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MARITIME LAW

GENERAL CONCEPTS

Maritime law is the system of laws which particularlyrelates to the affairs and business of the sea, to ships,their crews and navigation, and to marine conveyance ofpersons and property.

The primary law on maritime commerce is still the NewCivil Code provisions on common carriers. The Code ofCommerce and special laws apply only suppletorily.

REAL AND HYPOTHECARY NATURE

There are two reasons why it is impossible to do awaywith these privileges, to wit

1. The risk to which the thing is exposed

2. The real nature of maritime law according towhich liability of the parties is limited to a thing towhich is at mercy of the waves.

The Supreme Court likewise explained in another casethat the real and hypothecary nature of maritime lawsimply means that the liability of the carrier in connectionwith losses related to maritime contracts to the vesselwhich is hypothecated for such obligation or which standsas the guaranty for their settlement.

Thus, the liability of the vessel owner and agent arisingfrom the operation of such vessel were confined to thevessel itself, its equipment, freight and insurance if anywhich limitation served to induce capitalists intoeffectively wagering their resource against theconsideration of the large profits attainable in the trade.

STATUTORY PROVISIONS

Art. 587 The ship agent shall also be civilly liable for theindemnities in favor of third persons which may arise fromthe conduct of the captain in the care of the goods whichhe loaded on the vessel; but he may exempt himselftherefrom by abandoning the vessel with all herequipments and the freight it may have earned during thevoyage.

Art. 590 The co-owners of the vessel shall be civilly liablein the proportion of their contribution to the common fundfor the results of the acts of the captain, referred to inArticle 587.

Each co-owner may exempt himself from this liability bythe abandonment, before a notary, of that part of thevessel belonging to him.

Art. 643 If the vessel and her cargo should be totally lost,by reason of capture or wreck, all rghts shall beextinguished, both as regards the crew to demand anywages whatsoever, and as regards the ship agent torecover the advances made.

If a portion of the vessel of the cargo, or of both, shouldbe saved, the crew engaged on wages, including thecaptain shall retain their rights on the salvage, so far as

they go on, the remainder of the vessel as well as on tamount of the freightage of the cargo saved; but sailowhoa re engaged n shares shall not have any rigwhatsoever on the salvage of the hull, but only on tportion of the freightage saved. If they should haworked to recover the remainder of the shipwreckvessel they shall be given from the amount of tsalvage an award proportion of the efforts made and

the risks, encountered in order to accomplish tsalvage.

Art. 837 The civil liability incurred by the shipowners the cases prescribed in this section shall be understood limited to the value of the vessel with all happurtenances and freight earned during the voyage.

COVERAGE

Article 837 applies the principle of limited liability in casof collision, while Article 587 and 590 embody tuniversal principle of limited liability in all cases. Thtaken together Articles 837, 587 and 590 covers only wit

1. Liability to third parties

2. Acts of the captain

3. Collisions

No vessel, no liability expresses in a nutshell the limitliability rule. The total destruction of the vesextinguishes maritime liens because there is no longany res to which it can attach.

EXCEPTIONS TO THE LIMITED LIABILITY RULE

1. Where the injury or death is due either to the fa

of shipowner or to the concurring negligence the shipowner and captain

2. Where the vessel is insured

3. In workmens compensation claims

4. That the total destruction of the vessel affect tliability of the owner for repairs of the vescompleted before its loss

NEGLIGENCE

The limited liability rule applies if the captain or the crecaused the damage or injury.

However, if the failure to maintain the seaworthiness the vessel can be ascribed to the shipowner alone or tshipowner concurrently with the captain, then limitliability principle cannot be invoked.

Ex. Allowing the ship to carry more passengers than it wallowed to carry, captain playing mahjonunseaworthiness of the vessel at the time of its departuauthorizing a voyage notwithstanding knowledge oftyphoon, admittedly employing an unlicensed master aengineer


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INSURANCE

The Supreme Court explained that the total loss of thevessel did not extinguish the liability of the carriersinsurer. Despite the loss of the vessel, therefore, itsinsurance answers for the damages that a shipowner oragent may be held liable for by reason of the death ofpassengers.

WORKERS COMPENSATION

The provision of Code of Commerce has no room in theapplication of Workmens Compensation act.

If an accident is compensable under the WorkmensCompensation Act, it must be compensated even whenthe workmans right is not recognized by or is in conflictwith other provisions of the Civil Code or the Code ofCommerce. The reason behind this principle is that theWorkmens Compensation Act was enacted by thelegislature in abrogation of other existing laws.

ABANDONMENT

Abandonment of the vessel, its appurtenance and thefreightage is an indispensable requirement before theshipowner or shipagent can enjoy the benefits of thelimited liability principle. If the carrier does not want toabandon the vessel, then he is still liable even beyond thevalue of the vessel.

The Supreme Court held that the rule in the case ofcollision, abandonment of the vessel is necessary in orderto limit the liability of the shipowner or the agent to thevalue of the vessel, its appurtenance and freightageearned in the voyage in accordance with Article 837 of theCode of Commerce. The only instance where suchabandonment is dispensed with is when the vessel wasentirely lost. In such case, the obligation is therebyextinguished.

PROCEDURE FOR ENFORCEMENT

In the sinking of the vessel, the claimants are limited intheir recovery to the remaining value of accessible assets.In the case of a lost vessel, these are the insuranceproceeds and pending freightage for the particularvoyage.

The court ruled that in fairness to the claimants, and as amatter of equity, the total proceeds of the insurance andpending freightage should be deposited in trust.

PROTEST

Protest is a written statement by the master of the vesselor any authorized officer, attested by proper officer or anotary, to the effect that damages has suffered by theship.

Protest is required under the Code of Commerce in thefollowing cases:

1. Arrival under stress

2. Vessel is shipwrecked

3. Where the vessel has gone through a hurricanethe captain believes that the cargo has sufferdamages or averages

4. Maritime collisions

ADMIRALTY JURISDICTION

The Regional Trial Court has jurisdiction over admiraand maritime cases where the demand or claim exceP100,000 or if in Metro Manila a claim exceeds P200,000

If the claim does not exceed then jurisdiction is in tMunicipal Trial Court.

STANDARD OIL VS. CASTELO

That the owner of the ship is a person to whom tplaintiff in this case may immediately look freimbursement to the extent above stated is deducibnot only from the general doctrines of admira jurisprudence but from the provisions of the Code Commerce applicable to the case. It is universarecognized that the captain is primarily the representatof the owner; and article 586 of the Code of Commerexpressly declares that both the owner of the vessel athe naviero, or charterer, shall be civil liable for the acof the master. In this connection, it may be noted ththere is a discrepancy between the meaning ofnaviero,articles 586 of the Code of Commerce, where the wordused in contradistinction to the term "owner of the vess( propietario), and in article 587 where it is used alonand apparently in a sense broad enough to include towner. Fundamentally the word "naviero" must understood to refer to the person undertaking the voyagwho in one case may be the owner and in another thcharterer. But this is not vital to the present discussio

The real point to which we direct attention is that, by texpress provision of the Code, the owner of the vesselcivilly liable for the acts of the captain; and he can onescape from this civil liability by abandoning his propein the ship and any freight that he may have earned othe voyage (arts. 587, 588, Code of Comm.).

The shipper may in our opinion go at once upon the ownand the latter, if so minded, may have his recourse findemnization against his captain.

In considering the question now before us it important to remember that the owner of the shordinarily has vastly more capital embarked upon

voyage than has any individual shipper of cargMoreover, the owner of the ship, in the person of tcaptain, has complete and exclusive control of the creand of the navigation of the ship, as well as of tdisposition of the cargo at the end of the voyage. Ittherefore proper that any person whose property mhave been cast overboard by order of the captain shouhave a right of action directly against the ship's owner fthe breach of any duty which the law may have imposon the captain with respect to such cargo. To adopt tinterpretation of the law for which the appellant contenwould place the shipowner in a position to escape responsibility for a general average of this character


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means of the delinquency of his own captain. This cannotbe permitted. The evident intention of the Code, taken inall of its provisions, is to place the primary liability uponthe person who has actual control over the conduct of thevoyage and who has most capital embarked in theventure, namely, the owner of the ship, leaving him toobtain recourse, as it is very easy to do, from otherindividuals who have been drawn into the venture as

shippers.

YU CON VS. IPIL

Blanco, the commentator on mercantile law, in referringto the grammatical meaning of the word "ship" and"vessels," says, in his work aforecited, that these termsdesignate every kind of craft, large or small, whetherbelonging to the merchant marine or to the navy. Andreferring to their juridical meaning, he adds: "This doesnot differ essentially from the grammatical meaning; thewords "ship" and "vessel" also designate every craft, largeor 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 intendedfor ocean or for coastwise navigation, as well as thefloating docks, mud lighters, dredges, dumpscows or anyother floating apparatus used in the service of an industryor in that of maritime commerce. . . ." (Vol. 1, p.389.)chanrobles virtual law library

According to the foregoing definitions, then, we shouldthat the banca called Maria, chartered by the plaintiff YuCon 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 ofCommerce in force. virtual law library

The name of captain or master is given, according to thekind of vessel, to the person in charge of it.

