits alleged in the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall well-nigh result in more confusion than presently attends the instant case.In support of the instant petition, the following arguments are submitted by the petitioner:1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares;2. The finding of unseaworthiness of a vessel is not necessarily attributable to the shipowner; and3. The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.)On the other hand, private respondent opposes the foregoing contentions, arguing that: LexLib

1. There is no limited liability to speak of or applicable real and hypothecary rule under Articles 587, 590, and 837 of the Code of Commerce in the face of the facts found by the lower court (Civil Case No. 144425), upheld by the Appellate Court (CA G.R. No. 10609), and affirmed in toto by the Supreme Court in G.R. No. 89757 which cited G.R. No. 88159 as the Law of the Case; and2. Under the doctrine of the Law of the Case, cases involving the same incident, parties similarly situated and the same issues litigated should be decided in conformity therewith following the maxim stare decisis et non quieta movere. (pp. 225 to 279, Rollo.).Before proceeding to the main bone of contention, it is important to determine first whether or not the Resolution of this Court in G.R. No. 88159, Aboitiz Shipping Corporation vs. The Honorable Court of Appeals and Allied Guaranty Insurance Company, Inc., dated November 13, 1989 effectively bars and precludes the instant petition as argued by respondent GAFLAC.An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 282, Rollo) shows that the same settles two principal matters, first of which is that the doctrine of primary administrative jurisdiction is not applicable therein; and second is that a limitation of liability in said case would render inefficacious the extraordinary diligence required by law of common carriers.It should be pointed out, however, that the limited liability discussed in said case is not the same one now in issue at bar, but an altogether different aspect. The limited liability settled in G.R. No. 88159 is that which attaches to cargo by virtue of stipulations in the Bill of Lading, popularly known as package limitation clauses, which in that case was contained in Section 8 of the Bill of Lading and which limited the carrier's liability to US$500.00 for the cargo whose value was therein sought to be recovered. Said resolution did not tackle the matter of the Limited Liability Rule arising out of the real and hypothecary nature of maritime law, which was not raised therein, and which is the principal bone of contention in this case. While the matters threshed out in G.R. No. 88159, particularly those dealing with the issues on primary administrative jurisdiction and the package liability limitation provided in the Bill of Lading are now settled and should no longer be touched, the instant case raises a completely different issue. It appears, therefore, that the resolution in G.R. 88159 adverted to has no bearing other than factual to the instant case.This brings us to the primary question herein which is whether or not respondent court erred in granting execution of the full judgment award in Civil Case No. 14425 (G.R. No. 89757), thus

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effectively denying the application of the limited liability enunciated under the appropriated articles of the Code of Commerce. The articles may be ancient, but they are timeless and have remained to be good law. Collaterally, determination of the question of whether execution of judgments which have become final and executory may be stayed is also an issue.We shall tackle the latter issue first. This Court has always been consistent in its stand that the very purpose for its existence is to see to the accomplishment of the ends of justice. Consistent with this view, a number of decisions have originated herefrom, the tenor of which is that no procedural consideration is sacrosanct if such shall result in the subverting of substantial justice. The right to an execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled that: LLjur". . . It is a truism that every court has the power 'to control, in the furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a case before it, in every manner appertaining thereto.' It has also been said that:'. . . every court having jurisdiction to render a particular judgment has inherent power to enforce it, and to exercise equitable control over such enforcement. The court has authority to inquire whether its judgment has been executed, and will remove obstructions to the enforcement thereof. Such authority extends not only to such orders and such writs as may be necessary to carry out the judgment into effect and render it binding and operative, but also to such orders and such writs as may be necessary to prevent an improper enforcement of the judgment. If a judgment is sought to be perverted and made a medium of consummating a wrong the court on proper application can prevent it.'" (at p. 359)and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court found that:"The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes the imperative in the higher interest of justice to direct the suspension of its execution (Vecine v. Geronimo, 59 OG 579); whenever it is necessary to accomplish the aims of justice (Pascual v. Tan, 85 Phil. 164); or when certain facts and circumstances transpired after the judgment became final which would render the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354)." (at p. 201)

We now come to the determination of the principal issue as to whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law should apply in this and related cases. We rule in the affirmative. CdprIn deciding the instant case below, the Court of Appeals took refuge in this Court's decision in G.R. No. 89757 upholding private respondent's claims in that particular case, which the Court of Appeals took to mean that this Court has "considered, passed upon and resolved Aboitiz's contention that all claims for the losses should first be determined before GAFLAC's judgment may be satisfied," and that such ruling "in effect necessarily negated the application of the limited liability principle" (p. 175, Rollo). Such conclusion is not accurate. The decision in G.R. No. 89757 considered only the circumstances peculiar to that particular case, and was not meant to traverse the larger picture herein brought to fore, the circumstances of which heretofore were not relevant. We must stress that the matter of the Limited Liability Rule as discussed was never in issue in all prior cases, including those before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" in issue before the trial courts referred to the package limitation clauses in the bills of lading and not the limited liability doctrine arising from the real and hypothecary nature of maritime trade. The latter rule was never made a matter of defense in any of the cases a quo, as properly it could not have been made so since it was not relevant in said cases. The only time it could come into play is when any of the cases involving the mishap were to be executed, as in this case. Then, and only then, could the matter have been raised, as it has now been brought before the Court.The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into

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effectively wagering their resources against the consideration of the large profits attainable in the trade.It might be noteworthy to add in passing that despite the modernization of the shipping industry and the development of high-technology safety devices designed to reduce the risks therein, the limitation has not only persisted, but is even practically absolute in well-developed maritime countries such as the United States and England where it covers almost all maritime casualties. Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both international maritime conventions and generally accepted practices relative to maritime trade and travel. This is highlighted by the following excerpts on the limited liability of vessel owners and/or agents: prLL"SECTION 183. The liability of the owner of any vessel, whether American or foreign, for any embezzlement, loss, or destruction by any person of any person or any property, goods, or merchandise shipped or put on board such vessel, or for any loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners shall not exceed the amount or value of the interest of such owner in such vessel, and her freight then pending." (Section 183 of the US Federal Limitation of Liability Act)— and —"1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this Convention in respect of claims arising from any of the following occurrences, unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner;(a) loss of life of, or personal injury to, any person being carried in the ship, and loss of, or damage to, any property on board the ship.(b) loss of life of, or personal injury to, any other person, whether on land or on water, loss of or damage to any other property or infringement of any rights caused by the act, neglect or default the owner is responsible for, or any person not on board the ship for whose act, neglect or default the owner is responsible: Provided, however, that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers.

(c) any obligation or liability imposed by any law relating to the removal of wreck and arising from or in connection with the raising, removal or destruction of any ship which is sunk, stranded or abandoned (including anything which may be on board such ship) and any obligation or liability arising out of damage caused to harbor works, basins and navigable waterways." (Section 1, Article I of the Brussels International Convention of 1957)In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very statute from which it originates. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto:"ARTICLE 587.The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage. cdrep"ARTICLE 590.The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587."Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him""ARTICLE 837.The civil liability incurred by shipowners in the case prescribed in this section (on collisions), shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage." (Emphasis supplied)Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837).In view of the foregoing, this Court shall not take the application of such limited liability rule, which is a matter of near absolute application in other jurisdictions, so lightly as to merely "imply" its inapplicability, because as could be seen, the reasons for its being are still apparently much in existence and highly regarded.We now come to its applicability in the instant case. In the few instances when the matter was considered by this Court, we have been consistent in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when there is an actual finding of negligence on the part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v.

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Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus, is whether there is a finding of such negligence on the part of the owner in the instant case.A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the records in the instant case will show that there has been no actual finding of negligence on the part of petitioner. In its Decision, the trial court merely held that:". . . Considering the foregoing reasons, the Court holds that the vessel M/V 'Aboitiz' and its cargo were not lost due to fortuitous event or force majeure." (p. 32, Rollo)The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming the decision of the Court of Appeals in CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not make any new and additional finding of fact. Both merely affirmed the factual findings of the trial court, adding that the cause of the sinking of the vessel was because of unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. Indeed, there appears to have been no evidence presented sufficient to form a conclusion that petitioner shipowner itself was negligent, and no tribunal, including this Court, will add or subtract to such evidence to justify a conclusion to the contrary. LLjurThe qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of this case is underscored by the fact that in the Country Bankers case, supra, arising from the same sinking, the Court sustained the decision of the Court of Appeals that the sinking of the M/V P. Aboitiz was due to force majeure.On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely on petitioner's lap, absent a factual basis for such a conclusion. The unseaworthiness found in some cases where the same has been ruled to exist is directly attributable to the vessel's crew and captain, more so on the part of the latter since Article 612 of the Code of Commerce provides that among the inherent duties of a captain is to examine a vessel before sailing and to comply with the laws of navigation. Such a construction would also put matters to rest relative to the decision of the Board of Marine Inquiry. While the conclusion therein exonerating the captain and crew of the vessel was not sustained for lack of basis, the finding therein contained to the effect that the vessel was seaworthy deserves merit. Despite appearances, it is not totally incompatible with the findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness" clearly did

not pertain to the structural condition of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of the sinking, which condition was a result of the acts of the captain and the crew.The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders to limited liability under our corporation law. Both are privileges granted by statute, and while not absolute, must be swept aside only in the established existence of the most compelling of reasons. In the absence of such reasons, this Court chooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to do so, such incursion is definitely punitive in nature and must never be taken lightly.More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors against an insolvent corporation whose assets are not enough to satisfy the totality of claims as against it. While each individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who come later. In such an instance, such creditors too would not also be able to gain access to the assets of the individual shareholders, but must limit their recovery to what is left in the name of the corporation. Thus, in the case of Lipana v. Development Bank of Rizal earlier cited, We held that:"In the instant case, the stay of execution of judgment is warranted by the fact that respondent bank was placed under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA 114), after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or preference over another by an attachment, execution or otherwise." (at p. 261)In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of the corporation left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the particular voyage. LLpr

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In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the others by the simple expedience of having filed or completed its action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims.Finally, the Court notes that petitioner has provided this Court with a list of all pending cases (pp. 175 to 183, Rollo), together with the corresponding claims and the pro-rated share of each. We likewise note that some of these cases are still with the Court of Appeals, and some still with the trial courts and which probably are still undergoing trial. It would not, therefore, be entirely correct to preclude the trial courts from making their own findings of fact in those cases and deciding the same by allotting shares for these claims, some of which, after all, might not prevail, depending on the evidence presented in each. We, therefore, rule that the pro-rated share of each claim can only be found after all the cases shall have been decided.In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should now be deposited in trust. Moreover, petitioner should institute the necessary limitation and distribution action before the proper admiralty court within 15 days from the finality of this decision, and thereafter deposit with it the proceeds from the insurance company and pending freightage in order to safeguard the same pending final resolution of all incidents, for final pro-rating and settlement thereof.ACCORDINGLY, the petition is hereby GRANTED, and the Orders of the Regional Trial Court of Manila, Branch IV dated April 30, 1991 and the Court of Appeals dated June 21, 1991 are hereby set aside. The trial court is hereby directed to desist from proceeding with the execution of the judgment rendered in Civil Case No. 144425 pending determination of the totality of claims recoverable from the petitioner as the owner of the M/V P. Aboitiz. Petitioner is directed to institute the necessary action and to deposit the proceeds of the insurance of subject vessel as above-described within fifteen (15) days from finality of this decision. The temporary

restraining order issued in this case dated August 7, 1991 is hereby made permanent.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ ., concur.

(c) Specific rights and prerogatives

Arts. 575, 593, 594, 596, 601

ARTICLE 575. Co-owners of vessels shall have the right of repurchase and redemption in sales made to strangers, but they may exercise the same only within the nine days following the inscription of the sale in the registry, and by depositing the price at the same time.

ARTICLE 593. The owners of a vessel shall have preference in her charter over other persons, under the same conditions and price. If two or more of them should claim this right, the one having the greater interest shall be preferred; and should they have equal interests, the matter shall be decided by lot.

ARTICLE 594. The part owners shall elect the manager who is to represent them in the capacity of agent.

The appointment of director or agent shall be revocable at the will of the members.

ARTICLE 596. The agent may discharge the duties of captain of the vessel, subject, in every case, to the provisions contained in Article 609.

If two or more co-owners request the position of captain, the disagreement shall be decided by a vote of the members; and if the vote should result in a tie, the position shall be given to the part owner having the larger interest in the vessel.

If the interest of the petitioners should be the same, and there should be a tie, the matter shall be decided by lot.

ARTICLE 601. Should there be any profits, the co-owners may demand of the managing agent the amount due them, by means of

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an executory action without further requisites than the acknowledgment of the signatures of the instrument approving the account.

2. Captains and Masters

(a) Qualifications and licensingRep. Act 5173, Sec 3Art. 609

Republic Act No. 9993

AN ACT ESTABLISHING THE PHILIPPINES COAST GUARD AS AN ARMED AND UNIFORMED SERVICE ATTACHES TO THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, THEREBY REPEALING REPUBLIC ACT NO. 5173, AS AMENDED, AND FOR OTHER PURPOSES.

Section 3. Powers and Functions. - The PCG shall have the following powers and functions:

(a) To enforce regulations in accordance with all relevant maritime international conventions, treaties or instruments and national laws for the promotion of safety of life property at sea within the maritime jurisdiction of the Philippines and conduct port state control implementation;

(b) To inspections on all merchant ships and vessels, including but shall not be limited to inspections prior to departure, to ensure and enforce compliance with safety standards, rules and regulations;

(c) To detain, stop or prevent a ship or vessel which does not comply with safety standards, rules and regulations from sailing or leaving port;

(d) To conduct emergency readiness evaluation on merchant marine vessels;

(e) Subject to the approval of the Secretary of the DOTC, to issue and enforce rules and regulation for the promotion of

safety and life and property at sea on all maritime-related activities;

(f) To coordinate, develop, establish, maintain and operate aids to navigation, vessel traffic system, maritime communications and search and rescue facilities within the maritime jurisdiction of the Philippines;

(g) To remove, destroy or low to port, sunken or floating hazards to navigation, including illegal fish and vessels, at or close to sea lanes which may cause hazards to the marine environment;

(h) To issue permits for the salvage of vessels and to supervise all marine salvage operations, as well as prescribe and enforce rules and regulations governing the same;

(i) To render aid to persons and vessels in distress and conduct search rescue in marine accidents within the maritime jurisdiction of the Philippines, including the high seas, in accordance with applicable international conventions. In the performance of this function, the PCG may enlist the services of other government agencies and the merchant marine fleet;

(j) To investigate the inquire into the causes of all maritime accidents involving death, casualties and damage to properties;

(l) To assist in the enforcement of laws on fisheries, immigration, tariff and customs, forestry, firearms and explosives, human trafficking, dangerous drugs and controlled chemicals, transnational crimes and other applicable laws within the maritime jurisdiction of the Philippines;

(m) To board and inspect all types of merchant ships and watercrafts in the performance of this functions;

(n) To enforce laws and promulgated and administer rules and regulations for the protection of marine environment

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and resources from offshore sources or pollution within the maritime jurisdiction of the Philippines;

(o) To develop oil spill response, containment and recovery capabilities against ship-based pollution;

(p) To grant, within the capabilities and consistent with its mandate, requests for assistance of other government agencies in the performance of their functions;

(q) To organize, train and supervise the PCG Auxiliary (PCGA) for the purpose of assisting the PCG in carrying out its mandated functions; and

(r) To perform such other functions that may be necessary in the attainment of the objectives of this Act.

(b) Powers and Duties

Arts. 610, 611, 612, 622, 624, 625

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

1. To appoint or make contracts with the crew in the absence of the agent and propose said crew, should said agent be present; but the agent shall not be permitted to employ any member against the captain's express refusal.2. To command the crew and direct the vessel to the port of its destination, in accordance with the instructions he may have received from the agent.3. To impose, in accordance with the agreements and the laws and regulations of the merchants marine, on board the vessel, correctional punishment upon those who do not comply with his orders or who conduct themselves against discipline, holding a preliminary investigation on the crimes committed on board the vessel on the high seas, which shall be turned over to the authorities, who are to take cognizance thereof, at the first port touched.4. To make contracts for the charter of the vessel in the absence of the agent or of her consignee, acting in accordance with

the instructions received and protecting the interests of the owner most carefully.5. To adopt all the measures which may be necessary to keep the vessel well supplied and equipped, purchasing for the purpose all that may be necessary, provided there is no time to request instructions of the agent.6. To make, in similar urgent cases and on a voyage, the repairs to the hull and engines of the vessel and to her rigging and equipment which are absolutely necessary in order for her to be able to continue and conclude her voyage; but if she should arrive at a point where there is a consignee of the vessel, he shall act in concurrence with the latter.

ARTICLE 611. In order to comply with the obligations mentioned in the foregoing article, the captain, when he has no funds and does not expect to receive any from the agent, shall procure the same in the successive order stated below:1. By requesting said funds of the consignees or correspondents of a vessel.2. By applying to the consignees of the cargo or to the persons interested therein.3. By drawing on the agent.4. By borrowing the amount required by means of a bottomry bond.5. By selling a sufficient amount of the cargo to cover the amount absolutely necessary to repair the vessel, and to equip her to pursue the voyage. cdIn the two latter cases he must apply to the judicial authority of the port, if in Spain * and to the Spanish * consul, if in a foreign country; and where there should be none, to the local authority, proceeding in accordance with the prescriptions of Article 583, and with the provisions of the law of civil procedure.

ARTICLE 612. The following obligations are inherent in the office of captain:1. To have on board before starting on a voyage a detailed inventory of the hull, engines, rigging, tackle, stores, and other equipments of the vessel; the navigation certificate; the roll of the persons who make up the crew of the vessel, and the contracts entered into with the crew; the list of passengers; the health certificate; the certificate of the registry proving the ownership of

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the vessel, and all the obligations which encumber the same up to that date; the charters or authenticated copies thereof; the invoices or manifest of the cargo, and the instrument of the expert visit or inspection, should it have been made at the port of departure.2. To have a copy of this Code on board.3. To have three folioed and stamped books, placing at the beginning of each one a note of the number of folios it contains, signed by the maritime official, and in his absence by the competent authority.

In the first book, which shall be called "log book," he shall enter every day the condition of the atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of the engines, the distance covered, the maneuvers executed, and other incidents of navigation. He shall also enter the damage suffered by the vessel in her hull, engines, rigging, and tackle, no matter what is its cause, as well as the imperfections and averages of the cargo, and the effects and consequence of the jettison, should there be any; and in cases of grave resolutions which require the advice or a meeting of the officers of the vessel, or even of the passengers and crew, he shall record the decision adopted. For the informations indicated he shall make use of the binnacle book, and of the steam or engine book kept by the engineer.

In the second book, called the "accounting book," he shall enter all the amounts collected and paid for the account of the vessel, entering specifically article by article, the sources of the collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel, outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on account, either directly or by delivery to their families.

In the third book, called "freight book," he shall record the entry and exit of all the goods, stating their marks and packages, names of the shippers and of the consignees, ports of loading and unloading, and the freight earned. In the same book he shall record the names and places of sailing of the passengers and the number of packages of which their baggage consists, and the price of the passage.4. To make, before receiving the freight, with the officers of the crew, and the two experts, if required by the shippers and passengers, an examination of the vessel, in order to ascertain whether she is watertight, and whether the rigging and engines are in good condition; and if she has the equipment required for good

navigation, preserving a certificate of the memorandum of this inspection, signed by all the persons who may have taken part therein, under their liability.

The experts shall be appointed one by the captain of the vessel and the other one by the persons who request the examination, and in case of disagreement a third shall be appointed by the marine authority of the port.5. To remain constantly on board the vessel with the crew during the time the freight is taken on board and carefully watch the stowage thereof; not to consent to any merchandise or goods of a dangerous character to be taken on, such as inflammable or explosive substances, without the precautions which are recommended for their packing, management and isolation; not to permit that any freight be carried on deck which by reason of its disposition, volume, or weight makes the work of the sailors difficult, and which might endanger the safety of the vessel; and if, on account of the nature of the merchandise, the special character of the shipment, and principally the favorable season it takes place, he allows merchandise to be carried on deck, he must hear the opinion of the officers of the vessel, and have the consent of the shippers and of the agent.6. To demand a pilot at the expense of the vessel whenever required by navigation, and principally when a port, canal, or river, or a roadstead or anchoring place is to be entered with which neither he, the officers nor the crew are acquainted.7. To be on deck at the time of sighting land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He shall not spend the night away from the vessel except for serious causes or by reason of official business. cdtai8. To present himself, when making a port in distress, to the maritime authority if in Spain * and to the Spanish * consul if in a foreign country, before twenty-four hours have elapsed, and make a statement of the name, registry, and port of departure of the vessel, of its cargo, and reason of arrival, which declaration shall be vised by the authority or by the consul if after examining the same it is found to be acceptable, giving the captain the proper certificate in order to show his arrival under stress and the reasons therefor. In the absence of marine officials or of the consul, the declaration must be made before the local authority.9. To take the steps necessary before the competent authority in order to enter in the certificate of the Commercial Registry of the

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vessel the obligations which he may contract in accordance with Article 583.10. To put in a safe place and keep all the papers and belongings of any members of the crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as witnesses, and, in their absence, of members of the crew.11. To conduct himself according to the rules and precepts contained in the instructions of the agent, being liable for all that he may do in violation thereof.12. To give an account to the agent from the port where the vessel arrives, of the reason thereof, taking advantage of the semaphore, telegraph, mail, etc., according to the cases; notify him the freight he may have received, stating the name and domicile of the shippers, freight earned, and amounts borrowed on bottomry bond, advise him of his departure, and give him any information and data which may be of interest.13. To observe the rules on the situation of lights and evolutions to prevent collisions.14. To remain on board in case of danger to the vessel, until all hope to save her is lost, and before abandoning her to hear the officers of the crew, abiding by the decision of the majority; and if he should have to take a boat he shall take with him, before anything else, the books and papers, and then the articles of most value, being obliged to prove in case of the loss of the books and papers that he did all he could to save them.15. In case of wreck he shall make the proper protest in due form at the first port reached, before the competent authority or the Spanish * consul, within twenty-four hours, stating therein all the incidents of the wreck, in accordance with case 8 of this article.16. To comply with the obligations imposed by the laws and rules of navigation, customs, health, and others.

ARTICLE 622. If when on a voyage the captain should receive news of the appearance of privateers or men of war against his flag, he shall be obliged to make the nearest neutral port, inform his agent or shippers, and await an occasion to sail under convoy or until the danger is over or to receive final orders from the agent or shippers.

ARTICLE 624. A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered damages or averages, shall make a protest thereon before the competent

authority at the first port he touches within the twenty-four hours following his arrival, and shall ratify it within the same period when he arrives at the place of his destination, immediately preceding with the proof of the facts, it not being permitted to open the hatches until this has been done.The captain shall proceed in the same manner if, the vessel having been wrecked, he is saved alone or with part of his crew, in which case he shall appear before the nearest authority, and make a sworn statement of the facts.The authority or the consul abroad shall verify the said facts, receiving a sworn statement of the members of the crew and passengers who may have been saved, and taking the other steps which may assist in arriving at the facts, drafting a certificate of the result of the proceedings in the log book and in that of the sailing mate, and shall deliver the original records of the proceedings to the captain, stamped and folioed, with a memorandum of the folios, which he must rubricate, for their presentation to the judge or court of the port of destination.The statement of the captain shall be believed if it is in accordance with those of the crew and passengers; if they disagree, the latter shall be accepted, unless there is proof to the contrary.

ARTICLE 625. The captain, under his personal liability, as soon as he arrives at the port of destination, obtains the necessary permission from the health and customs officers and fulfills the other formalities required by the regulations of the administration, shall turn over the cargo, without any defalcation, to the consignees, and, in a proper case, the vessel, rigging, and freights to the agent.If, by reason of the absence of the consignee or on account of the nonappearance of a legal holder of the invoices, the captain does not know to whom he is to make the legal delivery of the cargo, he shall place it at the disposal of the proper judge or court or authority, in order that he may decide with regard to its deposit, preservation, and custody.

Inter Orient v. NLRC, 235 SCRA 269

THIRD DIVISION[G.R. No. 115286. August 11, 1994.]

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INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP MANAGEMENT, INC. and TRENDA WORLD SHIPPING (MANILA), INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT; CAPTAIN OF VESSEL A CONFIDENTIAL AND MANAGERIAL EMPLOYEE. — It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate investigation. Such employees, too, are entitled to security of tenure, fair standards of employment and the protection of labor laws. The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. Of these roles, by far the most important is the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. To the captain is committed the governance, care and management of the vessel. Clearly, the captain is vested with both management and fiduciary functions.2. ID.; TERMINATION OF EMPLOYMENT; ILLEGAL DISMISSAL ESTABLISHED IN CASE AT BAR. — It is plain from the records of the present petition that Captain Tayong was denied any opportunity to defend himself. Petitioners curtly dismissed him from his command and summarily ordered his repatriation to the Philippines without

informing him of the charge or charges levelled against him, and much less giving him a change to refute any such charge. In fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient requiring him to explain why he delayed sailing to South Africa. We also find that the principal contention of petitioners against the decision of the NLRC pertains to facts, that is, whether or not there was actual and sufficient basis for the alleged loss of trust or confidence. We have consistently held that a question of "fact" is, as a general rule, the concern solely of an administrative body, so long as there is substantial evidence of record to sustain its action. The record requires us to reject petitioners' claim that the NLRC's conclusion of fact were not supported by substantial evidence. Petitioner's rely on self-serving affidavits of their own officers and employees predictably tending to support petitioners' allegation that Captain Tayong had performed acts inimical to petitioners' interests for which, supposedly, he was discharged. The official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion that private respondent Captain did not arbitrarily and maliciously delay the voyage to South Africa. There had been, Mr. Clark stated, a disruption in the normal functioning of the vessel's turbo charger and economizer and that had prevented the full or regular operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the voyage to South Africa, instead of waiting in Singapore for the supplies that would permit shipboard repair of the malfunctioning machinery and equipment. Under all the circumstances of this case, we, along with the NLRC, are unable to hold that Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to wait seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the requisitioned supplies needed for the welding-repair, on board the ship, of the turbo-charger and the economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly insubordinate behavior on his part. In the view of the NLRC, that decision of Captain 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 thereof. We cannot hold this conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of jurisdiction; indeed, we share that conclusion and make it our own. Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed supplied before sailing from Singapore, and may have changed their estimate of their ability to

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work with him and of his capabilities as a ship captain. Assuming that to be petitioners' management prerogative, that prerogative is nevertheless not to be exercised, in the case at bar, at the cost of loss of Captain Tayong's rights under his contract with petitioner's and under Philippine law.3. COMMERCIAL LAW; CODE OF COMMERCE; CAPTAIN'S CONTROL OF VESSEL AND REASONABLE DISCRETION AS TO ITS NAVIGATION. — A ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of its and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowner, charterers, cargo owners or of underwriters. It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. Indeed, if the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by radio or telefax from their officers thousand of miles away) will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions. Compagnie de Commerce v. Hamburg is instructive in this connection. There, this Court recognized the discretionary authority of the master of a vessel and his right to exercise his best judgment, with respect to navigating the vessel he commands. In Compagnie de Commerce, a charger party was executed between Compagnie de Commerce and the owners of the vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of Saigon, certain cargo destined for the Ports of

Dunkirk and Hamburg in Europe. The Sambia flying the German flag, could not, in the judgment of its master, reach its ports of destination because war (World War I) had been declared between Germany and France. The master of the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of Manila. Compagnie de Commerce sued in the Philippines for damages arising from breach of the charter party and unauthorized sale of the cargo. In affirming the decision of the trial court dismissing the complaint, our Supreme Court held that the master of the Sambia had reasonable grounds to apprehend that the vessel was in danger of seizure or capture by the French authorities in Saigon was justified by necessity to elect the course which the took — i.e., to flee Saigon for the Port of Manila — with the result that the shipowner was relieved from liability for the deviation from the stipulated route and from liability for damage to the cargo. 4. ID.; ID.; COMMERCIAL LAW; CODE OF COMMERCE; CAPTAIN'S CONTROL OF VESSEL AND REASONABLE DISCRETION AS TO ITS NAVIGATION. — "The danger from which the master of the Sambia fled was a real and not merely an imaginary one as counsel for shipper contends. Seizure at the hands of an 'enemy of the King', though not inevitable, was a possible outcome of a failure to leave the port of Saigon; and we cannot say that under the conditions existing at the time when the master elected to flee from that port, there were no grounds for a 'reasonable apprehension of danger' from seizure by the French authorities, and therefore no necessity for flight. The word 'necessity' when applied to mercantile affairs, where the judgment must in the nature of things be exercised, cannot, of course, mean an irresistible compelling power. what is meant by it in such cases is the force of circumstances which determine the course of a man ought to take. Thus, where by the force of circumstances, a man has the duty cast upon him of taking some action for another, and under that obligation adopts a course which, to the judgment of a wise and prudent man, is apparently the best for the interest of the persons for whom he acts in a given emergency, it may properly be said of the course so taken that it was in a mercantile sense necessary to take it." Compagnie de Commerce contended that the shipowner should, at all events, be held responsible for the deterioration in the value of the cargo incident to its long stay on board the vessel from the date of its arrival in Manila until the cargo was sold. The Supreme Court, in rejecting this contention also, declared that: "But it is clear that the master could not be required to act on the very day of his arrival; or before he had a

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reasonable opportunity to ascertain whether he could hope to carry out his contract and earn his freight; and that he should not be held responsible for a reasonable delay incident to an effort to ascertain the wishes of the freighter, and upon failure to secure prompt advice, to decide for himself as to the course which he should adopt to secure the interests of the absent owner of the property aboard the vessel. The master is entitled to delay for such a period as may be reasonable under the circumstances, before deciding on the course he will adopt. he may claim a fair opportunity of carrying out a contract, and earning the freight, whether by repairing or transshipping. should the repair of the ship be undertaken, it must be proceeded with diligently; and if so done, the freighter will have no ground of complaint, although the consequent delay be a long one, unless, indeed, the cargo is perishable, and likely to be injured by the delay. Where that is the case, it ought to be forwarded, or sold, or given up, as the case may be, without waiting for repairs. A shipowner or shipmaster (if communication with the shipowner is impossible), will be allowed a reasonable time in which to decide what course he will adopt in such cases as those under discussion; time must be allowed to him to ascertain the facts, and to balance the conflicting interests involved, of shipowner, cargo owner, underwriter on ship and freight. But once the time has elapsed, he is bound to act promptly according as he has elected either to repair, or abandon the voyage, or tranship. If he delays, and owing to that delay a perishable cargo suffers damage; he cannot escape that obligation by pleading the absence of definite instructions from the owners of the cargo or their underwriters, since he has control of the cargo and is entitled to elect."

