Transportation law report

The Philippines is considered a maritime country: more than 7,100 islands

are scattered throughout its national territory. It is separated from its Asian
neigh- bours by big bodies of water. Travel through its waters is one of the
cheapest and principal modes of transporting passengers and goods to the
major islands of the country, as well as serving as a vital link to international
trade.
ARRASTRE is non maritime in character and is under the jurisdiction of a
Municipal trial court (depends on the value)
.

ICTSI vs Prudential: The legal relationship between an arrastre

operator and a consignee is akin to that between a warehouseman and a
depositor. As to both the nature of the functions and the place of their
performance, an arrastre operators services are clearly not maritime in
character. In a claim for loss filed by a consignee, the burden of proof to
show compliance with the obligation to deliver the goods to the
appropriate party devolves upon the arrastre operator. Since the
safekeeping of the goods rests within its knowledge, it must prove that
the losses were not due to its negligence or that of its employees

Delgado Brothers, Inc. (shipper) has nothing to do with the loading or

unloading of cargoes to and from the ships. Its operation on and its
responsibility for the merchandise and goods begins from the time they
are placed upon the wharves or piers or delivered along sides of ships

Chua Yek Hong vs IAC

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

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
SC: 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.

REAL AND HYPOTHECARY NATURE

1993 GAFLAC CASE

o one of the petitioners ship sank on voyage from hongkong
to the phils. The respondent herein was a subrogee of
several cargo consignee whose respective cargo sank with
the said vessel.
o Numerous claims were filed, diff courts, some with decisions
some pending
o Petitioners argued that the real and hypothecary doctrine
warranted the immediate stay of execution of judgment to
prevent the impairment of the other creditors shares.
Invoking the rule on the law of the case, private respondent
therein countered that the 1990 GAFLAC case had already
settled the extent of Aboitizs liability.
o Following the doctrine of limited liability, however, the Court
declared in the 1993 GAFLAC case that claims
againstAboitiz arising from the sinking of M/V
P. Aboitiz should be limited only to the extent of the value of

the vessel. Thus, the Court held that the execution of

judgments in cases already resolved with finality must be
stayed pending the resolution of all the other similar claims
arising from the sinking of M/V P. Aboitiz. Considering that
the claims against Aboitiz had reached more than 100, the
Court found it necessary to collate all these claims before
their payment from the insurance proceeds of the vessel and
its pending freightage. As a result, the Court exhorted the
trial courts before whom similar cases remained pending to
proceed with trial and adjudicate these claims so that the
pro-rated share of each claim could be determined after all
the cases shall have been decided
In the 1993 GAFLAC case, the Court applied the limited
liability rule in favor of Aboitiz based on the trial courts
finding therein that Aboitiz was not negligent

MONARCH INSURANCE

This
time,
the
petitioners
consisted
of
claimants
against Aboitiz because either the execution of the judgment
awarding full indemnification of their claims was stayed or set aside
or the lower courts awarded damages only to the extent of the
claimants proportionate share in the insurance proceeds of the
vessel.
In Monarch Insurance, the Court deemed it fit to settle once and for
all this factual issue by declaring that the sinking of M/V
P. Aboitiz was caused by the concurrence of the unseaworthiness of
the vessel and the negligence of both Aboitiz and the vessels crew
and master and not because of force majeure.
Notwithstanding this finding, the Court did not reverse but reiterated
instead the pronouncement in GAFLAC to the effect that the
claimants be treated as creditors in an insolvent corporation whose
assets are not enough to satisfy the totality of claims against it.
[43]
The Court explained that the peculiar circumstances warranted
that procedural rules of evidence be set aside to prevent frustrating
the just claims of shippers/insurers. Thus, the Court in Monarch
Insurance ordered Aboitiz to institute the necessary limitation and
distribution action before the proper RTC and to deposit with the said
court the insurance proceeds of and the freightage earned by the illfated ship.
Applied the limited liability doctrine notwithstanding the finding of
unseaworthiness
Peculiar because
o The sinking was initially investigated by the Board of

Marine Inquiry (BMI Case No. 466, December 26, 1984),

which found that such sinking was due to force
majeure and that subject vessel, at the time of the sinking
was seaworthy. This administrative finding
notwithstanding, the trial court in said Civil Case No.
144425 found against the carrier on the basis that the
loss subject matter therein did not occur as a result
of force majeure.
Because the said case had became final and executory it is
the ministerial duty of the court to order its execution.
However there is a need to collate all claims preparatory
to their satisfaction from the insurance proceeds on the
vessel M/V P. Aboitiz and its pending freightage at the
time of its loss.

No claimant can be given precedence over the others by

the simple expedience of having filed or completed its
action earlier than the rest.

Thus, execution of judgment in earlier completed cases,

even those already final and executory, must be stayed
pending completion of all cases occasioned by the
subject sinking.

Then and only then can all such claims be simultaneously

settled, either completely or pro-rata should the insurance
proceeds and freightage be not enough to satisfy all
claims.

Finally, the Court notes that petitioner has provided this Court
with a list of all pending cases (pp. 175 to 183, Rollo), together
with the corresponding claims and the pro-rated share of each.
We, therefore, rule that the pro-rated share of each claim can
only be found after all the cases shall have been decided.

In fairness to the claimants, and as a matter of equity, the total

proceeds of the insurance and pending freightage should now be
deposited in trust.

Aboitiz vs New India

In New India, the Court clarified that the earlier

pronouncement in Monarch Insurance was not an
abandonment of the doctrine of limited liability and
that the circumstances therein still made the doctrine
applicable
In New India, the Court declared that Aboitiz failed to
discharge its burden of showing that it exercised
extraordinary diligence in the transport of the goods it
had on board in order to invoke the limited liability
doctrine. Thus, the Court rejected Aboitizs argument
that the award of damages to respondent therein
should be limited to its pro rata share in the insurance
proceeds from the sinking of M/V P. Aboitiz

appellant vessel owner invoked the limited liability doctrine against

the claim of the heirs of the deceased crew members of the sank
vessel

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.

EXCEPTIONS
WORKMENS COMPENSATION ACT
Abueg vs Sandiego

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: