6.

2 Real and Hypothecary Rule collisions or shipwrecks, his liability is merely co-extensive with his interest in
the vessel such that a total loss thereof results in its extinction. In arriving at
Yangco vs Laserna this conclusion, the fact is not ignored that the ill-fated S. S. Negros, as a
G.R. No. L-47447-47449, October 29, 1941 vessel engaged in interisland trade, is a common carrier, and that the
Moran, J. relationship between the petitioner and the passengers who died in the
Facts: mishap rests on a contract of carriage. But assuming that petitioner is liable
S.S. Negros, belonging to petitioner, Teodoro Yangco, left the port of for a breach of contract of carriage, the exclusively "real and hypothecary
Romblon on its return trip to Manila. Typhoon signal No. 2 was then up, of nature" of maritime law operates to limit such liability to the value of the
which fact the captain was duly advised and his attention thereto called by vessel, or to the insurance thereon, if any. In the instant case it does not
the passengers themselves before the vessel set sail. The boat was appear that the vessel was insured.
overloaded as indicated by the loadline which was 6 to 7 inches below the
surface of the water. The passengers, numbering about 180, were Dela Torre v. Court of Appeals
overcrowded, the vessel's capacity being limited to only 123 passengers. G.R. No. 160088, Jul. 13, 2011
After two hours of sailing, the boat encountered strong winds and rough seas Mendoza, J.
between the islands of Banton and Simara. As the sea became increasingly
violent, the captain ordered the vessel to turn left, evidently to return to port, FACTS: Crisostomo G. Concepcion (Concepcion) owned LCT-Josephine, a
but in the maneuver, the vessel was caught sidewise by a big wave which vessel registered with the Philippine Coast Guard. Concepcion and the
caused it to capsize and sink. Many of the passengers died in the mishap. Philippine Trigon Shipyard Corporation (PTSC), represented by Roland,
The respondents instituted separate civil actions against petitioner here to entered into a "Contract of Agreement," wherein the latter would charter LCT-
recover damages for the death of the passengers. The court was in favour of Josephine. PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping
respondents. After the rendition of the judgment to this effect, petitioner, by a Lines (TSL), a single proprietorship owned by Roland’s father, Agustin de la
verified pleading, sought to abandon the vessel to the plaintiffs in the three Torre (Agustin). TSL, this time represented by Roland per Agustin’s Special
cases, together with all its equipments, without prejudice to his right to Power of Attorney, sub-chartered LCT-Josephine to Ramon Larrazabal
appeal. The abandonment having been denied, an appeal was taken to the (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte.
Court of Appeals, wherein all the judgments were affirmed. The LCT-Josephine with its cargo of sand and gravel arrived at Philpos,
Isabel, Leyte. The vessel was beached near the NDC Wharf. With the
Issue: vessel’s ramp already lowered, the unloading of the vessel’s cargo began
May the shipowner or agent, notwithstanding the total loss of the with the use of Larrazabal’s payloader. While the payloader was on the deck
vessel as a result of the negligence of its captain, be properly held liable in of the LCT-Josephine scooping a load of the cargo, the vessel’s ramp started
damages for the consequent death of its passengers? to move downward, the vessel tilted and sea water rushed in. Shortly
thereafter, LCT-Josephine sank. Concepcion demanded that PTSC/ Roland
Held: refloat LCT-Josephine. The latter assured Concepcion that negotiations were
The petitioner is not liable. underway for the refloating of his vessel. Unfortunately, this did not
We are of the opinion and so hold that this question is controlled by materialize. For this reason, Concepcion was constrained to institute a
the provision of article 587 of the Code of Commerce. complaint for "Sum of Money and Damages" against PTSC and Roland
"The agent shall also be civilly liable for the indemnities in favor of before the RTC. PTSC and Roland filed their answer together with a third-
third persons which arise from the conduct of the captain in the care of the party complaint against Agustin. Agustin, in turn, filed his answer plus a
goods which the vessel carried; but he may exempt himself therefrom by fourth-party complaint against Larrazabal. The latter filed his answer and
abandoning the vessel with all her equipments and the freight he may have counterclaim but was subsequently declared in default by the
earned during the voyage." RTC. Eventually, the fourth-party complaint against Larrazabal was
dismissed when the RTC rendered its decision in favor of Concepcion. The
The provision accords a shipowner or agent the right of
appellate court, in agreement with the findings of the RTC, affirmed its
abandonment; and by necessary implication, his liability is confined to that
decision in toto.