D E C I S I O N

FELICIANO, J p:

Private respondent Rizalino Tayong, a licensed Master Mariner with experience in commanding ocean-going vessels, was employed on 6 July 1989 by petitioners Trenda World Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through petitioner Inter-Orient Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1) year, as evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed command of petitioners' vessel at the port of Hongkong. His instructions were to replenish bunker and diesel fuel, to said

forthwith to Richard Bay, South Africa, and there to load 120,000 metric tons of coal.On 16 July 1989, while at the Pork of Hongkong and in the process of unloading cargo, Captain Tayong received a weather report that a storm code-named "Gordon" would shortly hit Hongkong. Precautionary measures were taken to secure the safety of the vessel, as well as its crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14) years old.On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of the Oceanic Mindoro for supplies of oxygen and acetylene, necessary for the welding-repair of the turbo-charger and the economizer. 1 This requisition had been made upon request of the Chief Engineer of the vessel and had been approved by the shipowner. 2 On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing message, Captain Tayong reported a water leak from M.E. Turbo Charger No. 2 Exhaust gas casing. He was subsequently instructed to block off the cooling water and maintain reduced RPM unless authorized by the owners. 3 On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the vessel had stopped in mid-ocean for six (6) hours and forty-five (45) minutes due to a leaking economizer. He was instructed to shut down the economizer and use the auxiliary boiler instead. 4 On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore. 5 The Chief Engineer reminded Captain Tayong that the oxygen and acetylene supplies had not been delivered. 6 Captain Tayong inquired from the ship's agent in Singapore about the supplies. The ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the stores had closed. 7 Captain Tayong called the shipowner, Sea Horse Ship Management, Ltc., in London and informed them that the departure of the vessel for South Africa may be affected because of the delay in the delivery of the supplies. 8 Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in Tokyo and who could provide a solution for the supply of said oxygen and acetylene. 9 On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that the vessel cannot said without the oxygen and acetylene for safety reasons due to the problems with the turbo charger and economizer. Mr. Clark responded that by shutting off the water to the turbo charger and using the auxiliary boiler, there should be no further problem. According to Mr. Clark,

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Captain Tayong agreed with him that the vessel could sail as scheduled on 0100 hours on 1 August 1989 for South Africa. 10 According to Captain Tayong, however, he communicated to Sea Horse his reservations regarding proceeding to South Africa without the requested supplied, 11 and was advised by Sea Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had arranged to be delivered on board the Oceanic Mindoro. 12 At 0800 hours on 1 August 1989, the requisitioned supplies were delivered and Captain Tayong immediately sailed for Richard Bay.When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to the Philippines, after serving petitioners for a little more than two weeks. 13 He was not informed of the charges against him. 14 On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the Philippine Overseas Employment Administration ("POEA"), claiming his unpaid salary for the unexpired portion of the written employment contract, plus attorney's fees.Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain Tayong. Petitioners alleged that he had refused to said immediately to South Africa to the prejudice and damage of petitioners. According to petitioners, as a direct result of Captain Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers refused to pay the charter hire or compensation corresponding to twelve (12) hours, amounting to US $15,500.00, due to time lost in the voyage. They stated that they had dismissed private respondent for loss of trust and confidence.The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his untimely repatriation. The decision of the POEA placed considerable weight on petitioners' assertion that all the time lost as a result of the delay was caused by Captain Tayong and that his concern for the oxygen and acetylene was not legitimate as these supplies were not necessary or indispensable for running the vessel. The POEA believed that the Captain had unreasonably refused to follow the instructions of petitioners and their representative, despite petitioner's firm assurances that the vessel was seaworthy for the voyage to South Africa.On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the decision of the POEA. The NLRC found that Captain Tayong had not been afforded an opportunity to be heard and that no substantial evidence was adduced to establish the basis for petitioners' loss of trust or confidence in the Captain.

The NLRC declared that he had only acted in accordance with his duties to maintain the seaworthiness of the vessel and to insure the safety of the ship and the crew. The NLRC directed petitioners to pay the Captain (a) his salary for the unexpired portion of the contract at US$1,900.00 a month, plus one (1) month leave benefit; and (b) attorney's fees equivalent to ten percent (10%) of the total award due.Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion. Petitioners allege that they had adduced sufficient evidence to establish the basis for private respondent's discharge, contrary to the conclusion reached by the NLRC. Petitioners insist that Captain Tayong, who must protect the interest of petitioners, had caused them unnecessary damage, and that they, as owners of the vessel, cannot be compelled to keep in their employ a captain of a vessel in whom they have lost their trust and confidence. Petitioners finally contend that the award to the Captain of his salary corresponding to the unexpired portion of the contract and one (1) month leave pay, including attorney's fees, also constituted grave abuse of discretion.

The petition must fail.We note preliminary that petitioners failed to attach a clearly legible, properly certified, true copy of the decision of the NLRC dated 23 April 1994, in violation of requirement no. 3 of Revised Circular No. 1-88. On this ground alone, the petition could have been dismissed. But the Court chose not to do so, in view of the nature of question here raised and instead required private respondent to file a comment on the petition. Captain Tayong submitted his comment. The Office of the Solicitor General asked for an extension of thirty (30) days to file its comment on behalf of the NLRC. We consider that the Solicitor General's comment may be dispensed with in this case.It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate investigation. 15 Such employees, too, are entitled to security of tenure, fair standards of employment and the protection of labor laws.The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of

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the country under whose flag he navigates. 16 Of these roles, by far the most important is the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. 17 To the captain is committed the governance, care and management of the vessel. 18 Clearly, the captain is vested with both management and fiduciary functions.It is plain from the records of the present petition that Captain Tayong was denied any opportunity to defend himself. Petitioners curtly dismissed him from his command and summarily ordered his repatriation to the Philippines without informing him of the charge or charges levelled against him, and much less giving him a change to refute any such charge. In fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient requiring him to explain why he delayed sailing to South Africa.We also find that the principal contention of petitioners against the decision of the NLRC pertains to facts, that is, whether or not there was actual and sufficient basis for the alleged loss of trust or confidence. We have consistently held that a question of "fact" is, as a general rule, the concern solely of an administrative body, so long as there is substantial evidence of record to sustain its action.The record requires us to reject petitioners' claim that the NLRC's conclusion of fact were not supported by substantial evidence. Petitioner's rely on self-serving affidavits of their own officers and employees predictably tending to support petitioners' allegation that Captain Tayong had performed acts inimical to petitioners' interests for which, supposedly, he was discharged. The official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion that private respondent Captain did not arbitrarily and maliciously delay the voyage to South Africa. There had been, Mr. Clark stated, a disruption in the normal functioning of the vessel's turbo charger 19 and economizer and that had

prevented the full or regular operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the voyage to South Africa, instead of waiting in Singapore for the supplies that would permit shipboard repair of the malfunctioning machinery and equipment.More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. 20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of underwriters. 21 It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. 22 Indeed, if the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by radio or telefax from their officers thousand of miles away) will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions. 23 Compagnie de Commerce v. Hamburg 24 is instructive in this connection. There, this Court recognized the discretionary authority of the master of a vessel and his right to exercise his best judgment, with respect to navigating the vessel he commands. In Compagnie de Commerce, a charter party was executed between Compagnie de Commerce and the owners of the vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of Saigon, certain cargo destined for the Ports of Dunkirk and Hamburg in Europe. The Sambia flying the German

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flag, could not, in the judgment of its master, reach its ports of destination because war (World War I) had been declared between Germany and France. The master of the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of Manila. Compagnie de Commerce sued in the Philippines for damages arising from breach of the charter party and unauthorized sale of the cargo. In affirming the decision of the trial court dismissing the complaint, our Supreme Court held that the master of the Sambia had reasonable grounds to apprehend that the vessel was in danger of seizure or capture by the French authorities in Saigon was justified by necessity to elect the course which the took — i.e., to flee Saigon for the Port of Manila — with the result that the shipowner was relieved from liability for the deviation from the stipulated route and from liability for damage to the cargo. The Court said:"The danger from which the master of the Sambia fled was a real and not merely an imaginary one as counsel for shipper contends. Seizure at the hands of an 'enemy of the King', though not inevitable, was a possible outcome of a failure to leave the port of Saigon; and we cannot say that under the conditions existing at the time when the master elected to flee from that port, there were no grounds for a 'reasonable apprehension of danger' from seizure by the French authorities, and therefore no necessity for flight.The word 'necessity' when applied to mercantile affairs, where the judgment must in the nature of things be exercised, cannot, of course, mean an irresistible compelling power. What is meant by it in such cases is the force of circumstances which determine the course of a man ought to take. Thus, where by the force of circumstances, a man has the duty cast upon him of taking some action for another, and under that obligation adopts a course which, to the judgment of a wise and prudent man, is apparently the best for the interest of the persons for whom he acts in a given emergency, it may properly be said of the course so taken that it was in a mercantile sense necessary to take it." 25 (Emphasis supplied)Compagnie de Commerce contended that the shipowner should, at all events, be held responsible for the deterioration in the value of the cargo incident to its long stay on board the vessel from the date of its arrival in Manila until the cargo was sold. The Supreme Court, in rejecting this contention also, declared that:"But it is clear that the master could not be required to act on the very day of his arrival; or before he had a reasonable opportunity to ascertain whether he could hope to carry out his contract and earn

his freight; and that he should not be held responsible for a reasonable delay incident to an effort to ascertain the wishes of the freighter, and upon failure to secure prompt advice, to decide for himself as to the course which he should adopt to secure the interests of the absent owner of the property aboard the vessel.The master is entitled to delay for such a period as may be reasonable under the circumstances, before deciding on the course he will adopt. He may claim a fair opportunity of carrying out a contract, and earning the freight, whether by repairing or transshipping. Should the repair of the ship be undertaken, it must be proceeded with diligently; and if so done, the freighter will have no ground of complaint, although the consequent delay be a long one, unless, indeed, the cargo is perishable, and likely to be injured by the delay. Where that is the case, it ought to be forwarded, or sold, or given up, as the case may be, without waiting for repairs.A shipowner or shipmaster (if communication with the shipowner is impossible), will be allowed a reasonable time in which to decide what course he will adopt in such cases as those under discussion; time must be allowed to him to ascertain the facts, and to balance the conflicting interests involved, of shipowner, cargo owner, underwriter on ship and freight. But once the time has elapsed, he is bound to act promptly according as he has elected either to repair, or abandon the voyage, or tranship. If he delays, and owing to that delay a perishable cargo suffers damage, the shipowner will be liable for that damage; he cannot escape that obligation by pleading the absence of definite instructions from the owners of the cargo or their underwriters, since he has control of the cargo and is entitled to elect." 26 (Emphasis supplied)The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to believe that the safety of the vessel and the crew under his command or the possibility of substantial delay at sea required him to wait for the delivery of the supplies needed for the repair of the turbo-charger and the economizer before embarking on the long voyage from Singapore to South Africa.In this connection, it is especially relevant to recall that, according to the report of Mr. Robert Clark, Technical Director of petitioner Sea Horse Ship Management, Inc., the Oceanic Mindoro had stopped in mid-ocean for six (6) hours and forty-five (45) minutes on its way to Singapore because of its leaking economizer. 27 Equally relevant is the telex dated 2 August 1989 sent by Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was en route to South Africa. In this telex, Captain Tayong explained his decision to Sea Horse in the following terms:

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"I CAPT R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN TO YOU THAT WE ARE INSECURITY/DANGER TO SAIL IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER PIPELINE, ECONOMIZER LEAKAGE N ETC WE COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I AND MR. CLARK WE CONTACTED EACH OTHER BY PHONE IN PAPAN N HE ADVSED US TO SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE ALSO EXPLAINED TO MY C/E HOW TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS WHY WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY OXY/ACET BEFORE SAILING TO AVOID RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16 DAYS FM SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION." 28 (Emphasis partly in source and partly supplied)Under all the circumstances of this case, we, along with the NLRC, are unable to hold that Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to wait seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the requisitioned supplies needed for the welding-repair, on board the ship, of the turbo-charger and the economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly insubordinate behavior on his part. In the view of the NLRC, that decision of Captain 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 thereof. We cannot hold this conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of jurisdiction; indeed, we share that conclusion and make it our own.Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed supplies before sailing from Singapore, and may have changed their estimate of their ability to work with him and of his capabilities as a ship captain. Assuming that to be petitioners' management prerogative, that prerogative is nevertheless not to be exercised, in the case at bar, at the cost of loss of Captain Tayong's rights under his contract with petitioner's and under Philippine law.ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss or excess of jurisdiction on the part of the NLRC in rendering its assailed decision, the Petition for Certiorari is hereby DISMISSED, for lack of merit. Costs against petitioners.SO ORDERED.

Bidin, Romero, Melo and Vitug, JJ., concur.

(c) Prohibited acts and transactionsArt. 613, 614, 615, 617, 621, 583

ARTICLE 613. A captain who navigates for freight in common or on shares can not make any transaction for his exclusive account, and should he do so the profit shall belong to the other persons in interest, and the losses shall be for his own exclusive account.

ARTICLE 614. A captain who, having made an agreement to make a voyage, should not fulfill his obligation, without being prevented by an accident case or by force majeure, shall pay for all the losses his action may cause, without prejudice to criminal penalties which may be proper.

ARTICLE 615. Without the consent of the agent, the captain can not have himself substituted by another person; and should he do so, besides being liable for all the acts of the substitute and bound to the indemnities mentioned in the foregoing article, the substitute as well as the captain may be discharged by the agent.

ARTICLE 617. The captain can not contract loans on respondentia, and should he do so the contracts shall be void.Neither can he borrow money on bottomry for his own transactions, except on the portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and provided there does not exist any other kind of lien or obligation thereon. When he is permitted to do so, he must necessarily state what interest he has in the vessel.In case of violation of this article the principal, interest, and costs shall be charged to the private account of the captain, and the agent may furthermore have the right to discharge him.

ARTICLE 621. A captain who borrows money on bottomry, or who pledges or sells merchandise or provisions in other cases and without the formalities prescribed in this Code, shall be liable for

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the principle, interest, and costs, and shall indemnify for the damages he may cause.The captain who commits fraud in his accounts shall reimburse the amount defrauded, and shall be subject to the provisions contained in the Penal Code.

ARTICLE 583. If the ship being on a voyage the captain should find it necessary to contract one or more of the obligations mentioned in Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he is in Spanish * territory, and otherwise to the consul of Spain, * should there be one, and, in his absence to the judge or court or to the proper local authority, presenting the certificate of the registry of the vessel treated of in Article 612, and the instruments proving the obligation contracted.

The judge or court, the consul or the local authority as the case may be, in view of the result of the proceedings instituted, shall make a temporary memorandum in the certificate of their result, in order that it may be recorded in the registry when the vessel returns to the port of her registry, or so that it can be admitted as a legal and preferred obligation in case of sale before the return, by reason of the sale of the vessel by virtue of a declaration of unseaworthiness.

The lack of this formality shall make the captain personally liable to the creditors who may be prejudiced through his fault.

3. Other Officers and Crew

(a) Contracts and formalities, Art. 634

ARTICLE 634. The captain may make up his crew with the number he may consider advisable, and in the absence of Spanish * sailors he may ship foreigners residing in the country, the number thereof not to exceed one-fifth of the total crew. If in foreign ports the captain should not find a sufficient number of Spanish * sailors, he may make up the crew with foreigners, with the consent of the consul or marine authorities.

The agreements which the captain may make with the members of the crew and others who go to make up the complement of the vessels, to which reference is made in Article 612, must be reduced to writing in the account book without the intervention of a notary public or clerk, signed by the parties thereto, and vised by the marine authority if they are executed in Spanish * territory, or by the consuls or consular agents of Spain * if executed abroad, stating therein all the obligations which each one contracts and all the rights they acquire, said authorities taking care that these obligations and rights are recorded in a concise and clear manner, which will not give rise to doubts or claims.

The captain shall take care to read to them the articles of this Code, which concern them, stating that they were read in the said document.

If the book includes the requisites prescribed in Article 612, and there should not appear any signs of alterations in its clauses, it shall be admitted as evidence in questions which may arise between the captain and the crew with regard to the agreements contained therein and the amounts paid on account of the same.

Every member of the crew may request a copy of the captain, signed by the latter, of the agreement and of the liquidation of his wages, as they appear in the book.

(b) Duties and liabilities, Art. 635

ARTICLE 635. A sailor who has been contracted to serve on a vessel can not rescind his contract nor fail to comply therewith except by reason of a legitimate impediment which may have occurred.

Neither can he pass from the service of one vessel to another without obtaining the written consent of the vessel on which he may be.If, without obtaining said permission, the sailor who has signed for one vessel should sign for another one, the second contract shall be void, and the captain may choose between forcing him to fulfill the service to which he first bound himself or look for a person to substitute him at his expense.

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Said sailor shall furthermore lose the wages earned on his first contract to the benefit of the vessel for which he may have signed.

A captain who, knowing that a sailor is in the service of another vessel, should have made a new agreement with him, without having requested the permission referred to in the foregoing paragraphs, shall be personally liable to the captain of the vessel to which the sailor first belonged for that part of the indemnity, referred to in the third paragraph of this article, which the sailor could not pay.

(c) Rights, Arts. 636 to 647

ARTICLE 636. Should a fixed period for which a sailor has signed not be stated, he can not be discharged until the end of the return voyage to the port where he enrolled.

ARTICLE 637. Neither can the captain discharge a sailor during the time of his contract except for sufficient cause, the following being considered as such:1. The perpetration of a crime which disturbs order on the vessel.2. Repeated offenses of insubordination, against discipline, or against the fulfillment of the service.3. Repeated incapacity or negligence in the fulfillment of the service to be rendered.4. Habitual drunkenness.5. Any occurrence which incapacitates the sailor to carry out the work under his charge, with the exception of the provisions contained in Article 644.6. Desertion.

The captain may, however, before setting out on a voyage and without giving any reason whatsoever, refuse to permit a sailor he may have engaged from going on board and may leave him on land, in which case he will be obliged to pay him his wages as if he had rendered services.

This indemnity shall be paid from the funds of the vessel if the captain should have acted for reasons of prudence and in the

interest of the safety and good service of the former. Should this not be the case, it shall be paid by the captain personally. aisadcAfter the vessel has sailed, and during the voyage and until the conclusion thereof, the captain can not abandon any member of his crew on land or on the sea, unless, by reason of being guilty of some crime, his imprisonment and delivery to the competent authority is proper in the first port touched, which will be obligatory on the captain.

ARTICLE 638. If, the crew having been engaged, the voyage is revoked by the will of the agent or of the charterers before or after the vessel has put to sea or if the vessel is in the same manner given a different destination than that fixed in the agreement with the crew, the latter shall be indemnified because of the rescission of the contract according to the case, viz:

1. If the revocation of the voyage should be decided before the departure of the vessel from the port, each sailor engaged shall be given one month's salary, besides what may be due him in accordance with his contract, for the services rendered to the vessel up to the date of the revocation.2. If the agreement should have been for a fixed amount for the whole voyage, there shall be graduated what may be due for said month and days, calculating the same in proportion to the estimated duration of the voyage, in the judgment of experts, in the manner established in the law of civil procedure; and if the proposed voyage should be of such short duration that it is calculated at one month more or less, the indemnity shall be fixed for fifteen days, discounting in all cases the sums advanced.3. If the revocation should take place after the vessel has put to sea, the sailors engaged for a fixed amount for the voyage shall receive the salary which may have been offered them in full as if the voyage had terminated, and those engaged by the month shall receive the amount corresponding to the time they might have been on board and to the time they may require to arrive at the port of destination, the captain being obliged, furthermore, to pay said sailors the passage to the said port or to the port of sailing of the vessel, as may be convenient for them.4. If the agent or the charterers of the vessel should give said vessel a destination other than that fixed in the agreement, and the members of the crew should not agree thereto, they shall be given by way of indemnity half the amount fixed in case No. 1, besides what may be owed them for the part of the monthly wages

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corresponding to the days which have elapsed from the date of their agreements.

If they accept the change, and the voyage, on account of the greater distance or for other reasons, should give rise to an increase of wages, the latter shall be privately regulated, or through amicable arbitrators in case of disagreement. Even though the voyage may be to a nearer point, this shall not give rise to a reduction in the wages agreed upon.If the revocation or change of the voyage should originate from the shippers or charterers, the agent shall have a right to demand of them the indemnity which is justly due.

ARTICLE 639. If the revocation of the voyage should arise from a just cause independent of the will of the agent or charterers, and the vessel should not have left the port, the members of the crew shall not have any other right than to receive the wages earned up to the day on which the revocation took place.

ARTICLE 640. The following shall be just causes for the revocation of the voyage:1. A declaration of war or interdiction of commerce with the power to whose territory the vessel was bound.2. The blockade of the port of destination or the breaking out of an epidemic after the agreement.3. The prohibition to receive in said port the goods which make up the cargo of the vessel.4. The detention or embargo of the same by order of the Government, or for any other reason independent of the will of the agent.5. The inability of the vessel to navigate.

ARTICLE 641. If, after a voyage has been begun, any of the first three causes mentioned in the foregoing article should occur, the sailors shall be paid at the port the captain may deem it advisable to make for the benefit of the vessel and cargo, according to the time they may have served thereon; but if the vessel is to continue the voyage, the captain and the crew may mutually demand the enforcement of the contract.

In case of the occurrence of the fourth cause, the crew shall continue to be paid half wages, if the agreement is by month but if the detention should exceed three months, the engagement shall

be rescinded and the crew shall be paid what they should have earned, according to the contract, if the voyage had been made. And if the agreement had been made for a fixed sum for the voyage, the contract must be complied within the terms agreed upon.

In the fifth case, the crew shall not have any other right than be entitled to recover the wages earned; but if the disability of the vessel should have been caused by the negligence or lack of skill of the captain, engineer, or sailing mate, they shall indemnify the crew for the loss suffered, always reserving the criminal liability which may be proper.

ARTICLE 642. If the crew has been engaged to work on shares they shall not be entitled, by reason of the revocation, delay, or greater extension of the voyage, to anything but the proportionate part of the indemnity paid into the common funds of the vessel by the persons liable for said occurrences.

ARTICLE 643. If the vessel and her freight should be totally lost, by reason of capture or wreck, all rights of the crew to demand any wages whatsoever shall be extinguished, as well as that of the agent for the recovery of the advances made.

If a portion of the vessel or freight should be saved, or part of either, the crew engaged on wages, including the captain, shall retain their rights on the salvage, so far as they go, on the remainder of the vessel as well as value of the freightage or the cargo saved; but sailors who are engaged on shares shall not have any right whatsoever to the salvage of the hull, but only on the portion of the freightage saved. If they should have worked to collect the remainder of the ship-wrecked vessel, they shall be given an award in proportion to the efforts made and to the risks encountered in order to accomplish the salvage.

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

If the sickness should be caused by an injury received in the service or defense of the vessel the sailor shall be attended and cured from

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the common funds, there being deducted before anything else from the proceeds of the freight, the cost of the attendance and cure.

ARTICLE 645. If a sailor should die during the voyage his heir shall be given the wages earned and not received, according to his engagement and the reason for his death, namely —If he should have died a natural death and should have been engaged on wages there shall be paid what may have been earned up to the date of his death.If the engagement had been made for a fixed sum for the whole voyage there shall be paid half the amount earned if the sailor died on the voyage out, and the whole amount if he died on the return voyage.And if the engagement had been made on shares and the death should have occurred after the voyage was begun, the heirs shall be paid the entire portion due the sailor; but should the latter have died before the departure of the vessel from the port, the heirs shall not be entitled to claim anything.

If the death should have occurred in the defense of the vessel, the sailor shall be considered as living, and his heirs shall be paid, at the end of the voyage, the full amount of wages or the full part of the profits due him as to the others of his grade.The sailor shall likewise be considered as present in the event of his capture when defending the vessel, in order to enjoy the same benefits as the rest; but should he have been captured on account of carelessness or other accident not related to the service, he shall only receive the wages due up to the day of his capture.ARTICLE 646. The vessel with her engines, rigging, equipment, and freights shall be liable for the wages earned by the crew engaged per month or for the trip, the liquidation and payment ought to take place between one voyage and the other.After a new voyage has been undertaken, credits such as the former shall lose their right of preference.

ARTICLE 647. The officers and the crew of the vessel shall be exempted from all obligations contracted, if they deem it proper, in the following cases:1. If, before the beginning of the voyage, the captain attempts to change it, or there occurs a naval war with the power to which the vessel was destined.2. If a disease should break out and be officially declared epidemic in the port of destination.

3. If the vessel should change owner or captain.

4. Supercargoes, Arts. 649-651

ARTICLE 649. Supercargoes shall discharge on board the vessel the administrative duties which the agent or shippers may have assigned them; they shall keep an account and record of their transactions in a book which shall have the same conditions and requisites as required for the accounting book of the captain, and shall respect the latter in his duties as chief of the vessel.

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

ARTICLE 650. All the provisions contained in the second section of Title III, Book II, with regard to qualifications, manner of making contracts, and liabilities of factors shall be applicable to supercargoes.

ARTICLE 651. Supercargoes can not, without special authorization or agreement, make any transaction for their own account during the voyage, with the exception of the ventures which, in accordance with the custom of the port of destination, they are permitted to do.Neither shall they be permitted to invest in the return trip more than the profits from the ventures, unless there is a special authorization thereto from the principals.

D. Accidents and Damages in Maritime Commerce

1. Averages

(a) Nature and Kinds, Arts. 806 to 808

TITLE IVRisks, Damages and Accidents of Maritime CommerceSECTION IAveragesARTICLE 806. For the purposes of this Code the following shall be considered averages:

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1. All extraordinary or accidental expenses which may be incurred during the navigation for the preservation of the vessel or cargo, or both.2. All damages or deterioration the vessel may suffer from the time she puts to sea from the port of departure until she casts anchor in the port of destination, and those suffered by the merchandise from the time it is loaded in the port of shipment until it is unloaded in the port of consignment.

ARTICLE 807. The petty and ordinary expenses of navigation, such 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, until the merchandise is placed on the wharf, and any other expenses common to navigation shall be considered ordinary expenses to be defrayed by the shipowner, unless there is a special agreement to the contrary.

ARTICLE 808. Averages shall be:1. Simple or particular.2. General or gross.

(1) Simple or Particular

(a) Defined, Art. 809

ARTICLE 809. Simple or particular averages shall be, as a general rule, all the expenses and damages caused to the vessel or to her cargo which have not redounded to the benefit and common profit of all the persons interested in the vessel and her cargo, 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 of the goods or by reason of an accident at sea or force majeure, and the expenses incurred to avoid and repair the same.2. The damages suffered by the vessel in her hull, rigging, arms, and equipment, for the same causes and reasons, from the time she puts to sea from the port of departure until she anchored in the port of destination.3. The damages suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it.

4. The wages and victuals of the crew when the vessel should be detained or embargoed by a legitimate order or force majeure, if the charter should have been for a fixed sum for the voyage.5. The necessary expenses on arrival at a port, in order to make repairs or secure provisions.6. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to cover any other requirement of the vessel against which the proper amount shall be charged.7. The victuals and wages of the crew during the time the vessel is in quarantine.8. The damage suffered by the vessel or cargo by reason of an impact or collision with another, if it were accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the damage caused.9. Any damage suffered by the cargo through the faults, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freight.

(b) Effects, Art. 810

ARTICLE 810. The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular averages. cd

(2) Gross or General

(a) Defined, Arts. 811, 817, 818

ARTICLE 811. General or gross averages shall be, as a general rule, all the damages and expenses which are deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk, and particularly the following:

1. The goods or cash invested in the redemption of the vessel or cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the arrangement or redemption is taking place.

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2. The goods jettisoned to lighten the vessel, whether they belong to the vessel, to the cargo, or to the crew, and the damage suffered through said act by the goods kept.3. The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned in order to save the cargo, the vessel, or both.4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place her in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or transferred.5. The damage suffered by the goods of the cargo through the opening made in the vessel in order to drain her and prevent her sinking.6. The expenses caused through floating a vessel intentionally stranded for the purpose of saving her.7. The damage caused to the vessel which it is necessary to break open, scuttle, or smash in order to save the cargo.8. The expenses of curing and maintaining the members of the crew who may have been wounded or crippled in defending or saving the vessel.9. The wages of any member of the crew detained as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it.10. The wages and victuals of the crew of a vessel chartered by the month during the time it should be embargoed or detained by force majeure or by order of the Government, or in order to repair the damage caused for the common good.11. The loss suffered in the value of the goods sold at arrivals under stress in order to repair the vessel because of gross average.12. The expenses of the liquidation of the average.

ARTICLE 817. If in lightening a vessel on account of a storm, in order to facilitate her entry into a port or roadstead, part of her cargo should be transferred to lighters or barges and be lost, the owner of said part shall be entitled to indemnity, as if the loss has originated from a gross average, the amount thereof being distributed between the entire vessel and cargo which caused the same.If, on the contrary, the merchandise transferred should be saved and the vessel should be lost, no liability can be demanded of the salvage.

ARTICLE 818. If, as a necessary measure to extinguish a fire in a port; roadstead; creek, or bay, it should be decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute.

(b) Essential Requisites, Arts. 813, 814, 860

ARTICLE 813. In order to incur the expenses and cause the damages corresponding to gross average, a previous resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and with a hearing of the persons interested in the cargo who may be present, shall be required.

If the latter shall object, and the captain and officers, or a majority, or the captain, if opposed to the majority, should consider certain measures necessary, they may be executed under his liability, without prejudice to the freighters exercising their rights against the captain before the judge or court of competent jurisdiction, if they can prove that he acted with malice, lack of skill, or negligence.

If the persons interested in the cargo, being on the vessel, should not be heard, they shall not contribute to the gross average, which contribution shall be paid by the captain, unless the urgency of the case should be such that the time necessary for previous deliberation was lacking.

ARTICLE 814. The resolution adopted to cause the damages which constitute a general average must necessarily be entered in the log book, stating the motives and reasons therefor, the votes against it, and the reasons for the disagreement should there be any, and the irresistible and urgent causes which moved the captain if he acted of his own accord.In the first case the minutes shall be signed by all the persons present who could do so before taking action if possible, and if not at the first opportunity; in the second case by the captain and by the officers of the vessel.

In the minutes and after the resolution there shall be stated in detail all the goods cast away, 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

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authority of the first port he may make within twenty-four hours after his arrival, and to ratify it immediately by an oath.

ARTICLE 860. If, notwithstanding the jettison of the merchandise, breakage of masts, ropes, and equipment, the vessel should be lost running said risk, no contribution whatsoever by reason of gross average shall be proper.The owners of the goods saved shall not be liable for the indemnity of those jettisoned, lost, or damaged.

Magsaysay Inc. V. Agan, 96 Phil 504

EN BANC[G.R. No. L-6393. January 31, 1955.]A. MAGSAYSAY, INC., plaintiff-appellee, vs. ANASTACIO AGAN, defendant-appellant.Custodio A. Villalva for appellant.Quijano, Alidio & Azores for appellee.

SYLLABUS

1. ADMIRALTY LAW; VESSELS; ACCIDENTAL STRANDING; AVERAGES. — The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809) and are, therefore, to be borne only by the owner of the property which gave rise to the same (Art. 810); while general or gross averages include "all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812).2. ID.; ID.; ID.; CLASSIFICATION OF AVERAGES. — In classifying averages into simple or particular and general or gross and defining each class, the Code (Arts. 809 and 811) at the same time enumerates certain specific cases as coming specially under one or the other denomination. While the expenses incurred in putting a vessel afloat may well come under number 2 of article 809 — which refers to expenses suffered by the vessel "by reason of an accident of the sea or force majeure" — and should therefore be classified as

particular average, the said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention "expenses caused in order to float 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 not intentional.3. ID.; ID.; GENERAL AVERAGE; ITS REQUISITES. — The following are the requisites for general average: (1) there must be a common danger; (2) for the common safety part of the vessel or of the cargo or both is sacrificed deliberately; (3) from the expenses or damages caused follows the successful saving of the vessel and cargo; and (4) the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority.4. ID.; ID.; ID.; ID. — It is the deliverance from an immediate peril, by a common sacrifice, that constitutes the essence of general average (Columbian Insurance Co. of Alejandria vs. Ashby & Stribling, 13 Peters 331, 10 L. ed. 186). Where there is no proof that the stranded vessel had to be put afloat to save it from an imminent danger, and what does appear is that the vessel had to be salvaged in order to enable it "to proceed to its port or destination," the expenses incurred in floating the vessel do not constitute general average. It is the safety of the property, and not of the voyage, which constitutes the true foundation of general average.5. ID.; ID.; ID.; ID. — Even if the salvage operation was a success, yet if the sacrifice was for the benefit of the vessel - to enable it to proceed to its destination — and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expense.D E C I S I O NREYES, A., J p:The SS "San Antonio", a vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound for Basco, Batanes, via Aparri, Cagayan, with general cargo belonging to different shippers, among them the defendant. The vessel reached Aparri on the 10th of that month, and after a day's stopover in that port, weighed anchor to proceed to 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 having failed, plaintiff had it refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat, the vessel returned to Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were delivered to their

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respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average.On the theory that the expenses incurred in floating the vessel constitute general average to which both ship and cargo should contribute, plaintiff brought the present action in the Court of First Instance of Manila to make defendant pay his contribution, which, as determined by the average adjuster, amounts to P841.40. Defendant, in his answer, denies liability for this amount, alleging, among other things, that the stranding of the vessel was due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat did not constitute general average, and that the liquidation of the average was not made in accordance with law. After trial, the lower court found for plaintiff and rendered judgment against the defendant for the amount of the claim, with legal interests. From this judgment defendant has appealed directly to this Court.Although appellant assigns various errors, under our view of the case only the following need be considered:"The trial court erred in allowing the general average for floating a vessel unintentionally stranded inside a port and at the mouth of a river during a fine weather."For the purposes of this assignment of error we may well accept the finding below that the stranding of plaintiff's vessel was due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate. The standing may, therefore, be regarded as accidental, and the question is whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners.The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809, and are, therefore, to be borne only by the owner of the property which gave rise to the same (Art. 810); while general or gross averages include "all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812).In classifying averages into simple or particular and general or gross and defining each class, the Code (Art. 809 and 811) at the

same time enumerates certain specific cases as coming specially under one or the other denomination. Going over the specific cases enumerated we find that, while the expenses incurred in putting plaintiff's vessel afloat may well come under number 2 of article 809 — which refers to expenses suffered by the vessel "by reason of an accident of the sea or force majeure" — and should therefore be classified as particular average, the said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention "expenses caused in order to float a vessel," but it specifically refers to "a vessel intentionally stranded for the purpose of saving it" and would have no application where, as in the present case, the stranding was not intentional.Let us now see whether the expenses here in question could come within the legal concept of general average. Tolentino, in his commentaries on the Code of Commerce, gives the following requisites for general average:"First, there must be a common danger. This means, that both the ship and the cargo, after it has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises from accidents of the sea, dispositions of the authority, or faults of men, provided, that the circumstance producing the peril should be ascertained and imminent - or may rationally be said to be certain and imminent. This last requirement excludes measures undertaken against a distant peril."Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately."Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo."Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority." (Vol. I, 7th ed., p. 155.)With respect to the first requisite, the evidence does not disclose that the expenses sought to be recovered from defendant were incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a place described as "very shallow". It would thus appear that vessel and cargo were at the time in no imminent danger or a danger which might "rationally be sought to be certain and imminent." It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated in the above quotation, "this last

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requirement excludes measures undertaken against a distant peril." It is the deliverance from an immediate, impending peril, by a common sacrifice, that constitutes the essence of general average. (The Columbian Insurance Company of Alexandria vs. Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the present case there is no proof that the vessel had to be put afloat to save it from an imminent danger. What does appear from the testimony of plaintiff's manager is that the vessel had to be salvaged in order to enable it "to proceed to its port of destination." But as was said in the case just cited, it is the safety of the property, and not of the voyage, which constitutes the true foundation of general average.As to the second requisite, we need only repeat that the expenses in question were not incurred for the common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. The cargo could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to do so.With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit of the vessel — to enable it to proceed to destination — and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses.The final requisite has not been proved, for it does not appear that the expenses here in question were incurred after following the procedure laid down in articles 813 et seq.In conclusion, we find that plaintiff has not made out a case for general average, with the result that its claim for contribution against the defendant cannot be granted.Wherefore, the decision appealed from is reversed and plaintiff's complaint ordered dismissed with costs.Paras, C. J., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, and Reyes, J. B. L., JJ., concur.

(c) Effects, Arts. 812

ARTICLE 812. In order to satisfy the amount of the gross or general averages, all the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute.

(d) Jettison, Arts. 815, 816

ARTICLE 815. The captain shall supervise the jettison, and shall order the goods cast overboard in the following order:

1. Those which are on deck, beginning with those which embarrass the handling of the vessel or damage her, preferring, if possible, the heaviest ones and those of least utility and value. 2. Those in the hold, always beginning with those of the greatest weight and smallest value, to the amount and number absolutely indispensable.

ARTICLE 816. In order that the goods jettisoned may be included in the gross average and the owners thereof be entitled to indemnity, it shall be necessary in so far as the cargo is concerned that their existence on board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory made up before the departure, in accordance with the first paragraph of Article 612.

(e) Jason Clauses (See York-Antewerp Rules, Rule D)

(b) Proof and Liquidation of Averages

(1) Modes, Arts. 846, 847, 848

ARTICLE 846. The persons interested in the proof and liquidation of averages may mutually agree and bind themselves at any time with regard to the liability, liquidation, and payment thereof.

In the absence of agreements, the following rules shall be observed:1. The proof of the average shall take place in the port where the repairs are made, should any be necessary, or in the port of unloading.2. The liquidation shall take place in the port of unloading should it be a Spanish * port.3. Should the average have occurred outside of the waters under the jurisdiction of the Philippines or the cargo should have been sold in a foreign port by reason of an arrival under stress, the liquidations shall be made in the port of arrival.

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4. If the average should have occurred near the port of destination, so that said port can be made, the proceedings treated of in Rules 1 and 2 shall be held there.

ARTICLE 847. In case of making the liquidation of the averages privately by virtue of agreement, as well as when a judicial authority takes part therein at the request of any of the parties interested who do not agree thereto, all of them shall be cited and heard, should they not have renounced this right.

Should they not be present or not have a legitimate representative, the liquidation shall be made by the consul in a foreign port, and where there is none, by the judge or court of competent jurisdiction, according to the laws of the country, and for the account of the proper person.When the representative is a person well known in the place where the liquidation takes place, his intervention shall be admitted and produce legal effects, even though he be authorized only by a letter of the shipowner, freighter, or underwriter.

ARTICLE 848. Claims for averages shall not be admitted if they do not exceed 5 per cent of the interest which the claimant may have in the vessel or cargo if it is gross average, and 1 per cent of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary.

(2) Appraisal of general average, Arts. 850 to 855; 857

ARTICLE 850. If by reason of one or more accidents of the sea particular and gross averages of the vessel or the cargo, or of both, should take place on the same voyage, the expenses and damages corresponding to each one shall be determined separately in the port where the repairs are made or where the cargo is discharged, or sold, or the merchandise is benefited.

For this purpose the captains shall be obliged to demand of the expert appraisers and of the contractors making the repairs, as well as of those appraising and taking part in the unloading, repair, sale, or the benefiting of the merchandise, that they separate and detail exactly in their appraisements or estimates and accounts all the expenses and damages belonging to each average, and in those of

each average those corresponding to the vessel and to the cargo, stating also separately whether there are or not any damages proceeding from the nature of the goods, and not by reason of a sea accident; and in case there should be expenses common to the different averages and to the vessel and her cargo, there must be calculated the amount corresponding to each and stated distinctly.

SECTION IILiquidation of Gross Averages

ARTICLE 851. At the instance of the captain, the adjustment, liquidation, and distribution of gross averages shall be held privately, with the consent of all the parties in interest.For this purpose, within forty-eight hours following the arrival of the vessel at the port, the captain shall call all the persons interested, in order that they may decide as to whether the adjustment or liquidation of the gross average is to be made by experts and liquidators appointed by themselves, in which case this shall be done should the persons interested agree.Should an agreement not be possible, the captain shall apply to the judge or court of competent jurisdiction, who shall be the one of the port where these proceedings are to be held in accordance with the provisions of this Code, or to the consul of Spain, * should there be one, and otherwise to the local authority when they are to be held in a foreign port.

ARTICLE 852. If the captain should not comply with the provisions contained in the foregoing article, the shipowner or agent or the freighters shall demand the liquidation, without prejudice to the action they may bring to demand indemnity from him.

ARTICLE 853. After the experts have been appointed by the persons interested, or by the judge or court, before the acceptance, an examination of the vessel and of the repairs required shall be made, as well as an estimate of their cost, separating these losses and damages from those arising from the natural vice of the thing.The experts shall also declare whether the repairs can be made immediately, or whether it is necessary to unload the vessel to examine and repair her.

With regard to the merchandise, if the average should be visible at a mere glance, the examination thereof must be made before it is

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delivered. Should it not be visible at the time of unloading, said examination may be held after the delivery provided it is done within forty-eight hours from the unloading and without prejudice to the other proofs which the experts may deem necessary.

ARTICLE 854. The appraisement of the goods which are to contribute to the gross average, and that of those which constitute the average, shall conform to the following rules:1. The merchandise saved which is to contribute to the payment of the gross average shall be valued at the current price thereof at the port of unloading, deducting the freights, customs duties, and charges for unloading, as may appear from a material inspection of the same, not taking into consideration the bills of lading, unless there is an agreement to the contrary.2. If the liquidation is to take place in the port of sailing, the value of the merchandise loaded shall be fixed by the purchase price, including the expenses until they are put on board, excluding the insurance premium.3. If the merchandise should be damaged, it shall be appraised at its true value.4. If the voyage should be interrupted, the merchandise having been sold in a foreign port and the average can not be estimated, there shall be taken as the contributing capital the value of the merchandise in the port of arrival, or the net proceeds obtained at the sale thereof.5. Merchandise lost, which should constitute the gross average, shall be appraised at the value merchandise of its kind may have in the port of unloading, provided its kind and quality appears in the bill of lading; and should this not be the case, the invoices of the purchase issued in the port of shipment shall be taken as a basis, adding to its value the expenses and freights subsequently arising. 6. The masts cut down, the sails, cables, and other equipment of the vessel rendered useless for the purpose of saving her, shall be appraised at the current value, deducting one-third by reason of the difference between new and old.

This deduction shall not be made in regard to anchors and chains.7. The vessel shall be appraised at her real value in her condition at the time.8. The freights shall represent 50 per cent by way of contributing capital.

ARTICLE 855. The merchandise loaded on the upper deck of the vessel shall contribute to the gross average should it be saved; but there shall be no right to indemnity if it should be lost by reason of being jettisoned for general safety, except when the marine ordinances allow its shipment in this manner in coastwise navigation.The same shall take place with that which is on board and is not included in the bills of lading or inventories, according to the cases.

In any case the shipowner and the captain shall be liable to freighters for the loss of the jettison, if the storage on the upper deck took place without the consent of the latter.

ARTICLE 857. After the appraisement of the goods saved has been concluded by the experts, as well as that of the goods lost which constitute the gross average, and after the repairs have been made to the vessel, should any have to be made, and in such case after the approval of the accounts of the same by the persons interested or by the judge or court, the entire record shall be turned over to the liquidator appointed, in order that he may proceed with the distribution of the average.

(3) Liquidation of general average, Arts. 858, 865 to 869

ARTICLE 858. In order to effect the liquidation the liquidator shall examine the sworn statement of the captain, comparing it, if necessary, with the log book and all the contracts which may have been made between the persons interested in the average, the appraisements, expert examinations, and accounts of repairs made. If, as a result of this examination, he should find any defect in this procedure which might injure the rights of the persons interested or affect the liability of the captain, he shall call attention thereto in order that it be corrected, if possible, and otherwise he shall include it in the preliminaries of the liquidation.Immediately thereafter he shall proceed with the distribution of the amount of the average, for which purpose he shall fix:

1. The contributing capital, which he shall determine by the value of the cargo, in accordance with the rules established in Article 854.2. That of the vessel in her actual condition, according to a statement of experts.

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3. The 50 per cent of the amount of the freight, deducting the remaining 50 per cent for wages and maintenance of the crew.After the amount of the gross average has been determined in accordance with the provisions of this Code, it shall be distributed pro rata among the goods which are to cover the same.

ARTICLE 865. The distribution of the gross average shall not be final until it has been agreed to, or in the absence thereof, until it has been approved by the judge or court after an examination of the liquidation and a hearing of the persons interested who may be present, or of their representatives.

ARTICLE 866. After the liquidation has been approved it shall be the duty of the captain to collect the amount of the distribution, and he shall be liable to the owners of the goods averaged for the losses they suffer through his delay or negligence.

ARTICLE 867. If the contributors should not pay the amount of the assessment within the third day after having been requested to do so, the goods saved shall be attached, at the request of the captain, and shall be sold to cover the payment.

ARTICLE 868. If the persons interested in receiving the goods saved should not give security sufficient to answer for the amount corresponding to the gross average, the captain may defer the delivery thereof until payment has been made.

SECTION IIILiquidation of Ordinary Averages

ARTICLE 869. The experts which the judge or court or the persons interested may appoint, according to the cases, shall proceed with the appraisement and examination of the averages in the manner prescribed in Article 853 and in Article 854, Rules 2 to 7, in so far as they are applicable.

(4) Liquidation of particular average, Art. 869

ARTICLE 869. The experts which the judge or court or the persons interested may appoint, according to the cases, shall proceed with the appraisement and examination of the averages in

the manner prescribed in Article 853 and in Article 854, Rules 2 to 7, in so far as they are applicable.

2. Arrivals Under Stress(a) Causes, Arts. 819 and 820

ARTICLE 819. If the captain during the navigation should believe that the vessel can not continue the voyage to the port of destination on account of the lack of provisions, well founded fear of seizure, privateers or pirates, or by reason of any accident of the sea disabling her to navigate, he shall assemble the officers and shall call the persons interested in the cargo who may be present, and who may attend the meeting without the right to vote; and if, after examining the circumstances of the case, the reasons should be considered well founded, it shall be decided to make the nearest and most convenient port drafting and entering in the log book the proper minutes, which shall be signed by all.

The captain shall have the deciding vote and the persons interested in the cargo may make the objections and protests they may deem proper, which shall be entered in the minutes in order that they may make use thereof in the manner they may consider advisable.ARTICLE 820. The arrival under stress shall not be considered legal in the following cases:1. If the lack of provisions should arise from the failure to take the necessary provisions for the voyage, according to usage and custom, or if they should have been rendered useless or lost through bad stowage or negligence in their care.2. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and justifiable facts.3. If the injury to the vessel should have been caused by reason of her not being repaired, rigged, equipped, and arranged in a convenient manner for the voyage, or by reason of some erroneous order of the captain.4. Whenever malice, negligence, want of foresight, or lack of skill on the part of the captain is the reason for the act causing the damage.

(b) Formalities, Arts. 819, 822

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

ARTICLE 822. If in order to make repairs to the vessel or because there should be danger of the cargo suffering damage it should be necessary to unload, the captain must request authorization of the judge or court of competent jurisdiction to lighten the vessel, and do so with the knowledge of the person interested or representative of the cargo, should there be one. aeIsaEIn a foreign port, it shall be the duty of the Spanish * consul, where there is one, to give the authorization.In the first case, the expenses shall be defrayed by the ship agent or owner, and in the second, they shall be for the account of the owners of the merchandise, for whose benefit the act took place.If the unloading should take place for both reasons, the expenses shall be defrayed in proportion to the value of the vessel and that of the cargo.

(c) Expense s, Arts. 821, 822

ARTICLE 821. The expenses caused by the arrival under stress shall always be for the account of the shipowner or agent, but the latter shall not be liable for the damage which may be caused the shippers by reason of the arrival under stress, provided the latter is legitimate.Otherwise, the shipowner or agent and the captain shall be jointly liable.

ARTICLE 822. If in order to make repairs to the vessel or because there should be danger of the cargo suffering damage it should be necessary to unload, the captain must request authorization of the judge or court of competent jurisdiction to lighten the vessel, and do so with the knowledge of the person interested or representative of the cargo, should there be one.

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

In the first case, the expenses shall be defrayed by the ship agent or owner, and in the second, they shall be for the account of the owners of the merchandise, for whose benefit the act took place.

If the unloading should take place for both reasons, the expenses shall be defrayed in proportion to the value of the vessel and that of the cargo.

(d) Responsibility of Captain, Arts. 823-825

ARTICLE 823. The care and preservation of the cargo which has been unloaded shall be in charge of the captain, who shall be responsible for the same, except in cases of force majeure.

ARTICLE 824. If the entire cargo or part thereof should appear to be damaged, or there should be imminent danger of its being damaged, the captain may request of the judge or court of competent jurisdiction or the consul, in a proper case, the sale of all or of part of the former, and the person taking cognizance of the matter shall authorize it after an examination and declaration of experts, advertisements, and other formalities required by the case and an entry in the book, in accordance with the provisions of Article 624.

The captain shall, in a proper case, justify the legality of the procedure, under the penalty of answering to the shipper for the price the merchandise would have brought if it should have arrived at the port of its destination in good condition.

ARTICLE 825. The captain shall answer for the damages caused by his delay, if the reason for the arrival under stress having ceased, he should not continue the voyage.

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If the reason for said arrival should have been the fear of enemies, privateers, or pirates, before sailing, a discussion and resolution of a meeting of the officers of the vessel and persons interested in the cargo who may be present shall take place, in accordance with the provisions contained in Article 819.

3. Collisions

(a) Classes and Effects

(1) Fortuitous, Arts. 830, 832

ARTICLE 830. If a vessel should collide with another by reason of an accident or through force majeure, each vessel and her cargo shall be liable for their own damage.

ARTICLE 832. If, by reason of a storm or other cause of force majeure, a vessel which is properly anchored and moored should collide with those in her immediate vicinity, causing them damage, the injury occasioned shall be looked upon as particular average to the vessel run into.

(2) Culpable, Arts. 826, 827 and 831

ARTICLE 826. If a vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal.

ARTICLE 827. If both vessels may be blamed for the collision, each one shall be liable for his own damages, and both shall be jointly responsible for the losses and damages suffered by their cargoes.

ARTICLE 831. If a vessel should be forced to collide with another one by a third vessel, the owner of the third vessel shall indemnify for the losses and damages caused, the captain thereof being civilly liable to said owner.

(3) Inscrutable Fault, Art. 828

ARTICLE 828. The provisions of the foregoing article are applicable to the case in which it can not be decided which of the two vessels was the cause of the collision.

(b) Presumption of loss by collision, Art. 833

ARTICLE 833. A vessel shall be presumed as lost thru a collision which, upon being run into, sinks immediately, and also any vessel which is obliged to make a port to repair the damages caused by the collision should be lost during the voyage, or should be obliged to be stranded in order to be saved.

(c) Liabilities

(1) shipowner or agent, Arts. 837, 837

ARTICLE 837. The civil liability contracted by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and all the freight earned during the voyage.

(2) captain, pilot, others, Arts. 829, 834

ARTICLE 829. In the cases above mentioned the civil action of the owner against the person liable for the damage is reserved, as well as the criminal liabilities which may be proper.

ARTICLE 834. If the vessels colliding should have pilots on board discharging their duties at the time of the collision, their presence shall not exempt the captains from the liabilities they incur; but the latter shall have the right to be indemnified by the pilots without prejudice to the criminal liability which the latter may incur.

(3) conditions; protests; Arts 835, 836, 839

ARTICLE 835. The action for the recovery of losses and damages arising from collisions can not be admitted if a protest or

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declaration is not presented within twenty-four hours to the competent authority of the point where the collision took place, or that of the first port of arrival of the vessel, if in Spain, * and to the consul of Spain * if it should have occurred in a foreign country.

ARTICLE 836. In so far as the damages caused to persons or to the cargo are concerned, the absence of a protest can not prejudice the persons interested who were not on board or were not in a condition to make known their wishes. ARTICLE 839. If the collision should take place between Philippine vessels in foreign waters, or if having taken place in the open seas, and the vessels should make a foreign port, the consul of the Republic of the Philippines in said port shall hold summary investigation of the accident, forwarding the proceedings to the Secretary of the Department of Foreign Affairs for continuation and conclusion.

4. Shipwrecks, Arts. 840 to 843

ARTICLE 840. The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding shall be individually for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion.

ARTICLE 841. If the wreck or stranding should arise through the malice, negligence, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and prepared, the owner or the freighters may demand indemnity of the captain for the damages caused to the vessel or cargo by the accident, in accordance with the provisions contained in Articles 610, 612, 614, and 621.

ARTICLE 842. The goods saved from the wreck shall be specially liable for the payment of the expenses of the respective salvage, and the amount thereof must be paid by the owners of the former before they are delivered to them, and with preference to any other obligation, if the merchandise should be sold.

ARTICLE 843. If several vessels navigate under convoy, and any of them should be wrecked, the cargo saved shall be distributed among the rest in the proportion to the amount each one can receive.

If any captain should refuse, without sufficient cause, to receive what may correspond to him, the captain of the wrecked vessel shall enter a protest against him before two sea officials of the losses and damages resulting therefrom, ratifying the complaint within twenty-four hours after arrival at the first port, and including it in the proceedings he must institute in accordance with the provisions contained in Article 612.

Should it not be possible to transfer to the other vessels the entire cargo of the one wrecked, the goods of the highest value and smallest volume shall be saved first, the designation thereof being made by the captain, in concurrence with the officers of his vessel.

(a) Salvage Law (Act No. 2616)ACT NO. 2616 - THE SALVAGE LAW Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward. Sec. 2. If the captain of the vessel, or the person acting in his stead, is present, no one shall take from the sea, or from the shores or coast merchandise or effects proceeding from a shipwreck or proceed to the salvage of the vessel, without the consent of such captain or person acting in his stead. Sec. 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the vessel, owner, or a representative of either of them, they being unknown, shall convey and deliver such vessel or merchandise, as soon as possible, to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or municipal mayor. Sec. 4. After the salvage is accomplished, the owner or his representative shall have a right to the delivery of the vessel or things saved, provided that he pays, or gives a bond to secure, the expenses and the proper reward. The amount and sufficiency of the bond, in the absence of agreement, shall be determined by the Collector of Customs or by the Judge of the Court of First Instance of the province in which the things saved may be found.

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Sec. 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a salvage is reported, shall order: a. That the things saved be safeguard and inventoried. b. The sale at public auction of the things saved which may be in danger of immediate loss or of those whose conservation is evidently prejudicial to the interests of the owner, when no objection is made to such sale. c. The advertisement within the thirty days subsequent to the salvage, in one of the local newspapers or in the nearest newspaper published, of all the details of the disaster, with a statement of the mark and number of the effects requesting all interested persons to make their claims. Sec. 6. If, while the vessel or things saved are at the disposition of the authorities, the owner or his representative shall claim them, such authorities shall order their delivery to such owner or his representative, provided that there is no controversy over their value, and a bond is given by the owner or his representative to secure the payment of the expenses and the proper reward. Otherwise, the delivery shall nor be made until the matter is decided by the Court of First Instance of the province. Sec. 7. No claim being presented in the three months subsequent to the publication of the advertisement prescribed in sub-section (c) of Section five, the things save shall be sold at public auction, and their proceeds, after deducting the expenses and the proper reward shall be deposited in the insular treasury. If three years shall pass without anyone claiming it, one-half of the deposit shall be adjudged to him who saved the things, and the other half to the insular government. Sec. 8. The following shall have no right to a reward for salvage or assistance: a. The crew of the vessel shipwrecked or which was is danger of shipwreck; b. He who shall have commenced the salvage in spite of opposition of the captain or his representative; and c. He who shall have failed to comply with the provisions of Section three. Sec. 9. If, during the danger, an agreement is entered into concerning the amount of the reward for salvage or assistance, its validity may be impugned because it is excessive, and it may be required to be reduced to an amount proportionate to the circumstances. Sec. 10. In a case coming under the last preceding section, as well as in the absence of an agreement, the reward for salvage or

assistance shall be fixed by the Court of First Instance of the province where the things salvaged are found, taking into account principally the expenditures made to recover or save the vessel or the cargo or both, the zeal demonstrated, the time employed, the services rendered, the excessive express occasioned the number of persons who aided, the danger to which they and their vessels were exposed as well as that which menaced the things recovered or salvaged, and the value of such things after deducting the expenses. Sec. 11. From the proceeds of the sale of the things saved shall be deducted, first, the expenses of their custody, conservation, advertisement, and auction, as well as whatever taxes or duties they should pay for their entrance; then there shall be deducted the expenses of salvage; and from the net amount remaining shall be taken the reward for the salvage or assistance which shall not exceed fifty per cent of such amount remaining. Sec. 12. If in the salvage or in the rendering of assistance different persons shall have intervened the reward shall be divided between them in proportion to the services which each one may have rendered, and, in case of doubt, in equal parts. Those who, in order to save persons, shall have been exposed to the same dangers shall also have a right to participation in the reward. Sec. 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel, the reward for salvage or for assistance shall be divided between the owner, the captain, and the remainder of the crew of the latter vessel, so as to give the owner a half, the captain a fourth, and all the remainder of the crew the other fourth of the reward, in proportion to their respective salaries, in the absence of an agreement to the contrary. The express of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged on their value. Sec. 14. This Act shall take effect on its passage.

Barrios v. Go Thong, 7 SCRA 535

EN BANC[G.R. No. L-17192. March 30, 1963.]HONORIO M. BARRIOS, plaintiff-appellant, vs. CARLOS A. GO THONG & COMPANY, defendant-appellee.Laput & Jardiel for plaintiff-appellant.Quisumbing & Quisumbing for defendant-appellee.

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SYLLABUS

1. ADMIRALTY; SALVAGE; REQUISITES. — Three elements are necessary to a valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success. (Erlanger & Galinger vs. Swedish East Asiatic Co., Ltd.. 34 Phil. 178, citing the case of The Mayflower vs. The Sabine, 101 U.S. 384.)2. ID.; ID.; ID.; LACK OF MARINE PERIL; CASE AT BAR. — The circumstances that although the defendant's vessel was in a helpless condition due to engine failure, it did not drift too far from the place where it was, that the weather was fair, clear, and good, that there were only ripples on the sea which was quite smooth, that there was moonlight, that although said vessel was drifting towards the open sea, there was no danger of its foundering or being stranded as it was far from any island or rocks, and its anchor could be released to prevent such occurrence, all show that there was no marine peril, and the vessel was not a quasi-derelict, as to warrant valid salvage claim for the towing of the vessel.3. ID.; TOWAGE; CONSENTING TO OFFER TO TOW VESSEL. — Plaintiff's service to defendant can be considered as a quasi-contract of "towage" because in consenting to plaintiff's offer to tow the vessel, defendant thereby impliedly entered into a Juridical relation of "towage" with the owner of the towing vessel, captained by plaintiff.4. ID.; ID.; ONLY OWNER OF TOWING VESSEL, NOT ITS CREW, ENTITLED TO REMUNERATION. — Where the contract created is one for towage, only the owner of the towing vessel, to the exclusion of the crew of the said vessel, may be entitled to remuneration.5. ID.; ID.; ID.; WAIVER BY OWNER. — As the vessel owner had expressly waived its claim for compensation for the towage service rendered to defendant, it is clear that plaintiff, whose right if at all depends upon and not separate from the interest of his employer, is not entitled to payment for such towage service.6. ID.; ID.; ID.; EQUITY MAY NOT BE INVOKED WHERE THERE IS AN EXPRESS PROVISION OF LAW APPLICABLE. — There being an express provision of law (Art. 2142, Civil Code) applicable to the relationship created in this case, that is, that of a quasi-contract of towage where the crew is not entitled to compensation separate from that of the vessel, there is no occasion to resort to equitable consideration.

D E C I S I O N

BARRERA, J p:

From the decision of the Court of First Instance of Manila (in Civil Case No. 37219) dismissing with costs his ease against defendant Carlos A. Go Thong & Co., plaintiff Honorio M. Barrios, interposed the present appeal.The facts of the case, as found by the trial court, are briefly stated in its decision, to wit:"The plaintiff Honorio M. Barrios was, on May 1 and 2, 1958, captain and/or master of the MV Henry I of the William Lines Incorporated, of Cebu City, plying between and to and from Cebu City and other southern cities and ports, among which are Dumaguete City, Zamboanga City, and Davao City. At about 8:00 o'clock on the evening of May 1, 1958, plaintiff in his capacity as such captain and/or master of the aforesaid MV Henry I, received or otherwise intercepted an S.O.S. distress signal by blinkers from the MV Alfredo, owned and/or operated by the defendant Carlos A. Go Thong & Company. Acting on and/or answering the S.O.S. call, the plaintiff Honorio M. Barrios, also in his capacity as captain and/or master of the MV Henry I, which was then sailing or navigating from Dumaguete City, altered the course of said vessel, and steered and headed towards the beckoning MV Don Alfredo, which plaintiff found to be in trouble, due to engine failure and the loss of her propeller, for which reason, it was drifting slowly southward from Negros Island towards Borneo in the open China Sea, at the mercy of a moderate easterly wind. At about 8:25 p.m. on the same day, May 1, 1958, the MV Henry, under the command of the plaintiff, succeeded in getting near the MV Don Alfredo — in fact as near as about seven meters from the latter ship — and with the consent and knowledge of the captain and/or master of the MV Don Alfredo, the plaintiff caused the latter vessel to be tied to, or well-secured and connected with tow lines from the MV Henry I; and in that manner, position and situation, the latter had the MV Don Alfredo in tow and proceeded towards the direction of Dumaguete City, as evidenced by a written certificate to this effect executed and accomplished by the Master, the Chief Engineer, the Chief Officer, and the Second Engineer of the MV Don Alfredo, who were then on board the latter ship at the time of the occurrence stated above (Exh. A). At about 5:10 o'clock the following morning, May 2, 1958, or after almost nine hours during the night, with the MV Don Alfredo still in tow by the MV Henry I, and while both vessels were

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approaching the vicinity of Apo Island off Zamboanga town, Negros Oriental, the MV Lux, a sister ship of the MV Don Alfredo, was sighted heading towards the direction of the aforesaid two vessels, reaching then fifteen minutes later, or at about 5:25 o'clock on that same morning. Thereupon, at the request and instance of the captain and/or master of the MV Don Alfredo, the plaintiff caused the tow lines to be released, thereby also releasing the MV Don Alfredo."These are the main facts of the present case as to which plaintiff and defendant quite agree with each other. As was manifested in its memorandum presented in this case on August 22, 198, defendant thru counsel said that there is, indeed, between the parties, no dispute as to the factual circumstances, but counsel adds that where plaintiff concludes that they establish an impending sea peril from which salvage of a ship worth more than P100 000.00, plus life and cargo was done, the defendant insists that the facts made out no such case, but that what merely happened was only mere towage from which plaintiff cannot claim any compensation or remuneration independently of the shipping company that owned the vessel commanded by him."On the basis of these facts, the trial court (on April 5, 1960) dismissed the case, stating:"Plaintiff basis his claim upon the provisions of the Salvage Law, Act No. 2616, . . ."In accordance with the Salvage Law, a ship which is lost or abandoned at sea is considered a derelict and, therefore, proper subject of salvage. A ship in a desperate condition, where persons on board are incapable, by reason of their mental and physical condition, of doing anything for their own safety, is a quasi-derelict and may, likewise, be the proper subject of salvage. Was the MV Don Alfredo, on May 1, 1958, when her engine failed and, for that reason, was left drifting without power on the high seas, a derelict or a quasi- derelict? In other words, was it a ship that was lost or abandoned, or in a desperate condition, which could not be saved by reason of incapacity or incapacity of its crew or the persons on board thereof? From all appearances and from the evidence extant in the records, there can be no doubt, for it seems clear enough, that the MV Don Alfredo was not a lost ship, nor was it abandoned. Can it be said that the said ship was in a desperate condition, simply, because of S.O.S. signals were sent from it?"From the testimony of the captain of the MV Don Alfredo, the engine failed and the ship already lost power as early as 8:00 o'clock on the morning of May 1, 1958; although it was helpless, in

the sense that it could not move, it did not drift too far from the place where it was, at the time it had an engine failure. The weather was fair — in fact, as described by witnesses, the weather was clear and good. The waves were small, too slight — there were only ripples on the sea, and the sea was quite smooth. And, during the night, while towing was going on, there was a moonlight. Inasmuch as the MV Don Alfredo was drifting towards the open sea, there was no danger of floundering. As testified to by one of the witnesses, it would take days or even weeks before the ship could as much as approach an island. And, even then, upon the least indication, the anchor could always be weighed down, in order to prevent the ship from striking against the rocks."There was no danger of the vessel capsizing, in view of the fairness of the sea, and the condition of the weather, as described above. As a matter of fact, although the MV Don Alfredo had a motor launch, and two lifeboats, there was no attempt, much less, was there occasion or necessity, to lower anyone or all of them, in order to evacuate the persons on board; nor did the conditions then obtaining require an order to jettison the cargo."But, it is insisted for the plaintiff that an S.O.S. or a distress signal was sent from aboard the MV Don Alfredo, which was enough to establish the fact that it was exposed to imminent peril at sea. It is admitted by the defendant that such S.O.S. signal was, in fact, sent by blinkers. However, defendant's evidence shows that Captain Loresto of the MV Don Alfredo, did not authorize the radio operator of the aforesaid ship to send an S.O.S. or distress signal, for the ship was never in distress, nor was it exposed to a great imminent peril of the sea. What the aforesaid Captain told the radio operator to transmit was a general call; for, at any rate, a message had been sent to defendant's office at Cebu City, which the latter acknowledged by sending back a reply stating that help was on the way. However, as explained by the said radio operator, in spite of his efforts to send a general call by radio, he did not receive any response. For this reason, the Captain instructed him to send the general call by blinkers from the deck of the ship; but the call by blinkers, which follows the dots and dashes method of sending messages, could not be easily understood by deck officers who ordinarily are not radio operators. Hence, the only way by which the attention of general officers on deck could be called, was to send an S.O.S. signal which can be understood by all and sundry."Be it as it may, the evidence further shows that when the two ships were already within hearing distance (barely seven meters) of each other, there was a sustained conversation between Masters

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and complement of the two vessels, by means of loud speakers and the radio; and, the plaintiff must have learned of the exact nature and extent of the disability from which the MV Don Alfredo had suffered — that is, that the only trouble that the said vessel had developed was an engine failure, due to the loss of its propellers."It can thus be said that the MV Don Alfredo was not in a perilous condition wherein the members of its crew would be incapable of doing anything to save passengers and cargo, and, for this reason, it cannot be duly considered as a quasi-derelict; hence, it was not the proper subject of salvage, and the Salvage Law, Act No. 2616, is not applicable."Plaintiff, likewise, predicates his action upon the provision of Article 2142 of the New Civil Code, which reads as follows:'Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.'This does not find clear application to the case at bar, for the reason that it is not the William Lines, Inc., owners of the MV Henry I which is claiming for damages or remuneration, because it has waived all such claims, but the plaintiff herein is the Captain of the salvaging ship, who has not shown that, in his voluntary act done towards and which benefited the MV Don Alfredo, he had been unduly prejudiced by his employers, the said William Lines, Incorporated."What about equity? Does not equity permit plaintiff to recover for his services rendered and sacrifices made? In this jurisdiction, equity may only be taken into account when the circumstances warrant its application, and in the absence of any provision of law governing the matter under litigation. That is not so in the present case."In view of the foregoing, judgment is hereby rendered dismissing the case with costs against the plaintiff; and inasmuch as the plaintiff has not been found to have brought the case maliciously, the counterclaim of the defendant is, likewise, dismissed, without pronouncement as to costs."SO ORDERED."The main issue to be resolved in this appeal is, whether under the facts of the case, the service rendered by plaintiff to defendant constituted "salvage" or "towage", and if so, whether plaintiff may recover from defendant compensation for such service.The pertinent provision of the Salvage Law (Act No. 2616), provides:

"SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage."Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward."According to this provision, those who assist in saving a vessel or its cargo from shipwreck, shall be entitled to a reward (salvage). "Salvage" has been defined as "the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict, or recapture." (Blackwall vs. Saucelito Tug Company, 10 Wall. 1, 12, cited in Erlanger & Galinger vs. Swedish East Asiatic Co., Ltd., 34 Phil. 178.) In the Erlanger & Galinger case, it was held that three elements are necessary to a valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success. 1 Was there a marine peril, in the instant case, to justify a valid salvage claim by plaintiff against defendant? Like the trial court, we do not think there was. It appears that although the defendant's vessel in question was, on the night of May 1, 1958, in a helpless condition due to engine failure, it did not drift too far from the place where it was. As found by the court a quo the weather was fair, clear, and good. The waves were small and too slight, so much so, that there were only ripples on the sea, which was quite smooth. During the towing of the vessel on the same night, there was moonlight. Although said vessel was drifting towards the open sea, there was no danger of its foundering or being stranded, as it was far from any island or rocks. In case of danger of stranding, its anchor could be released, to prevent such occurrence. There was no danger that defendant's vessel would sink in view of the smoothness of the sea and the fairness of the weather. That there was absence of danger is shown by the fact that said vessel or its crew did not even find it necessary to lower its launch and two motor boats, in order to evacuate its passengers aboard. Neither did they find occasion to jettison the vessel's cargo as a safety measure. Neither the passengers nor the cargo were in danger of perishing. All that the vessel's crew members could not do was to

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move the vessel on its own power. That did not make the vessel a quasi-derelict, considering that even before the appellant extended the help to the distress ship, a sister vessel was known to be on its way to succor it.If plaintiff's service to defendant does not constitute "salvage" within the purview of the Salvage Law, can it be considered as a quasi-contract of "towage" created in the spirit of the new Civil Code? The answer seems to incline in the affirmative, for in consenting to plaintiff's offer to tow the vessel, defendant (through the captain of its vessel MV Don Alfredo) thereby impliedly entered into a juridical relation of "towage" with the owner of the vessel MV Henry I, captained by plaintiff, the William Lines, Incorporated."Tug which put line aboard liberty ship which was not in danger or peril but which had reduced its engine speed because of hot grounds, and assisted ship over bar and, thereafter, dropped towline and stood by while ship proceeded to dock under own power, was entitled, in absence of written agreement as to amount to be paid for services, to payment for towage services, and not for salvage services." (Sauce, et al. vs. United States, et al., 107 F. Supp. 489).If the contract thus created, in this case, is one for towage, then only the owner of the towing vessel, to the exclusion of the crew of the said vessel, may be entitled to remuneration."It often becomes material too, for courts to draw a distinct line between salvage and towage; for the reason that a reward ought sometimes to be given to the crew of the salvage vessel and to other participants in salvage services, and such reward should not be given if the services were held to be merely towage." (The Rebecca Shepherd, 148 F. 731.)"The master and members of the crew of a tug were not entitled to participate in payment by liberty ship for services rendered by tug which were towage services and not salvage services." (Sause, et al. vs. United States, et al., supra)."The distinction between salvage and towage is of importance to the crew of the salvaging ship, for the following reasons: If the contract for towage is in fact towage, then the crew does not have any interest or rights in the remuneration pursuant to the contract. But if the owners of the respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the salved vessel for its share." (I Norris, The Law of Seamen, Sec. 222).And, as the vessel-owner, William Lines, Incorporated, had expressly waived its claim for compensation for the towage service

rendered to defendant, it is clear that plaintiff, whose right if at all depends upon and not separate from the interest of his employer, is not entitled to payment for such towage service.Neither may plaintiff invoke equity in support of his claim for compensation against defendant. There being an express provision of law (Art. 2142, Civil Code) applicable to the relationship created in this case, that is, that of a quasi-contract of towage where the crew is not entitled to compensation separate from that of the vessel, there is no occasion to resort to equitable considerations.WHEREFORE, finding no reversible error in the decision of the court a quo appealed from, the same is hereby affirmed in all respects, with costs against the plaintiff-appellant. So ordered.Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and Makalintal, JJ., concur.Footnotes 1. Citing the case of The Mayflower vs. The Sabine, 101 U.S. 384.

E. Special Contracts of Maritime Commerce

1. Charter Parties

(a) Definition page 412(b) Kinds

(1) Bareboat charter(2) Contract of affreightment

Planters Products v. CA, supraCoastwise Lighterage Corp. V. CA, 245 SCRA 796

THIRD DIVISION[G.R. No. 114167. July 12, 1995.]COASTWISE LIGHTERAGE CORPORATION, petitioner, vs. COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.David & Associates Law Offices for petitioner.Fajardo Law Offices for private respondent.

SYLLABUS

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1. CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIER; KINDS OF CHARTER PARTIES; CONTRACT OF AFFREIGHTMENT; DISTINGUISHED FROM BAREBOAT OR DEMISE. — The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of Appeals, wherein we ruled: "Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer, anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. . . . An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. . . ." Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of the aforementioned distinctions between the two.2. ID.; ID.; ID.; ID.; ID.; LIABLE AS A COMMON CARRIER. — Petitioner admits that the contract it entered into with the consignee was one of affreightment. We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage. Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. It

follows then that the presumption of negligence that attaches to common carriers, once the goods it transports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case.3. ID.; ID.; ID.; ID.; ID.; MUST ALSO EXERCISE EXTRAORDINARY DILIGENCE BY PLACING A PERSON WITH NAVIGATIONAL SKILLS. — Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code). Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed, he could be presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence.4. ID.; DAMAGES; INSURANCE COMPANY SHALL BE SUBROGATED TO THE RIGHTS OF THE INSURED AGAINST THE WRONGDOER. — On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule against the petitioner. We have already found petitioner liable for breach of the contract of carriage it entered into with Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo which petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein private respondent PhilGen. Article 2207 of the Civil Code is explicit on this point. Containing the equitable principle of subrogation has been applied in a long line of cases including Compania Maritima v. Insurance Company of North America; Fireman's Fund Insurance Company v. Jamilla & Company, Inc., and Pan Malayan Insurance Corporation v. Court of Appeals, wherein this Court explained: "Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is

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destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operated as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer."

R E S O L U T I O N

FRANCISCO, J p:

This is a petition for review of a Decision rendered by the Court of Appeals, dated December 17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding that herein petitioner is liable to pay herein private respondent the amount of P700,000.00, plus legal interest thereon, another sum of P100,000.00 as attorney's fees and the cost of the suit. cdasiaThe factual background of this case is as follows:Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9," struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches long." 1 As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private respondent, Philippine General Insurance Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value of the damaged cargo of molasses. cdtai

In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial Court of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may have against the carrier, which is presumed to have violated the contract of carriage.The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the Court of Appeals, the award was affirmed.Hence, this petition. cdtThere are two main issues to be resolved herein. First, whether or not petitioner Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it entered into with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier is in turn bound? Second, whether or not the insurer was subrogated into the rights of the consignee against the carrier, upon payment by the insurer of the value of the consignee's goods lost while on board one of the carrier's vessels.On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it was a common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport the shipment of molasses from Negros Oriental to Manila and refers to this contract as a "charter agreement." It then proceeds to cite the case of Home Insurance Company vs. American Steamship Agencies, Inc. 2 wherein this Court held: ". . . a common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private carrier."Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of the court are as follows: aisadc"Accordingly, the charter party contract is one of affreightment over the whole vessel, rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation." 3 The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of Appeals, 4 wherein we ruled:"Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and

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becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer, anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. cdtaOn the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. . . .. . .. An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. . . ."Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of the aforementioned distinctions between the two. cdasiaPetitioner admits that the contract it entered into with the consignee was one of affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage.Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such.The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. cdtaiIt follows then that the presumption of negligence that attaches to common carriers, once the goods it transports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case.The records show that the damage to the barge which carried the cargo of molasses was caused by its hitting an unknown sunken object as it was heading for Pier 18. The object turned out to be a

submerged derelict vessel. Petitioner contends that this navigational hazard was the efficient cause of the accident. Further, it asserts that the fact that the Philippine Coastguard "has not exerted any effort to prepare a chart to indicate the location of sunken derelicts within Manila North Harbor to avoid navigational accidents" 6 effectively contributed to the happening of this mishap. Thus, being unaware of the hidden danger that lies in its path, it became impossible for the petitioner to avoid the same. Nothing could have prevented the event, making it beyond the pale of even the exercise of extraordinary diligence.However, petitioner's assertion is belied by the evidence on record where it appeared that far from having rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties. cdtJesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code) provides:"Article 609. — Captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. . . ."Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed, he could be presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. cdtAs a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence.On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule against the petitioner. We have already found petitioner liable for breach of the contract

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of carriage it entered into with Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo which petitioner-carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein private respondent PhilGen.Article 2207 of the Civil Code is explicit on this point: aisadc"Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract. . . ."This legal provision containing the equitable principle of subrogation has been applied in a long line of cases including Compania Maritima v. Insurance Company of North America, 7 Firesman's Fund Insurance Company v. Jamilla & Company, Inc., 8 and Pan Malayan Insurance Corporation v. Court of Appeals, 9 wherein this Court explained:"Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operated as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer." aisadcUndoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being transported by petitioner Coastwise Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner Coastwise Lighterage.WHEREFORE, premises considered, this petition is DENIED and the appealed decision affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay respondent Philippine General Insurance Company the "principal amount of P700,000.00 plus interest thereon at the legal rate computed from March 29, 1989, the date the complaint was filed

until fully paid and another sum of P100,000.00 as attorney's fees and costs" 10 is likewise hereby AFFIRMED. cdtSO ORDERED.

(c) Forms and Effects, Arts. 652 – 657

ARTICLE 652. A charter party must be drawn in duplicate and signed by the contracting parties, and when either does not know how or is not able to do so, by two witnesses at his request. The charter party shall contain, besides the conditions freely stipulated, the following circumstances:

1. The kind, name, and tonnage of the vessel. 2. Its flag and port of registry. 3. The name, surname, and domicile of the captain.4. The name, surname, and domicile of the ship agent, if the

latter should make the charter party. 5. The name, surname, and domicile of the charterer; and if

he states that he is acting by commission, that of the person for whose account he makes the contract.

6. The port of loading and unloading.7. The capacity, number of tons or the weight or

measurement which they respectively bind themselves to load and to transport, or whether the charter party is total.

8. The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner whatsoever agreed upon.

9. The amount of primage to be paid to the captain. 10. The days agreed upon for loading and unloading. 11. The lay days and extra lay days to be allowed and the

demurrage to be paid for each of them. ARTICLE 653. If the cargo should be received without the charter party having been signed, the contract shall be understood as executed in accordance with what appears in the bill of lading, the sole evidence of title with regard to the cargo for determining the rights and obligations of the ship agent, of the captain, and of the charterer. cdt ARTICLE 654. The charter parties executed with the intervention of a broker, who certifies to the authenticity of the signatures of the contracting parties because they were signed in his presence, shall be full evidence in court; and if they should be conflicting, that which accords with one which the broker must keep in his registry,

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if kept in accordance with law, shall govern. The contracts shall also be admitted as evidence, even though a broker has not taken part therein, if the contracting parties acknowledge the signatures to be the same as their own. If no broker has intervened in the charter party and the signatures are not acknowledged, doubts shall be decided by what is provided for in the bill of lading and in the absence thereof, by the proofs submitted by the parties. ARTICLE 655. Charter parties executed by the captain in the absence of the ship agent shall be valid and effective, even though in executing them he should have acted in violation of the orders and instructions of the ship agent or shipowner; but the latter shall have a right of action against the captain for indemnification of damages. ARTICLE 656. If in the charter party the time in which the loading and unloading are to take place is not stated, the usages of the port where these acts take place shall be observed. After the stipulated or the customary period has passed, and there is no express proviso in the charter party fixing the indemnity for the delay, the captain shall be entitled to demand demurrage for the lay days and extra lay days which may have elapsed in loading and unloading. ARTICLE 657. If during the voyage the vessel should be rendered unseaworthy, the captain shall be obliged to charter at his expense another one in good condition to receive the cargo and carry it to its destination, for which purpose he shall be obliged to look for a vessel not only at the port of arrival but also in the neighborhood within distance of 150 kilometers. If the captain, through indolence or malice, should not furnish a vessel to its destination, the shippers, after requiring the captain to charter a vessel within an inextendible period, may charter one and petition the judicial authority to summarily approve the charter party which they may have made. The same authority shall judicially ("por la via de appremio") compel the captain, to carry out, for his account and under his responsibility, the charter made by the shippers. If the captain, notwithstanding his diligence, should not find a vessel for the charter, he shall deposit the cargo at the disposal of the shippers, to whom he shall communicate the facts on the first opportunity which presents itself, the freight being adjusted in such cases by the distance covered by the vessel, with no right to any indemnification whatsoever

(d) Rights and Obligations of Shipowners,Arts. 669 – 678

ARTICLE 669. The owners or the captain shall observe in charter parties the capacity of the vessel or that expressly designated in the registry of the same, a difference greater than 2 per cent between that stated and her true capacity not being permissible.If the owners or the captain should contract to carry a greater amount of cargo than the vessel can hold, in view of her tonnage, they shall indemnify the freighters whose contracts they do not fulfill for the losses they may have caused them by reason of their default, according to the cases, viz:

If the vessel has been chartered by one freighter only, and there should appear to be an error or fraud in her capacity, and the charterer should not wish to rescind the contract, when he has a right to do so, the charter should be reduced in proportion to the cargo the vessel can not receive, the person from whom the vessel is chartered being furthermore obliged to indemnify the charterer for the losses he may have caused.

If, on the contrary, there should be several charter parties, and by reason of the want of space all the cargo contracted for can not be received, and none of the charterers desires to rescind the contract, preference shall be given to the person who has already loaded and arranged the freight in the vessel, and the rest shall take the place corresponding to them in the order of the dates of their contracts.

Should there be no priority, the charterers may load, if they wish, pro rata of the amounts of weight or space they may have engaged, and the person from whom the vessel was chartered shall be obliged to indemnify them for the loss and damage.

ARTICLE 670. If the person from whom the vessel is chartered, after receiving a part of the freight, should not find sufficient to make up at least three-fifths of the amount which the vessel can hold, at the price he may have fixed, he may substitute for the transportation another vessel inspected and declared suitable for the same voyage, the expenses of transfer being defrayed by him, as well as the increase, should there be any, in the price of the charter. Should he not be able to make this change, the voyage shall be undertaken at the time agreed upon; and should no time have been fixed, within fifteen days from the time

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of beginning to load, should nothing to the contrary have been stipulated.

If the owner of the part of the freight already loaded should procure some more at the same price and under similar or proportionate conditions to those accepted for the freight received, the person from whom the vessel is chartered or the captain can not refuse to accept the rest of the cargo; and should he do so, the freighter shall have a right to demand that the vessel put to sea with the cargo she may have on board.

ARTICLE 671. After three-fifths of the vessel is loaded, the person from whom she is chartered can not, without the consent of the charterers or freighters substitute the vessel designated in the charter party by another one, under the penalty of making himself thereby liable for all the losses and damages occurring during the voyage to the cargo of the person who did not consent to the change.

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

ARTICLE 673. The person from whom the vessel is chartered shall be liable for all the losses caused the charterer by reason of the voluntary delay of the captain in putting to sea, according to the rules prescribed, provided he has been requested to put to sea at the proper time through a notary or judicially.

ARTICLE 674. If the charterer should carry to the vessel more freight than that contracted for, the excess may be admitted in accordance with the price stipulated in the contract, if it can be well stowed without injuring the other freighters, but if in order to stow said freight it should be necessary to stow it in such manner as to throw the vessel out of trim the captain must refuse it or unload it at the expense of its owner.The captain may likewise, before leaving the port, unload the merchandise placed on board clandestinely, or transport it, if he can do so and keep the vessel in trim, demanding by way of freightage the highest price which may have been stipulated for said voyage.

ARTICLE 675. If the vessel has been chartered to receive the cargo in another port, the captain shall appear before the consignee designated in the charter party, and, should the latter not deliver the cargo to him, he shall inform the charterer and await his instructions, and in the meantime the lay days agreed upon shall begin to run, or those allowed by custom in the port, unless there is a special agreement to the contrary.Should the captain not receive an answer within the time necessary therefor, he shall make efforts to find freight; and should he not find any after the lay days and extra lay days have elapsed, he shall make a protest and return to the port where the charter was made.The charterer shall pay the freightage in full, discounting that which may have been earned on the merchandise which may have been carried on the voyage out or on the return trip, if carried for the account of third persons.The same shall be done if a vessel, having been chartered for the round trip, should not be given any cargo for her return.

ARTICLE 676. The captain shall lose the freightage and shall indemnify the charterers if the latter should prove, even against the certificate of inspection, should one have taken place at the port of departure, that the vessel was not in a condition to navigate at the time of receiving the cargo.

ARTICLE 677. The charter party shall be enforced if the captain should not have any instructions from the charterer, and a declaration of war or a blockade should take place during the voyage.In such case the captain shall be obliged to make the nearest safe and neutral port, and request and await orders from the freighter; and the expenses incurred and salaries earned during the detention shall be paid as general average.If, by orders of the freighter, the cargo should be discharged at the port of arrival, the freight for the voyage out shall be paid in full.

ARTICLE 678. If the time necessary, in the opinion of the judge or court, in which to receive orders from the freighters should have elapsed without the captain having received any instructions, the cargo shall be deposited, and it shall be liable for the payment of the freight and expenses incurred by reason of the delay which shall be paid from the proceeds of the part first sold.

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(e) Obligations of charterers, Arts. 679-687

ARTICLE 679. The charterer of an entire vessel may subcharter the whole or part thereof for the amounts he may consider most convenient, without the captain being allowed to refuse to receive on board the freight delivered by the second charterers, provided the conditions of the first charter are not changed, and that the person from whom the vessel is chartered be paid the full price agreed upon even though the full cargo is not embarked, with the limitation established in the next article.

ARTICLE 680. A charterer who does not make up the full cargo he bound himself to ship shall pay the freightage of the amount he fails to ship, if the captain did not take other freight to make up the cargo of the vessel, in which case he shall pay the first charterer the difference should there be any.

ARTICLE 681. If the charterer should ship goods different from those indicated at the time of executing the charter party, without the knowledge of the person from whom the vessel was chartered or of the captain, and should thereby give rise to losses, by reason of confiscation, embargo, detention, or other causes, to the person from whom the vessel was chartered or to the shippers, the person giving rise thereto shall be liable with the value of his shipment and furthermore with his property, for the full indemnity to all those injured through his fault.ARTICLE 682. If the merchandise shipped should have been for the purpose of illicit commerce, and was taken on board with the knowledge of the person from whom the vessel was chartered or of the captain, the latter, jointly with the owner of the same, shall be liable for all the losses which may be caused the other shippers, and even though it may have been agreed, they can not demand any indemnity whatsoever of the charterer for the damage caused the vessel.

ARTICLE 683. In case of making a port to repair the hull, machinery, or equipment of the vessel, the freighters must wait until the vessel is repaired, being permitted to unload her at their own expense should they deem it advisable.

If, for the benefit of the cargo subject to deterioration, the freighters or the court, or the consul, or the competent authority in a foreign land should order the merchandise to be unloaded, the expenses of loading and unloading shall be for the account of the former.

ARTICLE 684. If the charterer, without the occurrence of any of the cases of force majeure mentioned in the foregoing article, should wish to unload his merchandise before arriving at the port of destination, he shall pay the full freight, the expenses of the stop made at his request, and the losses and damages caused the other freighters, should there be any.

ARTICLE 685. In charters for transportation of general freight any of the freighters may unload the merchandise before the beginning of the voyage, by paying one-half the freight, the expense of stowing and restowing the cargo, and any other damage which may be caused the other shippers.

ARTICLE 686. After the vessel has been unloaded and the cargo placed at the disposal of the consignee, the latter must immediately pay the captain the freight due and the other expenses to which he may be liable for said cargo.The primage must be paid in the same proportion and at the same time as the freight, all the changes and modifications to which the latter should be subject also governing the former.

ARTICLE 687. The charters and freighters can not abandon merchandise damaged on account of the inherent vice of the goods or by reason of an accidental case, for the payment of the freight and other expenses. aisadcThe abandonment shall be proper, however, if the cargo should consist of liquids and should they have leaked out, there not remaining in the containers more than one-quarter of their contents.

(f) Rescission, Arts. 688 to 692

ARTICLE 688. A charter party may be annulled at the request of the charterer:1. If before loading the vessel he should abandon the charter, paying half of the freightage agreed upon.

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2. If the capacity of the vessel should not agree with that stated in the certificate of the tonnage, or if there is an error in the statement of the flag under which she sails.3. If the vessel should not be placed at the disposal of the charterer within the period and in the manner agreed upon.4. If, after the vessel has put to sea, she should return to the port of departure, on account of risk of pirates, enemies, or bad weather, and the freighters should agree to unload her.

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

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

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

From one port to another of the Peninsula and adjacent islands, the freightage for one month only shall be paid.5. If a vessel should make a port during the voyage in order to make urgent repairs and the freighters should prefer to dispose of the merchandise.

When the delay does not exceed thirty days, the freighters shall pay the full freight for the voyage out.

Should the delay exceed thirty days, they shall only pay the freight in proportion to the distance covered by the vessel.

ARTICLE 689. At the request of the person from whom the vessel is chartered the charter party may be rescinded:1. If the charterer at the termination of the extra lay days does not place the cargo alongside the vessel.

In such case the charterer must pay half the freight stipulated besides the demurrage for the lay days and extra lay days elapsed.2. If the person from whom the vessel was chartered should sell her before the charterer has begun to load her and the purchaser should load her for his own account.

In such case the vendor shall indemnify the charterer for the losses he may suffer.

If the new owner of the vessel should not load her for his own account the charter party shall be respected, and the vendor

shall indemnify the purchaser if the former did not inform him of the charter pending at the time of making the sale.

ARTICLE 690. The charter party shall be rescinded and all action arising therefrom shall be extinguished if, before the vessel puts to sea from the port of departure, any of the following cases should occur:1. A declaration of war or interdiction of commerce with the power to whose ports the vessel was going to sail.2. A condition of blockade of the port of destination of said vessel, or the breaking out of an epidemic after the contract was executed.3. The prohibition to receive the merchandise of the vessel at the said port.4. An indefinite detention, by reason of an embargo of the vessel by order of the government or for any other reason independent of the will of the agent.5. The impossibility of the vessel to navigate, without fault of the captain or agent.The unloading shall be made for the account of the charterer.

ARTICLE 691. If the vessel can not put to sea on account of the closing of the port of departure, or any other temporary cause, the charter shall be in force without any of the contracting parties having a right to claim damages.The subsistence and wages of the crew shall be considered as general average.During the interruption the charterer may, at the proper time and for his own account, unload and load the merchandise, paying demurrage if the reloading should continue after the reason for the detention has ceased.

ARTICLE 692. A charter party shall be partially rescinded, unless there is an agreement to the contrary, and the captain shall only be entitled to the freight for the voyage out, if, by reason of a declaration of war, closing of ports, or interdiction of commercial relations during the voyage, the vessel should make the port designated for such a case in the instructions of the charterer.

2. Loans on Bottomry and Respondentia

(a) Loan on Bottomry, defined page 442(b) Loan on Respondentia, defined

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(c) Character of Loan, Art. 719

ARTICLE 719. A loan on bottomry or respondentia shall be considered that which the repayment of the sum loaned and the premium stipulated, under any condition whatsoever, depends on the safe arrival in port of the goods on which it is made, or of their value in case of accident.

(d) Forms and Requisites, Arts. 720-722

ARTICLE 720. Loans on bottomry or respondentia may be executed:1. By means of a public instrument.2. By means of a bond signed by the contracting parties and the broker who took part therein. cdt3. By means of a private instrument.Under whichever of these forms the contract is executed, it shall be entered in the certificate of the registry of the vessel and shall be recorded in the commercial registry, without which requisites the credits originating from the same shall not have, with regard to other credits, the preference which, according to their nature, they should have, although the obligation shall be valid between the contracting parties.The contracts made during a voyage shall be governed by the provisions of Articles 583 and 611, and shall be effective with regard to third persons from the date of their execution, if they should be recorded in the commercial registry of the port of registry of the vessel before eight days have elapsed from the date of her arrival. If said eight days should elapse without the record having been made in the commercial registry, the contracts made during the voyage of a vessel shall not have any effect with regard to third persons, except from the day and date of their entry.In order that the bonds of the contracts celebrated in accordance with No. 2 may have legal force, they must conform to the registry of the broker who took part therein. In those celebrated in accordance with No. 3 the acknowledgment of the signature must precede.Contracts which are not reduced to writing shall not be the basis for a judicial action.

ARTICLE 721. In a bottomry or respondentia bond there must be stated:1. The kind, name, and registry of the vessel.

2. The name, surname, and domicile of the captain.3. The names, surnames, and domicile of the person giving and of the person receiving the loan.4. The amount of the loan and the premium stipulated.5. The time for repayment.6. The goods pledged to secure repayment.7. The voyage for which the risk is run.

ARTICLE 722. The bonds may be issued to order, in which case they shall be transferable by indorsement, and the assignee shall acquire all the rights and run all the risks corresponding to the indorser.

(e) On What Constituted, Art. 724-725

ARTICLE 724. The loans may be constituted jointly or separately:1. On the hull of the vessel.2. On the rigging.3. On the equipment, provisions, and fuel.4. On the engine, if the vessel is a steamer.5. On the cargo.If the loan is constituted on the hull of the vessel, there shall be understood as also subject to the liability of the loan, the rigging, equipment and other goods, provisions, fuel, steam engines, and the freight earned during the voyage subject to the loan. cdtaIf the loan is made on the cargo, all that constitutes the same shall be subject to the repayment; and if on a particular object of the vessel or of the cargo, the object exclusively and specifically mentioned only shall be liable.

ARTICLE 725. No loans can be made on the salaries of the crew, nor on the profits which it is expected to earn.

(f) Amount, Arts. 723, 726-727

ARTICLE 723. Loans may be made in goods and in merchandise, their value being fixed in order to determine the amount of the loan.

ARTICLE 726. If the lender should prove that he loaned a larger amount than the value of the article liable for the bottomry loan, by reason of fraudulent measures employed by the borrower

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the loan shall only be valid for the amount at which said object is appraised by experts.The surplus principal shall be returned with legal interest for the whole period of the duration of the disbursement.

ARTICLE 727. If the full amount of the loan contracted to load the vessel should not be made use of for the cargo, the surplus shall be returned before clearing.The same procedure shall be observed with regard to the goods taken as a loan if they could not all have been loaded.

(g) By Whom, Arts 728, 617, 611, 583

ARTICLE 728. The loan which the captain takes at the point of residence of the owners of the vessel shall only affect that part of the latter which belongs to the captain, if the other owners or their agents should not have given their express authorization thereto or should not have taken part in the transaction.

If one or more of the owners should be requested to furnish the amount necessary to repair or provision the vessel, and should not do so within twenty-four hours, the interest which the parties in default may have in the vessel shall be liable for the loan in the proper proportion.Outside of the residence of the owners the captain may contract loans in accordance with the provisions of Articles 583 and 611.

ARTICLE 617. The captain can not contract loans on respondentia, and should he do so the contracts shall be void.

Neither can he borrow money on bottomry for his own transactions, except on the portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and provided there does not exist any other kind of lien or obligation thereon. When he is permitted to do so, he must necessarily state what interest he has in the vessel.

In case of violation of this article the principal, interest, and costs shall be charged to the private account of the captain, and the agent may furthermore have the right to discharge him.

ARTICLE 611. In order to comply with the obligations mentioned in the foregoing article, the captain, when he has no

funds and does not expect to receive any from the agent, shall procure the same in the successive order stated below:1. By requesting said funds of the consignees or correspondents of a vessel.2. By applying to the consignees of the cargo or to the persons interested therein.3. By drawing on the agent.4. By borrowing the amount required by means of a bottomry bond.5. By selling a sufficient amount of the cargo to cover the amount absolutely necessary to repair the vessel, and to equip her to pursue the voyage. cdIn the two latter cases he must apply to the judicial authority of the port, if in Spain * and to the Spanish * consul, if in a foreign country; and where there should be none, to the local authority, proceeding in accordance with the prescriptions of Article 583, and with the provisions of the law of civil procedure.

ARTICLE 583. If the ship being on a voyage the captain should find it necessary to contract one or more of the obligations mentioned in Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he is in Spanish * territory, and otherwise to the consul of Spain, * should there be one, and, in his absence to the judge or court or to the proper local authority, presenting the certificate of the registry of the vessel treated of in Article 612, and the instruments proving the obligation contracted.

The judge or court, the consul or the local authority as the case may be, in view of the result of the proceedings instituted, shall make a temporary memorandum in the certificate of their result, in order that it may be recorded in the registry when the vessel returns to the port of her registry, or so that it can be admitted as a legal and preferred obligation in case of sale before the return, by reason of the sale of the vessel by virtue of a declaration of unseaworthiness.The lack of this formality shall make the captain personally liable to the creditors who may be prejudiced through his fault.

(h) Effects of Contract, Arts. 719, 729, 726, 727, 730

ARTICLE 719. A loan on bottomry or respondentia shall be considered that which the repayment of the sum loaned and the

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premium stipulated, under any condition whatsoever, depends on the safe arrival in port of the goods on which it is made, or of their value in case of accident.

ARTICLE 729. Should the goods on which money is taken not be subjected to any risk, the contract shall be considered an ordinary loan, the borrower being under the obligation to return the principal and interest at the legal rate, if the interest stipulated should not have been lower.

ARTICLE 726. If the lender should prove that he loaned a larger amount than the value of the article liable for the bottomry loan, by reason of fraudulent measures employed by the borrower the loan shall only be valid for the amount at which said object is appraised by experts.The surplus principal shall be returned with legal interest for the whole period of the duration of the disbursement.

ARTICLE 727. If the full amount of the loan contracted to load the vessel should not be made use of for the cargo, the surplus shall be returned before clearing.The same procedure shall be observed with regard to the goods taken as a loan if they could not all have been loaded.

ARTICLE 730. Loans made during the voyage shall have preference over those made before the clearing of the vessel, and they shall be graduated by the inverse order to that of their dates.The loans for the last voyage shall have preference over prior ones.Should several loans have been made at a port made under stress and for the same purpose, all of them shall be paid pro rata.

ARTICLE 731. The actions pertaining to the lender shall be extinguished by the absolute loss of the goods on which the loan was made, if it arose from an accident of the sea at the time and during the voyage designated in the contract, and it is proven that the cargo was on board; but this shall not take place if the loss was caused by the inherent defect of the thing, or through the fault or malice, of the borrower, or barratry on the part of the captain, or if it was caused by damages suffered by the vessel as a consequence of being engaged in contraband, or if it arose from having loaded the merchandise on a vessel different from that designated in the contract, unless this change should have been made by reason of force majeure. Proof of the loss as well as of the existence in the

vessel of the goods declared to the lender as the object of the loan is incumbent upon him who received the loan.

ARTICLE 732. Lenders on bottomry or respondentia shall suffer, in proportion to their respective interest, the general average which may take place in the goods on which the loan is made. In particular averages, in the absence of an express agreement between the contracting parties, the lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of risks excepted in the foregoing article. ARTICLE 733. Should the period during which the lender shall run the risk not have been stated in the contract, it shall last, with regard to the vessel, engines, rigging, and equipment, from the moment said vessel puts to sea until she drops anchor in the port of destination; and with regard to the merchandise, from the time they are loaded at the shore or wharf of the port of shipment until they are unloaded in the port of consignment. aisadc

ARTICLE 734. In case of shipwreck, the amount liable for the payment of the loan shall be reduced to the proceeds of the goods saved, after deducting the costs of the salvage. If the loan should be on the vessel or any of its parts, the freightage earned during the voyage for which said loan was contracted shall also be liable for its payment, as far as it may reach.

ARTICLE 735. If the same vessel or cargo should be the object of a loan on bottomry or respondentia and marine insurance, the value of what may be saved in case of shipwreck shall be divided between the lender and the insurer, in proportion to the legitimate interest of each one, taking into consideration, for this purpose only, the principal with respect to the loan, and without prejudice to the right of preference of other creditors in accordance with Article 580.

F. Bill of Lading

1. Contents, Arts. 706, 707, 713, 714

ARTICLE 706. The captain and the freighter of the vessel are obliged to draft the bill of lading, in which there shall be stated:

1. The name, registry, and tonnage of the vessel.

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2. The name of the captain and his domicile.3. The port of loading and that of unloading.4. The name of the shipper.5. The name of the consignee, if the bill of lading is issued to order.6. The quantity, quality, number of packages, and marks of the merchandise.7. The freight and the primage stipulated.The bill of lading may be issued to bearer, to order, or in the name of a specific person, and must be signed within twenty-four hours after the cargo has been received on board, the freighter being able to request the unloading thereof at the expense of the captain should he not sign it, and in every case indemnity for the losses and damages suffered thereby.

ARTICLE 707. Four true copies of the original bill of lading shall be made, all of which shall be signed by the captain and by the freighter. Of these copies the freighter shall keep one and send another to the consignee; the captain shall take two, one for himself and another for the agent.

There may, furthermore, be made as many copies of the bill of lading as may be considered necessary by the persons interested; but when they are issued to order or to the bearer there shall be stated in all the copies, be they either of the first four or of the subsequent ones, the destination of each one, stating whether it is for the agent, for the captain, for the freighter, or for the consignee. If the copy sent to the latter should be duplicated there must be stated in said duplicate this fact, and that it is not valid except in case of the loss of the first one.

ARTICLE 713. If before delivering the cargo a new bill of lading should be demanded of the captain, it being alleged that the previous ones are not presented on account of their loss or for any other sufficient cause, he shall be obliged to issue it, provided security for the value of the cargo is given to his satisfaction; but without changing the consignment and stating therein the circumstances prescribed in the last paragraph of Article 707, when the bills of lading referred to therein are in question, under the penalty otherwise to be liable for said cargo if not properly delivered through his fault.

ARTICLE 714. If before the vessel puts to sea the captain should die or should discontinue in his position through any accident, the freighters shall have a right to demand of the new captain the ratification of the first bills of lading, and the latter must do so, provided all the copies previously issued be presented or returned to him, and it should appear from an examination of the cargo that they are correct.The expenses arising from the examination of the cargo shall be defrayed by the agent, without prejudice to the right of action of the latter against the first captain, if he ceased to be such through his own fault. Should said examination not be made, it shall be understood that the new captain accepts the cargo as it appears from the bills of lading issued.

2. Probative Value, Arts. 709, 710ARTICLE 709. A bill of lading drawn up in accordance with the provisions of this title shall be proof as between all those interested in the cargo and between the latter and the underwriters, proof to the contrary being reserved by the latter.

ARTICLE 710. Should the bills of lading not agree, and there should not be observed any correction or erasure in any of them, those possessed by the freighter or consignee signed by the captain shall be proof against the captain or agent in favor of the consignee or freighter; and those possessed by the captain or agent signed by the freighter shall be proof against the freighter or consignee in favor of the captain or agent.

G. Passengers on Sea Voyage

1. Nature of Contract, Art. 695

ARTICLE 695. The right to passage, if issued to a specified person, can not be transferred without the consent of the captain or of the consignee.

2. Obligations of Passengers, Arts. 693, 699, 704, 694, 700

ARTICLE 693. Should the passage price not have been agreed upon, the judge or court shall summarily fix it, after a statement of experts.

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ARTICLE 699. After the contract has been rescinded, before or after the commencement of the voyage, the captain shall have a right to claim payment for what he may have furnished the passengers.

ARTICLE 704. The captain, in order to collect the price of the passage and expenses of maintenance, may retain the goods belonging to the passenger, and in case of the sale of the same he shall be given preference over the other creditors, acting in the same way as in the collection of freight.

ARTICLE 694. Should the passenger not arrive on board at the time fixed, or should leave the vessel without permission from the captain, when the latter is ready to leave the port, the captain may continue the voyage and demand the full passage price.

ARTICLE 700. In all that relates to the preservation of order and police on board the vessel the passengers shall conform to the orders given by the captain, without any distinction whatsoever.

3. Rights of Passengers, Arts. 697, 698

ARTICLE 697. If before beginning the voyage it should be suspended through the sole fault of the captain or agent, the passengers shall be entitled to have their passage refunded and to recover for losses and damages; but if the suspension was due to an accidental cause, or to force majeure, or to any other cause beyond the control of the captain or agent, the passengers shall only be entitled to the return of the passage money.ARTICLE 698. In case a voyage already begun should be interrupted the passengers shall be obliged only to pay the passage in proportion to the distance covered, and shall not be entitled to recover for losses and damages if the interruption is due to an accidental cause or to force majeure, but have a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be by reason of the disability of the vessel, and the passenger should agree to await her repair, he can not be required to pay any increased price of passage, but his living expenses during the delay shall be for his own account.

In case the departure of the vessel is delayed the passengers have a right to remain on board and to be furnished with food for the account of the vessel, unless the delay is due to an accidental

cause or to force majeure. If the delay should exceed ten days, the passengers who request it shall be entitled to the return of the passage; and if it were due exclusively to the captain or agent they may furthermore demand indemnity for losses and damages.

A vessel which is exclusively destined to the transportation of passengers must take them directly to the port or ports of destination, no matter what the number of passengers may be, making all the stops indicated in her itinerary.

Sweet Lines v. CA, 121 SCRA 769

FIRST DIVISION[G.R. No. L-46340. April 28, 1983.]SWEET LINES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, MICAELA B. QUINTOS, FR. JOSE BACATAN, S.J., MARCIANO CABRAS and ANDREA VELOSO, respondents.Felixberto Leonardo and Ramon Tuangco for petitioner.Expedito P. Bugarin for respondents.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; FAILURE TO FULFILL UNDERTAKING AND/OR INTERRUPTION OF TRIP; LIABILITY FOR DAMAGES; EXISTENCE OF FORTUITOUS EVENT. A CRUCIAL FACTOR. — The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to damages and indemnity exists against a captain who fails to fulfill his undertaking or where the interruption has been caused by the captain exclusively. As found by both Courts below, there was no fortuitous event or force majeure which prevented the vessel from fulfilling its undertaking of taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier are not considered a caso fortuito that exempts the carrier from responsibility (Landingin vs. Pangasinan Transportation Co., 33 SCRA 284 [1970]). In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the delay in departure. When the vessel finally left the port of Cebu on July 10, 1972, there was no longer any force mucure that justified by-passing a port of call. The vessel was completely repaired the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left the next day for Manila to complete its voyage.

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2. ID.; ID.; LIABILITY; MAY NOT BE DIMINISHED OR CANCELLED BY CONDITIONS PRINTED AT THE BACK OF THE TICKET. — In defense, petitioner cannot rely on the conditions in small hold print at the back of the ticket. Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not comply with the same. It did not cancel the ticket nor did it refund the value of the tickets to private respondents. Besides, it was not the vessel's sailing schedule that was involved. Private respondents' complaint is directed not at the delayed departure the next day but at the by-passing of Catbalogan, their destination. Had petitioner notified them previously, and offered to bring them to their destination at its expense, or refunded the value of the tickets purchased, perhaps, this controversy would not have arisen. Furthermore, the conditions relied upon by petitioner cannot prevail over Articles 614 and 698 of the Code of Commerce heretofore quoted.3. ID.; ID.; CIVIL LIABILITY OF OWNER AND SHIP AGENT. — The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The "interruption" was not due to fortuitous event or force majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the passengers' right to indemnity is evident. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain.4. ID.; MORAL DAMAGES; RECOVERABLE IN THE CASE AT BAR. — Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner. That finding of bad faith is binding on this Court, since it is not the function of the Court to analyze and review evidence on this point all over again, aside from the fact that the Court finds it faithful to the meaning of bad faith enunciated thus: "Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or fraternal interest, and not personal illwill, may have been the motive, but it is malice nevertheless." Under the circumstances, however, the Court finds the award of moral damages excessive and accordingly reduce them to P3,000.00, respectively, for each of the private respondents.5. ID.; ATTORNEY'S FEES; AWARD HELD REASONABLE. — The total award of attorney's fees of P5,000.00 is in order considering that the case has reached this Tribunal.

6. ID.; EXEMPLARY DAMAGES; AWARD DISCRETIONARY UPON THE COURT. — Insofar as exemplary damages are concerned, although there was bad faith, the Court is not inclined to grant them in addition to moral damages. Exemplary damages cannot be recovered as a matter of right; the Court decides whether or not they should be adjudicated. The objective to meet its schedule might have been called for, but petitioner should have taken the necessary steps for the protection of its passengers under its contract of carriage.7. ID.; ACTUAL OR COMPENSATORY DAMAGES; NOT MITIGATED WHEN HARM OUTWEIGHS BENEFIT. — Article 2215(2) of the Civil Code invoked by petitioner is inapplicable herein. The harm done to private respondents outweighs any benefits they may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel's first port of call, pursuant to its normal schedule.

R E S O L U T I O N

MELENCIO-HERRERA, J p:

For having by-passed a port of call without previous notice, petitioner shipping company and the ship captain were sued for damages by four of its passengers, private respondents herein, before the then Court of First Instance of Cebu, Branch VIII.Briefly, the facts of record show that private respondents purchased first-class tickets from petitioner at the latter's office in Cebu City. They were to board petitioner's vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the scheduled hour of about midnight on July 8, 1972, the vessel set sail at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to engine trouble, arriving there at about 4:00 P.M. on the same day. Repairs having been accomplished, the vessel lifted anchor again on July 10, 1972 at around 8:00 A.M.Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to Tacloban at around 9:00 P.M. of July 10, 1972. Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan.Hence, this suit for damages for breach of contract of carriage which the Trial Court, affirmed by respondent Appellate Court, awarded as follows:

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"IN THE LIGHT OF THE FOREGOING OBSERVATIONS, judgment is rendered ordering the defendant Sweet Lines, Incorporated to pay to the plaintiffs the following:"1) P75,000.00 as moral damages divided among the plaintiffs as follows: P30,000.00 for Mrs. Micaela B. Quintos, P25,000.00 for Jesuit Father Jose Bacatan; P10,000.00 for Mrs. Andrea Veloso and P10,000.00 for plaintiff Mike Cabras;2) P30,000.00 as exemplary or corrective damages;3) Interest at the legal rate of 6% per annum on the moral and exemplary damages as set forth above from the date of this decision until said damages are fully paid;4) P5,000.00 as attorney's fees; and5) The costs.Counterclaim dismissed."The governing provisions are found in the Code of Commerce and read as follows:"ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being prevented by fortuitous event or force majeure, shall indemnify all the losses which his failure may cause, without prejudice to criminal penalties which may be proper.and"ART. 698. In case of interruption of a voyage already begun, the passengers shall only be obliged to pay the fare in proportion to the distance covered, without right to recover damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity, if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel, and the passenger should agree to wait for her repairs, he may not be required to pay any increased fare of passage, but his living expenses during the delay shall be for his own account."The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to damages and indemnity exists against a captain who fails to fulfill his undertaking or where the interruption has been caused by the captain exclusively.As found by both Courts below, there was no fortuitous event or force majeure which prevented the vessel from fulfilling its undertaking of taking private respondents to Catbalogan. In the first place, mechanical defects in the carrier are not considered a caso fortuito that exempts the carrier from responsibility. 1 In the second place, even granting arguendo that the engine failure was a fortuitous event, it accounted only for the delay in departure.

When the vessel finally left the port of Cebu on July 10, 1972, there was no longer any force majeure that justified by-passing a port of call. The vessel was completely repaired the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left the next day for Manila to complete its voyage. 2 The reason for by-passing the port of Catbalogan, as admitted by petitioner's General Manager, was to enable the vessel to catch up with its schedule for the next week. The record also discloses that there were 50 passengers for Tacloban compared to 20 passengers for Catbalogan, 3 so that the Catbalogan phase could be scrapped without too much loss for the company. CdprIn defense, petitioner cannot rely on the conditions in small bold print at the back of the ticket reading:"The passenger's acceptance of this ticket shall be considered as an acceptance of the following conditions:3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier reserves the right to bring the passenger to his/her destination at the expense of the carrier or to cancel the ticket and refund the passenger the value of his/her ticket;xxx xxx xxx11. The sailing schedule of the vessel for which this ticket was issued is subject to change without previous notice." (Exhibit "1-A").Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not comply with the same. It did not cancel the ticket nor did it refund the value of the tickets to private respondents. Besides, it was not the vessel's sailing schedule that was involved. Private respondents' complaint is directed not at the delayed departure the next day but at the by-passing of Catbalogan, their destination. Had petitioner notified them previously, and offered to bring them to their destination at its expense, or refunded the value of the tickets purchased, perhaps, this controversy would not have arisen.Furthermore, the conditions relied upon by petitioner cannot prevail over Articles 614 and 698 of the Code of Commerce heretofore quoted.The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The "interruption" was not due to fortuitous event or for majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the passengers' right to indemnity is evident. The

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owner of a vessel and the ship agent shall be civilly liable for the acts of the captain. 4 Under Article 2220 of the Civil Code, moral damages are justly due in breaches of contract where the defendant acted fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there was bad faith on the part of petitioner in that: Cdpr"(1) Defendants-appellants did not give notice to plaintiffs-appellees as to the change of schedule of the vessel;(2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the damaged engine, defendants-appellants instead made announcement of assurance that the vessel would leave within a short period of time, and when plaintiffs-appellees wanted to leave the port and gave up the trip, defendants-appellants' employees would come and say, `we are leaving, already.'(3) Defendants-appellants did not offer to refund plaintiffs-appellees' tickets nor provide them with transportation from Tacloban City to Catbalogan. 5 That finding of bad faith is binding on us, since it is not the function of the Court to analyze and review evidence on this point all over again 6 aside from the fact that we find it faithful to the meaning of bad faith enunciated thus:"Bad faith means a breach of a known duty through some motive or interest or illwill. Self-enrichment or fraternal interest, and not personal illwill, may have been the motive, but it is malice nevertheless." 7 Under the circumstances, however, we find the award of moral damages excessive and accordingly reduce them to P3,000.00, respectively, for each of the private respondents.The total award of attorney's fees of P5,000.00 is in order considering that the case has reached this Tribunal.Insofar as exemplary damages are concerned, although there was bad faith, we are not inclined to grant them in addition to moral damages. Exemplary damages cannot be recovered as a matter of right; the Court decides whether or not they should be adjudicated. 8 The objective to meet its schedule might have been called for, but petitioner should have taken the necessary steps for the protection of its passengers under its contract of carriage. llcdArticle 2215(2) of the Civil Code 9 invoked by petitioner is in-applicable herein. The harm done to private respondents outweighs any benefits they may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel's first port of call, pursuant to its normal schedule.

ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby sentenced to indemnify private respondents in the sum of P3,000.00 each, without interest, plus P1,250.00, each, by way of attorney's fees and litigation expenses.Costs against petitioner.SO ORDERED.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Footnotes

1. Son vs. Cebu Autobus Co., 94 Phil. 892 (1954); Necesito vs. Paras, 104 Phil. 75 (1958); Landingin vs. Pangasinan Transportation Co., 33 SCRA 284 (1970). 2. T.s.n., March 23, 1973, pp. 75; 84. 3. T.s.n., June 14, 1973, p. 178. 4. Article 586, Code of Commerce. 5. Decision, p. 13. 6. Tiongco vs. de la Merced, 58 SCRA 89 (1974). 7. Lopez vs. Pan American World Airways, 16 SCRA 431 (1966). 8. Article 2233, Civil Code. 9. Art. 2215. In Contracts, quasi-contracts. and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the following instances:

xxx xxx xxx

(2) That the plaintiff has derived some benefit as a result of the contract:

xxx xxx xxx

Trans-Asia Shipping v. CA, 254 SCRA 260

THIRD DIVISION[G.R. No. 118126. March 4, 1996.]TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and ATTY. RENATO T. ARROYO, respondents.Jose M. Perez for petitioner.Renato T. Arroyo for private respondent.

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SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIERS; APPLICABLE LAWS. — There was, between the petitioner and the private respondent, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws.2. ID.; ID.; ID.; SAFETY OF PASSENGERS; EXTRAORDINARY DILIGENCE REQUIRED. — Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the private respondent safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.3. ID.; ID.; ID.; ID.; VIOLATED WHERE VESSEL IS UNSEAWORTHY. — For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.4. ID.; ID.; ID.; ID.; ID.; LIABILITY FOR DAMAGES. — As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides: Damages . . . in this Section shall be awarded in accordance with Title XVIII of this Book, . . . The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary.5. ID.; DAMAGES; ACTUAL OR COMPENSATORY DAMAGES. — Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude.6. ID.; ID.; MORAL DAMAGES; WHEN AVAILABLE. — Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they

are the proximate result of, as in this case, the petitioner's breach of the contract of carriage. Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith.7. ID.; ID.; EXEMPLARY DAMAGES. — Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated. Before this court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof.8. CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIERS; DELAY AFTER COMMENCEMENT OF VOYAGE FOR FAILURE TO OBSERVE EXTRAORDINARY DILIGENCE; LIABILITY FOR PECUNIARY LOSS; ACTUAL DAMAGES MUST BE DULY PROVED. — There was no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, specifically, when the voyage was subsequently interrupted when the vessel had to stop after the only functioning engine conked out. As to the rights and duties of the parties strictly arising out of such delay, Article 698 of the Code of Commerce specifically provides for such a situation which applies suppletorily pursuant to Article 1766 of the Civil Code. The cause of the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that petitioner is liable for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. Any further delay then in the private respondent's arrival at the port of destination was caused by his decision to disembark. At any rate, his actual or compensatory damages must be proved, but private respondent failed to do so. There is no convincing evidence that he did not receive his salary nor that his absence was not excused.

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9. ID.; ID.; ID.; FAILURE TO OBSERVE EXTRAORDINARY DILIGENCE; LIABLE FOR MORAL AND EXEMPLARY DAMAGES. — Petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner.10. ID.; DAMAGES; ATTORNEY'S FEES; NOT PROPER IN CASE AT BAR. — We cannot give our affirmance to the award of attorney's fees. Under Article 2208 of the Civil Code, these are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, to merit such an award, it is settled that the amount thereof must be proven. Moreover, such must be specifically prayed for — as was not done in this case — and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable." Finally, it must be noted that aside from the following, the body of the respondent Court's decision was devoid of any statement regarding attorney's fees.

D E C I S I O N

DAVIDE, JR., J p:

As formulated by the petitioner, the issue in this petition for review on certiorari under Rule 45 of the Rules of Court is as follows:In case of interruption of a vessel's voyage and the consequent delay in that vessel's arrival at its port of destination, is the right of a passenger affected thereby to be determined and governed by the vague Civil Code provision on common carriers, or shall it be, in the absence of a specific provision thereon, governed by Art. 698 of the Code of Commerce? 1 The petitioner considers it a "novel question of law."Upon a closer evaluation, however, of the challenged decision of the Court of Appeals of 23 November 1994, 2 vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491 of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 24, 3 as well as the allegations and arguments adduced by the parties, we find the petitioner's formulation of the issue imprecise. As this Court sees it, what stands for resolution is a common carrier's liability for damages to a passenger who disembarked from the vessel upon its return to the port of origin, after it suffered engine trouble and had

to stop at sea, having commenced the contracted voyage on one engine.The antecedents are summarized by the Court of Appeals as follows:Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney, bought a ticket [from] defendant [herein petitioner], a corporation engaged in . . . inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991.At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair works [sic] were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only one (1) engine running.After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded [sic] to their request and thus the vessel headed back to Cebu City.At Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.On account of this failure of defendant to transport him to the place of destination on November 12, 1991, plaintiff filed before the trial court a complaint for damages against defendant. 4 In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private respondent) alleged that the engines of the M/V Asia Thailand conked out in the open sea, and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to Cebu City after it regained power, but for unexplained reasons, the passengers, including the private respondent, were arrogantly told to disembark without the necessary precautions against possible injury to them. They were thus unceremoniously dumped, which only exacerbated the private respondent's mental distress. He further alleged that by reason of the petitioner's wanton, reckless, and willful acts, he was unnecessarily exposed to danger and, having been stranded in Cebu City for a day, incurred additional expenses and loss of income. He then prayed that he be awarded P1,100.00,

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P50,000.00, and P25,000.00 as compensatory, moral, and exemplary damages, respectively. 5 In his pre-trial brief, the private respondent asserted that his complaint was "an action for damages arising from bad faith, breach of contract and from tort," with the former arising from the petitioner's "failure to carry [him] to his place of destination as contracted," while the latter from the "conduct of the [petitioner] resulting [in] the infliction of emotional distress" to the private respondent. 6 After due trial, the trial court rendered its decision 7 and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law — not Article 2180 of the same Code. It was of the opinion that Article 1170 made a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the non-performance of the obligation must have been tainted not only by fraud, negligence, or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as follows:WHEREFORE, it not appearing from the evidence that plaintiff was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of defendant's employees, the complaint is DISMISSED. Defendant's counterclaim is likewise dismissed it not appearing also that filing of the case by plaintiff was motivated by malice or bad faith. 8 The trial court made the following findings to support its disposition:In the light of the evidence adduced by the parties and of the above provisions of the New Civil Code, the issue to be resolved, in the resolution of this case is whether or not, defendant thru its employee in [sic] the night of November 12, 1991, committed fraud, negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it sailed back to Cagayan de Oro City after it has [sic] returned from Kawit Island.Evaluation of the evidence of the parties tended to show nothing that defendant committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had doubts as to the vessel's capacity to sail, he had time yet to take another boat. The ticket could be returned to defendant and corresponding cash [would] be returned to him.

Neither could negligence, bad faith or malice on the part of defendant be inferred from the evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned from Kawit Island, there was an announcement that passengers who would like to disembark were given ten (10) minutes only to do so. By this announcement, it could be inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts, he should have asked a member of the crew of the boat or better still, the captain of the boat. But as admitted by him, he was of the impression only that the boat will not proceed to Cagayan de Oro that evening so he disembarked. He was instead, the ones [sic] negligent. Had he been prudent, with the announcement that those who will disembark were given ten minutes only, he should have lingered a little by staying in his cot and inquired whether the boat will proceed to Cagayan de Oro City or not. Defendant cannot be expected to be telling [sic] the reasons to each passenger. Announcement by microphone was enough.The court is inclined to believe that the story of defendant that the boat returned to the Port of Cebu because of the request of the passengers in view of the waves. That it did not return because of the defective engines as shown by the fact that fifteen (15) minutes after the boat docked [at] the Port of Cebu and those who wanted to proceed to Cagayan de Oro disembarked, it left for Cagayan de Oro City.The defendant got nothing when the boat returned to Cebu to let those who did not want to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this would mean its loss instead because it will have to refund their tickets or they will use it the next trip without paying anymore. It is hard therefore, to imagine how defendant by leaving plaintiff in Cebu could have acted in bad faith, negligently, want only and with malice.If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it was not because defendant maliciously did it to exclude him [from] the trip. If he was left, it was because of his fault or negligence. 9Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No. 39901) and submitted for its determination the following assignment of errors: (1) the trial court erred in not finding that the defendant-appellee was guilty of fraud, delay, negligence, and bad faith; and (2) the trial court erred in not awarding moral and exemplary damages. 10 In its decision of 23 November 1994, 11 the Court of Appeals reversed the trial court's decision by applying Article 1755 in

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relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages as follows:WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and another one is rendered ordering defendant-appellee to pay plaintiff-appellant:1. P20,000.00 as moral damages;2. P10,000.00 as exemplary damages;3. P5,000.00 as attorney's fees;4. Cost of suit.

SO ORDERED. 12 It did not, however, allow the grant of damages for the delay in the performance of the petitioner's obligation as the requirement of demand set forth in Article 1169 of the Civil Code had not been met by the private respondent. Besides, it found that the private respondent offered no evidence to prove that his contract of carriage with the petitioner provided for liability in case of delay in departure, nor that a designation of the time of departure was the controlling motive for the establishment of the contract. On the latter, the court a quo observed that the private respondent even admitted he was unaware of the vessel's departure time, and it was only when he boarded the vessel that he became aware of such. Finally, the respondent Court found no reasonable basis for the private respondent's belief that demand was useless because the petitioner had rendered it beyond its power to perform its obligation; on the contrary, he even admitted that the petitioner had been assuring the passengers that the vessel would leave on time, and that it could still perform its obligation to transport them as scheduled.To justify its award of damages, the Court of Appeals ratiocinated as follows:It is an established and admitted fact that the vessel before the voyage had undergone some repair work on the cylinder head of the engine. It is likewise admitted by defendant-appellee that it left the port of Cebu City with only one engine running. Defendant-appellee averred:. . . The dropping of the vessel's anchor after running slowly on only one engine when it departed earlier must have alarmed some nervous passengers . . .The entries in the logbook which defendant-appellee itself offered as evidence categorically stated therein that the vessel stopped at Kawit Island because of engine trouble. It reads:

2330 HRS STBD ENGINE EMERGENCY STOP2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE, 2 ENGINE STOP.The stoppage was not to start and synchronized [sic] the engines of the vessel as claimed by defendant-appellee. It was because one of the engines of the vessel broke down; it was because of the disability of the vessel which from the very beginning of the voyage was known to defendant-appellee.Defendant-appellee from the very start of the voyage knew for a fact that the vessel was not yet in its sailing condition because the second engine was still being repaired. Inspite of this knowledge, defendant-appellee still proceeded to sail with only one engine running.Defendant-appellee at that instant failed to exercise the diligence which all common carriers should exercise in transporting or carrying passengers. The law does not merely require extraordinary diligence in the performance of the obligation. The law mandates that common carrier[s] should exercise utmost diligence in the transport of passengers.Article 1755 of the New Civil Code provides:ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should have pursued the voyage only when its vessel was already fit to sail. Defendant-appellee should have made certain that the vessel [could] complete the voyage before starting [to] sail. Anything less than this, the vessel [could not] sail . . . with so many passengers on board it.However, defendant-appellant [sic] in complete disregard of the safety of the passengers, chose to proceed with its voyage even if only one engine was running as the second engine was still being repaired during the voyage. Defendant-appellee disregarded the not very remote possibility that because of the disability of the vessel, other problems might occur which would endanger the lives of the passengers sailing with a disabled vessel.As expected, . . . engine trouble occurred. Fortunate[ly] for defendant-appellee, such trouble only necessitated the stoppage of the vessel and did not cause the vessel to capsize. No wonder why some passengers requested to be brought back to Cebu City. Common carriers which are mandated to exercise utmost diligence should not be taking these risks.

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On this premise, plaintiff-appellant should not be faulted why he chose to disembark from the vessel with the other passengers when it returned back to Cebu City. Defendant-appellee may call him a very "panicky passenger" or a "nervous person", but this will not relieve defendant-appellee from the liability it incurred for its failure to exercise utmost diligence. 13 xxx xxx xxxAs to the second assigned error, we find that plaintiff-appellant is entitled to the award of moral and exemplary damages for the breach committed by defendant-appellee.As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one engine and with full knowledge of the true condition of the vessel, acted in bad faith with malice, in complete disregard for the safety of the passengers and only for its own personal advancement/interest.The Civil Code provides:Art. 2201.xxx xxx xxxIn case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and serious anxiety he suffered during the voyage when the vessel's engine broke down and when he disembarked from the vessel during the wee hours of the morning at Cebu City when it returned. 14 Moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage where it is proved that the carrier was guilty of fraud or bad faith even if death does not result. 15Fraud and bad faith by defendant-appellee having been established, the award of moral damages is in order. 16 To serve as a deterrent to the commission of similar acts in the future, exemplary damages should be imposed upon defendant-appellee. 17 Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by creating . . . negative incentives or deterrents against such behavior. 18 Moral damages having been awarded, exemplary damages may be properly awarded. When entitlement to moral damages has been established, the award of exemplary damages is proper. 19 The petitioner then instituted this petition and submitted the question of law earlier adverted to.

Undoubtedly, there was, between the petitioner and the private respondent, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws. 20 Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the private respondent safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this obligation.Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain adrift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. 21 The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides:ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier.The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary.In his complaint, the private respondent claims actual or compensatory, moral, and exemplary damages.

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Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. 22 In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 23 Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as in this case, the petitioner's breach of the contract of carriage. 24 Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith. 25 Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. 26 In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton fraudulent, reckless, oppressive or malevolent manner. 27 It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated. 28 Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof. 29 The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out.As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads:In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the

distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account.This article applies suppletorily pursuant to Article 1766 of the Civil Code.Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and allow them to disembark. The private respondent then took the petitioner's other vessel the following day, using the ticket he had purchased for the previous day's voyage.Any further delay then in the private respondent's arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, 30 which the private respondent failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused.We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. On this score, however, the petitioner asserts that the safety of the vessel and

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passengers was never at stake because the sea was "calm" in the vicinity where it stopped as faithfully recorded in the vessel's log book (Exhibit "4"). Hence, the petitioner concludes, the private respondent was merely "over-reacting" to the situation obtaining then. 31 We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim demonstrates beyond cavil the petitioner's lack of genuine concern for the safety of its passengers. It was, perhaps, only providential that the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone at nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations.We cannot, however, give our affirmance to the award of attorney's fees. Under Article 2208 of the Civil Code, these are recoverable only in the concept of actual damages, 32 not as moral damages 33 nor judicial costs. 34 Hence, to merit such an award, it is settled that the amount thereof must be proven. 35 Moreover, such must be specifically prayed for — as was not done in this case — and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable." 36 Finally, it must be noted that aside from the following, the body of the respondent Court's decision was devoid of any statement regarding attorney's fees:Plaintiff-appellant was forced to litigate in order that he can claim moral and exemplary damages for the suffering he encurred [sic]. He is entitled to attorney's fees pursuant to Article 2208 of the Civil Code. It states:Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs cannot be recovered except:1. When exemplary damages are awarded;2. When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.This Court holds that the above does not satisfy the benchmark of "factual, legal and equitable justification" needed as basis for an

award of attorney's fees. 37 In sum, for lack of factual and legal basis, the award of attorney's fees must be deleted.WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the award for attorney's fees which is hereby SET ASIDE.Costs against the petitioner.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Footnotes 1. Rollo. 3. 2. Annex "A" of Petition; Id., 11-22. Per Labitoria, E.J., with Abad-Santos, Jr., Q., and Hofileña, H., JJ., concurring. 3. Original Record (OR), Civil Case No. 91-491, 92-99; 100-107; 108-115. Per Judge Leonardo N. Demecillo. 4. Rollo, 12-13. 5. OR, Civil Case No. 91-491, 2-5. 6. Id., 43. 7. Supra note 3. 8. OR, Civil Case No. 91-491, 99. 9. OR, Civil Case No. 91-491, 97-99.10. Rollo, 12.11. Supra note 2.12. Rollo, 21.13. Rollo, 14-16.14. Id., 19-20, citing Article 2217, Civil Code.15. Id., citing China Airlines Ltd. vs. Intermediate Appellate Court, 169 SCRA 226 [1989]; Sabena Belgina World Airlines vs. Court of Appeals, 171 SCRA 620 [1989].16. Id., citing Bert Osmeña & Associates vs. Court of Appeals, 120 SCRA 395 [1983].17. Rollo, 19-20, citing Rotea vs. Halili, 109 Phil. 495 [1960].18. Id., citing Mecenas vs. Court of Appeals, 180 SCRA 83 [1989].19. Id., citing De Leon vs. Court of Appeals, 165 SCRA 166 [1988].20. Article 1766, Civil Code.21. Chan Keep vs. Chan Gioco, 14 Phil. 5 [1909].22. Article 2199 and 2200.23. Article 2201.

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24. Article 2217.25. Article 2220. See Necesito vs. Paras, 104 Phil. 75, 82-83 [1958].26. Article 2229.27. Article 2232.28. Article 2233.29. Article 2234.30. Article 2199.31. Brief for Defendant Appellee, 9; Rollo, 33.32. Fores vs. Miranda, 105 Phil. 266, 272 [1959]; PCIB vs. Intermediate Appellate Court, 196 SCRA 29, 39 [1991].33. Mirasol vs. de la Cruz, 84 SCRA 337, 342 [ 1978].34. Damasen vs. Hernando, 104 SCRA 111, 116-117 [1981].35. See Warner, Barnes & Co., Ltd. vs. Luzon Surety Co., Inc., 95 Phil. 925 [1954].36. Mirasol vs. de la Cruz, supra note 33, at 343.37. See Scott Consultants & Resource Development vs. Court of Appeals, 242 SCRA 393, 405-406 [1995].

4. Responsibilities of Captain, Arts. 701, 702, 705, 612, 713; Art. 1754, Civil Code

ARTICLE 701. The convenience or the interest of the passengers shall not obligate nor empower the captain to stand in shore or enter places which may take the vessel out of her course, nor to remain in the ports he must or is under the necessity of touching for a period longer than that required for the business of the navigation.

ARTICLE 702. In the absence of an agreement to the contrary, it shall be understood that the maintenance of the passengers during the voyage is included in the price of the passage; but should said maintenance be for the account of the latter, the captain shall be under the obligation, in case of necessity, to furnish them the victuals at a reasonable price necessary for their maintenance.

ARTICLE 705. In case of the death of a passenger during the voyage the captain is authorized, with regard to the body, to take the steps required by the circumstances, and shall carefully take care of the papers and goods there may be on board belonging to the passenger, observing the provisions of Case No. 10 of Article 612 with regard to members of the crew.

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

In the first book, which shall be called "log book," he shall enter every day the condition of the atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of the engines, the distance covered, the maneuvers executed, and other incidents of navigation. He shall also enter the damage suffered by the vessel in her hull, engines, rigging, and tackle, no matter what is its cause, as well as the imperfections and averages of the cargo, and the effects and consequence of the jettison, should there be any; and in cases of grave resolutions which require the advice or a meeting of the officers of the vessel, or even of the passengers and crew, he shall record the decision adopted. For the informations indicated he shall make use of the binnacle book, and of the steam or engine book kept by the engineer.

In the second book, called the "accounting book," he shall enter all the amounts collected and paid for the account of the vessel, entering specifically article by article, the sources of the collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel, outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on account, either directly or by delivery to their families.

In the third book, called "freight book," he shall record the entry and exit of all the goods, stating their marks and packages, names of the shippers and of the consignees, ports of loading and

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unloading, and the freight earned. In the same book he shall record the names and places of sailing of the passengers and the number of packages of which their baggage consists, and the price of the passage.4. To make, before receiving the freight, with the officers of the crew, and the two experts, if required by the shippers and passengers, an examination of the vessel, in order to ascertain whether she is watertight, and whether the rigging and engines are in good condition; and if she has the equipment required for good navigation, preserving a certificate of the memorandum of this inspection, signed by all the persons who may have taken part therein, under their liability.

The experts shall be appointed one by the captain of the vessel and the other one by the persons who request the examination, and in case of disagreement a third shall be appointed by the marine authority of the port.5. To remain constantly on board the vessel with the crew during the time the freight is taken on board and carefully watch the stowage thereof; not to consent to any merchandise or goods of a dangerous character to be taken on, such as inflammable or explosive substances, without the precautions which are recommended for their packing, management and isolation; not to permit that any freight be carried on deck which by reason of its disposition, volume, or weight makes the work of the sailors difficult, and which might endanger the safety of the vessel; and if, on account of the nature of the merchandise, the special character of the shipment, and principally the favorable season it takes place, he allows merchandise to be carried on deck, he must hear the opinion of the officers of the vessel, and have the consent of the shippers and of the agent.6. To demand a pilot at the expense of the vessel whenever required by navigation, and principally when a port, canal, or river, or a roadstead or anchoring place is to be entered with which neither he, the officers nor the crew are acquainted.7. To be on deck at the time of sighting land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He shall not spend the night away from the vessel except for serious causes or by reason of official business. cdtai8. To present himself, when making a port in distress, to the maritime authority if in Spain * and to the Spanish * consul if in a foreign country, before twenty-four hours have elapsed, and make a statement of the name, registry, and port of departure of the

vessel, of its cargo, and reason of arrival, which declaration shall be vised by the authority or by the consul if after examining the same it is found to be acceptable, giving the captain the proper certificate in order to show his arrival under stress and the reasons therefor. In the absence of marine officials or of the consul, the declaration must be made before the local authority.9. To take the steps necessary before the competent authority in order to enter in the certificate of the Commercial Registry of the vessel the obligations which he may contract in accordance with Article 583.10. To put in a safe place and keep all the papers and belongings of any members of the crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as witnesses, and, in their absence, of members of the crew.11. To conduct himself according to the rules and precepts contained in the instructions of the agent, being liable for all that he may do in violation thereof.12. To give an account to the agent from the port where the vessel arrives, of the reason thereof, taking advantage of the semaphore, telegraph, mail, etc., according to the cases; notify him the freight he may have received, stating the name and domicile of the shippers, freight earned, and amounts borrowed on bottomry bond, advise him of his departure, and give him any information and data which may be of interest.13. To observe the rules on the situation of lights and evolutions to prevent collisions.14. To remain on board in case of danger to the vessel, until all hope to save her is lost, and before abandoning her to hear the officers of the crew, abiding by the decision of the majority; and if he should have to take a boat he shall take with him, before anything else, the books and papers, and then the articles of most value, being obliged to prove in case of the loss of the books and papers that he did all he could to save them.15. In case of wreck he shall make the proper protest in due form at the first port reached, before the competent authority or the Spanish * consul, within twenty-four hours, stating therein all the incidents of the wreck, in accordance with case 8 of this article.16. To comply with the obligations imposed by the laws and rules of navigation, customs, health, and others.

ARTICLE 713. If before the delivery of the cargo a new bill of lading should be demanded of the captain, on the allegation that

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the failure to present the previous ones is due to their loss or to any other just cause, he shall be obliged to issue it, provided that security for the value of the cargo is given to his satisfaction, but without changing the consignment, and stating therein the circumstances prescribed in the last paragraph of Article 707, under penalty, should he not so state, of being held liable for said cargo if improperly delivered through his fault.

ARTICLE 1754. The provisions of articles 1733 to 1753 shall apply to the passenger’s baggage which is not in his personal custody or in that of his employee. As to other baggage, the rules in articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.

H. Carriage of Goods by Sea Act (Commonwealth Act No. 65;Act No. 521, 74th US Congress)

Ang v. American Steamship Agencies, 19 SCRA 123

EN BANC[G.R. No. L-22491. January 27, 1967.]DOMINGO ANG, plaintiff-appellant, vs. AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee.Juan T. David and M.C. Gunigundo for plaintiff-appellant.Ross, Salcedo, Del Rosario, Bito & Misa for defendant-appellee.

SYLLABUS

1. CARRIAGE OF GOODS BY SEA ACT; LOSS DEFINED. — As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery — but delivery to the wrong person, or a misdelivery.2. PLEADING AND PRACTICE; MOTION TO DISMISS; EFFECT. — It is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the truth of the allegations of fact contained in the complaint.

3. PRESCRIPTION OF ACTIONS; SUITS PREDICATED ON MISDELIVERY; APPLICABLE RULE. — Where the suit is predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods as in the case at bar, the applicable rule on prescription is not the one-year period provided for in Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, which short period is designed merely to meet the exigencies of maritime hazards but that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi- delict. (Arts. 1144 [1] 1146, Civil Code)

D E C I S I O N

BENGZON, J.P., J p:

Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue, agreed to sell 140 packages of galvanized steel durzinc sheets to one Herminio G. Teves (the date of said agreement is not shown in the record here) for the sum of $32,458.26 (US). Said agreement was subject to the following terms and arrangements: (a) the purchase price should be covered by a bank draft for the corresponding amount which should be paid by Herminio G. Teves in exchange for the delivery to him of the corresponding bill of lading to be deposited with a local bank, the Hongkong & Shanghai Bank of Manila; (b) upon arrival of the articles in Manila, Teves would be notified and he would have to pay the amount called for in the corresponding demand draft, after which the bill of lading would be delivered to him; and (c) Teves would present said bill of lading to the carrier's agent, American Steamship Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported Articles" to be presented to the Bureau of Customs to obtain the release of the articles.Pursuant to said terms and arrangements, Yau Yue, through Tokyo Boeki, Ltd. of Tokyo, Japan, shipped the articles at Yawata, Japan, on April 30, 1961 aboard the S.S. TENSAI MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the American Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No. WM-2, dated April 30, 1961, consigned "to order of the shipper", with Herminio G. Teves as the party to be notified of the arrival of the 140 packages of galvanize steel durzinc sheets in Manila.The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand

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draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank.When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price of the articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang.Meanwhile, despite his non-payment of the purchase price of the articles, Teves as able to obtain a bank guaranty in favor of the American Steamship Agencies, Inc., as carrier's agent, to the effect that he would surrender the original and negotiable bill of lading duly indorsed by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver Imported Articles" from the carrier's agent, which he presented to the Bureau of Customs which in turn released to him the articles covered by the bill of lading.Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of lading, but he was informed by the latter that it had delivered the articles to Teves.On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila against the American Steamship Agencies, Inc., for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading belonging to plaintiff Ang, to the damage and prejudice of the latter.On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act (Commonwealth Act No. 65), more particularly Section 3(6), paragraph 4, which provides:"In any event, the carrier and the ship shall discharged from all liability in respect to loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered."It argued that the cargo should have been delivered to the person entitled to the delivery thereof (meaning the plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila, and that even allowing a reasonable time (even one month) after such arrival within which to make delivery, still, the action commenced on October 30, 1963 was filed beyond the prescribed period of one year.

By order dated December 21, 1963, copy of which was received by plaintiff on December 26, 1963, the lower court dismissed the action on the ground of prescription. His motion for reconsideration dated December 26, 1963 having been denied by the lower court in its order dated January 13, ]964, plaintiff appealed directly to this Court on a question of law: Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act?The provision of law involved in this case speaks of "loss or damage". That there was no damage caused to the goods which were delivered intact to Herminio G. Teves who did not file any notice of damage, is admitted by both parties in this case. What is to be resolved — in order to determine the applicability of the prescriptive period of one year to the case at bar — is whether or not there was "loss" of the goods subject matter of the complaint.Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be had to the Civil Code which provides in Article 18 thereof that, "In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code."Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been imposed with the intention of suspending the efficacy of an obligation to give. The contract of carriage under consideration entered into by and between American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the shipment to plaintiff herein Domingo Ang), is one involving an obligation to give or to deliver the goods "to the order of shipper", that is, upon the presentation and surrender of the bill of lading. This being so, said article can be applied to the present controversy, more specifically paragraph 2 thereof which provides that, ". . . it is understood that a thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered."As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such away that their existence is unknown or they cannot he recovered. It does not include a situation where there was indeed delivery — but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case.

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The distinction between nondelivery and misdelivery has already been clearly made in reference to bills of lading. As this Court said in Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558:"Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer without paying the price of the same, these facts constitutes misdelivery and not nondelivery, because there was in fact delivery of merchandise. We do not believe it can be seriously and reasonably argued that what took place, as contended by the petitioner is a case of misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the bill of lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether, on the contrary, the PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered."According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill of lading, because his duty was not only to transport the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading." (Italics supplied)Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the truth of the allegations of fact contained in the complaint (Philippine National Bank vs. Hipolito, et al., L-16463, Jan. 30, 1965; Republic vs. Ramos, L-15484, Jan. 31, 1963; Pascual vs. Secretary of Public Works & Communications, 110 Phil. 331; Pangan vs. Evening News Publishing Co., Inc., 110 Phil. 409). Thus, defendant-appellant having filed a motion to dismiss, it is deemed to have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these allege:

"6. — That, when the said articles arrived in Manila, the defendant authorized the delivery thereof to Herminio G. Teves, through the issuance of the corresponding Permit to Deliver Imported Articles, without the knowledge and consent of the plaintiff, who is the holder in due course of said bill of lading, notwithstanding the fact that the said Herminio G. Teves could not surrender the corresponding bill of lading;"7. — That, without any evidence of the fact that Herminio G. Teves is the holder of the corresponding bill of lading in due course; without the surrender of the bill of lading; without the knowledge and consent of the plaintiff, as holder thereof in due course, and in violation of the provision on the bill of lading which requires that the articles are only to be delivered to the person who is the holder in due course of the said bill of lading, or his order, the defendant issued the corresponding `Permit To Deliver Imported Articles' in favor of the defendant, without the knowledge and consent of the plaintiff as holder in due course of said bill of lading, which, originally was Yau Yue, subsequently, the plaintiff Domingo Ang;"8. — That, as a result of the issuance by the defendant of said permit, Herminio G. Teves was able to secure the release of the articles from the Bureau of Customs, which is not legally possible without the presentation of said permit to the said Bureau; . . ."From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G. Teves, so that there can only be either delivery, if Teves really was entitled to receive them or misdelivery, if he was not so entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there was rightful delivery or misdelivery.The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the afore-quoted provision of the Carriage of Goods by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is

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different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-delict. (Arts. 1144(1), 1146, Civil Code) In either case, plaintiff's cause of action has not yet prescribed, since his right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963.Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for further proceedings. No costs. So ordered.Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Ruiz Castro, JJ., concur.

F.H. Stevens v. Nordeutscher, 6 SCRA 180

EN BANC[G.R. No. L-17730. September 29, 1962.]F. H. STEVENS & CO., INC., plaintiff-appellant, vs. NORDDEUSCHER LLOYD, defendant-appellee.Delgado, Flores, Macapagal & Dizon for plaintiff-appellant.Ross, Selph & Carrascoso for defendant-appellee.

SYLLABUS

1. ACTIONS; DISMISSAL FOR LACK OF JURISDICTION; PERIOD WITHIN WHICH A NEW ACTION MAY BE COMMENCED. — Where an action commenced in the municipal court on April 27, 1960, was dismissed for lack of jurisdiction over the subject-matter on June 13, 1960, or over twenty (20) days after the expiration of the period of one year, beginning from May 21, 1959, within which plaintiff's action could be brought, pursuant to Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act, it is Held, that under section 49 of Act No. 190, the period within which plaintiff could bring a new action in the proper court was renewed for another year, beginning from June 14, 1960 (Tolentino vs. Vitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 936).

D E C I S I O N

CONCEPCION, J p:

This is an appeal from an order granting defendant's motion to dismiss and, accordingly, dismissing the case without any pronouncement as to costs.Plaintiff commenced this action in the Court of First Instance of Manila on June 24, 1960. It alleged in the complaint that on March 28, 1959, it had shipped from Hamburg to Manila, aboard the "MS SCHWABENSTEIN", a vessel of defendant Norddeuscher Lloyd, 2,000 pieces of prismatical thermometers valued at $650; that on May 15, 1959, said vessel arrived at Manila; that on May 21, 1959, the master of said vessel notified the plaintiff, thru its broker, of the delivery of said goods; that, upon examination of the case containing the same, it turned out that 1,154 pieces of said thermometers valued at $342.74, were missing and/or destroyed; that plaintiff immediately filed the corresponding notice of loss and/or short delivery, followed by the corresponding notice and formal claim for loss and/or short delivery; that, despite several demands, defendant had refused and failed to pay said sum of $342.74; that as a consequence, plaintiff had, also, incurred damages in the sum of P1,000, as attorney's fees, and P664.70, as unrealized profits; and that an action instituted in the Municipal Court of Manila on April 27, 1960 — seemingly, for the recovery of the value of said thermometers and the amount of said damages — was dismissed by said court on June 13, 1960, without any trial on the merits, upon the ground of lack of jurisdiction over the subject-matter of the case, inasmuch as the same involved the exercise of admiralty and maritime jurisdiction. Plaintiff prayed for judgment for said sums of $342.74, P1,000 and P664.70 plus costs.On July 8, 1960, defendant moved to dismiss the complaint upon the ground that plaintiff's cause of action had prescribed, it having been filed on June 24, 1960, or more than a year from May 21, 1959, when plaintiff was notified of the delivery of the case containing the thermometers in question. This motion having been granted and the complaint dismissed, plaintiff interposed this appeal, maintaining that the period of one (1) year prescribed in Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act — within which the liability of carriers, based upon a contract of carriage of goods by sea, may be enforced by suit — was suspended by the commencement of the first action in the municipal court, on April 27, 1960; that the running of said period was resumed or continued on June 13, 1960, when said action was dismissed; and that, excluding said period, from April 27, 1960 to June 13, 1960, or forty-seven (47) days, less than one (1) year has

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elapsed from May 21, 1959 to June 24, 1960, when this case was filed in the court of first instance. In support of this pretense, plaintiff invokes Articles 1155 of the Civil Code of the Philippines, reading:"The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor."Upon mature deliberation, we are of the opinion, and so hold, that the order appealed from should be reversed, not only because of the operation of said Article 1155 of our Civil Code, but, also, in view of the provisions of section 49 of Act No. 190, pursuant to which:"If, in an action commenced, in due time, a judgment for the plaintiff be reversed, or if the plaintiff fail otherwise than upon the merits, and the time limited for the commencement of such action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and the cause of action survive, his representatives may commence a new action within one, year after such date, and this provision shall apply to any claim asserted in any pleading by a defendant."The action commenced by the plaintiff in the Municipal Court of Manila, on April 27, 1960, was dismissed on June 13, 1960, or over twenty (20) days after the expiration of the period of one (1) year, beginning from May 21, 1959, within which plaintiff's action could be brought, pursuant to Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act. Under said section 49 of Act No. 190, the period within which plaintiff could initiate the present case was renewed, therefore, for another year, beginning from June 14, 1960 (Tolentino vs. Vitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 986). The case at bar was commenced on June 24, 1960, or within the period last mentioned.The cases of Oriental Commercial Co. vs. Jureidini (71 Phil., 25) and Conspecto vs. Fruto (31 Phil., 144), in which it was held that:" . . . Cuando se entabía una accion dentro del plazo de prescripcion y se desiste de ella despues, o se sobresee sin condiciones, por una razon u otra, no hace que la accion que se entable mas tarde, pero ya fuera del período de prescripcion, se pueda considerar como presentada dentro de dicho período porque quiere contarse con la acción entablada con anterioridad. La falta de geation de la recurrente por cuya causa se desestimaron sus demandas segunda y tercera, no puede interpretarse sino como una renuncia de su parte; y, al ejercita su última acción no se ha

colocado en la misma situacion en que antes se hallaba al ejercitar sus tres anteriores acciones. Este es el mismo criterio que expresamos cuando so nos presentó una cuestión análogia en la causa de Conspecto contra Fruto, 31 jur. Fil., 155." (Emphasis supplied.)are not in point, for the dismissal of the herein plaintiff's complaint in the municipal court was not due to its desistance or voluntary abandonment.Insofar as inconsistent with the conclusion we have thus reached, the view adopted in Chua Kuy vs. Everett Steamship Corp., 93 Phil., 207; 50 Off. Gaz. 159 and Yek Tong Lin Fire & Marine Insurance Co. vs. American President Lines, Inc., L-11081 (April 30, 1958) should be, as it is hereby, modified accordingly.WHEREFORE, the order appealed from is reversed and this case remanded to the lower court for further proceedings, with the costs of this instance against defendant Norddeuscher Lloyd. It is so ordered.Bengzon, C.J., Padilla, Bautista Angelo, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

Labrador, J., concurs in the result.Reyes, J.B.L., did not take part.

II. International Air Transport

(Unless otherwise indicated, reference is to the Warsaw Convention, 51 O.G. 5084; Presidential Proclamation No. 201, 51, O.G. 4933 [Oct. 1955]

C. Constitutionality

Santos v. Northwest, 210 SCRA 256

EN BANC[G.R. No. 101538. June 23, 1992.]AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner, vs. NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

D E C I S I O N

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CRUZ, J p:

This case involves the proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A., and licensed to do business and maintain a branch office in the Philippines.On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco, U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. 1 On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint could be instituted only in the territory of one of the High Contracting Parties, before:1. the court of the domicile of the carrier;2. the court of its principal place of business;3. the court where it has a place of business through which the contract had been made;4. the court of the place of destination.The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States.On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of Appeals, which affirmed the decision of the lower court. 3 On June

26, 1991, the petitioner filed a motion for reconsideration, but the same was denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of Appeals.The assignment of errors may be grouped into two major issues, viz:(1) the constitutionality of Article 28(1) of the Warsaw Convention; and(2) the jurisdiction of Philippine courts over the case.The petitioner also invokes Article 24 of the Civil Code on the protection of minors.I.THE ISSUE OF CONSTITUTIONALITYA. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the constitutional guarantees of due process and equal protection.The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5 The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that there is no substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The classification of the places in which actions for damages may be brought is arbitrary and irrational and thus violates the due process and equal protection clauses.It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy

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involving a conflict of legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper party and the resolution of the question is unavoidably necessary to the decision of the case itself. 6 Courts generally avoid having to decide constitutional question. This attitude is based on the doctrine of separation of powers, which enjoins upon the departments of the government a becoming respect for each other's acts.The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first carefully studied and determined to be constitutional before it was adopted and given the force of law in this country.The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the four places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case can be decided on other grounds without the necessity of resolving the constitutional issue.B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is inapplicable because of a fundamental change in the circumstances that served as its basis.The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the significant developments in the airline industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for approval, it has become unconstitutional.The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation in which the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they could not have foreseen at the time the treaty was concluded.The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee. They wished to design a system of air law that would be both durable and flexible enough to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can be served within the framework they created.It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely unforeseen although they were expected in a general sense only. In fact, the Convention itself, anticipating such developments, contains the following significant provision:Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this convention to call for the assembling of a new international conference in order to consider any improvements which may be made in this convention. To this end, it will communicate with the Government of the French Republic which will take the necessary measures to make preparations for such conference.But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic stantibus does not operate automatically to render the treaty inoperative. here is a necessity for a formal act of rejection, usually made by the head of State, with a statement of the reasons why compliance with the treaty is no longer required.In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under its Article 39, viz: cdrepArticle 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting Parties.(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the party which shall have proceeded to denunciation.Obviously, rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but of the other branches of government. This is a political act. The conclusion and renunciation of treaties is the prerogative of the political departments and may not be usurped by the

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judiciary. The courts are concerned only with the interpretation and application of laws and treaties in force and not with their wisdom or efficacy.C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this would deny him the right to access to our courts.The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of Rights.Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.II.THE ISSUE OF JURISDICTIONA. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss on the ground of improper venue.By its own terms. the Convention applies to all international transportation of persons performed by aircraft for hire.International transportation is defined in paragraph (2) of Article 1 as follows:(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated [either] within the territories of two High Contracting Parties . . .Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When the contract of carriage provides for the transportation of the passenger between certain designated terminals "within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger.Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to

the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be brought.Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10 Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration. 11 A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damage "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of Article 32. Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for domestic decision questions regarding the suitability and location of a particular Warsaw Convention case."

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In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted.The petitioner submits that since Article 32 state that the parties are precluded "before the damages occurred" from amending the rules of Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw Convention was not intended to preclude them from doing so "after the damages occurred."Article 32 provides:Article 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to infringe the rules laid down by this convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take place within one of the jurisdictions referred to in the first paragraph of Article 28.His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction, the private respondent has waived improper venue as a ground to dismiss.The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order. The respondent court was correct in affirming the ruling of the trial court on this matter, thus:Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its motion is that the

Philippines is not the proper place where SANTOS could file the action — meaning that the venue of the action is improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the proper ground of the motion — improper venue — has been discussed therein.Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13 Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their original motion to dismiss. Even so, the motivation of the private respondent should have been taken into account by both the trial judge and the respondent court in arriving at their decisions.The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article 28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is finding on this Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later case of Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition.B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this case was properly filed in the Philippines, because Manila was the destination of the plaintiff.The petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were specified but not of the return flight. The plane crashed while en route from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was denied thus:. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Log Angeles on a certain flight, a certain time and a certain class, but that the time for her to return remained completely in her power. Coupon No. 2 was only a continuing offer

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by Air Canada to give her a ticket to return to Montreal between certain dates . . .The only conclusion that. can be reached then, is that "the place of destination" as used in the Warsaw Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least two "places of destination," viz., the "place of destination" of a particular flight either an "outward destination" from the "point of origin" or from the "outward point of destination" to any place in Canada.Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the contract between the parties and the suit is properly filed in this Court which has jurisdiction.The petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to San Francisco were, as in the Aanestad case, also left open: Consequently, Manila and not San Francisco should be considered the petitioner's destination.The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern District of Pennsylvania) said:. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are almost unanimous in concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the return portion of the ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger back to the place of origin within the prescribed time and the passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage. The fact that the passenger could forego her rights under the contract does not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket.We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the

petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination.The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and correct, interpretation of Article 28(1).Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded he a "place of destination."C. The petitioner claims that the lower court erred in not ruling that under Art. 28 (1) of the Warsaw Convention, this case was properly filed in the Philippines because the defendant has its domicile in the Philippines.The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions, American courts have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place where it has a branch office.The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a corporation includes any country where the airline carries on its business on "a regular and substantial basis," and that the United States qualifies under such definition. The meaning of domicile cannot, however, be so extended. The domicile of a corporation is customarily regarded as the place where it is incorporated, and the courts have given the meaning to the term as it is used in article 28(1) of the Convention.

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(See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962), 207 F. Supp. 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out two places where an action for damages may be brought: the country where the carrier's principal place of business is located, and the country in which it has a place of business through which the particular contract in question was made, that is, where the ticket was bought. Adopting the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a third intermediate category. It would obviously introduce uncertainty into litigation under the article because of the necessity of having to determine, and without standards or criteria, whether the amount of business done by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in effect a request to create a new jurisdictional standard for the Convention.Furthermore, it was argued in another case 20 that:. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French law? . . . We think this question and the underlying choice of law issue warrant some discussion . . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the choice of law sense, to determine the meaning and scope of the Conventio's terms. Of course, French legal usage must be considered in arriving at an accurate English translation of the French. But when an accurate English translation is made and agreed upon, as here, the inquiry not meaning does not then revert to a quest for a past or present French law to be "applied" for revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in French that in interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in its present state of development. There is no suggestion in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we found any indication to this effect in its legislative history or from our study of its application and interpretation by other courts. Indeed, analysis of the cases indicates that the courts, in interpreting and applying the Warsaw Convention, have not considered themselves bound to

apply French law simply because the Convention is written in French.We agree with these rulings.Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the contract was made, and the place of destination, the article clearly meant that these three other places were not comprehended in the term "domicile."D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not apply to actions based on tort.The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and gave his reserved seat to someone who had no better right to it. In short, the private respondent committed a tort.Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not provided for in the Convention as modified by the Montreal Agreement. It does not, however, limit the kind of cause of action on which the relief may be founded; rather it provides that any action based on the injuries specified in Article 17 "however founded," i.e., regardless of the type of action on which relief is founded, can only be brought subject to the conditions and limitations established by the Warsaw System. Presumably, the reason for the use of the phrase "however founded," is two-fold: to accommodate all of the multifarious bases on which a claim might be founded in different countries, whether under code law or common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be founded in any one country. In other words, if the injury occurs as described in Article 17, any relief available is subject to the conditions and limitations established by the Warsaw System, regardless of the particular cause of action which forms the basis on which a plaintiff could seek relief . . .

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xxx xxx xxxThe private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(1) of the Convention, which reads as follows:Article 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability, if the damage is caused by his willful misconduct or by such default on his part as, in accordance which the law of the court to which the case is submitted, is considered to be equivalent to willful misconduct.It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first been commenced properly under the rules on jurisdiction set forth in Article 28 (1).III.THE ISSUE OF PROTECTION TO MINORSThe petitioner calls our attention to Article 24 of the Civil Code, which states:Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged minor. As already explained, such jurisdiction is absent in the case at bar.CONCLUSIONA number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. The reason for this proposal is explained thus:

In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air carrier which is generally subject to the jurisdiction of the US, Article 28 would prevent that person from suing the carrier in the US in a "Warsaw Case" even though such a suit could be brought in the absence of the Convention.The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala City on March 8, 1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties. Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention.The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own courts simply because the defendant airline has a place of business in his country. LibLexThe Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at less inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will have to litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country is known for its sense of fairness and, generally, its strict adherence to the rule of law.WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.Narvasa, C .J ., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ ., concur.Footnotes 1. Annex "A," Orig. Records, pp. 4-5. 2. Ibid., pp. 205-207; penned by Judge Pedro N. Laggui. 3. Rollo, p. 60; penned by Buena, J., with Gonzaga-Reyes and Abad Santos, Jr., JJ., concurring. 4. Ibid., p. 79. 5. 51 O.G. 4933-4934. 6. Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343; Dumlao v. Comelec, 95 SCRA 392. 7. A Modern Law of Nations (1950), p. 150.

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8. 528 F. 2d 31. 9. Berner v. United Airlines, Inc., 149 NYS 2d, 335, 343, 1956; Doering v. Scandinavian Airlines System, 329 F Supp 1081, 1082, 1971; Spencer v. Northwest Orient Airlines, 201 F. Supp. 504, 506, 1962.10. Smith v. Canadian Pacific Airways Ltd., 452 F. 2d 798 1971; Campagnie Nationale Air France v. Giliberto, 1838 N.E., 2d 977, 1978; Mac Carthy v. East African Airways Corp., 13 Av 17, 385, Records, p. 113, 1974; Sabharwal v. Kuwait Airways Corp., 18 Av 8, 380; Records, p. 115, 1984; Duff v. Varig Airlines, Inc., S.A., 22 Avi, Rollo, p. 186, 1989.11. Francisco, Rules of Court, Vol. I, 1973, p. 331.12. 452 F. 2d 798.13. 171 SCRA 605.14. CA G.R.-SP No. 09259, January 22, 1987.15. CA G.R.-CV No. 19974, April 8, 1991.16. 390 F. Supp. 1165, 1975.17. 421 F. Suppl. 127.18. Block v. Compagnie, 386 F. 2d 232.19. 838 N.E. 2d 977, 1978.20. Rosman v. TWA, 1974; 34 NY 2d 385; 358 NYS 2d 97;p 314 N.E. 2d 848; 72 A.L.R. 3d 1282.21. Eck v. United Arab, S.A.A., 241 F. Supp. 804-807; Spancer v. Northwest Orient Airlines, 201 F. Supp. 504-507.22. Rollo, pp. 189-199; 388 F. Supp. 1238.23. Article 22. (1) In the transportation of passengers, the liability of the carrier for each passenger shall be limited to the sum of 125,000 francs. Where in accordance with the law of the court to which the case is submitted, damages may be awarded in the form of periodical payments, the equivalent capital value of the said payments shall not exceed 125,00 francs. Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability. (2) In the transportations of checked baggage and of goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value of delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.(3) As regards objects of which the passenger takes charge himself, the liability of the carrier shall be limited to 5,000 francs per passenger.(4) The sums mentioned above shall be deemed to

refer to the French franc consisting of 65-1/2 milligrams of gold at the standard of fineness of nine hundred thousandths. These sums may be converted into any national currency in round figures.24. Varkonyi v. S.A. Impresa De Viacao Airea Rio Grandense (Varig) 1972; 336 NYS 2d 1973.

D. When applicable, Art. 1(1)

E. Liabilities under the Convention, Arts. 17, 18, 19

Northwest v. Cuenca, 14 SCRA 1063

EN BANC[G.R. No. L-22425. August 31, 1965.]NORTHWEST AIRLINES, INC., petitioner, vs. NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION), respondents.Ross, Selph & Carrascoso for petitioner.Bengzon, Villegas & Zarraga for respondents.

SYLLABUS

1. AIR CARRIERS; LIABILITY UNDER THE WARSAW CONVENTION OF 1929 AND FOR OTHER BREACHES OF CONTRACT. — Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the airlines liable for damage in the cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others regulate or exclude liability for other breaches of contract by the air carriers.2. ID.; ID.; ID.; LIABILITY FOR NOMINAL AND EXEMPLARY DAMAGES; CASE AT BAR. — Respondent boarded petitioner's plane in Manila with a first class ticket to Tokyo. Upon arrival at Okinawa, an agent of petitioner rudely compelled him, in the presence of other passengers, to move to the tourist class. Respondent protested, revealing that he was traveling in his official capacity as delegate of the Republic of the Philippines to a conference in Tokyo. In order to reach the conference on time, respondent obeyed. Held: Having been given first class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe

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that this was a confirmation of his first class reservation and that he would keep the same until his ultimate destination, Tokyo. Since the offense had been committed with full knowledge of the fact that respondent was an official representative of the Republic of the Philippines, the sum of P20,000.00 awarded as damages may well be considered as merely nominal. At any rate, considering that petitioners agent had acted in a wanton, reckless and oppressive manner, said award may, also, be considered as one for exemplary damages.

D E C I S I O N

CONCEPCION, J p:

This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of First Instance of Manila, in which the case was originally filed, rendered judgment sentencing defendant Northwest Airlines, Inc., — hereinafter referred to as petitioner — to pay to plaintiff Cuenca — hereinafter referred to as respondent — "the sum of P20,000 as moral damages, together with the sum of P5,000 as exemplary damages, with legal interest thereon from the date of the filing of the complaint" — December 12, 1959 — "until fully paid, plus the further sum of P2,000 as attorney's fees and expenses of litigation". On appeal taken by petitioner, said decision was affirmed by the Court of Appeals, except as to the P50,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for moral damages, which was converted into nominal damages. The case is now before us on petition for review by certiorari filed by petitioner, upon the ground that the lower court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the second assignment of error, and the latter is devoid of merit, even if we assumed the former to

be well taken. Indeed, the second assignment of error is predicated upon Articles 17, 18 and 19 of said Convention, reading:"ART. 17. The carrier shall be liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking."ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage to, any checked baggage, or any goods, if the occurrence which caused the damage so sustained took place during the transportation by air."(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever."(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by river performed outside an airport. If, however, such transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transshipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air."ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of passengers, baggage, or goods."Petitioner argues that pursuant to these provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of, or damage to any checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the

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event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804). Neither case is, however, in point, aside from the fact that the latter is not controlling upon us. In the first case, this Court eliminated a P10,000 award for nominal damages, because the aggrieved party had already been awarded P6,000 as compensatory damages, P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages cannot co-exist with compensatory damages". In the case at bar, the Court of Appeals has adjudicated no such compensatory, moral and exemplary damages to respondent herein.Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified, even if said award were characterized as nominal damages. When his contract of carriage was violated by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the Philippines. Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class compartment. Although he revealed that he was traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled him, in the presence of other passengers, to move, over his objection, to the tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on time, respondent had no choice but to obey.It is true that said ticket was marked "W/L", but respondent's attention was not called thereto. Much less was he advised that "W/L" meant "wait listed". Upon the other hand, having paid the first class fare in full and having been given first class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe that this was a confirmation of his first class reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried to explain or even alleged that the person to whom respondent's first class seat was given had a better right thereto. In other words, since the offense had been committed with full knowledge of the fact that

respondent was an official representative of the Republic of the Philippines, the sum of P20,000 awarded as damages may well be considered as merely nominal. At any rate, considering that petitioner's agent had acted in a wanton, reckless and oppressive manner, said award may, also, be considered as one for exemplary damages.WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so ordered.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Dizon, Regala, Makalintal and Zaldivar, JJ., concur.

Bengzon, J.P., took no part.Barrera, J., is on leave.

Alitalia v. IAC, 192 SCRA 10

FIRST DIVISION[G.R. No. 71929. December 4, 1990.]ALITALIA, petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO, respondents.Santiago & Santiago for petitioner.Alfredo L. Bentulan for private respondent.

D E C I S I O N

NARVASA, J p:

Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a research grantee of the Philippine Atomic Energy Agency — was invited to take part at a meeting of the Department of Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the United Nations in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign substances in food and the agriculture environment." She accepted the invitation, and was then scheduled by the organizers, to read a paper on "The Fate of Radioactive Fusion Products Contaminating Vegetable Crops." 3 The program

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announced that she would be the second speaker on the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA.She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan." 5 Her luggage consisted of two (2) suitcases: one contained her clothing and other personal items; the other, her scientific papers, slides and other research material. But the other flights arriving from Rome did not have her baggage on board.By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired about her suitcases in the domestic and international airports, and filled out the forms prescribed by ALITALIA for people in her predicament. However, her baggage could not be found. Completely distraught and discouraged, she returned to Manila without attending the meeting in Ispra, Italy. prcdOnce back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by her. ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ." She rejected the offer, and forthwith commenced the action 6 which has given rise to the present appellate proceedings.As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only on the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer there to accept delivery; she was already on her way home to Manila. And for some reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11) months later, and four (4) months after institution of her action. 9After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's favor: 10"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency, by way of nominal damages;

(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine Currency, as and for attorney's fees; (and)(3) Ordering the defendant to pay the costs of the suit."ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment. 11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also increased the award of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it justified as follows: 13"Considering the circumstances, as found by the Trial Court and the negligence committed by defendant, the amount of P20,000.00 under present inflationary conditions as awarded . . . to the plaintiff as nominal damages, is too little to make up for the plaintiff's frustration and disappointment in not being able to appear at said conference; and for the embarrassment and humiliation she suffered from the academic community for failure to carry out an official mission for which she was singled out by the faculty to represent her institution and the country. After weighing carefully all the considerations, the amount awarded to the plaintiff for nominal damages and attorney's fees should be increased to the cost of her round trip air fare or at the present rate of peso to the dollar at P40,000,00."ALITALIA has appealed to this Court on certiorari. Here, it seeks to make basically the same points it tried to make before the Trial Court and the Intermediate Appellate Court, i.e.:1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's fees. 14In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused to pass on all the assigned errors and in not stating the facts and the law on which its decision is based. 15Under the Warsaw Convention, 16 an air carrier is made liable for damages for:1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations of embarking or disembarking; 17

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2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during the carriage by air;" 18 and3) delay in the transportation by air of passengers, luggage or goods. 19In these cases, it is provided in the Convention that the "action for damages, however, founded, can only be brought subject to conditions and limits set out" therein. 20The Convention also purports to limit the liability of the carriers in the following manner: 211. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000 francs . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability. LLjur2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that sum is greater than the actual value to the consignor at delivery.b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check or the same air way bill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability.3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5000 francs per passenger.4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or

part of the court costs and of the other expenses of litigation incurred by the plaintiff. The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later.The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is considered to be equivalent to wilful misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the scope of his employment." 22 The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, 23 and declaring the stated limits of liability not applicable "if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result." The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful misconduct. 24 The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. 25 Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by the

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carrier" 26 or misconduct of its officers and employees, or for some particular or exceptional type of damage. Otherwise, "an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd." 27 Nor may it for a moment be supposed that if a member of the aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's property, the Convention might successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the peculiar facts presented by each case. cdphilIn Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied as regards the limitation on the carrier's liability, there being a simple loss of baggage without any otherwise improper conduct on the part of the officials or employees of the airline or other special injury sustained by the passenger.On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive of the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees. 29 Thus, an air carrier was sentenced to pay not only compensatory but also moral and exemplary damages, and attorney's fees, for instance, where its employees rudely put a passenger holding a first-class ticket in the tourist or economy section, 30 or ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave the seat of a passenger with a confirmed reservation to another, 32 or subjected a passenger to extremely rude, even barbaric treatment, as by calling him a "monkey." 33 In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some special species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at

the time appointed — a breach of its contract of carriage, to be sure — with the result that she was unable to read the paper and make the scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations) that she had painstakingly labored over, at the prestigious international conference, to attend which she had traveled hundreds of miles, to her chagrin and embarrassment and the disappointment and annoyance of the organizers. She felt, not unreasonably, that the invitation for her to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Nations, was a singular honor not only to herself, but to the University of the Philippines and the country as well, an opportunity to make some sort of impression among her colleagues in that field of scientific activity. The opportunity to claim this honor or distinction was irretrievably lost to her because of Alitalia's breach of its contract.Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having gone to Rome, she finally realized that she would no longer be able to take part in the conference. As she herself put it, she "was really shocked and distraught and confused."Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however entitled to nominal damages — which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered — and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the purely technical argument that the award to her of such nominal damages is precluded by her omission to include a specific claim therefor in her complaint, it suffices to draw attention to her

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general prayer, following her plea for moral and exemplary damages and attorney's fees, "for such other and further just and equitable relief in the premises," which certainly is broad enough to comprehend an application as well for nominal damages. Besides, petitioner should have realized that the explicit assertion, and proof, that Dr. Pablo's right had been violated or invaded by it — absent any claim for actual or compensatory damages, the prayer thereof having been voluntarily deleted by Dr. Pablo upon the return to her of her baggage — necessarily raised the issue of nominal damages. cdrepThis Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorney's fees inter alia where, as here, "the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest," 34 or "where the court deems it just and equitable." 35 WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing on the contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED, with costs against the petitioner.SO ORDERED.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

F. Limitation on Liability, Art 22

Pan Am v. IAC, 164 SCRA 268

THIRD DIVISION[G.R. No. 70462. August 11, 1988.]PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and ARCHER PRODUCTIONS, respondents.Guerrero & Torres for petitioner.Jose B. Layug for private respondents.SYLLABUS

1. WARSAW CONVENTION; CIVIL LAW; ACTUAL DAMAGES; LIABILITY OF AIRLINE CARRIER. — On the basis of the stipulations printed at the back of the Airline ticket, specifically referring to the applicability of the Warsaw convention the airline carrier's liability for the lost baggage of private respondent Pangan is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket as the latter did not declare a higher value for his baggage and pay the corresponding additional charges, the case of Ong Yiu v. Court of Appeals (G.R. No. L-40597, June 29, 1979, 91 SCRA 223) is squarely applicable to the instant case.2. REMEDIAL LAW; EVIDENCE; CONCLUSION AND FINDINGS OF THE TRIAL COURT AND THE COURT OF APPEALS, REVERSED AND SET ASIDE. — The Court set aside the decision of the trial court and affirmed by the Court of Appeals, awarding private respondent's damages as for and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. Applying the ruling in Mendoza v. Philippine Airlines, Inc. (90 Phil. 836), petitioner cannot be held liable for the cancellation of respondents' contracts in the absence of showing that petitioner's attention was called to the special circumstances requiring prompt delivery of the respondent's luggage on or before a certain date.

D E C I S I O N

CORTES, J p:

Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost baggage, containing promotional and advertising materials for films to be exhibited in Guam and the U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount specified in the airline ticket absent a declaration of a higher valuation and the payment of additional charges. LLjurThe undisputed facts of the case, as found by the trial court and adopted by the appellate court, are as follows:On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and Archer Productions, while in San Francisco, California and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement (Exh. A) whereby the former, for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with three films. 'Ang Mabait, Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition in the United States. It was also their agreement that plaintiffs would

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provide the necessary promotional and advertising materials for said films on or before May 30, 1978.On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of two of the films above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan undertook to provide the necessary promotional and advertising materials for said films on or before the exhibition date on May 30, 1978.By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite promotional handbills and still pictures for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C-1). Likewise in preparation for his trip abroad to comply with his contracts, plaintiff Pangan purchased fourteen clutch bags, four capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E, and F).On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the Your Travel Guide, an economy class airplane ticket with No. 0269207406324 (Exh. G) for passage from Manila to Guam on defendant's Flight No. 842 of May 27, 1978, upon payment by said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiff's witness Mila de la Rama.On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter at the Manila International Airport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1). The two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in Guam to comply with his commitment, paying an additional sum of $112.00.When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a consequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United States were cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J) for his missing luggages.

Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary representations to protest as to the treatment which he received from the employees of the defendant and the loss of his two luggages (Exh. M, O, Q, S, and T). Defendant Pan Am assured plaintiff Pangan that his grievances would be investigated and given its immediate consideration (Exhs. N, P and R). Due to the defendant's failure to communicate with Pangan about the action taken on his protests, the present complaint was filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-29.]On the basis of these facts, the Court of First Instance found petitioner liable and rendered judgment as follows:(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the sum of P83,000.00, for actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, when the complaint was filed, until the same is fully paid, plus the further sum of P10,000.00 as attorney's fees;(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V. Pangan the sum of P8,123.34, for additional actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, until the same is fully paid;(3) Dismissing the counterclaim interposed by defendant Pan American World Airways, Inc.; and(4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit. [Rollo, pp. 106-107.]On appeal, the then Intermediate Appellate Court affirmed the trial court decision.Hence, the instant recourse to this Court by petitioner.The petition was given due course and the parties, as required, submitted their respective memoranda. In due time the case was submitted for decision.In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors:1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of carriage.2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of alleged lost profits in the face of this Court's ruling concerning special or consequential damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]The assigned errors shall be discussed seriatim.

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1. The airline ticket (Exh. "G") contains the following conditions:NOTICEIf the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. See also notice headed "Advice to International Passengers on Limitation of Liability."CONDITIONS OF CONTRACT1. As used in this contract "ticket" means this passenger ticket and baggage check of which these conditions and the notices form part, "carriage" is equivalent to "transportation," "carrier" means all air carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other service incidental to such air carriage. "WARSAW CONVENTION" means the convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th October 1929, or that Convention as amended at The Hague, 28th September 1955, whichever may be applicable.2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not "international carriage" as defined by that Convention.3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier's conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier), except in transportation between a place in the United States or Canada and any place outside thereof to which tariffs in force in those countries apply.xxx xxx xxxNOTICE OF BAGGAGE LIABILITY LIMITATIONSLiability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: (1) for most international travel (including domestic portions of international journeys) to approximately $9.70 per pound ($20.00 per kilo) for checked baggage and $400 per passenger for unchecked baggage: (2) for travel wholly between U.S. points, to $750 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain

types of valuable articles. Carriers assume no liability for fragile or perishable articles further information may be obtained from the carrier. [Emphasis supplied.].On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and pay the corresponding additional charges.To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223), where the Court sustained the validity of a printed stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specified amount and ruled that the carrier's liability was limited to said amount since the passenger did not declare a higher value, much less pay additional charges.We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through Justice Melencio-Herrera, stated:Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket . . .We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:8. BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damage baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750 * of the Civil Code has not been complied with.While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d 450, 176 N.Y.S. 2d

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400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known as a contract of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent, [Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence."Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00. On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where the Court held that the stipulation limiting the carrier's liability to a specified amount was invalid, finds no application in the instant case, as the ruling in said case was premised on the finding that the conditions printed at the back of the ticket were so small and hard to read that they would not warrant the presumption that the passenger was aware of the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts that would make the case fall under the exception have not been alleged, much less shown to exist. LibLexIn view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket.At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that the Court of Appeals' reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of contractual breach of carriage ** is against public policy" is utterly misplaced, to say the least. In said case, while the Court, as quoted in the Intermediate Appellate Court's decision, said:Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of, or damages to any checked baggage or any goods, or of delay in the transportation by air of

passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare the carrier liable for damages in enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.it prefaced this statement by explaining that:. . . The case is now before us on petition for review by certiorari, upon the ground that the lower court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines: (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well-taken. (Emphasis supplied.)Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be considered as supportive of the appellate court's statement that the provisions of the Warsaw Convention limited a carrier's liability are against public policy.2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled.The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any clearer:. . . Under Art. 1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of transportation was entered into. The trial court correctly found that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by

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posters and advertisement in the newspaper, were not called to the defendant's attention.In our research for authorities we have found a case very similar to the one under consideration. In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to the defendant Fargo, an express company, consigned and to be delivered to him in Utica. At the time of shipment the attention of the express company was called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was found that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered damages or loss of profits. But the highest court in the State of New York refused to award him special damages. Said appellate court observed:But before defendant could be held to special damages such as the present alleged loss of profits on account of delay or failure of delivery it must have appeared that he had notice at the time of delivery to him of the particular circumstances attending the shipment and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form in order to impose on the defaulting party further liability than for damages naturally and directly i.e., in the ordinary course of things arising from a breach of contract such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of breach at the time of or prior to contracting. Generally notice then of any special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held sufficient far this effect.As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in the present case. [Emphasis supplied.]Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that petitioner's attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit. prLL

The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down in Mendoza and affirmance of the trial court's conclusion that petitioner is liable for damages based on the finding that "[t]he undisputed fact is that the contracts of the plaintiffs for the exhibition of the films in Guam and California were cancelled because of the loss of the two luggages in question." [Rollo, p. 36] The evidence reveals that the proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring delivery of the promotional and advertising materials on or before a certain date.3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the award of attorney's fees, which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent's just and valid claim, loses support and must be set aside.WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court is SET ASIDE and a new judgment is rendered ordering petitioner to pay private respondents damages in the amount of US$600.00 or its equivalent in Philippine currency at the time of actual payment.

SO ORDERED.

Fernan, C.J., Feliciano and Bidin, JJ., concur.Gutierrez, Jr., J., no part as I was on leave during the deliberation.

Footnotes * Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.** The Warsaw Convention actually provides that "[i]n the transportation of checked baggage and of goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value of delivery and has paid a supplementary sum if the case so requires. In that case, the carrier will be liable to pay a sum not exceeding the

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declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.. The sums mentioned above shall be deemed to refer to the French franc consisting of 65-1/2 milligrams of gold at the standard of fineness of nine hundred thousandths. These sums may be converted into any national currency in round figures." [51 O.G. 5084, 5091.]

Proclamation No. 201, (September 23, 1955) made public the adherence of the Republic of the Philippines to the Warsaw Convention. [51 O.G. 4933.]

G. When Limitations unavailable, Arts. 3, 25

TWA v. CA, 165 SCRA 143

FIRST DIVISION[G.R. No. 78656. August 30, 1988.]TRANS WORLD AIRLINES, petitioner, vs. COURT OF APPEALS and ROGELIO A. VINLUAN, respondents.Guerrero & Torres Law Offices for petitioner.Angara, Abello, Concepcion, Regala & Cruz for private respondent.The Solicitor General for public respondent.

SYLLABUS

1. CIVIL LAW; DAMAGES; MORAL AND EXEMPLARY DAMAGES; BASIS FOR THE AWARD THEREOF IN THE CASE AT BAR. — The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable. Consequently, the award of moral and exemplary damages by the respondent court is in order. At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He was a director of several companies and was active in civic and social organizations in the Philippines. Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled to the award of moral and exemplary damages. However, the moral damages should be reduced to P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award should be reasonably sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an example to discourage the repetition of similar oppressive and discriminatory acts.

2. ID.; ID.; MORAL DAMAGES; PRESENCE OF BAD FAITH JUSTIFIES AWARD THEREOF. — Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of economy. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. More so in this case where instead of courteously informing private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner.

D E C I S I O N

GANCAYCO, J p:

Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several cities in Europe and the U.S. to attend to some matters involving several clients. He entered into a contract for air carriage for valuable consideration with Japan Airlines first class from Manila to Tokyo, Moscow, Paris, Hamburg, Zurich, New York, Los Angeles, Honolulu and back to Manila thru the same airline and other airlines it represents for which he was issued the corresponding first class tickets for the entire trip.On April 18, 1979, while in Paris, he went to the office of Trans World Airlines (TWA) at the De Gaulle Airport and secured therefrom confirmed reservation for first class accommodation on board its Flight No. 41 from New York to San Francisco which was scheduled to depart on April 20, 1979. A validated stub was attached to the New York-Los Angeles portion of his ticket evidencing his confirmed reservation for said flight with the mark "OK." 1 On April 20, 1979, at about 8:00 o'clock A.M., Vinluan reconfirmed his reservation for first class accommodation on board TWA Flight No. 41 with its New York office. He was advised that his reservation was confirmed. He was even requested to indicate his seat preference on said flight on said scheduled date of departure of TWA Flight No. 41. Vinluan presented his ticket for check-in at the counter of TWA at JFK International Airport at about 9:45 o'clock A.M., the scheduled time of the departure being 11:00 o'clock A.M. He was informed that there was no first class seat available for him on the flight. He asked for an explanation but TWA employees on duty declined to give any reason. When he began to protest, one of the TWA employees, a certain Mr. Braam, rudely threatened him with the words "Don't argue with me, I have a very bad temper."

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To be able to keep his schedule, Vinluan was compelled to take the economy seat offered to him and he was issued a "refund application" as he was downgraded from first class to economy class.While waiting for the departure of Flight No. 41, Vinluan noticed that other passengers who were white Caucasians and who had checked-in later than him were given preference in some first class seats which became available due to "no show" passengers.On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court of First Instance of Rizal alleging breach of contract and bad faith. After trial on the merits, a decision was rendered the dispositive part of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant holding the latter liable to the former for the amount representing the difference in fare between first class and economy class accommodations on board Flight No. 6041 from New York to San Francisco, the amount of P500,000.00 as moral damages, the amount of P300,000.00 as exemplary damages and the amount of P100,000.00 as and for attorney's fees, all such amounts to earn interest at the rate of twelve (12%) percent per annum from February 15, 1980 when the complaint was filed until fully paid.Correspondingly, defendant's counterclaim is dismissed.Costs against the defendant.SO ORDERED."

Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due course a decision was rendered on May 27, 1987, 2 the dispositive part of which reads as follows:"WHEREFORE, the decision dated March 8, 1984 is hereby modified by (1) fixing the interest which appellant must pay on the awards of moral and exemplary damages at six per cent (6%) per annum from the date of the decision a quo, March 8, 1984 until date of full payment and (2) reducing the attorney's fees to P50,000.00 without interest, the rest of the decision is affirmed. Costs against appellant.SO ORDERED."

Hence, the herein petition for review.The theory of the petitioner is that because of maintenance problems of the aircraft on the day of the flight, TWA Flight No. 41 was cancelled and a special Flight No. 6041 was organized to

operate in lieu of Flight No. 41. 3 Flight No. 41 was to have utilized a Lockheed 1011 with 34 first class seats, but instead, a smaller Boeing 707 with only 16 first class seats was substituted for use in Flight No. 6041. Hence, passengers who had first class reservations on Flight No. 41 had to be accommodated on Flight No. 6041 on a first-come, first-served basis. An announcement was allegedly made to all passengers in the entire terminal of the airport advising them to get boarding cards for Flight No. 6041 to San Francisco and that the first ones getting them would get first preference as to seats in the aircraft. It denied declining to give any explanation for the downgrading of private respondent as well as the discourteous attitude of Mr. Braam.On the other hand, private respondent asserts that he did not hear such announcement at the terminal and that he was among the early passengers to present his ticket for check-in only to be informed that there was no first class seat available for him and that he had to be downgraded.The petitioner contends that the respondent Court of Appeals committed a grave abuse of discretion in finding that petitioner acted maliciously and discriminatorily, and in granting excessive moral and exemplary damages and attorney's fees.The contention is devoid of merit. Private respondent had a first class ticket for Flight No. 41 of petitioner from New York to San Francisco on April 20, 1979. It was twice confirmed and yet respondent unceremoniously told him that there was no first class seat available for him and that he had to be downgraded to the economy class. As he protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he was waiting for the flight, he saw that several Caucasians who arrived much later were accommodated in first class seats when the other passengers did not show up.The discrimination is obvious and the humiliation to which private respondent was subjected is undeniable. Consequently, the award of moral and exemplary damages by the respondent court is in order. 4Indeed, private respondent had shown that the alleged switch of planes from a Lockheed 1011 to a smaller Boeing 707 was because there were only 138 confirmed economy class passengers who could very well be accommodated in the smaller plane and not because of maintenance problems.Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan for the sake of economy. Such inattention and lack of care for the interest of its passengers who

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are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. 5 More so in this case where instead of courteously informing private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an employee of petitioner.At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior partner of a big law firm in Manila. He was a director of several companies and was active in civic and social organizations in the Philippines. Considering the circumstances of this case and the social standing of private respondent in the community, he is entitled to the award of moral and exemplary damages. However, the moral damages should be reduced to P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award should be reasonably sufficient to indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an example to discourage the repetition of similar oppressive and discriminatory acts.WHEREFORE, with the above modification reducing the moral and exemplary damages as above-stated, the decision subject of the petition for review is AFFIRMED in all other respects, without pronouncement as to costs in this instance.SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1. Exhibit B. 2. Justice Floreliana Castro-Bartolome, ponente, concurred in by Justices Arturo Buena and Eduardo R. Bengzon. 3. Exhibits 6, 6-A and 6-B. 4. Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1063 (1965); Lopez v. Pan American World Airways, 16 SCRA 431 (1966). 5. Ortigas, Jr. v. Lufthansa German Airlines, 64 SCRA 610 (1975).

H. Conditions on Imposition of Liability, Arts. 26, 28, 29

Santos v. Northwest, supraLuna v. Court of Appeals, 216 SCRA 107

FIRST DIVISION[G.R. No. 100374-75. November 27, 1992.]RUFINO Y. LUNA, RODOLFO J. ALONSO and PORFIRIO RODRIGUEZ, petitioners, vs. HON. COURT OF APPEALS, HON. CRISTINA M. ESTRADA in her capacity as Presiding Judge, RTC-Pasig, Br. 69, Metro Manila, HON. TERESITA D. CAPULONG in her capacity as Presiding Judge, RTC-Valenzuela, Br. 172, Metro Manila, and NORTHWEST AIRLINES, INC., respondents.Virgilio R. Garcia for petitioners.Quisumbing, Torres & Evangelista for Northwest Airlines, Inc.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; TECHNICALITIES SHOULD BE DISREGARDED TO RENDER PARTIES WHAT IS DUE THEM. — From the facts, it appears that private respondent Northwest Airlines indeed failed to deliver petitioners' baggage at the designated time and place. For this, all that respondent carrier could say was that "[W]e exerted all efforts to comply with this condition of the contract." Hence, it is evident that petitioners suffered some special specie of injury for which they should rightly be compensated. Private respondent cannot be allowed to escape liability be seeking refuge in the argument that the trial courts' orders have attained finality due to petitioners' failure to move for reconsideration or to file a timely appeal therefrom. Technicalities should be disregarded if only to render to the respective parties that which is their due.2. ID.; SPECIAL CIVIL ACTION; CERTIORARI; GENERALLY, NOT A SUBSTITUTE FOR APPEAL; EXCEPTIONS. — Although We have said that certiorari cannot be a substitute for a lapsed appeal, We have, time and again, likewise held that where a rigid application of that rule will result in a manifest failure or miscarriage of justice, the rule may be relaxed. Hence, considering the broader and primordial interests of justice, particularly when there is grave abuse of discretion, thus impelling occasional departure from the general rule that the extraordinary writ of certiorari cannot substitute for a lost appeal, respondent appellate court may legally entertain the special civil action for certiorari.3. ID.; ACTIONS; WARSAW CONVENTION; A TREATY COMMITMENT WHICH DOES NOT OPERATE AS AN EXCLUSIVE ENUMERATION OF GROUNDS NOR LIMITATION OF LIABILITY FOR

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BREACH OF CONTRACT OF CARRIAGE. — The Warsaw Convention was a treaty commitment voluntarily assumed by the Philippine government; consequently, it has the force and effect of law in this country. But, in the same token, We are also aware of jurisprudence that the Warsaw Convention does not operate as an exclusive enumeration of the instances for declaring an airline liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Convention merely declares the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. For sure, it does not regulate the liability, much less exempt, the carrier for violating the rights of others which must simply be respected in accordance with their contracts of carriage. The application of the Convention must not therefore be construed to preclude the operation of the Civil Code and other pertinent laws.4. ID.; ID.; ID.; ID.; CASE AT BAR. — Hence, petitioners' alleged failure to file a claim with the common carrier as mandated by the provisions of the Warsaw Convention should not be a ground for the summary dismissal of their complaints since private respondent may still be held liable for breach of other relevant laws which may provide a different period or procedure for filing a claim. Considering that petitioners indeed filed a claim which private respondent admitted having received on 21 June 1989, their demand may have very well filed within the period prescribed by those applicable laws. Consequently, respondent trial courts, as well as respondent appellate court, were in error when they limited themselves to the provisions of the Warsaw Convention and disregarding completely the provisions of the Civil Code.5. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF CARRIAGE; BREACH OF CONTRACT FOR FAILURE TO DELIVER CARGO; MUST BE INTENTIONAL TO RECOVER DAMAGES; FAILURE IN CASE AT BAR, NOT INTENTIONAL. — We are not prepared to subscribe to petitioners' argument that the failure of private respondent to deliver their luggage at the designated time and place amounted ipso facto to willful misconduct. for willful misconduct to exist, there must be a showing that the acts complained of were impelled by an intention to violate the law, or were in persistent disregard of one's rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct.

D E C I S I O N

BELLOSILLO, J p:

This joint petition for review on certiorari originated from two (2) separate complaints arising from an airline's delay in the delivery of the luggage of its passengers at their destination which respondent courts dismissed for lack of cause of action. The resulting issue is whether the application of the Warsaw Convention operates to exclude the application of the provisions of the New Civil Code and other pertinent statutes.Briefly, the facts: On 19 May 1989, at around 8:00 in the morning, petitioners Rufino Luna, Rodolfo Alonso and Porfirio Rodriguez boarded Flight 020 of private respondent Northwest Airlines bound for Seoul, South Korea, to attend the four-day Rotary International Convention from the 21st to the 24th of May 1992. They checked in one (1) piece of luggage each. After boarding, however, due to engine trouble, they were asked to disembark and transfer to a Korean Airlines plane scheduled to depart four (4) hours later. They were assured that their baggage would be with them in the same flight.When petitioners arrived in Seoul, they discovered that their personal belongings were nowhere to be found; instead, they were allegedly flown to Seattle, U.S.A. It was not until four (4) days later, and only after repeated representations with Northwest Airlines personnel at the airport in Korea were petitioners able to retrieve their luggage. By then the Convention, which they were hardly able to attend, was almost over. LLjurPetitioners Rufino Y. Luna and Rodolfo J. Alonso assert that on 6 June 1989, or thirteen (13) days after they recovered their luggage, they sent a written claim to private respondent's office along Roxas Blvd., Ermita, Manila. Petitioner Porfirio Rodriguez, on his part, asseverates that he filed his claim on 13 June 1989. However, private respondent, in a letter of 21 June 1989, disowned any liability for the delay and averred that it exerted "its best efforts to carry the passenger and baggage with reasonable dispatch." 1 Thus, on 14 July 1989, petitioners Luna and Alonso jointly filed a complaint for breach of contract with damages before the Regional Trial Court of Pasig, Metro Manila, docketed as Civil Case No. 58390, subsequently raffled to Br. 69, 2 while petitioner Rodriguez filed his own complaint with the Regional Trial Court of Valenzuela, Metro Manila, docketed as Civil Case No. 3194-V-89, assigned to Br. 172. 3 However, upon motion of private respondent, both complaints were dismissed 4 for lack of cause of action due to petitioner's failure to state in their respective complaints that they

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filed a prior claim with private respondent within the prescribed period.Petitioners Luna and Alonso then filed a petition for certiorari before the Court of Appeals to set aside the order of respondent Judge Cristina M. Estrada granting private respondent's motion to dismiss, while petitioner Rodriguez proceeded directly to this Court on Certiorari for the same purpose. However, in Our resolution of 26 February 1990, We referred his petition to the Court of Appeals. On 26 March 1991, the Third Division of respondent Court of Appeals, applying the provisions of the Warsaw Convention and ruling that certiorari was not a substitute for a lost appeal, dismissed the petition of Luna and Alonso, 5 and on 7 June 1991 denied their motion for reconsideration. 6 Meanwhile, on 28 February 1991 the Seventh Division of respondent Court of Appeals, ruling that the questioned order of the trial court had already become final, similarly rejected the petition of Rodriguez, and on 6 June 1991 denied his motion for reconsideration. 7 Hence, this present recourse by petitioners Luna, Alonso and Rodriguez.Four (4) grounds are relied upon by petitioners which, nevertheless, may be reduced to three, namely: (a) that respondent appellate court disregarded Our ruling in Alitalia v. CA 8 where We said that "[t]he Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability;" 9 (b) that "petitions to revoke orders and decisions may be entertained even after the time to appeal had elapsed, in cases wherein the jurisdiction of the court had been exceeded;" 10 and, (c) that Art. 26 of the Warsaw Convention which prescribes the reglementary period within which to file a claim cannot be invoked if damage is caused by the carrier's willful misconduct, as provided by Art. 25 of the same Warsaw Convention.Private respondent, on the other hand, argues that the dismissal orders of respondent courts had already become final after petitioners failed to either move for reconsideration or appeal from the orders within the reglementary period, hence, certiorari is no substitute for a lost appeal. LLprPrivate respondent also maintains that it did not receive any demand letter from petitioners within the 21-day reglementary period, as provided in par. 7 of the Conditions of Contract appearing in the plane ticket. Since Art. 26, par. (4), of the Warsaw Convention provides that "[f]ailing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on him part," the carrier consequently cannot be held liable

for the delay in the delivery of the baggage. In other words, non-observance of the prescribed period to file a claim bars claimant's action in court for recovery.Private respondent, citing foreign jurisprudence, 11 likewise submits that Art. 25, par. (1), of the Warsaw Convention which excludes or limits liability of common carriers if the damage is caused by its willful misconduct, refers only to the monetary ceiling on damages found in Art. 22.We find the appeal impressed with merit.From the facts, it appears that private respondent Northwest Airlines indeed failed to deliver petitioners' baggage at the designated time and place. For this, all that respondent carrier could say was that "[w]e exerted all efforts to comply with this condition of the contract." 12 Hence, it is evident that petitioners suffered some special specie of injury for which they should rightly be compensated. Private respondent cannot be allowed to escape liability by seeking refuge in the argument that the trial courts' orders have attained finality due to petitioners' failure to move for reconsideration or to file a timely appeal therefrom. Technicalities should be disregarded if only to render to the respective parties that which is their due. Thus, although We have said that certiorari cannot be a substitute for a lapsed appeal, We have, time and again, likewise held that where a rigid application of that rule will result in a manifest failure or miscarriage of justice, the rule may be relaxed. 13 Hence, considering the broader and primordial interests of justice, particularly when there is grave abuse of discretion, thus impelling occasional departure from the general rule that the extraordinary writ of certiorari cannot substitute for a lost appeal, respondent appellate court may legally entertain the special civil action for certiorari. 14 Previously, We ruled that the Warsaw Convention was a treaty commitment voluntarily assumed by the Philippine government; consequently, it has the force and effect of law in this country. 15 But, in the same token, We are also aware of jurisprudence that the Warsaw Convention does not operate as an exclusive enumeration of the instances for declaring an airline liable for breach of contract of carriage or as an absolute limit of the extent of that liability. 16 The Convention merely declares the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. 17 For sure, it does not regulate the liability, much less exempt, the carrier for violating the rights of others which must simply be respected in accordance with their contracts of carriage. The application of the Convention must not therefore be construed

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to preclude the operation of the Civil Code and other pertinent laws. In fact, in Alitalia v. IAC, 18 We awarded Dr. Felipa Pablo nominal damages, the provisions of the Convention notwithstanding.Hence, petitioners' alleged failure to file a claim with the common carrier as mandated by the provisions of the Warsaw Convention should not be a ground for the summary dismissal of their complaints since private respondent may still be held liable for breach of other relevant laws which may provide a different period or procedure for filing a claim. Considering that petitioners indeed filed a claim which private respondent admitted having received on 21 June 1989, their demand may have very well been filed within the period prescribed by those applicable laws. Consequently, respondent trial courts, as well as respondent appellate court, were in error when they limited themselves to the provisions of the Warsaw Convention and disregarding completely the provisions of the Civil Code. cdphilWe are unable to agree however with petitioners that Art. 25 of the Convention operates to exclude the other provisions of the Convention operates to exclude the other provisions of the Convention if damage is caused by the common carrier's willful misconduct. As correctly pointed out by private respondent, Art. 25 refers only to the monetary ceiling on damages found in Art. 22 should damage be caused by carrier's willful misconduct. Hence, only the provisions of Art. 22 limiting the carrier's liability and imposing a monetary ceiling in case of willful misconduct on its part that the carrier cannot invoke. 19 This issue however has become academic in the light of our ruling that the trial courts erred in dismissing petitioners' respective complaints.

We are not prepared to subscribe to petitioners' argument that the failure of private respondent to deliver their luggage at the designated time and place amounted ipso facto to willful misconduct. For willful misconduct to exist, there must be a showing that the acts complained of were impelled by an intention to violate the law, or were in persistent disregard of one's rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct.

WHEREFORE, the assailed decisions and resolutions of respondent Court of Appeals are REVERSED and SET ASIDE. The complaints for breach of contract of carriage with damages in Civil Case No. 3194-V-89 and Civil Case No. 58390 dismissed by respondent Judges

Teresita D. Capulong and Cristina M. Estrada, respectively, are ordered REINSTATED and given due course until terminated. No costs.SO ORDERED.

Cruz, Padilla and Griño-Aquino, JJ ., concur.