TRANSPORTATION LAW- CASE LAWI. NON-USE OF ORIGINAL CONTRACTED ROUTE: NOTICE OF LOSS

SAVELLANO ET. AL v SAVILLO (G.R No. 151783; July 8, 2003)

FACTS:On October 27, 1991, at around 1:45 p.m., petitioners Savellano (mayor, former COMELEC Chairman, & RTC judge), Virginia, and Deogracias (VG, Ilocos Sur) departed from San Francisco, USA on board Northwest Airlines (NW) Flight 27, Business Class, bound for Manila, Philippines using the NW round-trip tickets which were issued at [respondent's] Manila ticketing office. They were expected to arrive at NAIA, Manila on October 29, 1991 or after 12 hours of travel. However, after 2 hours, pilot made an emergency landing at Seattle upon announcement that a fire started in one of the planes engines. Petitioners and the other passengers proceeded to Gate 8 of the Seattle Airport where they were instructed to go home to Manila the next day, 'using the same boarding passes with the same seating arrangements'. Respondent's shuttle bus thereafter brought all passengers to the Seattle Red Lion Hotel where they were billeted by, and at the expense of respondent.Petitioners who were travelling as a family were assigned one room at the hotel. At around 12:00 midnight, they were awakened by a phone call from [respondent's] personnel who advised them to be at the Seattle Airport by 7:00 a.m. (Seattle time) the following day, October 28, 1991, for departure. To reach the airport on time, the NW shuttle bus fetched them early, making them skip the 6:30 a.m. hotel breakfast. Prior to leaving the hotel, however, [petitioners] met at the lobby Col. Roberto Delfin, a Filipino co-passenger who was also travelling Business Class, who informed them that he and some passengers were leaving the next day, October 29, 1991, on board the same plane with the same itinerary.When petitioners reached the Seattle Airport, [respondent's] ground stewardess belatedly advised them that instead of flying to Manila they would have to board NW Flight 94, a DC-10 plane, bound for a 3-hour flight to Los Angeles for a connecting flight to Manila. When [Petitioner] Savellano insisted theirs was a direct flight to Manila, the female ground stewardess just told them to hurry up as they were the last passengers to board.In Los Angeles, [petitioners] and the other passengers became confused for while 'there was a sort of a board' which announced a Seoul-Bangkok flight, none was posted for a Manila flight. It was only after they complained to the NW personnel that the latter 'finally changed the board to include Manila.'Before boarding NW Flight 23 for Manila via Seoul, petitioners encountered another problem. Their three small handcarried items which were not padlocked as they were merely closed by zippers were 'not allowed' to be placed inside the passengers' baggage compartments of the plane by an arrogant NW ground stewardess. On petitioners arrival at the NAIA, Manila where they saw Col. Delfin and his wife as well as the other passengers of the distressed flight who unlike them [petitioners] who left Seattle on October 28, 1991, left Seattle on October 29, 1991, they were teased for taking the longer and tiresome route to the Philippines. Furthermore, when petitioners claimed their luggage at the baggage carousel, they discovered that the would-have-been handcarried items which were not allowed to be placed inside the passengers' baggage compartment had been ransacked and the contents thereof stolen. Petitioner filed a case for damages, claiming that they suffered inconvenience, embarrassment, and humiliation for taking a longer route. RTC granted them moral and actual damages, crediting petitioners claim that that they were excluded from the Seattle-Tokyo-Manila flight to accommodate several Japanese passengers bound for Japan. And as basis of its award of actual damages arising from the allegedly lost articles contained in the would-have-been handcarried[luggage, the RTC, passing on the lack of receipts covering the same, took judicial notice of the Filipinos' practice of often bringing home o for friends and relatives. CA however reversed.

ISSUES: 1. Whether or not petitioners discriminatory bump-off constitutes breach by respondent airline of its air-carriage contract2. Whether or not petitioners are entitled to actual, moral and exemplary damages including attorney's fees as a consequence3. Whether or not petitioners can claim the value of the alleged lost items/baggageHELD:1. YES. a. Carrier may without notice substitute alternate carriers or aircraft or may alter or omit stopping places shown on the ticket in case of necessity. (provisions of the airline ticket)

b. UNILATERAL CHANGE: NOT PERMITTED

The Court finds that there is nothing there authorizing Northwest to decide unilaterally, after the distressed flight landed in Seattle, what other stopping places petitioners should take and when they should fly. True, Condition 9 on the ticket allowed respondent to substitute alternate carriers or aircraft without notice. However, nothing there permits shuttling passengers without so much as a by your-leave to stopping places that they have not been previously notified of, much less agreed to or been prepared for. Substituting aircrafts or carriers without notice is entirely different from changing stopping places or connecting cities without notice.

The ambiguities in the contract, being one of adhesion, should be construed against the party that caused its preparation in this case, respondent. Since the conditions enumerated on the ticket do not specifically allow it to change stopping places or to fly the passengers to alternate connecting cities without consulting them, then it must be construed to mean that such unilateral change was not permitted.The basis of the Complaint was the way respondent allegedly treated petitioners like puppets that could be shuttled to Manila via Los Angeles and Seoul without their consent.12 Undeniably, it did not take the time to explain how it would be meeting its contractual obligation to transport them to their final destination. Its employees merely hustled the confused petitioners into boarding one plane after another without giving the latter a choice from other courses of action that were available. It unilaterally decided on the most expedient way for them to reach their final destination.

c. NO NECESSITY OF ALTERATION

The change in petitioners' flight itinerary does not fall under the situation covered by the phrase "may alter or omit stopping places shown on the ticket in case of necessity." A case of necessity must first be proven. The burden of proving it necessarily fell on respondent. This responsibility it failed to discharge.

Petitioners do not question the stop in Seattle. The airplane engine trouble that developed during the flight bound for Tokyo from San Francisco definitely merited the "necessity" of landing the plane at some place for repair in this case, Seattle but not that of shuttling petitioners to other connecting points thereafter without their consent.

Northwest failed to show a "case of necessity" for changing the stopping place from Tokyo to Los Angeles and Seoul. It is a fact that some of the passengers on the distressed flight continued on to the Tokyo (Narita) connecting place. No explanation whatsoever was given to petitioners as to why they were not similarly allowed to do so. It may be that the Northwest connecting flight from Seattle to Tokyo to Manila could no longer accommodate them. Yet it may also be that there were other carriers that could have accommodated them for these sectors of their journey, and whose route they might have preferred to the more circuitous one unilaterally chosen for them by respondent.

When, as a result of engine malfunction, a commercial airline is unable to ferry its passengers on the original contracted route, it nonetheless has the duty of fulfilling its responsibility of carrying them to their contracted destination on the most convenient route possible. Failing in this, it cannot just unilaterally shuttle them, without their consent, to other routes or stopping places outside of the contracted sectors.