The first denomination is applied to those who governvessels that navigate the high seas or ships of largedimensions and importance, although they be engaged inthe coastwise trade.

Masters are those who command smaller ships engagedexclusively in the coastwise trade.\

For the purposes of maritime commerce, the words"captain" and "master" have the same meaning; bothbeing 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 favorof third persons which arise from the conduct of thecaptain in the care of the goods which the vessel carried;but he may exempt himself therefrom by abandoning thevessel with all her equipments and the freight he mayhave earned during the trip.

It is well and good that the shipowner be not heldcriminally liable for such crimes or quasi crimes; but the

cannot be excused from liability for the damage and hawhich, in consequence of those acts, may be suffered the third parties who contracted with the captain, in hdouble capacity of agent and subordinate of tshipowner himself. In maritime commerce, the shippeand passengers in making contracts with the captain so through the confidence they have in the shipownwho appointed him; they presume that the owner made

most careful investigation before appointing him, anabove all, they themselves are unable to make such investigation, and even though they should do so, thcould not obtain complete security, inasmuch as tshipowner can, whenever he sees fit, appoint anothcaptain instead

The shipowner is in the same case with respect to tmembers of the crew, for, though he does not appodirectly, yet, expressly or tacitly, he contributes to theappointment.

On the other hand, if the shipowner derives profits frothe results of the choice of the captain and the cre

when the choice turns out successful, it is also just that should suffer the consequences of an unsuccessappointment, by application of the rule of natural lcontained in the Partidas, viz., that he who enjoys thbenefits derived from a thing must likewise suffer tlosses that ensue therefrom.

The Code of Commerce in force omits the declarationnon-liability contained in the old code, and clearly makthe shipowner liable civilly for the loss suffered by thowho contracted with the captain, in consequence of tmisdemeanors and crimes committed by the latter or the members of the crew.

YANGCO VS. LASERNA

May the shipowner or agent, notwithstanding the toloss of the vessel as a result of the negligence of captain, be properly held liable in damages for tconsequent death of its passengers? We are of topinion and so hold that this question is controlled by tprovisions of article 587 of the Code of Commerce. Saarticle reads:

The agent shall also be civilly liable for the indemnitiesfavor of third persons which arise from the conduct of tcaptain in the care of the goods which the vessel carriebut he may exempt himself therefrom by abandoning tvessel with all her equipments and the freight he mhave earned during the voyage.

The provisions accords a shipowner or agent the rightabandonment; and by necessary implication, his liabilityconfined to that which he is entitled as of right to aband- "the vessel with all her equipments and the freightmay have earned during the voyage." It is true that tarticle appears to deal only with the limited liability shipowners or agents for damages arising from tmisconduct of the captain in the care of the goods whithe vessel carries, but this is a mere deficiency language and in no way indicates the true extent of suliability


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The present code (1829) does not determine the juridicalstatus of the agent where such agent is not himself theowner of the vessel. This omission is supplied by theproposed code, which provides in accordance with theprinciples of maritime law that by agent it is to beunderstood the person intrusted with the provisioning ofthe vessel, or the one who represents her in the port inwhich she happens to be. This person is the only one who

represents the vessel - that is to say, the only one whorepresents the interests of the owner of the vessel. Thisprovision has therefore cleared the doubt which existedas to the extent of the liability, both of the agent and ofthe owner of the vessel. Such liability is limited by theproposed code to the value of the vessel and other thingsappertaining thereto.

In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in such acomprehensive manner as to leave no room for doubt onthe applicability of our ratio decidendi not only to cases ofcollision but also to those of shipwrecks, etc. We said:

This is the difference which exists between the lawful actsand lawful obligations of the captain and the liabilitywhich he incurs on account of any unlawful act committedby him. In the first case, the lawful acts and obligations ofthe captain beneficial to the vessel may be enforced asagainst the agent for the reason that such obligationsarise from the the contract of agency (provided, however,that the captain does not exceed his authority), while asto any liability incurred by the captain through hisunlawful acts, the ship agent is simply subsidiarily civillyliable. This liability of the agent is limited to the vesseland it does not extend further. For this reason the Code ofCommerce makes the agent liable to the extent of thevalue of the vessel, as the codes of the principal maritimenations provide with the vessel, and not individually. Suchis also the spirit of our Code.

It will be observed that these rights are correlative, andnaturally so, because if the agent can exempt himselffrom liability by abandoning the vessel and freight money,thus avoiding the possibility of risking his whole fortune inthe business, it is also just that his maritime creditor mayfor any reason attach the vessel itself to secure his claimwithout waiting for a settlement of his rights by a finaljudgment, even to the prejudice of a third person.

. It only remains to be noted that the rule of limitedliability provided for in our Code of Commerce reflectsmerely, or is but a restatement, imperfect though it is, ofthe almost universal principle on the subject. Whilepreviously under the civil or common law, the owner of avessel was liable to the full amount for damages causedby the misconduct of the master, by the general maritimelaw of modern Europe, the liability of the shipowner wassubsequently 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 BritishParliament upon the liability of English shipownersthrough a series of statutes beginning in 1734 with theAct of 7 George II, chapter 15. The legislatures ofMassachusetts and Maine followed suit in 1818 and 1821,and finally, Congress enacted the Limited Liability Act of

March 3, 1851, embodying most of the provisiocontained in the British Statutes (see 24 R. C. L. pp. 1381389). Section 4283 of the Revised Statutes (sec. 183, T46, Code of Laws of U. S. A.) reads:

LIABILITY OF OWNER NOT TO EXCEED INTEREST. - Tliability of the owner of any vessel, for any embezzlemeloss, or destruction, by any person, of any proper

goods, or merchandise, shipped or put on board of suvessel, or for any loss, damage, or injury by collision, for any act, matter or thing, loss, damage, or forfeitudone, occasioned, or incurred without the privity, knowledge of such owner or owners, shall in no caexceed the amount or value of the interest of such ownin such vessel, and her freight then pending.

The policy which the rule is designed to promote is tencouragement of shipbuilding and investment maritime commerce. (Vide: Norwich & N. Y. Trans. Co.Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C634.) And it is in that spirit that the American couconstrued the Limited Liability Act of Congress where

the immunities of the Act were applied to claims not onfor lost goods but also for injuries and "loss of life passengers, whether arising under the general law admiralty, or under Federal or State statutes." (The CityColumbus, 22 Fed. 460; The Longfellow, 104 Fed. 36Butler v. Boston & Savannah Steamship Co., 32 Law. e1017; Craig v. Continental Insurance Co., 35 Law. e836.) The Supreme Court of the United States in Norwi& N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 58589-590, accounting for the history of the principclinches our exposition of the supporting authorities:

The history of the limitation of liability of shipownersmatter of common knowledge. The learned opinion

Judge Ware in the case ofThe Rebecca, 1 Ware, 187-19leaves little to be desired on the subject. He shows thatoriginated in the maritime law of modern Europe; thwhilst the civil, as well as the common law, made towner responsible to the whole extent of damage causby the wrongful act or negligence of the matter or crethe maritime law only made then liable (if personally frfrom blame) to the amount of their interest in the ship. that, if they surrendered the ship, they were discharged

Grotius, in his law of War and Peace, says that men woube deterred from investing in ships if they thereincurred the apprehension of being rendered liable to indefinite amount by the acts of the master antherefore, in Holland, they had never observed the RomLaw on that subject, but had a regulation that the showners should be bound no farther than the value of thship and freight.

So that it is evident that, by this law, the owner's liabilwas coextensive with his interest in the vessel and freight, and ceased by his abandonment and surrender these to the parties sustaining loss.

In the light of all the foregoing, we therefore hold thatthe shipowner or agent may in any way be held civiliable at all for injury to or death of passengers arisi


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from the negligence of the captain in cases of collisions orshipwrecks, his liability is merely co-extensive with hisinterest in the vessel such that a total loss thereof resultsin its extinction. In arriving at this conclusion, we have notbeen unmindful of the fact that the ill-fated steamshipNegros, as a vessel engaged in interisland trade, is acommon carrier (De Villata v. Stanely, 32 Phil., 541), andthat the as a vessel engaged in interisland trade, is a

common carrier (De Villata v. Stanely, 32 Phil., 541), andthat the relationship between the petitioner and thepassengers who died in the mishap rests on a contract ofcarriage. But assuming that petitioner is liable for abreach of contract of carriage, the exclusively "real andhypothecary nature" of maritime law operates to limitsuch liability to the value of the vessel, or to the insurancethereon, if any. In the instant case it does not appear thatthe vessel was insured. law library

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

CHUA YEK HONG VS. IAC SEPTEMBER

Art. 587. The ship agent shall also be civilly liable for theindemnities in favor of third persons which may arise fromthe conduct of the captain in the care of the goods whichhe loaded on the vessel; but he may exempt himselftherefrom by abandoning the vessel with all theequipments and the freight it may have earned during thevoyage.

