Case Digest: Switzerland vs. Ramirez, 96 SCRA 297, G.R. No. L48264

 

Switzerland vs. Ramirez, 96 SCRA 297, G.R. No. L48264, February 21, 1980

Subject: Transportation Law

FACTS

Switzerland insured a shipment of 60,000 bags of Urea Nitrogen from Japan to the Philippines. The shipment was discharged from the vessel into lighters owned by Mabuhay Brokerage Co., Inc.

When the shipment was delivered to the consignee, it was found to have sustained losses and damages. Switzerland, as the insurer, paid the consignee for the damages and became subrogated to their rights.

Switzerland filed an admiralty case against the carrier (Oyama Lines), the local agent of the carrier (Citadel Lines), and the lighterage company (Mabuhay Brokerage Co., Inc.). After trial, the trial court rendered decision in favor of petitioner as against therein defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability. 

ISSUE

Whether or not the respondent Citadel Lines, Inc., the local agent of a foreign ocean-going vessel, the S/S "St. Lourdes", may be held primarily liable for the loss/damage found to have been sustained by subject shipment while on board and/or still in the custody of the said vessel.

RULING

Yes, the respondent Citadel Lines, Inc. may be held primarily liable for the loss/damage.

Under the Code of Commerce, it provides that the ship agent shall also be 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 carrier.

In this case, it appears that the Citadel Lines is the ship agent for the vessel S/S "St. Lourdes" at the port of Manila, it is, therefore, liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing the value of the goods lost and or damaged. The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel Lines, Inc. is concerned. The law does not make the liability of the ship agent dependent upon the solvency or insolvency of the ship owner.

Case Digest: Caltex vs. Sulpicio Lines, G.R. No. 131166

 

Caltex vs. Sulpicio Lines, 315 SCRA 709, G.R. No. 131166, September 30, 1999

Subject: Transportation Law

FACTS

MT Vector, a tramping motor tanker owned and operated by Vector Shipping Corporation, left the port of Limay, Bataan carrying petroleum products of Caltex Philippines, Inc. (petitioner) en route to Masbate by a charter contract. While MV Doña Paz, a passenger and cargo vessel owned and operated by Sulpicio Lines, left the port of Tacloban headed for Manila.

On December 20, 1987, the two vessels collided in the open sea. Among those who perished were public school teacher Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both unmanifested passengers but proved to be on board the vessel.

After investigation, it was found that the MT Vector was at fault and responsible for its collision with MV Doña Paz.

Sebastian Cañezal's wife and mother filed a complaint for "Damages Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. with the RTC of Manila. Sulpicio, in turn, filed a third-party complaint against Francisco Soriano, Vector Shipping Corporation, and Caltex (Philippines), Inc.

The trial court rendered a decision dismissing the third-party complaint against the petitioner. On appeal, CA modified the trial court's ruling and included petitioner Caltex as one of those liable for damages. Hence this petition.

ISSUE

Whether or not Caltex, the charterer of a sea vessel, is liable for damages resulting from a collision between the chartered vessel and a passenger ship.

RULING

No, Caltex, the charterer of a sea vessel, is not liable for damages.

Under the law, a charter party or a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.

In this case, Caltex and Vector entered into a voyage charter, which retains the character of the vessel (MT Vector) as a common carrier. The charterer of a vessel has no obligation before transporting its cargo to ensure that the chartered vessel complies with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service”. The nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargo.

Case Digest: Western Shipping vs. NLRC, G.R. No. 109717

 

Western Shipping vs. NLRC, 253 SCRA 405, G.R. No. 109717, February 9, 1996

Subject: Transportation Law

FACTS

Petitioner Western Shipping Agency, Inc. and its principal Yeh Shipping Co., Ltd., owners of M/V Sea Wealth, faced a legal challenge initiated by the private respondent, the vessel's master. Discharged on January 14, 1989, the master was accused of misconduct, particularly failing to notify the company about the vessel's arrival in Manila and allowing unauthorized passengers on board. The dismissal led to a complaint filed on March 1, 1989, alleging illegal termination, underpayment of salary, fixed overtime pay, and non-payment of wages.

Western Shipping justified the dismissal citing the master's failure to communicate and alleged safety violations. The Philippine Overseas Employment Administration (POEA) found in favor of the master, declaring his dismissal illegal. The POEA ordered petitioners to pay a total of US$45,643.00 representing salary for the unexpired contract, salary differentials, underpayment of family allotment, and conversion differences, plus attorney's fees.

