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Litonjua Shipping vs. National Seamen Board (GR 51910, 10 August 1989)Third Division, Feliciano (J): 4 concurFacts: Litonjua is the duly appointed local crewing Managing Office of the Fairwind Shipping Corporation. The M/V Dufton Bay is an ocean-going vessel of foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd. On 11 September 1976, while the Dufton Bay was in the port of Cebu and while under charter by Fairwind, the vessels master contracted the services of, among others, Gregorio Candongo to serve as Third Engineer for a period of 12 months with a monthly wage of US$500.00. This agreement was executed before the Cebu Area Manning Unit of the NSB. Thereafter, Candongo boarded the vessel. On 28 December 1976, before expiration of his contract, Candongo was required to disembark at Port Kelang, Malaysia, and was returned to the Philippines on 5 January 1977. The cause of the discharge was described in his Seamans Book as by owners arrange. Shortly after returning to the Philippines, Candongo filed a complaint before the National Seamen Board (NSB; NSB-1331-77), for violation of contract, against Mullion as the shipping company and Litonjua as agent of the ship owner and of the charterer of the vessel. At the initial hearing, the NSB hearing officer held a conference with the parties, at which conference Litonjua was represented by one of its supercargoes, Edmond Cruz. Edmond Cruz asked, in writing, that the hearing be postponed for a month upon the ground that the employee of Litonjua in charge of the case was out of town. The hearing officer denied this request and then declared Litonjua in default. At the hearing, Candongo testified that when he was recruited by the Captain of the Dufton Bay, the latter was accompanied to the NSB Cebu Area Manning Unit by 2 supercargoes sent by Litonjua to Cebu, and that the 2 supercargoes Edmond Cruz and Renato Litonjua assisted Candongo in the procurement of his National Investigation and Security Agency (NISA) clearance. Messrs. Cruz and Litonjua were also present during Canfongos interview by Captain Ho King Yiu of the Dufton Bay. On 17 February 1977, the hearing officer of the NSB rendered a judgment by default, ordering R.D. Mullion Shipbrokers Co., Ltd., and Litonjua Shipping Co., Inc., jointly and solidarily to pay Candongo the sum of $4,657.63 or its equivalent in the Philippine currency within 10 days from receipt of the copy of the Decision the payment of which to be coursed through the then NSB. Litonjua filed a motion for reconsideration of the hearing officers decision; the motion was denied.Litonjua filed an Appeal and/or Motion for Reconsideration of the Default Judgment dated 9 August 1977 with the central office of the NSB. NSB then suspended its hearing officers decision and lifted the order of default against Litonjua, thereby allowing the latter to adduce evidence in its own behalf. On 26 April 1978, the NSB then lifted the suspension of the hearing officers 17 February 1977 decision. Litonjua once more moved for reconsideration. On 31 May 1979, NSB rendered a decision which affirmed its hearing officers decision of 17 February 1977. Hence, the petition for certiorari. The Supreme Court dismissed the Petition for Certiorari and affirmed the Decision of the then National Seamen Board dated 31 May 1979; without pronouncement as to costs.1. Grounds where Litonjua may be made liable on the contract of employmentThere are 2 grounds upon which Litonjua may be held liable to Candongo on the contract of employment. The first basis is the charter party which existed between Mullion, the ship owner, and Fairwind, the charterer. The second and ethically more compelling basis for holding Litonjua liable on the contract of employment of Candongo refers to that the charterer of the vessel, Fairwind, clearly benefitted from the employment of Candongo as Third Engineer of the Dufton Bay. Litonjua assisted the Master of the vessel in locating and recruiting Candongo as Third Engineer of the vessel as well as 10 other Filipino seamen as crew members. In so doing, Litonjua certainly in effect represented that it was taking care of the crewing and other requirements of a vessel chartered by its principal, Fairwind.2. Types of charter partiesIn modern maritime law and usage, there are three (3) distinguishable types of charter parties: (a) the bareboat or demise charter; (b) the time charter; and (c) the voyage or trip charter.3. Bareboat or demise charterA bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished house is a demise of real property. The ship owner turns over possession of his vessel to the charterer, who then undertakes to provide a crew and victuals and supplies and fuel for her during the term of the charter. The ship owner is not normally required by the terms of a demise charter to provide a crew, and so the charterer gets the bare boat, i.e., without a crew. Sometimes, of course, the demise charter might provide that the ship owner is to furnish a master and crew to man the vessel under the charterers direction, such that the master and crew provided by the ship owner become the agents and servants or employees of the charterer, and the charterer (and not the owner) through the agency of the master, has possession and control of the vessel during the charter period.4. Time charterA time charter, like a demise charter, is a contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages. In this case, however, the owner of a time- chartered vessel (unlike the owner of a vessel under a demise or bare- boat charter), retains possession and control through the master and crew who remain his employees. What the time charterer acquires is the right to utilize the carrying capacity and facilities of the vessel and to designate her destinations during the term of the charter.5. Voyage or trip charterA voyage charter, or trip charter, is simply a contract of affreightment, that is, a contract for the carriage of goods, from one or more ports of loading to one or more ports of unloading, on one or on a series of voyages. In a voyage charter, master and crew remain in the employ of the owner of the vessel.6. Charterer the pro hac vice owner of the vessel in bareboat charterIt is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of the vessel, the charterer assuming in large measure the customary rights and liabilities of the ship owner in relation to third persons who have dealt with him or with the vessel. In such case, the Master of the vessel is the agent of the charterer and not of the ship owner. The charterer or owner pro hac vice, and not the general owner of the vessel, is held liable for the expenses of the voyage including the wages of the seamen.7. Presumption arising from failure of Litonjua to attach bareboat charter into the records of the caseLitonjua did not place into the record of the case a copy of the charter party covering the M/V Dufton Bay. It is assumed then that Litonjua was aware of the nature of a bareboat or demise charter and that if it did not see fit to include in the record a copy of the charter party, which had been entered into by its principal, it was because the charter party and the provisions thereof were not supportive of the position adopted by Litonjua in the present case, position diametrically opposed to the legal consequence of a bareboat charter. Treating Fairwind as owner pro hac vice, Litonjua having failed to show that it was not such, Litonjua, as Philippine agent of the charterer, may be held liable on the contract of employment between the ship captain and Candongo.8. Equitable consequence of benefit to the chartererThe charterer of the vessel, Fairwind, clearly benefitted from the employment of Candongo as Third Engineer of the Dufton Bay, along with 10 other Filipino crew members recruited by Captain Ho in Cebu at the same occasion. If Candongo had not agreed to serve as such Third Engineer, the ship would not have been able to proceed with its voyage.9. Circumstances reinforcing equitable consequence of benefit to chartererThe equitable consequence of benefit to the charterer is, moreover, reinforced by convergence of other circumstances of which the Court must take account. (1) There is the circumstance that only the charterer, through Litonjua, was present in the Philippines. (2) The scope of authority or the responsibility of Litonjua was not clearly delimited.10. Litonjuas commission unclear; Litonjuas assistance in the recruitment of Candongo clearLitonjua took the position that its commission was limited to taking care of vessels owned by Fairwind. But the documentary authorization read into the record of the case does not make that clear at all. The words our ships may well be read to refer both to vessels registered in the name of Fairwind and vessels owned by others but chartered by Fairwind. Indeed the commercial, operating requirements of a vessel for crew members and for supplies and provisions have no relationship to the technical characterization of the vessel as owned by or as merely chartered by Fairwind. In any case, it is not clear from the authorization given by Fairwind to Litonjua that vessels chartered by Fairwind (and owned by some other companies) were not to be taken care of by Litonjua should such vessels put into a Philippine port. The statement of account which the Dufton Bays Master had signed and which pertained to the salary of Candongo had referred to a Philippine agency which would take care of disbursing or paying such account. There is no question that the Philippine agency was the Philippine agent of the charterer Fairwind. Moreover, there is also no question that Litonjua did assist the Master of the vessel in locating and recruiting Candongo as Third Engineer of the vessel as well as 10 other Filipino seamen as crew members. In so doing, Litonjua certainly in effect represented that it was taking care of the crewing and other requirements of a vessel chartered by its principal, Fairwind.11. Wages constitute maritime lien upon vessel; Candongo in no position to enforce said lien if contrary holding is madeThere is the circumstance that extreme hardship would result for Candongo if Litonjua, as Philippine agent of the charterer, is not held liable to Candongo upon the contract of employment. Clearly, Candongo, and the other Filipino crew members of the vessel, would be defenseless against a breach of their respective contracts. While wages of crew members constitute a maritime lien upon the vessel, Candongo is in no position to enforce that lien. If only because the vessel, being one of foreign registry and not ordinarily doing business in the Philippines or making regular calls on Philippine ports cannot be effectively held to answer for such claims in a Philippine forum. Upon the other hand, it seems quite clear that Litonjua, should it be held liable to Candongo for the latters claims, would be better placed to secure reimbursement from its principal Fairwind. In turn, Fairwind would be in an infinitely better position (than Candongo) to seek and obtain recourse from Mullion, the foreign ship owner, should Fairwind feel entitled to reimbursement of the amounts paid to Candongo through Litonjua.12. Result compelled by equitable principles and demands of substantial justiceCandongo was properly regarded as an employee of the charterer Fairwind and that Litonjua may behold to answer to Candongo for the latters claims as the agent in the Philippines of Fairwind. This result, far from constituting a grave abuse of discretion, is compelled by equitable principles and by the demands of substantial justice. To hold otherwise would be to leave Candongo (and others who may find themselves in his position) without any effective recourse for the unjust dismissal and for the breach of his contract of employment.Caltex vs. Sulpicio Lines (GR 131166, 30 September 1999)First Division, Pardo (J): 3 concur, 1 took no partFacts: MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, which is engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. On the other hand, the MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week. On 19 December 1987, motor tanker MT Vector left Limay, Bataan, enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by Caltex, by virtue of a charter contract between Vector Shipping and Caltex. The next day, the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance, but possibly carrying an estimated 4,000 passengers. At about 10:30 p.m. of 20 December 1987, the two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the incident. Only 24 survived the tragedy after having been rescued from the burning waters by vessels that responded to distress calls. Among those who perished were public school teacher Sebastian Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both unmanifested passengers but proved to be on board the vessel. On 22 March 1988, the board of marine inquiry after investigation found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz. On 13 February 1989, Teresita and Sotera Caezal, filed with the RTC Manila, a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. On 15 September 1992, the trial court rendered decision dismissing the third party complaint against Caltex. On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc. (CA-GR CV 39626), on 15 April 1997, the Court of Appeal modified the trial courts ruling and included petitioner Caltex as one of the those liable for damages. Hence the petition. The Supreme Court granted the petition and set aside the decision of the Court of Appeals, insofar as it held Caltex liable under the third party complaint to reimburse/indemnify Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The Court affirmed the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever damages, attorneys fees and costs the latter is adjudged to pay plaintiffs-appellees in the case.1. The respective rights and duties of a carrier depends on the nature of the contract of carriageThe respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. In the case at bar, Caltex and Vector entered into a contract of affreightment, also known as a voyage charter.2. Charter party and contract of affreightment definedA charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.3. Kinds of contract of affreightmentA contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.4. Charterers liability: Bareboat charter vs. Contract of affreightmentUnder a demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.5. Categories of charter partiesCharter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter.6. Bareboat, but not voyage charter, transforms common carrier into private carrierAlthough a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment (Coastwise Lighterage Corp. vs. CA) A public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. (Planters Products vs. CA). In the case at bar, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier.7. Common carrier definedA common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. In the case at bar, MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code (Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers for passengers or goods or both, by land, water, or air for compensation, offering their services to the public).8. Article 1732, Common carrier, construedArticle 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such services on a an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one who offers services or solicitsbusiness only from a narrow segment of the general population. Article 1733 deliberately refrained from making such distinctions.9. Responsibility of carrier before voyage; SeaworthinessUnder Section 3 of the Carriage of Goods by Sea Act, (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; among others. Carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.10. Article 1173 of the New Civil CodeArticle 1173 of the Civil Code provides that the fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.11. Negligence definedNegligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do something which ordinarily regulate the conduct of human affairs, would do (Southeastern College vs. CA).12. Reason for the applicability of Section 3 COGSA, and Article 1755 NCC to carriers, not shipper and passengers; Ordinary diligence required of shippersThe provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in public service. The Civil Code demands diligence which is required by the nature of the obligation and that which corresponds with the circumstances of the persons, the time and the place. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, passengers cannot be expected to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation. In the case at bar, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his cargoes.13. Caltex not liable for damagesCaltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.Smith bell co vs caEn Banc, Feliciano (J): 14 concurFacts: On 3 May 1970, 3:50 a.m., on the approaches to the port of Manila near Caballo Island, a collision took place between the M/V Don Carlos, an inter-island vessel owned and operated by Carlos A. Go Thong and Company (Go Thong), and the M/S Yotai Maru, a merchant vessel of Japanese registry. The Don Carlos was then sailing south bound leaving the port of Manila for Cebu, while the Yotai Maru was approaching the port of Manila, coming in from Kobe, Japan. The bow of the Don Carlos rammed the portside (left side) of the Yotai Maru inflicting a 3 cm. gaping hole on her portside near Hatch 3, through which seawater rushed in and flooded that hatch and her bottom tanks, damaging all the cargo stowed therein. The consignees of the damaged cargo got paid by their insurance companies. The insurance companies in turn, having been subrogated to the interests of the consignees of the damaged cargo, commenced actions against Go Thong for damages sustained by the various shipments in the then CFI of Manila. 2 cases were filed in the CFI of Manila. The first case, Civil Case 82567, was commenced or 13 March 1971 by Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire Insurance Company Ltd., against Go Thong, in Branch 3, which was presided over by Judge Bernardo P. Fernandez. The second case, Civil Case 82556, was filed on 15 March 1971 by Smith Bell and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance Company, Inc. against Go Thong in Branch 4, which was presided over by then Judge, later Associate Justice of this Court, Serafin R. Cuevas. Civil Cases 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were tried under the same issues and evidence relating to the collision between the Don Carlos and the Yotai Maru the parties in both cases having agreed that the evidence on the collision presented in one case would be simply adopted in the other. In both cases, the Manila CFI held that the officers and crew of the Don Carlos had been negligent, that such negligence was the proximate cause of the collision and accordingly held Go Thong liable for damages to the insurance companies. Judge Fernandez awarded the insurance companies P19,889.79 with legal interest plus P3,000.00 as attorneys fees; while Judge Cuevas awarded the insurance companies on two (2) claims US$68,640.00 or its equivalent in Philippine currency plus attorneys fees of P30,000.00, and P19,163.02 plus P5,000.00 as attorneys fees, respectively.The decision of Judge Fernandez in Civil Case 82567 was appealed by Go Thong to the Court of Appeals (CA-GR 61320-R). The decision of Judge Cuevas in Civil Case 82556 was also appealed by Go Thong to the Court of Appeals (CA-GR 61206-R). Substantially identical assignments of errors were made by Go Thong in the 2 appealed cases before the Court of Appeals. In CA-GR 61320-R, the Court of Appeals through Reyes, L.B., J., rendered a Decision on 8 August 1978 affirming the Decision of Judge Fernandez. Go Thong moved for reconsideration, without success.Go Thong then went to the Supreme Court on Petition for Review, the Petition (GR L-48839; Carlos A. Go Thong and Company v. Smith Bell and Company [Philippines], Inc., et al.). In its Resolution dated 6 December 1978, the Supreme Court, denied the Petition for lack of merit. Go Thong filed a Motion for Reconsideration; the Motion was denied by the Supreme Court on 24 January 1979. In CA-GR 61206-R, the Court of Appeals, on 26 November 1980, reversed the Cuevas Decision and held the officers of the Yotai Maru at fault in the collision with the Don Carlos, and dismissed the insurance companies complaint. Smith Bell & Co. and the Tokyo Marine & Fire Insurance Co. Inc. asked for reconsideration, to no avail. Hence, the petition for review on certiorari.The Supreme Court reversed and set aside the Decision of the Court of Appeals dated 26 November 1980 in CA-GR 61206-R, and reinstated and affirmed the decision of the trial court dated 22 September 1975 in its entirety; with costs against Go Thong.1. Minute resolutions; EffectThat the Supreme Court denied Go Thongs Petition for Review in a minute Resolution did not in any way diminish the legal significance of the denial so decreed by the Court. The Supreme Court is not compelled to adopt a definite and stringent rule on how its judgment shall be framed. It has long been settled that the Supreme Court has discretion to decide whether a minute resolution should be used in lieu of a full blown decision in any particular case and that a minute Resolution of dismissal of a Petition for Review on Certiorari constitutes an adjudication on the merits of the controversy or subject matter of the Petition. It has been stressed by the Court that the grant of due course to a Petition for Review is not a matter of right, but of sound judicial discretion; and so there is no need to fully explain the Courts denial. For one thing, the facts and law are already mentioned in the Court of Appeals opinion. A minute Resolution denying a Petition for Review of a Decision of the Court of Appeals can only mean that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, in other words, that the Decision sought to be reviewed and set aside is correct.2. Res Judicata; Substantial identity of the partiesThe parties in CA-GR. 61320-R involved Smith Bell and Company (Philippines), Inc., and Sumitomo Marine and Fire Insurance Co., Ltd. while the present case involved Smith Bell and Co. (Philippines), Inc. and Tokyo Marine and Fire Insurance Co., Ltd. In other words, there was a common petitioner in the 2 cases, although the co-petitioner in one was an insurance company different from the insurance company copetitioner in the other case. The co-petitioner in both cases, however, was an insurance company and that both petitioners in the 2 cases represented the same interest, i.e., the cargo owners interest as against the hull interest or the interest of the ship owner. More importantly, both cases had been brought against the same defendant, Go Thong, the owner of the vessel Don Carlos. In sum, CA-GR 61320-R and CA-GR 61206-R exhibited substantial identity of parties.3. Res Judicata; Cause of action and judgments the sameAlthough the subject matters of the 2 suits were not identical, in the sense that the cargo which had been damaged in the one case and for which indemnity was sought, was not the very same cargo which had been damaged in the other case indemnity for which was also sought. The cause of action was, however, the same in the 2 cases, i.e., the same right of the cargo owners to the safety and integrity of their cargo had been violated by the same casualty, the ramming of the Yotai Maru by the Don Carlos. The judgments in both cases were final judgments on the merits rendered by the 2 divisions of the Court of Appeals and by the Supreme Court, the jurisdiction of which has not been questioned.4. Res Judicata; Absence of identity of subject matter does not preclude application of res judicataUnder the circumstances, the Court believes that the absence of identity of subject matter, there being substantial identity of parties and identity of cause of action, will not preclude the application of res judicata.5. Res Judicata; Concepts of bar by former judgment and conclusiveness of judgment; Tingson vs. CAIn Tingson v. Court of Appeals, the Court distinguished one from the other the 2 concepts embraced in the principle of res judicata, i.e., bar by former judgment and conclusiveness of judgment: There is no question that where as between the first case where the judgment is rendered and the second case where such judgment is invoked, there is identity of parties, subject-matter and cause of action, the judgment on the merits in the first case constitutes an absolute bar to the subsequent action not only as to every matter which was offered and received to sustain or defeat the claim or demand, but also as to any other admissible matter which might have been offered for that purpose and to all matters that could have been adjudged in that case.This is designated as bar by former judgment. But where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. In fine, the previous judgment is conclusive in the second case, only as those matters actually and directly controverted and determined and not as to matters merely involved therein. This is the rule on conclusiveness of judgment embodied in subdivision (c) of Section 49 of Rule 39 of the Revised Rules of Court.6. Res Judicata; Concepts of bar by former judgment and conclusiveness of judgment; Lopezvs. ReyesIn Lopez v. Reyes, the Court elaborated further the distinction between bar by former judgment which bars the prosecution of a second action upon the same claim, demand or cause of action, and conclusiveness of judgment which bars the relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action. The doctrine of res judicata has two aspects. The first is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second aspect is that it precludes the relitigation of a particular fact or issues in another action between the same parties on a different claim or cause of action. The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of the litigation. Thus, it extends to questions necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment, although no specific finding may have been made in reference thereto, and although such matters were directly referred to in the pleadings and were not actually or formally presented. Under this rule; if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties, and if a judgment necessarily presupposes certain premises, they are as conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion and upon which such conclusion is based is as effectually passed upon as the ultimate question which is finally solved. 7. Decision in CA-GR 61320-R conclusive as to negligence of Don CarlosHerein, the issue of which vessel (Don Carlos or Yotai Maru) had been negligent, or so negligent as to have proximately caused the collision between them, was an issue that was actually, directly and expressly raised, controverted and litigated in CA-GR 61320-R; where it was found that Don Carlos to have been negligent. That Decision was affirmed by the Supreme Court in GR L-48839 in a Resolution dated 6 December 1978. The Reyes Decision thus became final and executory approximately 2 years before the Sison Decision was promulgated. Applying the rule of conclusiveness of judgment, the question of which vessel had been negligent in the collision between the 2 vessels, had long been settled by the Supreme Court and could no longer be relitigated in CA-GR 61206-R. Go Thong was certainly bound by the ruling or judgment of Reyes, L.B., J. and that of the Supreme Court.8. Compromise definedA compromise is an agreement between 2 or more persons who, in order to forestall or put an end to a law suit, adjust their differences by mutual consent, an adjustment which everyone of them prefers to the hope of gaining more, balanced by the danger of losing more. 9. Compromise agreement not an admission that anything is due, not admissible in evidence against person making the offerBy virtue of the compromise agreement, the owner of the Yotai Maru paid a sum of money to the owner of the Don Carlos. Nowhere, however, in the compromise agreement did the owner of the Yotai Maru admit or concede that the Yotai Maru had been at fault in the collision. The familiar rule is that an offer of compromise is not an admission that anything is due, and is not admissible in evidence against the person making the offer. An offer to compromise does not, in legal contemplation, involve an admission on the part of a defendant that he is legally liable, nor on the part of a plaintiff that his claim or demand is groundless or even doubtful, since the compromise is arrived at precisely with a view to avoiding further controversy and saving the expenses of litigation. It is of the very nature of an offer of compromise that it is made tentatively, hypothetically and in contemplation of mutual concessions. 10. Basis of rule on compromisesThe above rule on compromises is anchored on public policy of the most insistent and basic kind; that the incidence of litigation should be reduced and its duration shortened to the maximum extent feasible.11. Administrative proceedings before the Board of Marine Inquiry; Decision of PCG remains ineffectHerein, the decision of the Office of the President upholding the belated reversal by the Ministry of National Defense of the PCGS decision holding the Don Carlos solely liable for the collision, is so deeply flawed as not to warrant any further examination. Upon the other hand, the basic decision of the PCG holding the Don Carlos solely negligent in the collision remains in effect.12. Rule 18 (a) of the International Rules of the RoadRule 18 (a) of the International Rules of the Road, provides (a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve risk of collision, each shall alter her course to starboard, so that each may pass on the port side of the other. This Rule only applies to cases where vessels are meeting end on or nearly end on, in such a manner as to involve risk of collision, end does not apply to two vessels which must, if both keep on their respective course, pass clear of each other. The only cases to which it does apply are when each of two vessels is end on, or nearly end on, to the other; in other words, to cases in which, by day, each vessel sees the masts of the other in a line or nearly in a line with her own; and by night to cases in which each vessel is in such a position as to see both the sidelights of the other. It does not apply, by day, to cases in which a vessel sees another ahead crossing her own course; or, by night, to cases where the red light of one vessel is opposed to the red light of the other or where the green light of one vessel is opposed to the green light of the other or where a red light without a green light or a green light without a red light is seen ahead, or where both green and red lights are seen anywhere but ahead.13. Factors constituting negligence on part of Don Carlos; Rule 18 (a) of the International Rules of the RoadThe first of the factors, which are constitutive of negligence on the part of the Don Carlos, was the failure of the Don Carlos to comply with the requirements of Rule 18 (a) of the International Rules of the Road (Rules). Herein, Don Carlos was overtaking another vessel, the Don Francisco and was then at the starboard (right side) of the aforesaid vessel at 3.40 a.m. It was in the process of overtaking Don Francisco that Don Carlos was finally brought into a situation where he was meeting end-on or nearly end-on Yotai Maru thus involving risk of collision. For her part, the Yotai Maru did comply with its obligations under Rule 18 (a). As the Yotai Maru found herself on an end-on or a nearly end-on situation vis-a-vis the Don Carlos, and as the distance between them was rapidly shrinking, the Yotai Maru turned starboard (to its right) and at the same time gave the required signal consisting of one short horn blast. The Don Carlos turned to portside (to its left), instead of turning to starboard as demanded by Rule 18 (a). The Don Carlos also violated Rule 28 (c) for it failed to give the required signal of two (2) short horn blasts meaning I am altering my course to port. When the Yotai Maru saw that the Don Carlos was turning to port, the master of the Yotai Maru ordered the vessel turned hard starboard at 3:45 a.m. and stopped her engines; at about 3:46 a.m. the Yotai Maru went full astern engine. The collision occurred at exactly 3:50 a.m.14. Factors constituting negligence on part of Don Carlos; Proper lookoutThe second circumstance constitutive of negligence on the part of the Don Carlos was its failure to have on board that might a proper look-out as required by Rule I (B). Under Rule 29 of the same set of Rules, all consequences arising from the failure of the Don Carlos to keep a proper look-out must be borne by the Don Carlos.15. Proper look out definedA proper look-out is one who has been trained as such and who is given no other duty save to act as a look-out and who is stationed where he can see and hear best and maintain good communication with the officer in charge of the vessel, and who must, of course, be vigilant.16. Who is not a proper look outThe look-out should have no other duty to perform. (Chamberlain v. Ward, 21, N.O.W. 62, U.S. 548, 571). He has only one duty, that which its name implies to keep a look-out. So a deckhand who has other duties, is not a proper look-out (Brooklyn Perry Co. v. U.S., 122, Fed. 696). The navigating officer is not a sufficient look-out (Larcen B. Myrtle, 44 Fed. 779) Griffin on Collision, pages 277-278). Neither the captain nor the [helmsman] in the pilothouse can be considered to be a look-out within the meaning of the maritime law. Nor should he be stationed in the bridge. He should be as near as practicable to the surface of the water so as to be able to see low-lying lights (Griffin on Collision, page 273). Herein, it is hardly probable that neither German or Leo Enriquez may qualify as look-out in the real sense of the word. The failure of the Don Carlos to recognize in a timely manner the risk of collision with the Yotai Maru coming in from the opposite direction, was