G.R. No. L-27798 June 15, 1977 UNION CARBIDE PHILIPPINES, INC. (formerly National Carbon Philippines, Inc.), plaintiff-appellant, vs. MANILA RAILROAD CO., substituted by the PHILIPPINE NATIONAL RAILWAYS, MANILA PORT SERVICE and AMERICAN STEAMSHIP AGENCIES, INC., defendants- appellees. This is an admiralty and arrastre case. On December 18, 1961 the vessel Daishin Maru arrived in Manila with a cargo of 1,000 bags of synthetic resin consigned to General Base Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc. On the following day, December 19, that cargo was delivered to the Manila Port Service in good order and condition except for twenty- five bags which were in bad order (Par. IV and Annexes C to C-25 of Stipulation of Facts). On January 20 and February 6 and 8, 1962 eight hundred ninety-eight (898) bags of resin (out of the 1,000 bags) were delivered by the customs broker to the consignee. One hundred two bags were missing. The contents of twenty-five bags were damaged or pilfered while they were in the custody of the arrastre operator (Par. XII and Annexes D and H of Stipulation of Facts All in all fifty bags out of the 898 bags were damaged (Annex D-5). The 152 bags of resin (102 missing and 50 damaged) were valued at $12.65 a bag or a total value of $1,992.80, which amount at the prevailing rate of exchange of P3.85 to the American dollar, is equivalent to P7,402.78 (Annex I of Stipulation of Facts). The consignee, through the customs broker, filed on January 3, 1962 with the Manila Port Service, as arrastre operator, and the American Steamship Agencies, Inc., as agent of the carrier, a provisional claim advising them that the shipment in question was "shorthanded, short delivered and/or landed in bad order" (Annexes E and F of Stipulation of Facts). Formal claims dated June 11, 1962 were made by the consignee with the arrastre operator and the agent of the carrier (Annexes I and I-1 of Stipulation of Facts The claims were reiterated by the consignee's lawyer in his letters dated September 26, 1962 which were received by the carrier's agent and the arrastre operator on October 4, 1962 (Annexes J and J-1 of Stipulation of Facts). As the claims were not paid, Union Carbide Philippines, Inc. filed a complaint on December 21, 1962 in the Court of First Instance of Manila against the Manila Railroad Company, the Manila Port Service and the American Steamship Agencies, Inc. for the recovery of damages amounting to P7,402.78 as the value of the undelivered 102 bags of resin and the damaged 50 bags plus legal rate of interest from the filing of the complaint and P1,000 as attorney's fees. Union Carbide's complaint was a double-barrelled action or a joinder of two causes of action. One was an action in admiralty under the Carriage of Goods by Sea Act against the carrier's agent for the recovery of P1,217.56 as the value of twenty-five bags of resin which were damaged before they were landed (Annex C-25). The other was an action under the management contract between the Bureau of Customs and the Manila Port Service, a subsidiary of the Manila Railroad Company, for the recovery of P6,185.22 as the value of the undelivered 102 bags of resin and twenty-five bags, the contents of which were damaged or pilfered while in the custody of the arrastre operator. The case was submitted for decision on the basis of a stipulation of facts. The trial court in its decision of January 15, 1964 dismissed the case as to the carrier's agent on the ground that the action had already

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prescribed because it was not "brought within one year after delivery of the goods", as contemplated in section 3(6) of the Carriage of Goods by Sea Act. The one-year period was counted from December 19, 1961 when the cargo was delivered to the arrastre operator. As above stated, the action was brought on December 21, 196'2 or two days late, according to the trial court's reckoning (Civil Case No. 52562). With respect to the consignee's claim against the arrastre operator, the trial court found that the provisional claim was filed within the fifteen-day period fixed in paragraph 15 of the arrastre contract. Yet, in spite of that finding, the trial court dismissed the action against the arrastre operator (p. 65, Record on Appeal). Union Carbide appealed to the Court of Appeals on questions of fact and of law, That Appellate Court elevated the case to this Court because in its opinion the appeal raises only the legal issue of prescription (Resolution of May 10, 1967 in CA-G. R. No. 33743-R). Union Carbide contends that the trial court erred (1) in finding that its action was barred by the statute of limitations and (2) in not holding that the carrier and the arrastre operator were liable for the value of the undelivered and damaged cargo. Claim against the carrier's agent.-There is no question that, as shown in the twenty-five tally sheets, 975 bags of resin were delivered by the carrier in good order to the arrastre operator and that only twenty-five (25) bags were damaged while in the carrier's custody (Annexes C to C-25 and K-1 of Stipulation of Facts). The one-year period within which the consignee should sue the carrier is computed from "the delivery of the goods or the date when the goods should have been delivered". The Carriage of Goods by Sea Act provides: RESPONSIBILITIES AND LIABILITIES SEC. 3. xxx xxx xxx (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or hi agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.

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In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (Commonwealth Act No. 65, adopting U.S. Public Act No. 521 of April 16,1936). What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act The trial court construed delivery as referring to the discharge or landing of the cargo. Union Carbide contends that "delivery" does not mean the discharge of goods or the delivery thereof to the arrastre operator but the actual delivery of the goods to the consignee by the customs broker. The carrier contends that delivery means discharge from the vessel into the custody of the customs arrastre operator because under sections 1201 and 1206 of the Tariff and Customs Code merchandise cannot be directly delivered by the carrier to the consignee but should first pass through the customhouse at a port of entry for the collection of customs duties. The carrier cites the following provisions of the bill of lading to support its contention: 9. Delivery. The Carrier retains the option of delivery at all times from ship's side or from craft, hulk, custom house, warehouse, wharf or quay at the risk of the shippers, consignees or owners of the goods, and all expenses incurred by delivery otherwise than from ship's side shall be borne by the shippers, consignee or owners of the goods. 11. Discharge of Goods. The goods may be discharge without notice, as soon as the ship is ready to unload, continuously day and night, Sundays and holidays included, on to wharf or quay or into warehouse, or into hulk, lazaretto or craft or on any other place and be stored there at the risk and expense of the shippers, consignees or owners of the goods, any custom of the port to the contrary notwithstanding. In any case, the Carrier's liability is to cease as soon as the goods are lifted from ship's deck or leave the ship's tackle, any custom of the port to the contrary notwithstanding. Consignees to pay charges for sorting and stocking the goods on wharf or in shed. If the consignees fail to take delivery of their goods immediately the ship is ready to discharge them, the Carrier shall be at liberty to land and warehouse or discharge the said goods into hulk or craft, or at any other place at the risk and expense of the shippers, consignees or owners of the goods without notice. 15. Notice of Claim. Any claim for loss of or damage to the goods must be preferred in writing to the Carrier's Agents at the place of delivery within 3 days after the ship's discharge thereof, and before the goods are removed from the quay or ship's " or place of discharge, and in the event of such claim not being preferred as above specified, the claim shall be deemed as waived, and the Carrier shall be discharged therefrom. Suit for the recovery of loss or damage shall not in any event be maintainable against the Carrier or the ship unless instituted within one year after the delivery of the written notice above specified. The amount of claim shall be restricted to the Cash Value of the goods at the place and time of original shipment plus all charges actually paid thereon, and all claims for either partial or total loss or damage shall be entertained and adjusted upon this basis of value. (Annex B). In this connection, it is pertinent to state that the Tarifff and Customs Code allows the delivery of imported merchandise to the arrastre operator:

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SEC. 1213. Receiving Handling Custody and Delivery of Articles. The Bureau of Customs shall have "elusive supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the convenience and comfort of passengers and the handling of baggage, as well as to acquire fire protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to the approval of the department head, contract with any private party for the service of receiving, handling, custody and delivery of articles, and in such event, the contract may include the sale or lease of government-owned equipment and facilities used in such service. The sensible and practical interpretation is that delivery within the meaning of section 3(6) of the Carriage of Goods by Sea Law means delivery to the arrastre operator. That delivery is evidenced by tally sheets which show whether the goods were landed in good order or in bad order, a fact which the consignee or shipper can easily ascertain through the customs broker. To use as basis for computing the one-year period the delivery to the consignee would be unrealistic and might generate confusion between the loss or damage sustained by the goods while in the carrier's custody and the loss or damage caused to the goods while in the arrastre operator's possession. Apparently, section 3(6) adheres to the common-law rule that the duty imposed water carriers was merely to transport from wharf to wharf and that the carrier was not bound to deliver the goods at the warehouse of the consignee (Tan Hi vs. United States, 94 Fed. Supp. 432,435). In the Tan Hi case, it was held that a requirement of Philippine law that all cargo unloaded at Manila be delivered to the consignee through the arrastre operator acting as customs' agent was not unreasonable. The common-law requirements as to the proper delivery of goods by water carrier apply only when customs regulations at the port of destination do not otherwise provide. The delivery must be in accordance with the usages of the port in order that such delivery would discharge the carrier of responsibility. (Notes 50 and 51, 80 C.J.S. 922; 58 C. J. 372 note 24. See 70 Am. Jur 2nd 613, note 19). Under the facts of this case, we held that the one-year period was correctly reckoned by the trial court from December 19, 1961, when, as agreed upon by the parties and as shown in the tally sheets, the cargo was discharged from the carrying vessel and delivered to the Manila Port Service. That one-year period expired on December 19, 1962. Inasmuch as the action was filed on December 21, 1962, it was barred by the statute of limitations. Defendant American Steamship Agencies, Inc., as agent of the carrier, has no more liability to the consignee's assignee, Union Carbide Philippines, Inc., in connection with the damaged twenty-five bags of resin. Prescription was duly pleaded by the said defendant in its answer and motion to dismiss. That defense was correctly entertained by trial court. Claim against the arrastre operator. The liability of the arrastre contractor has a factual and legal basis different from that of the carrier's. The management contract between the Manila Port Service and the Bureau of Customs provides:

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15. ... ; in any event the CONTRACTOR hall be relieved and released of any and all responsibility or liability for loss, damage, misdelivery, and/or non-delivery of goods, unless suit in the court of proper jurisdiction is brought within a period of one (1) year from the date of the discharge of the goods, or from the date when the claim for the value of such goods have been rejected or denied by the CONTRACTOR, provided that such claim shall have been filed with the CONTRACTOR within fifteen (15) days from the date of discharge of the last package from the carrying vessel. ... (Annex A of Stipulation of Facts Under the foregoing contractual provisions, the action against the arrastre operator to enforce liability for loss of the cargo or damage thereto should be filed within one year from the date of the discharge of the goods or from the date when the claim for the value of such goods has been rejected or denied by the arrastre operator. However, before such action can be filed a condition precedent should be complied with and that is, that a claim (provisional or final) shall have been previously filed with the arrastre operator within fifteen days from the date of the discharge of the last package from the carrying vessel (Continental Insurance Company vs. Manila Port Service, L-22208, March 30,1966,16 SCRA 425). In this case, the consignee's customs broker filed with the Manila Port Service as provisional claim advising the latter that the cargo was "short, short delivered and/or landed in bad order". That claim was filed on January 3, 1962 or on the fifteenth day following December 19, 1961, the date of the discharge of the last package from the carrying vessel. That claim was never formally rejected or denied by the Manila Port Service. Having complied with the condition precedent for the filing of a claim within the fifteen- day period, Union Carbide could file the court action within one year, either from December 19, 1961 or from December 19, 1962. This second date is regarded as the expiration of the period within which the Manila Port Service should have acted on the claim (Philippine Education Co., Inc. vs. Manila Port Service, L-24091, 21 SCRA, 174, 178). In other words, the claimant or consignee has a two-year prescriptive period, counted from the date of the discharge of the goods, within which to file the action in the event that the arrastre contractor, as in this case, has not rejected nor admitted liability (Continental Insurance Company vs. Manila Port Service, supra. Philippine Education Company vs. Manila Port Service, L-23444, October 29, 1971, 42 SCRA 31). Since the action in this case against the arrastre operator was filed on December 21, 1962, or within the two-year period expiring on December 19, 1963, that action was filed on time. The trial court erred in dismissing the action against the Manila Port Service and its principal, the Manila Railroad Company. As shown in the statement of facts, the arrastre operator is responsible for the value of 102 bags of resin which were not delivered, and twenty-five bags, which were damaged, or a total of one hundred twentyseven bags valued at P6,185.22. The arrastre operator should pay attorney's fees to the plaintiff for not having satisfied its plainly valid, just and demandable claim (Art. 2208, Civil Code). We fix the attorney's fees and the litigation expenses in the sum of one thousand pesos. WHEREFORE, the trial court's judgment is affirmed insofar as it dismissed plaintiff-appellant's claim against defendant American Steamship Agencies, Inc. on the ground of prescription. The trial court's decision is reversed insofar as it dismissed plaintiff's claim against the Manila Railroad Company, as arrastre operator. The Philippine National Railways, as the successor of the Manila Railroad Company (See. 22, Republic Act No. 4156), is hereby ordered to pay plaintiff Union Carbide Philippines, Inc. the sum of P6,185.22, as the value of the 127 bags of resin (102 bags missing and 25 bags damaged), with legal rate of interest from the

