Republic of the Philippines If the negligence by which the patron of the launch Euclid has contributed to the cause
h Euclid has contributed to the cause of the
SUPREME COURT
Manila
EN BANC
G.R. No. L-8325 March 10, 1914
C. B. WILLIAMS, plaintiff-appellant,
vs.
TEODORO R. YANGCO, defendant-appellant.
William A. Kincaid and Thomas L. Hartigan for plaintiff.
Haussermann, Cohn, & Fisher fro defendant.
CARSON, J.:
The steamer Subic, owned by the defendant, collided with the lunch Euclid owned by the
plaintiff, in the Bay of Manila at an early hour on the morning of January 9, 1911, and the
Euclid sank five minutes thereafter. This action was brought to recover the value of the
Euclid.
The court below held from the evidence submitted that the Euclid was worth at a fair
valuation P10,000; that both vessels were responsible for the collision; and that the loss
should be divided equally between the respective owners, P5,000 to be paid the plaintiff by
the defendant, and P5,000 to be borne by the plaintiff himself. From this judgment both
defendant and plaintiff appealed.
After a careful review of all the evidence of record we are all agreed with the trial judge in
his holding that the responsible officers on both vessels were negligent in the performance of
their duties at the time when the accident occurred, and that both vessels were to blame for
the collision. We do not deem it necessary to review the conflicting testimony of the
witnesses called by both parties, the trial also having inserted in his opinion a careful and
critical summary and analysis of the testimony submitted to him, which, to our minds, fully
and satisfactorily disposes of the evidence are set forth in the following language
(translated):
In view of the negligence of which the patron Millonario (of defendant's vessel) has been
guilty as well as that imputable to the patron of the launch Euclid, both contributed in a
decided manner and beyond all doubt to the occurrence of the accident and the consequent
damages resulting therefrom in the loss of the launch Euclid.
With a little diligence which either of the two patrons might have practiced under the
circumstances existing at the time of the collision, if both had not been so distracted and so
negligent in the fulfillment of their respective duties, the disaster could have been easily
avoided, since the sea was free of obstacles and the night one which permitted the patron
Millonario to distinguish the hull of the launch twenty minutes before the latter entered upon
his path . . .
There is proven, therefore, the negligence of which the patron of the Euclid has been guilty.
accident and to the resulting damages is patent, none the less so is the negligence of the
patron of the steamer Subic, Hilarion Millonario by name, as may be seen from his own
testimony which is here copied for the better appreciation thereof.
It will be seen that the trial judge was of opinion that the vessels were jointly liable for the
loss resulting from the sinking of the launch. But actions for damages resulting from
maritime collisions are governed in this jurisdiction by the provisions of section 3, title 4,
Book III of the Code of Commerce, and among these provisions we find the following:
ART. 827. If both vessels may be blamed for the collision, each one shall be liable
for its own damages, and both shall be jointly responsible for the loss and damages suffered
by their cargoes.
In disposing of this case the trial judge apparently had in mind that portion of the section
which treats of the joint liability of both vessels for loss or damages suffered by their
cargoes. In the case at bar, however, the only loss incurred was that of the launch Euclid
itself, which went to the bottom soon after the collision. Manifestly, under the plain terms of
the statute, since the evidence of record clearly discloses, as found by the trail judge, that
"both vessels may be blamed for the collision," each one must be held may be blamed for it
own damages, and the owner of neither one can recover from the other in an action for
damages to his vessel.
Counsel for the plaintiff, basing his contention upon the theory of the facts as contended for
by him, insisted that under he doctrine of "the last clear chance," the defendant should be
held liable because, as he insists, even if the officers on board the plaintiff's launch were
negligence in failing to exhibit proper lights and in failing to take the proper steps to keep
out of the path of the defendant's vessel, nevertheless the officers on defendant's vessel, by
the exercise of due precautions might have avoided the collision by a very simple manuever.
But it is sufficient answer to this contention to point out that the rule of liability in this
jurisdiction for maritime accidents such as that now under consideration is clearly,
definitely, and unequivocally laid down in the above-cited article 827 of the Code of
Commerce; and under that rule, the evidence disclosing that both vessels were blameworthy,
the owners of either can successfully maintain an action against the other for the loss or
injury of his vessel.
In cases of a disaster arising from the mutual negligence of two parties, the party who has a
last clear opportunity of avoiding the accident, notwithstanding the negligence of his
opponent, is considered wholly responsible for it under the common-law rule of liability as
applied in the courts of common law of the United States. But this rule (which is not
recognized in the courts of admiralty in the United States, wherein the loss is divided in
cases of mutual and concurring negligence, as also where the error of one vessel has exposed
her to danger of collision which was consummated by he further rule, that where the
previous application by the further rule, that where the previous act of negligence of one
vessel has created a position of danger, the other vessel is not necessarily liable for the mere
failure to recognize the perilous situation; and it is only when in fact it does discover it in
time to avoid the casualty by the use of ordinary care, that it becomes liable for the failure to
make use of this last clear opportunity to avoid the accident. (See cases cited in Notes, 7
Cyc., pp. 311, 312, 313.) So, under the English rule which conforms very nearly to the
common-law rule as applied in the American courts, it has been held that the fault of the first
vessel in failing to exhibit proper lights or to take the proper side of the channel will relieve
1
from liability one who negligently runs into such vessels before he sees it; although it will
not be a defense to one who, having timely warning of the danger of collision, fails to use
proper care to avoid it. (Pollock on Torts, 374.) In the case at bar, the most that can be said
in support of plaintiff's contention is that there was negligence on the part of the officers on
defendant's vessel in failing to recognize the perilous situation created by the negligence of
those in charge of plaintiff's launch, and that had they recognized it in time, they might have
avoided the accident. But since it does not appear from the evidence that they did, in fact,
discover the perilous situation of the launch in time to avoid the accident by the exercise of
ordinary care, it is very clear that under the above set out limitation to the rule, the plaintiff
cannot escape the legal consequences of the contributory negligence of his launch, even
were we to hold that the doctrine is applicable in the jurisdiction, upon which point we
expressly reserve our decision at this time.
The judgment of the court below in favor of the plaintiff and against the defendant should be
reserved, and the plaintiff's complaint should be dismissed without day, without costs to
either party in this instance. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 110581 September 21, 1994
TELENGTAN BROTHERS & SONS, INC. (LA SUERTE CIGAR & CIGARETTE),
petitioner,
vs.
THE COURT OF APPEALS, KAWASAKI KISHEN KAISHA, LTD. and SMITH,
BELL & CO., INC., respondents.
Juan, Luces, Luna and Associates for petitioner.
Bito, Lozada, Ortega & Castillo for private respondents.
MENDOZA, J.:
This is a petition for review of the decision of the Court of Appeals, 1 in CA-G.R. CV No.
09514, affirming with modification the decision of the Regional Trial Court in a case for
specific performance brought by petitioner.
Private respondent Kawasaki Kishen Kaisha, Ltd. (K-Line) is a foreign shipping company
doing business in the Philippines, its shipping agent being respondent the Smith, Bell & Co.,
Inc. It is a member of the Far East Conference, the body which fixes rates by agreement of
its member-shipowners. The conference is registered with the U.S. Federal Maritime
Commission. 2
On May 8, 1979, the Van Reekum Paper, Inc. entered into a contract of affreightment with
the K-Line for the shipment of 468 rolls of container board liners from Savannah, Georgia to
Manila. The shipment was consigned to herein petitioner La Suerte Cigar & Cigarette
Factory. The contract of affreightment was embodied in Bill of Lading No. 602 issued by the
carrier to the shipper. The expenses of loading and unloading were for the account of the
consignee.
The shipment was packed in 12 container vans and loaded on board the carrier's vessel, SS
Verrazano Bridge. At Tokyo, Japan, the cargo was transhipped on two vessels of the K-Line.
Ten container vans were loaded on the SS Far East Friendship, while two were loaded on the
SS Hangang Glory.
Shortly thereafter, the consignee (herein petitioner) received from the shipper photocopies of
the bill of lading, consular invoice and packing list, as well as notice of the estimated time of
arrival of the cargo.
On June 11, 1979, the SS Far East Friendship arrived at the port of Manila. Aside from the
regular advertisements in the shipping section of the Bulletin Today announcing the arrival
of its vessels, petitioner was notified in writing of the ship's arrival, together with
information that container demurrage at the rate of P4.00 per linear foot per day for the first
5 days and P8.00 per linear foot per day after the 5th day would be charged unless the
consignee took delivery of the cargo within ten days.
On June 21, 1979, the other vessel SS Hangang Glory, carrying petitioner's two other vans,
arrived and was discharged of its contents the next day. On the same day the shipping agent
Smith, Bell & Co. released the Delivery Permit for twelve (12) containers to the broker upon
payment of freight charges on the bill of lading.
The next day, June 22, 1979, the Island Brokerage Co. presented, in behalf of petitioner, the
shipping documents to the Customs Marine Division of the Bureau of Customs. But the
latter refused to act on them because the manifest of the SS Far East Friendship covered only
10 containers, whereas the bill of lading covered 12 containers.
The broker, therefore, sent back the manifest to the shipping agent with the request that the
manifest be amended. Smith, Bell & Co. refused on the ground that an amendment, as
requested, would violate §1005 of the Tariff and Customs Code relating to unmanifested
cargo. Later, however, it agreed to add a footnote reading "Two container vans carried by the
SS Hangang Glory to complete the shipment of twelve containers under the bill of lading."
On June 29, 1979 the manifest was picked up from the office of respondent shipping agent
by an employee of the IBC and filed with the Bureau of Customs. The manifest was
approved for release on July 3, 1979. IBC wrote Smith, Bell & Co. to make of record that
entry of the shipment had been delayed by the error in the manifest.
On July 11, 1979, when the IBC tried to secure the release of the cargo, it was informed by
private respondents' collection agent, the CBCS Guaranteed Fast Collection Services, that
the free time for removing the containers from the container yard had expired on June 26,
1979, in the case of the SS Far East Friendship, and on July 9, in the case of the SS Hangang
Glory, 3 and that demurrage charges had begun to run on June 27, 1979 with respect to the
10 containers on the SS Far East Friendship and on July 10, 1979 with respect to the 2
containers shipped on board the SS Hangang Glory.
2
On July 13, 1979, petitioner paid P47,680.00 representing the total demurrage charges on all 1. Far East Friendship
the containers, but it was not able to obtain its goods. On July 16, 1979 it was able to obtain
the release of two containers and on a. on 2 containers released July 16
July 17, 1979 of one more container. It was able to obtain only a partial release of the cargo
because of the breakdown of the arrastre's equipment at the container yard. 3 days x P8 x 40 ft. x 2 ctnrs. P 1,920.00