The term "ship agent" as used in the foregoing provisionis broad enough to include the ship owner (Standard OilCo. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to

said provision, therefore, both the ship owner and shipagent are civilly and directly liable for the indemnities infavor of third persons, which may arise from the conductof the captain in the care of goods transported, as well asfor the safety of passengers transported Yangco vs.Laserna, supra; Manila Steamship Co., Inc. vs.Abdulhaman et al., 100 Phil. 32 [1956]).

However, under the same Article, this direct liability ismoderated and limited by the ship agent's or ship owner'sright of abandonment of the vessel and earned freight.This expresses the universal principle of limited liabilityunder maritime law. The most fundamental effect ofabandonment is the cessation of the responsibility of theship agent/owner (Switzerland General Insurance Co., Ltd.vs. Ramirez, L-48264, February 21, 1980, 96 SCRA 297). Ithas thus been held that by necessary implication, the shipagent's or ship owner's liability is confined to that whichhe is entitled as of right to abandon the vessel with all herequipment and the freight it may have earned during thevoyage," and "to the insurance thereof if any" (Yangco vs.Lasema, supra). In other words, the ship owner's oragent's liability is merely co-extensive with his interest inthe vessel such that a total loss thereof results in itsextinction. "No vessel, no liability" expresses in a nutshellthe limited liability rule. The total destruction of the vesselextinguishes maritime liens as there is no longer any resto which it can attach (Govt. Insular Maritime Co. vs. The

Insular Maritime, 45 Phil. 805, 8[1924]).chanroblesvirtualawlibrary chanrobles virtual lalibrary

As this Court held:

If the ship owner or agent may in any way be held civiliable at all for injury to or death of passengers arisifrom the negligence of the captain in cases of collisionsshipwrecks, his liability is merely co-extensive with hinterest in the vessel such that a total loss thereof resuin its extinction. (Yangco vs. Laserna, et al., supra).

As evidence of this real nature of the maritime law whave (1) the limitation of the liability of the agents to tactual value of the vessel and the freight money, and (the right to retain the cargo and the embargo adetention of the vessel even in cases where the ordinacivil law would not allow more than a personal actiagainst the debtor or person liable. It will be observthat these rights are correlative, and naturally sbecause if the agent can exempt himself from liability

abandoning the vessel and freight money, thus avoidithe possibility of risking his whole fortune in the businesit is also just that his maritime creditor may for areason attach the vessel itself to secure his claim withowaiting for a settlement of his rights by a final judgmeeven to the prejudice of a third person. (Phil. Shipping Cvs. Vergara, 6 Phil. 284 [1906]).

The limited liability rule, however, is not withexceptions, namely: (1) where the injury or death topassenger is due either to the fault of the ship owner, to the concurring negligence of the ship owner and tcaptain (Manila Steamship Co., Inc. vs. Abdulhamsupra); (2) where the vessel is insured; and (3)

workmen's compensation claims Abueg vs. San Diegsupra). In this case, there is nothing in the records show that the loss of the cargo was due to the fault of tprivate respondent as shipowners, or to their concurrenegligence with the captain of the vessel.

CHUA YEK HONG VS. IAC DECEMBER

The Appellate Court Decision, however, mentions only tship captain as having been negligent in the performanof his duties (p. 3, Court of Appeals Decision, p. 15, RollThis is a factual finding binding on this Court. For texception to the limited liability rule (Article 587, Code Commerce) to apply, the loss must be due to the fault

the shipowner, or to the concurring negligence of tshipowner and the captain. As we held, there is nothingthe records showing such negligence (p. 6, Decisiochanrobles virtual law library

HEIRS OF AMPARO DE LOS SANTOS VS. CA

The petition has merit. At the outset, We note that thereno dispute as to the finding of the captain's negligencethe mishap. The present controversy centers on tquestions of Maritima's negligence and of the applicatiof Article 587 of the Code of Commerce. The said articprovides:


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Art. 587. The ship agent shall also becivilly liable for indemnities in favor ofthird persons which may arise from theconduct of the captain in the care of thegoods which he loaded on the vessel, buthe may exempt himself therefrom byabandoning the vessel with all herequipments and the freight it may have

earned during the voyage.

Under this provision, a shipowner or agent has the right ofabandonment; and by necessary implication, his liability isconfined to that which he is entitled as of right toabandon-"the vessel with all her equipments and thefreight it may have earned during the voyage" (Yangco v.Laserna, et al., 73 Phil. 330, 332). Notwithstanding thepassage of the New Civil Code, Article 587 of the Code ofCommerce is still good law. The reason lies in the peculiarnature of maritime law which is exclusively real andhypothecary that operates to limit such liability to thevalue of the vessel, or to the insurance thereon, if any(Yangco v. Laserna, Ibid). As correctly stated by the

appellate court, "(t)his rule is found necessary to offsetagainst the innumerable hazards and perils of a seavoyage and to encourage shipbuilding and marinecommerce. (Decision, Rollo, p. 29). Contrary to thepetitioners' supposition, the limited liability doctrineapplies not only to the goods but also in all cases likedeath or injury to passengers wherein the shipowner oragent may properly be held liable for the negligent orillicit acts of the captain (Yangco v. Laserna, Ibid). It mustbe stressed at this point that Article 587 speaks only ofsituations where the fault or negligence is committedsolely by the captain. In cases where the shipowner islikewise to be blamed, Article 587 does not apply (seeManila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil.32, 38). Such a situation will be covered by the provisions

of the New Civil Code on Common Carriers. Owing to thenature of their business and for reasons of public policy,common carriers are tasked to observe extraordinarydiligence in the vigilance over the goods and for thesafety of its passengers (Article 1733, New Civil Code).

Maritima claims that it did not have any information abouttyphoon 'Welming' until after the boat was already at sea.Modem technology belie such contention. The WeatherBureau is now equipped with modern apparatus whichenables it to detect any incoming atmosphericdisturbances. In his summary report on tropical cyclone'Welming' which occurred within the Philippine Area ofResponsibility, Dr. Roman L. Kintanar, Weather BureauDirector, stated that during the periods of November 15,1967, the Bureau issued a total of seventeen (17)warnings or advisories of typhoon 'Welming' to shippingcompanies.

While indeed it is true that all these things were done onthe vessel, Maritima, however, could not present evidencethat it specifically installed a radar which could haveallowed the vessel to navigate safely for shelter during astorm. Consequently, the vessel was left at the mercy of''Welming' in the open sea because although it wasalready in the vicinity of the Aklan river, it was unable toenter the mouth of Aklan River to get into NewWashington, Aklan due to darkness and the Floripon

Lighthouse at the entrance of the Aklan River was nfunctioning or could not be seen at all (Exh. 3-H, Index Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. 16Storms and typhoons are not strange occurrences. 1967 alone before 'Welming,' there were about typhoons that hit the country (Exh. M, Index of Exhibits,115), the latest of which was typhoon Uring whoccurred on October 20-25, which cost so much dama

to lives and properties. With the impending threat 'Welming,' an important device such as the radar couhave enabled the ship to pass through the river and safety.

ABOITIZ SHIPPING CORP VS. GAFLAC

The other issue raised is whether or not the carrieliability is limited to $500.00 pursuant to section 8 of tBill of Lading. The petitioner claims that the appellacourt erred in disregarding the limitation of liabilstipulated in the bill of lading. It argues that the consignagreed to this amount (and) therefore is bound by thrate and that there is no basis for the appellate cour

finding that the rate is unreasonable.

The argument is not well-taken. As aptly stated by tappellate court:

Generally speaking any stipulation, limiting the commcarrier's liability to the value of the goods appearing the bill of lading, unless the shipper or owner declaresgreater value is valid. (Civil Code, Art. 1749) Sustipulation, however, must be reasonable and just undthe circumstances and must have been fairly and freeagreed upon. (St. Paul Fire & Marine Insurance Co. Macondray & Co., 70 SCRA 122, 126-127 [1976] In tcase at bar, the goods shipped on the M/V "P. Aboiti

were insured for P278,536.50, which may be taken their value. To limit the liability of the carrier to $500.would obviously put in its power to have taken the whocargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., Phil. 90 [1927], it was held that a stipulation limiting tcarrier's liability to P300.00 per package of silk, when tvalue of such package was P2,500.00, unless the trvalue had been declared and the corresponding freigpaid; was void as against public policy. That ruling applito this case.

As argued by the respondent, a limitation of liability in thcase would render inefficacious the extraordinadiligence required by law of common carriers.

MONARCH INSURANCE CO VS. CA

fault and/or negligence of Aboitiz, the captain and crew, thereby barring Aboitiz from availing of the beneof the limited liability rule.

The principle of limited liability is enunciated in tfollowing provisions of the Code of Commerce:

Art. 587. The shipagent shall also civilly liable for the indemnities in favor


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third persons which may arise from theconduct of the captain in the care ofgoods which he loaded on the vessel; buthe may exempt himself therefrom byabandoning the vessel with all theequipments and the freight it may haveearned during the voyage.

Art. 590. The co-owners of a vessel shallbe civilly liable in the proportion of theirinterests in the common fund for theresults of the acts of the captain referredto in Art. 587.

Each co-owner may exempt himself fromhis liability by the abandonment, before anotary, of the part of the vessel belongingto him.

Art. 837. The civil liability incurred byshipowners in the case prescribed in thissection, shall be understood as limited to

the value of the vessel with all itsappurtenances and the freightage servedduring the voyage.

Art. 837 appeals the principle of limited liability in cases ofcollision hence, Arts. 587 and 590 embody the universalprinciple of limited liability in all cases. In Yangco v.Laserna, this Court elucidated on the import of Art. 587 asfollows:

The provision accords a shipowner oragent the right of abandonment; and bynecessary implication, his liability isconfined to that which he is entitled as ofright to abandon-"the vessel with all herequipments and the freight it may haveearned during the voyage." It is true thatthe article appears to deal only with thelimited liability of the shipowners oragents for damages arising from themisconduct of the captain in the care ofthe goods which the vessel carries, butthis is a mere deficiency of language andin no way indicates the true extent of suchliability. The consensus of authorities is tothe effect that notwithstanding thelanguage of the aforequoted provision,the benefit of limited liability therein

provided for, applies in all cases whereinthe shipowner or agent may properly beheld liable for the negligent or illicit actsof the captain. 49

"No vessel, no liability," expresses in a nutshell the limitedliability rule. The shipowner's or agent's liability is merelyco-extensive with his interest in the vessel such that atotal loss thereof results in its extinction. The totaldestruction of the vessel extinguishes maritime liensbecause there is no longer any res to which it can attach.50 This doctrine is based on the real and hypothecarynature of maritime law which has its origin in the

prevailing conditions of the maritime trade and svoyages during the medieval ages, attended innumerable hazards and perils. To offset against theadverse conditions and to encourage shipbuilding amaritime commerce, it was deemed necessary to confithe liability of the owner or agent arising from toperation of a ship to the vessel, equipment, and freigor insurance, if any.

Contrary to the petitioners' theory that the limited liabilrule has been rendered obsolete by the advances modern technology which considerably lessen the risinvolved in maritime trade, this Court continues to appthe said rule in appropriate cases. This is not to sahowever, that the limited liability rule is withoexceptions, namely: (1) where the injury or death topassenger is due either to the fault of the shipowner, or the concurring negligence of the shipowner and tcaptain; 52 (2) where the vessel is insured; and (3) workmen's compensation claims.

However, once the vessel owner or any party asserts t

right to limit its liability, the burden of proof as to lack privity or knowledge on its part with respect to the mattof negligence or unseaworthiness is shifted to it. 79 Tburden, Aboitiz had unfortunately failed to discharge. ThAboitiz failed to discharge the burden of proving that tunseaworthiness of its vessel was not due to its faand/or negligence should not however mean that tlimited liability rule will not be applied to the presecases

VESSELS

GENERAL CONCEPTS

DEFINITION

When the mercantile codes speak of vessels, they refsolely and exclusively to merchant ships, as they do ninclude war ships and furthermore they almost refer craft which are not accessory to another as is the caselaunches and lifeboats. (see Yu Con vs. Ipil)

The ship when it is found these provisions ought to understood in the sense of a vessel serving the purposemaritime navigation or seagoing vessel, and not in tsense of a vessel devoted to navigation of rivers.

Other vessels of a minor nature not engaged in maritim

commerce, such as river boats and those carryipassengers, must be governed as to their liability passengers, by the provisions of the Civil Code or othappropriate special provisions of law.

CONSTRUCTION , EQUIPMENT AND MANNING

The construction, equipment and manning of vessels asubject to the rules issued by Maritime Industrial Author(MARINA).

PERSONAL PROPERTY


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Vessels are personal property under the Civil Code. Thesame rule can be found in the Code of Commerce whichprovides:

Art. 585 For all purposes of law not modified or restrictedby the provisions of this Code, vessel shall continue to beconsidered as personal property.

OWNERSHIP

PRESCRIPTION

Vessels may be acquired or transferred by any meansrecognized by law.

PRESCRIPTION

Art. 573

Merchant vessels constitute property which may beacquired and transferred by any means recognized bylaw. The acquisition of a vessel must appear in a writteninstrument which shall not produce any effect with

respect to third persons if not inscribed in the registry ofvessels.

The ownership of a vessel shall likewise be acquired bypossession in good faith, continued for three years, with ajust title duly recorded.

In the absence of any of these requisites, continuouspossession for ten years shall be necessary, in order toacquire ownership.

A captain may not acquire by prescription the vessel ofwhich he is in command.

SALE

Art. 576 in the sale of a vessel it shall always beunderstood as included the rigging, masts, stores andengine of a streamer appurtenant thereto, which at thetime belongs to the vendor.

The vendor shall be under the obligation to deliver to thepurchaser a certified copy of the record sheet of thevessel in the registry up to the date of the sale.

REGISTRATION

Vessels are now registered through the MARINA. It is along standing rule that the person who is the registeredowner of the vessel is presumed to be the owner of thevessel. Moreover, it is likewise a settled rule that the saleand transfer of the vessel is not binding on third personsunless the same is registered.

SHIPS MANIFEST

Vessels are required to carry manifests in coastwise trade.Under the Tariff and Customs Code, it provides thatmanifests shall be required for cargo and passengerstransported from one place or port in the Philippines toanother only when one or both of such places is a port ofentry.

A manifest is a declaration of the entire cargo. The objeof a manifest is to furnish customs officers with a list check against, to inform the revenue officers what gooare being brought into a port of the country on a vessel.

PRESIDENTIAL DECREE 1521

THE SHIP MORTGAGE DECREE ACT OF 1978

Section 2. Who may Constitute a Ship Mortgage. Acitizen of the Philippines, or any association or corporatiorganized under the laws of the Philippines, at least sixper cent of the capital of which is owned by citizens of tPhilippines may, for the purpose of financing tconstruction, acquisition, purchase of vessels or initoperation of vessels, freely constitute a mortgage or aother lien or encumbrance on his or its vessels and equipment with any bank or other financial institutiondomestic or foreign.

Section 3. Mortgage of Vessel of Domestic Ownershrecords.

(a) No mortgage, which at the time sumortgage is made includes a vessel of domesownership as this term is defined in PresidentDecree No. 761, or any portion thereof, as twhole or any part of the property mortgaged, shbe valid, in respect to such vessel, against aperson other than the mortgagor, his heir assign, and a person having actual notice thereountil such mortgage is recorded in the office the Philippine Coast Guard of the port documentation of such vessel.

(b) The Coast Guard District or Stati

Commander shall record mortgages delivered him, in the order of their reception, in books to kept for that purpose and indexed to show

1. The name of the vessel;

2. The names of the parties tot mortgage;

3. The time and date of reception of tinstrument;

4. The interest in the vessel

mortgaged;

5. The amount and date of maturity of tmortgage;

6. Name, citizenship, nationality aresidence of owner, and

7. Any material change of condition respect to any of the preceding items.


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conveyance, or mortgage thereof. The master of thevessel shall upon the request of any such person, exhibitto him the documents of the vessel placed on boardthereof. The requirement of this Section that a copy of apreferred mortgage be placed and retained on board themortgaged vessel shall not apply in the case of amortgaged vessel which is not self-propelled (includingbut not limited to, barges, scors, lighters, and car floats).

If the master of the vessel willfully fails to exhibit thedocuments of the vessel or the copy of any preferredmortgage thereof, the Philippine Coast Guard maysuspend or cancel the master's license.

Section 6. Prior and Subsequent Maritime Liens onMortgaged Vessel. The mortgagor (1) shall, upon requestof the mortgagee, disclose in writing to him prior to theexecution of any preferred mortgage, the existence of anymaritime lien, prior mortgage, or other obligation orliability upon the vessel to be mortgaged, that is known tothe mortgagor, and (2) without the consent of themortgagee, shall not incur, after the execution of such

mortgage and before the mortgagee has had areasonable time in which to record the mortgage andhave indorsements in respect thereto made upon thedocuments of the vessel, any contractual obligationcreating a lien upon the vessel other than a lien for wagesof stevedores when employed directly by the owner,operator, master, ship's husband, or agent of the vessel,for wages of the crew of the vessel, for general average,or for salvage, including contract salvage, in respect tothe vessel, tonnage dues and all other charges (not toexceed P20,000) of the Philippine Government in respectto the vessel.

A mortgagor, who, with intent to defraud, violates the

above provision and if the mortgagor is a corporation orassociation, the president or other principal executiveofficer of the corporation or association, shall be punishedby a fine of not, more than P5,000 or imprisonment of notmore than two years, or both. The mortgage indebtednessshall thereupon become immediately due and payable atthe election of the mortgagee.