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filing of the complaint on December 21, 1962 up to the date of payment, Plus P1,000 as attorney's fees and litigation expenses, and the costs. G.R. No. L-61352 February 27, 1987 DOLE PHILIPPINES, INC., plaintiff-appellant, vs. MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee. This appeal, which was certified to the Court by the Court of Appeals as involving only questions of law, 1 relates to a claim for loss and/or damage to a shipment of machine parts sought to be enforced by the consignee, appellant Dole Philippines, Inc. (hereinafter caged Dole) against the carrier, Maritime Company of the Philippines (hereinafter called Maritime), under the provisions of the Carriage of Goods by Sea Act. 2 The basic facts are succinctly stated in the order of the Trial Court portion of which reads: xxx xxx xxx Before the plaintiff started presenting evidence at today's trial at the instance of the Court the lawyers entered into the following stipulation of facts: 1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee on December 18, 1971; 2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant vessel on May 4, 1972; 3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila, docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving three (3) separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation; 4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043 dismissing the first two causes of action in the aforesaid case with prejudice and without pronouncement as to costs because the parties had settled or compromised the claims involved therein. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. The dismissal of that complaint containing the three causes of action was upon a joint motion to dismiss filed by the parties; 5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the third cause of action without prejudice, plaintiff instituted this present complaint on January 6, 1975. xxx xxx xxx 4 To the complaint in the subsequent action Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act, 5 and following pre-trial, moved for a preliminary hearing on said defense. 6 The Trial Court granted the motion, scheduling the preliminary hearing on April 27, 1977. 7 The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription. 8 The motion was opposed by Dole 9 and the Trial Court, after due3

dated March 16, 1977, the relevant

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consideration, resolved the matter in favor of Maritime and dismissed the complaint 10 Dole sought a reconsideration, which was denied, 11 and thereafter took the present appeal from the order of dismissal. The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act which, in its Section 3, paragraph 6, provides that: *** the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. xxx xxx xxx Dole concedes that its action is subject to the one-year period of limitation prescribe in the above-cited provision. 12 The substance of its argument is that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter, 13 and there being "*** a patent deficiency *** with respect to the tolling of the prescriptive period ***" provided for in the Carriage of Goods by Sea Act, 14 prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling and because Dole's claim for loss or damage made on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. To much the same effect is the further argument based on Article 1176 of the Civil Code which provides that the rights and obligations of common carriers shag be governed by the Code of Commerce and by special laws in all matters not regulated by the Civil Code. These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, Inc. 15 There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention that an extrajudicial demand toiled the prescriptive period provided for in the Carriage of Goods by Sea Act, viz: In the second assignment of error plaintiff-appellant argues that it was error for the court a quo not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss on August 22, 1952. We notice that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the oneyear period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. * * *

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Moreover, no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage-filed by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one- year prescriptive period from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted "tolled" would be the more precise term and began to run anew from May 4, 1972, affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed. Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 *** (and that) in legal contemplation *** (the) case (Civil Case No. 96353) was filed on January 6, 1975 *** well within the oneyear prescriptive period in Sec. 3(6) of the Carriage of Goods by Sea Act." 16 equates tolling with indefinite suspension. It is clearly fallacious and merits no consideration. WHEREFORE, the order of dismissal appealed from is affirmed, with costs against the appellant, Dole Philippines, Inc.

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G.R. No. 74125 July 31, 1990 UNIVERSAL SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELATE COURT and ALLIANCE ASSURANCE COMPANY, LTD., respondents. In this appeal by certiorari, the petitioner seeks to set aside the decision of the then Intermediate Appellate Court, now Court of Appeals, promulgated on March 25, 1986 in AC-G.R. CV No. 69824, affirming with modification the decision of the former Court of First Instance of Manila dated February 4, 1981, against the herein petitioner, Universal Shipping Lines, Inc., the defendant in the trial court. On or about March 22,1974, SEVALCO Limited, owned and operated by the petitioner, shipped from Rotterdam Netherlands, to Bangkok, Thailand, aboard its M/V "TAIWAN", two (2) cargoes of 50 palletized cartons consisting of 2,000 units of 25-kilogram bags of State R Brand carton black, with a declared gross weight of 53,000 kilos each. They were respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm Retreads,Ltd., per Bills of Lading Nos. RB-15 (Exh. A) and RB-16 (Exh. B). Both shipments were insured with the private respondent, Alliance Assurance Company, Ltd., a foreign insurance company domiciled in London, England, which had withdrawn from the Philippine market on June 30, 1951 yet. Despite the arrival of the vessel on June 28, 1974 at Bangkok, the cargo covered by Bill of Lading No. RB15 was not unloaded nor delivered to the consignee, S. Lersen Company, Ltd. The shipment under Bill of Lading No. RB-16 was delivered to Muang Ngarm Retreads, Ltd. with a total weight shortage of 11,070 kilos because the cargoes had been either totally or partially dissolved in saltwater which flooded Hatch No. 2 of the vessel where they had been stored. Upon arrival in Manila on July 4, 1974, Arturo C. Saavedra, master of M/V "TAIWAN" filed a marine protest (Exh. H), pertinent portions of which read: By investigation, the source of the water could not be definitely ascertained where it comes from. However, the bilge pump was employed to pump out continue working for almost 12 hours No. 2. The bilge pump was employed every other day to pump out the water, but it was seems to be almost same soundings. Suspecting of some leakage of suction pipes. That the hold No. 2 cannot be inspected on account of the full cargoes inside the hold, rendering it to be inaccessible. Suspecting that the water comes from outside passing through some loosen rivets on starboard side of the ship. (sic.) That the pumping out the water from the hold was done by shore help upon arrival at Bangkok. (sic.) (pp. 23-24, Rollo.) The consignees, S. Lersen Co., Ltd. and Muang Ngarm Retreads, Inc., filed their respective formal claims for loss and damage to their cargoes on August 7, 1974 (Exhs. N and N-1) and on November 12,1974 (Exh. M). (p. 24, Rollo.) The insurer paid both claims in the amounts of I2,180 and 2,547.18 for the loss and damage to their cargoes.

