Transpo notes by ace

MARITIME LAW GENERAL CONCEPTS Maritime law is the system o laws which partic!larly relates to the a airs an" b!siness o the sea# to ships# their crews an" na$i%ation# an" to marine con$eyance o persons an" property& The primary law on maritime commerce is still the New Ci$il Co"e pro$isions on common carriers& The Co"e o Commerce an" special laws apply only s!ppletorily& REAL AN' ()POT(ECAR) NAT*RE There are two reasons why it is impossible to "o away with these pri$ile%es# to wit +& .& The ris, to which the thin% is e-pose" The real nat!re o maritime law accor"in% to which liability o the parties is limite" to a thin% to which is at mercy o the wa$es& they %o on# the remain"er o the $essel as well as on the amo!nt o the rei%hta%e o the car%o sa$e"4 b!t sailors whoa re en%a%e" n shares shall not ha$e any ri%ht whatsoe$er on the sal$a%e o the h!ll# b!t only on the portion o the rei%hta%e sa$e"& I they sho!l" ha$e wor,e" to reco$er the remain"er o the shipwrec,e" $essel they shall be %i$en rom the amo!nt o the sal$a%e an awar" proportion o the e orts ma"e an" to the ris,s# enco!ntere" in or"er to accomplish the sal$a%e& Art& 2:3 The ci$il liability inc!rre" by the shipowners in the cases prescribe" in this section shall be !n"erstoo" as limite" to the $al!e o the $essel with all her app!rtenances an" rei%ht earne" "!rin% the $oya%e& CO0ERAGE Article 2:3 applies the principle o limite" liability in cases o collision# while Article 123 an" 156 embo"y the !ni$ersal principle o limite" liability in all cases& Th!s# ta,en to%ether Articles 2:3# 123 an" 156 co$ers only to wit +& .& :& Liability to thir" parties Acts o the captain Collisions

The S!preme Co!rt li,ewise e-plaine" in another case that the real an" hypothecary nat!re o maritime law simply means that the liability o the carrier in connection with losses relate" to maritime contracts to the $essel which is hypothecate" or s!ch obli%ation or which stan"s as the %!aranty or their settlement& Th!s# the liability o the $essel owner an" a%ent arisin% rom the operation o s!ch $essel were con ine" to the $essel itsel # its e/!ipment# rei%ht an" ins!rance i any which limitation ser$e" to in"!ce capitalists into e ecti$ely wa%erin% their reso!rce a%ainst the consi"eration o the lar%e pro its attainable in the tra"e& STAT*TOR) PRO0ISIONS Art& 123 The ship a%ent shall also be ci$illy liable or the in"emnities in a$or o thir" persons which may arise rom the con"!ct o the captain in the care o the %oo"s which he loa"e" on the $essel4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e& Art& 156 The co7owners o the $essel shall be ci$illy liable in the proportion o their contrib!tion to the common !n" or the res!lts o the acts o the captain# re erre" to in Article 123& Each co7owner may e-empt himsel rom this liability by the aban"onment# be ore a notary# o that part o the $essel belon%in% to him& Art& 89: I the $essel an" her car%o sho!l" be totally lost# by reason o capt!re or wrec,# all r%hts shall be e-tin%!ishe"# both as re%ar"s the crew to "eman" any wa%es whatsoe$er# an" as re%ar"s the ship a%ent to reco$er the a"$ances ma"e& I a portion o the $essel o the car%o# or o both# sho!l" be sa$e"# the crew en%a%e" on wa%es# incl!"in% the captain shall retain their ri%hts on the sal$a%e# so ar as

No $essel# no liability e-presses in a n!tshell the limite" liability r!le& The total "estr!ction o the $essel e-tin%!ishes maritime liens beca!se there is no lon%er any res to which it can attach& E;CEPTIONS TO T(E LIMITE' LIA<ILIT) R*LE +& Where the in=!ry or "eath is "!e either to the a!lt o shipowner or to the conc!rrin% ne%li%ence o the shipowner an" captain Where the $essel is ins!re" In wor,men>s compensation claims That the total "estr!ction o the $essel a ect the liability o the owner or repairs o the $essel complete" be ore its loss

.& :& 9&

NEGLIGENCE The limite" liability r!le applies i the captain or the crew ca!se" the "ama%e or in=!ry& (owe$er# i the ail!re to maintain the seaworthiness o the $essel can be ascribe" to the shipowner alone or the shipowner conc!rrently with the captain# then limite" liability principle cannot be in$o,e"& E-& Allowin% the ship to carry more passen%ers than it was allowe" to carry# captain playin% mah=on%# !nseaworthiness o the $essel at the time o its "epart!re# a!thori?in% a $oya%e notwithstan"in% ,nowle"%e o a typhoon# a"mitte"ly employin% an !nlicense" master an" en%ineer

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INS*RANCE The S!preme Co!rt e-plaine" that the total loss o the $essel "i" not e-tin%!ish the liability o the carrier>s ins!rer& 'espite the loss o the $essel# there ore# its ins!rance answers or the "ama%es that a shipowner or a%ent may be hel" liable or by reason o the "eath o passen%ers& WOR@ER>S COMPENSATION The pro$ision o Co"e o Commerce has no room in the application o Wor,men>s Compensation act& I an acci"ent is compensable !n"er the Wor,men>s Compensation Act# it m!st be compensate" e$en when the wor,man>s ri%ht is not reco%ni?e" by or is in con lict with other pro$isions o the Ci$il Co"e or the Co"e o Commerce& The reason behin" this principle is that the Wor,men>s Compensation Act was enacte" by the le%islat!re in abro%ation o other e-istin% laws& A<AN'ONMENT Aban"onment o the $essel# its app!rtenance an" the rei%hta%e is an in"ispensable re/!irement be ore the shipowner or shipa%ent can en=oy the bene its o the limite" liability principle& I the carrier "oes not want to aban"on the $essel# then he is still liable e$en beyon" the $al!e o the $essel& The S!preme Co!rt hel" that the r!le in the case o collision# aban"onment o the $essel is necessary in or"er to limit the liability o the shipowner or the a%ent to the $al!e o the $essel# its app!rtenance an" rei%hta%e earne" in the $oya%e in accor"ance with Article 2:3 o the Co"e o Commerce& The only instance where s!ch aban"onment is "ispense" with is when the $essel was entirely lost& In s!ch case# the obli%ation is thereby e-tin%!ishe"& PROCE'*RE AOR ENAORCEMENT In the sin,in% o the $essel# the claimants are limite" in their reco$ery to the remainin% $al!e o accessible assets& In the case o a lost $essel# these are the ins!rance procee"s an" pen"in% rei%hta%e or the partic!lar $oya%e& The co!rt r!le" that in airness to the claimants# an" as a matter o e/!ity# the total procee"s o the ins!rance an" pen"in% rei%hta%e sho!l" be "eposite" in tr!st& PROTEST Protest is a written statement by the master o the $essel or any a!thori?e" o icer# atteste" by proper o icer or a notary# to the e ect that "ama%es has s! ere" by the ship& Protest is re/!ire" !n"er the Co"e o Commerce in the ollowin% casesB +& .& Arri$al !n"er stress 0essel is shipwrec,e" :& Where the $essel has %one thro!%h a h!rricane or the captain belie$es that the car%o has s! ere" "ama%es or a$era%es Maritime collisions

9&

A'MIRALT) C*RIS'ICTION The Re%ional Trial Co!rt has =!ris"iction o$er a"miralty an" maritime cases where the "eman" or claim e-cee" P+66#666 or i in Metro Manila a claim e-cee"s P.66#666& I the claim "oes not e-cee" then =!ris"iction is in the M!nicipal Trial Co!rt& STAN'AR' OIL 0S& CASTELO That the owner o the ship is a person to whom the plainti in this case may imme"iately loo, or reimb!rsement to the e-tent abo$e state" is "e"!cible not only rom the %eneral "octrines o a"miralty =!rispr!"ence b!t rom the pro$isions o the Co"e o Commerce applicable to the case& It is !ni$ersally reco%ni?e" that the captain is primarily the representati$e o the owner4 an" article 128 o the Co"e o Commerce e-pressly "eclares that both the owner o the $essel an" the naviero# or charterer# shall be ci$il liable or the acts o the master& In this connection# it may be note" that there is a "iscrepancy between the meanin% o naviero# in articles 128 o the Co"e o Commerce# where the wor" is !se" in contra"istinction to the term Downer o the $esselD E propietarioF# an" in article 123 where it is !se" alone# an" apparently in a sense broa" eno!%h to incl!"e the owner& A!n"amentally the wor" Dna$ieroD m!st be !n"erstoo" to re er to the person !n"erta,in% the $oya%e# who in one case may be the owner an" in another the charterer& <!t this is not $ital to the present "isc!ssion& The real point to which we "irect attention is that# by the e-press pro$ision o the Co"e# the owner o the $essel is ci$illy liable or the acts o the captain4 an" he can only escape rom this ci$il liability by aban"onin% his property in the ship an" any rei%ht that he may ha$e earne" on the $oya%e Earts& 123# 122# Co"e o Comm&F& The shipper may in o!r opinion %o at once !pon the owner an" the latter# i so min"e"# may ha$e his reco!rse or in"emni?ation a%ainst his captain& In consi"erin% the /!estion now be ore !s it is important to remember that the owner o the ship or"inarily has $astly more capital embar,e" !pon a $oya%e than has any in"i$i"!al shipper o car%o& Moreo$er# the owner o the ship# in the person o the captain# has complete an" e-cl!si$e control o the crew an" o the na$i%ation o the ship# as well as o the "isposition o the car%o at the en" o the $oya%e& It is there ore proper that any person whose property may ha$e been cast o$erboar" by or"er o the captain sho!l" ha$e a ri%ht o action "irectly a%ainst the shipGs owner or the breach o any "!ty which the law may ha$e impose" on the captain with respect to s!ch car%o& To a"opt the interpretation o the law or which the appellant conten"s wo!l" place the shipowner in a position to escape all responsibility or a %eneral a$era%e o this character by

Transpo notes by ace

means o the "elin/!ency o his own captain& This cannot be permitte"& The e$i"ent intention o the Co"e# ta,en in all o its pro$isions# is to place the primary liability !pon the person who has act!al control o$er the con"!ct o the $oya%e an" who has most capital embar,e" in the $ent!re# namely# the owner o the ship# lea$in% him to obtain reco!rse# as it is $ery easy to "o# rom other in"i$i"!als who ha$e been "rawn into the $ent!re as shippers& )* CON 0S& IPIL <lanco# the commentator on mercantile law# in re errin% to the %rammatical meanin% o the wor" DshipD an" D$essels#D says# in his wor, a orecite"# that these terms "esi%nate e$ery ,in" o cra t# lar%e or small# whether belon%in% to the merchant marine or to the na$y& An" re errin% to their =!ri"ical meanin%# he a""sB DThis "oes not "i er essentially rom the %rammatical meanin%4 the wor"s DshipD an" D$esselD also "esi%nate e$ery cra t# lar%e or small# so lon% as it be not an accessory o another# s!ch as the small boat o a $essel# o %reater or less tonna%e& This "e inition comprises both the cra t inten"e" or ocean or or coastwise na$i%ation# as well as the loatin% "oc,s# m!" li%hters# "re"%es# "!mpscows or any other loatin% apparat!s !se" in the ser$ice o an in"!stry or in that o maritime commerce& & & &D E0ol& +# p& :25&Fchanrobles $irt!al law library Accor"in% to the ore%oin% "e initions# then# we sho!l" that the banca calle" Maria# chartere" by the plainti )! Con rom the "e en"ant Narciso La!ron# was a D$esselD# p!rs!ant to the meanin% this wor" has in mercantile law# that is# in accor"ance with the pro$isions o the Co"e o Commerce in orce& $irt!al law library The name o captain or master is %i$en# accor"in% to the ,in" o $essel# to the person in char%e o it& The irst "enomination is applie" to those who %o$ern $essels that na$i%ate the hi%h seas or ships o lar%e "imensions an" importance# altho!%h they be en%a%e" in the coastwise tra"e& Masters are those who comman" smaller ships en%a%e" e-cl!si$ely in the coastwise tra"e&H Aor the p!rposes o maritime commerce# the wor"s DcaptainD an" DmasterD ha$e the same meanin%4 both bein% the chie s or comman"ers o ships& E0ol& .# p& +82&F Article 123 o the Co"e o Commerce in orce pro$i"esB The a%ent shall be ci$illy liable or the in"emnities in a$or o thir" persons which arise rom the con"!ct o the captain in the care o the %oo"s which the $essel carrie"4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all her e/!ipments an" the rei%ht he may ha$e earne" "!rin% the trip& It is well an" %oo" that the shipowner be not hel" criminally liable or s!ch crimes or /!asi crimes4 b!t the cannot be e-c!se" rom liability or the "ama%e an" harm which# in conse/!ence o those acts# may be s! ere" by the thir" parties who contracte" with the captain# in his "o!ble capacity o a%ent an" s!bor"inate o the shipowner himsel & In maritime commerce# the shippers an" passen%ers in ma,in% contracts with the captain "o so thro!%h the con i"ence they ha$e in the shipowner who appointe" him4 they pres!me that the owner ma"e a most care !l in$esti%ation be ore appointin% him# an"# abo$e all# they themsel$es are !nable to ma,e s!ch an in$esti%ation# an" e$en tho!%h they sho!l" "o so# they co!l" not obtain complete sec!rity# inasm!ch as the shipowner can# whene$er he sees it# appoint another captain instea" The shipowner is in the same case with respect to the members o the crew# or# tho!%h he "oes not appoint "irectly# yet# e-pressly or tacitly# he contrib!tes to their appointment& On the other han"# i the shipowner "eri$es pro its rom the res!lts o the choice o the captain an" the crew# when the choice t!rns o!t s!ccess !l# it is also =!st that he sho!l" s! er the conse/!ences o an !ns!ccess !l appointment# by application o the r!le o nat!ral law containe" in the Parti"as# $i?&# that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom. The Co"e o Commerce in orce omits the "eclaration o non7liability containe" in the ol" co"e# an" clearly ma,es the shipowner liable ci$illy or the loss s! ere" by those who contracte" with the captain# in conse/!ence o the mis"emeanors an" crimes committe" by the latter or by the members o the crew& )ANGCO 0S& LASERNA May the shipowner or a%ent# notwithstan"in% the total loss o the $essel as a res!lt o the ne%li%ence o its captain# be properly hel" liable in "ama%es or the conse/!ent "eath o its passen%ersI We are o the opinion an" so hol" that this /!estion is controlle" by the pro$isions o article 123 o the Co"e o Commerce& Sai" article rea"sB The a%ent shall also be ci$illy liable or the in"emnities in a$or o thir" persons which arise rom the con"!ct o the captain in the care o the %oo"s which the $essel carrie"4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all her e/!ipments an" the rei%ht he may ha$e earne" "!rin% the $oya%e& The pro$isions accor"s a shipowner or a%ent the ri%ht o aban"onment4 an" by necessary implication# his liability is con ine" to that which he is entitle" as o ri%ht to aban"on 7 Dthe $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e&D It is tr!e that the article appears to "eal only with the limite" liability o shipowners or a%ents or "ama%es arisin% rom the miscon"!ct o the captain in the care o the %oo"s which the $essel carries# b!t this is a mere "e iciency o lan%!a%e an" in no way in"icates the tr!e e-tent o s!ch liability

Transpo notes by ace

The present co"e E+2.5F "oes not "etermine the =!ri"ical stat!s o the a%ent where s!ch a%ent is not himsel the owner o the $essel& This omission is s!pplie" by the propose" co"e# which pro$i"es in accor"ance with the principles o maritime law that by a%ent it is to be !n"erstoo" the person intr!ste" with the pro$isionin% o the $essel# or the one who represents her in the port in which she happens to be& This person is the only one who represents the $essel 7 that is to say# the only one who represents the interests o the owner o the $essel& This pro$ision has there ore cleare" the "o!bt which e-iste" as to the e-tent o the liability# both o the a%ent an" o the owner o the $essel& S!ch liability is limite" by the propose" co"e to the value of the vessel an" other thin%s appertainin% thereto& In Philippine Shipping Co. vs. Garcia E8 Phil&# .2+# .297 .28F# we ha$e e-presse" o!rsel$es in s!ch a comprehensi$e manner as to lea$e no room or "o!bt on the applicability o o!r ratio decidendi not only to cases o collision b!t also to those o shipwrec,s# etc& We sai"B This is the "i erence which e-ists between the law !l acts an" law !l obli%ations o the captain an" the liability which he inc!rs on acco!nt o any !nlaw !l act committe" by him& In the irst case# the law !l acts an" obli%ations o the captain bene icial to the $essel may be en orce" as a%ainst the a%ent or the reason that s!ch obli%ations arise rom the the contract o a%ency Epro$i"e"# howe$er# that the captain "oes not e-cee" his a!thorityF# while as to any liability inc!rre" by the captain thro!%h his !nlaw !l acts# the ship a%ent is simply s!bsi"iarily ci$illy liable& This liability o the a%ent is limite" to the $essel an" it "oes not e-ten" !rther& Aor this reason the Co"e o Commerce ma,es the a%ent liable to the e-tent o the $al!e o the $essel# as the co"es o the principal maritime nations pro$i"e with the vessel# an" not in"i$i"!ally& S!ch is also the spirit o o!r Co"e& It will be obser$e" that these ri%hts are correlati$e# an" nat!rally so# beca!se i the a%ent can e-empt himsel rom liability by aban"onin% the $essel an" rei%ht money# th!s a$oi"in% the possibility o ris,in% his whole ort!ne in the b!siness# it is also =!st that his maritime cre"itor may or any reason attach the $essel itsel to sec!re his claim witho!t waitin% or a settlement o his ri%hts by a inal =!"%ment# e$en to the pre=!"ice o a thir" personJ& & It only remains to be note" that the r!le o limite" liability pro$i"e" or in o!r Co"e o Commerce re lects merely# or is b!t a restatement# imper ect tho!%h it is# o the almost !ni$ersal principle on the s!b=ect& While pre$io!sly !n"er the ci$il or common law# the owner o a $essel was liable to the !ll amo!nt or "ama%es ca!se" by the miscon"!ct o the master# by the %eneral maritime law o mo"ern E!rope# the liability o the shipowner was s!bse/!ently limite" to his interest in the $essel& ENorwich K N& )& Trans& Co& v. Wri%ht# 26 *& S& +69# .6 Law& e"& 121&F A similar limitation was place" by the <ritish Parliament !pon the liability o En%lish shipowners thro!%h a series o stat!tes be%innin% in +3:9 with the Act o 3 Geor%e II# chapter +1& The le%islat!res o Massach!setts an" Maine ollowe" s!it in +2+2 an" +2.+# an" inally# Con%ress enacte" the Limite" Liability Act o March :# +21+# embo"yin% most o the pro$isions containe" in the <ritish Stat!tes Esee .9 R& C& L& pp& +:237 +:25F& Section 9.2: o the Re$ise" Stat!tes Esec& +2:# Tit& 98# Co"e o Laws o *& S& A&F rea"sB LIA<ILIT) OA OWNER NOT TO E;CEE' INTEREST& 7 The liability o the owner o any $essel# or any embe??lement# loss# or "estr!ction# by any person# o any property# %oo"s# or merchan"ise# shippe" or p!t on boar" o s!ch $essel# or or any loss# "ama%e# or in=!ry by collision# or or any act# matter or thin%# loss# "ama%e# or or eit!re# "one# occasione"# or inc!rre" witho!t the pri$ity# or ,nowle"%e o s!ch owner or owners# shall in no case e-cee" the amo!nt or $al!e o the interest o s!ch owner in s!ch $essel# an" her rei%ht then pen"in%& The policy which the r!le is "esi%ne" to promote is the enco!ra%ement o shipb!il"in% an" in$estment in maritime commerce& E0i"eB Norwich K N& )& Trans& Co& v. Wri%ht# supra4 The Main v. Williams# +1. *& S& +..4 12 C& C& 8:9&F An" it is in that spirit that the American co!rts constr!e" the Limite" Liability Act o Con%ress whereby the imm!nities o the Act were applie" to claims not only or lost %oo"s b!t also or in=!ries an" Dloss o li e o passen%ers# whether arisin% !n"er the %eneral law o a"miralty# or !n"er Ae"eral or State stat!tes&D EThe City of Columbus# .. Ae"& 9864 The Longfellow# +69 Ae"& :864 <!tler v. <oston K Sa$annah Steamship Co&# :. Law& e"& +6+34 Crai% v. Continental Ins!rance Co&# :1 Law& e"& 2:8&F The S!preme Co!rt o the *nite" States in Norwich K N& )& Trans& Co& $& Wri%ht# 26 *& S& +69# .6 Law& e"& 121# 1257156# acco!ntin% or the history o the principle# clinches o!r e-position o the s!pportin% a!thoritiesB The history o the limitation o liability o shipowners is matter o common ,nowle"%e& The learne" opinion o Judge Ware in the case o he !ebecca# + Ware# +237+59# lea$es little to be "esire" on the s!b=ect& (e shows that it ori%inate" in the maritime law o mo"ern E!rope4 that whilst the ci$il# as well as the common law# ma"e the owner responsible to the whole e-tent o "ama%e ca!se" by the wron% !l act or ne%li%ence o the matter or crew# the maritime law only ma"e then liable Ei personally ree rom blameF to the amo!nt o their interest in the ship& So that# i they s!rren"ere" the ship# they were "ischar%e"& Groti!s# in his law o War an" Peace# says that men wo!l" be "eterre" rom in$estin% in ships i they thereby inc!rre" the apprehension o bein% ren"ere" liable to an in"e inite amo!nt by the acts o the master an"# there ore# in (ollan"# they ha" ne$er obser$e" the Roman Law on that s!b=ect# b!t ha" a re%!lation that the ship owners sho!l" be bo!n" no arther than the $al!e o their ship an" rei%ht& So that it is e$i"ent that# by this law# the ownerGs liability was coe-tensi$e with his interest in the $essel an" its rei%ht# an" cease" by his aban"onment an" s!rren"er o these to the parties s!stainin% loss& In the li%ht o all the ore%oin%# we there ore hol" that i the shipowner or a%ent may in any way be hel" ci$illy liable at all or in=!ry to or "eath o passen%ers arisin%