This matter was reported by IBC in letters of complaint sent to the Philippine Ports (Exh. L-2)
Authority. In addition, on July 16, 1979, petitioner sent a letter dated July 12, 1979 (Exh. I)
to Smith, Bell & Co., requesting reconsideration of the demurrage charges, on the ground b. on 1 container released July 17
that the delay in claiming the goods was due to the alleged late arrival of the shipping
documents, the delay caused by the amendment of the manifest, and the fact that two of the 4 days x P8 x 40 ft. x 7 cntrs. P 1,280.00
containers arrived separately from the other ten containers.
(Exh. L-3)
On July 19, 1979, petitioner paid additional charges in the amount of P20,160.00 for the
period July 14-19, 1979 to secure the release of its cargo, but still petitioner was unable to c. remaining 7 containers as of July 19
get any cargo from the remaining nine container vans. It was only the next day, July 20,
1979, that it was able to have two more containers released from the container yard, bringing 6 days x P8 x 40 ft. x 7 cntrs. P 13,440.00
to five the total number of containers whose contents had been delivered to it.
(Exh. L-1)
Subsequently, petitioner refused to pay any more demurrage charges on the ground that there
was agreement for their payment in the bill of lading and that the delay in the release of the 2. Hangang Glory
cargo was not due to its fault but to the breakdown of the equipment at the container yard. In
all, petitioner had paid demurrage charges from June 27 to July 19, 1979, in the total amount a. 5th day (July 14)
of P67,840.00, computed as follows:
1 day x P4.00 x 40 ft. x 2 cntrs. P 320.00
A. Container demurrage paid on July 13, 1979
b. July 15-19:
1. Far East Friendship (Exh. H-1) June 27 — July 13 (17 days)
5 days x P8.00 x 40 ft. x 2 cntrs. P 3,200.00
1st 5 days @ P4/day/foot
5 days x P40 ft. x 10 ctrns. P 8,000.00 (Exh. L)
Next 12 days @ P8/day/foot
12 days x P8 x 40 ft. x 10 ctrns. P 38,400.00 —————

————— TOTAL P 20,160.00

P 46,400.00 (Exh. L-4)