2. YES (actual, nominal); NO (moral, exemplary)a. ACTUAL DAMAGES: ARTICLE 1170 & 2201 (NCC) b. MORAL DAMAGES: NO BAD FAITH ( ARTICLE 2219)

There is no persuasive evidence that they were maliciously singled out to fly the Seattle-Los Angeles-Seoul-Manila route. It appears that the passengers of the distressed flight were randomly divided into two groups. One group was made to take the Tokyo-Manila flight; and the other, the Los Angeles-Seoul-Manila flight. The selection of who was to take which flight was handled via the computer reservation system, which took into account only the passengers' final destination.

The records show that respondent was impelled by sincere motives to get petitioners to their final destination by whatever was the most expeditious course in its judgment, if not in theirs. Though they claim that they were not accommodated on Flight 27 from Seattle to Tokyo because respondent had taken on Japanese passengers, petitioners failed to present convincing evidence to back this allegation. In the absence of convincing evidence, we cannot find respondent guilty of bad faith.

In a breach of contract, such damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith. Insufficient to warrant the award of moral damages is the fact that complainants suffered economic hardship, or that they worried and experienced mental anxiety.

c. EXEMPLARY DAMAGES: NO ACT IN A WANTON, FRAUDULENT, OPPRESIVE OR MALEVOLENT MANNER (ARTICLE 2232)

At most, it can only be found guilty of having acted without first considering and weighing all other possible courses of actions it could have taken, and without consulting petitioners and securing their consent to the new stopping places.

The unexpected and sudden requirement of having to arrange the connecting flights of every single person in the distressed plane in just a few hours, in addition to the Northwest employees' normal workload, was difficult to satisfy perfectly. We cannot find respondent liable for exemplary damages for its imperfection of neglecting to consult with the passengers beforehand.

d. NOMINAL DAMAGES (ARTICLES 2221 & 2222)

Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.

In the present case, we must consider that petitioners suffered the inconvenience of having to wake up early after a bad night and having to miss breakfast; as well as the fact that they were business class passengers. They paid more for better service; thus, rushing them and making them miss their small comforts was not a trivial thing. We also consider their social and official status. Victorino Savellano was a former mayor, regional trial court judge and chairman of the Commission on Elections. Virginia B. Savellano was the president of five rural banks, and Deogracias Savellano was then the incumbent vice governor of Ilocos Sur. Hence, it will be proper to grant one hundred fifty thousand pesos (P150,000) as nominal damages28 to each of them, in order to vindicate and recognize their right29 to be notified and consulted before their contracted stopping place was changed.

3. NO.a. FAILURE TO GIVE TIMELY NOTICE OF LOSSThe Conditions printed on the airline ticket plainly read:

"2.Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not `International carriage' as defined by that Convention."7.Checked baggage will be delivered to bearer of the baggage check. In case of damage to baggage moving in international transportation complaint must be made in writing to carrier forthwith after discovery of damage, and at the latest, within 7 days from receipt; in case of delay, complaint must be made within 21 days from date the baggage was delivered.

The pertinent provisions of the Rules Relating to International Carriage by Air (Warsaw Convention) state:

"Article 261.Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that the same have been delivered in good condition and in accordance with the document of carriage.2.In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within three days from the date of receipt in the case of luggage and seven days from date of receipt in the case of goods. In the case of delay the complaint must be made at the latest within fourteen days from the date on which the luggage or goods have been placed at his disposal.3.Every complaint must be made in writing upon the document of carriage or by separate notice in writing dispatched within the times aforesaid.4.Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part."

After allegedly finding that their luggage had been ransacked, petitioners never lodged a complaint with any Northwest airport personnel. Neither did they mention the alleged loss of their valuables in their November 22, 1991 demand letter.31 Hence, in accordance with the parties' contract of carriage, no claim can be heard or admitted against respondent with respect to alleged damage to or loss of petitioners' baggage.

II. APPLICABILITY OF PERIODS OF PRESCRIPTION: ARTICLE 29 OF THE WARSAW CONVENTION AND ARTICLE 1146

PHILIPPINE AIRLINES INC V SAVILLO (GR No. 149547; July 4, 2008)

FACTS:Private respondent Simplicio Grio was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta. On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00 oclock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00 oclock in the same evening. Singapore Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was explained to private respondent and his group that if Singapore Airlines honored the tickets without PALs endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PALs office at the airport, only to find out that it was closed. Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress. Eventually, private respondent and his companions were forced to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 oclock midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private respondent became ill and was unable to participate in the tournament. Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL on and another to Singapore but both airlines disowned liability and blamed each other for the fiasco. Hence, private respondent filed a Complaint for Damages before the RTC seeking compensation for moral damages in the amount of P1,000,000.00 and attorneys fees. Instead of filing an answer to private respondents Complaint, PAL filed a Motion to Dismiss[8] dated 18 September 1998 on the ground that the said complaint was barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of Court. PAL argued that the Warsaw Convention, particularly Article 29 thereof,governed this case, as it provides that any claim for damages in connection with the international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was already barred by prescription. RTC issued an Order denying the Motion to Dismiss. It maintained that the provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case. CA affirmed. The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application of the Warsaw Convention must not be construed to preclude the application of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil Code,[13] which allowed for a ten-year prescription period, the appellate court declared that the Complaint filed by private respondent should not be dismissed.

ISSUE: Whether or not the complaint was already barred by prescription HELD: NO.

1. SCOPE AND APPLICABILITY OF WARSAW CONVENTIONIt applies to all international transportation of persons, baggage or goods performed by any aircraft for hire. It seeks to accommodate or balance the interests of passengers seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air carriers. The cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing claims arising from international air travel; thus, it precludes a passenger from maintaining an action for personal injury damages under local law when his or her claim does not satisfy the conditions of liability under the Convention. Article 19 of the Warsaw Convention provides for liability on the part of a carrier for damages occasioned by delay in the transportation by air of passengers, baggage or goods. Article 24 excludes other remedies by further providing that in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention. Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of limitations of two years has already lapsed.

2. CLAIM BASED ONLY ON BREACH OF CONTRACT OF CARRIAGE, DELAY: WARSAW CONVENTION EMOTIONAL HARM RESULTING FROM GROSS NEGLIGENCE: CIVIL CODE APPLICABLE

Private respondents Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, which resulted in his being subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress. The emotional harm suffered by the private respondent as a result of having been unreasonably and unjustly prevented from boarding the plane should be distinguished from the actual damages which resulted from the same incident. Under the Civil Code provisions on tort, such emotional harm gives rise to compensation where gross negligence or malice is proven. In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still needs to be heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw Convention. Had the present case merely consisted of claims incidental to the airlines delay in transporting their passengers, the private respondents Complaint would have been time-barred under Article 29 of the Warsaw Convention. However, the present case involves a special species of injury resulting from the failure of PAL and/or Singapore Airlines to transport private respondent from Singapore to Jakarta the profound distress, fear, anxiety and humiliation that private respondent experienced when, despite PALs earlier assurance that Singapore Airlines confirmed his passage, he was prevented from boarding the plane and he faced the daunting possibility that he would be stranded in Singapore Airport because the PAL office was already closed. 3. ACTION NOT YET PRESCRIBED (ARTICLE 1146)Art. 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict. Private respondents Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondents claims have not yet prescribed and PALs Motion to Dismiss must be denied.