Section 7. Record of Notice of Claim of Lien on MortgagedVessel; discharge of lien

(a) The Coast Guard District or StationCommander of the port of documentation shall,upon the request of any person, record notice of

his claim of a lien upon a vessel covered by apreferred mortgage, together with the nature,date of creation, and amount of the lien, and thename and address of the person. Any person whohas caused notice of his claim of lien to be sorecorded shall, upon a discharge in whole or inpart of the indebtedness, forthwith file with theCoast Guard District or Station Commander acertificate of such discharge. The Coast GuardDistrict or Station Commander shall thereuponrecord the certificate.

(b) The mortgagor upon a discharge in whole orpart of the mortgage indebtedness, shall forthwfile with the Coast Guard District or StatiCommander for the port of documentation of tvessel, a certificate of such discharge duexecuted by the mortgagee. Such Coast GuaDistrict or Station Commander shall there uprecord the certificate. In case of a vessel cover

by a preferred mortgage, the Coast Guard Distror Station Commander at the port documentation shall endorse upon the documenof the vessel, or direct the Coast Guard District Station Commander at any port in which tvessel is found, to so endorse, the fact of sudischarge.

A certificate of such endorsement, giving the time, plaand description of the endorsement, shall be recordwith the Philippine Coast Guard. Where the endorsemeis made by a person other than the Coast Guard DistrictStation Commander such certificate shall be prompforwarded to the Philippine Coast Guard.

Section 8. Conditions Precedent to Record; interest Preferred Mortgage

(a) No mortgage shall be recorded unless it statthe interest of the mortgagor in the vessel, athe interest so mortgaged.

(b) No mortgage, notice of claim of lien, certificate of discharge thereof, shall be recordunless previously acknowledged before the CoaGuard District or Station Commander of the poof documentation or a notary public or othofficer authorized by a law of the Philippines

take acknowledgment of deeds or before Philippine consul or consular agent.

(c) In case of a change in the port documentation of a vessel of the Philippines, mortgage shall be recorded at the new port documentation unless there is furnished to tCoast Guard District or Station Commander such port, together with the copy of the mortgato be recorded, a certified copy of the record the vessel at the former port of documentatifurnished by the Coast Guard District or StatiCommander of such port. The Coast Guard Distror Station Commander at the new port

documentation is authorized and directed record such certified copy.

Section 10. Lien of preferred Mortgage; foreclosu jurisdiction; procedure A preferred mortgage sconstitute a lien upon the mortgaged vessel in tamount of the outstanding mortgage indebtednesecured by such vessel. Upon the default of any term condition of the mortgage such lien may be enforced the mortgagee by suit in remaining admiralty, wherein tvessel itself may be made a partly defendant and arrested in the manner as provided in Section 11 hereOriginal jurisdiction of all such suits is granted to t


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Court of First Instance of the Philippines exclusively. Inaddition to any notice by publication, actual notice ofcommencement of any such suit shall direct, to (1) themaster, other ranking officer, or caretaker of the vessel,and (2) any person who has recorded a notice of claim ofan undischarged lien upon the vessel, as provided inSection 7 hereof, unless after search by the mortgagesatisfactory to the court, such mortgagor, master, other

ranking officer, caretaker, or claimant is not found withinthe Philippines. Failure to give notice to any such person,as required by this Section, shall be liable to such personfor damages in the amount of his interest in the vesselterminated by the suit.

In case of judicial foreclosure as provided herein, theprovisions of Rule 68 of the New Rules of Court, if notinconsistent herewith, shall apply.

The lien of a preferred ship mortgage may also beenforced by a suit in rem in admiralty or otherwise in anyforeign country in which the vessel may be foundpursuant to the procedure of said country for the

enforcement of ship mortgages constituting maritimeliens on vessels documented under the laws of saidcountry.

Section 11. Arrest of Vessels Upon the filing of the petitionfor the judicial foreclosure of a Preferred Ship Mortgage,or immediately thereafter, the applicant may apply ex-parte for an order for the arrest of the mortgaged vesselor vessels and the judge shall immediately issue thesame, provided that it is made to appear by affidavit ofthe applicant, or of some other person who personallyknows the facts that a default in the mortgage hasoccurred and that applicant files a bond executed to theadverse party in an amount to be fixed by the judge, not

exceeding the applicant's claim, conditioned that thelatter will pay all the costs which may be adjudged to theadverse party and all damages which he may sustain byreason of such arrest, if the court shall finally adjudge thatthe applicant was not entitled thereto.

Section 12. Discharge of Order of Arrest; Counterbond Atany time after an order of arrest has been granted, theparty whose vessel or vessels had been arrested, or theperson appearing in his behalf, may, upon reasonablenotice to the applicant, apply to the judge who grantedthe order, or to the judge of the court in which the actionis pending, for an order discharging the order of arrest.That judge shall order the discharge of the arrest if a cashdeposit is made, or counterbond executed to the creditoris filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made in anamount double the value of the claim to secure thepayment of any judgment that the creditor may recover inthe action. Upon the filing of such counterbond, copythereof shall forthwith be served on the creditor or hislawyer. Upon discharge of the order of arrest, the propertyarrested or seized shall be delivered to the party makingthe deposit or giving the counterbond, or the personappearing in his behalf, the deposit or counterbondaforesaid standing in place of the vessel or vesselsreleased. Should such deposit or counterbond for anyreason be found to be, or become insufficient, and the

party furnishing the same fails to file an additional ccounterbond, the attaching creditor may apply for a neorder of arrest or seizure.

Section 13. Discharge of Order of Arrest for Improper Irregular Issuance The party whose vessel/s has bearrested may also, at any time either before or after trelease of the arrested vessel, or before any arrest

seizure has been effected, upon reasonable notice to tcreditor, apply to the judge who granted the order, or the judge of the court in which the action is pending, fan order to discharge the order of arrest or seizure on tground that the same improperly or irregularly issueAfter hearing, the judge shall order the discharge of torder of arrest or seizure if it appears that it wimproperly or irregularly issued and the defect is ncured forthwith.

Section 14. Extrajudicial Foreclosure The provisions of tChattel Mortgage Law on the remedy of extra-judicforeclosure of mortgages in so far as they are ninconsistent herewith shall still apply. For the purpose

taking possession of the vessel or vessels, the foreclosicreditor may secure from a judge of the Court of FiInstance of the province where the vessel may be fouor where the creditor or debtor resides an order for tarrest or seizure of the vessel. Upon such order of seizuor arrest being issued, the sheriff shall immediately tapossession of the vessel or vessels for the purpose foreclosure and sale. The vessel may only be released accordance with the provisions of Section 13 of this Aor when the debtor pays the outstanding obligation.

Section 15. Foreign Ship Mortgages As used in Sections to 18 hereof, the term "preferred mortgage" shall includin addition to a preferred mortgage made pursuant to t

provisions of this Decree, any mortgage, hypothecatioor similar charge created as security upon adocumented foreign vessel if such mortgaghypothecation, or similar charge has been duly and validexecuted in accordance with the laws of the foreign natiunder the laws of which the vessel is documented and hbeen duly registered in accordance with such laws inpublic register either at the port of registry of the vessor at a central office; and the term "preferred mortgalien" shall also include the lien of such mortgaghypothecation, or similar charge: Provided, however, Thsuch "preferred mortgage lien" in the case of a foreivessel shall be subordinate to maritime liens for repaisupplies, towage, use of drydock or marine railway, other necessaries, performed or supplied in t

Philippines.

Section 16. Receiver in Foreclosure; possession by sheIn any suit in rem in admiralty for the enforcement of tpreferred mortgage lien, the court may appoint a receivand, in its discretion, authorize the receiver to operate tmortgaged vessel. The sheriff may be authorized adirected by the court to take possession of the mortgagvessel notwithstanding the fact that the vessel is in tpossession or under the control of any person claimingpossessory common law lien.


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Section 17. Preferred Maritime Lien, Priorities, Other Liens(a) Upon the sale of any mortgaged vessel in any extrajudicial sale or by order of a district court of thePhilippines in any suit in rem in admiralty for theenforcement of a preferred mortgage lien thereon, all pre-existing claims in the vessel, including any possessorycommon-law lien of which a lienor is deprived under theprovisions of Section 16 of this Decree, shall be held

terminated and shall thereafter attach in like amount andin accordance with the priorities established herein to theproceeds of the sale. The preferred mortgage lien shallhave priority over all claims against the vessel, except thefollowing claims in the order stated: (1) expenses and feesallowed and costs taxed by the court and taxes due to theGovernment; (2) crew's wages; (3) general average; (4)salvage; including contract salvage; (5) maritime liensarising prior in time to the recording of the preferredmortgage; (6) damages arising out of tort; and (7)preferred mortgage registered prior in time.