2. Hangang Glory (Exh. H) July 10 — July 13 (4 days) —————

1st 4 days: OVERALL TOTAL P 67,840.00

4 days x P4 x 40 ft. x 2 ctnrs. P 1,280.00
=========
—————
On July 20, 1979 petitioner wrote private respondent for a refund of the demurrage charges,
TOTAL PAID ON JULY 13 P 47,680.00 but private respondent replied on July 25, 1979 that, as member of the Far East Conference,
it could not modify the rules or authorize refunds of the stipulated tariffs.
(Exh. H-2)
Petitioner, therefore, filed this suit in the RTC for specific performance to compel private
B. Container demurrage paid on July 19, 1979 respondent carrier, through it s shipping agent, the Smith, Bell & Co., to release 7 container
3
vans consigned to it free of charge and for a refund of P67,840.00 which it had paid, plus
attorney's fees and other expenses of litigation. Petitioner also asked for the issuance of a
writ of preliminary injunction to restrain private respondents from charging additional
demurrage.
In their amended answer, private respondents claimed that collection of container charges
was authorized by §§ 2, 23 and 29 of the bill of lading and that they were not free to waive
these charges because under the United States Shipping Act of 1916 it was unlawful for any
common carrier engaged in transportation involving the foreign commerce of the United
States to charge or collect a greater or lesser compensation that the rates and charges
specified in its tariffs on file with the Federal Maritime Commission.
Private respondents alleged that petitioner knew that the contract of carriage was subject to
the Far East Conference rules and that the publication of the notice of reimposition of
container demurrage charges published in the shipping section of the Bulletin Today and
Businessday newspapers from February 19 — February 25, 1979 was binding upon
petitioner. They contended further that the collection of container demurrage was an
international practice which is widely accepted in ports all over the world and that it was in
conformity with Republic Act No. 1407, otherwise known as the Philippine Overseas
Shipping Act of 1955.
Thereafter, a writ was issued after petitioner had posted a bond of P50,000.00 and the
container vans were released to the petitioner. On March 19, 1986, however, the RTC
dismissed petitioner's complaint. It cited the bill of lading which provided:
23. The ocean carrier shall have a lien on the goods, which shall survive delivery, for
all freight, dead freight, demurrage, damages, loss, charges, expenses and any other sums
whatsoever payable or chargeable to or for the account of the Merchant under this bill of
lading . . . .
It likewise invoked clause 29 of the bill of lading which provided:
29. . . .The terms of the ocean carrier's applicable tariff, including tariffs covering intermodal
transportation on file with the Federal Maritime Commission and the Interstate Commission
or any other regulatory body which governs a portion of the carriage of goods, are
incorporated herein.
Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12 Rules and Regulations,
referred to above, provides:
(D) Free Time, Demurrage, and Equipment Detention at Ports in the Philippines.
Note: Philippine Customs Law prescribes all cargo discharged from vessels to be given
into custody of the Government Arrastre Contractor, appointed by Philippine Customs who
undertakes delivery to the consignee.
xxx xxx xxx
Demurrage charges on Containers with CY Cargo.
1. Free time will commence at 8:00 a.m. on the first working calendar day following
completion of discharge of the vessel. It shall expire at 12:00 p.m. (midnight) on the tenth
working calendar day, excluding Saturdays, Sundays and holidays.
Work stoppage at a terminal due to labor dispute or other force majeure as defined by the
conference preventing delivery of cargo or containers shall be excluded from the calculation
of the free time for the period of the work stoppage.
2. Demurrage charges are incurred before the container leaves the carrier's designated
CY, and shall be applicable on the container commencing the next working calendar day
following expiration of the allowable free time until the consignee has taken delivery of the
container or has fully striped the container of its contents in the carrier's designated CY.
Demurrage charges shall be assessed hereunder:
Ordinary containers — P4.00 per linear foot of the container per day for the first five days;
P8.00 per linear foot of the container per day, thereafter.
The RTC held that the bill of lading was the contract between the parties and, therefore,
petitioner was liable for demurrage charges. It rejected petitioner's claim of force majeure. It
held:
This Court cannot also accord faith and credit on the plaintiff's claim that the delay in the
delivery of the containers was caused by the breaking down of the equipment of the arrastre
operator. Such claim was not supported with competent evidence. Let us assume the fact that
the arrastre operator's equipment broke down still plaintiff has to pay the corresponding
demurrage charges. The possibility that the equipment would break down was not only
foreseeable, but actually, foreseen, and was not caso fortuito. 4
The RTC, therefore, ordered:
WHEREFORE, finding the preponderance of evidence in favor of the defendants and against
the plaintiff, judgment is hereby rendered dismissing the complaint with costs against it.
Plaintiff is hereby ordered to pay defendants the sum of P36,480.00 representing demurrage
charges for the detention of the seven (7) forty-footer container vans from July 20 to August
7, 1979, with legal interest commencing on August 7, 1979 until fully paid. And plaintiff has
to pay the sum of P10,000.00, by way of attorney's fees.
SO ORDERED.
On appeal, the case was affirmed with modification by the Court of Appeals as follows:
WHEREFORE, modified as indicated above deleting the award of attorney's fees, the
decision appealed from is hereby AFFIRMED in all other respects.
Costs against plaintiff-appellant.
SO ORDERED. 5
Hence, this petition for review in which it is contended:
4
1 that no demurrage lies in the absence of any showing that the vessels had been
improperly detained or that loss or damage had been incurred as a consequence of improper
detention;
2 that respondent Court's finding that private respondent Smith Bell had promptly
and on the same day amended the defective manifest is contrary to the evidence of record.
3 that respondent Court manifestly over-looked undisputed evidence presented by
petitioner showing that the breakdown in the facilities and equipment of the arrastre operator
further delayed petitioner's withdrawal of the cargo. 6
Petitioner prays for a reversal of the decision of the Court of Appeals and the refund to it of
the demurrage charges paid by it, with interest, as well as to pay attorney's fees and expenses
of litigation.
Our decision will be presently explained, but in brief it is this: petitioner is liable for
demurrage for delay in removing its cargo from the containers but only for the period July 3
to 13, 1979 with respect to ten containers and from July 10 to July 13, 1979, in respect of
two other containers.
First. With respect to petitioner's liability for demurrage, petitioner's contention is that
the bill of lading does not provide for the payment of container demurrage, as Clause 23 of
the bill of lading only says "demurrage," i.e., damages for the detention of vessels, and here
there is no detention of vessels. Petitioner invokes the ruling in Magellan Manufacturing
Marketing Corp. v. Court of Appeals 7, where we defined "demurrage" as follows:
Demurrage, in its strict sense, is the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the time agreed on for loading and
unloading. Essentially, demurrage is the claim for damages for failure to accept delivery. In
a broad sense, every improper detention of a vessel may be considered a demurrage.
Liability for demurrage, using the word in its strictly technical sense, exists only when
expressly stipulated in the contract. Using the term in [its broader sense, damages in the]
nature of demurrage are recoverable for a breach of the implied obligation to load or unload
the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only
against one who is a party to the shipping contract.
Whatever may be the merit of petitioner's contention as to the meaning of the word
"demurrage" in clause 23 of the bill of lading, the fact is that clause 29(a) also of the bill of
lading, in relation to Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12, as
quoted above, specifically provides for the payment by the consignee of demurrage for the
detention of containers and other equipment after the so-called "free time."
Now a bill of lading is both a receipt and a contract. As a contract, its terms and conditions
are conclusive on the parties, including the consignee. What we said in one case mutatis
mutandis applies to this case:
A bill of lading operates both as a receipt and a contract . . . As a contract, it names the
contracting parties which include the consignee, fixes the route, destination, freight rate or
charges, and stipulates the right and obligations assumed by the parties . . . . By receiving the
bill of lading, Davao Parts and Services, Inc. assented to the terms of the consignment
contained therein, and became bound thereby, so far as the conditions named are reasonable
in the eyes of the law. Since neither appellant nor appellee alleges that any provision therein
is contrary to law, morals, good customs, public policy or public order — and indeed we
found none — the validity of the Bill of Lading must be sustained and the provisions therein
properly applies to resolve the conflict between the parties. 8
As the Court of Appeals pointed out in its appealed decision, the enforcement of the rules of
the Far East Conference and the Federal Maritime Commission is in accordance with
Republic Act No. 1407, §1 of which declares that the Philippines, in common with other
maritime nations, recognizes the international character of shipping in foreign trade and
existing international practices in maritime transportation and that it is part of the national
policy to cooperate with other friendly nations in the maintenance and improvement of such
practices.
Petitioner's argument that it is not bound by the bill of lading issued by K-Line because it is
a contract of adhesion, whose terms as set forth at the back are in small prints and are hardly
readable, is without merit. As we held in Servando v. Philippine Steam Navigation: 9
While it may be true that petitioner had not signed the plane ticket (Exh. 12), he is
nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of
the contract of carriage, and valid and binding upon the passenger regardless of the latter's
lack of knowledge or assent to the regulation". It is what is known as a contract of
"adhesion," in regards to which it has been said that contracts of adhesion wherein one party
imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the contract is in reality free to
reject it entirely; if he adheres, he gives his consent. (Tolentino, Civil Code, Vol. IV, 1962
Ed., p. 462, citing Mr. Justice JBL Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Second. With respect to the period of petitioner's liability, private respondent's position is
that the "free time" expired on June 26, 1979 and demurrage began to toll on June 27, 1979,
with respect to 10 containers which were unloaded from the SS Far East Friendship, while
with respect to the 2 containers which were unloaded from the SS Hangang Glory, the free
time expired on July 9, 1979 and demurrage began to run on July 10, 1979.
This contention is without merit. Petitioner cannot be held liable for demurrage starting June
27, 1979 on the 10 containers which arrived on the SS Far East Friendship because the delay
in obtaining release of the goods was not due to its fault. The evidence shows that because
the manifest issued by the respondent K-Line, through the Smith, Bell & Co., stated only 10
containers, whereas the bill of lading also issued by the K-Line showed there were 12
containers, the Bureau of Customs refused to give an entry permit to petitioner. For this
reason, petitioner's broker, the IBC, had to see the respondent's agent (Smith, Bell & Co.) on
June 22, 1979 but the latter did not immediately do something to correct the manifest. Smith,
Bell & Co. was asked to "amend" the manifest, but it refused to do so on the ground that this
would violate the law. It was only on June 29, 1979 that it thought of adding instead a
footnote to indicate that two other container vans — to account for a total of 12 container
vans consigned to petitioner — had been loaded on the other vessel
SS Hangang Glory.
It is not true that the necessary correction was made on June 22, 1979, the same day the
manifest was presented to Smith, Bell & Co. There is nothing in the testimonies of witnesses
of either party to support the appellate court's finding that the footnote, explaining the
apparent discrepancy between the bill of lading and the manifest, was added on June 22,
5
1979 but that petitioner's representative did not return to pick up the manifesst until June 29,
1979. To the contrary, it is more probable to believe the petitioner's claim that the manifest TOTAL DEMURRAGE DUE P 28,480
was corrected only on June 29, 1979 (by which time the "free time" had already expired),
because Smith, Bell & Co. did not immediately know what to do as it insisted it could not =======
amend the manifest and only thought of adding a footnote on June 29, 1979 upon the
suggestion of the IBC. LESS: TOTAL PAID (P 67,840)