MARITIME COMMERCEI. DUTIES OF CAPTAIN INTER-ORIENT MARITIME ENTERPRISE V NLRC (GR No. 115286; August 11, 1994)FACTS:Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in commanding ocean-going vessels, was employed by petitioners Trenda World Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through petitioner Inter-Orient Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1) year, as evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed command of petitioners' vessel at the port of Hongkong. His instructions were to replenish bunker and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120,000 metric tons of coal.

On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain Tayong received a weather report that a storm code-named "Gordon" would shortly hit Hongkong. Precautionary measures were taken to secure the safety of the vessel, as well as its crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14) years old.

Captain Tayong followed-up the requisition by the former captain of the Oceanic Mindoro for supplies of oxygen and acetylene, necessary for the welding-repair of the turbo-charger and the economizer. This requisition had been made upon request of the Chief Engineer of the vessel and had been approved by the shipowner.

On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing message, Captain Tayong reported a water leak from M.E. Turbo Charger No. 2 Exhaust gas casing. He was subsequently instructed to blank off the cooling water and maintain reduced RPM unless authorized by the owners.

On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the vessel had stopped in mid-ocean for six (6) hours and forty-five (45) minutes due to a leaking economizer. He was instructed to shut down the economizer and use the auxiliary boiler instead.

On 31 July 1989 ,the vessel arrived at the port of Singapore. 5The Chief Engineer reminded Captain Tayong that the oxygen and acetylene supplies had not been delivered. 6 Captain Tayong inquired from the ship's agent in Singapore about the supplies. The ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the stores had closed.

Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and informed them that the departure of the vessel for South Africa may be affected because of the delay in the delivery of the supplies.

Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in Tokyo and who could provide a solution for the supply of said oxygen and acetylene.

On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that the vessel cannot sail without the oxygen and acetylene for safety reasons due to the problems with the turbo charger and economizer. Mr. Clark responded that by shutting off the water to the turbo chargers and using the auxiliary boiler, there should be no further problems. According to Mr. Clark, Captain Tayong agreed with him that the vessel could sail as scheduled on 0100 hours on 1 August 1989 for South Africa.

According to Captain Tayong, however, he communicated to Sea Horse his reservations regarding proceeding to South Africa without the requested supplies, and was advised by Sea Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had arranged to be delivered on board the Oceanic Mindoro. 12 At 0800 hours on 1 August 1989, the requisitioned supplies were delivered and Captain Tayong immediately sailed for Richard Bay.

When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to the Philippines, after serving petitioners for a little more than two weeks. He was not informed of the charges against him. 14

On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the Philippine Overseas Employment Administration ("POEA"), claiming his unpaid salary for the unexpired portion of the written employment contract, plus attorney's fees.

Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain Tayong. Petitioners alleged that he had refused to sail immediately to South Africa to the prejudice and damage of petitioners. According to petitioners, as a direct result of Captain Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours. This meant that the charterers refused to pay the charter hire or compensation corresponding to twelve (12) hours, amounting to US$15,500.00, due to time lost in the voyage. They stated that they had dismissed private respondent for loss of trust and confidence.

The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his untimely repatriation. The decision of the POEA placed considerable weight on petitioners' assertion that all the time lost as a result of the delay was caused by Captain Tayong and that his concern for the oxygen and acetylene was not legitimate as these supplies were not necessary or indispensable for running the vessel. The POEA believed that the Captain had unreasonably refused to follow the instructions of petitioners and their representative, despite petitioners' firm assurances that the vessel was seaworthy for the voyage to South Africa. NLRC reversed finding that Captain Tayong had not been afforded an opportunity to be heard and that no substantial evidence was adduced to establish the basis for petitioners' loss of trust or confidence in the Captain. The NLRC declared that he had only acted in accordance with his duties to maintain the seaworthiness of the vessel and to insure the safety of the ship and the crew.

ISSUE: Whether or not Captain Tayong was validly dismissed

HELD: NO.

1. CAPTAIN OF VESSEL: CONFIDENTIAL AND MANAGERIAL EMPLOYEEIt is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate investigation. 15 Such employees, too, are entitled to security of tenure, fair standards of employment and the protection of labor laws. The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine.

2. DUTIES/FUNCTIONS/AUTHORITY OF MASTER OR CAPTAINA master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. Of these roles, by far the most important is the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo.

In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. To the captain is committed the governance, care and management of the vessel. 18 Clearly, the captain is vested with both management and fiduciary functions.

3. CAPTAIN HAS DISCRETION TO PERFORM ACTS NECESSARY FOR THE PROTECTION AND PRESERVATION UNDER HISCHARGE

A ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. 20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of underwriters. It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. 22 Indeed, if the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by radio or telefax from their offices thousands of miles away) will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions.

4. CAPTAIN TAYONGS DECISION REGARDING NECESSITY OF DELIVERY OF SUPPLIES: WELL FOUNDED

There had been, Mr. Clark stated, a disruption in the normal functioning of the vessel's turbo-charger 19 and economizer and that had prevented the full or regular operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the voyage to South Africa, instead of waiting in Singapore for the supplies that would permit shipboard repair of the malfunctioning machinery and equipment.

The word "necessity" when applied to mercantile affairs, where the judgment must in the nature of things be exercised, cannot, of course, mean an irresistible compelling power. What is meant by it in such cases is the force of circumstances which determine the course a man ought to take. Thus, where by the force of circumstances, a man has the duty cast upon him of taking some action for another, and under that obligation adopts a course which, to the judgment of a wise and prudent man, is apparently the best for the interest of the persons for whom he acts in a given emergency, it may properly be said of the course so taken that it was in a mercantile sense necessary to take it.

In this connection, it is specially relevant to recall that, according to the report of Mr. Robert Clark, Technical Director of petitioner Sea Horse Ship Management, Inc., the Oceanic Mindoro had stopped in mid-ocean for six (6) hours and forty-five (45) minutes on its way to Singapore because of its leaking economizer. 27 Equally relevant is the telex dated 2 August 1989 sent by Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was en route to South Africa. In this telex, Captain Tayong explained his decision to Sea Horse in the following terms:

I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN TO YOU THAT WE ARE INSECURITY/DANGER TO SAIL IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER PIPELINE, ECONOMIZER LEAKAGE N ETC WE COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I AND MR. CLARK WE CONTACTED EACH OTHER BY PHONE IN PAPAN N HE ADVSED US TO SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE ALSO EXPLAINED TO MY C/E HOW TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS WHY WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY OXY/ACET BEFORE SAILING TO AVOID RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16 DAYS FM SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION. 28 (Emphasis partly in source and partly supplied)

Under all the circumstances of this case, we, along with the NLRC, are unable to hold that Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to wait seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the requisitioned supplies needed for the welding-repair, on board the ship, of the turbo-charger and the economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly insubordinate behavior on his part. In the view of the NLRC, that decision of Captain Tayong did not constitute a legal basis for the summary dismissal of Captain Tayong and for termination of his contract with petitioners prior to the expiration of the term thereof. We cannot hold this conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of jurisdiction; indeed, we share that conclusion and make it our own.

Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed supplies before sailing from Singapore, and may have changed their estimate of their ability to work with him and of his capabilities as a ship captain. Assuming that to be petitioners' management prerogative, that prerogative is nevertheless not to be exercised, in the case at bar, at the cost of loss of Captain Tayong's rights under his contract with petitioners and under Philippine law.

5. CAPTAIN TAYONG: DENIED DUE PROCESS

It is plain from the records of the present petition that Captain Tayong was denied any opportunity to defend himself. Petitioners curtly dismissed him from his command and summarily ordered his repatriation to the Philippines without informing him of the charge or charges levelled against him, and much less giving him a chance to refute any such charge. In fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient requiring him to explain why he delayed sailing to South Africa.

II. DUTIES OF PILOT

FAR EASTERN SHIPPING v CA & PPA (GR No. 130068; October 1, 1998)

FACTS:On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the USSR, owned and operated by the Far Eastern Shipping Company (FESC) arrived at the Port of Manila from Vancouver, British Columbia at about 7:00 o'clock in the morning. The vessel was assigned Berth 4 of the Manila International Port, as its berthing space. Captain Roberto Abellana was tasked by the Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino was assigned by the Appellant Manila Pilots' Association (MPA) to conduct docking maneuvers for the safe berthing of the vessel to Berth No. 4.Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and proceeded to the Manila International Port. The sea was calm and the wind was ideal for docking maneuvers.When the vessel reached the landmark (the big church by the Tondo North Harbor) one-half mile from the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles, were dropped. However, the anchor did not take hold as expected. The speed of the vessel did not slacken. A commotion ensued between the crew members. A brief conference ensued between Kavankov and the crew members. When Gavino inquired what was all the commotion about, Kavankov assured Gavino that there was nothing to it.After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern. Abellana, who was then on the pier apron, noticed that the vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the "full-astern" code. Before the right anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier. The vessel sustained damage too.Philippine Ports Authority (PPA) filed a complaint for a sum of money against Far Eastern Shipping Co., Capt. Senen C. Gavino and the Manila Pilots' Association, praying that the defendants therein be held jointly and severally liable to pay the plaintiff actual and exemplary damages plus costs of suit. This was favorably ruled by the court. CA affirmed except that insofar as the existence of employer-employee relationship.Petitioner, in claiming that CA erred in its decision, asserts that since the MV PAVLODAR was under compulsory pilotage at the time of the incident, it was the compulsory pilot, Capt. Gavino, who was in command and had complete control in the navigation and docking of the vessel. It is the pilot who supersedes the master for the time being in the command and navigation of a ship and his orders must be obeyed in all respects connected with her navigation. Consequently, he was solely responsible for the damage caused upon the pier apron, and not the owners of the vessel. It claims that the master of the boat did not commit any act of negligence when he failed to countermand or overrule the orders of the pilot because he did not see any justifiable reason to do so. In other words, the master cannot be faulted for relying absolutely on the competence of the compulsory pilot. If the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot. ISSUES:1. Whether or not pilot commercial vessel, under compulsory pilotage, solely liable for the damage causes by the vessel to the pier, at the port of destination, for his negligence2. Whether or not owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of the master of the vessel and the pilot under a compulsory pilotage

HELD:1. NO. Both the pilot and the master of the vessel are liable.a. PILOT: FUNCTION AND AUTHORITY

A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it is to guide vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation of vessels on the high seas. However, the term "pilot" is more generally understood as a person taken on board at a particular place for the purpose of conducting a ship through a river, road or channel, or from a port.

Under English and American authorities, generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the master pro hac vice and should give all directions as to speed, course, stopping and reversing anchoring, towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to act as pilot. Under certain systems of foreign law, the pilot does not take entire charge of the vessel, but is deemed merely the adviser of the master, who retains command and control of the navigation even in localities where pilotage is compulsory.

b. COMPULSORY PILOTAGE: PURPOSE

It is quite common for states and localities to provide for compulsory pilotage, and safety laws have been enacted requiring vessels approaching their ports, with certain exceptions, to take on board pilots duly licensed under local law. The purpose of these laws is to create a body of seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and property from the dangers of navigation.

c. COMPULSORY PILOTAGE, DUTIES: MASTER v CAPTAINThe Port of Manila is within the Manila Pilotage District which is under compulsory pilotage pursuant to Section 8, Article III of Philippine Ports Authority Administrative Order No. 03-85, 47 which provides that:Sec. 8.Compulsor Pilotage Service. For entering a harbor and anchoring thereat, or passing through rivers or straits within a pilotage district, as well as docking and undocking at any pier/wharf, or shifting from one berth or another, every vessel engaged in coastwise and foreign trade shall be under compulsory pilotage. . . .

In case of compulsory pilotage, the respective duties and responsibilities of the compulsory pilot and the master have been specified by the same regulation in this wise:

Sec. 11.Control of vessels and liability for damage. On compulsory pilotage grounds, the Harbor Pilot providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and property at ports due to his negligence or fault. He can only be absolved from liability if the accident is caused by force majeure or natural calamities provided he has exercised prudence and extra diligence to prevent or minimize damage.

The Master shall retain overall command of the vessel even on pilotage grounds whereby he can countermand or overrule the order or command of the Harbor Pilot on beard. In such event, any damage caused to a vessel or to life and property at ports by reason of the fault or negligence of the Master shall be the responsibility and liability of the registered owner of the vessel concerned without prejudice to recourse against said Master.

Such liability of the owner or Master of the vessel or its pilots shall be determined by competent authority in appropriate proceedings in the light of the facts and circumstances of each particular case.

Sec. 32.Duties and responsibilities of the Pilot or Pilots' Association. The duties and responsibilities of the Harbor Pilot shall be as follows:f)a pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his responsibility shall cease at the moment the Master neglects or refuses to carry out hisorder.

Customs Administrative Order No. 15-65 issued twenty years earlier likewise provided in Chapter I thereof for the responsibilities of pilots:

Par. XXXIX. A Pilot shall be held responsible for the direction of a vessel from the time he assumes control thereof until he leaves it anchored free from shoal: Provided, That his responsibility shall cease at the moment the master neglects or refuses to carry out his instructions.