which he is entitled as of right to abandon - "the vessel with all her
equipments and the freight it may have earned during the voyage." If the
shipowner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of
ISSUE: charterer through their respective contracts of agreement/charter parties,
(1) W/N the Code of Commerce is applicable, more specifically, the Limited obtained the use and service of the entire LCT-Josephine. The vessel was
Liability Rule; and likewise manned by the charterer and later by the sub-charterer’s people.
(2) W/N the petitioners are solidarily liable. With the complete and exclusive relinquishment of possession, command
and navigation of the vessel, the charterer and later the sub-charterer
HELD: No. Petitioners’ position is that the Limited Liability Rule under the became the vessel’s owner pro hac vice. Now, and in the absence of any
Code of Commerce should be applied to them, the argument is misplaced. showing that the vessel or any part thereof was commercially offered for use
The said rule has been explained to be that of the real and hypothecary to the public, the above agreements/charter parties are that of a private
doctrine in maritime law where the shipowner or ship agent’s liability is held carriage where the rights of the contracting parties are primarily defined and
as merely co-extensive with his interest in the vessel such that a total loss governed by the stipulations in their contract. Thus, Roland, who, in his
thereof results in its extinction. In this jurisdiction, this rule is provided in three personal capacity, entered into the Preliminary Agreement with Concepcion
articles of the Code of Commerce. One of which, Article 837 specifically for the dry-docking and repair of LCT-Josephine, is liable under Article
applies to cases involving collision which is a necessary consequence of the 1189 of the New Civil Code. There is no denying that the vessel was not
right to abandon the vessel given to the shipowner or ship agent under the returned to Concepcion after the repairs because of the provision in the
first provision – Article 587. Similarly, Article 590 is a reiteration of Article 587, Preliminary Agreement that the same "should" be used by Roland for the first
only this time the situation is that the vessel is co-owned by several persons. two years. Before the vessel could be returned, it was lost due to the
Obviously, the forerunner of the Limited Liability Rule under the Code of negligence of Agustin to whom Roland chose to sub-charter or sublet the
Commerce is Article 587. Now, the latter is quite clear on which indemnities vessel.
may be confined or restricted to the value of the vessel pursuant to the said Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-
Rule, and these are the – "indemnities in favor of third persons which may Josephine, is liable under Article 1651 of the New Civil Code. Although he
arise from the conduct of the captain in the care of the goods which he was never privy to the contract between PTSC and Concepcion, he remained
loaded on the vessel." Thus, what is contemplated is the liability to third bound to preserve the chartered vessel for the latter. Despite his non-
persons who may have dealt with the shipowner, the agent or even the inclusion in the complaint of Concepcion, it was deemed amended so as to
charterer in case of demise or bareboat charter. The only person who could include him because, despite or in the absence of that formality of amending
avail of this is the shipowner, Concepcion. He is the very person whom the the complaint to include him, he still had his day in court as he was in fact
Limited Liability Rule has been conceived to protect. The petitioners cannot impleaded as a third-party defendant by his own son, Roland – the very
invoke this as a defense. The shipowner’s or agent’s liability is merely same person who represented him in the Contract of Agreement with
coextensive with his interest in the vessel such that a total loss thereof Larrazabal. Clearly, the petitioners, to whom the possession of LCT
results in its extinction. The total destruction of the vessel extinguishes Josephine had been entrusted as early as the time when it was dry-docked
maritime liens because there is no longer any res to which it can attach. This for repairs, were obliged to insure the same. Unfortunately, they failed to do
doctrine is based on the real and hypothecary nature of maritime law which so in clear contravention of their respective agreements. Certainly, they
has its origin in the prevailing conditions of the maritime trade and sea should now all answer for the loss of the vessel.