Now June 29, 1979 was a Friday. Again it is probable the correct manifest was presented to
the Bureau of Customs only on Monday, July 2, 1979 and, therefore, it was only on July 3
that it was approved. It was, therefore, only from this date (July 3, 1979) that petitioner
could have claimed its cargo and charged for any delay in removing its cargo from the
containers. With respect to the other two containers which arrived on the SS Hangang Glory,
demurrage was properly considered to have accrued on July 10, 1979 since the "free time"
expired on July 9.
The period of delay, however, for all the 12 containers must be deemed to have stopped on
July 13, 1979, because on this date petitioner paid P47,680.00. If it was not able to get its
cargo from the container vans, it was because of the breakdown of the shifter or cranes. This
breakdown cannot be blamed on petitioners since these were cranes of the arrastre service
operator. It would be unjust to charge demurrage after July 13, 1979 since the delay in
emptying the containers was not due to the fault of the petitioner.
Indeed, there is no reason why petitioner should not get its cargo after paying all demurrage
charges due on July 13, 1979. If it paid P20,180.00 more in demurrage charges after July 13,
1979 it was only because respondents would not release the goods. Even then petitioner was
able to obtain the release of cargo from five container vans. Its trucks were unable to load
anymore cargo and returned to petitioner's premises empty.
In sum, we hold that petitioner can be held liable for demurrage only for the period July 3-
13, 1979 and that in accordance with the stipulation in its bill of lading, it is liable for
demurrage only in the amount of P28,480.00 computed as follows;
A. 10 containers ex Far East Friendship (July 3-13, 1979)
1. 1st 5 days @ P4.00/day/foot
5 days x P4 x 40 ft. x 10 ctnrs. P 8,000
2. Next 6 days @ P8.00/day/foot
6 days x P8 x 40 ft. x 10 cntrs. P 19,200 P 27,200
————
B. 2 containers ex Hangang Glory (July 10-13, 1979)
1st 4 days @ P4.00/day/foot
4 days x P4 x 40 ft. x 10 cntrs. P 1,280
————
OVERPAYMENT (P 39,360)
As shown above there is an overpayment of P39,360.00 which should be refunded to
petitioner.
WHEREFORE, the decision appealed from is SET ASIDE and another one is RENDERED,
ORDERING the private respondents to pay to petitioner the sum of P39,360.00 by way of
refund, with legal interest.
SO ORDERED.
FIRST DIVISION
[G.R. No. 116863. February 12, 1998]
KENG HUA PAPER PRODUCTS CO. INC., petitioner, vs. COURT OF APPEALS;
REGIONAL TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
respondents.
DECISION
PANGANIBAN, J.:
What is the nature of a bill of lading? When does a bill of lading become binding on a
consignee? Will an alleged overshipment justify the consignees refusal to receive the goods
described in the bill of lading? When may interest be computed on unpaid demurrage
charges?
Statement of the Case
These are the main questions raised in this petition assailing the Decision[1] of the Court of
Appeals[2] promulgated on May 20, 1994 in C.A.-G.R. CV No. 29953 affirming in toto the
decision[3] dated September 28, 1990 in Civil Case No. 85-33269 of the Regional Trial
Court of Manila, Branch 21. The dispositive portion of the said RTC decision reads:
WHEREFORE, the Court finds by preponderance of evidence that Plaintiff has proved its
cause of action and right to relief. Accordingly, judgment is hereby rendered in favor of the
Plaintiff and against Defendant, ordering the Defendant to pay plaintiff:
1. The sum of P67,340.00 as demurrage charges, with interest at the legal rate from the date
of the extrajudicial demand until fully paid;
2. A sum equivalent to ten (10%) percent of the total amount due as Attorneys fees and
litigation expenses.
Send copy to respective counsel of the parties.
6