Transpo notes by ace

rom the ne%li%ence o the captain in cases o collisions or shipwrec,s# his liability is merely co7e-tensi$e with his interest in the $essel s!ch that a total loss thereo res!lts in its e-tinction& In arri$in% at this concl!sion# we ha$e not been !nmin" !l o the act that the ill7 ate" steamship "egros# as a $essel en%a%e" in interislan" tra"e# is a common carrier E'e 0illata v. Stanely# :. Phil&# 19+F# an" that the as a $essel en%a%e" in interislan" tra"e# is a common carrier E'e 0illata v. Stanely# :. Phil&# 19+F# an" that the relationship between the petitioner an" the passen%ers who "ie" in the mishap rests on a contract o carria%e& <!t ass!min% that petitioner is liable or a breach o contract o carria%e# the e-cl!si$ely Dreal an" hypothecary nat!reD o maritime law operates to limit s!ch liability to the $al!e o the $essel# or to the ins!rance thereon# i any& In the instant case it "oes not appear that the $essel was ins!re"& law library Whether the aban"onment o the $essel so!%ht by the petitioner in the instant case was in accor"ance with law o not# is immaterial& The $essel ha$in% totally perishe"# any act o aban"onment wo!l" be an i"le ceremony C(*A )E@ (ONG 0S& IAC SEPTEM<ER Art& 123& The ship a%ent shall also be ci$illy liable or the in"emnities in a$or o thir" persons which may arise rom the con"!ct o the captain in the care o the %oo"s which he loa"e" on the $essel4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all the e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e& The term Dship a%entD as !se" in the ore%oin% pro$ision is broa" eno!%h to incl!"e the ship owner EStan"ar" Oil Co& $s& Lope? Castelo# 9. Phil& .18 L+5.+MF& P!rs!ant to sai" pro$ision# there ore# both the ship owner an" ship a%ent are ci$illy an" "irectly liable or the in"emnities in a$or o thir" persons# which may arise rom the con"!ct o the captain in the care o %oo"s transporte"# as well as or the sa ety o passen%ers transporte" #angco vs. Laserna$ supra4 %anila Steamship Co.$ &nc. vs. 'bdulhaman et al&# +66 Phil& :. L+518MF& (owe$er# !n"er the same Article# this "irect liability is mo"erate" an" limite" by the ship a%entGs or ship ownerGs ri%ht o aban"onment o the $essel an" earne" rei%ht& This e-presses the !ni$ersal principle o limite" liability !n"er maritime law& The most !n"amental e ect o aban"onment is the cessation o the responsibility o the ship a%entNowner ESwit?erlan" General Ins!rance Co&# Lt"& $s& Ramire?# L792.89# Aebr!ary .+# +526# 58 SCRA .53F& It has th!s been hel" that by necessary implication# the ship a%entGs or ship ownerGs liability is con ine" to that which he is entitle" as o ri%ht to aban"on the $essel with all her e/!ipment an" the rei%ht it may ha$e earne" "!rin% the $oya%e#D an" Dto the ins!rance thereo i anyD E)an%co $s& Lasema# supraF& In other wor"s# the ship ownerGs or a%entGs liability is merely co7e-tensi$e with his interest in the $essel s!ch that a total loss thereo res!lts in its e-tinction& DNo $essel# no liabilityD e-presses in a n!tshell the limite" liability r!le& The total "estr!ction o the $essel e-tin%!ishes maritime liens as there is no lon%er any res to which it can attach EGo$t& Ins!lar Maritime Co& $s& The Ins!lar Maritime# 91 Phil& 261# 263 L+5.9MF&chanrobles$irt!alawlibrary chanrobles $irt!al law library As this Co!rt hel"B I the ship owner or a%ent may in any way be hel" ci$illy liable at all or in=!ry to or "eath o passen%ers arisin% rom the ne%li%ence o the captain in cases o collisions or shipwrec,s# his liability is merely co7e-tensi$e with his interest in the $essel s!ch that a total loss thereo res!lts in its e-tinction& E)an%co $s& Laserna# et al&# supraF& As e$i"ence o this real nat!re o the maritime law we ha$e E+F the limitation o the liability o the a%ents to the act!al $al!e o the $essel an" the rei%ht money# an" E.F the ri%ht to retain the car%o an" the embar%o an" "etention o the $essel e$en in cases where the or"inary ci$il law wo!l" not allow more than a personal action a%ainst the "ebtor or person liable& It will be obser$e" that these ri%hts are correlati$e# an" nat!rally so# beca!se i the a%ent can e-empt himsel rom liability by aban"onin% the $essel an" rei%ht money# th!s a$oi"in% the possibility o ris,in% his whole ort!ne in the b!siness# it is also =!st that his maritime cre"itor may or any reason attach the $essel itsel to sec!re his claim witho!t waitin% or a settlement o his ri%hts by a inal =!"%ment# e$en to the pre=!"ice o a thir" person& EPhil& Shippin% Co& $s& 0er%ara# 8 Phil& .29 L+568MF& The limite" liability r!le# howe$er# is not witho!t e-ceptions# namelyB E+F where the in=!ry or "eath to a passen%er is "!e either to the a!lt o the ship owner# or to the conc!rrin% ne%li%ence o the ship owner an" the captain EManila Steamship Co&# Inc& $s& Ab"!lhaman supraF4 E.F where the $essel is ins!re"4 an" E:F in wor,menGs compensation claims Ab!e% $s& San 'ie%o# supraF& In this case# there is nothin% in the recor"s to show that the loss o the car%o was "!e to the a!lt o the pri$ate respon"ent as shipowners# or to their conc!rrent ne%li%ence with the captain o the $essel& C(*A )E@ (ONG 0S& IAC 'ECEM<ER The Appellate Co!rt 'ecision# howe$er# mentions only the ship captain as ha$in% been ne%li%ent in the per ormance o his "!ties Ep& :# Co!rt o Appeals 'ecision# p& +1# RolloF& This is a act!al in"in% bin"in% on this Co!rt& Aor the e-ception to the limite" liability r!le EArticle 123# Co"e o CommerceF to apply# the loss m!st be "!e to the a!lt o the shipowner# or to the conc!rrin% ne%li%ence o the shipowner an" the captain& As we hel"# there is nothin% in the recor"s showin% s!ch ne%li%ence Ep& 8# 'ecision&F chanrobles $irt!al law library (EIRS OA AMPARO 'E LOS SANTOS 0S& CA The petition has merit& At the o!tset# We note that there is no "isp!te as to the in"in% o the captainGs ne%li%ence in the mishap& The present contro$ersy centers on the /!estions o MaritimaGs ne%li%ence an" o the application o Article 123 o the Co"e o Commerce& The sai" article pro$i"esB

Transpo notes by ace

Art& 123& The ship a%ent shall also be ci$illy liable or in"emnities in a$or o thir" persons which may arise rom the con"!ct o the captain in the care o the %oo"s which he loa"e" on the $essel# b!t he may e-empt himsel there rom by aban"onin% the $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e& *n"er this pro$ision# a shipowner or a%ent has the ri%ht o aban"onment4 an" by necessary implication# his liability is con ine" to that which he is entitle" as o ri%ht to aban"on7Dthe $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%eD E)an%co $& Laserna# et al&# 3: Phil& ::6# ::.F& Notwithstan"in% the passa%e o the New Ci$il Co"e# Article 123 o the Co"e o Commerce is still %oo" law& The reason lies in the pec!liar nat!re o maritime law which is e-cl!si$ely real an" hypothecary that operates to limit s!ch liability to the $al!e o the $essel# or to the ins!rance thereon# i any E)an%co $& Laserna# &bidF& As correctly state" by the appellate co!rt# DEtFhis r!le is o!n" necessary to o set a%ainst the inn!merable ha?ar"s an" perils o a sea $oya%e an" to enco!ra%e shipb!il"in% an" marine commerce& E'ecision# Rollo# p& .5F& Contrary to the petitionersG s!pposition# the limite" liability "octrine applies not only to the %oo"s b!t also in all cases li,e "eath or in=!ry to passen%ers wherein the shipowner or a%ent may properly be hel" liable or the ne%li%ent or illicit acts o the captain E)an%co $& Laserna# &bidF& It m!st be stresse" at this point that Article 123 spea,s only o sit!ations where the a!lt or ne%li%ence is committe" solely by the captain& In cases where the shipowner is li,ewise to be blame"# Article 123 "oes not apply Esee Manila Steamship Co&# Inc& $& Ab"!lhanan# et al&# +66 Phil& :.# :2F& S!ch a sit!ation will be co$ere" by the pro$isions o the New Ci$il Co"e on Common Carriers& Owin% to the nat!re o their b!siness an" or reasons o p!blic policy# common carriers are tas,e" to obser$e e-traor"inary "ili%ence in the $i%ilance o$er the %oo"s an" or the sa ety o its passen%ers EArticle +3::# New Ci$il Co"eF& Maritima claims that it "i" not ha$e any in ormation abo!t typhoon GWelmin%G !ntil a ter the boat was alrea"y at sea& Mo"em technolo%y belie s!ch contention& The Weather <!rea! is now e/!ippe" with mo"ern apparat!s which enables it to "etect any incomin% atmospheric "ist!rbances& In his s!mmary report on tropical cyclone GWelmin%G which occ!rre" within the Philippine Area o Responsibility# 'r& Roman L& @intanar# Weather <!rea! 'irector# state" that "!rin% the perio"s o No$ember +1# +583# the <!rea! iss!e" a total o se$enteen E+3F warnin%s or a"$isories o typhoon GWelmin%G to shippin% companies& While in"ee" it is tr!e that all these thin%s were "one on the $essel# Maritima# howe$er# co!l" not present e$i"ence that it speci ically installe" a ra"ar which co!l" ha$e allowe" the $essel to na$i%ate sa ely or shelter "!rin% a storm& Conse/!ently# the $essel was le t at the mercy o GGWelmin%G in the open sea beca!se altho!%h it was alrea"y in the $icinity o the A,lan ri$er# it was !nable to enter the mo!th o A,lan Ri$er to %et into New Washin%ton# A,lan "!e to "ar,ness an" the Aloripon Li%htho!se at the entrance o the A,lan Ri$er was not !nctionin% or co!l" not be seen at all EE-h& :7(# In"e- o E-hibits# p& +5.7+514 see also E-h& .7A# &bid# p& +86F& Storms an" typhoons are not stran%e occ!rrences& In +583 alone be ore GWelmin%#G there were abo!t +3 typhoons that hit the co!ntry EE-h& M# In"e- o E-hibits# p& ++1F# the latest o which was typhoon *rin% which occ!rre" on October .67.1# which cost so m!ch "ama%e to li$es an" properties& With the impen"in% threat o GWelmin%#G an important "e$ice s!ch as the ra"ar co!l" ha$e enable" the ship to pass thro!%h the ri$er an" to sa ety& A<OITIO S(IPPING CORP 0S& GAALAC The other iss!e raise" is whether or not the carrierGs liability is limite" to P166&66 p!rs!ant to section 2 o the <ill o La"in%& The petitioner claims that the appellate co!rt erre" in "isre%ar"in% the limitation o liability stip!late" in the bill o la"in%& It ar%!es that the consi%nee a%ree" to this amo!nt Ean"F there ore is bo!n" by this rate an" that there is no basis or the appellate co!rtGs in"in% that the rate is !nreasonable& The ar%!ment is not well7ta,en& As aptly state" by the appellate co!rtB Generally spea,in% any stip!lation# limitin% the common carrierGs liability to the $al!e o the %oo"s appearin% in the bill o la"in%# !nless the shipper or owner "eclares a %reater $al!e is $ali"& ECi$il Co"e# Art& +395F S!ch stip!lation# howe$er# m!st be reasonable an" =!st !n"er the circ!mstances an" m!st ha$e been airly an" reely a%ree" !pon& ESt& Pa!l Aire K Marine Ins!rance Co& $& Macon"ray K Co&# 36 SCRA +..# +.87+.3 L+538M In the case at bar# the %oo"s shippe" on the MN0 DP& Aboiti?D were ins!re" or P.32#1:8&16# which may be ta,en as their $al!e& To limit the liability o the carrier to P166&66 wo!l" ob$io!sly p!t in its power to ha$e ta,en the whole car%o& In Juan #smael ( Co. v. Gabino )arretto ( Co.# 1+ Phil& 56 L+5.3M# it was hel" that a stip!lation limitin% the carrierGs liability to P:66&66 per pac,a%e o sil,# when the $al!e o s!ch pac,a%e was P.#166&66# !nless the tr!e $al!e ha" been "eclare" an" the correspon"in% rei%ht pai"4 was $oi" as a%ainst p!blic policy& That r!lin% applies to this case& As ar%!e" by the respon"ent# a limitation o liability in this case wo!l" ren"er ine icacio!s the e-traor"inary "ili%ence re/!ire" by law o common carriers& MONARC( INS*RANCE CO 0S& CA a!lt an"Nor ne%li%ence o Aboiti?# the captain an" its crew# thereby barrin% Aboiti? rom a$ailin% o the bene it o the limite" liability r!le& The principle o limite" liability is en!nciate" in the ollowin% pro$isions o the Co"e o CommerceB Art& 123& The shipa%ent shall also be ci$illy liable or the in"emnities in a$or o

Transpo notes by ace

thir" persons which may arise rom the con"!ct o the captain in the care o %oo"s which he loa"e" on the $essel4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all the e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e& Art& 156& The co7owners o a $essel shall be ci$illy liable in the proportion o their interests in the common !n" or the res!lts o the acts o the captain re erre" to in Art& 123& Each co7owner may e-empt himsel rom his liability by the aban"onment# be ore a notary# o the part o the $essel belon%in% to him& Art& 2:3& The ci$il liability inc!rre" by shipowners in the case prescribe" in this section# shall be !n"erstoo" as limite" to the $al!e o the $essel with all its app!rtenances an" the rei%hta%e ser$e" "!rin% the $oya%e& Art& 2:3 appeals the principle o limite" liability in cases o collision hence# Arts& 123 an" 156 embo"y the !ni$ersal principle o limite" liability in all cases& In #angco v. Laserna# this Co!rt el!ci"ate" on the import o Art& 123 as ollowsB The pro$ision accor"s a shipowner or a%ent the ri%ht o aban"onment4 an" by necessary implication# his liability is con ine" to that which he is entitle" as o ri%ht to aban"on7Dthe $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e&D It is tr!e that the article appears to "eal only with the limite" liability o the shipowners or a%ents or "ama%es arisin% rom the miscon"!ct o the captain in the care o the %oo"s which the $essel carries# b!t this is a mere "e iciency o lan%!a%e an" in no way in"icates the tr!e e-tent o s!ch liability& The consens!s o a!thorities is to the e ect that notwithstan"in% the lan%!a%e o the a ore/!ote" pro$ision# the bene it o limite" liability therein pro$i"e" or# applies in all cases wherein the shipowner or a%ent may properly be hel" liable or the ne%li%ent or illicit acts o the captain& 95 DNo $essel# no liability#D e-presses in a n!tshell the limite" liability r!le& The shipownerGs or a%entGs liability is merely co7e-tensi$e with his interest in the $essel s!ch that a total loss thereo res!lts in its e-tinction& The total "estr!ction o the $essel e-tin%!ishes maritime liens beca!se there is no lon%er any res to which it can attach& 16 This "octrine is base" on the real an" hypothecary nat!re o maritime law which has its ori%in in the pre$ailin% con"itions o the maritime tra"e an" sea $oya%es "!rin% the me"ie$al a%es# atten"e" by inn!merable ha?ar"s an" perils& To o set a%ainst these a"$erse con"itions an" to enco!ra%e shipb!il"in% an" maritime commerce# it was "eeme" necessary to con ine the liability o the owner or a%ent arisin% rom the operation o a ship to the $essel# e/!ipment# an" rei%ht# or ins!rance# i any& Contrary to the petitionersG theory that the limite" liability r!le has been ren"ere" obsolete by the a"$ances in mo"ern technolo%y which consi"erably lessen the ris,s in$ol$e" in maritime tra"e# this Co!rt contin!es to apply the sai" r!le in appropriate cases& This is not to say# howe$er# that the limite" liability r!le is witho!t e-ceptions# namelyB E+F where the in=!ry or "eath to a passen%er is "!e either to the a!lt o the shipowner# or to the conc!rrin% ne%li%ence o the shipowner an" the captain4 1. E.F where the $essel is ins!re"4 an" E:F in wor,menGs compensation claims& (owe$er# once the $essel owner or any party asserts the ri%ht to limit its liability# the b!r"en o proo as to lac, o pri$ity or ,nowle"%e on its part with respect to the matter o ne%li%ence or !nseaworthiness is shi te" to it& 35 This b!r"en# Aboiti? ha" !n ort!nately aile" to "ischar%e& That Aboiti? aile" to "ischar%e the b!r"en o pro$in% that the !nseaworthiness o its $essel was not "!e to its a!lt an"Nor ne%li%ence sho!l" not howe$er mean that the limite" liability r!le will not be applie" to the present cases

0ESSELS GENERAL CONCEPTS 'EAINITION When the mercantile co"es spea, o $essels# they re er solely an" e-cl!si$ely to merchant ships# as they "o not incl!"e war ships an" !rthermore they almost re er to cra t which are not accessory to another as is the case o la!nches an" li eboats& Esee )! Con $s& IpilF The ship when it is o!n" these pro$isions o!%ht to be !n"erstoo" in the sense o a $essel ser$in% the p!rpose o maritime na$i%ation or sea%oin% $essel# an" not in the sense o a $essel "e$ote" to na$i%ation o ri$ers& Other $essels o a minor nat!re not en%a%e" in maritime commerce# s!ch as ri$er boats an" those carryin% passen%ers# m!st be %o$erne" as to their liability to passen%ers# by the pro$isions o the Ci$il Co"e or other appropriate special pro$isions o law& CONSTR*CTION # EQ*IPMENT AN' MANNING The constr!ction# e/!ipment an" mannin% o $essels are s!b=ect to the r!les iss!e" by Maritime In"!strial A!thority EMARINAF& PERSONAL PROPERT)