Par. XLIV. Pilots shall properly and safely secure or anchor vessels under their control when requested to do so by the master of such vessels.

d. PRESUMPTION OF FAULT AGAINST MOVING VESSEL: COLLISION WITH A STATIONARY OBJECT

The evidentiary rule in American jurisprudence that there is a presumption of fault against a moving vessel that strikes a stationary object such as a dock or navigational aid. In admiralty, this presumption does more than merely require the ship to go forward and produce some evidence on the presumptive matter. The moving vessel must show that it was without fault or that the collision was occasioned by the fault of the stationary object or was the result of inevitable accident. It has been held that such vessel must exhaust every reasonable possibility which the circumstances admit and show that in each, they did all that reasonable care required. In the absence of sufficient proof in rebuttal, the presumption of fault attaches to a moving vessel which collides with a fixed object and makes a prima facie case of fault against the vessel. Logic and experience support this presumption:

The common sense behind the rule makes the burden a heavy one. Such accidents simply do not occur in the ordinary course of things unless the vessel has been mismanaged in some way. It is nor sufficient for the respondent to produce witnesses who testify that as soon as the danger became apparent everything possible was done to avoid an accident.

e. PILOT: MUST EXERCISE STANDARD OF CARE AND DILIGENCE ACCORDING TO THE CIRCUMSTANCES

He is not held to the highest possible degree of skill and care, but must have and exercise the ordinary skill and care demanded by the circumstances, and usually shown by an expert in his profession. Under extraordinary circumstance, a pilot must exercise extraordinary care.

f. PILOT MUST ACT ACCORDING TO THE COMPETENCE AND SKILL HE CLAIMS/HOLDS TO REPRESENT: OTHERWISE, HE IS NEGLIGENTAn act may be negligent if it is done without the competence that a reasonable person in the position of the actor would recognize as necessary to prevent it from creating an unreasonable risk of harm to another. Those who undertake any work calling for special skills are required not only to exercise reasonable care in what they do but also possess a standard minimum of special knowledge and ability.Every man who offers his services to another, and is employed, assumes to exercise in the employment such skills he possesses, with a reasonable degree of diligence. In all these employments where peculiar skill is requisite, if one offers his services he is understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same employment, and if his pretensions are unfounded he commits a species of fraud on every man who employs him in reliance on his public profession. Furthermore, there is an obligation on all persons to take the care which, under ordinary circumstances of the case, a reasonable and prudent man would take, and the omission of that care constitutes negligence. 65 Generally, the degree of care required is graduated according to the danger a person or property attendant upon the activity which the actor pursues or the instrumentality which he uses. The greater the danger the greater the degree of care required. What is ordinary under extraordinary of conditions is dictated by those conditions; extraordinary risk demands extraordinary care. Similarly, the more imminent the danger, the higher the degree of care.

g. CAPTAIN GAVINO: NON-COMPLIANCE OF (e) and (f)

Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and knowledge in respect to navigation in the particular waters over which his license extends superior to and more to be trusted than that of the master. 57 A pilot 57 should have a thorough knowledge of general and local regulations and physical conditions affecting the vessel in his charge and the waters for which he is licensed, such as a particular harbor or river.

As can be gleaned from the logbook, Gavino ordered the left anchor and two (2) shackles dropped at 8:30 o'clock in the morning. He ordered the engines of the vessel stopped at 8:31 o'clock. By then,Gavino must have realized that the anchor did not hit a hard object and was not clawed so as to reduce the momentum of the vessel. In point of fact, the vessel continued travelling towards the pier at the same speed. Gavino failed to react, At 8:32 o'clock, the two (2) tugboats began to push the stern part of the vessel from the port side bur the momentum of the vessel was not contained. Still, Gavino did not react. He did not even order the other anchor and two (2) more shackles dropped to arrest the momentum of the vessel. Neither did he order full-astern. It was only at 8:34 o'clock, or four (4) minutes, after the anchor was dropped that Gavino reacted. But his reaction was even (haphazard) because instead of arresting fully the momentum of the vessel with the help of the tugboats, Gavino ordered merely "half-astern". It took Gavino another minute to order a "full-astern". By then, it was too late. The vessel's momentum could no longer be arrested and, barely a minute thereafter, the bow of the vessel hit the apron of the pier. Patently, Gavino miscalculated. He failed to react and undertake adequate measures to arrest fully the momentum of the vessel after the anchor failed to claw to the seabed. When he reacted, the same was even (haphazard). Gavino failed to reckon the bulk of the vessel, its size and its cargo. He erroneously believed that only one (1) anchor would suffice and even when the anchor failed to claw into the seabed or against a hard object in the seabed, Gavino failed to order the other anchor dropped immediately. His claim that the anchor was dropped when the vessel was only 1,000 feet from the pier is but a belated attempt to extricate himself from the quagmire of his own insouciance and negligence. In sum, then, Appellants' claim that the incident was caused by "force majeure" is barren of factual basis.

The harbor pilots are especially trained for this job. In the Philippines, one may not be a harbor pilot unless he passed the required examination and training conducted then by the Bureau of Custom, under Customs Administrative Order No. 15-65, now under the Philippine Ports Authority under PPA Administrative Order 63-85, Paragraph XXXIX of the Customs Administrative Order No. 15-65 provides that "the pilot shall be held responsible for the direction of the vessel from the time he assumes control thereof, until he leaves it anchored free from shoal: Provided, that his responsibility shall cease at the.moment the master neglects or refuse(s) to carry out his instructions." The overall direction regarding the procedure for docking and undocking the vessel emanates from the harbor pilot. In the present recourse, Gavino failed to live up to his responsibilities and exercise reasonable care or that degree of care required by the exigencies of the occasion. Failure on his part to exercise the degree of care demanded by the circumstances is negligence (Reese versus Philadelphia & RR Co. 239 US 363, 60 L ed. 384, 57 Am Jur, 2d page 418). 67

Negligence in manuevering the vessel must be attributed to Capt. Senen Gavino. He was an experienced pilot and by this time should have long familiarized himself with the depth of the port and the distance he could keep between the vessel and port in order to berth safely.

h. MASTER OF SHIP-STILL IN COMMAND OF VESSEL DESPITE COMPULSORY PILOTAGE: MUST INTERFERE IN CASE OF INCOMPETENCY OF PILOT

While it is indubitable that in exercising his functions a pilot is in sole command of the ship 69 and supersedes the master for the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated and the circumstances may require the master to displace a compulsory pilot because of incompetency or physical incapacity. If, however, the master does nor observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot, but not blindly.

The master is not wholly absolved from his duties while a pilot is on board his vessel, and may advise with or offer suggestions to him. He is still in command of the vessel, except so far as her navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on and the usual precaution taken. Thus, in particular, he is bound to see that there is sufficient watch on deck, and that the men are attentive to their duties, also that engines are stopped, towlines cast off, and the anchors clear and ready to go at the pilot's order.

i. CAPT. KABANCOV (MASTER): NEGLIGENT

Although negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible for the allision. His unconcerned lethargy as master of the ship in the face of troublous exigence constitutes negligence.A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of his duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of maintaining watchful vigilance over this risky maneuver. In fact, in his testimony, Capt. Kavankov admitted that all throughour the man(eu)vering procedures he did not notice anything was going wrong, and even observed that the order given to drop the anchor was done at the proper time. He even ventured the opinion that the accident occurred because the anchor failed to take hold but that this did not alarm him because there was still time to drop a second anchor.