SO ORDERED.[4]
The Facts
The factual antecedents of this case as found by the Court of Appeals are as follows:
Plaintiff (herein private respondent), a shipping company, is a foreign corporation licensed
to do business in the Philippines. On June 29, 1982, plaintiff received at its Hong Kong
terminal a sealed container, Container No. SEAU 67523, containing seventy-six bales of
unsorted waste paper for shipment to defendant (herein petitioner), Keng Hua Paper
Products, Co. in Manila. A bill of lading (Exh. A) to cover the shipment was issued by the
plaintiff.
On July 9, 1982, the shipment was discharged at the Manila International Container Port.
Notices of arrival were transmitted to the defendant but the latter failed to discharge the
shipment from the container during the free time period or grace period. The said shipment
remained inside the plaintiffs container from the moment the free time period expired on
July 29, 1982 until the time when the shipment was unloaded from the container on
November 22, 1983, or a total of four hundred eighty-one (481) days. During the 481-day
period, demurrage charges accrued. Within the same period, letters demanding payment
were sent by the plaintiff to the defendant who, however, refused to settle its obligation
which eventually amounted to P67,340.00. Numerous demands were made on the defendant
but the obligation remained unpaid. Plaintiff thereafter commenced this civil action for
collection and damages.
In its answer, defendant, by way of special and affirmative defense, alleged that it purchased
fifty (50) tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as
manifested in Letter of Credit No. 824858 (Exh. 7. p. 110. Original Record) issued by
Equitable Banking Corporation, with partial shipment permitted; that under the letter of
credit, the remaining balance of the shipment was only ten (10) metric tons as shown in
Invoice No. H-15/82 (Exh. 8, p. 111, Original Record); that the shipment plaintiff was
asking defendant to accept was twenty (20) metric tons which is ten (10) metric tons more
than the remaining balance; that if defendant were to accept the shipment, it would be
violating Central Bank rules and regulations and custom and tariff laws; that plaintiff had no
cause of action against the defendant because the latter did not hire the former to carry the
merchandise; that the cause of action should be against the shipper which contracted the
plaintiffs services and not against defendant; and that the defendant duly notified the plaintiff
about the wrong shipment through a letter dated January 24, 1983 (Exh. D for plaintiff, Exh.
4 for defendant, p. 5. Folder of Exhibits).
As previously mentioned, the RTC found petitioner liable for demurrage, attorneys fees and
expenses of litigation. The petitioner appealed to the Court of Appeals, arguing that the
lower court erred in (1) awarding the sum of P67,340 in favor of the private respondent, (2)
rejecting petitioners contention that there was overshipment, (3) ruling that petitioners
recourse was against the shipper, and (4) computing legal interest from date of extrajudicial
demand.[5]
Respondent Court of Appeals denied the appeal and affirmed the lower courts decision in
toto. In a subsequent resolution,[6] it also denied the petitioners motion for reconsideration.
Hence, this petition for review.[7]
The Issues
In its memorandum, petitioner submits the following issues:
I. Whether or not petitioner had accepted the bill of lading;
II. Whether or not the award of the sum of P67,340.00 to private respondent was proper;
III. Whether or not petitioner was correct in not accepting the overshipment;
IV. Whether or not the award of legal interest from the date of private respondents
extrajudicial demand was proper;[8]
In the main, the case revolves around the question of whether petitioner was bound by the
bill of lading. We shall, thus, discuss the above four issues as they intertwine with this main
question.
The Courts Ruling
The petition is partly meritorious. We affirm petitioners liability for demurrage, but modify
the interest rate thereon.
Main Issue: Liability Under the Bill of Lading
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is
a contract by which three parties, namely, the shipper, the carrier, and the consignee
undertake specific responsibilities and assume stipulated obligations.[9] A bill of lading
delivered and accepted constitutes the contract of carriage even though not signed,[10]
because the (a)cceptance of a paper containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all of its terms and conditions of which the
acceptor has actual or constructive notice.[11] In a nutshell, the acceptance of a bill of lading
by the shipper and the consignee, with full knowledge of its contents, gives rise to the
presumption that the same was a perfected and binding contract.[12]
In the case at bar, both lower courts held that the bill of lading was a valid and perfected
contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier
(Private Respondent Sea-Land). Section 17 of the bill of lading provided that the shipper and
the consignee were liable for the payment of demurrage charges for the failure to discharge
the containerized shipment beyond the grace period allowed by tariff rules. Applying said
stipulation, both lower courts found petitioner liable. The aforementioned section of the bill
of lading reads:
17. COOPERAGE FINES. The shipper and consignee shall be liable for, indemnify the
carrier and ship and hold them harmless against, and the carrier shall have a lien on the
goods for, all expenses and charges for mending cooperage, baling, repairing or
reconditioning the goods, or the van, trailers or containers, and all expenses incurred in
protecting, caring for or otherwise made for the benefit of the goods, whether the goods be
damaged or not, and for any payment, expense, penalty fine, dues, duty, tax or impost, loss,
damage, detention, demurrage, or liability of whatsoever nature, sustained or incurred by or
7
levied upon the carrier or the ship in connection with the goods or by reason of the goods
being or having been on board, or because of shippers failure to procure consular or other
proper permits, certificates or any papers that may be required at any port or place or
shippers failure to supply information or otherwise to comply with all laws, regulations and
requirements of law in connection with the goods of from any other act or omission of the
shipper or consignee: (Underscoring supplied.)
Petitioner contends, however, that it should not be bound by the bill of lading because it
never gave its consent thereto. Although petitioner admits physical acceptance of the bill of
lading, it argues that its subsequent actions belie the finding that it accepted the terms and
conditions printed therein.[13] Petitioner cites as support the Notice of Refused or On Hand
Freight it received on November 2, 1982 from private respondent, which acknowledged that
petitioner declined to accept the shipment. Petitioner adds that it sent a copy of the said
notice to the shipper on December 29, 1982. Petitioner points to its January 24, 1983 letter to
the private respondent, stressing that its acceptance of the bill of lading would be tantamount
to an act of smuggling as the amount it had imported (with full documentary support) was
only (at that time) for 10,000 kilograms and not for 20,313 kilograms as stated in the bill of
lading and could lay them vulnerable to legal sanctions for violation of customs and tariff as
well as Central Bank laws.[14] Petitioner further argues that the demurrage was a
consequence of the shippers mistake of shipping more than what was bought. The
discrepancy in the amount of waste paper it actually purchased, as reflected in the invoice
vis--vis the excess amount in the bill of lading, allegedly justifies its refusal to accept the
shipment.[15]
Petitioner Bound by the Bill of Lading
We are not persuaded. Petitioner admits that it received the bill of lading immediately after
the arrival of the shipment[16] on July 8, 1982.[17] Having been afforded an opportunity to
examine the said document, petitioner did not immediately object to or dissent from any
term or stipulation therein. It was only six months later, on January 24, 1983, that petitioner
sent a letter to private respondent saying that it could not accept the shipment. Petitioners
inaction for such a long period conveys the clear inference that it accepted the terms and
conditions of the bill of lading. Moreover, said letter spoke only of petitioners inability to
use the delivery permit, i.e. to pick up the cargo, due to the shippers failure to comply with
the terms and conditions of the letter of credit, for which reason the bill of lading and other
shipping documents were returned by the banks to the shipper.[18] The letter merely proved
petitioners refusal to pick up the cargo, not its rejection of the bill of lading.
Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of its
nonacceptance of the bill of lading, is of no consequence. Said notice was not written by
petitioner; it was sent by private respondent to petitioner in November 1982, or four months
after petitioner received the bill of lading. If the notice has any legal significance at all, it is
to highlight petitioners prolonged failure to object to the bill of lading. Contrary to
petitioners contention, the notice and the letter support not belie the findings of the two
lower courts that the bill of lading was impliedly accepted by petitioner.
As aptly stated by Respondent Court of Appeals:
In the instant case, (herein petitioner) cannot and did not allege non-receipt of its copy of the
bill of lading from the shipper. Hence, the terms and conditions as well as the various entries
contained therein were brought to its knowledge. (Herein petitioner) accepted the bill of
lading without interposing any objection as to its contents. This raises the presumption that
(herein petitioner) agreed to the entries and stipulations imposed therein.
Moreover, it is puzzling that (herein petitioner) allowed months to pass, six (6) months to be
exact, before notifying (herein private respondent) of the wrong shipment. It was only on
January 24, 1983 that (herein petitioner) sent (herein private respondent) such a letter of
notification (Exh D for plaintiff, Exh. 4 for defendant; p. 5, Folder of Exhibits). Thus, for the
duration of those six months (herein private respondent never knew the reason for (herein
petitioners) refusal to discharge the shipment.
After accepting the bill of lading, receiving notices of arrival of the shipment, failing to
object thereto, (herein petitioner) cannot now deny that it is bound by the terms in the bill of
lading. If it did not intend to be bound, (herein petitioner) would not have waited for six
months to lapse before finally bringing the matter to (herein private respondents attention.