voyages during the medieval ages, attended by innumerable hazards and
perils. To offset against these adverse conditions and to encourage Limited Liability Rule
shipbuilding and maritime commerce, it was deemed necessary to confine
the liability of the owner or agent arising from the operation of a ship to the CHUA YEK HONG,
vessel, equipment, and freight, or insurance, if any. The charterer of a vessel, vs.
under the conditions stipulated in the charter party in question, is the owner INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and
pro hac vice of the ship and takes upon himself the responsibilities of the DOMINADOR OLIT
owner. G.R. No. 74811 September 30, 1988
Therefore, even if the contract is for a bareboat or demise charter where Melencio-Herrera, J.
possession, free administration and even navigation are temporarily
surrendered to the charterer, dominion over the vessel remains with the DOCTRINE:
shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise The term "ship agent" as used in the foregoing provision is broad enough to
above that of the former, can never set up the Limited Liability Rule against include the ship owner. Pursuant to said provision, therefore, both the ship
the very owner of the vessel. In the present case, the charterer and the sub- owner and ship agent are civilly and directly liable for the indemnities in favor
of third persons, which may arise from the conduct of the captain in the care destruction of the vessel extinguishes maritime liens as there is no longer
of goods transported, as well as for the safety of passengers transported. any res to which it can attach.

FACTS: If the ship owner or agent may in any way be held civilly liable at all for injury
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental to or death of passengers arising from the negligence of the captain in cases
Mindoro, while private respondents are the owners of the vessel, "M/V of collisions or shipwrecks, his liability is merely co-extensive with his interest
Luzviminda I," a common carrier engaged in coastwise trade from the in the vessel such that a total loss thereof results in its extinction.
different ports of Oriental Mindoro to the Port of Manila.
The real and hypothecary nature of the liability of the ship owner or agent
In October 1977, petitioner loaded 1,000 sacks of copra, valued at embodied in the provisions of the Maritime Law, Book III, Code of
P101,227.40, on board the vessel "M/V Luzviminda I" for shipment from Commerce, had its origin in the prevailing conditions of the maritime trade
Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not and sea voyages during the medieval ages, attended by innumerable
reach Manila because somewhere between Cape Santiago and Calatagan, hazards and perils. To offset against these adverse conditions and to
Batangas, the vessel capsized and sank with all its cargo. encourage ship building and maritime commerce, it was deemed necessary
to confine the liability of the owner or agent arising from the operation of a
On 30 March 1979, petitioner instituted before the then Court of First ship to the vessel, equipment, and freight, or insurance, if any, so that if the
Instance of Oriental Mindoro, a Complaint for damages based on breach of ship owner or agent abandoned the ship, equipment, and freight, his liability
contract of carriage against private respondents (Civil Case No. R-3205). was extinguished.

In their Answer, private respondents averred that even assuming that the Without the principle of limited liability, a ship owner and investor in maritime
alleged cargo was truly loaded aboard their vessel, their liability had been commerce would run the risk of being ruined by the bad faith or negligence of
extinguished by reason of the total loss of said vessel. his captain, and the apprehension of this would be fatal to the interest of
navigation."