(b) If the proceeds of the sale should not besufficient to pay all creditors included in one

number or grade, the residue shall be dividedamong them pro rata. All credits not paid,whether fully or partially shall subsist as ordinarycredits enforceable by personal action against thedebtor. The record of judicial sale or sale by publicauction shall be recorded in the Record of Transfers and Encumbrances of Vessels in theport of documentation.

Section 18. Suit in Personam in Admiralty on Default

(a) Upon the default of any term or condition of apreferred mortgage upon a vessel, the mortgageemay, in addition to all other remedies granted by

this Decree, bring suit in personal in admiralty in adistrict court of the Philippines, against themortgagor for the amount of the outstandingmortgage indebtedness secured by such vessel orany deficiency in the full payment thereof.

(b) This Decree shall not be construed, in the caseof a mortgage covering, in addition to vessels,realty or personality other than vessels, or both,to authorize the enforcement by suit in rem inadmiralty of the rights of the mortgage in respectto such realty or personality other than vessels.

Section 19. Surrender of Documents; termination of

mortgagee's interest; sale of mortgaged vessel

(a) The documents of a vessel of the Philippinescovered by a preferred mortgaged may not besurrendered (except in the case of the forfeitureof the vessel or its sale by the order of any courtof the Philippines or any foreign country) withoutthe approval of the Maritime Industry Authority.The Administrator shall not grant such approvalwithout the mortgagee's consent.

(b) The interest of the mortgage in a vessel of thePhilippines covered by a mortgage, shall not be

terminated by the forfeiture of the vessel forviolation of any law of the Philippines, unless tmortgage authorized, consented, or conspired effect the illegal act, failure, or omission whconstituted such violation. Neither shall tchance by the shipowner in the use or charactof the vessel or in the business of the mortgagowithout the consent of the mortgagee, nor t

failure by the mortgagor to comply with tprovisions of Section 5 hereof affect the validity preference of the preferred ship mortgage against third persons.

(c) Upon the sale of any vessel of the Philippincovered by a preferred mortgage in aextrajudicial sale or by order of a district court the Philippines in any suit in rem in admiralty fthe enforcement of a maritime lien other thanpreferred maritime lien, the vessel shall be sofree from all pre-existing claims thereon; but tcourt shall, upon the request of the mortgagethe plaintiff, or any intervenor, require t

purchase at such sale to give and the mortgagto accept a new mortgage of the vessel for tbalance of the term of the original mortgage. Tconditions of such new mortgage shall be tsame, so far as practicable, as those of toriginal mortgage and shall be subject to tapproval of the court. If such new mortgage given, the mortgagee shall not be paid from tproceeds of the sale and the amount payable the purchase price shall be held diminished in tamount of the new mortgage indebtedness.

(d) No vessel of domestic ownership shall mortgaged, nor, any rights under said mortgashall be assigned, to any person not a citizen the Philippines without the approval of tMaritime Industry Authority. The penalties asanctions provided for under Commonwealth ANo. 606 shall apply in case of any violation here

(e) The foreclosure sale of vessels mortgagunder the provisions of this Decree, whethjudicially or extra- judicially, shall not require tapproval of the Maritime Industry Authority.

Section 20. Who May Bid in the Foreclosure Sale Tfollowing persons are qualified to bid in the foreclosusale of the mortgaged vessel:

(a) Citizens of the Philippines or corporations 60of the capital of which is owned by Filipicitizens.

(b) A foreign mortgagee or foreign national whocountry has diplomatic relations with tPhilippines or whose country grants reciprorights to Filipino citizens.

In case the purchaser is a foreign individual or entity, tPhilippine Coast Guard shall, upon presentation of t


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certificate of sale, cancel the registration of the vesseland issue a certificate to that effect upon request.

Section 21. Maritime Lien for Necessaries; personsentitled to such lien Any person furnishing repairs,supplies, towage, use of dry dock or marine railway, orother necessaries to any vessel, whether foreign ordomestic, upon the order of the owner of such vessel, or

of a person authorized by the owner, shall have amaritime lien on the vessel, which may be enforced bysuit in rem, and it shall be necessary to allege or provethat credit was given to the vessel.

Section 22. Persons Authorized to Procure Repairs,Supplies, and Necessaries The following persons shall bepresumed to have authority from the owner to procurerepairs, supplies, towage, use of dry dock or marinerailway, and other necessaries for the vessel: Themanaging owner, ship's husband, master or any person towhom the management of the vessel at the port of supplyis entrusted. No person tortuously or unlawfully inpossession or charge of a vessel shall have authority to

bind the vessel.

Section 23. Notice to Person Furnishing Repairs, Supplies,and Necessaries The officers and agents of a vesselspecified in Section 22 of this Decree shall be taken toinclude such officers and agents when appointed by acharacter, by an owner pro hac vice, or by an agreedpurchaser in possession of the vessel; but nothing in thisDecree shall be construed to confer a lien when thefurnisher know, or by exercise of reasonable diligencecould have ascertained, that because of the terms of acharter party, agreement for sale of the vessel, or for anyother reason, the person ordering the repairs, supplies, orother necessaries was without authority to bind the vessel

therefor.

Section 24. Waiver of Right to Lien Nothing in this Decreeshall be construed to prevent the furnisher of repairs,supplies, towage, use of dry dock or marine railway, orother necessaries, or the mortgagee, from waiving hisright to a lien, or in the case of a preferred mortgage lien,to the preferred status of such lien, at any time byagreement or otherwise.

Section 25. Existing Mortgages Not Affected; exceptionThis Decree shall not apply (1) to any existing mortgage,or (2) to any mortgage hereafter placed at any vesselunder an existing mortgage, so long as such existing

mortgage remains undischarged. The Decree shall,however, apply to mortgages executed pursuant toPresidential Decree No. 214, provided, that no vestedrights of third parties are affected thereby.

Section 26. Rules and Regulations by Philippine CoastGuard and the Maritime Industry Authority The PhilippineCoast Guard and the Maritime Industry Authority arehereby authorized to make such rules and regulationswithin their respective spheres of jurisdiction, as they maydeem necessary for the efficient execution of theprovisions of this Decree.

Section 28. Instruments and Acts Validated All mortgagof any vessel of any part thereof, and all documentationrecordations, indorsements and indexing thereof, aproceedings incidental thereto made or done, prior to teffectivity of this Decree are declared valid to the extethey would have been valid if the port or ports at whichshould have been documented in accordance with laand this Section is declared retroactive so as

accomplish such validations: Provided, That nothiherein contained shall be construed to deprive any persof any vested right.

Section 29. Repealing Clause The provisions of the NeCivil Code, the Code of Commerce, the Chattel MortgaLaw, the Revised Rules of Court and of such other lawdecrees, executive orders, rules and regulations which ain conflict or inconsistent with the provisions of tDecree are hereby repealed, amended or modifiaccordingly. If for any reason, any section, subsectiosentence, clauses or term of this Decree is held to unconstitutional such decision shall not affect the validof the other provisions of this Decree.

PNB VS. CA

The applicable law on the matter is Presidential DecrNo. 1521, otherwise known as the Ship Mortgage Decrof 1978. Sections 17 and 21 of the said PresidentDecree provides as follows:

Sec. 17. Preferred Maritime Liens, Priorities, Other Lie(a) Upon the sale of any mortgaged vessel in any extr judicial sale or by order of a district court of tPhilippines in any suit in rem in admiralty for tenforcement of a preferred mortgage lien thereon, all pexisting claims on the vessel, including any possesso

common-law lien of which a lienor is deprived under tprovisions of Section 16 of this Decree, shall be heterminated and shall thereafter attach, in like amount ain accordance with the priorities established herein to tproceeds of the sale. The preferred mortgage lien shhave priority over all claims against the vessel, except tfollowing claims in the order stated: (1) expenses and feallowed and costs taxed by the court and taxes due to tgovernment; (2) crews wages; (3) general average; (salvage; including contract salvage; (5) maritime liearising prior in time to the recording of the preferrmortgage; and (6) damages arising out of tort; and (preferred mortgage registered prior in time.

(b) If the proceeds of the sale should not be sufficient pay all creditors included in one number or grade, tresidue shall be divided among them pro rata. All crednot paid, whether fully or partially shall subsist as ordinacredits enforceable by personal action against the debtoThe record of judicial sale or sale by public auction shbe recorded in the Record of Transfers & EncumbrancesVessels in the port of documentation.

Sec. 21. Maritime Lien for Necessaries; persons entitled such lien. Any person furnishing repairs, supplies, towaguse of dry dock or maritime railway, or other necessarito any vessel, whether foreign or domestic, upon t


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order of the owner, shall have a maritime lien on thevessel, which may be enforced by suit in rem, and it shallbe necessary to allege or prove that credit was given tothe vessel.

Under these provisions, any person furnishing repairs,supplies, or other necessaries to a vessel on credit willhave a maritime lien on the said vessel. Such maritime

lien, if it arose prior to the recording of a preferredmortgage lien, shall have priority over the said mortgagelien.