The most logical reaction in such a case would be to immediately verify the matter with the
other parties involved. In this case, however, (herein petitioner) unreasonably detained
(herein private respondents) vessel to the latters prejudice.[19]
Petitioners attempt to evade its obligation to receive the shipment on the pretext that this
may cause it to violate customs, tariff and central bank laws must likewise fail. Mere
apprehension of violating said laws, without a clear demonstration that taking delivery of the
shipment has become legally impossible,[20] cannot defeat the petitioners contractual
obligation and liability under the bill of lading.
In any event, the issue of whether petitioner accepted the bill of lading was raised for the
first time only in petitioners memorandum before this Court. Clearly, we cannot now
entertain an issue raised for the very first time on appeal, in deference to the well-settled
doctrine that (a)n issue raised for the first time on appeal and not raised timely in the
proceedings in the lower court is barred by estoppel. Questions raised on appeal must be
within the issues framed by the parties and, consequently, issues not raised in the trial court
cannot be raised for the first time on appeal.[21]
In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo from
the private respondents vessel constitutes a violation of the terms of the bill of lading. It
should thus be liable for demurrage to the former.
In The Apollon,[22] Justice Story made the following relevant comment on the nature of
demurrage:
In truth, demurrage is merely an allowance or compensation for the delay or detention of a
vessel. It is often a matter of contract, but not necessarily so. The very circumstance that in
ordinary commercial voyages, a particular sum is deemed by the parties a fair compensation
for delays, is the very reason why it is, and ought to be, adopted as a measure of
compensation, in cases ex delicto. What fairer rule can be adopted than that which founds
itself upon mercantile usage as to indemnity, and fixes a recompense upon the deliberate
consideration of all the circumstances attending the usual earnings and expenditures in
common voyages? It appears to us that an allowance, by way of demurrage, is the true
measure of damages in all cases of mere detention, for that allowance has reference to the
ships expenses, wear and tear, and common employment.[23]
Amount of Demurrage Charges
8
Petitioner argues that it is not obligated to pay any demurrage charges because, prior to the
filing of the complaint, private respondent made no demand for the sum of P67,340.
Moreover, private respondents loss and prevention manager, Loi Gillera, demanded P50,260,
but its counsel, Sofronio Larcia, subsequently asked for a different amount of P37,800.
Petitioners position is puerile. The amount of demurrage charges in the sum of P67,340 is a
factual conclusion of the trial court that was affirmed by the Court of Appeals and, thus,
binding on this Court.[24] Besides such factual finding is supported by the extant
evidence.[25] The apparent discrepancy was a result of the variance of the dates when the
two demands were made. Necessarily, the longer the cargo remained unclaimed, the higher
the demurrage. Thus, while in his letter dated April 24, 1983,[26] private respondents
counsel demanded payment of only P37,800, the additional demurrage incurred by petitioner
due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by
November 22, 1983. The testimony of Counsel Sofronio Larcia as regards said letter of April
24, 1983 elucidates, viz:
Q Now, after you sent this letter, do you know what happened?
A Defendant continued to refuse to take delivery of the shipment and the shipment stayed at
the port for a longer period.
Q So, what happened to the shipment?
A The shipment incurred additional demurrage charges which amounted to P67,340.00 as of
November 22, 1983 or more than a year after - almost a year after the shipment arrived at the
port.
Q So, what did you do?
A We requested our collection agency to pursue the collection of this amount.[27]
Bill of Lading Separate from
Other Letter of Credit Arrangements
In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale
between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3)
the letter of credit proper in which the bank promises to pay the seller pursuant to the terms
and conditions stated therein. Few things are more clearly settled in law than that the three
contracts which make up the letter of credit arrangement are to be maintained in a state of
perpetual separation.[28] A transaction involving the purchase of goods may also require,
apart from a letter of credit, a contract of transportation specially when the seller and the
buyer are not in the same locale or country, and the goods purchased have to be transported
to the latter.
Hence, the contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract for the issuance of a letter of credit between the buyer and the issuing bank. Any
discrepancy between the amount of the goods described in the commercial invoice in the
contract of sale and the amount allowed in the letter of credit will not affect the validity and
enforceability of the contract of carriage as embodied in the bill of lading. As the bank
cannot be expected to look beyond the documents presented to it by the seller pursuant to the
letter of credit,[29] neither can the carrier be expected to go beyond the representations of
the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice
and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the
invoice and the amount in the bill of lading cannot negate petitioners obligation to private
respondent arising from the contract of transportation. Furthermore, private respondent, as
carrier, had no knowledge of the contents of the container. The contract of carriage was
under the arrangement known as Shippers Load And Count, and the shipper was solely
responsible for the loading of the container while the carrier was oblivious to the contents of
the shipment. Petitioners remedy in case of overshipment lies against the seller/shipper, not
against the carrier.
Payment of Interest
Petitioner posits that it first knew of the demurrage claim of P67,340 only when it received,
by summons, private respondents complaint. Hence, interest may not be allowed to run from
the date of private respondents extrajudicial demands on March 8, 1983 for P50,260 or on
April 24, 1983 for P37,800, considering that, in both cases, there was no demand for
interest.[30] We agree.
Jurisprudence teaches us:
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.[31]
The case before us involves an obligation not arising from a loan or forbearance of money;
thus, pursuant to Article 2209 of the Civil Code, the applicable interest rate is six percent per
annum. Since the bill of lading did not specify the amount of demurrage, and the sum
claimed by private respondent increased as the days went by, the total amount demanded
cannot be deemed to have been established with reasonable certainty until the trial court
rendered its judgment. Indeed, (u)nliquidated damages or claims, it is said, are those which
are not or cannot be known until definitely ascertained, assessed and determined by the
courts after presentation of proof.[32] Consequently, the legal interest rate is six percent, to
be computed from September 28, 1990, the date of the trial courts decision. And in
accordance with Philippine Natonal Bank[33] and Eastern Shipping,[34] the rate of twelve
percent per annum shall be charged on the total then outstanding, from the time the judgment
becomes final and executory until its satisfaction.
9
Finally, the Court notes that the matter of attorneys fees was taken up only in the dispositive
portion of the trial courts decision. This falls short of the settled requirement that the text of
the decision should state the reason for the award of attorneys fees, for without such
justification, its award would be a conclusion without a premise, its basis being improperly
left to speculation and conjecture.[35]
WHEREFORE, the assailed Decision is hereby AFFIRMED with the MODIFICATION that
the legal interest of six percent per annum shall be computed from September 28, 1990 until
its full payment before finality of judgment. The rate of interest shall be adjusted to twelve
percent per annum, computed from the time said judgment became final and executory until
full satisfaction. The award of attorneys fees is DELETED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17192 March 30, 1963
HONORIO M. BARRIOS, plaintiff-appellant,
vs.
CARLOS A. GO THONG & COMPANY, defendant-appellee.
Laput & Jardiel for plaintiff-appellant.
Quisumbing & Quisumbing for defendant-appellee.
BARRERA, J.:
From the decision of the Court of First Instance of Manila (in Civil Case No. 37219)
dismissing with costs his case against defendant Carlos A. Go Thong & Co., plaintiff
Honorio M. Barrios, interposed the present appeal.
The facts of the case, as found by the trial court, are briefly stated in its decision, to wit:
The plaintiff Honorio M. Barrios was, on May 1 and 2, 1958, captain and/or master of the
MV Henry I of the William Lines Incorporated, of Cebu City, plying between and to and
from Cebu City and other southern cities and ports, among which are Dumaguete City,
Zamboanga City, and Davao City. At about 8:00 o'clock on the evening of May 1, 1958,
plaintiff in his capacity as such captain and/or master of the aforesaid MV Henry I, received
or otherwise intercepted an S.O.S. or distress signal by blinkers from the MV Don Alfredo,
owned and/or operated by the defendant Carlos A. Go Thong & Company. Acting on and/or
answering the S.O.S. call, the plaintiff Honorio M. Barrios, also in his capacity as captain
and/or master of the MV Henry I, which was then sailing or navigating from Dumaguete
City, altered the course of said vessel, and steered and headed towards the beckoning MV
Don Alfredo, which plaintiff found to be in trouble, due to engine failure and the loss of her
propeller, for which reason, it was drifting slowly southward from Negros Island towards
Borneo in the open China Sea, at the mercy of a moderate easterly wind. At about 8:25 p.m.
on the same day, May 1, 1958, the MV Henry I, under the command of the plaintiff,
succeeded in getting near the MV Don Alfredo — in fact as near as about seven meters from
the latter ship — and with the consent and knowledge of the captain and/or master of the
MV Don Alfredo, the plaintiff caused the latter vessel to be tied to, or well-secured and
connected with two lines from the MV Henry I; and in that manner, position and situation,
the latter had the MV Don Alfredo in tow and proceeded towards the direction of
Dumaguete City, as evidenced by a written certificate to this effect executed and
accomplished by the Master, the Chief Engineer, the Chief Officer, and the Second
Engineer, of the MV Don Alfredo, who were then on board the latter ship at the time of the