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0essels are personal property !n"er the Ci$il Co"e& The same r!le can be o!n" in the Co"e o Commerce which pro$i"esB Art& 121 Aor all p!rposes o law not mo"i ie" or restricte" by the pro$isions o this Co"e# $essel shall contin!e to be consi"ere" as personal property& OWNERS(IP PRESCRIPTION 0essels may be ac/!ire" or trans erre" by any means reco%ni?e" by law& PRESCRIPTION Art& 13: Merchant $essels constit!te property which may be ac/!ire" an" trans erre" by any means reco%ni?e" by law& The ac/!isition o a $essel m!st appear in a written instr!ment which shall not pro"!ce any e ect with respect to thir" persons i not inscribe" in the re%istry o $essels& The ownership o a $essel shall li,ewise be ac/!ire" by possession in %oo" aith# contin!e" or three years# with a =!st title "!ly recor"e"& In the absence o any o these re/!isites# contin!o!s possession or ten years shall be necessary# in or"er to ac/!ire ownership& A captain may not ac/!ire by prescription the $essel o which he is in comman"& SALE Art& 138 in the sale o a $essel it shall always be !n"erstoo" as incl!"e" the ri%%in%# masts# stores an" en%ine o a streamer app!rtenant thereto# which at the time belon%s to the $en"or& The $en"or shall be !n"er the obli%ation to "eli$er to the p!rchaser a certi ie" copy o the recor" sheet o the $essel in the re%istry !p to the "ate o the sale& REGISTRATION 0essels are now re%istere" thro!%h the MARINA& It is a lon% stan"in% r!le that the person who is the re%istere" owner o the $essel is pres!me" to be the owner o the $essel& Moreo$er# it is li,ewise a settle" r!le that the sale an" trans er o the $essel is not bin"in% on thir" persons !nless the same is re%istere"& S(IP>S MANIAEST 0essels are re/!ire" to carry mani ests in coastwise tra"e& *n"er the Tari an" C!stoms Co"e# it pro$i"es that Rmani ests shall be re/!ire" or car%o an" passen%ers transporte" rom one place or port in the Philippines to another only when one or both o s!ch places is a port o entry& 8& Name# citi?enship# resi"ence o owner# an" nationality an" Section .& Who may Constit!te a Ship Mort%a%e& Any citi?en o the Philippines# or any association or corporation or%ani?e" !n"er the laws o the Philippines# at least si-ty per cent o the capital o which is owne" by citi?ens o the Philippines may# or the p!rpose o inancin% the constr!ction# ac/!isition# p!rchase o $essels or initial operation o $essels# reely constit!te a mort%a%e or any other lien or enc!mbrance on his or its $essels an" its e/!ipment with any ban, or other inancial instit!tions# "omestic or orei%n& Section :& Mort%a%e o recor"s& 0essel o 'omestic Ownership4 A mani est is a "eclaration o the entire car%o& The ob=ect o a mani est is to !rnish c!stoms o icers with a list to chec, a%ainst# to in orm the re$en!e o icers what %oo"s are bein% bro!%ht into a port o the co!ntry on a $essel& PRESI'ENTIAL 'ECREE +1.+ T(E S(IP MORTGAGE 'ECREE ACT OA +532

EaF No mort%a%e# which at the time s!ch mort%a%e is ma"e incl!"es a $essel o "omestic ownership as this term is "e ine" in Presi"ential 'ecree No& 38+# or any portion thereo # as the whole or any part o the property mort%a%e"# shall be $ali"# in respect to s!ch $essel# a%ainst any person other than the mort%a%or# his heir or assi%n# an" a person ha$in% act!al notice thereo # !ntil s!ch mort%a%e is recor"e" in the o ice o the Philippine Coast G!ar" o the port o "oc!mentation o s!ch $essel& EbF The Coast G!ar" 'istrict or Station Comman"er shall recor" mort%a%es "eli$ere" to him# in the or"er o their reception# in boo,s to be ,ept or that p!rpose an" in"e-e" to show +& The name o the $essel4 .& The names o mort%a%e4 the parties tot he

:& The time an" "ate o reception o the instr!ment4 9& The interest mort%a%e"4 in the $essel so

1& The amo!nt an" "ate o mat!rity o the mort%a%e4

3& Any material chan%e o con"ition in respect to any o the prece"in% items&

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A copy o the instr!ment or mort%a%e shall be !rnishe" the Central <an, o the Philippines& Section 9& Pre erre" Mort%a%es EaF A $ali" mort%a%e which at the time it is ma"e incl!"es the whole o any $essel o "omestic ownership shall ha$e# in respect to s!ch $essel an" as o the "ate o recor"ation# the pre erre" stat!s %i$en by the pro$isions o Section +3 hereo # i +& The mort%a%e is recor"e" as pro$i"e" in Section : hereo 4 .& An a i"a$it is ile" with the recor" o s!ch mort%a%e to the e ect that the mort%a%e is ma"e in %oo" aith an" witho!t any "esi%n to hin"er# "elay# or "e ra!" any e-istin% or !t!re cre"itor o the mort%a%or or any lien or o the mort%a%e" $essel4 :& The mort%a%e "oes not stip!late that the mort%a%ee wai$es the pre erre" stat!s thereo 4 EbF Any mort%a%e which complies with the abo$e con"itions is herea ter calle" a Dpre erre" mort%a%eD& Aor p!rposes o this 'ecree# a $essel hol"in% a Pro$isional Certi icate o Philippine Re%istry is consi"ere" a $essel o "omestic ownership s!ch that it can be s!b=ect o pre erre" mort%a%e& The Philippine Coast G!ar" is hereby a!thori?e" to enter a $essel hol"in% a Pro$isional Certi icate o Philippine Re%istry in the Re%istry o 0essels an" to recor" any mort%a%e e-ec!te" thereon& S!ch mort%a%e shall ha$e the pre erre" stat!s as o the "ate o recor"ation !pon compliance with the abo$e con"itions& EcF There shall be en"orse" !pon the "oc!ments o a $essel co$ere" by a pre erre" mort%a%e +& The names o mort%a%ee4 the mort%a%or an" Comman"er o any port in which the $essel is o!n"# i s!ch Coast G!ar" 'istrict or Station Comman"er is "irecte" to ma,e the en"orsement by the Coast G!ar" 'istrict or Station Comman"er o the port o "oc!mentation& The Coast G!ar" 'istrict or Station Comman"er o the port o "oc!mentation shall %i$e s!ch "irection by wire o letter at the re/!est o the mort%a%ee an" !pon the ten"er o the cost o comm!nication o s!ch "irection& Whene$er any new "oc!ment is iss!e" or the $essel# s!ch en"orsement shall be trans erre" to an" en"orse" !pon the new "oc!ment by the Coast G!ar" 'istrict or Station Comman"er& In the case o a $essel hol"in% a pro$incial certi icate o Philippine Re%istry# the en"orsement shall be ma"e by the Philippine cons!l abroa" !pon "irection by wire or letter rom the Maritime In"!stry A!thority at the re/!est o the mort%a%ee an" !pon ten"er o the cost o comm!nication o s!ch "irection& A certi icate o s!ch en"orsement# %i$in% the place# time an" "escription o the en"orsement# shall be recor"e" with the recor"s o re%istration to be maintaine" at the Philippine Cons!late& EeF A mort%a%e which incl!"es property other than a $essel shall not be hel" a pre erre" mort%a%e !nless the mort%a%e pro$i"es or the separate "ischar%e o s!ch property by the payment o a speci ie" portion o the mort%a%e in"ebte"ness& I a pre erre" mort%a%e so pro$i"es or the separate "ischar%e# the amo!nt o the portion o s!ch payment shall be en"orse" !pon the "oc!ments o the $essel& E F A pre erre" mort%a%e incl!"es more than one $essel an" pro$i"es or the separate "ischar%e o each $essel by the payment o a portion o mort%a%e in"ebte"ness# the amo!nt o s!ch portion o s!ch payment shall be en"orse" !pon the "oc!ments o the $essel& In case s!ch mort%a%e "oes not pro$i"e or the separate "ischar%e o a $essel an" the $essel is to be sol" !pon the or"er o a "istrict co!rt o the Philippines in a s!it in rem in a"miralty# the co!rt shall "etermine the portion o the mort%a%e in"ebte"ness increase" by .6 per cent!m E+F which# in the opinion o the co!rt# the appro-imate $al!e o all the $essels co$ere" by the mort%a%e# an" E.F !pon the payment o which the $essel shall be "ischar%e" rom the mort%a%e& Section 1& Certi ie" Copies o Mort%a%e4 e-hibition& The Coast G!ar" 'istrict or Station Comman"er !pon the recor"in% o a pre erre" mort%a%e shall "eli$er two certi ie" copies thereo to the mort%a%or who shall place# an" !se "!e "ili%ence to retain# one copy on boar" the mort%a%e" $essel notice o which shall be poste" in a conspic!o!s place thereat an" ca!se s!ch copy an" the "oc!ments o the $essel to be e-hibite" by the master to any person ha$in% b!siness with the $essel# which %i$e rise to a maritime lien !pon the $essel or to the sale#

.& The time an" "ate the en"orsement is ma"e4 :& The amo!nt an" "ate o mat!rity o the mort%a%e4 an" 9& Any amo!nt re/!ire" to be en"orse" by the pro$isions o para%raphs EeF or E F o this Section& E"F S!ch en"orsement shall be ma"e E+F by the Coast G!ar" 'istrict or Station Comman"er o the port o "oc!mentation o the mort%a%e" $essel# or E.F by the Coast G!ar" 'istrict or Station

Transpo notes by ace

con$eyance# or mort%a%e thereo & The master o the $essel shall !pon the re/!est o any s!ch person# e-hibit to him the "oc!ments o the $essel place" on boar" thereo & The re/!irement o this Section that a copy o a pre erre" mort%a%e be place" an" retaine" on boar" the mort%a%e" $essel shall not apply in the case o a mort%a%e" $essel which is not sel 7propelle" Eincl!"in% b!t not limite" to# bar%es# scors# li%hters# an" car loatsF& I the master o the $essel will !lly ails to e-hibit the "oc!ments o the $essel or the copy o any pre erre" mort%a%e thereo # the Philippine Coast G!ar" may s!spen" or cancel the masterGs license& Section 8& Prior an" S!bse/!ent Maritime Liens on Mort%a%e" 0essel& The mort%a%or E+F shall# !pon re/!est o the mort%a%ee# "isclose in writin% to him prior to the e-ec!tion o any pre erre" mort%a%e# the e-istence o any maritime lien# prior mort%a%e# or other obli%ation or liability !pon the $essel to be mort%a%e"# that is ,nown to the mort%a%or# an" E.F witho!t the consent o the mort%a%ee# shall not inc!r# a ter the e-ec!tion o s!ch mort%a%e an" be ore the mort%a%ee has ha" a reasonable time in which to recor" the mort%a%e an" ha$e in"orsements in respect thereto ma"e !pon the "oc!ments o the $essel# any contract!al obli%ation creatin% a lien !pon the $essel other than a lien or wa%es o ste$e"ores when employe" "irectly by the owner# operator# master# shipGs h!sban"# or a%ent o the $essel# or wa%es o the crew o the $essel# or %eneral a$era%e# or or sal$a%e# incl!"in% contract sal$a%e# in respect to the $essel# tonna%e "!es an" all other char%es Enot to e-cee" P.6#666F o the Philippine Go$ernment in respect to the $essel& A mort%a%or# who# with intent to "e ra!"# $iolates the abo$e pro$ision an" i the mort%a%or is a corporation or association# the presi"ent or other principal e-ec!ti$e o icer o the corporation or association# shall be p!nishe" by a ine o not# more than P1#666 or imprisonment o not more than two years# or both& The mort%a%e in"ebte"ness shall there!pon become imme"iately "!e an" payable at the election o the mort%a%ee& Section 3& Recor" o Notice o Claim o Lien on Mort%a%e" 0essel4 "ischar%e o lien EaF The Coast G!ar" 'istrict or Station Comman"er o the port o "oc!mentation shall# !pon the re/!est o any person# recor" notice o his claim o a lien !pon a $essel co$ere" by a pre erre" mort%a%e# to%ether with the nat!re# "ate o creation# an" amo!nt o the lien# an" the name an" a""ress o the person& Any person who has ca!se" notice o his claim o lien to be so recor"e" shall# !pon a "ischar%e in whole or in part o the in"ebte"ness# orthwith ile with the Coast G!ar" 'istrict or Station Comman"er a certi icate o s!ch "ischar%e& The Coast G!ar" 'istrict or Station Comman"er shall there!pon recor" the certi icate& EbF The mort%a%or !pon a "ischar%e in whole or in part o the mort%a%e in"ebte"ness# shall orthwith ile with the Coast G!ar" 'istrict or Station Comman"er or the port o "oc!mentation o the $essel# a certi icate o s!ch "ischar%e "!ly e-ec!te" by the mort%a%ee& S!ch Coast G!ar" 'istrict or Station Comman"er shall there !pon recor" the certi icate& In case o a $essel co$ere" by a pre erre" mort%a%e# the Coast G!ar" 'istrict or Station Comman"er at the port o "oc!mentation shall en"orse !pon the "oc!ments o the $essel# or "irect the Coast G!ar" 'istrict or Station Comman"er at any port in which the $essel is o!n"# to so en"orse# the act o s!ch "ischar%e& A certi icate o s!ch en"orsement# %i$in% the time# place an" "escription o the en"orsement# shall be recor"e" with the Philippine Coast G!ar"& Where the en"orsement is ma"e by a person other than the Coast G!ar" 'istrict or Station Comman"er s!ch certi icate shall be promptly orwar"e" to the Philippine Coast G!ar"& Section 2& Con"itions Prece"ent to Recor"4 interest on Pre erre" Mort%a%e EaF No mort%a%e shall be recor"e" !nless it states the interest o the mort%a%or in the $essel# an" the interest so mort%a%e"& EbF No mort%a%e# notice o claim o lien# or certi icate o "ischar%e thereo # shall be recor"e" !nless pre$io!sly ac,nowle"%e" be ore the Coast G!ar" 'istrict or Station Comman"er o the port o "oc!mentation or a notary p!blic or other o icer a!thori?e" by a law o the Philippines to ta,e ac,nowle"%ment o "ee"s or be ore a Philippine cons!l or cons!lar a%ent& EcF In case o a chan%e in the port o "oc!mentation o a $essel o the Philippines# no mort%a%e shall be recor"e" at the new port o "oc!mentation !nless there is !rnishe" to the Coast G!ar" 'istrict or Station Comman"er o s!ch port# to%ether with the copy o the mort%a%e to be recor"e"# a certi ie" copy o the recor" o the $essel at the ormer port o "oc!mentation !rnishe" by the Coast G!ar" 'istrict or Station Comman"er o s!ch port& The Coast G!ar" 'istrict or Station Comman"er at the new port o "oc!mentation is a!thori?e" an" "irecte" to recor" s!ch certi ie" copy& Section +6& Lien o pre erre" Mort%a%e4 oreclos!re4 =!ris"iction4 proce"!re A pre erre" mort%a%e shall constit!te a lien !pon the mort%a%e" $essel in the amo!nt o the o!tstan"in% mort%a%e in"ebte"ness sec!re" by s!ch $essel& *pon the "e a!lt o any term or con"ition o the mort%a%e s!ch lien may be en orce" by the mort%a%ee by s!it in remainin% a"miralty# wherein the $essel itsel may be ma"e a partly "e en"ant an" be arreste" in the manner as pro$i"e" in Section ++ hereo & Ori%inal =!ris"iction o all s!ch s!its is %rante" to the

Transpo notes by ace

Co!rt o Airst Instance o the Philippines e-cl!si$ely& In a""ition to any notice by p!blication# act!al notice o commencement o any s!ch s!it shall "irect# to E+F the master# other ran,in% o icer# or careta,er o the $essel# an" E.F any person who has recor"e" a notice o claim o an !n"ischar%e" lien !pon the $essel# as pro$i"e" in Section 3 hereo # !nless a ter search by the mort%a%e satis actory to the co!rt# s!ch mort%a%or# master# other ran,in% o icer# careta,er# or claimant is not o!n" within the Philippines& Aail!re to %i$e notice to any s!ch person# as re/!ire" by this Section# shall be liable to s!ch person or "ama%es in the amo!nt o his interest in the $essel terminate" by the s!it& In case o =!"icial oreclos!re as pro$i"e" herein# the pro$isions o R!le 82 o the New R!les o Co!rt# i not inconsistent herewith# shall apply& The lien o a pre erre" ship mort%a%e may also be en orce" by a s!it in rem in a"miralty or otherwise in any orei%n co!ntry in which the $essel may be o!n" p!rs!ant to the proce"!re o sai" co!ntry or the en orcement o ship mort%a%es constit!tin% maritime liens on $essels "oc!mente" !n"er the laws o sai" co!ntry& Section ++& Arrest o 0essels *pon the ilin% o the petition or the =!"icial oreclos!re o a Pre erre" Ship Mort%a%e# or imme"iately therea ter# the applicant may apply e-7 parte or an or"er or the arrest o the mort%a%e" $essel or $essels an" the =!"%e shall imme"iately iss!e the same# pro$i"e" that it is ma"e to appear by a i"a$it o the applicant# or o some other person who personally ,nows the acts that a "e a!lt in the mort%a%e has occ!rre" an" that applicant iles a bon" e-ec!te" to the a"$erse party in an amo!nt to be i-e" by the =!"%e# not e-cee"in% the applicantGs claim# con"itione" that the latter will pay all the costs which may be a"=!"%e" to the a"$erse party an" all "ama%es which he may s!stain by reason o s!ch arrest# i the co!rt shall inally a"=!"%e that the applicant was not entitle" thereto& Section +.& 'ischar%e o Or"er o Arrest4 Co!nterbon" At any time a ter an or"er o arrest has been %rante"# the party whose $essel or $essels ha" been arreste"# or the person appearin% in his behal # may# !pon reasonable notice to the applicant# apply to the =!"%e who %rante" the or"er# or to the =!"%e o the co!rt in which the action is pen"in%# or an or"er "ischar%in% the or"er o arrest& That =!"%e shall or"er the "ischar%e o the arrest i a cash "eposit is ma"e# or co!nterbon" e-ec!te" to the cre"itor is ile"# on behal o the a"$erse party# with the cler, or =!"%e o the co!rt where the application is ma"e in an amo!nt "o!ble the $al!e o the claim to sec!re the payment o any =!"%ment that the cre"itor may reco$er in the action& *pon the ilin% o s!ch co!nterbon"# copy thereo shall orthwith be ser$e" on the cre"itor or his lawyer& *pon "ischar%e o the or"er o arrest# the property arreste" or sei?e" shall be "eli$ere" to the party ma,in% the "eposit or %i$in% the co!nterbon"# or the person appearin% in his behal # the "eposit or co!nterbon" a oresai" stan"in% in place o the $essel or $essels release"& Sho!l" s!ch "eposit or co!nterbon" or any reason be o!n" to be# or become ins! icient# an" the party !rnishin% the same ails to ile an a""itional co7 co!nterbon"# the attachin% cre"itor may apply or a new or"er o arrest or sei?!re& Section +:& 'ischar%e o Or"er o Arrest or Improper or Irre%!lar Iss!ance The party whose $esselNs has been arreste" may also# at any time either be ore or a ter the release o the arreste" $essel# or be ore any arrest or sei?!re has been e ecte"# !pon reasonable notice to the cre"itor# apply to the =!"%e who %rante" the or"er# or to the =!"%e o the co!rt in which the action is pen"in%# or an or"er to "ischar%e the or"er o arrest or sei?!re on the %ro!n" that the same improperly or irre%!larly iss!e"& A ter hearin%# the =!"%e shall or"er the "ischar%e o the or"er o arrest or sei?!re i it appears that it was improperly or irre%!larly iss!e" an" the "e ect is not c!re" orthwith& Section +9& E-tra=!"icial Aoreclos!re The pro$isions o the Chattel Mort%a%e Law on the reme"y o e-tra7=!"icial oreclos!re o mort%a%es in so ar as they are not inconsistent herewith shall still apply& Aor the p!rpose o ta,in% possession o the $essel or $essels# the oreclosin% cre"itor may sec!re rom a =!"%e o the Co!rt o Airst Instance o the pro$ince where the $essel may be o!n" or where the cre"itor or "ebtor resi"es an or"er or the arrest or sei?!re o the $essel& *pon s!ch or"er o sei?!re or arrest bein% iss!e"# the sheri shall imme"iately ta,e possession o the $essel or $essels or the p!rpose o oreclos!re an" sale& The $essel may only be release" in accor"ance with the pro$isions o Section +: o this Act# or when the "ebtor pays the o!tstan"in% obli%ation& Section +1& Aorei%n Ship Mort%a%es As !se" in Sections +6 to +2 hereo # the term Dpre erre" mort%a%eD shall incl!"e# in a""ition to a pre erre" mort%a%e ma"e p!rs!ant to the pro$isions o this 'ecree# any mort%a%e# hypothecation# or similar char%e create" as sec!rity !pon any "oc!mente" orei%n $essel i s!ch mort%a%e# hypothecation# or similar char%e has been "!ly an" $ali"ly e-ec!te" in accor"ance with the laws o the orei%n nation !n"er the laws o which the $essel is "oc!mente" an" has been "!ly re%istere" in accor"ance with s!ch laws in a p!blic re%ister either at the port o re%istry o the $essel or at a central o ice4 an" the term Dpre erre" mort%a%e lienD shall also incl!"e the lien o s!ch mort%a%e# hypothecation# or similar char%eB Pro$i"e"# howe$er# That s!ch Dpre erre" mort%a%e lienD in the case o a orei%n $essel shall be s!bor"inate to maritime liens or repairs# s!pplies# towa%e# !se o "ry"oc, or marine railway# or other necessaries# per orme" or s!pplie" in the Philippines& Section +8& Recei$er in Aoreclos!re4 possession by sheri In any s!it in rem in a"miralty or the en orcement o the pre erre" mort%a%e lien# the co!rt may appoint a recei$er an"# in its "iscretion# a!thori?e the recei$er to operate the mort%a%e" $essel& The sheri may be a!thori?e" an" "irecte" by the co!rt to ta,e possession o the mort%a%e" $essel notwithstan"in% the act that the $essel is in the possession or !n"er the control o any person claimin% a possessory common law lien&