Petitioners appealed to the National Labor Relations Commission (NLRC), which modified the POEA decision on March 20, 1992. The NLRC set aside the award for alleged salary differentials but affirmed the US$5,643.00 for the unexpired portion of the contract. It held Western Shipping and Yeh Shipping jointly and severally liable, with the bonding company, Philippine British Assurance Company, Inc., also held accountable.

ISSUE

Whether or not, Alexander Bao was rightfully dismissed for his failure to notify the petitioner of the vessel’s arrival in Manila and to provide life-saving equipment for the passengers he had allowed to board, as required by Section 1019 of the Philippine Merchant Marine Rules and Regulation.

RULING

No, Alexander Bao was illegally dismissed.

Under the law, Loss of confidence is a valid ground for the dismissal of managerial employees like petitioner herein, who was the master of a vessel. The loss of confidence must be substantiated by evidence. The burden of proof is on the employer to show grounds justifying the loss of confidence.

In this case, petitioners failed to discharge this burden, as the POEA and the NLRC found that: (1) the private respondent had taken on board the vessel the fifteen passengers with the knowledge of Noimi Zabala, the president of Western Shipping; (2) the clearance to sail issued by the Coast Guard, an agency of the government charged with the seaworthiness of vessels, establishes approval of the application for the boarding of the additional passengers and the safety of the vessel was not endangered by the presence of the additional passengers; (3) the vessel had adequate life-saving equipment; and (4) additional passengers were not ordinary passengers but the wives and children of the vessel’s complement, including private respondent’s wife. The private respondent, who had 15 years of maritime experience behind him, would unlikely allow unsafe passage. Therefore, the dismissal was illegal. 

Case Digest: Aboitiz vs. New India, G.R. No. 156978

 

Aboitiz vs. New India, 488 SCRA 563, G.R. No. 156978, May 02, 2006

Subject: Transportation Law

FACTS

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.

While at sea, the vessel received a report of a typhoon moving within its general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe of the typhoon when its hull leaked. On October 31, 1980, the vessel sank.

General Textile lodged a claim with New India for the amount of its loss. Respondent paid General Textile and was subrogated to the rights of the latter. Then the respondent filed a complaint for damages against petitioner Aboitiz, Franco-Belgian Services, and the latter’s local agent, F.E. Zuellig, Inc.

The trial court, citing the Court of Appeals decision in General Accident Fire and Life Assurance Corporation v. Aboitiz Shipping Corporation involving the same incident, ruled in favor of the respondent. On appeal, the appellate court affirmed in toto the trial court’s decision. Hence, this petition for review.

Petitioner contends that respondent’s claim for damages should only be against the insurance proceeds and limited to its pro-rata share in view of the doctrine of limited liability.

ISSUE

Whether or not the limited liability doctrine, which limits the respondent’s award of damages to its pro-rata share in the insurance proceeds, applies in this case.

RULING

No, the limited liability doctrine does not apply on this case.

Under the law, in the event of loss, destruction or deterioration of the insured goods, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. Moreover, where the vessel is found unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can be delegated, still, the shipowner must exercise close supervision over its men.

In this case, the petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on board to invoke the limited liability doctrine. Considering the evidence presented and the circumstances obtained in this case, the petitioner failed to discharge this burden. Both the trial and the appellate courts found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the weather was moderate when the vessel sank. Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. Therefore, the petitioner is liable for the total value of the lost cargo.

Case Digest: Santiago Lighterage vs. Court of Appeals, G.R. No. 139629

 

Santiago Lighterage vs. Court of Appeals, G.R. No. 139629, June 21, 2004 

Subject: Transportation Law

FACTS

Square filed a complaint against Pelaez, claiming damages for a failed voyage to South Korea on MV Christine Gay. Pelaez, in turn, filed a third-party complaint against petitioner, alleging damages and attaching a preliminary writ. The trial court summarized the case, stating that Pelaez offered MV Christine Gay to C-Square, representing it as seaworthy. A Voyage Charter Agreement was signed, with a provision for rescission if the vessel was unfit. Pelaez, having signed a Bareboat Charter Agreement with petitioner, received the vessel in Manila but encountered engine issues on the way to Zambales. Repairs proved inadequate, and the vessel, loaded with chromite ores, had to return to Manila due to seaworthiness concerns. The plaintiff rescinded the Charter Agreement, citing damages. Pelaez sought payment from third parties, and MARINA later declared MV Christine Gay "dead." Consequently, plaintiff had to contract with other companies to transport its chromite ores to South Korea and this entailed additional expenses. The trial court held that MV Christine Gay was not seaworthy, which was thereby affirmed by the appellate courts. Hence this instant petition.