occurrence stated above (Exh. A). At about 5:10 o'clock the following morning, May 2,
1958, or after almost nine hours during the night, with the MV Don Alfredo still in tow by
the MV Henry I, and while both vessels were approaching the vicinity of Apo Islands off
Zamboanga town, Negros Oriental, the MV Lux, a sister ship of the MV Don Alfredo, was
sighted heading towards the direction of the aforesaid two vessels, reaching then fifteen
minutes later, or at about 5:25 o'clock on that same morning. Thereupon, at the request and
instance of the captain and/or master of the MV Don Alfredo, the plaintiff caused the tow
lines to be released, thereby also releasing the MV Don Alfredo.
These are the main facts of the present case as to which plaintiff and defendant quite agree
with each other. As was manifested in its memorandum presented in this case on August 22,
1958, defendant thru counsel said that there is, indeed, between the parties, no dispute as to
the factual circumstances, but counsel adds that where plaintiff concludes that they establish
an impending sea peril from which salvage of a ship worth more than P100,000.00, plus life
and cargo was done, the defendant insists that the facts made out no such case, but that what
merely happened was only mere towage from which plaintiff cannot claim any
compensation or remuneration independently of the shipping company that owned the vessel
commanded by him.
On the basis of these facts, the trial court (on April 5, 1960) dismissed the case, stating:
Plaintiff bases his claim upon the provisions of the Salvage Law, Act No. 2616, .....
In accordance with the Salvage Law, a ship which is lost or abandoned at sea is considered a
derelict and, therefore, proper subject of salvage. A ship in a desperate condition, where
persons on board are incapable, by reason of their mental and physical condition, of doing
anything for their own safety, is a quasi-derelict and may, likewise, be the proper subject of
salvage. Was the MV Don Alfredo, on May 1, 1958, when her engine failed and, for that
reason, was left drifting without power on the high seas, a derelict or a quasi-derelict? In
other words, was it a ship that was lost or abandoned, or in a desperate condition, which
could not be saved by reason of incapacity or incapacity of its crew or the persons on board
thereof? From all appearances and from the evidence extant in the records, there can be no
doubt, for it seems clear enough, that the MV Don Alfredo was not a lost ship, nor was it
abandoned. Can it be said that the said ship was in a desperate condition, simply because
S.O.S. signals were sent from it?.
From the testimony of the captain of the MV Don Alfredo, the engine failed and the ship
already lost power as early as 8:00 o'clock on the morning of May 1, 1958; although it was
helpless, in the sense that it could not move, it did not drift too far from the place where it
was, at the time it had an engine failure. The weather was fair — in fact, as described by
10
witnesses, the weather was clear and good. The waves were small, too slight — there were
only ripples on the sea, and the sea was quite smooth. And, during the night, while towing
was going on, there was a moonlight. Inasmuch as the MV Don Alfredo was drifting towards
the open sea, there was no danger of floundering. As testified to by one of the witnesses, it
would take days or even weeks before the ship could as much as approach an island. And,
even then, upon the least indication, the anchor could always be weighed down, in order to
prevent the ship from striking against the rocks.
"There was no danger of the vessel capsizing, in view of the fairness of the sea, and the
condition of the weather, as described above. As a matter of fact, although the MV Don
Alfredo had a motor launch, and two lifeboats, there was no attempt, much less, was there
occasion or necessity, to lower anyone or all of them, in order to evacuate the persons on
board; nor did the conditions then obtaining require an order to jettison the cargo.
But, it is insisted for the plaintiff that an S.O.S. or a distress signal was sent from aboard the
MV Don Alfredo, which was enough to establish the fact that it was exposed to imminent
peril at sea. It is admitted by the defendant that such S.O.S. signal was, in fact, sent by
blinkers. However, defendant's evidence shows that Captain Loresto of the MV Don
Alfredo, did not authorize the radio operator of the aforesaid ship to send an S.O.S. or
distress signal, for the ship was never in distress, nor was it exposed to a great imminent
peril of the sea. What the aforesaid Captain told the radio operator to transmit was a general
call; for, at any rate, message had been sent to defendant's office at Cebu City, which the
latter had acknowledged, by sending back a reply stating that help was on the way. However,
as explained by the said radio operator, in spite of his efforts to send a general call by radio,
he did not receive any response. For this reason, the Captain instructed him to send the
general call by blinkers from the deck of the ship; but the call by blinkers, which follows the
dots and dashes method of sending messages, could not be easily understood by deck
officers who ordinarily are not radio operators. Hence, the only way by which the attention
of general officers on deck could be called, was to send an S.O.S. signal which can be
understood by all and sundry.
Be it as it may, the evidence further shows that when the two ships were already within
hearing distance (barely seven meters) of each other, there was a sustained conversation
between Masters and complement of the two vessels, by means of loud speakers and the
radio; and, the plaintiff must have learned of the exact nature and extent of the disability
from which the MV Don Alfredo had suffered — that is, that the only trouble that the said
vessel had developed was an engine failure, due to the loss of its propellers..
It can thus be said that the MV Don Alfredo was not in a perilous condition wherein the
members of its crew would be incapable of doing anything to save passengers and cargo,
and, for this reason, it cannot be duly considered as a quasi-derelict; hence, it was not the
proper subject of salvage, and the Salvage Law, Act No. 2616, is not applicable.
Plaintiff, likewise, predicates his action upon the provisions of Article 2142 of the New Civil
Code, which reads as follows:
Certain lawful, voluntary and unilateral acts give to the juridical relation of quasi-contract to
the end that no one shall be unjustly enriched or benefited at the expense of another.
This does not find clear application to the case at bar, for the reason that it is not the William
Lines, Inc., owners of the MV Henry I which is claiming for damages or remuneration,
because it has waived all such claims, but the plaintiff herein is the Captain of the salvaging
ship, who has not shown that, in his voluntary act done towards and which benefited the MV
Don Alfredo, he had been unduly prejudiced by his employers, the said William Lines,
Incorporated.
What about equity? Does not equity permit plaintiff to recover for his services rendered and
sacrifices made? In this jurisdiction, equity may only be taken into account when the
circumstances warrant its application, and in the absence of any provision of law governing
the matter under litigation. That is not so in the present case.
In view of the foregoing, judgment is hereby rendered dismissing the case with costs against
the plaintiff; and inasmuch as the plaintiff has not been found to have brought the case
maliciously, the counterclaim of the defendant is, likewise, dismissed, without
pronouncement as to costs.
SO ORDERED.
The main issue to be resolved in this appeal is, whether under the facts of the case, the
service rendered by plaintiff to defendant constituted "salvage" or "towage", and if so,
whether plaintiff may recover from defendant compensation for such service.
The pertinent provision of the Salvage Law (Act No. 2616), provides:
SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control
of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe
place by other persons, the latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in saving a vessel or its cargo
from shipwreck, shall be entitled to a like reward.
According to this provision, those who assist in saving a vessel or its cargo from shipwreck,
shall be entitled to a reward (salvage). "Salvage" has been defined as "the compensation
allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in
part, from impending peril on the sea, or in recovering such property from actual loss, as in
case of shipwreck, derelict, or recapture." (Blackwall v. Saucelito Tug Company, 10 Wall. 1,
12, cited in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178.) In the
Erlanger & Galinger case, it was held that three elements are necessary to a valid salvage
claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an
existing duty or from a special contract, and (3) success in whole or in part, or that the
service rendered contributed to such success.1
Was there a marine peril, in the instant case, to justify a valid salvage claim by plaintiff
against defendant? Like the trial court, we do not think there was. It appears that although
the defendant's vessel in question was, on the night of May 1, 1958, in a helpless condition
due to engine failure, it did not drift too far from the place where it was. As found by the
court a quo the weather was fair, clear, and good. The waves were small and too slight, so
much so, that there were only ripples on the sea, which was quite smooth. During the towing
of the vessel on the same night, there was moonlight. Although said vessel was drifting
towards the open sea, there was no danger of it floundering or being stranded, as it was far
from any island or rocks. In case of danger of stranding, its anchor could released, to prevent
such occurrence. There was no danger that defendant's vessel would sink, in view of the
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smoothness of the sea and the fairness of the weather. That there was absence of danger is
shown by the fact that said vessel or its crew did not even find it necessary to lower its WHEREFORE, finding no reversible error in the decision of the court a quo appealed from,
launch and two motor boats, in order to evacuate its passengers aboard. Neither did they find the same is hereby affirmed in all respects, with costs against the plaintiff-appellant. So
occasion to jettison the vessel's cargo as a safety measure. Neither the passengers nor the ordered.
cargo were in danger of perishing. All that the vessel's crew members could not do was to
move the vessel on its own power. That did not make the vessel a quasi-derelict, considering
that even before the appellant extended the help to the distressed ship, a sister vessel was
known to be on its way to succor it.