at least in part due to the failure of the Don Carlos to maintain a proper look-out.14. Factors constituting negligence on part of Don Carlos; Second Mate in commandThe third factor constitutive of negligence on the part of the Don Carlos relates to the fact that Second Mate Benito German was, immediately before and during the collision, in command of the Don Carlos, although its captain, Captain Rivera, was very much in the said vessel at the time. There was no explanation as to why the second mate was at the helm of the aforesaid vessel when Captain Rivera did not appear to be under any disability at the time. The fact that second mate German was allowed to be in command of Don Carlos and not the chief or the sailing mate in the absence of Captain Rivera, gives rise to no other conclusion except that said vessel had no chief mate. Worst still aside from Germans being only a second mate, is his apparent lack of sufficient knowledge of the basic and generally established rules of navigation (e.g. necessity of look-out). There is, therefore, every reasonable ground to believe that his inability to grasp actual situation and the implication brought about by inadequacy of experience and technical know-how was mainly responsible and decidedly accounted for the collision of the vessels involved in the case.15. No exclusive obligation upon one of the vessels to avoid the collisionBy imposing an exclusive obligation upon one of the vessels, the Yotai Maru, to avoid the collision, the Court of Appeals not only chose to overlook all the above facts constitutive of negligence on the part of the Don Carlos; it also in effect used the very negligence on the part of the Don Carlos; to absolve it from responsibility and to shift that responsibility exclusively onto the Yotai Maru the vessel which had observed carefully the mandate of Rule 18 (a).16. Urrutia vs. Baco River Plantation not applicableThe case of G. Urrutia and Company v. Baco River Plantation Company is simply inappropriate and inapplicable. For the collision in the Urrutia case was between a sailing vessel, on the one hand, and a power driven vessel, on the other; the Rules, of course, imposed a special duty on the power-driven vessel to watch the movements of a sailing vessel, the latter being necessarily much slower and much less maneuverable than the power-driven one. Herein, both the Don Carlos and the Yotai Maru were power-driven and both were equipped with radar; the maximum speed of the Yotai Maru was thirteen (13) knots while that of the Don Carlos was eleven (11) knots. Moreover, as already noted, the Yotai Maru precisely took last minute measures to avert collision as it saw the Don Carlos turning to portside: the Yotai Maru turned hard starboard and stopped its engines and then put its engines full astern.National Development Co. vs. CA (GR L-49407, 19 August 1988)Maritime Co. of the Philippines vs. CA (GR L-49469)Second Division, Paras (J): 3 concurFacts: In accordance with a memorandum agreement entered into between National Development Corporation (NDC) and Maritime Corporation of the Philippines Inc. (MCP) on 13 September 1962, NDC as the first preferred mortgagee of three ocean going vessels including one with the name Doa Nati appointed MCP as its agent to manage and operate said vessel for and in its behalf and account. Thus, on 28 February 1964 the E. Philipp Corporation of New York loaded on board the vessel Doa Nati at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the Peoples Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Doa Nati figured in a collision at 6:04 a.m. on 15 April 1964 at Ise Bay, Japan with a Japanese vessel SS Yasushima Maru as a result of which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Y6,045,500 and 15 bales were not landed and deemed lost. The damaged and lost cargoes was worth P344,977.86 which amount, the Development Insurance and Surety Corporation (DISC) as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19,938.00 which DISC as insurer paid to Guilcon as holder of the duly endorsed bill of lading. Thus, DISC had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes.On 22 April 1965, DISC filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorneys fees of P10,000.00 against NDC and MCP. On 12 November 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering MCP and NDC to pay jointly and solidarily to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on 22 April 1965, until fully paid and attorneys fees of P10,000.00. Likewise, in said decision, the trial court granted MCPs cross-claim against NDC. MCP interposed its appeal on 20 December 1969, while NDC filed its appeal on 17 February 1970 after its motion to set aside the decision was denied by the trial court in its order dated 13 February 1970. On 17 November 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence, the appeals by certiorari. On 25 July 1979, the Supreme Court ordered the consolidation of the above cases.The Supreme Court denied the subject petitions for lack of merit, and affirmed the assailed decision of the Appellate Court.1. Law of country of destination governs liability of common carrierAs held in Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) where it was held under similar circumstances that the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code.2. Actual collision occurring in foreign waters immaterialHerein, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.3. Extraordinary diligence required of common carriers; Negligence presumedUnder Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all cases other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.4. Collision does not fall under matters regulated by Civil Code; Application of Article 826 to 839 of the Code of Commerce properThe collision, however, falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in the lower courts application to the present case of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.5. Articles 826 and 827 of the Code of Commerce; Liability of owner either when imputable to the personnel of the vessel or imputable to both vesselsArticle 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.6. Primary liability of ship owner on occasion of collision due to fault of captainUnder the provisions of the Code of Commerce, particularly Articles 826 to 839, the ship owner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the ship owner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Yeung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).7. Code of Commerce applies both to domestic and foreign trade; COGSA does not repeal nor limit Code of Commerces applicationThe Code of Commerce applies not only to domestic trade but also foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Commonwealth Act 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade. Under Section 1 thereof, it is explicitly provided that nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application. By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit its application.8. DISC a subrogee, has a right of action against MCPHerein, Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, DISC paid the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that DISC has a cause of action to recover (what it has paid) from MCP.9. MCP an agent; Agency broad enough to include shipagent in maritime lawThe Memorandum Agreement of 13 September 1962 shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Consequently, under the circumstances, MCP cannot escape liability.10. Owner and agent of offending vessel liable when both are impleadedIt is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damagesoccasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn, Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).11. Value of goods declared in bills of lading, liability of MCP not limited to P200 per package or per bale of raw cotton as stated in paragraph 17 of bill of ladingThe declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) cannot limit its liability for injury to a less of goods where such injury or loss was caused by its own negligence. Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce).12. Action not prescribed; Section 3 (6)The bills of lading issued allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Doa Nati on 18 April 1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on 18 April 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on the said dates. Accordingly, the complaint was filed on 22 April 1965, i.e. long before the lapse of 1 year from the date the lost or damaged cargo should have been delivered in the light of Section 3, sub-paragraph (6) of COGSA.ABOITIZ SHIPPING CORP VS GENERAL FIRE AND LIFE ASSURANCE CORPFACTS: Aboitiz Shipping is the owner of M/V P. Aboitiz, a vessel w/c sank on a voyage from Hongkong to the Philippines. This sinking of the vessel gave rise to the filing of several suits for recovery of the lost cargo either by the shippers their successors-in-interest, or the cargo insurers like General Accident (GAFLAC). Board of Marine Inquiry (BMI), on its initial investigation found that such sinking was due to force majeureand that subject vessel, at the time of the sinking was seaworthy. The trial court rules against the carrier on the ground that the loss did not occur as a result offorce majeure. This was affirmed by the CA and ordered the immediate execution of the full judgment award.However, other cases have resulted in the finding that vessel was seaworthy at the time of the sinking, and that such sinking was due toforce majeure. Due to these different rulings, Aboitiz seeks a pronouncement as to the applicability of the doctrine of limited liability on the totality of the claimsvis a visthe losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of maritime law.Aboitiz argued that theLimited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares.ISSUE: Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law should apply in this and related cases.RULING: The SC ruled in the affirmative.The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade.The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587, 590, and 837, hereunder quotedin toto:Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587.Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.Art. 837. The civil liability incurred by ship owners in the case prescribed in this section (on collisions), shall be understood aslimited to the value of the vessel with all its appurtenances and freightage served during the voyage.Theonlytime the Limited Liability Ruledoes not applyis when there is an actual finding of negligence on the part of the vessel owner or agent. ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case.RULING 2: The SC ruled in the negative.In its Decision, the trial court merely held that:. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.Decisions in other cases affirmed the factual findings of the trial court, adding that the cause of the sinking of the vessel was because of unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. Indeed, there appears to have been no evidence presented sufficient to form a conclusion that Aboitiz the ship owner itself was negligent, and no tribunal, including this Court will add or subtract to such evidence to justify a conclusion to the contrary.The findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness" clearlydid not pertain to the structural condition of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of the sinking, which condition was a result of the acts of the captain and the crew.The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders to limited liability under our corporation law. Both are privileges granted by statute, and while not absolute, must be swept aside only in the established existence of the most compelling of reasons. In the absence of such reasons, this Court chooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to do so, such incursion is definitely punitive in nature and must never be taken lightly.More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors against an insolvent corporation whose assets are not enough to satisfy the totality of claims as against it. While each individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who come later. In such an instance, such creditors too would not also be able to gain access to the assets of the individual shareholders, but must limit their recovery to what is left in the name of the corporation.In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of the corporation left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the particular voyage.In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the others by the simple expedience of having filed or completed its action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims.CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.

DOCTRINE OF LIMITED LIABILITY DOES NOT APPLY TO SITUATIONS IN WHICH THE LOSS OR THE INJURY IS DUE TO THE CONCURRENT NEGLIGENCE OF THE SHIPOWNER AND THE CAPTAIN.

Facts:

1. On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.

2. During the voyage the degree of the position of the ship would change due to the shifting of the logs inside. Eventually at about 15 degrees the captain ordered for everyone to abandon the ship.

3. Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain. Petitioner while admitting the sinking of the vessel, interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and secured; that the vessels master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm.

4. It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen.

5. The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo.

6. The CA affirmed the trial courts finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea. Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative liability of the owner/operator, officers and crew of the vessel. However, the determination of whether the carrier observed extraordinary diligence in protecting the cargo it was transporting was a function of the courts, not of the BMI.

Issue:Whether or not the Doctrine of Limited Liability applies.

Held:No it does not.Common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case; In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought aboutamong othersby flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the ship-owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. Closer supervision on the part of the ship owner could have prevented this fatal miscalculation. As such, the ship owner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

Erlanger & Galinger vs. Swedish East Asiatic (GR 10051, 9 March 1916)First Division, Per Curiam (p): 5 concurFacts: The steamship Nippon loaded principally with copra and with some other general merchandise sailed from Manila on 7 May 1913, bound for Singapore. The steamship Nippon went aground on Scarborough Reef about 4:30 p.m. of 8 May 1913. Scarborough Reef is about 120 to 130 miles from the nearest point on the Island of Luzon. On 9 May 1913, the chief officer, Weston, and 9 members of the crew left the Nippon and succeeded in reaching the coast of Luzon at Santa Cruz, Zambales, on the morning of 12 May 1913. On 12 May 1913, at 12:30 p.m. the chief officer sent a telegram to Helm, the Director of the Bureau of Navigation at Manila. At 1.30 p. m., the Government of the Philippine Islands ordered the coast guard cutter Mindoro with life-saving appliances to the scene of the wreck of the Nippon. At 3 p. m. the steamship Manchuria sailed from manila for Hongkong and was requested to pass by Scarborough Reef. The Manchuria arrived at Scarborough Reef some time before the arrival of the Mindoro on 13 May 1913, and took on board the captain and the remainder of the crew. The Manchuria was still near Scarborough Reef when the Mindoro arrived. The captain of the Manchuria informed the captain of the Mindoro that the captain and crew of the Nippon were on board the Manchuria and were proceeding to Hongkong. The captain of theMindorooffered to render assistance to the captain and crew of theNippon, which assistance was declined. The Mindoro proceeded to the Nippon and removed the balance of the baggage of the officers and crew, which was found upon the deck. The Mindoro proceeded to Santa Cruz, Zambales, where the chief officer, Weston, and the 9 members of the crew were taken on board and brought to Manila, arriving there on 14 May 1913. On 13 May 1913, Dixon, captain of the Manchuria sent the message that All rescued from the Nippon. Stranded on extreme north end of shoal. Vessel stranded May 9. She is full of water fore and aft and is badly ashore. Ship abandoned. Proceed Hongkong. The captain of the Nippon saw the above message before it was sent. On 14 May 1913, Erlanger & Galinger applied to the Director of Navigation for a charter of a coast guard cutter, for the purpose of proceeding to the stranded and abandoned steamer Nippon. The coast guard cutter Mindoro was chartered to Erlanger & Galinger and started on its return to the S.S. Nippon on 14 May 1913. Erlanger & Galinger took possession of the