Transpo notes by ace

Section +3& Pre erre" Maritime Lien# Priorities# Other Liens EaF *pon the sale o any mort%a%e" $essel in any e-tra7 =!"icial sale or by or"er o a "istrict co!rt o the Philippines in any s!it in rem in a"miralty or the en orcement o a pre erre" mort%a%e lien thereon# all pre7 e-istin% claims in the $essel# incl!"in% any possessory common7law lien o which a lienor is "epri$e" !n"er the pro$isions o Section +8 o this 'ecree# shall be hel" terminate" an" shall therea ter attach in li,e amo!nt an" in accor"ance with the priorities establishe" herein to the procee"s o the sale& The pre erre" mort%a%e lien shall ha$e priority o$er all claims a%ainst the $essel# e-cept the ollowin% claims in the or"er state"B E+F e-penses an" ees allowe" an" costs ta-e" by the co!rt an" ta-es "!e to the Go$ernment4 E.F crewGs wa%es4 E:F %eneral a$era%e4 E9F sal$a%e4 incl!"in% contract sal$a%e4 E1F maritime liens arisin% prior in time to the recor"in% o the pre erre" mort%a%e4 E8F "ama%es arisin% o!t o tort4 an" E3F pre erre" mort%a%e re%istere" prior in time& EbF I the procee"s o the sale sho!l" not be s! icient to pay all cre"itors incl!"e" in one n!mber or %ra"e# the resi"!e shall be "i$i"e" amon% them pro rata& All cre"its not pai"# whether !lly or partially shall s!bsist as or"inary cre"its en orceable by personal action a%ainst the "ebtor& The recor" o =!"icial sale or sale by p!blic a!ction shall be recor"e" in the Recor" o Trans ers an" Enc!mbrances o 0essels in the port o "oc!mentation& Section +2& S!it in Personam in A"miralty on 'e a!lt EaF *pon the "e a!lt o any term or con"ition o a pre erre" mort%a%e !pon a $essel# the mort%a%ee may# in a""ition to all other reme"ies %rante" by this 'ecree# brin% s!it in personal in a"miralty in a "istrict co!rt o the Philippines# a%ainst the mort%a%or or the amo!nt o the o!tstan"in% mort%a%e in"ebte"ness sec!re" by s!ch $essel or any "e iciency in the !ll payment thereo & EbF This 'ecree shall not be constr!e"# in the case o a mort%a%e co$erin%# in a""ition to $essels# realty or personality other than $essels# or both# to a!thori?e the en orcement by s!it in rem in a"miralty o the ri%hts o the mort%a%e in respect to s!ch realty or personality other than $essels& Section +5& S!rren"er o 'oc!ments4 termination o mort%a%eeGs interest4 sale o mort%a%e" $essel EaF The "oc!ments o a $essel o the Philippines co$ere" by a pre erre" mort%a%e" may not be s!rren"ere" Ee-cept in the case o the or eit!re o the $essel or its sale by the or"er o any co!rt o the Philippines or any orei%n co!ntryF witho!t the appro$al o the Maritime In"!stry A!thority& The A"ministrator shall not %rant s!ch appro$al witho!t the mort%a%eeGs consent& EbF The interest o the mort%a%e in a $essel o the Philippines co$ere" by a mort%a%e# shall not be terminate" by the or eit!re o the $essel or a $iolation o any law o the Philippines# !nless the mort%a%e a!thori?e"# consente"# or conspire" to e ect the ille%al act# ail!re# or omission which constit!te" s!ch $iolation& Neither shall the chance by the shipowner in the !se or character o the $essel or in the b!siness o the mort%a%or# witho!t the consent o the mort%a%ee# nor the ail!re by the mort%a%or to comply with the pro$isions o Section 1 hereo a ect the $ali"ity or pre erence o the pre erre" ship mort%a%e as a%ainst thir" persons& EcF *pon the sale o any $essel o the Philippines co$ere" by a pre erre" mort%a%e in any e-tra=!"icial sale or by or"er o a "istrict co!rt o the Philippines in any s!it in rem in a"miralty or the en orcement o a maritime lien other than a pre erre" maritime lien# the $essel shall be sol" ree rom all pre7e-istin% claims thereon4 b!t the co!rt shall# !pon the re/!est o the mort%a%ee# the plainti # or any inter$enor# re/!ire the p!rchase at s!ch sale to %i$e an" the mort%a%ee to accept a new mort%a%e o the $essel or the balance o the term o the ori%inal mort%a%e& The con"itions o s!ch new mort%a%e shall be the same# so ar as practicable# as those o the ori%inal mort%a%e an" shall be s!b=ect to the appro$al o the co!rt& I s!ch new mort%a%e is %i$en# the mort%a%ee shall not be pai" rom the procee"s o the sale an" the amo!nt payable as the p!rchase price shall be hel" "iminishe" in the amo!nt o the new mort%a%e in"ebte"ness& E"F No $essel o "omestic ownership shall be mort%a%e"# nor# any ri%hts !n"er sai" mort%a%e shall be assi%ne"# to any person not a citi?en o the Philippines witho!t the appro$al o the Maritime In"!stry A!thority& The penalties an" sanctions pro$i"e" or !n"er Commonwealth Act No& 868 shall apply in case o any $iolation hereo & EeF The oreclos!re sale o $essels mort%a%e" !n"er the pro$isions o this 'ecree# whether =!"icially or e-tra7 =!"icially# shall not re/!ire the appro$al o the Maritime In"!stry A!thority& Section .6& Who May <i" in the Aoreclos!re Sale The ollowin% persons are /!ali ie" to bi" in the oreclos!re sale o the mort%a%e" $esselB EaF Citi?ens o the Philippines or corporations 86S o the capital o which is owne" by Ailipino citi?ens& EbF A orei%n mort%a%ee or orei%n national whose co!ntry has "iplomatic relations with the Philippines or whose co!ntry %rants reciprocal ri%hts to Ailipino citi?ens& In case the p!rchaser is a orei%n in"i$i"!al or entity# the Philippine Coast G!ar" shall# !pon presentation o the

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certi icate o sale# cancel the re%istration o the $essel an" iss!e a certi icate to that e ect !pon re/!est& Section .+& Maritime Lien or Necessaries4 persons entitle" to s!ch lien Any person !rnishin% repairs# s!pplies# towa%e# !se o "ry "oc, or marine railway# or other necessaries to any $essel# whether orei%n or "omestic# !pon the or"er o the owner o s!ch $essel# or o a person a!thori?e" by the owner# shall ha$e a maritime lien on the $essel# which may be en orce" by s!it in rem# an" it shall be necessary to alle%e or pro$e that cre"it was %i$en to the $essel& Section ..& Persons A!thori?e" to Proc!re Repairs# S!pplies# an" Necessaries The ollowin% persons shall be pres!me" to ha$e a!thority rom the owner to proc!re repairs# s!pplies# towa%e# !se o "ry "oc, or marine railway# an" other necessaries or the $esselB The mana%in% owner# shipGs h!sban"# master or any person to whom the mana%ement o the $essel at the port o s!pply is entr!ste"& No person tort!o!sly or !nlaw !lly in possession or char%e o a $essel shall ha$e a!thority to bin" the $essel& Section .:& Notice to Person A!rnishin% Repairs# S!pplies# an" Necessaries The o icers an" a%ents o a $essel speci ie" in Section .. o this 'ecree shall be ta,en to incl!"e s!ch o icers an" a%ents when appointe" by a character# by an owner pro hac $ice# or by an a%ree" p!rchaser in possession o the $essel4 b!t nothin% in this 'ecree shall be constr!e" to con er a lien when the !rnisher ,now# or by e-ercise o reasonable "ili%ence co!l" ha$e ascertaine"# that beca!se o the terms o a charter party# a%reement or sale o the $essel# or or any other reason# the person or"erin% the repairs# s!pplies# or other necessaries was witho!t a!thority to bin" the $essel there or& Section .9& Wai$er o Ri%ht to Lien Nothin% in this 'ecree shall be constr!e" to pre$ent the !rnisher o repairs# s!pplies# towa%e# !se o "ry "oc, or marine railway# or other necessaries# or the mort%a%ee# rom wai$in% his ri%ht to a lien# or in the case o a pre erre" mort%a%e lien# to the pre erre" stat!s o s!ch lien# at any time by a%reement or otherwise& Section .1& E-istin% Mort%a%es Not A ecte"4 e-ception This 'ecree shall not apply E+F to any e-istin% mort%a%e# or E.F to any mort%a%e herea ter place" at any $essel !n"er an e-istin% mort%a%e# so lon% as s!ch e-istin% mort%a%e remains !n"ischar%e"& The 'ecree shall# howe$er# apply to mort%a%es e-ec!te" p!rs!ant to Presi"ential 'ecree No& .+9# pro$i"e"# that no $este" ri%hts o thir" parties are a ecte" thereby& Section .8& R!les an" Re%!lations by Philippine Coast G!ar" an" the Maritime In"!stry A!thority The Philippine Coast G!ar" an" the Maritime In"!stry A!thority are hereby a!thori?e" to ma,e s!ch r!les an" re%!lations within their respecti$e spheres o =!ris"iction# as they may "eem necessary or the e icient e-ec!tion o the pro$isions o this 'ecree& Section .2& Instr!ments an" Acts 0ali"ate" All mort%a%es o any $essel o any part thereo # an" all "oc!mentations# recor"ations# in"orsements an" in"e-in% thereo # an" procee"in%s inci"ental thereto ma"e or "one# prior to the e ecti$ity o this 'ecree are "eclare" $ali" to the e-tent they wo!l" ha$e been $ali" i the port or ports at which it sho!l" ha$e been "oc!mente" in accor"ance with law4 an" this Section is "eclare" retroacti$e so as to accomplish s!ch $ali"ationsB Pro$i"e"# That nothin% herein containe" shall be constr!e" to "epri$e any person o any $este" ri%ht& Section .5& Repealin% Cla!se The pro$isions o the New Ci$il Co"e# the Co"e o Commerce# the Chattel Mort%a%e Law# the Re$ise" R!les o Co!rt an" o s!ch other laws# "ecrees# e-ec!ti$e or"ers# r!les an" re%!lations which are in con lict or inconsistent with the pro$isions o this 'ecree are hereby repeale"# amen"e" or mo"i ie" accor"in%ly& I or any reason# any section# s!bsection# sentence# cla!ses or term o this 'ecree is hel" to be !nconstit!tional s!ch "ecision shall not a ect the $ali"ity o the other pro$isions o this 'ecree& PN< 0S& CA The applicable law on the matter is Presi"ential 'ecree No& +1.+# otherwise ,nown as the Ship Mort%a%e 'ecree o +532& Sections +3 an" .+ o the sai" Presi"ential 'ecree pro$i"es as ollowsB Sec& +3& Preferred %aritime Liens$ Priorities$ *ther Liens EaF *pon the sale o any mort%a%e" $essel in any e-tra7 =!"icial sale or by or"er o a "istrict co!rt o the Philippines in any s!it in rem in a"miralty or the en orcement o a pre erre" mort%a%e lien thereon# all pre7 e-istin% claims on the $essel# incl!"in% any possessory common7law lien o which a lienor is "epri$e" !n"er the pro$isions o Section +8 o this 'ecree# shall be hel" terminate" an" shall therea ter attach# in li,e amo!nt an" in accor"ance with the priorities establishe" herein to the procee"s o the sale& The pre erre" mort%a%e lien shall ha$e priority o$er all claims a%ainst the $essel# e-cept the ollowin% claims in the or"er state"B E+F e-penses an" ees allowe" an" costs ta-e" by the co!rt an" ta-es "!e to the %o$ernment4 E.F crews wa%es4 E:F %eneral a$era%e4 E9F sal$a%e4 incl!"in% contract sal$a%e4 E1F maritime liens arisin% prior in time to the recor"in% o the pre erre" mort%a%e4 an" E8F "ama%es arisin% o!t o tort4 an" E3F pre erre" mort%a%e re%istere" prior in time& EbF I the procee"s o the sale sho!l" not be s! icient to pay all cre"itors incl!"e" in one n!mber or %ra"e# the resi"!e shall be "i$i"e" amon% them pro rata& All cre"its not pai"# whether !lly or partially shall s!bsist as or"inary cre"its en orceable by personal action a%ainst the "ebtor& The recor" o =!"icial sale or sale by p!blic a!ction shall be recor"e" in the Recor" o Trans ers K Enc!mbrances o 0essels in the port o "oc!mentation& Sec& .+& %aritime Lien for "ecessaries+ persons entitled to such lien. Any person !rnishin% repairs# s!pplies# towa%e# !se o "ry "oc, or maritime railway# or other necessaries to any $essel# whether orei%n or "omestic# !pon the

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or"er o the owner# shall ha$e a maritime lien on the $essel# which may be en orce" by s!it in rem# an" it shall be necessary to alle%e or pro$e that cre"it was %i$en to the $essel& *n"er these pro$isions# any person !rnishin% repairs# s!pplies# or other necessaries to a $essel on cre"it will ha$e a maritime lien on the sai" $essel& S!ch maritime lien# i it arose prior to the recor"in% o a pre erre" mort%a%e lien# shall ha$e priority o$er the sai" mort%a%e lien& As hel" by the p!blic respon"ent Co!rt o Appeals# those who pro$i"e cre"it to a master o a $essel or the p!rpose o "ischar%in% a maritime lien also ac/!ire a lien o$er the sai" $essel& *n"er American =!rispr!"ence# E F!rnishin% money to a master in %oo" aith to obtain repairs or s!pplies or to remo$e liens# in or"er to orwar" the $oya%e o the $essel# raises a lien =!st as tho!%h the thin%s E or whichF money was obtaine" to pay or ha" been !rnishe" by the len"er&L:. Li,ewise# EaF"$ances to "ischar%e maritime liens create a lien on the $essel# an" one a"$ancin% money to "ischar%e a $ali" lien %ets a lien o e/!al "i%nity with the one "ischar%e"&L:: There is no reason why these "octrines cannot be %i$en pers!asi$e application in the instant case consi"erin% that they "o not $iolate or contra$ene any o o!r e-istin% laws& Moreo$er# as pointe" o!t by the appellate co!rt# these "octrines are in accor" with o!r pro$isions on s!bro%ation partic!larly Art& +:6.# para%raph . o the New Ci$il Co"e which pro$i"es that there is le%al s!bro%ation when a thir" person# not intereste" in the !l illment in the obli%ation# pays with the e-press or tacit appro$al o the "ebtor& (a$in% th!s establishe" that pri$ate respon"ent C<C possesse" a maritime lien o$er the $essel MN0 Asean Liberty# the ne-t iss!e is whether the sai" maritime lien is pre erre" o$er the mort%a%e lien o petitioners& As state" by a note" commentator on the s!b=ect# a maritime lien constit!tes a present ri%ht o property in the ship# a jus in re# to be a terwar" en orce" in a"miralty by process in rem& Arom the moment the claim or pri$ile%e attaches# it is inchoate# an" when carrie" into e ect by le%al process# by a procee"in% in rem# it relates bac, to the perio" when it irst attache"&L96 In the case at bench# the maritime lien o$er the $essel MN0 Asean Liberty arose or was constit!te" at the time (on%,on% *nite" 'ry"oc,s# Lt"& ma"e repairs on the sai" $essel on cre"it& As s!ch# as early as March +.# +535# the "ate o the contract or the repair an" con$ersion o MN0 Asean Liberty# a maritime lien ha" alrea"y attache" to the sai" $essel& When Citiban, a"$ance" the amo!nt o *SP.9.#..1&66 or the p!rpose o payin% o PISCs "ebt to (on%,on% *nite" 'oc,yar"s# Lt"&# it ac/!ire" the e-istin% maritime lien o$er the $essel& When pri$ate respon"ent honore" its contract o %!arantee with Citiban, on March :6# +52:# it li,ewise ac/!ire" by s!bro%ation the maritime lien that was alrea"y e-istin% o$er the $essel MN0 Asean Liberty& Th!s# when pri$ate respon"ent C<C chose to e-ercise its ri%ht to the maritime lien "!rin% the procee"in%s in the trial co!rt# it was act!ally en orcin% a pri$ile%e that attache" to the ship as early as March +.# +535& The maritime lien o pri$ate respon"ent C<C th!s arose prior in time to the recor"in% o petitioners mort%a%e on September .1# +535& As s!ch# the sai" maritime lien has priority o$er the sai" mort%a%e lien& P!rs!ant to Section +3 o the Ship Mort%a%e 'ecree o +532# a pre erre" mort%a%e lien shall ha$e priority o$er all claims a%ainst the $essel e-cept# amon% others# maritime liens arisin% prior in time to the recor"in% o the pre erre" mort%a%e& The respon"ent co!rt th!s committe" no re$ersible error when it r!le" that the maritime lien o pri$ate respon"ent C<C is s!perior to the mort%a%e lien o petitioners& POLIAN' IN'*STRIAL 0S& NATIONAL 'E0ELOPMENT Section . o P&'& No& +1.+ reco%ni?es the constit!tion o a mort%a%e on a $essel# to witB SECTION .& Who may Constit!te a Ship Mort%a%e& G Any citi?en o the Philippines# or any association or corporation or%ani?e" !n"er the laws o the Philippines# at least si-ty per cent o the capital o which is owne" by citi?ens o the Philippines may# or the p!rpose o inancin% the constr!ction# ac/!isition# p!rchase o $essels or initial operation o $essels# reely constit!te a mort%a%e or any other lien or enc!mbrance on his or its $essels an" its e/!ipment with any ban, or other inancial instit!tions# "omestic or orei%n& I the mort%a%e on the $essel is constit!te" or the p!rpose state" !n"er Section .# the mort%a%e obtains a pre erre" stat!s pro$i"e" the ormal re/!isites en!merate" !n"er Section 9L1:M are complie" with& *pon en orcement o the pre erre" mort%a%e an" e$ent!al oreclos!re o the $essel# the procee"s o the sale shall be irst applie" to the claim o the mort%a%e cre"itor !nless there are s!perior or pre erential liens# as en!merate" !n"er Section +3# namelyB SECTION +3& Pre erre" Maritime Lien# Priorities# Other Liens& G EaF *pon the sale o any mort%a%e" $essel in any e-tra7=!"icial sale or by or"er o a "istrict co!rt o the Philippines in any s!it in rem in a"miralty or the en orcement o a pre erre" mort%a%e lien thereon# all pre7 e-istin% claims in the $essel# incl!"in% any possessory common7law lien o which a lienor is "epri$e" !n"er the pro$isions o Section +8 o this 'ecree# shall be hel" terminate" an" shall therea ter attach in li,e amo!nt an" in accor"ance with the priorities establishe" herein to the procee"s o the sale& The pre erre" mort%a%e lien shall ha$e priority o$er all claims a%ainst the $essel# e-cept the ollowin% claims in the or"er state"B ,-. e/penses and fees allowed and costs ta/ed by the court and ta/es due to the Government+ ,0. crew1s wages+ ,2. general average+ ,3. salvage including contract salvage+ ,4. maritime liens arising prior in time to the recording of the preferred mortgage+ ,5. damages arising out of tort+ and ,6. preferred mortgage registered prior in time. EbF I the procee"s o the sale sho!l" not be s! icient to pay all cre"itors incl!"e" in one n!mber or %ra"e# the