As held by the public respondent Court of Appeals, thosewho provide credit to a master of a vessel for the purposeof discharging a maritime lien also acquire a lien over thesaid vessel. Under American jurisprudence, (f)urnishingmoney to a master in good faith to obtain repairs orsupplies or to remove liens, in order to forward thevoyage of the vessel, raises a lien just as though thethings (for which) money was obtained to pay for hadbeen furnished by the lender.[32 Likewise, (a)dvances todischarge maritime liens create a lien on the vessel, and

one advancing money to discharge a valid lien gets a lienof equal dignity with the one discharged.[33 There is noreason why these doctrines cannot be given persuasiveapplication in the instant case considering that they donot violate or contravene any of our existing laws.Moreover, as pointed out by the appellate court, thesedoctrines are in accord with our provisions on subrogationparticularly Art. 1302, paragraph 2 of the New Civil Codewhich provides that there is legal subrogation when athird person, not interested in the fulfillment in theobligation, pays with the express or tacit approval of thedebtor.

Having thus established that private respondent CBC

possessed a maritime lien over the vessel M/V AseanLiberty, the next issue is whether the said maritime lien ispreferred over the mortgage lien of petitioners.

As stated by a noted commentator on the subject, amaritime lien constitutes a present right of property in theship, ajus in re, to be afterward enforced in admiralty byprocess in rem. From the moment the claim or privilegeattaches, it is inchoate, and when carried into effect bylegal process, by a proceeding in rem, it relates back tothe period when it first attached.[40

In the case at bench, the maritime lien over the vesselM/V Asean Liberty arose or was constituted at the time

Hongkong United Drydocks, Ltd. made repairs on the saidvessel on credit. As such, as early as March 12, 1979, thedate of the contract for the repair and conversion of M/VAsean Liberty, a maritime lien had already attached to thesaid vessel. When Citibank advanced the amount ofUS$242,225.00 for the purpose of paying off PISCs debt toHongkong United Dockyards, Ltd., it acquired the existingmaritime lien over the vessel. When private respondenthonored its contract of guarantee with Citibank on March30, 1983, it likewise acquired by subrogation the maritimelien that was already existing over the vessel M/V AseanLiberty. Thus, when private respondent CBC chose toexercise its right to the maritime lien during theproceedings in the trial court, it was actually enforcing a

privilege that attached to the ship as early as March 11979.

The maritime lien of private respondent CBC thus aroprior in time to the recording of petitioners mortgage September 25, 1979. As such, the said maritime lien hpriority over the said mortgage lien. Pursuant to Secti17 of the Ship Mortgage Decree of 1978, a preferr

mortgage lien shall have priority over all claims againthe vessel except, among others, maritime liens arisiprior in time to the recording of the preferred mortgagThe respondent court thus committed no reversible erwhen it ruled that the maritime lien of private respondeCBC is superior to the mortgage lien of petitioners.

POLIAND INDUSTRIAL VS. NATIONAL DEVELOPMENT

Section 2 of P.D. No. 1521 recognizes the constitution omortgage on a vessel, to wit:

SECTION 2. Who may Constitute a Ship Mortgage. ' A

citizen of the Philippines, or any association or corporatiorganized under the laws of the Philippines, at least sixper cent of the capital of which is owned by citizens of tPhilippines may, for the purpose of financing tconstruction, acquisition, purchase of vessels or initoperation of vessels, freely constitute a mortgage or aother lien or encumbrance on his or its vessels and equipment with any bank or other financial institutiondomestic or foreign.

If the mortgage on the vessel is constituted for tpurpose stated under Section 2, the mortgage obtainspreferred status provided the formal requisitenumerated under Section 4[53]are complied with. Upenforcement of the preferred mortgage and eventuforeclosure of the vessel, the proceeds of the sale shall first applied to the claim of the mortgage creditor unlethere are superior or preferential liens, as enumeratunder Section 17, namely:

SECTION 17. Preferred Maritime Lien, Priorities, OthLiens. ' (a) Upon the sale of any mortgaged vessel in aextra-judicial sale or by order of a district court of tPhilippines in any suit in rem in admiralty for tenforcement of a preferred mortgage lien thereon, all pexisting claims in the vessel, including any possessocommon-law lien of which a lienor is deprived under tprovisions of Section 16 of this Decree, shall be heterminated and shall thereafter attach in like amount a

in accordance with the priorities established herein to tproceeds of the sale. The preferred mortgage lien shhave priority over all claims against the vessel, except tfollowing claims in the order stated: (1) expenses afees allowed and costs taxed by the court and taxes dto the Government; (2) crew's wages; (3) generaverage; (4) salvage including contract salvage; (maritime liens arising prior in time to the recording of thpreferred mortgage; (6) damages arising out of tort; a(7) preferred mortgage registered prior in time.

(b) If the proceeds of the sale should not be sufficient pay all creditors included in one number or grade, t
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residue shall be divided among them pro rata. All creditsnot paid, whether fully or partially shall subsist as ordinarycredits enforceable by personal action against the debtor.The record of judicial sale or sale by public auction shallbe recorded in the Record of Transfers and Encumbrancesof Vessels in the port of documentation. (Emphasissupplied.)

There is no question that the mortgage executed in favorof DBP is covered by P.D. No. 1521. Contrary to NDC'sassertion, the mortgage constituted on GALLEON's vesselsin favor of DBP may appropriately be characterized as apreferred mortgage under Section 2, P.D. No. 1521because GALLEON constituted the same for the purposeof financing the construction, acquisition, purchase ofvessels or initial operation of vessels. While it is correctthat GALLEON executed the mortgage in consideration ofDBP's guarantee of the prompt payment of GALLEON'sobligations to the Japanese lenders, DBP's undertaking topay the Japanese banks was a condition sine qua non tothe acquisition of funds for the purchase of the GALLEONvessels. Without DBP's guarantee, the Japanese lenders

would not have provided the funds utilized in thepurchase of the GALLEON vessels. The mortgage in favorof DBP was therefore constituted to facilitate theacquisition of funds necessary for the purchase of thevessels.

The provision of P.D. No. 1521 on the order of preferencein the satisfaction of the claims against the vessel is themore applicable statute to the instant case compared tothe Civil Code provisions on the concurrence andpreference of credit. General legislation must give way tospecial legislation on the same subject, and generally beso interpreted as to embrace only cases in which thespecial provisions are not applicable.[55]

POLIAND's maritime lien is superiorto DBP's mortgage lien

Before POLIAND's claim may be classified as superior tothe mortgage constituted on the vessel, it must be shownto be one of the enumerated claims which Section 17, P.D.No. 1521 declares as having preferential status in theevent of the sale of the vessel. One of such claimsenumerated under Section 17, P.D. No. 1521 which isconsidered to be superior to the preferred mortgage lienis a maritime lien arising prior in time to the recording ofthe preferred mortgage. Such maritime lien is describedunder Section 21, P.D. No. 1521, which reads:

SECTION 21. Maritime Lien for Necessaries; personsentitled to such lien. ' Any person furnishing repairs,supplies, towage, use of dry dock or marine railway, orother necessaries to any vessel, whether foreign ordomestic, upon the order of the owner of such vessel, orof a person authorized by the owner, shall have amaritime lien on the vessel, which may be enforced bysuit in rem, and it shall be necessary to allege or provethat credit was given to the vessel.

The trial court found that GALLEON's advances obtainedfrom Asian Hardwood were used to cover for the payment

of bunker oil/fuel, unused stores and oil, bonded storeprovisions, and repair and docking of the GALLEOvessels.[58] These expenses clearly fall under Section 2P.D. No. 1521.

As stated in Section 21, P.D. No. 1521, a maritime limay consist in 'other necessaries spent for the vessel. Tship modification cost may properly be classified und

this broad category because it was a necessary expensfor the vessel's navigation. As long as an expense on tvessel is indispensable to the maintenance and navigatiof the vessel, it may properly be treated as a maritimlien for necessaries under Section 21, P.D. No. 1521.

With respect to the claim for salary and wages of tcrew, there is no doubt that it is also one of tenumerated claims under Section 17, P.D. No. 152second only to judicial costs and taxes due tgovernment in preference and, thus, having a statsuperior to DBP's mortgage lien.