Nippon on or about 17 May 1913, and continued in possession until about 1July 1914, when the last of the cargo was shipped to Manila. The Nippon was floated and towed to Olongapo, where temporary repairs were made, and then brought to Manila. The Manchuria arrived at Hongkong on the evening of 14 May 1913. When the captain and crew left the Nippon and went on board the Manchuria, they took with them the chronometer, the ships register, the ships articles, the ships log, and as much of the crews baggage as a small boat could carry. The balance of the baggage of the crew was packed and left on the deck of the Nippon and was later removed to the Mindoro, without protest on the part of the captain of the Nippon. The cargo was brought to the port of Manila and the values for the (1) Copra (approximately 1317 tons) valued at, less cost of sale by Collector of Customs were valued at P142,657.05; (2) General cargo-sold at customhouse at P5,939.68; (3) Agar-agar at P5,635.00; (4) Gamphor at P 1,850.00; (5) Curios at P150.00, respectively; totaling P156,231.73. The ship was valued at P250,000. The Erlanger & Galingers claim against the ship was settled for (L)15,000 or about P145,800 On 5 August 1913, Erlanger & Galinger brought an action against the insurance companies and underwriters, who represented the cargo salved from the Nippon, to have the amount of salvage, to which Erlanger & Galinger were entitled, determined. The case came on for trial before the Honorable A. S. Crossfield. The Oelwerke Teutonia, a corporation, appeared as claimant of the copra. The New Zealand Insurance Company appeared as insurer and assignee of 1,000 case of bean oil and two cases of bamboo lacquer work; and The Thames and Mersey Marine Insurance Company appeared as a reinsurer to the extent of P6,500 on the cargo of copra. The court adjudged the case in favor of Erlanger & Galinger for of the net proceeds of sales amounting to P74,298.36 and of the interest accruing thereon, and against Carl Maeckler for the sum of P925, and against the New Zealand Insurance Company (Ltd.) for the of P2,800, and against whomever the two cases marked R W, Copenhagen, were delivered to, and for the sum of P2,370.68, out of the proceeds of the sale of 1,000 cases of vegetable oil, and in favor of the Oelwerke Teutonia for the sum of P71,328.53, now deposited with the Hongkong & Shanghai Banking Corporation, together with of the interest thereon.No costs were taxed.The Oelwerke Teutonia, The New Zealand Insurance Company (Ltd.). and Erlanger & Galinger appealed from the decision. The Supreme Court ordered and decreed that the judgment of the lower court be modified, and that a judgment be entered against the Oerlwerke Teutonia and New Zealand Insurance Co. and in favor of Erlanger & Galinger (against Oelwerke Teutonia for the sum of P41,721.55; against The New Zealand Insurance Co. in the sum of P1,127). The Court further ordered and decreed that the amount of the judgment rendered be paid out of the money which is under the control of the CFI of Manila; without any finding as to costs.1. General rules governing salvage services and salvage awards; Laws of Oleron (1226)In the Laws of Oleron, which were promulgated sometime before the year 1226, at article IV, states If a vessel, departing with her lading from Bordeaux, or any other place, happens in the course of her voyage, to be rendered unfit to proceed therein, and the mariners save as much of the lading as possibly they can; if the merchants require their goods of the master, he may deliver them if he pleases, they paying the freight in proportion to the part of the voyage that is performed, and the costs of the salvage. But if the master can readily repair his vessel, he may do it; or if he pleases, he may freight another ship to perform his voyage.And if he has promised the people who help him to save the ship the third, or the half part of the goods saved for the danger they ran, the judicatures of the country should consider the pains and trouble they have been at, and reward them accordingly, without any regard to the promises made them by the parties concerned in the time of their distress.2. Salvage definedIn general, salvage may be defined as a service which one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect and secure.3. Salvage defined; Flanders on Maritime LawSalvage is founded on the equity of remunerating private and individual services performed in saying, in whole or in part, a ship or its cargo from impending peril, or recovering them after actual loss. It is a compensation for actual services rendered to the property charged with it, and is allowed for meritorious conduct of the salvor, and in consideration of a benefit conferred upon the person whose property he has saved. A claim for salvage rests on the principle that, unless the property be in fact saved by those who claim the compensation, it can not be allowed, however benevolent their intention and however heroic their conduct.4. Salvage defined; Williamson vs. the AlphonsoIn the case of Williamson vs. The Alphonso, it was held that the relief of property from an impending peril of the sea, by the voluntary exertions of those who are under no legal obligation to render assistance, and the consequent ultimate safety of the property, constitute a case of salvage. It may be a case of more or less merit, according to the degree of peril in which the property was, and the danger and difficulty or relieving it; but these circumstances affect the degree of the service and not its nature.5. Salvage defined; Blackwall vs. Saucelito Tug Co.In Blackwall vs. Saucelito Tug Company, the court said Salvage is the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict, or recapture.6. Elements necessary to a valid salvage claim; Mayflower vs. the SabineThree elements are necessary to a valid salvage claim: (1) A marine peril. (2) Service voluntarily rendered when not required as an existing duty or from a special contract. (3) Success, in whole or in part, or that the service rendered contributed to such success.7. Derelict defined; Abbotts law of merchant ships and seamenA derelict is defined as A ship or her cargo which is abandoned and deserted at sea by those who were in charge of it, without any hope of recovering it (sine spe recuperandi), or without any intention of returning to it (sine animo revertendi). Whether property is to be adjudged derelict is determined by ascertaining what was the intention and expectation of those in charge of it when they quitted it. If those in charge left within the intention of returning, or of procuring assistance, the property is not derelict, but if they quitted the property with the intention of finally leaving it, it is derelict, and a change of their intention and an attempt to return will not change of their intention and an attempt to return will not change its nature.8. Ship was abandoned, salvage was commencedHerein, at the time Erlanger & Galinger commenced the attempt to salve what was possible of the S. S. Nippon and cargo, it was justified, from all the conditions existing, in believing that it had abandoned and in taking possession, even though the master of the vessel intended when he left it, to return and attempt salvage. Such intention, if it existed, does not appear to have been very firmly fixed, considering the leisurely manner in which the master proceeded after he reached the Port of Hongkong. Captain Eggert did not make any determined effort to arrange for the salvage of the Nippon. Capt. Eggert had over two days in which to arrange for salvage operations and he did nothing, while Erlanger & Galinger, who were strangers and had no interest, sent out a salvage expedition in 24 hours after they discovered that the ship was wrecked. The evidence proves that the Nippon was in peril; that the captain left in order to protect his life and the lives of the crew; that the animo revertendi was slight. The argument of the defendant-appellant to the effect that the ship was in no danger is a bit out of place in view of the statement of the captain that she would sink with the first gale, coupled with the fact that a typhoon was the cause of her stranding.9. Cases where claim for salvage was allowed; Bee caseIn The Bee (Fed. Cas. No. 1219; 3 Fed. Cas., 41), the facts were as follows: The Bee sailed from Boston to Nova Scotia. Three days after leaving port a gale was encountered which forced her to run into a cove on the north side of Grand Manan Island, where an anchor was let out. The ship was somewhat injured from the force of the storm. The