RTC ruled in favor of plaintiff. CA Reversed on basis of limited liability under
A587, CoC. MR Denied. The limited liability rule, however, is not without exceptions, namely: (1)
where the injury or death to a passenger is due either to the fault of the ship
ISSUE: W/N the Appellate Court erred in applying the doctrine of limited owner, or to the concurring negligence of the ship owner and the captain; (2)
liability under Article 587 of the Code of Commerce. where the vessel is insured; and (3) in workmen's compensation claims. In
this case, there is nothing in the records to show that the loss of the cargo
HELD: No. Petition denied. was due to the fault of the private respondent as shipowners, or to their
concurrent negligence with the captain of the vessel.
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 Regarding the provisions of the Civil Code on common carriers:
of the goods which he loaded on the vessel; but he may exempt himself Considering the "real and hypothecary nature" of liability under maritime law,
therefrom by abandoning the vessel with all the equipments and the freight it these provisions would not have any effect on the principle of limited liability
may have earned during the voyage. for ship owners or ship agents

The term "ship agent" as used in the foregoing provision is broad enough to Moreover, Article 1766 of the Civil Code provides that “In all matters not
include the ship owner. Pursuant to said provision, therefore, both the ship regulated by this Code, the rights and obligations of common carriers shall
owner and ship agent are civilly and directly liable for the indemnities in favor be governed by the Code of Commerce and by special laws.”
of third persons, which may arise from the conduct of the captain in the care
of goods transported, as well as for the safety of passengers transported. In other words, the primary law is the Civil Code (Arts. 17321766) and in
default thereof, the Code of Commerce and other special laws are applied.
The ship owner's or agent's liability is merely co-extensive with his interest in Since the Civil Code contains no provisions regulating liability of ship owners
the vessel such that a total loss thereof results in its extinction. "No vessel, or agents in the event of total loss or destruction of the vessel, it is the
no liability" expresses in a nutshell the limited liability rule. The total
provisions of the Code of Commerce, more particularly Article 587, that o The Weather Bureau is equipped with modern apparatus
govern in this case. which enables it to detect any incoming atmospheric
disturbances.
Since the ship agent's or ship owner's liability is merely co-extensive with his o It is highly improbable due to the late departure of the ship
interest in the vessel such that a total loss thereof results in its extinction, and that the Weather Bureau had not yet issued any typhoon bulletin
none of the exceptions to the rule on limited liability being present, the liability at any time during the day to the shipping companies.
of private respondents for the loss of the cargo of copra must be deemed to  Maritima displayed lack of foresight and minimum concern
have been extinguished. There is no showing that the vessel was insured in for the safety of its passengers.
this case. o The ship was delayed for 4 hours and it did not check from
the captain the reasons behind the delay nor send its
Heirs of Amparo de los Santos v. Court of Appeals representative to inquire into the cause of the delay.
G.R. No. L-51165 June 21, 1990 o A closer supervision could have prevented the overloading of
Medialdea, J. the vessel.
o Maritima also did not install a radar which could have
RATIO DECIDENDI
allowed the ship to navigate safely for shelter during the storm.
The limited liability doctrine applies not only to goods but also in all cases like The vessel was left at the mercy of Welming.
death or injury to passengers wherein the shipowner or agent may properly [2] Art. 587 is inapplicable because the shipowner was also negligent.
be held liable for the negligent or illicit acts of the captain and it only applies  Under Art. 587 of the Code of Commerce, a shipowner or agent has
in situations where the fault or negligence is committed solely by the captain. the right of abandonment; and by necessary implication, his liability
is confined to that which he is entitled of right to abandon – the
FACTS vessel with all her equipments and the freight it may have earned
 M/V Mindoro sailed from Manila to New Washington, Aklan with during the voyage.
many passengers aboard. o This rule is necessary to offset against the innumerable
 The vessel met typhoon Welming and it sank. hazards and perils of sea voyage and to encourage shipbuilding
o Many of its passengers died. One of them was Amparo delos and maritime commerce.
Santos.  The limited liability doctrine applies not only to goods but
 In a decision by the Board of Marine Inquiry, it was found also in all cases like death or injury to passengers
that the captain and some officers of the crew were negligent in wherein the shipowner or agent may properly be held liable
operating the vessel. for the negligent or illicit acts of the captain.