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resi"!e shall be "i$i"e" amon% them pro rata& All cre"its not pai"# whether !lly or partially shall s!bsist as or"inary cre"its en orceable by personal action a%ainst the "ebtor& The recor" o =!"icial sale or sale by p!blic a!ction shall be recor"e" in the Recor" o Trans ers an" Enc!mbrances o 0essels in the port o "oc!mentation& EEmphasis s!pplie"&F There is no /!estion that the mort%a%e e-ec!te" in a$or o '<P is co$ere" by P&'& No& +1.+& Contrary to N'CGs assertion# the mort%a%e constit!te" on GALLEONGs $essels in a$or o '<P may appropriately be characteri?e" as a pre erre" mort%a%e !n"er Section .# P&'& No& +1.+ beca!se GALLEON constit!te" the same or the p!rpose o inancin% the constr!ction# ac/!isition# p!rchase o $essels or initial operation o $essels& While it is correct that GALLEON e-ec!te" the mort%a%e in consi"eration o '<PGs %!arantee o the prompt payment o GALLEONGs obli%ations to the Capanese len"ers# '<PGs !n"erta,in% to pay the Capanese ban,s was a con"ition sine 7ua non to the ac/!isition o !n"s or the p!rchase o the GALLEON $essels& Witho!t '<PGs %!arantee# the Capanese len"ers wo!l" not ha$e pro$i"e" the !n"s !tili?e" in the p!rchase o the GALLEON $essels& The mort%a%e in a$or o '<P was there ore constit!te" to acilitate the ac/!isition o !n"s necessary or the p!rchase o the $essels& The pro$ision o P&'& No& +1.+ on the or"er o pre erence in the satis action o the claims a%ainst the $essel is the more applicable stat!te to the instant case compare" to the Ci$il Co"e pro$isions on the conc!rrence an" pre erence o cre"it& General le%islation m!st %i$e way to special le%islation on the same s!b=ect# an" %enerally be so interprete" as to embrace only cases in which the special pro$isions are not applicable&L11M POLIAN'Gs maritime lien is s!perior to '<PGs mort%a%e lien <e ore POLIAN'Gs claim may be classi ie" as s!perior to the mort%a%e constit!te" on the $essel# it m!st be shown to be one o the en!merate" claims which Section +3# P&'& No& +1.+ "eclares as ha$in% pre erential stat!s in the e$ent o the sale o the $essel& One o s!ch claims en!merate" !n"er Section +3# P&'& No& +1.+ which is consi"ere" to be s!perior to the pre erre" mort%a%e lien is a maritime lien arisin% prior in time to the recor"in% o the pre erre" mort%a%e& S!ch maritime lien is "escribe" !n"er Section .+# P&'& No& +1.+# which rea"sB SECTION .+& Maritime Lien or Necessaries4 persons entitle" to s!ch lien& G Any person !rnishin% repairs# s!pplies# towa%e# !se o "ry "oc, or marine railway# or other necessaries to any $essel# whether orei%n or "omestic# !pon the or"er o the owner o s!ch $essel# or o a person a!thori?e" by the owner# shall ha$e a maritime lien on the $essel# which may be en orce" by s!it in rem# an" it shall be necessary to alle%e or pro$e that cre"it was %i$en to the $essel& The trial co!rt o!n" that GALLEONGs a"$ances obtaine" rom Asian (ar"woo" were !se" to co$er or the payment o b!n,er oilN !el# !n!se" stores an" oil# bon"e" stores# pro$isions# an" repair an" "oc,in% o the GALLEON $essels&L12M These e-penses clearly all !n"er Section .+# P&'& No& +1.+& As state" in Section .+# P&'& No& +1.+# a maritime lien may consist in Gother necessaries spent or the $essel& The ship mo"i ication cost may properly be classi ie" !n"er this broa" cate%ory beca!se it was a necessary e-penses or the $esselGs na$i%ation& As lon% as an e-pense on the $essel is in"ispensable to the maintenance an" na$i%ation o the $essel# it may properly be treate" as a maritime lien or necessaries !n"er Section .+# P&'& No& +1.+& With respect to the claim or salary an" wa%es o the crew# there is no "o!bt that it is also one o the en!merate" claims !n"er Section +3# P&'& No& +1.+# secon" only to =!"icial costs an" ta-es "!e the %o$ernment in pre erence an"# th!s# ha$in% a stat!s s!perior to '<PGs mort%a%e lien& All thin%s consi"ere"# howe$er# the Co!rt in"s that only N'C is liable or the payment o the maritime lien& A maritime lien is a,in to a mort%a%e lien in that in spite o the trans er o ownership# the lien is not e-tin%!ishe"& The maritime lien is inseparable rom the $essel an" !ntil "ischar%e"# it ollows the $essel& (ence# the en orcement o a maritime lien is in the nat!re an" character o a procee"in% 7uasi in rem&L81M The e-pression Gaction in rem is# in its narrow application# !se" only with re erence to certain procee"in%s in co!rts o a"miralty wherein the property alone is treate" as responsible or the claim or obli%ation !pon which the procee"in%s are base"&L88M Consi"erin% that '<P s!bse/!ently trans erre" ownership o the $essels to N'C# the Co!rt hol"s the latter liable on the maritime lien& Notwithstan"in% the s!bse/!ent trans er o the $essels to N'C# the maritime lien s!bsists& NEGROS NA0IGATION 0S& CA The ar%!ment o T(I is misplace"& There is no con lict as to which law sho!l" apply to the case at bench& T(I wishes to impress this Co!rt that its claim or repairman>s lien is a maritime lien an"# accor"in%ly# may be en orce" only in a procee"in% in rem& The Co!rt a%rees that P' +1.+ is the %o$ernin% law concernin% its maritime lien or the ser$ices it ren"ere" to NNC& (owe$er# when NNC ile" a petition or corporate rehabilitation an" s!spension o payments# an" the Manila RTC o!n" that the petition was s! icient in orm an" in s!bstance an" appointe" the rehabilitation recei$er# the a"miralty procee"in% was appropriately s!spen"e" in accor"ance with Section 8 o the Interim R!les on Corporate Rehabilitation It is !n"isp!te" that T(I hol"s a pre erre" maritime lien o$er NNC>s assets by $irt!e o T(I>s !npai" ser$ices& The iss!ance o the stay or"er by the rehabilitation co!rt "oes not impair or in any way "iminish T(I>s pre erre" stat!s as a cre"itor o NNC& The en orcement o its claim thro!%h co!rt action was merely s!spen"e" to %i$e way to the spee"y an" e ecti$e rehabilitation o the "istresse" shippin% company& *pon termination o the rehabilitation procee"in%s or in the e$ent o the ban,r!ptcy an"

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conse/!ent "issol!tion o the company# T(I can still en orce its pre erre" claim !pon NNC& PERSONS W(O TA@E PART IN MARITIME COMMERCE S(IPOWNER AN' S(IPAGENTS A shipa%ent is the person entr!ste" with pro$isionin% o the $essel or who represents her in the port in which she happens to be& CAPTAIN OR MASTERS OA 0ESSELS Aor the p!rpose o maritime commerce# the wor"s captain an" masters ha$e the same meanin% both bein% the chie s or comman"er o ships& Q*ALIAICATIONS Art& 865 Captains# masters or patrons o $essels m!st be Ailipinos# ha$e le%al capacity to contract in accor"ance with this co"e# an" pro$e the s,ill# capacity an" /!ali ications necessary to comman" "irect the $essel# as establishe" by marine or na$i%ation laws# or"inances# or re%!lations# an" m!st not be "is/!ali ie" accor"in% to the same or the "ischar%e o the "!ties o the position& I the owner o the $essel "esire to be captain thereo # witho!t ha$in% the le%al /!ali ications there or# he shall limit himsel to the inancial a"ministration o the $essel# an" shall intr!st the na$i%ation to a person possessin% the /!ali ication re/!ire" by sai" or"inances an" re%!lations& ROLE OA CAPTAIN +& .& :& (e is a %eneral a%ent o the shipowner (e is comman"er an" technical "irector o the $essel (e is a representati$e o the co!ntry !n"er whose la% he na$i%ates On comp!lsory pilota%e# the harbor pilot pro$i"in% the ser$ice to a $essel shall be responsible or the "ama%e ca!se" to a $essel or to li e an" property at ports "!e to his ne%li%ence or a!lt& The master shall retain o$erall comman" o the $essel e$en on pilota%e %ro!n"s whereby he can co!nterman" or o$err!le the or"er or comman" o the harbor pilot on boar"& MASTER AN' PILOT *n"er En%lish an" American a!thorities# the pilot s!perse"es the master or the time bein% in the comman" an" na$i%ation o the ship# an" his or"ers m!st be obeye" in all matters connecte" with her na$i%ation& (owe$er# there is o$erwhelmin% a!thority to the e ect that the master "oes not s!rren"er his $essel to the pilot an" the pilot is not the master& The master is still in comman" o the $essel notwithstan"in% the presence o a pilot& There are occasions when the master may an" sho!l" inter ere an" e$en "isplace the pilot as when the pilot is ob$io!sly incompetent or into-icate" an" the circ!mstances may re/!ire the master to "isplace a comp!lsory pilot beca!se o incompetency or physical "isability& I howe$er the master "oes not obser$e that a comp!lsory pilot is incompetent or physically incapacitate"# the master is =!sti ie" in relyin% on the pilot b!t not blin"ly& Er%o# the master is not wholly absol$e" rom his "!ties while a pilot is on boar" his $essel& The master has o$erri"in% a!thority o$er the pilot& S(IPOWNER AN' PILOT In %eneral# a pilot is personally liable or "ama%es ca!se" by his own ne%li%ence or "e a!lt to the owners o the $essel# an" to thir" parties or "ama%es s!staine" in a collision& S!ch ne%li%ence o the pilot in the per ormance o "!ty constit!te maritime tort& E$en tho!%h the pilot is comp!lsory# i his ne%li%ence was not the sole ca!se o the in=!ry b!t the ne%li%ence o the master or crew contrib!te" thereto# the owners are liable& PILOT AN' (IS ASSOCIATION The act that the pilot is a member o an association "oes not ma,e the association =ointly an" se$erally liable& Article .+26 o the Ci$il Co"e "oes not apply beca!se there is no employer7employee relationship& MINIM*M SAAE MANNING It is not eno!%h that the o icers mannin% the merchant $essel ha$e all the /!ali ications impose" by law& It is also re/!ire" that there is s! icient n!mber o o icers an" crew that are ser$in% the $essel& SEC*RIT) OA TEN*RE The Labor Co"e pro$ision applies to o icers an" crew o merchant $essels en%a%e" in "omestic tra"e or coastwise shippin%&

The most important role is the role per orme" by the captain as comman"er o the $essel# it is analo%o!s to bein% a CEO o a present7"ay corporation& 'ISCRETION OA CAPTAIN OR MASTER The applicable principle is that the captain has control o all "epartments o ser$ice in the $essel# an" reasonable "iscretion as to its na$i%ation& The "iscretionary a!thority is reco%ni?e" with respect to his ri%ht to e-ercise his best =!"%ment# with respect to na$i%atin% the $essel he comman"s& PILOTAGE A pilot in maritime law is a person "!ly /!ali ie" an" license" to con"!ct a $essel into or o!t o ports or in certain waters& In this =!ris"iction COMP*LSOR) PILOTAGE is bein% implemente"&

Transpo notes by ace

INTER ORIENT MARITIME ENTERPRISE 0S& NLRC The captain o a $essel is a con i"ential an" mana%erial employee within the meanin% o the abo$e "octrine& A master or captain# or p!rposes o maritime commerce# is one who has comman" o a $essel& A captain commonly per orms three E:F "istinct rolesB E+F he is a %eneral a%ent o the shipowner4 E.F he is also comman"er an" technical "irector o the $essel4 an" E:F he is a representati$e o the co!ntry !n"er whose la% he na$i%ates& +8 O these roles# by ar the most important is the role per orme" by the captain as comman"er o the $essel4 or s!ch role Ewhich# to o!r min"# is analo%o!s to that o DChie E-ec!ti$e O icerD LCEOM o a present7"ay corporate enterpriseF has to "o with the operation an" preser$ation o the $essel "!rin% its $oya%e an" the protection o the passen%ers Ei anyF an" crew an" car%o& In his role as %eneral a%ent o the shipowner# the captain has a!thority to si%n bills o la"in%# carry %oo"s aboar" an" "eal with the rei%ht earne"# a%ree !pon rates an" "eci"e whether to ta,e car%o& The ship captain# as a%ent o the shipowner# has le%al a!thority to enter into contracts with respect to the $essel an" the tra"in% o the $essel# s!b=ect to applicable limitations establishe" by stat!te# contract or instr!ctions an" re%!lations o the shipowner& +3 To the captain is committe" the %o$ernance# care an" mana%ement o the $essel& +2 Clearly# the captain is $este" with both mana%ement an" i"!ciary !nctions& More importantly# a shipGs captain m!st be accor"e" a reasonable meas!re o "iscretionary a!thority to "eci"e what the sa ety o the ship an" o its crew an" car%o speci ically re/!ires on a stip!late" ocean $oya%e& The captain is hel" responsible# an" properly so# or s!ch sa ety& (e is ri%ht there on the $essel# in comman" o it an" Eit m!st be pres!me"F ,nowle"%eable as to the speci ic re/!irements o seaworthiness an" the partic!lar ris,s an" perils o the $oya%e he is to embar, !pon& The applicable principle is that the captain has control o all "epartments o ser$ice in the $essel# an" reasonable "iscretion as to its na$i%ation& .6 It is the ri%ht an" "!ty o the captain# in the e-ercise o so!n" "iscretion an" in %oo" aith# to "o all thin%s with respect to the $essel an" its e/!ipment an" con"!ct o the $oya%e which are reasonably necessary or the protection an" preser$ation o the interests !n"er his char%e# whether those be o the shipowners# charterers# car%o owners or o !n"erwriters& .+ It is a basic principle o a"miralty law that in na$i%atin% a merchantman# the master m!st be le t ree to e-ercise his own best =!"%ment& The re/!irements o sa e na$i%ation compel !s to re=ect any s!%%estion that the =!"%ment an" "iscretion o the captain o a $essel may be con ine" within a strait=ac,et# e$en in this a%e o electronic comm!nications& .. In"ee"# i the ship captain is con$ince"# as a reasonably pr!"ent an" competent mariner actin% in %oo" aith that the shipownerGs or ship a%entGs instr!ctions Einsiste" !pon by ra"io or tele a- rom their o ices tho!san"s o miles awayF will res!lt# in the $ery speci ic circ!mstances acin% him# in imposin% !nacceptable ris,s o loss or serio!s "an%er to ship or crew# he cannot cas!ally see, absol!tion rom his responsibility# i a marine cas!alty occ!rs# in s!ch instr!ctions& MACON'RA) 0S& PRO0I'ENT INS*RANCE Article 128 o the Co"e o Commerce states that a ship a%ent is Dthe person entr!ste" with pro$isionin% or representin% the $essel in the port in which it may be o!n"&D (ence# whether actin% as a%ent o the owner +6 o the $essel or as a%ent o the charterer# ++ petitioner will be consi"ere" as the ship a%ent +. an" may be hel" liable as s!ch# as lon% as the latter is the one that pro$isions or represents the $essel& The trial co!rt o!n" that petitioner Dwas appointe" as local a%ent o the $essel# which "!ty incl!"es arran%ement or the entrance an" clearance o the $essel&D+: A!rther# the CA o!n" an" the e$i"ence shows that petitioner represente" the $essel& The latter prepare" the Notice o Rea"iness# the Statement o Aacts# the Completion Notice# the Sailin% Notice an" C!stomGs Clearance&+9 PetitionerGs employees were present at San%i# Tole"o City# one "ay be ore the arri$al o the $essel# where they staye" !ntil it "eparte"& They were also present "!rin% the act!al "ischar%in% o the car%o& +1 Moreo$er# Mr& "e la Cr!?# the representati$e o petitioner# also prepare" or the nee"s o the $essel# li,e money# pro$ision# water an" !el&+8 As ship a%ent# it may be hel" ci$illy liable in certain instances& The Co"e o Commerce pro$i"esB DArticle 128& The shipowner an" the ship a%ent shall be ci$illy liable or the acts o the captain an" or the obli%ations contracte" by the latter to repair# e/!ip# an" pro$ision the $essel# pro$i"e" the cre"itor pro$es that the amo!nt claime" was in$este" or the bene it o the same&D DArticle 123& The ship a%ent shall also be ci$illy liable or the in"emnities in a$or o thir" persons which may arise rom the con"!ct o the captain in the care o the %oo"s which he loa"e" on the $essel4 b!t he may e-empt himsel there rom by aban"onin% the $essel with all her e/!ipments an" the rei%ht it may ha$e earne" "!rin% the $oya%e&D C(ARTER PARTIES Charter party was essentially "e ine" as a contract whereby an entire ship or some principal part o sai" ship# is let by the owner thereo to a merchant or other person or a speci ie" time or !se or the con$eyance o %oo"s# in consi"eration o the payment o rei%ht& The charter contract is o ten re erre" to as a mercantile lease or it in$ol$es a charterer# who is most o ten a merchant himsel # who "esires to lease a ship or $essel owne" by another or the transport o his or her %oo"s or commercial p!rposes& The charter may also in$ol$e the transportation o one person rom one paort to another& The parties in$ol$e" thereo are the charterer# charter party an" the shipowner& 'IAAERENT @IN'S OA C(ARTER PARTIES

Transpo notes by ace

+& .& <ARE<OAT OR 'EMISE C(ARTER CONTRACT OA AAAREIG(TMENT A& Time charter <& 0oya%e charter <ARE<OAT C(ARTER In a bareboat or "emise charter# the shipowner leases the whole $essel# trans errin% to the latter the entire comman"# possession an" conse/!ent control o$er the $essel>s na$i%ation# incl!"in% the master an" the crew who thereby become the charterer>s ser$ants& Th!s the charterer becomes the wner pro hac $ice o the $essel since he mans the $essel with his own set o master an" crew# e ecti$ely becomin% the owner or the $oya%e or ser$ice stip!late"# s!b=ect howe$er to any liability or "ama%es arisin% rom ne%li%ence& CONTRACT OA AAAREIG(TMENT In a time charter# the $essel is lease" to the charterer or a i-e" perio" o time# whereas in a $oya%e charter# the $essel is lease" or a sin%le or partic!lar $oya%e& EAAECTS OA C(ARTER ON C(ARACTER OA CARRIER Generally the character o common carrier as s!ch is not a ecte" by the charter party i the same is a contract o a rei%htment& PERSONS W(O MA) MA@E C(ARTER The owner o the $essel# either in whole or in part or in ma=ority part# who ha$e le%al control an" possession o the $essel# may $ali"ly enter into charter parties with a charterer& A thir" person calle" a bro,er may howe$er# inter$ene in the e-ec!tion o the charter between the principals& The charterer may himsel s!bcharter the entire $essel to a thir" person b!t only in the e$ent that there is no prohibition in the ori%inal charter re%ar"in% any s!bcharter& The shipa%ent !n"er the Co"e o Commerce is not allowe" to ma,e contracts or a new charter !nless he is properly or "!ly a!thori?e"& On the other han"# it is one o the inherent powers o the captain or master o the $essel to enter into $ali" an" bin"in% charter parties# b!t only in the e$ent o the absence o the ship a%ent or consi%nee& REQ*ISITES AO A 0ALI' C(ARTER PART) +& .& :& Consent o the contractin% parties An e-istin% $essel which sho!l" be place" at the "isposition o the shipper Arei%ht 9& Compliance with the re/!irements o Art& 81. o Co"e o Commerce which re/!ires that a charter party m!st be "rawn in "!plicate# si%ne" by the parties an" by two witness at his the parties re/!est&

AREIG(T The parties themsel$es may i- the manner or orm in which the charter price or money shall be satis ie"& 'EM*RRAGE AN' 'EA'AREIG(T 'em!rra%e means a s!m o money "!e by e-press contract or the "etention o the $essel in loa"in% or !nloa"in% beyon" the time allowe" or that p!rpose in the charter party# in other wor"s i the $essel is "etaine" beyon" the n!mber o "ays a%ree" !pon in the charter contract or the loa"in% an" !nloa"in% o the car%o or or e$ent!al sail# the charterer shall answer or the "em!rra%e inc!rre" thereby# the s!m o which is !s!ally i-e" by the parties in the charter party& EAAECT OA <ILL OA LA'ING I a bill o la"in% was iss!e" by the shipowner to the charterer# the charter party still %o$erns their ri%hts an" the bill o la"in% may be !se" as proo o receipt o the %oo"s& CALTE; 0S& S*LPICIO LINES The charterer has no liability or "ama%es !n"er Philippine Maritime laws& The respecti$e ri%hts an" "!ties o a shipper an" the carrier "epen"s not on whether the carrier is p!blic or pri$ate# b!t on whether the contract o carria%e is a bill o la"in% or e/!i$alent shippin% "oc!ments on the one han"# or a charter party or similar contract on the other& 5 Petitioner an" 0ector entere" into a contract a rei%htment# also ,nown as a $oya%e charter& +6 o

A charter party is a contract by which an entire ship# or some principal part thereo # is let by the owner to another person or a speci ie" time or !se4 a contract o a rei%htment is one by which the owner o a ship or other $essel lets the whole or part o her to a merchant or other person or the con$eyance o %oo"s# on a partic!lar $oya%e# in consi"eration o the payment o rei%ht& ++ A contract o a rei%htment may be either time charter# wherein the lease" $essel is lease" to the charterer or a i-e" perio" o time# or voyage charter# wherein the ship is lease" or a sin%le $oya%e& In both cases# the charter7 party pro$i"es or the hire o the $essel only# either or a "eterminate perio" o time or or a sin%le or consec!ti$e $oya%e# the ship owner to s!pply the shipGs store# pay or the wa%es o the master o the crew# an" "e ray the e-penses or the maintenance o the ship& +. *n"er a demise or bareboat charter on the other han"# the charterer mans the $essel with his own people an"