Under normal circumstances, the abovementioned facts would have caused the master of a vessel to take charge of the situation and see to the man(eu)vering of the vessel himself. Instead, Capt. Kavankov chose to rely blindly upon his pilot, who by this time was proven ill-equipped to cope with the situation.

It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov was no lesss responsible for as master of the vessel he stood by the pilot during the man(eu)vering procedures and was privy to every move the latter made, as well as the vessel's response to each of the commands. His choice to rely blindly upon the pilot's skills, to the point that despite being appraised of a notice of alert he continued to relinquish control of the vessel to Gavino, shows indubitably that he was not performing his duties with the diligence required of him and therefore may be charged with negligence along with defendant Gavino.

As correctly affirmed by the Court of Appeals

In the present recourse, Captain Viktor Kavankov had been a mariner for thirty-two years before the incident. When Gavino was (in) the command of the vessel, Kavankov was beside Gavino, relaying the commands or orders of Gavino to the crewmembers-officers of the vessel concerned. He was thus fully aware of the docking maneuvers and procedure Gavino undertook to dock the vessel. Irrefragably, Kavankov was fully aware of the bulk and size of the vessel and its cargo as well as the weight of the vessel. Kavankov categorically admitted that, when the anchor and two (2) shackles were dropped to the sea floor, the claws of the anchor did not hitch on to any hard object in the seabed. The momentum of the vessel was not arrested. The use of the two (2) tugboats was insufficient. The momentum of the vessel, although a little bit arrested, continued (sic) the vessel going straightforward with its bow towards the port (Exhibit "A-1 ). There was thus a need for the vessel to move "full-astern" and to drop the other anchor with another shackle or two (2), for the vessel to avoid hitting the pier. Kavankov refused to act even as Gavino failed to act. Even as Gavino gave mere "half-astern" order, Kavankov supinely stood by. The vessel was already about twenty (20) meters away from the pier when Gavino gave the "full-astern" order. Even then, Kavankov did nothing to prevent the vessel from hitting the pier simply because he relied on the competence and plan of Gavino. While the "full-astern'' maneuver momentarily arrested the momentum of the vessel, it was, by then, too late. All along, Kavankov stood supinely beside Gavino, doing nothing but relay the commands of Gavino. Inscrutably, then, Kavankov was negligent.

In sum, where a compulsory pilot is in charge of a ship, the master being required to permit him to navigate it, if the master observes that the pilot is incompetent or physically incapable, then it is the dury of the master to refuse to permit the pilot to act. But if no such reasons are present, then the master is justified in relying upon the pilot, but not blindly. Under the circumstances of this case, if a situation arose where the master, exercising that reasonable vigilance which the master of a ship should exercise, observed, or should have observed, that the pilot was so navigating the vessel that she was going, or was likely to go, into danger, and there was in the exercise of reasonable care and vigilance an opportunity for the master to intervene so as to save the ship from danger, the master should have acted accordingly. The master of a vessel must exercise a degree of vigilance commensurate with the circumstances.

2. YES.In general, a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of the pilot in the performance of duty constitutes a maritime tort. At common law, a shipowner is not liable for injuries inflicted exclusively by the negligence of a pilot accepted by a vessel compulsorily. The exemption from liability for such negligence shall apply if the pilot is actually in charge and solely in fault. Since, a pilot is responsible only for his own personal negligence, he cannot be held accountable for damages proximately caused by the default of others, or, if there be anything which concurred with the fault of the pilot in producing the accident, the vessel master and owners are liable.

Since the colliding vessel is prima facie responsible, the burden of proof is upon the party claiming benefit of the exemption from liability. It must be shown affirmatively that the pilot was at fault, and that there was no fault on the part of the officers or crew, which might have been conducive to the damage. The fact that the law compelled the master to take the pilot does not exonerate the vessel from liability. The parties who suffer are entitled to have their remedy against the vessel that occasioned the damage, and are not under necessity to look to the pilot from whom redress is not always had for compensation. The owners of the vessel are responsible to the injured party for the acts of the pilot, and they must be left to recover the amount as well as they can against him. It cannot be maintained that the circumstance of having a pilot on board, and acting in conformity to his directions operate as a discharge of responsibility of the owners. 90 Except insofar as their liability is limited or exempted by statute, the vessel or her owner are liable for all damages caused by the negligence or other wrongs of the owners or those in charge of the vessel. Where the pilot of a vessel is not a compulsory one in the sense that the owner or master of the vessel are bound to accept him, but is employed voluntarily, the owners of the vessel are, all the more, liable for his negligent act. Except insofar as their liability is limited or exempted by statute, the vessel or her owners are liable for all damages caused by the negligence or other wrongs of the owners or those in charge of the vessel. As a general rule, the owners or those in possession and control of a vessel and the vessel are liable for all natural and proximate damages caused to persons or property by reason of her negligent management or navigation.