 The Heirs of Amparo contends that there was negligence on o Art. 587 speaks only of situations where the fault or
the part of the vessel. On the other hand, Compania Maritima contends negligence is committed solely by the captain.
that no negligence was ever established and that the drowning of the o In cases where the shipowner is likewise to be blamed,
passengers was due to force majeure. Art. 587 does not apply.
o Such a situation will be covered by the New Civil Code
ISSUE/HELD provisions on common carriers.
[1] WoN Compania Maritima was negligent – YES
[2] WoN Art. 587 is applicable in this case – NO CHAPTER 7- VESSELS

RATIO 7.1 GENERAL CONCEPTS

[1] Compania Maritima was negligent.
 Modern technology belies the claim of Compania Maritima that it did Philippine Refining Co., Inc. v. Aboitiz & Co.,
not have any information about typhoon Welming until after the boat G.R. No. L-41506, March 25, 1935
was already at sea. Malcolm, J.
Facts:
Philippine Refining Co., Inc., and Francisco Jarque executed three chattel
mortgages on the motor vessels Pandan and Zaragoza, which were recorded 9.1 Ship Owners and Ship Agents, Captains and Masters of Vessels;
in the record of transfers and incumbrances of vessels for the port of Cebu. Officers and Crew, Supercargoes
The mortgages had no appended affidavit of good faith except for the 3rd
mortgage, which was not registered in the customs house within the period of CHUA YEK HONG,
30 days prior to the start of the insolvency proceedings against Francisco vs.
Jarque. INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and
A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on DOMINADOR OLIT
the motorship Zaragoza and was entered in the chattel mortgage registry of G.R. No. 74811 September 30, 1988
the register of deeds. Melencio-Herrera, J.
Francisco Jarque was then declared to be an insolvent debtor that resulted to
an assignment of all his properties in favor of Jose Corominas The Phil. American Gen. Insurance Co., Inc. vs Court of Appeals and
Judge Jose M. Hontiveros declined the foreclosure of the mortgages and Felman Shipping Lines
sustained the special defenses of fatal defectiveness of the mortgages. G.R. No. 116940 June 11, 1997
Bellosillo, J.
Issue: Whether or not the mortgages are defective.
Facts:
Held:
Vessels are considered personal property under the civil law. (Code of July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by
Commerce, article 585.) Similarly under the common law, vessels are Felman, 7,500 cases of 1-liter Coca-Cola soft drink bottles to be transported
personal property although occasionally referred to as a peculiar kind of to Zamboanga City to Cebu. The shipment was insured with Philamgen.
personal property.
July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a
Since the term "personal property" includes vessels, they are subject to claim with respondent Felman for recovery of damages. Felman denied thus
mortgage agreeably to the provisions of the Chattel Mortgage Law. (Act No. prompted cocacola to file an insurance claim with Philamgen. Philamgen
1508, section 2.) later on claimed its right of subrogation against Felman which disclaimed any
liability for the loss.
The only difference between a chattel mortgage of a vessel and a chattel
mortgage of other personalty is that it is not now necessary for a chattel
Philamgen alleged that the sinking and loss were due to the vessel's
mortgage of a vessel to be noted n the registry of the register of deeds, but it
is essential that a record of documents affecting the title to a vessel be unseaworthiness, that the vessel was improperly manned and its officers
entered in the record of the Collector of Customs at the port of entry. were grossly negligent. Felman filed a motion to dismiss saying that there is
Otherwise a mortgage on a vessel is generally like other chattel mortgages no right of subrogation in favor of Philamgen was transmitted by the shipper.
as to its requisites and validity.