Transpo notes by ace

becomes# in e ect# the owner or the $oya%e or ser$ice stip!late"# s!b=ect to liability or "ama%es ca!se" by ne%li%ence& I the charter is a contract o a rei%htment# which lea$es the %eneral owner in possession o the ship as owner or the $oya%e# the ri%hts an" the responsibilities o ownership rest on the owner& The charterer is ree rom liability to thir" persons in respect o the ship& In this case# the charter party a%reement "i" not con$ert the common carrier into a pri$ate carrier& The parties entere" into a $oya%e charter# which retains the character o the $essel as a common carrier& In Planters Products# &nc& vs& Court of 'ppeals#
+9

re/!ire" by the Co"e o Commerce# while in simple loan the ormal re/!isites o contract wo!l" apply Ao!rth# the loan on bottomry an" respon"entia m!st be recor"e" in the re%istry o $essels in or"er to bin" thir" persons whereas no s!ch re%istration is re/!ire" in simple loa" Ai th# in the loan o bottomry an" respon"entia# pre erence is e-ten"e" to the last len"er i there be se$eral len"ers# on the theory that were it not or the last len"er# then prior len"ers wo!l" not ha$e bene itte" rom the preser$ation o the sec!rity# whereas in simple lao"# the irst len"er as a %eneral r!le en=oys pre erence& PARTIES TO T(E LOANS

we sai"B

It is there ore imperati$e that a p!blic carrier shall remain as s!ch# notwithstan"in% the charter o the whole portion o a $essel o one or more persons# pro$i"e" the charter is limite" to the ship only# as in the case o a time7charter or the $oya%e charter& It is only when the charter incl!"es both the $essel an" its crew# as in a bareboat or "emise that a common carrier becomes pri$ate# at least inso ar as the partic!lar $oya%e co$erin% the charter7party is concerne"& In"!bitably# a ship7owner in a time or $oya%e charter retains possession an" control o the ship# altho!%h her hol"s may# or the moment# be the property o the charterer

The shipowner may sec!re a loan on bottomry !pon his ship& The car%o owner shall ha$e the ri%ht to enter into a loan on respon"entia& AORM OA T(E LOANS *n"er the Co"e o Commerce# it m!st be4 +& .& :& <y means o a p!blic instr!ment <y means o a policy si%ne" by the contractin% parties an" the bro,er ta,in% part therein <y means o a pri$ate instr!ment

LOANS ON <OTTOMR) AN' RESPON'ENTIA <OTTOMR) in maritime law is a contract whereby the owner o a ship borrows or the !se# e/!ipment or repair o the $essel# or a "e inite term# an" ple"%es the ship as the sec!rity with the stip!lation that i the ship is lost "!rin% the $oya%e or "!rin% the limite" time on acco!nt o the perils en!merate"# the len"er shall lose his money& RESPON'ENTIA is where the %oo"s or some part thereo # are hypothecate" as sec!rity or a loa"# the repayment o which is "epen"ent !pon maritime ris,s# what ens!es is a loan on respon"entia& There m!st be a marine ris, !pon which the loan is pre"icate" s!ch that i the $essel is lost by $irt!e o that ris,# the len"er loses the capital or money lent& 'ISTING*IS(E' AROM SIMPLE LOAN Airst# in bottomry or respon"entia# the rate o interest is not s!b=ect to the *s!ry Law# whereas in simple loan it is s!b=ect to s!ch law& Secon"# in bottomry or respon"entia# there m!st necessarily be a marine ris,# the e-istence o which m!st be "!ly establishe" whereas in simple loan# there nee" not be s!ch ris,s in$ol$e" Thir"# the loan on bottomry an" respon"entia m!st be e-ec!te" in accor"ance with the orm an" manner

*pon which o these orms the contract is e-ec!te"# it shall be entere" in the certi icate o re%istry o the $essel an" shall be recor"e" in the re%istry o $essels& Contracts which are not re"!ce" into writin% shall not %i$e rise to =!"icial action& CONSEQ*ENCES OA LOSS OA EAAECTS OA T(E LOANS I the e ects o the loans be lost "!e to an acci"ent o the sea "!rin% the time an" on the occasion o the $oya%e which has been "esi%nate" in the contract an" it is pro$en that the car%o was on boar"# then the len"er loses the ri%ht to instit!te the action which wo!l" pertain to him as s!ch& A0ERAGES A$era%es may be %eneral a$era%es or simple a$era%es SIMPE A0ERAGES Simple a$era%es shall incl!"e all the e-penses an" "ama%es ca!se" to the $essel or to her car%o which ha$e not in!re" to the common bene it an" pro it o all the person intereste" in the $essel an" her car%o& <) W(OM <ORNE Since simple or partic!lar a$era%e "o not in!re to the common bene it# the owner o the %oo"s that s! ere" the "ama%e bears the loss& Res perit "omio principles applies

Transpo notes by ace

GENERAL A0ERAGES A %eneral a$era%e shall incl!"e all the "ama%es an" e-penses which are "eliberately ca!se" in or"er to sa$e the $essel# its car%o or both at the same time# rom real an" ,nown ris,& REQ*ISITES AOR A GENERAL A0ERAGE +& .& :& There m!st be a common "an%er That or the common sa ety# part o the $essel or o the car%o or both is sacri ice" "eliberately That rom the e-penses or "ama%es ca!se" by the ollows the s!ccess !l sa$in% o the $essel an" car%o That the e-penses or "ama%es sho!l" ha$e been inc!rre" or in licte" a ter ta,in% proper le%al steps an" a!thority The Co"e o Commerce e-pressly pro$i"es that %eneral a$era%es shall be borne by those who bene itte" rom the sacri ice& These incl!"e the shipowner an" the owners o the car%oes that were sa$e"& INS*RERS Art& 215 o the Co"e o the $essel o the obli%e" to pay or a$era%e# inso ar as ob=ects respecti$ely& o Commerce pro$i"es that ins!rers rei%hta%e an" o the car%o shall be the in"emni ication o the %ross it is re/!ire" o each one o the

LEN'ERS OA <OTTOMR) AN' RESPON'ENTIA Art& 3:. o the same co"e pro$i"es that len"ers on bottomry an" respon"entia shall s! er in proportion to their respecti$e interest# the %eneral a$era%e which may ta,e place in the %oo"s on which the loan is ma"e& W(O IS ENTITLE' TO IN'EMNIT) The owner o the %oo"s which were sacri ice" is entitle" to recei$e the %eneral a$era%e contrib!tion& (owe$er# there are %oo"s i sacri ice" are not co$ere"# to wit4 +& .& :& Goo"s carrie" on "ec, !nless the r!le# special law or c!stoms o the place allow the same Goo"s that are not recor"e" in the boo,s or recor" o the $essel A!el or $essel i there is more than s! icient !el or the $oya%e

9&

COMMON 'ANGER There can be no %eneral a$era%e i there is no common "an%er at all to the ship or the car%o& There is no common "an%er i the meas!re was !n"erta,en a%ainst a "istant peril& There m!st be imme"iate peril an" not "istant& 'ELI<ERATE SACRIAICE Normally# the sacri ice is ma"e thro!%h the =ettison o the car%o o the ship is thrown o$erboar" "!rin% the $oya%e& There are also instances where there is %eneral a$era%e e$en i the sacri ice was not ma"e "!rin% the $oya%e s!ch asB +& Where the sin,in% o the $essel is necessary to e-tin%!ish a ire in a port an" .& Where car%o is trans erre" to li%hten the ship on acco!nt o a storm to acilitate entry into the port& SACRIAICE M*ST <E S*CCESA*L No %eneral contrib!tion can be "eman"e" i the $essel an" other car%o that are so!%ht to be sa$e" were in act not sa$e"& COMPLIANCE WIT( LEGAL STEPS There m!st be a resol!tion o the captain a"opte" a ter "eliberation with the sailin% mate an" other o icers o the $essel# an" a ter hearin% the person intereste" in the car%o who may be present& The min!tes o the resol!tion shall be state" in "etail all the %oo"s =ettisone"# an" mention sho!l" be ma"e o the in=!ry ca!se" to those ,ept on boar"& The captain shall be obli%e" to "eli$er one copy o these min!tes to the maritime =!"icial a!thority o the irst port he may ma,e# within .9 ho!rs a ter his arri$al# an" to rati y it imme"iately !n"er oath& <) W(OM <ORNE

AMERICAN (OME ASS*RANCE COMPAN) 0S& CA Art& 292 o the Co"e o commerce rea"s that Rclaims or a$era%es shall not be a"mitte" i they "o not e-cee" 1S o the interest which the claimant may ha$e in the $essel or car%o i it is %ross a$era%e# an" +S o the %oo"s "ama%e" i partic!lar a$era%es# "e"!ctin% in both cases the e-penses o appraisal# !nless there is an a%reement to the contrary& COLLISIONS 'EAINITION Collision is consi"ere" as an impact or s!""en contact o a mo$in% bo"y with an obstr!ction in its line o motion whether both bo"ies are in motion or one stationary an" the other no matter which# in motion& ERROR IN E;TREMIS In the irst ?one no r!les apply& In the secon" ?one the b!r"en is on the $essel re/!ire" to ,eep away an" a$oi" the "an%er& The thir" ?one co$ers the perio" in which error in e-tremis an" the r!le is that the $essel which has orce" the pri$ile%e" $essel into "an%er is responsible

Transpo notes by ace

e$en i the pri$ile%e" $essel has committe" an error within that ?one& APPLICA<LE LAW Ci$il Co"e on /!asi7"elicts& Co"e o Commerce or liabilities o shipa%ents as well as captain an" crew& R*LES ON LIA<ILIT) In some respect# howe$er# the r!les that apply to /!asi7 "elict cannot be applie" in collision cases& Aor e-ample# the $iew is that the "octrine o last clear chance an" the r!le on contrib!tory ne%li%ence cannot be applie" in collision cases& SPECIAIC R*LES *N'ER T(E CO'E OA COMMERCE ONE 0ESSEL AT AA*LT Art& 2.8& I a $essel sho!l" colli"e with another # thro!%h or the a!lt# ne%li%ence# or lac, o s,ill o the captain# sailin% mate# or any other member o the complement# the owner o the $essel at a!lt shall in"emni y the losses an" "ama%es s! ere"# a ter an e-pert appraisal& <OT( 0ESSELS AT AA*LT Art& 2.3 I the collision is imp!table to both $essels# each one shall s! er its own "ama%e# an" both shall be soli"arily responsible or the losses an" "ama%es occasione" to their car%oes& 'OCTRINE OA INSCR*TA<LE AA*LT4 PART) AT AA*LT CANNOT <E 'ETERMINE' Art& 2.2 The pro$isions o the prece"in% article are applicable to the !se in it cannot be "etermine" which o the two $essels ca!se" the collision& PROTEST Art& 2:1 The action or the reco$ery o losses an" "ama%es arisin% rom collisions cannot be a"mitte" i a protest or "eclaration is not presente" within .9 ho!rs be ore the competent a!thority o the point where the collision too, place# or that o the irst port o arri$al o the $essel# i in the Philippine territory# an" to the cons!l o the Rep!blic o the Philippines i it occ!rre" in a orei%n co!ntry& LIMITE' LIA<ILIT) R*LE Art& 2:3 The ci$il liability inc!rre" by the shipowners in the cases prescribe" in this section shall be !n"erstoo" as limite" to the $al!e o the $essel with all her app!rtenances an" rei%ht earne" "!rin% the $oya%e& N'C 0S& CA A%entN na$iero also liable altho!%h not e-pressly pro$i"e" in Art& 2.8& LOPEO 0S& '*R*ELO e& b& c& shipowners an" The pro$ision o the Co"e o Commerce on collision sho!l" not hel" to incl!"e minor cra t en%a%e" only in ri$er an" bay tra ic# s!ch $essel m!st be %o$erne" by the ci$il co"e or other pro$isions o law& (ence# protest is not re/!ire" in this case& ARRI0AL *N'ER STRESS Arri$al !n"er stress is the arri$al o a $essel at the nearest an" most con$enient port which wsa "eci"e" !pon a ter "eterminin% that there is well7 o!n"e" ear o sei?!re# pri$ateers# or pirates or reason o any acci"ent o the sea "isablin% it to na$i%ate& STEPS a& Captains sho!l" "etermine "!rin% the $oya%e i there is well o!n"e" ear o sei?!re The captain shall then assemble the o icers The captain shall s!mmon the persons intereste" in the car%o who may be present an" who may atten" witho!t the ri%ht to $ote The o icers shall "etermine an" a%ree i there is a well7 o!n"e" ear& Captain shall ha$e "eci"in% $ote The a%reement shall be "ra te" an" the proper min!tes shall be si%ne" an" entere" in the lo% boo, Ob=ections an" protest shall li,ewise be entere"

"&

&

S(IPWREC@ Shipwrec, has been "e ine" as the "emolition or shatterin% o a $essel ca!se" by her "ri$in% ashore or on roc,s an" shoals in the mi"seas or by the $iolence o win"s or wa$es in tempest& CO'E OA COMMERCE PRO0ISION Art& 296 The losses an" "eteriorations s! ere" by the $essel an" her car%o by reason o shipwrec, or stran"in% shall be in"i$i"!ally or the acco!nt o the owners# the part which may be sa$e" belon%in% to them in the same proportion& Art& 29+ I the wrec, is ca!se" by the malice# ne%li%ence o lac, o s,ill o the captain or lac, or repair or !nseaworthiness o the $essel# the ship a%ent or the shipper may "eman" in"emnity o the captain or "ama%es ca!se" to the $essel& SAL0AGE P' 256 It is ille%al or one to en%a%e in the b!siness o sal$a%e i s!ch is not license to "o so& SAL0AGE

Transpo notes by ace

Sal$a%e is a ser$ice which one person ren"ers to the owner o a ship or %oo"s# by his own labor# preser$in% the %oo"s or the ship which the owner or those entr!ste" with the care o them ha$e either aban"one" in "istress at sea or are !nable to protect an" sec!re @IN'S OA SAL0AGE SER0ICES +& .& :& 0ol!ntary# wherein the "epen"ent !pon s!ccess compensation is possession which can be maintaine" a%ainst the tr!e owner& E;CEPTIONB <!t when the owner or the master an" crew who represent him# lea$e a $essel temporarily# witho!t any intention o inal aban"onment b!t with the intent to ret!rn an" res!me the possession# she is not consi"ere" as a le%al "erelict& Q*ASI7'ERELICT Prima acie $essel o!n" at sea in a sit!ation o peril with no one aboar" her is a "erelict# b!t where the master an" crew lea$e s!ch $essel temporarily witho!t any intention o inal aban"onment# or the p!rpose o obtainin% assistance# she is not technically a "erelict& <ASIS AOR ENTITLEMENT TO SAL0AGE REWAR' Principal circ!mstance to be ta,en in consi"eration +& .& :& The labor e-pen"e" by the sal$ors in ren"erin% the sal$a%e ser$ice The promptit!"e# s,ill an" ener%y "isplaye" in ren"erin% the ser$ice an" sa$in% the property The $al!e o the property employe" by the sal$ors in ren"erin% the ser$ice# an" "an%er to which s!ch property was e-pose" The ris, inc!rre" by the sal$ors in resc!in% the property rom the impen"in% peril The $al!e o the property sal$e" The "e%ree o resc!e" "an%er which the property was

Ren"ere" !n"er a contract or a pier "iem or per horam wa%e payable at all e$ents *n"er a contract or a compensations payable only in cases o s!ccess

CLAIM AOR 0ALI' SAL0AGE AN' ITS ELEMENTS Sal$a%eD has been "e ine" as Dthe compensation allowe" to persons by whose assistance a ship or her car%o has been sa$e"# in whole or in part# rom impen"in% peril on the sea# or in reco$erin% s!ch property rom act!al loss# as in case o shipwrec,# "erelict# or recapt!re&D E<lac,wall $& Sa!celito T!% Company# +6 Wall& +# +.# cite" in Erlan%er K Galin%er $& Swe"ish East Asiatic Co&# Lt"&# :9 Phil& +32&F In the 8rlanger ( Galinger case# it was hel" that three elements are necessary to a $ali" sal$a%e claim# namely# E+F a marine peril# E.F ser$ice $ol!ntarily ren"ere" when not re/!ire" as an e-istin% "!ty or rom a special contract# an" E:F s!ccess in whole or in part# or that the ser$ice ren"ere" contrib!te" to s!ch s!ccess E9F the $essel is shipwrec,e" beyon" the control o the crew or shall ha$e been aban"one" A<AN'ONMENT A "erelict is a ship or her car%o which is aban"one" an" "eserte" at sea by those who were in char%e o it# witho!t any hope o reco$erin% it or witho!t any intention o ret!rnin% it& whether the property is a"=!"%e" "erelict is "etermine" by ascertainin% what was the intention an" e-pectation o those in char%e o it when they /!itte" it& i those in char%e le t with the intention o ret!rnin% or o proc!rin% assistance# the property is not "erelict b!t i they /!itte" the property with the intention o inally lea$in% it# it is "erelict an" a chan%e o their intention an" an attempt to ret!rn will not chan%e its nat!re& Ne$ertheless# i it is clear that the intention to ret!rn is sli%ht# the sal$a%e which was "one thera ter is consi"ere" $ali"& GENERAL R*LEB When a $essel is o!n" at sea# "eserte"# an" has been aban"one" by the master an" crew witho!t the intention o ret!rnin% an" res!min% the possession# she is# in the sense o the law a "erelict# an" the in"er who ta,es the possession with the intention o sa$in% her %ains a ri%ht o

9& 1& 8&

RIG(TS AN' O<LIGATION OA SAL0ORS AN' OWNERS Sal$or is entitle" to compensation& (e has !n"er the sal$a%e law a lien !pon the property sal$a%e"& On the other han"# the owner "oes not "eno!nce his ri%ht to the property& There is no ipres!mption o an intention to aban"on s!ch property ri%hts&

Section +& When in case o shipwrec,# the $essel or its car%o shall be beyon" the control o the crew# or shall ha$e been aban"one" by them# an" pic,e" !p an" con$eye" to a sa e place by other persons# the latter shall be entitle" to a rewar" or the sal$a%e& Those who# not bein% incl!"e" in the abo$e para%raph# assist in sa$in% a $essel or its car%o rom shipwrec,# shall be entitle" to a li,e rewar"& Sec& .& I the captain o the $essel# or the person actin% in his stea"# is present# no one shall ta,e rom the sea# or rom the shores or coast merchan"ise or e ects

Transpo notes by ace

procee"in% rom a shipwrec, or procee" to the sal$a%e o the $essel# witho!t the consent o s!ch captain or person actin% in his stea"& Sec& :& (e who shall sa$e or pic, !p a $essel or merchan"ise at sea# in the absence o the captain o the $essel# owner# or a representati$e o either o them# they bein% !n,nown# shall con$ey an" "eli$er s!ch $essel or merchan"ise# as soon as possible# to the Collector o C!stoms# i the port has a collector# an" otherwise to the pro$incial treas!rer or m!nicipal mayor& Sec& 9& A ter the sal$a%e is accomplishe"# the owner or his representati$e shall ha$e a ri%ht to the "eli$ery o the $essel or thin%s sa$e"# pro$i"e" that he pays# or %i$es a bon" to sec!re# the e-penses an" the proper rewar"& The amo!nt an" s! iciency o the bon"# in the absence o a%reement# shall be "etermine" by the Collector o C!stoms or by the C!"%e o the Co!rt o Airst Instance o the pro$ince in which the thin%s sa$e" may be o!n"& & Sec& 8& I # while the $essel or thin%s sa$e" are at the "isposition o the a!thorities# the owner or his representati$e shall claim them# s!ch a!thorities shall or"er their "eli$ery to s!ch owner or his representati$e# pro$i"e" that there is no contro$ersy o$er their $al!e# an" a bon" is %i$en by the owner or his representati$e to sec!re the payment o the e-penses an" the proper rewar"& Otherwise# the "eli$ery shall nor be ma"e !ntil the matter is "eci"e" by the Co!rt o Airst Instance o the pro$ince& Sec& 3& No claim bein% presente" in the three months s!bse/!ent to the p!blication o the a"$ertisement prescribe" in s!b7section EcF o Section i$e# the thin%s sa$e shall be sol" at p!blic a!ction# an" their procee"s# a ter "e"!ctin% the e-penses an" the proper rewar" shall be "eposite" in the ins!lar treas!ry& I three years shall pass witho!t anyone claimin% it# one7hal o the "eposit shall be a"=!"%e" to him who sa$e" the thin%s# an" the other hal to the ins!lar %o$ernment& Sec& 2& The ollowin% shall ha$e no ri%ht to a rewar" or sal$a%e or assistanceB a& The crew o the $essel shipwrec,e" or which was is "an%er o shipwrec,4 b& (e who shall ha$e commence" the sal$a%e in spite o opposition o the captain or his representati$e4 an" c& (e who shall ha$e aile" to comply with the pro$isions o Section three& Sec& 5& I # "!rin% the "an%er# an a%reement is entere" into concernin% the amo!nt o the rewar" or sal$a%e or assistance# its $ali"ity may be imp!%ne" beca!se it is e-cessi$e# an" it may be re/!ire" to be re"!ce" to an amo!nt proportionate to the circ!mstances& Sec& +6& In a case comin% !n"er the last prece"in% section# as well as in the absence o an a%reement# the rewar" or sal$a%e or assistance shall be i-e" by the Co!rt o Airst Instance o the pro$ince where the thin%s sal$a%e" are o!n"# ta,in% into acco!nt principally the e-pen"it!res ma"e to reco$er or sa$e the $essel or the car%o or both# the ?eal "emonstrate"# the time employe"# the ser$ices ren"ere"# the e-cessi$e e-press occasione" the n!mber o persons who ai"e"# the "an%er to which they an" their $essels were e-pose" as well as that which menace" the thin%s reco$ere" or sal$a%e"# an" the $al!e o s!ch thin%s a ter "e"!ctin% the e-penses& Sec& ++& Arom the procee"s o the sale o the thin%s sa$e" shall be "e"!cte"# irst# the e-penses o their c!sto"y# conser$ation# a"$ertisement# an" a!ction# as well as whate$er ta-es or "!ties they sho!l" pay or their entrance4 then there shall be "e"!cte" the e-penses o sal$a%e4 an" rom the net amo!nt remainin% shall be ta,en the rewar" or the sal$a%e or assistance which shall not e-cee" i ty per cent o s!ch amo!nt remainin%& Sec& +.& I in the sal$a%e or in the ren"erin% o assistance "i erent persons shall ha$e inter$ene" the rewar" shall be "i$i"e" between them in proportion to the ser$ices which each one may ha$e ren"ere"# an"# in case o "o!bt# in e/!al parts& Those who# in or"er to sa$e persons# shall ha$e been e-pose" to the same "an%ers shall also ha$e a ri%ht to participation in the rewar"& Sec& +:& I a $essel or its car%o shall ha$e been assiste" or sa$e"# entirely or partially# by another $essel# the rewar" or sal$a%e or or assistance shall be "i$i"e" between the owner# the captain# an" the remain"er o the crew o the latter $essel# so as to %i$e the owner a hal # the captain a o!rth# an" all the remain"er o the crew the other o!rth o the rewar"# in proportion to their respecti$e salaries# in the absence o an a%reement to the contrary& The e-press o sal$a%e# as well as the rewar" or sal$a%e or assistance# shall be a char%e on the thin%s sal$a%e" on their $al!e&