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On June 25, 1976, private respondent, as insurer-subrogee, filed an action in the Court of First Instance of Manila to recover from the petitioner and its Manila agent, Carlos Go Thong & Company, what it paid the consignees of the cargo. After trial, the court a quo rendered judgment for the private respondent, the dispositive portion of which reads: PREMISES CONSIDERED, judgment is hereby rendered ordering defendants Universal Shipping Lines, Inc. and Carlos Go Thong & Co., jointly and severally, to pay plaintiff Alliance Asurance Co., Ltd., under the first cause of action, the sum of 12,180.00 or the peso equivalent thereof, and under the second cause of action, the sum of 2,547.18 or the peso equivalent thereof, both with legal interest thereon from June 25, 1976, the date of the filing of the present action, until said obligations are fully paid, plus attorney's fees in the sum of P10,000.00, with costs. (pp. 24-25, Rollo.) On appeal to the Court of Appeals, the decision was affirmed after exculpating petitioner's ship-agents in Manila (Go Thong) from any liability on the ground that it had no participation in the shipment of the cargo which had been loaded and discharged in places other than Manila (p. 28, Rollo).itc-asl In this appeal by certiorari, petitioner alleges that respondent court erred: 1. in holding petitioner liable for the damage/loss suffered by the subject shipments; 2. in holding that private respondent has capacity to sue in this jurisdiction; 3. in finding that private respondent's cause of action has not yet prescribed; and 4. in awarding attorney's fees without stating any factual, legal and equitable justification. The petition is not meritorious. The first assignment of error raises a factual issue which we decline to review as this Court may review only legal issues which must be distinctly set forth in the petition (Sec. 2, Rule 45, Rules of Court). In any event, the Court of Appeals committed no reversible error in holding, as the trial court did, that: ... It was incumbent upon the defendants to prove that the losses and damages were due to causes other than the negligence or fault of their employees. Said defendants have not adduced proof on this point. It having been shown that the losses and damages were incurred while the shipments were in the custody of the M/V' Taiwan' the liability of its owner/operator and shipping agent is clear-they must pay for the losses and damages sustained by the consignees as a consequence of the breach of contract of water transportation. (pp. 27-28, Rollo.) On the issue of jurisdiction, we uphold the appellate court's ruling that the private respondent may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country, for it is not the lack of the prescribed license (to do business in the Philippines) but doing business without such license, which bars a foreign corporation from access to our courts. (Pacific Vegetable Oil Corporation vs. Singzon L-7919, April 29, 1955; Eastboard Navigation, Ltd. vs. J. Ysmael & Co., Inc., L-9090, Sept. 10, 1957.) Anent the issue of prescription of the action under Section 3(6), Title I, of the Carriage of Goods by Sea Act (Commonwealth Act No. 65) which provides that:

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... the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. ... This provision of the law admits of an xception: if the one-year period is suspended by express agreement of the parties (Chua Kay vs. Everett Steamship Corporation, L-5554, May 27,1953; Tan Liao vs. American President Lines, Ltd., L-7280, January 20, 1956) for in such a case, their agreement becomes the law for them. (Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 674; Baluyot vs. Venegas, 22 SCRA 412; Lazo vs. Republic Surety & Insurance, Co., Inc., 31 SCRA 329; Philippine American General Insurance Co., Inc. vs. Mutuc, 61 SCRA 22-23). The exchange of correspondence between the parties and/or their associates/representatives (Exhs. R, S, S-1, T, T-1 and T-2) shows that the parties had mutually agreed to extend the time within which the plaintiff or its predecessors-in-interest may file suit until December 27,1976. When the complaint was filed on June 25, 1976, that deadline had not yet expired. An award of attorney's fees lies within the discretion of the court and depends upon the circumstances of each case (Medco Industrial Corp., et al. vs. Court of Appeals, et al., 167 SCRA 838).itc-asl In this case, the award of P10,000 as attorney's fees was reasonable and justified because the defendant's rejection of the private respondent's demand, compelled the latter to litigate and incur expenses to protect and enforce its just and valid claim. WHEREFORE, the petition for review is denied for lack of merit. Costs against the petitioner.

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G.R. No. L-58897 December 3, 1987 LUZON STEVEDORING CORPORATION, petitioner, vs. COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, respondents. On May 30, 1968 at past 6:00 in the morning a maritime collision occurred within the vicinity of the entrance to the North Harbor, Manila between the tanker LSCO "Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando Escano" a passenger ship owned by Hijos de F. Escano, Inc. as a result of which said passenger ship sunk. An action in admiralty was filed by Hijos de F. Escano, Inc. and Domestic Insurance Company of the Philippines against the Luzon Stevedoring Company (LSC) in the Court of First Instance of Cebu. In the course of the trial, the trial court appointed two commissioners representing the plaintiffs and defendant to determine the value of the LSCO "CAVITE." Said commissioners found the value thereof to be P180,000.00. After trial on the merits, a decision was rendered on January 24, 1974 finding that LSCO "Cavite" was solely to blame for the collision, thus its dispositive portion reads as follows: WHEREFORE, based on all the foregoing considerations, the Court renders judgment in favor of the plaintiffs and against the defendant ordering the latter to pay to the plaintiff Domestic Insurance Company of the Philippines the sum of P514,000.00, and to the plaintiff Hijos de F. Escano, Inc. the sum of P68,819.00, with interest on both sums at the legal rate, from the date the complaint was filed and the further sum of P252,346.70, with interest at the legal rate from August 7, 1972 and the sum of P163,721.91, without interest in trust for, and with direction that it pay the same to, the claimants concerned. With costs against the defendant. 1 In the penultimate paragraph of the decision the trial court held: With respect to the defense that defendant's liability is limited to the value of the LSCO "Cavite" and freight earned, invoking Art. 837 of the Code of Commerce, the Court believes and so holds that the defense has not been established. Moreover, the evidence is such that in principle Art. 837 does not apply here. The counterclaim of the defendant is likewise ordered dismissed for lack of merit. 2 Not satisfied therewith the defendant interposed an appeal therefrom to the Court of Appeals wherein in due course a decision was rendered on June 30, 1981 affirming the decision of the court a quo in toto with costs against appellant. The motion for reconsideration filed by the defendant of the decision was denied in a resolution of the Court of Appeals of November 7, 1981. Hence said defendant filed a petition for certiorari in this Court based on the following grounds: I THE LOWER COURT ERRED IN FINDING THAT THE LSCO "CAVITE" WAS THE VESSEL AT FAULT IN THE COLLISION. II

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THE LOWER COURT ERRED IN NOT FINDING THAT THE COLLISION BETWEEN THE M/V "FERNANDO ESCANO" AND THE LSCO "CAVITE" WAS DUE SOLELY AND EXCLUSIVELY TO THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE MASTER OF THE FORMER VESSEL. III THE LOWER COURT ERRED IN NOT RULING THAT THE CIVIL LIABILITY OF THE PETITIONER, IF ANY THERE BE, SHOULD BE LIMITED TO THE VALUE OF THE LSCO "CAVITE" WITH ALL ITS APPURTENANCES AND FREIGHT- AGE WHEN THE COLLISION TOOK PLACE. 3 In a resolution of February 26, 1982 this Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed by petitioner limiting the issue to the legal question of whether under Art. 837 of the Code of Commerce abandonment of vessel at fault is necessary in order that the liability of owner of said vessel shall be limited only to the extent of the value thereof, its appurtenances and freightage earned in the voyage. After respondents submitted their comment to the motion as required, on September 29, 1982 this Court denied the motion for reconsideration for lack of merit. With leave of court petitioner filed a second motion for reconsideration of said resolution raising the following issues: 1. Whether abandonment is required under Article 837 of the Code of Commerce. The decisions of this Honorable Court cited by the parties in support of their respective positions only imply the answer to the question, and the implied answers are contradictory. 2. If abandonment is required under Article 837 of the Code of Commerce, when should it be made? The Code of Commerce is silent on the matter. The decision of this Honorable Court in Yangco v. Laserna, 13 Phil. 330, left the question open and no other decision, as far as petitioner can ascertain, has resolved the question. 3. Is the decision of this Honorable Court in Manila Steamship Co., Inc. v. Abdulhama,n 100 Phil. 32, wherein it was held that "(t)he international rule to the effect that the right of abandonment of vessels, as a legal station of a shipowner's own fault," invoked by private respondents and apparently a major consideration in the denial of the motion for reconsideration, applicable to petitioner under the circumstances of the case at bar? 4 The respondents were required to comment thereto and after said comment was submitted petitioners submitted a reply thereto to which the respondents filed a rejoinder. On November 28, 1983, the Court gave due course to the petition for review and considered the respondents' comment thereto as the Answer. The parties were required to file their briefs. Both parties having filed their briefs the case is now submitted for decision. Articles 587, 590, and 837 of the Code of Commerce provide as follows: ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voyage.

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xxx xxx xxx ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the common fund for the results of the acts of the captain, referred to in Article 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the vessel belonging to him. xxx xxx xxx ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and freight earned during the voyage. 5 In the case of Philippine Shipping Company vs. Garcia, 6 which is an action for damages instituted by the Philippine Shipping Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a result of the collision with the Steamship "Navarra" of Garcia, it was found that the "Navarra" was responsible for the collision. The claim of the Philippine Shipping is that the defendant should pay P18,000.00, the value of the "Navarro" at the time of its loss, in accordance with the provision of Article 837 of the Code of Commerce, and that it was immaterial that the "Navarro" had been entirely lost provided the value could be ascertained since the extent of liability of the owner of the colliding vessel resulting from the collision is to be determined by its value. This Court speaking through the then Chief Justice Arellano held: Article 837 of the Code of 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." (Lorenzo Benito, "Lecciones," 352.) ART. 587. The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the trip. ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund, for the results of the acts of the captain referred to in Article 587. Each part owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829) does not determine the juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed code, which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted with the provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only one who represents the vessel that is to say, the only one who represents the interests of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the extent

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of the liability, both of the agent and of the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and other things appertaining thereto." There is no doubt that if the Navarro had not been entirely lost, the agent, having been held liable for the negligence of the captain of the vessel could have abandoned her with all her equipment and the freight money earned during the voyage, thus bringing himself within the provisions of article 837 in so far as the subsidiary civil liability is concerned This abandonment which would have amounted to an offer of the value of the vessel, of her equipment, and freight money earned could not have been refused, and the agent could not have been personally compelled, under such circumstances, to pay the 18,000 pesos, the estimated value of the vessel at the time of the collision. This is the difference which exists between the lawful acts and lawful obligations of the captain and the liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise from the contract of agency (provided, however, that the captain does not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the codes of the principal maritime nations provide, with the vessel, and not individually. Such is also the spirit of our code. The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the following as the basis of this decision: That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real and hypothecary nature of the former, and the many securities of a real nature that maritime customs from time immemorial the laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting interests which are ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs made to the vessel. As evidence of this "real" nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person. This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal action lies against the owner or agent of the vessel. For instance, where the' vessel is lost the sailors and members of the crew can not recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwreck, those who loan their money on the vessel and cargo lose all their rights and can not claim reimbursement under the law.

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There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed, and (2) the "real" nature of the maritime law, exclusively "real," according to which the liability of the parties is limited to a thing which is at the mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through the accidents of navigation it is only just that the maritime creditor have some means of obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost. The liens tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to respect and recognize are in addition to those existing in favor of the State by virtue of the privileges which are granted to it by all the laws pilot, tonnage, and port dues and other similar charges, the wages of the crew earned during the last voyage as provided in article 646 of the Code of Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as provided in article 608, and all other liabilities arising from collisions under Articles 837 and 838.' (Madariaga pp. 60, 62, 63, 85. We accordingly hold that the defendant is liable for the indemnification to which the plaintiff is entitled by reason of the collision but he is not required to pay such indemnification for the reason that the obligation thus incurred has been extinguished on account of the loss of the thing bound for the payment thereof and in this respect the judgment of the court below is affirmed except in so far as it requires the plaintiff to pay the costs of this action, which is not exactly proper. No special order is made as to costs of this appeal. After the expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter the record be remanded to the Court of First Instance for execution. So ordered.7

From the foregoing the rule is that in the case of collision, abandonment of the vessel is necessary in order to limit the liability of the shipowner or the agent to the value of the vessel, its appurtenances and freightage earned in the voyage in accordance with Article 837 of the Code of Commerce. The only instance where such abandonment is dispensed with is when the vessel was entirely lost. In such case, the obligation is thereby extinguished. In the case of Government of the Philippines vs. Maritime this Court citing Philippine Shipping stated the exception thereto in that while "the total destruction of the vessel extinguishes a maritime lien, as there is no longer any risk to which it can attach, but the total destruction of the vessel does not affect the liability of the owner for repairs of the vessel completed before its loss, 8 interpreting the provision of Article 591 of the Code of Commerce in relation with the other Articles of the same Code. In Ohta Development Company vs. Steamship "Pompey" 9 it appears that at the pier sunk and the merchandise was lost due to the fault of the steamship "Pompey" that was then docked at said pier. This Court ruled that the liability of the owner of "Pompey" may not be limited to its value under Article 587 of the Code of Commerce as there was no abandonment of the ship. We also held that Article 837 cannot apply as it refers to collisions which is not the case here. 10 In the case of Guison vs. Philippine Shipping Company 11 involving the collision at the mouth of the Pasig river between the motor launches Martha and Manila H in which the latter was found to be at fault, this Court, applying Article 837 of the Code of Commerce limited the liability of the agent to its value. In the case of Yangco vs. Laserna 12 which involved the steamers SS "Negros" belonging to Yangco which after two hours of sailing from Romblon to Manila encountered rough seas as a result of which it capsized such that many of its passengers died in the mishap, several actions for damages were filed against Yangco, by a verified pleading, he sought to abandon the vessel to the plaintiffs in the three cases together