RTC dismissed the complaint of Philamgen. CA set aside the dismissal and
A good chattel mortgage according to Section 5 of The Chattell Mortgage remanded the case to the lower court for trial on the merits. Felman filed a
Law, includes the requirement of an affidavit of good faith appended to the petition for certiorari but was denied.
mortgage and recorded therewith. The absence of the affidavit vitiates a
mortgage as against creditors and subsequent encumbrancers. As a RTC rendered judgment in favor of Felman. it ruled that the vessel was
consequence a chattel mortgage of a vessel wherein the affidavit of good
seaworthy when it left the port of Zamboanga as evidenced by the certificate
faith required by the Chattel Mortgage Law is lacking, is unenforceable
against third persons. issued by the Phil. Coast Guard and the ship owner’s surveyor. Thus, the
loss is due to a fortuitous event, in which, no liability should attach unless
there is stipulation or negligence.
CHAPTER 9 – PERSONS WHO TAKE PART IN MARITIME COMMERCE
On appeal, CA rendered judgment finding the vessel unseaworthy for the
cargo for being top-heavy and the cocacola bottles were also improperly
stored on deck. Nonetheless, the CA denied the claim of Philamgen, saying would mean that Philamgen has accepted the risk of unseaworthiness,
that Philamgen was not properly subrogated to the rights and interests of the therefore Philamgen is liable.
shipper plus the filing of notice of abandonment had absolved the ship owner
from liability under the limited liability rule. On the matter of subrogation, it is provided that;

Issues:
(a) Whether the vessel was seaworthy,
Art. 2207. If the plaintiff's property has been insured, and he has
(b) whether limited liability rule should apply and
received indemnity from the insurance company for the injury or loss arising
(c) whether Philamgen was properly subrogated to the rights against Felman.
out of the wrong or breach of contract complained of, the insurance company
Ruling:
shall be subrogated to the rights of the insured against the wrongdoer or the
(a) The vessel was unseaworthy. The proximate cause thru the findings of person who has violated the contract. If the amount paid by the insurance
the Elite Adjusters, Inc., is the vessel's being top-heavy. Evidence shows that company does not fully cover the injury or loss, the aggrieved party shall be
days after the sinking coca-cola bottles were found near the vicinity of the entitled to recover the deficiency from the person causing the loss or injury.
sinking which would mean that the bottles were in fact stowed on deck which
Pan Malayan Insurance Corp. vs CA: The right of subrogation is not
the vessel was not designed to carry substantial amount of cargo on deck.
dependent upon, nor does it grow out of any privity of contract or upon
The inordinate loading of cargo deck resulted in the decrease of the vessel's
payment by the insurance company of the insurance claim. It accrues simply
metacentric height thus making it unstable.
upon payment by the insurance company of the insurance claim.
(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers
the negligent acts of the captain in the care of the goods. This liability
Philippines, Inc., gave the former the right to bring an action as subrogee
however can be limited through abandonment of the vessel, its equipment
against FELMAN. Having failed to rebut the presumption of fault, the liability
and freightage. Nonetheless, there are exceptions wherein the ship agent
of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft drink
could still be held answerable despite the abandonment, as where the loss or
bottles is inevitable.
injury was due to the fault of the ship owner and the captain. The
international rule is that the right of abandonment of vessels, as legal WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING
limitation of liability, does not apply to cases where the injury was occasioned LINES is ordered to pay petitioner PHILIPPINE AMERICAN GENERAL
by the fault of the ship owner. Felman was negligent, it cannot therefore INSURANCE CO., INC.
escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to

the assurer that the vessel is seaworthy and such warranty is as much a term
of the contract as if expressly written on the face of the policy. However, the
implied warranty of seaworthiness can be excluded by terms in writing in the
policy of the clearest language. The marine policy issued by Philamgen to
cocacola has dispensed that the "seaworthiness of the vessel as between
the assured and the underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two

things: (1) the warranty of seaworthiness is fulfilled and (2) the risk of
unseaworthiness is assumed by the insurance company. This waiver clause