ISSUE

Whether or not MV Christine Gay is seaworthy.

RULING

No, MV Christine Gay is not seaworthy.

According to Maritime Law, to be seaworthy, a vessel “must have that degree of fitness which an ordinary, careful and prudent owner would require his vessel to have at the commencement of her voyage, having regard to all the probable circumstances of it.” Thus, the degree of seaworthiness varies in relation to the contemplated voyage.

In this case, petitioner asserts that MV Christine Gay is “sufficient in materials, construction, equipment and outfit” as shown by the documents the Philippine Coast Guard (“Coast Guard”) and the Maritime Industry Authority (“MARINA”) issued to petitioners. However, the trial court relied on the testimonies of Engineer Panaguiton and Captain Sorongon, who found numerous defects during a survey of the hull and superstructures. The petitioner's claim of seaworthiness is challenged, especially considering that the voyage across the Atlantic requires stronger equipment than sailing across the Visayan Sea. The obligation of seaworthiness is absolute, and even if the shipowner takes precautions, failure to ensure actual seaworthiness is not excusable. MV Christine Gay was deemed unseaworthy for the intended purpose in the bare-boat charter agreement, and the charterer's right to inspect the vessel before loading doesn't absolve the shipowner of the obligation to provide a cargoworthy ship.

Case Digest: Philippine Refining Co. vs. Francisco Jarque, G.R. No. L-41506

 

Philippine Refining Co. vs. Francisco Jarque, 61 Phil. 229, G.R. No. L-41506, March 25, 1935

Subject: Transportation Law

FACTS

Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor vessels Pandan and Zaragoza. These documents were recorded in the record of transfers and incumbrances of vessels for the port of Cebu and each was therein denominated a "chattel mortgage".

Neither of the first two mortgages had appended an affidavit of good faith. The third mortgage contained such an affidavit, but this mortgage was not registered in the customs house or within the period of thirty days prior to the commencement of insolvency proceedings against Francisco Jarque; also, while the last-mentioned mortgage was subscribed by Francisco Jarque and M. N. Brink, there was nothing to disclose in what capacity the said M. N. Brink signed.

A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage registry of the register of deeds on May 12, 1932, or again within the thirty-day period before the institution of insolvency proceedings.

A petition was filed with the Court of First Instance of Cebu in which it was prayed that Francisco Jarque be declared an insolvent debtor, which soon thereafter was granted, with the result that an assignment of all the properties of the insolvent was executed in favor of Jose Corominas.

Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on the contrary, sustained the special defenses of fatal defectiveness of the mortgages. In so doing we believe that the trial judge acted advisedly.

ISSUE

Whether or not the mortgages are defective.

RULING

Yes, they are defective.

Under Article 585 of the Code of Commerce, for all purposes of law not modified or restricted by the provisions of this Code, vessels shall continue to be considered as personal property.

In this case, article 585 of the Code of Commerce is in force. Vessels are considered personal property under the civil law. A mortgage on a vessel is in nature a chattel mortgage. The only difference between a chattel mortgage of a vessel is that a record of documents affecting the title to a vessel must be entered in the record of the Collector of Customs at the port of entry. Section 5 of the Chattel Mortgage Law provides that a good chattel mortgage includes the requirement of an affidavit of good faith appended to the mortgage and recorded therewith. A chattel mortgage of a vessel that lacks the affidavit of good faith is unenforceable against third persons.

Case Digest: McMicking vs. Banco Espanol, G.R. No. 5029

 

McMicking vs. Banco Espanol, 13 Phil 429, G.R. No. 5029, April 1, 1909

Subject: Transportation Law

FACTS

In 1907, Sanchez and Cue Suan owned the Hock-Tay steamship. They borrowed P3,000 from El Banco Español-Filipino and provided a chattel mortgage as security. The mortgage was recorded in the port's collector of customs and register of property. In October, El Banco Español-Filipino delivered the mortgage to Manila's sheriff, requesting the ship's sale. The sheriff informed the mortgagors of the request and the ship would be sold in accordance with the law. The sale was scheduled for October 27th, and the steamer was sold to the highest bidder for P30,000. The transaction was documented in various records.

ISSUE

Whether or not appellant has liens existing in this case.

RULING

Yes, the appellant has existing liens.

Under Article 580 of the Code of Commerce, the wages of the crew and expenses incurred for the ship during the last voyage have a preference over the claim of a mortgagee.

In this case, this reference is known as a legal lien and takes priority over a lien created by giving the ship as security for money borrowed. The sale of a ship under a mortgage does not affect the right of prior lien holders, and their remedies lie in foreclosing their liens against the ship itself.