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with all the equipment without prejudice to the right to appeal. This Court in resolving the issue held as follows: Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its passengers? We are of the opinion and so hold that this question is controlled by the provision of article 587 of the Code of Commerce. Said article reads: The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the. care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage. The provision accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to that 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." It is true that the article apears to deal only with the limited liability of shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability. The consensus of authorities is to the effect that notwithstanding the language of the afore-quoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco commenting on said article, said: La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono, si se atiende a lo escrito, solo se refiere a las indemnizaciones a que diere lugar la conducta del Capitan en la custodia de los efectos que cargo en el buque. Es ese el espiritu del legislador? No; habra derecho de abandono en las responsabilidades nacidas de obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta copiar el siguiente parrafo de la Exposicion de motivos: El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio maritimo que quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o Capitan del buque, la garantia real del mismo, cualesquiera que sean las facultades o atribuciones de que se hallen investidos; (Echavarri, Codigo de Comercio, Tomo 4, 2. ed., pags. 483- 484.) A cursory examination will disclose that the principle of limited liability of a shipowner or agent is provided for in but three articles of the Code of Commerce Article 587 aforequoted and articles 590 and 837. Article 590 merely reiterates the principle embodied in article 587, where the vessel is owned by several person Article 837 applies the same principle in cases of collision and it has been observed that said article is but 'a necessary consequence of the right to abandon the vessel given to the shipowner in Article 587 to the Code, and it is one of the many superfluities contained in the Code. (Lorenzo Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.) In effect therefore, only Articles 587 and 590 are the provisions contained in our Code of Commerce on the matter, and the framers of said code had intended those provisions to embody the universal principle of limited liability in all cases. ... . 13 In the said case We invoked our ruling in Philippine Shipping and concluded as follows:

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In the light of all the foregoing, we therefore hold that 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 collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this conclusion, we have not been unmindful of the fact that the illfated steamship Negros, as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely 32 Phil. 541), and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law or not, is immaterial The vessel having totally perished any act of abandonment would be an Idle ceremony. 14 In the case of Abueg vs. San Diego,15 which involves a claim of compensation under the Workmen's Compensation Act for the deceased members of the crew of the MS "San Diego II" and MS "Bartolome" which were caught by a typhoon in the vicinity of Mindoro Island and as a consequence of which they were sunk and totally lost, this Court held as follows: Counsel for the appellant cite article 7837 of the Code of Commerce which provides that if the vessel together with all her tackle and freight money earned during the voyage are abandoned, the agent's liability to third persons for tortious acts of the captain in the care of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil. 330) Article 937 of the same Code which provides that in cases of collision, the shipowners' liability is limited to the value of the vessel with all her equipment and freight earned during the voyage (Philippine Shipping Company vs. Garcia, 6 Phil. 281); and Article 643 of the same Code which provides that if the vessel and freight are totally lost, the agent's liability for wages of the crew is extinguished. From these premises counsel draw the conclusion that appellant's liability, as owner of the two motor ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on October 1, 1941, was extinguished. The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage 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 vessel equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and freight, his liability was extinguished But the provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the liability for the loss of the ship as a result of collision; nor the responsibility for wages of the crew, but a liability created by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged in the performance of their work or employment, or the heirs and dependents of such laborers and employees in the event of death caused by their employment. Such compensation has nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of production which must be included in the budget of any well managed industry.

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Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil. 446), and Murillo vs. Mendoza (66 Phil. 689), the question of the extinction of the shipowner's liability due to abandonment of the ship by him was not fully discussed, as in the case of Yangco vs. Laserna, supra, is not entirely correct. In the last mentioned case, the limitation of the shipowner's liability to the value of the ship, equipment, freight, and insurance, if any, was the lis mota In the case of Enciso vs. Dy-Liaco, supra, the application of the Workmen's Compensation Act to a master or patron who perished as a result of the sinking of the motorboat of which he was the master, was the controversy submitted to the court for decision. This Court held in that case that .It has been repeatedly stated that the Workmen's Compensation Act was enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the employer need not be guilty of neglect or fault in order that responsibility may attach to him' (pp. 449-450); and that the shipowner was liable to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the fact that the motorboat was totally lost. In the case of Murillo vs. Mendoza, supra, this Court held that 'The rights and responsibilities defined in said Act must be governed by its own peculiar provisions in complete disregard of other similar provisions of the Civil as well as the mercantile law. If an accident is compensable under the Workmen's Compensation Act, it must be compensated even when the workman's right is not recognized by or is in conflict with other provisions of the Civil Code or of the Code of Commerce. The reason behind this principle is that the Workmen's Compensation Act was enacted by the Legislature in abrogation of the other existing laws.' This quoted part of the decision is in answer to the contention that it was not the intention of the Legislature to repeal Articles 643 and 837 of the Code of Commerce with the enactment of the Workmen's Compensation Act. 16 In said case the Court reiterated that the liability of the shipowner or agent under the provision of Articles 587 and 837 of the Code of Commerce is limited to the value of the vessel with all her equivalent and freight earned during the voyage if the shipowner or agent abandoned the ship with all the equipment and freight. However, it does not apply to the liability under the Workmen's Compensation Act where even as in said case the vessel was lost the liability thereunder is still enforceable against the employer or shipowner. The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman and Lim Hong To 17 is a case of collision of the ML "Consuelo V" and MS "Bowline Knot" as a result of which the ML "Consuelo V" capsized and was lost where nine (9) passengers died or were missing and all its cargoes were lost. In the action for damages arising from the collision, applying Article 837 of the Code of Commerce, this Court held that in such case where the collision was imputable to both of them, each vessel shall suffer her own damages and both shall be solidarily liable for the damages occasioned to their cargoes.18 Thus, We held: In fact, it is a general principle, well established maritime law and custom, that shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article 587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability, moderated and limited by the owner's right of abandonment of the vessel and earned freight (Article 587) has been declared to exist not only in case of breached contracts, but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511; 515): xxx xxx xxx It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater protection of injured parties. Shipowners would be able to escape liability in practically every case, considering that the qualifications and