master and the crew stayed on board for 24 hours and then went ashore to procure assistance. The island was very sparsely settled. They met on shore a number of men (the libelants) to whom they explained the predicament and position of the ship. These men immediately went to the ship, boarded her, and took possession. After the master had been ashore about five hours he returned to the ship and found the libelants in possession. The owners contended that the master was excluded from the ship wrongfully and therefore the libelants could not claim salvage.10. Justification of award of salvage in the Bee caseWhen a vessel is found at sea, deserted, and has been abandoned by the master and crew without the intention of returning and resuming the possession, she is, in the sense of the law, derelict, and the finder who takes the possession with the intention of saving her, gains a right of possession, which he can maintain against the true owner. The owner does not, indeed, renounce his right of property. This is not presumed to be his intention, nor does the finder acquire any such right. But the owner does abandon temporarily his right of possession, which is transferred to the finder, who becomes bound to preserve the property with good faith, and bring it to a place of safety for the owners use; and he acquires a right to be paid for his services a reasonable and proper compensation, out of the property itself. He is not bound to part with the possession until this is paid, or it is taken into the custody of the law, preparatory to the amount of salvage being legally ascertained. Should the salvors meet with the owner after an abandonment, and he should tender his assistance in saving and securing the property, surely this ought not, without good reasons, to be refused, as this would be no bar to the right of salvage, and should it be unreasonably rejected it might affect the judgment of a court materially, as to the amount proper to be allowed. Still, the right possession is in the salvor. But when the owner, or the master and crew who represent him, leave a vessel temporarily, without any intention of a final abandonment, but with the intent to return and resume the possession, she is not considered as a legal derelict, nor is the right of possession lost by such temporary absence for the purpose of obtaining assistance, although no individual may be remaining on board for the purpose of retaining the possession. Property is not, in the sense of the law, derelict and the possession left vacant for the finder, until the spes recuperandi is gone, and the animus revertendi is finally given up. (The Aquila, 1 C. Rob. Adm., 41.) But when a man finds property thus temporarily left to the mercy of the elements, whether from necessity orany other cause, though not finally abandoned and legally derelict, and he takes possession of it with the bona fide intention of saying if for the owner, he will not be treated as a trespasser. On the contrary, if by his exertions he contributes materially to the preservation of the property, he will entitle himself to a remuneration according to the merits of his service as a salvor.11. Cases where claim for salvage was allowed; In the John GilpinIn The John Gilpin (Fed. Cas. No. 7345; 13 Fed. Cas., 675) the ship John Gilpin, attempting to leave New York harbor in a winter storm, was driven ashore. The ships crew sent for help and in the meantime put forth every effort to get her off. Help arrived toward evening, but accomplished nothing. The master and crew went ashore. The same night the libelants went out to the ship with equipment and started working. It was contended that the master had gone ashore for assistance. He returned the next morning with a tug and some men and demanded possession, which was refused. Salvage was allowed.12. Justification of award of salvage in the John Gilpin caseThe libelants, in the exercise of their calling as wreckers, coming to a vessel in that plight, would be guilty of a dereliction of duty if they failed to employ all their means for the instantaneous preservation of property so circumstanced. This may not be strictly and technically a case of derelict, if really the master of the brig had gone to the city to obtain the necessary help to save the cargo and brig, intending at the time, to return with all practicable dispatch. It appears he came to the wreck by 8 or 9 a. m. the following day, in a steam-tug, with men to assist in saving the cargo. The animus revertendi et recuperandi may thus far havecontinued with the master, but this mental hope or purpose must be regarded inoperative and unavailing as an actual occupancy of the vessel, or manifestation to others of a continuing possession. She was absolutely deserted for 12 or 14 hours in a condition when her instant destruction was menaced, and the lives of those who should attempt to remain by her would be considered in highest jeopardy. She was quite derelict; and being thus found by the libelants, the possession they took of her was lawful. Possession being thus taken when the vessel was, in fact, abandoned and quite derelict, under peril of instant destruction, the libelants had a right to retain it until the salvage was completed, and no other person could interfere against them forcibly, provided they were able to effect the purpose, and were conducting the business with fidelity and vigor.13. Cases where claim for salvage was allowed; In The ShawmutIn The Shawmut (155 Fed. Rep., 476) the court allowed salvage upon the following facts: The fourmasted schooner Myrthle Tunnel sailed from Brunswick bound for New York The first day out a hurricane struck her and tore the sails away and carried off the deck load. She was badly damaged and leaking. The master of the Myrthle Tunnel requested towage by the steamship Mae to the port of Charleston. The Mae, on account of her own damaged condition, was unable to tow but she took the master and crew of the Myrthle Tunnel off and landed them at Charleston. The owners notified and they started an expedition out in search.Before this expedition reached her, the steamship Shawmut sighted the Myrthle Tunnel, and, finding that she was abandoned and waterlogged, took her in tow and succeeded in taking her to Charleston. The owners of the Myrthle Tunnel contended that she was not derelict, because the master had gone ashore to procure assistance.14. Justification of award of salvage in The Shawmut caseThe first question that arises is whether the Myrthle Tunnel is a derelict. Prima facie a vessel found at sea in a situation of peril, with no one aboard of her, is a derelict; but where the master and crew leave such vessel temporarily, without any intention of final abandonment, for the purpose of obtaining assistance, and with the intent to return and resume possession, she is not technically a derelict. It is not of substantial importance to decide that question. She was what may be called a quasi-derelict; abandoned, helpless, her sails gone, entirely without power in herself to save herself from a situation not of imminent but ofconsiderable peril; lying about midway between the Gulf Stream and the shore, and about 30 miles from either. An east wind would have driven her upon one, and a west wind into the other, where she would have become a total loss. Lying in the pathway of commerce, with nothing aboard to indicate an intention to return and resume possession, it was a highly meritorious act upon the part of the Shawmut to take possession of her, and the award must be governed by the rules which govern in case of derelicts; the amount of it to be modified in some degree in the interest of the owners in consideration of their prompt, intelligent, and praiseworthy efforts to resume possession of her, wherein they incurred considerable expense.15. Doctrine in the cases of Bee, The John Gilpin, and The ShawmutThe first of these cases was decided in 1836 and the last in 1907. They indicate that the abandonment of a vessel by all on board, when the vessel is in peril, will justify third parties in taking possession with the bona fide intention of saving the vessel and its cargo for its owners. The mental hope of the master and the crew will in no way affect the possession nor the right to salvage.16. Manila is base for operationsAs to whether Manila or Hongkong should be used as a base for operations, Capt. Robinson, who was the only one of the experts who had had any experience in handling wet copra, unqualifiedly approved Manila as a base for operations. Further, Lebreton, a stevedore, testified that he would have