G& *RR*TIA 0S& PASIG STREAMER The towa%e o a $essel in perilto some place o sec!rity# when the $essel by itsel is !nable to reach the same is a ser$ice o sal$a%e& C&G RO<INSON 0S& T(E S(IP ALTA Sal$or is bo!n" by the contract e$en i e-penses were lar%er than rem!neration stip!late" i contract is ree rom ra!"# misrepresentation# etc& <ARRIOS 0S& GO T(ONG SECTION +& When in case o shipwrec,# the $essel or its car%o shall be beyon" the control o the crew# or shall ha$e been aban"one" by them# an" pic,e" !p an" con$eye" to a sa e place by other persons# the latter shall be entitle" to a rewar" or the sal$a%e&

Transpo notes by ace

Those who# not bein% incl!"e" in the abo$e para%raph# assist in sa$in% a $essel or its car%o rom shipwrec,# shall be entitle" to a li,e rewar"& Accor"in% to this pro$ision# those who assist in sa$in% a $essel or its car%o rom shipwrec,# shall be entitle" to a rewar" Esal$a%eF& DSal$a%eD has been "e ine" as Dthe compensation allowe" to persons by whose assistance a ship or her car%o has been sa$e"# in whole or in part# rom impen"in% peril on the sea# or in reco$erin% s!ch property rom act!al loss# as in case o shipwrec,# "erelict# or recapt!re&D E<lac,wall $& Sa!celito T!% Company# +6 Wall& +# +.# cite" in Erlan%er K Galin%er $& Swe"ish East Asiatic Co&# Lt"&# :9 Phil& +32&F In the 8rlanger ( Galinger case# it was hel" that three elements are necessary to a $ali" sal$a%e claim# namely# E+F a marine peril# E.F ser$ice $ol!ntarily ren"ere" when not re/!ire" as an e-istin% "!ty or rom a special contract# an" E:F s!ccess in whole or in part# or that the ser$ice ren"ere" contrib!te" to s!ch s!ccess&+ Was there a marine peril# in the instant case# to =!sti y a $ali" sal$a%e claim by plainti a%ainst "e en"antI Li,e the trial co!rt# we "o not thin, there was& It appears that altho!%h the "e en"antGs $essel in /!estion was# on the ni%ht o May +# +512# in a helpless con"ition "!e to en%ine ail!re# it "i" not "ri t too ar rom the place where it was& As o!n" by the co!rt a 7uo the weather was air# clear# an" %oo"& The wa$es were small an" too sli%ht# so m!ch so# that there were only ripples on the sea# which was /!ite smooth& '!rin% the towin% o the $essel on the same ni%ht# there was moonli%ht& Altho!%h sai" $essel was "ri tin% towar"s the open sea# there was no "an%er o it lo!n"erin% or bein% stran"e"# as it was ar rom any islan" or roc,s& In case o "an%er o stran"in%# its anchor co!l" release"# to pre$ent s!ch occ!rrence& There was no "an%er that "e en"antGs $essel wo!l" sin,# in $iew o the smoothness o the sea an" the airness o the weather& That there was absence o "an%er is shown by the act that sai" $essel or its crew "i" not e$en in" it necessary to lower its la!nch an" two motor boats# in or"er to e$ac!ate its passen%ers aboar"& Neither "i" they in" occasion to =ettison the $esselGs car%o as a sa ety meas!re& Neither the passen%ers nor the car%o were in "an%er o perishin%& All that the $esselGs crew members co!l" not "o was to mo$e the $essel on its own power& That "i" not ma,e the $essel a /!asi7"erelict# consi"erin% that e$en be ore the appellant e-ten"e" the help to the "istresse" ship# a sister $essel was ,nown to be on its way to s!ccor it& I plainti Gs ser$ice to "e en"ant "oes not constit!te Dsal$a%eD within the p!r$iew o the Sal$a%e Law# can it be consi"ere" as a /!asi7contract o Dtowa%eD create" in the spirit o the new Ci$il Co"eI The answer seems to incline in the a irmati$e# or in consentin% to plainti Gs o er to tow the $essel# "e en"ant Ethro!%h the captain o its $essel M0 'on Al re"oF thereby implie"ly entere" into a =!ri"ical relation o Dtowa%eD with the owner o the $essel M0 (enry I# captaine" by plainti # the William Lines# Incorporate"& It o ten becomes material too# or co!rts to "raw a "istinct line between salvage an" towage# or the reason that a rewar" o!%ht sometimes to be %i$en to the crew o the sal$a%e $essel an" to other participants in sal$a%e ser$ices4 an" s!ch rewar" sho!l" not be %i$en i the ser$ices were hel" to be merely towa%e& EThe Rebecca Shepher"# +92 A& 3:+&F The master an" members o the crew o a t!% were not entitle" to participate in payment by liberty ship or ser$ices ren"ere" by t!% which were towage ser$ices an" not salvage ser$ices& ESa!se# et al& $& *nite" States# et al&# supra&F DThe "istinction between salvage an" towage is o importance to the crew o the sal$a%in% ship# or the ollowin% reasonsB I the contract or towa%e is in act towa%e# then the crew "oes not ha$e any interest or ri%hts in the rem!neration p!rs!ant to the contract& <!t i the owners o the respecti$e $essels are o a sal$a%e nat!re# the crew o the sal$a%in% ship is entitle" to sal$a%e# an" can loo, to the sal$a%e" $essel or its share& EI Norris# The Law o Seamen# Sec& ...&F COGSA The New Ci$il Co"e is the primary law on %oo"s that are bein% transporte" rom a orei%n port to the Philippines& Ne$ertheless# COGSA remaisn to be a s!ppletorily law or s!ch type o transportation7 international shippin%& SEC : PAR& 8 *nless notice or loss or "ama%e an" the %eneral nat!re o s!ch loss or "ama%e by %i$en in writin% to the carrier or his a%ent at the port o "ischar%e or at the time o the remo$al o the %oo"s into the c!sto"y o the person entitle" to "eli$ery thereo !n"er the contract o carria%e# s!ch remo$al shall be prima acie e$i"ence o the "eli$ery by the carrier o the %oo"s as "escribe" in the bill o la"in%& I the loss or "ama%e is not apparent# the notice m!st be %i$en within : "ays o the "eli$ery& Sai" notice o loss or "ama%e may be en"orse" !pon the receipt o the %oo"s %i$en by the person ta,in% "eli$ery thereo & The notice in writin% nee" not be %i$en i the state o the %oo"s has at the time o their receipt been the s!b=ect o =oint s!r$ey or inspection& In any e$ent the carrier an" the ship shall be "ischar%e" rom all liability in respect o loss or "ama%e !nless s!it is bro!%ht within + year a ter "eli$ery o the %oo"s or the "ate when the %oo"s sho!l" ha$e been "eli$ere"B Pro$i"e"# that i a notice o loss or "ama%e either apparent or conceale"# is not %i$en as pro$i"e" or in this section# that act shall not a ect or pre=!"ice the ri%ht o the shipper to brin% s!it within + year a ter "eli$ery o the %oo"s or the "ate the %oo"s sho!l" ha$e been "eli$ere"& In case o any act!al or apprehen"e" loss or "ama%e# the carrier an" the recei$er shall %i$e all reasonable acilities to each other or inspectin% an" tallyin% the %oo"s&

Transpo notes by ace

ANG 0S& AMERICAN STEAMS(IP AGENCIES "e ine" in the Ci$il Co"e an" as applie" to Section : E8F para%raph 9 o the Carria%e o Goo"s by Sea Act# DlossD contemplates merely a sit!ation where no "eli$ery at all was ma"e by the shipper o the %oo"s beca!se the same ha" perishe"# %one o!t o commerce# or "isappeare" that their e-istence is !n,nown or they cannot be reco$ere"& It "oes not incl!"e a sit!ation where there was in"ee" "eli$ery T b!t "eli$ery to the wron% person# or a mis"eli$ery# as alle%e" in the complaint in this case& The "istinction between non7"eli$ery an" mis"eli$ery has re erence to bills o la"in%& As this Co!rt shall in an Pho vs. 9assamal :alamal# 83 Phil& 111# 1137112B Consi"erin% that the bill o la"in% co$erin% the %oo"s in /!estion has been ma"e to or"er# which means that sai" %oo"s cannot be "eli$ere" witho!t pre$io!s payment o the $al!e thereo # it is e$i"ent that# the sai" %oo"s ha$in% been "eli$ere" to Al"e%!er witho!t payin% the price o the same# these facts constitute misdelivery and not nondelivery$ because their was in fact delivery of merchandise& We "o not belie$e it can be serio!sly an" reasonably ar%!e" that what too, place# as conten"e" o by the petitioner# is a case o mis"eli$ery with respect to Al"e%!er an" at the same time non"eli$ery with respect to the PN< who ha" the bill o la"in%# beca!se the only thin% to consi"er in this /!estion is whether Enri/!e Al"e%!er was entitle" to %et the merchan"ise or whether# on the contrary# the PN< is the one entitle" thereto& *n"er the acts# the "e en"ant petitioner sho!l" not ha$e "eli$ere" the %oo"s to Al"e%!er b!t to the Philippine National <an,& (a$in% ma"e the "eli$ery to Al"e%!er# the "eli$ery is a case o mis"eli$ery& &f the goods have been delivered$ it cannot at the same time be said that they have not been delivered& Accor"in% to the bill o la"in% which was iss!e" in the case at bar to the or"er o the shipper# the carrier was !n"er a "!ty not to "eli$er the merchan"ise mentione" in the bill o la"in% e-cept !pon presentation o the bill o la"in% "!ly en"orse" by the shipper& E+6 C&C&# .15F 9ence$ the defendant;petitioner an Pho having delivered the goods to 8nri7ue 'ldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper$ the said defendant made a misdelivery an" $iolate" the bill o la"in%# beca!se his "!ty was not only to transport the %oo"s entr!ste" to him sa ely# b!t to "eli$er them to the person in"icate" in the bill o la"in%& EEmphasis s!pplie"F The point that matters here is that the sit!ation is either "eli$ery or mis"eli$ery# b!t not non"eli$ery& Th!s# the %oo"s were either ri%htly "eli$ere" or mis"eli$ere"# b!t they were not lost& There bein% no loss or "ama%e to the %oo"s# the a ore/!ote" pro$ision o the Carria%e o Goo" by Sea Act statin% that DIn any e$ent# the carrier an" the ship shall be "ischar%e" rom all liability in respect o loss or "ama%e !nless s!it is bro!%ht within one year a ter "eli$ery o the %oo"s or the "ate when the %oo"s sho!l" ha$e been "eli$ere"#D "oes not apply& The reason is not "i ic!lt to see& Sai" one7year perio" o limitation is "esi%ne" to meet the e-i%encies o maritime ha?ar"s& In a case where the %oo"s shippe" were neither last nor "ama%e" in transit b!t were# on the contrary# "eli$ere" in port to someone who claime" to be entitle" thereto# the sit!ation is "i erent# an" the special nee" or the short perio" o limitation in cases o loss or "ama%e ca!se" by maritime perils "oes not obtain& It ollows that or s!its pre"icate" not !pon loss or "ama%e b!t on alle%e" mis"eli$ery Eor con$ersionF o the %oo"s# the applicable r!le on prescription is that o!n" in the Ci$il Co"e# namely# either ten years or breach o a written contract or o!r years or /!asi7"elict& EArts& ++99L+M# ++98# Ci$il Co"eF In either case# plainti Gs ca!se o action has not $et prescribe"# since his ri%ht o action wo!l" ha$e accr!e" at the earliest on May 5# +58+ when the ship arri$e" in Manila an" he ile" s!it on October :6# +58:& AMERICAN INS*RANCE 0S& COMPANIA MARITIMA The transshipment o the car%o rom Manila to Ceb! was not a separate transaction rom that ori%inally entere" into by Macon"ray# as %eneral a%ent or the DMNS TOREA'ORD& It was part o Macon"rayGs obli%ation !n"er the contract o carria%e an" the act that the transshipment was ma"e $ia an inter7islan" $essel "i" not operate to remo$e the transaction rom the operation o the Carria%e o Goo"s by Sea Act& *NION CAR<I'E P(ILS& 0S& MANILA RAILROA' The sensible an" practical interpretation is that "eli$ery within the meanin% o section :E8F o the Carria%e o Goo"s by Sea Law means delivery to the arrastre operator. That "eli$ery is e$i"ence" by tally sheets which show whether the %oo"s were lan"e" in %oo" or"er or in ba" or"er# a act which the consi%nee or shipper can easily ascertain thro!%h the c!stoms bro,er& To !se as basis or comp!tin% the one7year perio" the "eli$ery to the consi%nee wo!l" be !nrealistic an" mi%ht %enerate con !sion between the loss or "ama%e s!staine" by the %oo"s while in the carrierGs c!sto"y an" the loss or "ama%e ca!se" to the %oo"s while in the arrastre operatorGs possession& EASTERN AN' AMERICAN A*STRALIAN STEAMS(IP 0S& GREAT

A stip!lation in a contract o carria%e that the carrier will not be liable beyon" a speci ie" amo!nt !nless the shipper "eclares the %oo"s to ha$e a %reater $al!e is %enerally "eeme" to be $ali" an" will operate to limit the carrierGs liability# e$en i the loss or "ama%e res!lts rom the carrierGs ne%li%ence& P!rs!ant to s!ch pro$ision# where the shipper is silent as to the $al!e o his %oo"s# the carrierGs liability or loss or "ama%e thereto is limite" to the amo!nt speci ie" in the contract o carria%e an"

Transpo notes by ace

where the shipper states the $al!e o his %oo"s# the carrierGs liability or loss or "ama%e thereto is limite" to that amo!nt& *n"er a stip!lation s!ch as this# it is the "!ty o the shipper to "isclose# rather than the carrierGs to "eman" the tr!e $al!e o the %oo"s an" silence on the part o the shipper will be s! icient to limit reco$ery in case o loss to the amo!nt state" in the contract o carria%e& There is no inconsistency between Section 9 E1F o the Carria%e o Goo"s by Sea Act an" Cla!se +3 o the <ill o La"in%& The irst part o the pro$ision o Section 9 E1F o the Carria%e o Goo"s by Sea Act limits the melee# amo!nt that may be reco$ere" by the shipper in the absence o an a%reement as to the nat!re an" $al!e o %oo"s shippe"& Sai" pro$ision "oes not prescribe the minim!m an" hence# it co!l" be any amo!nt which is below P166&66& Cla!se +3 o the /!estione" <ill o La"in% also pro$i"es the melee# or which the carrier is liable& It prescribes that the carrier may only be hel" liable or an amo!nt not more than L+66 Sterlin% which is below the melee# limit re/!ire" in the Carria%e o Goo"s by Sea Act&$irt!al The secon" para%raph o Section 9 E1F o the Carria%e o Goo"s by Sea Act prescribin% the melee# amo!nt shall not be less than P166&66 re ers to a sit!ation where there is an a%reement other than set orth in the <ill o La"in% pro$i"in% or a melee# hi%her than P166&66 per pac,a%e& In the case at bar# it is apparent that there ha" been no a%reement between the parties# an" hence# Cla!se +3 o the <ill o La"in% shall pre$ail& MA)ER STEEL PIPE CORP 0S& CA Section :E8F o the Carria%e o Goo"s by Sea Act pro$i"es that Dthe carrier an" the ship shall be "ischar%e" rom all liability in respect o loss or "ama%e !nless s!it is bro!%ht within one year a ter "eli$ery o the %oo"s or the "ate when the %oo"s sho!l" ha$e been "eli$ere"&D Respon"ent co!rt r!le" that this pro$ision applies not only to the carrier b!t also to the ins!rer# citin% Ailipino Merchants Ins!rance Co&# Inc& $s& Ale=an"ro& Section :E8F o the Carria%e o Goo"s by Sea Act states that the carrier an" the ship shall be "ischar%e" rom all liability or loss or "ama%e to the %oo"s i no s!it is ile" within one year a ter "eli$ery o the %oo"s or the "ate when they sho!l" ha$e been "eli$ere"& *n"er this pro$ision# only the carrierGs liability is e-tin%!ishe" i no s!it is bro!%ht within one year& <!t the liability o the ins!rer is not e-tin%!ishe" beca!se the ins!rerGs liability is base" not on the contract o carria%e b!t on the contract o ins!rance& A close rea"in% o the law re$eals that the Carria%e o Goo"s by Sea Act %o$erns the relationship between the carrier on the one han" an" the shipper# the consi%nee an"Nor the ins!rer on the other han"& It "e ines the obli%ations o the carrier !n"er the contract o carria%e& It "oes not# howe$er# a ect the relationship between the shipper an" the ins!rer& The latter case is %o$erne" by the Ins!rance Co"e& MITS*I OS@ LINES 0S& CA Petitioner Mits!i O&S&@& Lines Lt"& is a orei%n corporation represente" in the Philippines by its a%ent# Ma%saysay A%encies& It entere" into a contract o carria%e thro!%h Meister Transport# Inc&# an international rei%ht orwar"er# with pri$ate respon"ent La$ine Lo!n%ewear Man! act!rin% Corporation to transport %oo"s o the latter rom Manila to Le (a$re# Arance& Petitioner !n"ertoo, to "eli$er the %oo"s to Arance .2 "ays rom initial loa"in%& On C!ly .9# +55+# petitioners $essel loa"e" pri$ate respon"ents container $an or carria%e at the sai" port o ori%in& (owe$er# in @aoshi!n%# Taiwan the %oo"s were not transshippe" imme"iately# with the res!lt that the shipment arri$e" in Le (a$re only on No$ember +9# +55+& The consi%nee alle%e"ly pai" only hal the $al!e o the sai" %oo"s on the %ro!n" that they "i" not arri$e in Arance !ntil the o season in that co!ntry& The remainin% hal was alle%e"ly char%e" to the acco!nt o pri$ate respon"ent which in t!rn "eman"e" payment rom petitioner thro!%h its a%ent& There wo!l" be some merit in appellants insistence that the "ama%es s! ere" by him as a res!lt o the "elay in the shipment o his car%o are not co$ere" by the prescripti$e pro$ision o the Carria%e o Goo"s by Sea Act abo$e re erre" to# i s!ch "ama%es were "!e# not to the "eterioration an" "ecay o the %oo"s while in transit# b!t to other ca!ses in"epen"ent o the con"ition o the car%o !pon arri$al# li,e a "rop in their mar,et $al!e Sai" one7year perio" o limitation is "esi%ne" to meet the e-i%encies o maritime ha?ar"s& In a case where the %oo"s shippe" were neither lost nor "ama%e" in transit b!t were# on the contrary# "eli$ere" in port to someone who claime" to be entitle" thereto# the sit!ation is "i erent# an" the special nee" or the short perio" o limitation in cases o loss or "ama%e ca!se" by maritime perils "oes not obtain& In the case at bar# there is neither "eterioration nor "isappearance nor "estr!ction o %oo"s ca!se" by the carriers breach o contract& Whate$er re"!ction there may ha$e been in the $al!e o the %oo"s is not "!e to their "eterioration or "isappearance beca!se they ha" been "ama%e" in transit& $irt!alawlibrary Precisely# the /!estion be ore the trial co!rt is not the partic!lar sense o "ama%es as it re ers to the physical loss or "ama%e o a shippers %oo"s as speci ically co$ere" by :E8F o COGSA b!t petitioners potential liability or the "ama%es it has ca!se" in the %eneral sense an"# as s!ch# the matter is %o$erne" by the Ci$il Co"e# the Co"e o Commerce an" COGSA# or the breach o its contract o carria%e with pri$ate respon"ent& $ir We concl!"e by hol"in% that as the s!it below is not or loss or "ama%e to %oo"s contemplate" in :E8F# the /!estion o prescription o action is %o$erne" not by the COGSA b!t by Art& ++99 o the Ci$il Co"e which pro$i"es or a prescripti$e perio" o ten years& P(IL AIRST INS*RANCE CO 0S& WALLEM P(ILS& S(IPPING

Transpo notes by ace

Aor marine $essels# Article 8+5 o the Co"e o Commerce pro$i"es that the ship captain is liable or the car%o rom the time it is t!rne" o$er to him at the "oc, or a loat alon%si"e the $essel at the port o loa"in%# !ntil he "eli$ers it on the shore or on the "ischar%in% whar at the port o !nloa"in%# !nless a%ree" otherwise& In Standard *il Co. of "ew #ork v. Lope< Castelo$ the Co!rt interprete" the ship captain>s liability as !ltimately that o the shipowner by re%ar"in% the captain as the representati$e o the ship owner& Lastly# Section . o the COGSA pro$i"es that !n"er e$ery contract o carria%e o %oo"s by sea# the carrier in relation to the loa"in%# han"lin%# stowa%e# carria%e# c!sto"y# care# an" "ischar%e o s!ch %oo"s# shall be s!b=ect to the responsibilities an" liabilities an" entitle" to the ri%hts an" imm!nities set orth in the Act& Section : E.F thereo then states that amon% the carriers> responsibilities are to properly an" care !lly loa"# han"le# stow# carry# ,eep# care or# an" "ischar%e the %oo"s carrie"& P*<LIC *TILITIES P!blic !tility is a b!siness or ser$ice en%a%e" in re%!larly s!pplyin% the p!blic with some commo"ity or ser$ice o p!blic conse/!ence s!ch as electricity# %as water# transportation# telephone or tele%raph ser$ice& As s!ch p!blic !tility ser$ices are impresse" with p!blic interest an" concern& When# there ore# one "e$otes his property to a !se in which the p!blic has an interest# he# in e ect %rants to the p!blic an interest in that !se# an" m!st s!bmit to the control by the p!blic or the common %oo"# to the e-tent o the interest he has th!s create"& P!blic ser$ice incl!"es e$ery person that now or herea ter may own# operate# mana%e or control in the Philippines or hire or or compensation with %eneral or limite" clientele whether permanent# occasional# or acci"ental an" "one or %eneral b!siness& CONSTIT*TIONAL PRO0ISION ART ;II SEC& ++ No ranchise# certi icate# or any other orm o a!thori?ation or the operation o a p!blic !tility shall be %rante" e-cept to citi?ens o the Philippines or to corporations or associations or%ani?e" !n"er the laws o the Philippines at least 86 S o whose capital is owne" by s!ch citi?ens# nor shall s!ch ranchise# certi icate# or a!thori?ation be e-cl!si$e in character or or a lon%er perio" than 16 years& Neither shall any s!ch ranchise or ri%ht be %rante" e-cept !n"er the con"ition that it shall be s!b=ect to amen"ment# alteration or repeal by the Con%ress when the common %oo" re/!ires& The state shall enco!ra%e e/!ity participation in p!blic !tilities by the %eneral p!blic& The participation o orei%n in$estors in the %o$ernin% bo"y o any p!blic !tility enterprise shall be limite" to their proportionate share in its capital# an" all the e-ec!ti$e an" mana%in% o icers o s!ch corporation or association m!st be citi?ens o the Philippines& LTAR< They may a"opt . metho"s in rate "etermination& +& .& Strai%ht metho" A""7on metho" <ASES OA REG*LATION OA P*<LIC *TILITIES The police power o the State =!sti ies the re%!lation o p!blic !tilities& In other wor"s# re%!lation o p!blic !tilities is o!n"e" !pon the police powers o the State an" stat!tes prescribin% r!les or the control an" re%!lation o p!blic !tilities are consi"ere" $ali" e-ercise thereo & OWNERS(IP OA P*<LIC *TILITIES ART ;II SEC& ++ (owe$er# the limit impose" by the Constit!tion on orei%n e/!ity applies only to the operation o a p!blic !tility an" not to ownership o the acilities& REG*LATION OA RATES The re%!lations o p!blic !tilities incl!"e the re%!lation o the rates that they are char%in% the p!blic& The i-in% o =!st an" reasonable rates in$ol$es a balancin% o the in$estor an" the cons!mer interests& NON7'ELEGATION The power to i- the rates o p!blic !tilities is a power that has been "ele%ate" to the re%!latory a"ministrati$e a%encies& As s!ch it cannot be !rther "ele%ate" by the sai" a"ministrati$e a%encies& STAN'AR' IN AI;ING RATES The only stan"ar" which the le%islat!re is re/!ire" to prescribe or the %!i"ance o the a"ministrati$e a!thority is that the rate be reasonable an" =!st& AACTORS TO CONSI'ER a& b& c& Rate o ret!rn Rate base The ret!rn itsel or the comp!te" re$en!e to be earne" by the p!blic !tility base" on the rate o ret!rn an" rate base

Strai%ht metho" is the process by which the act!al "istance tra$elle" is m!ltiplie" by the a!thori?e" are per s!ccee"in% ,ilometer A""7on metho" is a""in% the establishe" minim!m are to the are s!ccee"in% ,ilometer m!ltiplie" by "istance co$ere"&

Transpo notes by ace

PRO0ISIONAL INCREASE An a"ministrati$e a%ency may be empowere" by law to appro$e pro$isionally# when "eman"e" by !r%ent p!blic nee"# rates o p!blic !tilities witho!t a hearin%& The reason is easily "iscerne" rom the act that a pro$isional rates are by their nat!re temporary an" s!b=ect to a"=!stment in con ormity with the "e initi$e rates appro$e" a ter inal hearin%& A*T(ORIT) TO OPERATE AS P*<LIC *TILIT) The power to a!thori?e an" control the operation o a p!blic !tility is a"mitte"ly a prero%ati$e o the le%islat!re# since Con%ress is that branch o %o$ernment $este" with plenary powers o le%islation& The ranchise is a le%islati$e %rant# whether ma"e "irectly by the le%islat!re itsel or by any one o its property constit!te" instr!mentalities& It is !p to con%ress whether it will "ele%ate the power to a!thori?e the operation o p!blic !tilities to a"ministrati$e a%encies& ARANC(ISE AN' CERTIAICATE OA P*<LIC CON0ENIENCE A ranchise is "istin%!ishe" rom a CPC in that the ormer is a %rant or pri$ile%e rom the so$erei%n power# while the latter is a orm o re%!lation thro!%h the a"ministrati$e a%encies& A certi icate o p!blic con$enience is not necessary or the iss!ance o a le%islati$e ranchise& (owe$er# a le%islati$e ranchise is necessary be ore a CPC can be iss!e" to operate ra"io an" tele$ision broa"castin% companies& Conse/!ently# e$en i there was alrea"y a "ele%ation o a!thority to a speci ic a"ministrati$e a%ency to iss!e a CPC# it "oes not ollow that a le%islati$e ranchise is no lon%er necessary& NAT*RE OA CPC A certi icate is a mere pri$ile%e that is always s!b=ect to the re%!lation o the State& Inso ar as the State is concerne"# a certi icate o p!blic con$enience constit!te neither a ranchise nor a contract# con ers no property ri%ht# an" is a mere license or pri$ile%e& TRANSAER OA CERTIAICATE The law really re/!ires the appro$al o the P!blic Ser$ice Commission in or"er that a ranchise or any pri$ile%e pertainin% thereto may be sol" or lease" witho!t in rin%in% the certi icate iss!e" to the %rantee& The re%istere" owner r!le applies i the trans er o the ranchise was not appro$e" by the re%!latin% a%ency& RE0OCATION OA CERTIAICATE Since the hol"in% o p!blic con$enience is =!st a pri$ile%e# the same certi icate may be re$o,e" by the a"ministrati$e a%ency concerne"& INSTANCES W(ERE CANCELLATION OA CPC IS (EL' 0ALI' +& .& Where hol"er is a mere "!mmy Where operator cease" operation an" place" his b!ses on stora%e Where the operator aban"ons totally the ser$ice

:&

L*Q*E 0S& 0ILLEGAS Secon"# the same sit!ation hol"s tr!e with respect to the pro$ision o the P!blic Ser$ice Act& Altho!%h the P!blic Ser$ice Commission is empowere"# !n"er its Section +8EmF# to amen"# mo"i y or re$o,e certi icates o p!blic con$enience a ter notice an" hearin%# yet there is no pro$ision# speci ic or otherwise# which can be o!n" in this stat!te ECommonwealth Act No& +98F $estin% power in the P!blic Ser$ice Commission to s!perinten"# re%!late# or control the streets o respon"ent City or s!spen" its power to license or prohibit the occ!pancy thereo & On the other han"# this ri%ht or a!thority# as hereinabo$e concl!"e" is con erre" !pon respon"ent City o Manila& The power $este" in the P!blic Ser$ice Commission !n"er Section +8EmF is# there ore# s!bor"inate to the a!thority %rante" to respon"ent City# !n"er sai" section +2 EhhF& & & & That the powers con erre" by law !pon the P!blic Ser$ice Commission were not "esi%ne" to "eny or s!perse"e the re%!latory power o local %o$ernments o$er motor tra ic# in the streets s!b=ect to their control is ma"e e$i"ent by section +3 E=F o the P!blic Ser$ice Act ECommonwealth Act No& +98F that pro$i"es as ollowsB DSEC& +3& Proceedings of Commission without previous hearing& T The Commission shall ha$e power# witho!t pre$io!s hearin%# s!b=ect to establishe" limitations an" e-ceptions# an" sa$in% pro$isions to the contraryB E=F To re/!ire any p!blic ser$ice to comply with the laws o the Philippines# an" with any pro$incial resol!tion or m!nicipal or"inance relatin% thereto# an" to con orm to the "!ties impose" !pon it thereby# or by the pro$isions o its own charter# whether obtaine" !n"er any %eneral or special law o the Philippines&D EEmphasis s!pplie"F The petitionerGs contention that# !n"er this section# the respecti$e or"inances o the City can only be en orce" by the Commission alone is ob$io!sly !nso!n"& S!bsection E=F re ers not only to or"inances b!t also to Dthe laws o the Philippines#D an" it is plainly abs!r" to ass!me

Transpo notes by ace

that e$en laws relatin% to p!blic ser$ices are to remain a "ea" letter witho!t the placet o the Commission4 an" the section ma,es no "istinction whate$er between en orcement o laws an" that o m!nicipal or"inances& Conten"in% that they possess $ali" an" s!bsistin% certi icates o p!blic con$enience# the petitionin% p!blic ser$ices a$er that they ac/!ire" a $este" ri%ht to operate their p!blic !tility $ehicles to an" rom Manila as appearin% in their sai" respecti$e certi icates o p!blic con$enience& PetitionerGs ar%!ment pales on the ace o the act that the $ery nat!re o a certi icate o p!blic con$enience is at cross p!rposes with the concept o $este" ri%hts& To this "ay# the accepte" $iew# at least inso ar as the State is concerne"# is that Da certi icate o p!blic con$enience constit!tes neither a ranchise nor a contract# con ers no property ri%ht# an" is a mere license or pri$ile%e&D5 The hol"er o s!ch certi icate "oes not ac/!ire a property ri%ht in the ro!te co$ere" thereby& Nor "oes it con er !pon the hol"er any proprietary ri%ht or interest o ranchise in the p!blic hi%hways&+6 Re$ocation o this certi icate "epri$es him o no $este" ri%ht&++ Little re lection is necessary to show that the certi icate o p!blic con$enience is %rante" with so many strin%s attache"& New an" a""itional b!r"ens# alteration o the certi icate# an" e$en re$ocation or ann!lment thereo is reser$e" to the State& We nee" b!t a"" that the P!blic Ser$ice Commission# a %o$ernment a%ency $este" by law with D=!ris"iction# s!per$ision# an" control o$er all p!blic ser$ices an" their ranchises# e/!ipment# an" other propertiesD +. is empowere"# !pon proper notice an" hearin%# amon%st othersB E+F DLtMo amen"# mo"i y or re$o,e at any time a certi icate iss!e" !n"er the pro$isions o this Act LCommonwealth Act +98# as amen"e"M# whene$er the acts an" circ!mstances on the stren%th o which sai" certi icate was iss!e" ha$e been misrepresente" or materially chan%e"D4+: an" E.F DLtMo s!spen" or re$o,e any certi icate iss!e" !n"er the pro$isions o this Act whene$er the hol"er thereo has $iolate" or wil !lly an" cont!macio!sly re !se" to comply with any or"er# r!le or re%!lation o the Commission or any pro$ision o this ActB Provided# That the Commission# or %oo" ca!se# may prior to the hearin% s!spen" or a perio" not to e-cee" thirty "ays any certi icate or the e-ercise o any ri%ht or a!thority iss!e" or %rante" !n"er this Act by or"er o the Commission# whene$er s!ch step shall in the =!"%ment o the Commission be necessary to a$oi" serio!s an" irreparable "ama%e or incon$enience to the p!blic or to pri$ate interests&D+9 C!rispr!"ence echoes the r!le that the Commission is a!thori?e" to ma,e reasonable r!les an" re%!lations or the operation o p!blic ser$ices an" to en orce them&+1 In reality# all certi icates o p!blic con$enience iss!e" are s!b=ect to the con"ition that all p!blic ser$ices Dshall obser$e an" comply LwithM &&& all the r!les an" re%!lations o the Commission relati$e toD the ser$ice&+8 To !rther emphasi?e the control impose" on p!blic ser$ices# be ore any p!blic ser$ice can Da"opt# maintain# or apply practices or meas!res# r!les# or re%!lations to which the p!blic shall be s!b=ect in its relation with the p!blic ser$ice#D appro$al m!st irst be ha"&+3 the CommissionGs

An" more& P!blic ser$ices m!st also rec,on with pro$incial resol!tions an" m!nicipal or"inances relatin% to the operation o p!blic !tilities within the pro$ince or m!nicipality concerne"& The Commission can re/!ire compliance with these pro$incial resol!tions or m!nicipal or"inances&+2 @IL*SANG MA)O *NO 0S& GARCIA P!blic !tilities are pri$ately owne" an" operate" b!sinesses whose ser$ice are essential to the %eneral p!blic& They are enterprises which specially cater to the nee"s o the p!blic an" con"!ce to their com ort an" con$enience& As s!ch# p!blic !tility ser$ices are impresse" with p!blic interest an" concern& The same is tr!e with respect to the b!siness o common carrier which hol"s s!ch a pec!liar relation to the p!blic interest that there is s!perin"!ce" !pon it the ri%ht o p!blic re%!lation when pri$ate properties are a ecte" with p!blic interest# hence# they cease to be juris privati only& When# there ore# one "e$otes his property to a !se in which the p!blic has an interest# he# in e ect %rants to the p!blic an interest in that !se# an" m!st s!bmit to the control by the p!blic or the common %oo"# to the e-tent o the interest he has th!s create"& + An ab"ication o the licensin% an" re%!latory %o$ernment a%encies o their !nctions as the instant petition see,s to show# is in"ee" lamentable& Not only is it an !nso!n" a"ministrati$e policy b!t it is inimical to p!blic tr!st an" p!blic interest as well& S!ch "ele%ation o le%islati$e power to an a"ministrati$e a%ency is permitte" in or"er to a"apt to the increasin% comple-ity o mo"ern li e& As s!b=ects or %o$ernmental re%!lation m!ltiply# so "oes the "i ic!lty o a"ministerin% the laws& (ence# speciali?ation e$en in le%islation has become necessary& Gi$en the tas, o "eterminin% sensiti$e an" "elicate matters as ro!te7 i-in% an" rate7 ma,in% or the transport sector# the responsible re%!latory bo"y is entr!ste" with the power o s!bor"inate le%islation& With this a!thority# an a"ministrati$e bo"y an" in this case# the LTAR<# may implement broa" policies lai" "own in a stat!te by D illin% inD the "etails which the Le%islat!re may neither ha$e time or competence to pro$i"e& (owe$er# nowhere !n"er the a oresai" pro$isions o law are the re%!latory bo"ies# the PSC an" LTAR< ali,e# a!thori?e" to "ele%ate that power to a common carrier# a transport operator# or other p!blic ser$ice& In the case at bench# the a!thority %i$en by the LTAR< to the pro$incial b!s operators to set a are ran%e o$er an" abo$e the a!thori?e" e-istin% are# is ille%al an" in$ali" as it is tantamo!nt to an !n"!e "ele%ation o le%islati$e a!thority& Potestas delegata non delegari potest& What has been "ele%ate" cannot be "ele%ate"& This "octrine is base" on the ethical principle that s!ch a "ele%ate" power constit!tes not only a ri%ht b!t a "!ty to be per orme" by the "ele%ate thro!%h the instr!mentality o

Transpo notes by ace

his own =!"%ment an" not thro!%h the inter$enin% min" o another& The abo$e7/!ote" pro$ision is entirely incompatible an" inconsistent with Section +8EcFEiiiF o the P!blic Ser$ice Act which re/!ires that be ore a CPC will be iss!e"# the applicant m!st pro$e by proper notice an" hearin% that the operation o the p!blic ser$ice propose" will promote p!blic interest in a proper an" s!itable manner& On the contrary# the policy %!i"eline states that the pres!mption o p!blic nee" or a p!blic ser$ice shall be "eeme" in a$or o the applicant& In case o con lict between a stat!te an" an a"ministrati$e or"er# the ormer m!st pre$ail& <y its terms# p!blic con$enience or necessity %enerally means somethin% ittin% or s!ite" to the p!blic nee"& +8 As one o the basic re/!irements or the %rant o a CPC# p!blic con$enience an" necessity e-ists when the propose" acility or ser$ice meets a reasonable want o the p!blic an" s!pply a nee" which the e-istin% acilities "o not a"e/!ately s!pply& The e-istence or non7e-istence o p!blic con$enience an" necessity is there ore a /!estion o act that m!st be establishe" by e$i"ence# real an"Nor testimonial4 empirical "ata4 statistics an" s!ch other means necessary# in a p!blic hearin% con"!cte" or that p!rpose& The ob=ect an" p!rpose o s!ch proce"!re# amon% other thin%s# is to loo, o!t or# an" protect# the interests o both the p!blic an" the e-istin% transport operators& 0erily# the power o a re%!latory bo"y to iss!e a CPC is o!n"e" on the con"ition that a ter !ll7"ress hearin% an" in$esti%ation# it shall in"# as a act# that the propose" operation is or the con$enience o the p!blic& +3 <asic con$enience is the primary consi"eration or which a CPC is iss!e"# an" that act alone m!st be consistently borne in min"& Also# e-istin% operators in s!b=ect ro!tes m!st be %i$en an opport!nity to o er proo an" oppose the application& There ore# an applicant m!st# at all times# be re/!ire" to pro$e his capacity an" capability to !rnish the ser$ice which he has !n"erta,en to ren"er& +2 An" all this will be possible only i a p!blic hearin% were con"!cte" or that p!rpose& Otherwise state"# the establishment o p!blic nee" in a$or o an applicant re$erses well7settle" an" instit!tionali?e" =!"icial# /!asi7=!"icial an" a"ministrati$e proce"!res& It allows the party who initiates the procee"in%s to pro$e# by mere application# his a irmati$e alle%ations& Moreo$er# the o en"in% pro$isions o the LTAR< memoran"!m circ!lar in /!estion wo!l" in e ect amen" the R!les o Co!rt by a""in% another "isp!table pres!mption in the en!meration o :3 pres!mptions !n"er R!le +:+# Section 1 o the R!les o Co!rt& S!ch !s!rpation o this Co!rtGs a!thority cannot be co!ntenance" as only this Co!rt is man"ate" by law to prom!l%ate r!les concernin% plea"in%# practice an" proce"!re&