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licensing of ship masters and officers are determined by the State, and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for almost always its members. are, from captains down, mere wage earners. We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of the Manila Steamship Co., that it is exempt from liability for the collision with the M L "Consuelo V " due to the absence of negligence on its part in the selection and supervision of the officers and crew of the M/S "Bowline Knot. 19 However, insofar as respondent Lim Hong To, owner of M L "Consuelo V" who admittedly employed an unlicensed master and engineer and who in his application for permission to operate expressly assumed full risk and responsibility thereby (Exh. 2) this Court held that the liability of Lim Hong To cannot be limited to the value of his motor launch by abandonment of the vessel as invoked in Article 587 of the Code of Commerce, We said: The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or the average is due to shipowner's own fault. Farina (Derecho Commercial Maritima Vol. 1, pp. 122123), on the authority of judicial precedents from various nations, sets the rule to be as follows: xxx xxx xxx 20 From the foregoing, it is clear that in case of collision of vessels, in order to avail of the benefits of Article 837 of the Code of Commerce the shipowner or agent must abandon the vessel. In such case the civil liability shall be limited to the value of the vessel with all the appurtenances and freight earned during the voyage. However, where the injury or average is due to the ship-owner's fault as in said case, the shipowner may not avail of his right to limited liability by abandoning the vessel. We reiterate what We said in previous decisions that the real and hypothecary nature of the liability of the shipowner or agent is embodied in the provisions of the Maritime Law, Book III, Code of Commerce. 21 Articles 587, 590 and 837 of the same code are precisely intended to limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and freightage earned in the voyage, provided that owner or agent abandons the vessel. Although it is not specifically provided for in Article 837 of the same code that in case of collision there should be such abandonment to enjoy such limited liability, said article on collision of vessels is a mere amplification of the provisions of Articles 587 and 590 of same code where abandonment of the vessel is a pre-condition. Even without said article, the parties may avail of the provisions of Articles 587 and 590 of same code in case of collision. This is the reason why Article 837 of the same code is considered a superfluity. 22 Hence the rule is that in case of collision there should be abandonment of the vessel by the shipowner or agent in order to enjoy the limited liability provided for under said Article 837. The exception to this rule is when the vessel is totally lost in which case there is no vessel to abandon so abandonment is not required. Because of such total loss the liability of the shipowner or agent for damages is extinguished. Nevertheless, the shipowner or agent is personally liable for claims under the Workmen's Compensation Act and for repairs of the vessel before its loss. 23 In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In such instance the shipowner or agent may avail of the provisions of Article 837 of the Code by abandoning the vessel. 24

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However, if the injury or damage is caused by the shipowner's fault as where he engages the services of an inexperienced and unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of the Code by abandoning the vessel. 25 He is personally liable for the damages arising thereby. In the case now before the Court there is no question that the action arose from a collision and the fault is laid at the doorstep of LSCO "Cavite" of petitioner. Undeniably petitioner has not abandoned the vessel. Hence petitioner can not invoke the benefit of the provisions of Article 837 of the Code of Commerce to limit its liability to the value of the vessel, all the appurtenances and freightage earned during the voyage. In the light of the foregoing conclusion, the issue as to when abandonment should be made need not be resolved. WHEREFORE, the petition is DENIED with costs against petitioner.

G.R. No. 74811 September 30, 1988

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CHUA YEK HONG, petitioner, vs. INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT, respondents. In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G.R. No. 01375 entitled "Chua Yek Hong vs. Mariano Guno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving private respondents (defendants below) of any liability for damages for loss of cargo. The basic facts are not disputed: Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are the owners of the vessel, "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to the Port of Manila. In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo. On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a Complaint for damages based on breach of contract of carriage against private respondents (Civil Case No. R-3205). In their Answer, private respondents averred that even assuming that the alleged cargo was truly loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said vessel. On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows: WHEREFORE, in view of the foregoing considerations, the court believes and so holds that the preponderance of evidence militates in favor of the plaintiff and against the defendants by ordering the latter, jointly and severally, to pay the plaintiff the sum of P101,227.40 representing the value of the cargo belonging to the plaintiff which was lost while in the custody of the defendants; P65,550.00 representing miscellaneous expenses of plaintiff on said lost cargo; attorney's fees in the amount of P5,000.00, and to pay the costs of suit. (p. 30, Rollo). On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in its extinction. The decretal portion of that Decision 1 reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby REVERSED, and another one entered dismissing the complaint against defendantsappellants and absolving them from any and all liabilities arising from the loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs against appellee. (p. 19, Rollo). Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of the present recourse. The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.

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Article 587 of the Code of Commerce provides: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage. The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship 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 of goods transported, as well as for the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32 [1956]). However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]). As this Court held: If the ship owner 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 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. (Yangco vs. Laserna, et al., supra). The rationale therefor has been explained as follows: The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to 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 ship to the vessel, equipment, and freight, or insurance, if any, so that if the ship owner or agent abandoned the ship, equipment, and freight, his liability was extinguished. (Abueg vs. San Diego, 77 Phil. 730 [1946]) 0 Without the principle of limited liability, a ship owner and investor in maritime commerce would run the risk of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the interest of navigation." Yangco vs. Lasema, supra).

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0 As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]). 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 owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as shipowners, or to their concurrent negligence with the captain of the vessel. What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability under maritime law, these provisions would not have any effect on the principle of limited liability for ship owners or ship agents. As was expounded by this Court: In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a vessel engaged in interisland trade, is a common carrier, and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively 'real and hypothecary nature of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. (Yangco vs. Laserila, et al., supra). Moreover, Article 1766 of the Civil Code provides: Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. 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. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case. In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this case. WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs. G.R. No. L-7675 March 25, 1913