All things considered, however, the Court finds that on

NDC is liable for the payment of the maritime lien.maritime lien is akin to a mortgage lien in that in spite the transfer of ownership, the lien is not extinguished. Tmaritime lien is inseparable from the vessel and undischarged, it follows the vessel. Hence, the enforcemeof a maritime lien is in the nature and character ofproceeding quasi in rem.[65] The expression 'action rem is, in its narrow application, used only with referento certain proceedings in courts of admiralty wherein tproperty alone is treated as responsible for the claim obligation upon which the proceedings are based.[6Considering that DBP subsequently transferred ownershof the vessels to NDC, the Court holds the latter liable the maritime lien. Notwithstanding the subseque

transfer of the vessels to NDC, the maritime lien subsists

NEGROS NAVIGATION VS. CA

The argument of THI is misplaced. There is no conflict to which law should apply to the case at bench. Twishes to impress this Court that its claim for repairmanlien is a maritime lien and, accordingly, may be enforconly in a proceeding in rem. The Court agrees that P1521 is the governing law concerning its maritime lien fthe services it rendered to NNC. However, when NNC fila petition for corporate rehabilitation and suspension payments, and the Manila RTC found that the petition wsufficient in form and in substance and appointed trehabilitation receiver, the admiralty proceeding wappropriately suspended in accordance with Section 6 the Interim Rules on Corporate Rehabilitation

It is undisputed that THI holds a preferred maritime liover NNCs assets by virtue of THIs unpaid services. Tissuance of the stay order by the rehabilitation court donot impair or in any way diminish THIs preferred status a creditor of NNC. The enforcement of its claim throucourt action was merely suspended to give way to tspeedy and effective rehabilitation of the distressshipping company. Upon termination of the rehabilitatiproceedings or in the event of the bankruptcy a
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consequent dissolution of the company, THI can stillenforce its preferred claim upon NNC.

PERSONS WHO TAKE PART IN MARITIME COMMERCE

SHIPOWNER AND SHIPAGENTS

A shipagent is the person entrusted with provisioning of

the vessel or who represents her in the port in which shehappens to be.

CAPTAIN OR MASTERS OF VESSELS

For the purpose of maritime commerce, the words captainand masters have the same meaning both being thechiefs or commander of ships.

QUALIFICATIONS

Art. 609 Captains, masters or patrons of vessels must beFilipinos, have legal capacity to contract in accordancewith this code, and prove the skill, capacity andqualifications necessary to command direct the vessel, asestablished by marine or navigation laws, ordinances, orregulations, and must not be disqualified according to thesame for the discharge of the duties of the position.

If the owner of the vessel desire to be captain thereof,without having the legal qualifications therefor, he shalllimit himself to the financial administration of the vessel,and shall intrust the navigation to a person possessing thequalification required by said ordinances and regulations.

ROLE OF CAPTAIN

1. He is a general agent of the shipowner

2. He is commander and technical director of thevessel

3. He is a representative of the country under whoseflag he navigates

The most important role is the role performed by thecaptain as commander of the vessel, it is analogous tobeing a CEO of a present-day corporation.

DISCRETION OF CAPTAIN OR MASTER

The applicable principle is that the captain has control ofall departments of service in the vessel, and reasonablediscretion as to its navigation.

The discretionary authority is recognized with respect tohis right to exercise his best judgment, with respect tonavigating the vessel he commands.

PILOTAGE

A pilot in maritime law is a person duly qualified andlicensed to conduct a vessel into or out of ports or incertain waters.

In this jurisdiction COMPULSORY PILOTAGE is beingimplemented.

On compulsory pilotage, the harbor pilot providing tservice to a vessel shall be responsible for the damacaused to a vessel or to life and property at ports due his negligence or fault.

The master shall retain overall command of the veseven on pilotage grounds whereby he can countermandoverrule the order or command of the harbor pilot

board.

MASTER AND PILOT

Under English and American authorities, the pisupersedes the master for the time being in the commaand navigation of the ship, and his orders must be obeyin all matters connected with her navigation.

However, there is overwhelming authority to the effethat the master does not surrender his vessel to the piand the pilot is not the master. The master is still command of the vessel notwithstanding the presence opilot. There are occasions when the master may ashould interfere and even displace the pilot as when t

pilot is obviously incompetent or intoxicated and tcircumstances may require the master to displacecompulsory pilot because of incompetency or physicdisability. If however the master does not observe thatcompulsory pilot is incompetent or physicaincapacitated, the master is justified in relying on the pibut not blindly.

Ergo, the master is not wholly absolved from his dutiwhile a pilot is on board his vessel. The master hoverriding authority over the pilot.

SHIPOWNER AND PILOT

In general, a pilot is personally liable for damages causby his own negligence or default to the owners of tvessel, and to third parties for damages sustained incollision. Such negligence of the pilot in the performanof duty constitute maritime tort.

Even though the pilot is compulsory, if his negligence wnot the sole cause of the injury but the negligence of tmaster or crew contributed thereto, the owners are liabl

PILOT AND HIS ASSOCIATION

The fact that the pilot is a member of an association donot make the association jointly and severally liabArticle 2180 of the Civil Code does not apply becau

there is no employer-employee relationship.

MINIMUM SAFE MANNING

It is not enough that the officers manning the merchavessel have all the qualifications imposed by law. It is alrequired that there is sufficient number of officers acrew that are serving the vessel.

SECURITY OF TENURE

The Labor Code provision applies to officers and crewmerchant vessels engaged in domestic trade or coastwshipping.


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INTER ORIENT MARITIME ENTERPRISE VS. NLRC

The captain of a vessel is a confidential and managerialemployee within the meaning of the above doctrine. Amaster or captain, for purposes of maritime commerce, isone who has command of a vessel. A captain commonlyperforms three (3) distinct roles: (1) he is a general agentof the shipowner; (2) he is also commander and technical

director of the vessel; and (3) he is a representative of thecountry under whose flag he navigates. 16 Of these roles,by far the most important is the role performed by thecaptain as commander of the vessel; for such role (which,to our mind, is analogous to that of "Chief ExecutiveOfficer" [CEO] of a present-day corporate enterprise) hasto do with the operation and preservation of the vesselduring its voyage and the protection of the passengers (ifany) and crew and cargo. In his role as general agent ofthe shipowner, the captain has authority to sign bills oflading, carry goods aboard and deal with the freightearned, agree upon rates and decide whether to takecargo. The ship captain, as agent of the shipowner, haslegal authority to enter into contracts with respect to the

vessel and the trading of the vessel, subject to applicablelimitations established by statute, contract or instructionsand regulations of the shipowner. 17 To the captain iscommitted the governance, care and management of thevessel. 18 Clearly, the captain is vested with bothmanagement and fiduciary functions.

More importantly, a ship's captain must be accorded areasonable measure of discretionary authority to decidewhat the safety of the ship and of its crew and cargospecifically requires on a stipulated ocean voyage. Thecaptain is held responsible, and properly so, for suchsafety. He is right there on the vessel, in command of itand (it must be presumed) knowledgeable as to thespecific requirements of seaworthiness and the particularrisks and perils of the voyage he is to embark upon. Theapplicable principle is that the captain has control of alldepartments of service in the vessel, and reasonablediscretion as to its navigation. 20 It is the right and duty ofthe captain, in the exercise of sound discretion and ingood faith, to do all things with respect to the vessel andits equipment and conduct of the voyage which arereasonably necessary for the protection and preservationof the interests under his charge, whether those be of theshipowners, charterers, cargo owners or of underwriters. 21

It is a basic principle of admiralty law that in navigating amerchantman, the master must be left free to exercise hisown best judgment. The requirements of safe navigationcompel us to reject any suggestion that the judgment and

discretion of the captain of a vessel may be confinedwithin a straitjacket, even in this age of electroniccommunications. 22 Indeed, if the ship captain isconvinced, as a reasonably prudent and competentmariner acting in good faith that the shipowner's or shipagent's instructions (insisted upon by radio or telefax fromtheir offices thousands of miles away) will result, in thevery specific circumstances facing him, in imposingunacceptable risks of loss or serious danger to ship orcrew, he cannot casually seek absolution from hisresponsibility, if a marine casualty occurs, in suchinstructions.

MACONDRAY VS. PROVIDENT INSURANCE

Article 586 of the Code of Commerce states that a shagent is "the person entrusted with provisioning representing the vessel in the port in which it may found."

Hence, whether acting as agent of the owner10 of tvessel or as agent of the charterer,11 petitioner will considered as the ship agent12 and may be held liable

such, as long as the latter is the one that provisions represents the vessel.

The trial court found that petitioner "was appointed local agent of the vessel, which duty includarrangement for the entrance and clearance of tvessel."13 Further, the CA found and the evidence showthat petitioner represented the vessel. The latter preparthe Notice of Readiness, the Statement of Facts, tCompletion Notice, the Sailing Notice and CustomClearance.14Petitioner's employees were present at San Toledo City, one day before the arrival of the vesswhere they stayed until it departed. They were apresent during the actual discharging of the cargo

Moreover, Mr. de la Cruz, the representative of petitionealso prepared for the needs of the vessel, like moneprovision, water and fuel.16

As ship agent, it may be held civilly liable in certainstances. The Code of Commerce provides:

"Article 586. The shipowner and the ship ageshall be civilly liable for the acts of the captaand for the obligations contracted by the latter repair, equip, and provision the vessel, providthe creditor proves that the amount claimed winvested for the benefit of the same."

"Article 587. The ship agent shall also be civiliable for the indemnities in favor of third persowhich may arise from the conduct of the captain the care of the goods which he loaded on tvessel; but he may exempt himself therefrom abandoning the vessel with all her equipmenand the freight it may have earned during tvoyage."

CHARTER PARTIES

Charter party was essentially def