III. MARITIME CONTRACTS: MARITIME LIENS CRESCENT PETROLEUM LTD v MV LOK MAHESHWARI (GR. 155014; November 11, 2005)FACTS:Respondent M/V Lok Maheshwari (Vessel) is an oceangoing vessel of Indian registry that is owned by respondent Shipping Corporation of India (SCI), a corporation organized and existing under the laws of India and principally owned by the Government of India. It was time-chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-chartered the Vessel through a time charter to Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered the Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations organized and existing under the laws of Canada. On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent), a corporation organized and existing under the laws of Canada that is engaged in the business of selling petroleum and oil products for the use and operation of oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through an advice via facsimile dated November 2, 1995. As security for the payment of the bunker fuels and related services, petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another Canadian corporation, for the physical delivery of the bunker fuels to the Vessel. On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly acknowledged and received the delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker fuels. Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check was duly encashed. Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21, 1995 to Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers of M/V Lok Maheshwari in the amount of US$103,544.00 with instruction to remit the amount on or before December 1, 1995. The period lapsed and several demands were made but no payment was received. Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for interest, tracking fees, and legal fees.While the Vessel was docked at the port of Cebu City, petitioner Crescent instituted an action with the RTC for a sum of money with prayer for temporary restraining order and writ of preliminary attachment against respondents Vessel and SCI, Portserv and/or Transmar. This was favorably ruled upon the trial court and defendants were held joint and severally liable. CA however reversed for want of jurisdiction on the ground of forum non conveniens considering that the parties are foreign corporations which are not doing business in the Philippines. Petitioner rejects the applicability of said doctrine and now alleges, among others, that Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the enforcement of a maritime lien against said vessel and/or its owners and operators, which is expressly granted by law, the Ship Mortgage Acts as well as the Code of Commerce.ISSUE: Whether or not the dismissal of case is properHELD:1. RTC HAS JURISDICTIONa. ADMIRALTY AND MARITIME JURISDICTION OF RTCUnder Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive original jurisdiction (i)n all actions in admiralty and maritime where the demand or claim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where such demand or claim exceeds four hundred thousand pesos (P400,000). b. TESTS IN DETERMINING WHETHER A CASE FALLS WITHIN (1): LOCATIONAL TEST AND SUBJECT MATTER TESTIn a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign supplier in a foreign port to a vessel of foreign registry that is owned, chartered and sub-chartered by foreign entities.Two (2) tests have been used to determine whether a case involving a contract comes within the admiralty and maritime jurisdiction of a court - the locational test and the subject matter test. The English rule follows the locational test wherein maritime and admiralty jurisdiction, with a few exceptions, is exercised only on contracts made upon the sea and to be executed thereon. This is totally rejected under the American rule where the criterion in determining whether a contract is maritime depends on the nature and subject matter of the contract, having reference to maritime service and transactions.c. SUBJECT MATTER TEST: PREFERRED In International Harvester Company of the Philippines v. Aragon, we adopted the American rule and held that (w)hether or not a contract is maritime depends not on the place where the contract is made and is to be executed, making the locality the test, but on the subject matter of the contract, making the true criterion a maritime service or a maritime transaction. d. NATURE OF INSTANT CASE: WITHIN JURISDICTION OF RTCA contract for furnishing supplies like the one involved in this case is maritime and within the jurisdiction of admiralty. It may be invoked before our courts through an action in rem or quasi in rem or an action in personam. Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not only the liens created under Section 580 but also for the collection of any kind of lien whatsoever.In the Philippines, we have a complete legislation, both substantive and adjective, under which to bring an action in rem against a vessel for the purpose of enforcing liens. The substantive law is found in Article 580 of the Code of Commerce. The procedural law is to be found in Article 584 of the same Code. The result is, therefore, that in the Philippines any vessel even though it be a foreign vessel found in any port of this Archipelago may be attached and sold under the substantive law which defines the right, and the procedural law contained in the Code of Commerce by which this right is to be enforced. But where neither the law nor the contract between the parties creates any lien or charge upon the vessel, the only way in which it can be seized before judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of the Rules of Court.2. CRESCENT: NOT ENTITLED TO MARITIME LIENa. BASIS FOR CLAIM OF EXISTENCE OF MARITIME LIENPetitioner Crescent bases its claim of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of 1978, viz:

Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following persons shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for the vessel: The managing owner, ships husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel.Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel therefor.b. TEST IN DETERMINING EXISTENCE OF MARITIME LIEN: APPLICABILITY OF US JURISPRUDENCEP.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the growth and development of the shipping industry and to extend the benefits accorded to overseas shipping under Presidential Decree No. 214 to domestic shipping. It is patterned closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred mortgages. Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case. The various tests used in the U.S. to determine whether a maritime lien exists are the following:One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port, whether such lien exists, or whether the court has or will exercise jurisdiction, depends on the law of the country where the supplies were furnished, which must be pleaded and proved. This principle was laid down in the 1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm II (1916), in The Woudrichem (1921) and in The City of Atlanta (1924). Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the law of the place of supply.In Lauritzen v. Larsen, a Danish seaman, while temporarily in New York, joined the crew of a ship of Danish flag and registry that is owned by a Danish citizen. He signed the ships articles providing that the rights of the crew members would be governed by Danish law and by the employers contract with the Danish Seamens Union, of which he was a member. While in Havana and in the course of his employment, he was negligently injured. He sued the shipowner in a federal district court in New York for damages under the Jones Act. In holding that Danish law and not the Jones Act was applicable, the Supreme Court adopted a multiple-contact test to determine, in the absence of a specific Congressional directive as to the statutes reach, which jurisdictions law should be applied. The following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum.Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International Terminal Operating Co. again considered a foreign seamans personal injury claim under both the Jones Act and the general maritime law. The Court held that the factors first announced in the case of Lauritzen were applicable not only to personal injury claims arising under the Jones Act but to all matters arising under maritime law in general.Hellenic Lines, Ltd. v. Rhoditis was also a suit under the Jones Act by a Greek seaman injured aboard a ship of Greek registry while in American waters. The ship was operated by a Greek corporation which has its largest office in New York and another office in New Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in regularly scheduled runs between various ports of the U.S. and the Middle East, Pakistan, and India, with its entire income coming from either originating or terminating in the U.S. The contract of employment provided that Greek law and a Greek collective bargaining agreement would apply between the employer and the seaman and that all claims arising out of the employment contract were to be adjudicated by a Greek court. The U.S. Supreme Court observed that of the seven factors listed in the Lauritzen test, four were in favor of the shipowner and against jurisdiction. In arriving at the conclusion that the Jones Act applies, it ruled that the application of the Lauritzen test is not a mechanical one. It stated thus: [t]he significance of one or more factors must be considered in light of the national interest served by the assertion of Jones Act jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be exhaustive. x x x [T]he shipowners base of operations is another factor of importance in determining whether the Jones Act is applicable; and there well may be others.The principles enunciated in these maritime tort cases have been extended to cases involving unpaid supplies and necessaries such as the cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine Services v. M/V El Centroamericano.Three. The factors provided in Restatement (Second) of Conflicts of Law have also been applied, especially in resolving cases brought under the Federal Maritime Lien Act. Their application suggests that in the absence of an effective choice of law by the parties, the forum contacts to be considered include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield, an admiralty action in rem was brought by an American supplier against a vessel of Norwegian flag owned by a Norwegian Company and chartered by a London time charterer for unpaid fuel oil and marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed in London. It was held that because the bunker fuel was delivered to a foreign flag vessel within the jurisdiction of the U.S., and because the invoice specified payment in the U.S., the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals recognized the modern approach to maritime conflict of law problems introduced in the Lauritzen case. However, it observed that Lauritzen involved a torts claim under the Jones Act while the present claim involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its conclusion is limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute and that the initial choice of law determination is significantly affected by the statutory policies surrounding a maritime lien. It ruled that the facts in the case call for the application of the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the congressional intent in enacting the Maritime Lien Statute to protect the interests of American supplier of goods, services or necessaries by making maritime liens available where traditional services are routinely rendered. It concluded that the Maritime Lien Statute represents a relevant policy of the forum that serves the needs of the international legal system as well as the basic policies underlying maritime law. The court also gave equal importance to the predictability of result and protection of justified expectations in a particular field of law. In the maritime realm, it is expected that when necessaries are furnished to a vessel in an American port by an American supplier, the American Lien Statute will apply to protect that supplier regardless of the place where the contract was formed or the nationality of the vessel.The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I[29] where the American court refused to apply the Federal Maritime Lien Act to create a maritime lien for goods and services supplied by foreign companies in foreign ports. In this case, a Swedish company supplied radio equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some of the contract negotiations occurred in Spain and the agreement for supplies between the parties indicated Swedish companys willingness to submit to Swedish law. The ship was later sold under a contract of purchase providing for the application of New York law and was arrested in the U.S. The U.S. Court of Appeals also held that while the contacts-based framework set forth in Lauritzen was useful in the analysis of all maritime choice of law situations, the factors were geared towards a seamans injury claim. As in Gulf Trading, the lien arose by operation of law because the ships owner was not a party to the contract under which the goods were supplied. As a result, the court found it more appropriate to consider the factors contained in Section 6 of the Restatement (Second) of Conflicts of Law. The U.S. Court held that the primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and services. The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.c. IN THE INSTANT CASE: NO MARITIME LIEN EXISTSFirst. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one the law of the forum. All other elements are foreign Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of contract; India is the law of the flag and the allegiance of the defendant shipowner. Balancing these basic interests, it is inconceivable that the Philippine court has any interest in the case that outweighs the interests of Canada or India for that matter. Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers and was not intended to create a lien from a contract for supplies between foreign entities delivered in a foreign port. Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien exists would not promote the public policy behind the enactment of the law to develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien under our laws even if they are not entitled to a maritime lien under their laws will encourage forum shopping. Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties to the contract. Indeed, when the parties entered into a contract for supplies in Canada, they could not have intended the laws of a remote country like the Philippines to determine the creation of a lien by the mere accident of the Vessels being in Philippine territory.d. PETITIONER SHOULD HAVE ATTEMPTED TO PROVE EXISTENCE OF MARITIME LIEN UNDER CANADIAN LAW In light of the interests of the various foreign elements involved, it is clear that Canada has the most significant interest in this dispute. The injured party is a Canadian corporation, the sub-charterer which placed the orders for the supplies is also Canadian, the entity which physically delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the supplies were delivered in Canada. The arbitration clause contained in the Bunker Fuel Agreement which states that New York law governs the construction, validity and performance of the contract is only a factor that may be considered in the choice-of-law analysis but is not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose by operation of law and not by contract because the shipowner was not a party to the contract under which the goods were supplied. It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the existence of a maritime lien. To the end, it insisted on its theory that Philippine law applies. Petitioner contends that even if foreign law applies, since the same was not properly pleaded and proved, such foreign law must be presumed to be the same as Philippine law pursuant to the doctrine of processual presumption.Thus, we are left with two choices: (1) dismiss the case for petitioners failure to establish a cause of action[31] or (2) presume that Canadian law is the same as Philippine law. In either case, the case has to be dismissed.It is well-settled that a party whose cause of action or defense depends upon a foreign law has the burden of proving the foreign law. Such foreign law is treated as a question of fact to be properly pleaded and proved. Petitioner Crescents insistence on enforcing a maritime lien before our courts depended on the existence of a maritime lien under the proper law. By erroneously claiming a maritime lien under Philippine law instead of proving that a maritime lien exists under Canadian law, petitioner Crescent failed to establish a cause of action.e. DOCTRINE OF PROCESSIONAL PRESUMPTION: STILL NO MARITIME LIEN EXISTS ON NECESSARIESEven if we apply the doctrine of processual presumption, the result will still be the same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites for maritime liens on necessaries to exist: (1) the necessaries must have been furnished to and for the benefit of the vessel; (2) the necessaries must have been necessary for the continuation of the voyage of the vessel; (3) the credit must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries must be ordered by persons authorized to contract on behalf of the vessel.[34] These do not avail in the instant case.First. It was not established that benefit was extended to the vessel. While this is presumed when the master of the ship is the one who placed the order, it is not disputed that in this case it was the sub-charterer Portserv which placed the orders to petitioner Crescent.[35] Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to the vessel. Petitioner did not.Second. Petitioner Crescent did not show any proof that the marine products were necessary for the continuation of the vessel.Third. It was not established that credit was extended to the vessel. It is presumed that in the absence of fraud or collusion, where advances are made to a captain in a foreign port, upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the vessel, that they are made upon the credit of the vessel as well as upon that of her owners.[36] In this case, it was the sub-charterer Portserv which requested for the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in favor of petitioner Crescent prior to the delivery of the bunkers as security for the payment of the obligation weakens petitioner Crescents contention that credit was extended to the Vessel. We also note that when copies of the charter parties were submitted by respondents in the Court of Appeals, the time charters between respondent SCI and Halla and between Halla and Transmar were shown to contain a clause which states that the Charterers shall provide and pay for all the fuel except as otherwise agreed. This militates against petitioner Crescents position that Portserv is authorized by the shipowner to contract for supplies upon the credit of the vessel.Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it appears that the repairs and supplies were necessary for the ship and that they were ordered by the master. This presumption does not arise in this case since the fuels were not ordered by the master and there was no proof of necessity for the supplies.Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner, the ships husband, master or any person with whom the management of the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone to whom the management of the vessel has been entrusted. A time 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 wherein the owner of the time-chartered vessel retains possession and control through the master and crew who remain his employees. Not enjoying the presumption of authority, petitioner Crescent should have proved that Portserv was authorized by the shipowner to contract for supplies. Petitioner failed. IV. LIMITED LIABILITY RULE PHILIPPINE SHIPPING COMPANY v VERGARA (G.R. No. L-1600 June 1, 1906)FACTS:The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification of 44,000 pesos for the loss of the said ship as a result of a collision. Ynchusti & Co. also claimed 24,705.64 pesos as an indemnification for the loss of the cargo of hemp and coprax carried by the said ship on her last trip. The defendant, Francisco Garcia Vergara, was the owner of the steamship Navarra, which collided with the Lourdes.The court below found that the steamship Lourdes was sailing in accordance with law, but that the Navarra was not, and was therefore responsible for the collision. The court also found as a fact that "both ships with their respective cargoes were entirely lost." Construing article 837 of the Code Commerce, the court below held "that the defendant was not responsible to the plaintiff for the value of the steamship Lourdes, with the costs against the latter." Appellant Philippine Shipping Company, contends that the defendant should pay to 18,000 pesos, the value of the Navarra at the time of its loss; and that it was immaterial whether the Navarra had been entirely lost, provided her value at the time she was lost could be ascertained, since the extent of the liability of the owner of the colliding vessel for the damages resulting from the collision is to be determined in accordance with such value.ISSUE: Whether or not defendant was liable for value of its vessel at the time of collision even though the latter was entirely lostHELD: No. 1. PROVISIONS APPLICABLE: ARTICLE 837; ARTICLE 587; ARTICLE 590Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the cases prescribed in this section shall be understood as limited to the value of the vessel with all her equipment and all the freight money earned during the voyage."This section is a necessary consequence of the right to abandon the vessel given to the shipowner in article 587 of the code, and it is one of the many superfluities contained in the code. Art. 587.The agent shall also the civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goo