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G. URRUTIA & CO., plaintiff-appellee, vs. BACO RIVER PLANTATION CO., defendant-appellee. M. GARZA, intervener-appellant. This action spring from a collision between the steamship Nuestra Seora del Pilar, owned by the plaintiff, and the schooner Mangyan owned by the defendant, which occurred in the early morning of the 8th of April, 1910, in Verde Island North Passage. The sail vessel was sailing with a fresh breeze dead astern, her sails wing and wing. The steamer was seen by those on board the sailing vessel some time before the actual collision, sailing erratically. The sail vessel kept her course steadily until just before the actual contact when her helmsman threw her hard to port in an effort to avoid the collision. The movement, however, was unsuccessful and the sail vessel rammed the steamer on the starboard quarter well aft. The steamer sank and eight lives were lost. The sail vessel was considerably injured. This action was brought by the owners of the steamship against the owner of the sail vessel, to recover the value of the destroyed steamer and the damages caused by reason of its destruction, alleging as a basis therefor the negligence of the said vessel. The defendant denied the material allegations of the complaint and set up a counterclaim for damages, alleging as grounds therefor that the injuries sustained by the said vessel were due to the gross negligence of those handling plaintiff's steamer. Before the action was tried, M. Garza made an application to intervene under the provisions of section 121 of the Code of Civil Procedure, he alleging in support of his application that the steamer was carrying for him at the time several thousand pesos' worth of merchandise as freight, which was lost as a result of the collision. He was permitted to intervene and accordingly filed a complaint setting up the loss of this merchandise and the value thereof and alleging, as the basis for his right to recover, the negligence of one or the other of the vessels, without specifying which, and praying that the court award him damages against the vessel the negligence of which, upon the trial, was shown to have caused his loss. The case turns upon the question which of the vessels was negligent in failing to conform to the International Rules for the Prevention of Collissions at Sea. The learned trials court found that those managing the steamer were guilty of gross negligence and that for that reason the plaintiff could recover nothing. An examination of the record leave no doubt that the finding of the trial court that the steamer was handled in a grossly negligent manner is clearly and fully supported by the evidence. No other finding could be sustained. Relative to the alleged negligence of the sail vessel the learned trial court said: I am satisfied beyond any reasonable doubt that the steamer Ntra. Sra. del Pilar was sailing erratically, that it did not have a proper watch on board, and that it therefore contributed neglect to the collision. I am thoroughly satisfied that the sailing vessel Mangyan had its lights properly on it long before the time the collision occurred, and that the lights were so arranged upon the rigging of the vessel as to comply with the rules, and that they were visible and were seen by the crew of the steamer Elcano and could have been seen by the wathcman or the chief officer of the steamer Ntra. Sra. del Pilar, if they had been on the lookout for them; That the steamer Ntra. Sra. del Pilar, being bound to keep out of the course of the sailing vessel and suddenly seeing the sailing vessel very close, went over hard to port and crossed the course of the sailing vessel.

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I also find that the sailing vessel, notwithstanding the erratic movements of the steamer, proceeded directly on its course regardless of consequences when with all the searoom there was it could easily have maneuvered so as to very well avoid the collision, and thereby having contributed neglect to the collision, neither is entitled to recover from the other any damages which may have occurred. These facts and circumstances clearly appear in the record and fully sustain the conclusions reached. We are of the opinion that under the facts stated in the decision of the trial court the defendant was entitled to recover upon its counterclaim. It being clear from, the evidence that the gross negligence of those managing the steamer brought it into such close proximity to the sail vessel that a collision was apparently inevitable, the question is whether or not the sail vessel was negligent in continuing its course without variation up to the moment that it found itself in extremis. Article 20 of the International Rules for the Prevention of Collission at Sea is as follows: "If two ships, one of which is a sailing ship and the other a steam ship, are proceeding in such directions as to involve risk of collision, the steam ship shall keep out of the way, of the sailing ship." Article 21 is as follows: "where by any of these rules one of two vessels is to keep out of the way, the other shall keep her course and speed." Generally speaking, in collisions between vessels there exist three divisions of time, or zones; The first division covers all the time up to the moment when the risk of collision may be said to have begun. Within this zone no rule is applicable because none is necessary. Each vessel is free to direct its course as it deems best without reference to the movements of the other vessel. The second division covers the time between the moment when the risk of collision begins and the moment when it has become a practical certainty. The third division covers the time between the moment when collision has become a practical certainty and the moment of actual contact. It was during the time when the sail vessel was passing through the third zone that it changed its course to port in order to avoid, if possible, the collision. This act may be said to have been done in extremis, and, even if wrong, the sailing vessel is not responsible for the result. The question before us, as presented by the finding of the trial court, arises wholly over the action of the schooner in keeping her course through the second zone, that is, during the period when there was a risk of collision. In resolving this question we have to note the well-established presumption which favors the sail vessel in cases of this character. The rule relative to this presumption is conservatively stated in volume 25 of the American and English Encyclopedia of Law, page 926: Subject to the general rules of evidence in collision cases as to the burden of proof, in the case of a collision between a steam vessel and a sail vessel, the presumption is against the steam vessel, and she must show that she took the proper measures to avoid a collision. Hughes on Admiralty, page 242, declares the law thus: A steamer must keep out of the way of a sail vessel. In doing so she must allow the said vessel a wide berth. . . . A steamer may take her own method of passing a sail vessel. The mere approach of the two vessels does not bring about risk of collision. The steamer may assume that the sail vessel will do

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her duty and do nothing to embarrass her. Hence the steamer may shape her course so as to avoid the sail vessel. . . . This rule that vessels may each assume that the other will obey the law is one of the most important in the law of collision. Were it otherwise and were vessels required to take all sorts of measures to keep out the way, when they are not in each other's way, navigation would be impossible. . . . There is, however, one important qualification which must be borne in mind. It is that a steamer must not approach so near a sailing vessel, and on such a course as to alarm a man of ordinary skill and prudence. If the man on the sailing vessel makes an improper manuever, he is not responsible. It is what is called an "error in extremis." . . . The leading case on the subject is The Lucille (15 Wallace, 676). In that case a steamer and schooner were approaching on converging course only half a point apart, so that they would have come within thirty yards of each other, and that in Chesapeake Bay. The court held that this was too close and condemned the steamer." On page 245 the same author says: Article 21 . . . renders it obligatory on the vessel which has the right of way to pursue her course. . . . She must rely on the other vessel to avoid the collision and not embarrass her by any maneuver. All she need do is to do nothing. Then the other vessel knows to expect and navigates accordingly. . . . In collisions between steam and sail vessels the steamer's defense is almost invariably that the sail vessel changed her course. On page 255 of the same work appears the following: In The Clara Davidson (24 Fed. 763), the court said: "But I do not find my self at liberty to ignore the inquiry whether a statutory rule of navigation was violated by the schooner. These rules are the law of laws in cases of collision. They admit of no option or choice. No navigator is at liberty to set up his discretion against them. If these rules were subject to the caprice or election of masters and pilots, they would be not only useless, but worse than useless. These rules are imperative. They yield to necessity, indeed, but only to actual and obvious necessity. It is not stating the principles too strongly to say that nothing but imperious necessity or some overpowering his major will excuse a sail vessel in changing her course when in