If plaintiff's service to defendant does not constitute "salvage" within the purview of the
Salvage Law, can it be considered as a quasi-contract of "towage" created in the spirit of the
new Civil Code? The answer seems to incline in the affirmative, for in consenting to
plaintiff's offer to tow the vessel, defendant (through the captain of its vessel MV Don
Alfredo) thereby impliedly entered into a juridical relation of "towage" with the owner of the
vessel MV Henry I, captained by plaintiff, the William Lines, Incorporated.

Tug which put line aboard liberty ship which was not in danger or peril but which had
reduced its engine speed because of hot grounds, and assisted ship over bar and, thereafter,
dropped towline and stood by while ship proceeded to dock under own power, was entitled,
in absence of written agreement as to amount to be paid for services, to payment for towage
services, and not for salvage services. (Sause, et al. v. United States, et al., 107 F. Supp. 489)

If the contract thus created, in this case, is one for towage, then only the owner of the towing
vessel, to the exclusion of the crew of the said vessel, may be entitled to remuneration.

It often becomes material too, for courts to draw a distinct line between salvage and towage,
for the reason that a reward ought sometimes to be given to the crew of the salvage vessel
and to other participants in salvage services; and such reward should not be given if the
services were held to be merely towage. (The Rebecca Shepherd, 148 F. 731.)

The master and members of the crew of a tug were not entitled to participate in payment by
liberty ship for services rendered by tug which were towage services and not salvage
services. (Sause, et al. v. United States, et al., supra.)

"The distinction between salvage and towage is of importance to the crew of the salvaging
ship, for the following reasons: If the contract for towage is in fact towage, then the crew
does not have any interest or rights in the remuneration pursuant to the contract. But if the
owners of the respective vessels are of a salvage nature, the crew of the salvaging ship is
entitled to salvage, and can look to the salvaged vessel for its share. (I Norris, The Law of
Seamen, Sec. 222.)

And, as the vessel-owner, William Lines, Incorporated, had expressly waived its claim for
compensation for the towage service rendered to defendant, it is clear that plaintiff, whose
right if at all depends upon and not separate from the interest of his employer, is not entitled
to payment for such towage service.

Neither may plaintiff invoke equity in support of his claim for compensation against
defendant. There being an express provision of law (Art. 2142, Civil Code) applicable to the
relationship created in this case, that is, that of a quasi-contract of towage where the crew is
not entitled to compensation separate from that of the vessel, there is no occasion to resort to
equitable considerations.
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