palabrica notes finals notes_reviewer.doc

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

TRANSPORTATION LAW- Dec. 3, 2010 airlines and the main carrier is PAL and so PAL should be I. Air Transportation the one sued. Lhuiller v. British Airways case: 2. Yes. The cause of contract here is not a breach of contact of carriage but the negligence of PAL in communicating  says that the governing law is the Warsaw Convention the ticket to the British Embassy as far as the connection  issue is jurisdiction is concerned. Note that the negligence happened before  “high contacting parties” – countries which are signatories in the Warsaw contact of carriage was effected. convention; countries who abide with the provisions of the agreement in the WC 3. No. The cause of action is not the contract of carriage but  “international flight” – flight between two high contracting parties (according to PAL’s negligence making the WC not applicable. WC)  NOTE: Compare the Lhuiller case and this case  importance to determine if international flight – to know the applicability of WC (if international flight, then WC applies) II. OBLIGATIONS OF THE PARTIES  in this case, international flight (London-Italy) therefore, WC applies A. Vigilance over the Cargo  Held: case shall be filed in the: (a) place of the main office of the airline (London) 1733. Extraordinary diligence is required (b) place where you bought the ticket (Italy) 1735. Presumption of negligence in case of loss, damage or deterioration (c) place where the incident happened  GR: as long as it is shown that there is damage then the common carrier (CC)  Therefore: Philippine court has no jurisdiction over the case, case dismissed for could be made liable lack of jurisdiction  EXP: CC could prove that it has exercised extraordinary diligence over the goods IN ONE CASE:  One guy from Iloilo or Bacolod who joined a golf tournament in Bangkok 1736. Coverage of extraordinary diligence  lasts from the time the cargoes are  He needed to pass Singapore and so he bought ticket from PAL going to conditionally placed in the position of and received/accepted for transportation by the Singapore carrier to be delivered to the consignee, without prejudice to 1738  since PAL has no direct flight from Singapore to Bangkok he got a British 1737. Even if the cargoes are temporarily unloaded, CC is still obligated to exercise Airways ticket going to Thailand from Singapore extraordinary diligence UNLESS the shipper/owner avails of the right to stoppage in transitu  He arrived using PAL’s plane but British Airways would not accept them  “stoppage in transitu” – right of an unpaid vendor to stop the shipment or because the ticket was not indorsed by PAL transportation of the cargo to the consignee because the consignee is not capable  BA: if we accept this ticket, there is a possibility that PAL will not pay us of paying him, and so the vessel becomes a warehouse, therefore shall exercise  He was not able to use the questioned ticket and Garuda Airways going to the diligence of the good father of a family and not extraordinary diligence Bangkok  Some of them got sick because of the hassle and so was not able to play golf 1738. CC has to continue to operate with extraordinary diligence even if the goods are  When they got back in the Phils, they filed a case for damages for breach of placed in the warehouse at the place of destination. contact against PAL  Fact that it has reached the destination and place of the warehouse it doesn’t  PAL filed motion to dismiss follow that the extraordinary diligence has already ceased to exist.  ISSUES  It would only cease to exist if CC has given a reasonable time and given notice 1. Should the case be filed against BA? to the consignee to release the same 2. Do the Philippine courts have jurisdiction over the case  If there is actual or constructive delivery, extraordinary diligence ceases to exist given it is a flight from Singapore to Thailand?  Actual delivery – cargoes were given to the consignee and the consignee 3. Does the WC apply? receives the cargoes.  Constructive delivery – notice was already given to the consignee regarding the  HELD arrival of the cargoes and the consignee was already given a reasonable time to 1. No. When he purchased ticket from PAL, PAL only used release it even if there is no actual release BA as their agent by virtue of an agreement between

Transportation Law – Atty Palabrica (FINAL REVIEWER)  In cargoes, if there is delay, then one of the options of the shipper is to abandon the cargo once in transit and ask for the full price of the cargo. But to be able to do so, Requisites: 1. there should be a demand in writing addressed to the CC stating your intention to abandon the goods 2. it shall be done before the cargo reaches the destination B. TRANSPORTATION OF PASSENGERS (CC) 1. 2. 3.

Obligation to accept the passengers without discrimination Obligation to transport them safely Obligation to transport without delay

When will CC be liable in transporting passengers? a. When there is delay (1740) b. When there is deviation (1747) III. DEFENSES OF THE COMMON CARRIER 1734. GR: CCs are responsible for the loss, destruction and deterioration of the goods EXP: if the same is due to any of the following causes ONLY: memorize!!! 1. floods, storm, lightning, earthquake or other natural disasters and calamities 2. in case of an act of a public enemy during war, international or civil 3. act or omission of the owner of the cargo (shipper) 4. character of the goods or defects in the packing or container 5. order or act of competent public authority REQUISITES: Natural Disaster 1. this is the only cause of loss, destruction and deterioration of the goods 2. that the CC has exercised the due diligence in preventing or minimizing the loss before, during and after the occurrence of the natural disaster (1739)  CC incurs delay (1740) or deviation – change of route (1742 or 1741)  “Delay” – delay in the departure and/or arrival  If there is delay, CC is still liable although the goods suffered deterioration, loss or destruction caused by natural calamity, which is an absolute defense. Act of Public Enemy 1. there should be actual war between the place of destination and place where the carrier belongs, international or civil  “public enemy” – pirates are public enemy, thieves, robbers, rioters and hijackers are not public enemies 

Public enemy in war, whether civil or international , as a valid defense of common carrier

Dugie & Mela (2011) , Diato & Cagampan (updates) o

There must be an actual war between the country where the common carrier comes from and the country that confiscated the goods. (hijackers, thieves, robbers are not considered as public enemy; but a pirates are considered as such.)

Character of the goods or defect in the packing of the container o Common carrier will not be liable if there are already defects in the goods or in the packing of the goods. o But If the defect is apparent and the common carrier still accepts it, then the fact that there was prior defect could no longer be raised as a defense against the shipper. If the common carrier does not know of the defect then it can be raised as a defense. Provided, that it had exercised the diligence to forestall or minimize damage (Art. 1742). Order of a Public Authority may be used as a defense when: o It is a valid order o There is a force that could compel the common carrier to abide by the order of the competent authority. LIABILITIES OF COMMON CARRIER:  Act of an employee that caused injury to the passenger would still make the common carrier liable, whether or not the employee is acting in accordance with his duty; or even if the act of the employee that caused the injury is in violation of the instruction of the common carrier. 

It shall also be noted that, by express provision of the law, an act of a stranger or co-passenger of the common carrier that caused injury to another passenger would still make the common carrier liable.

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If a passenger was injured and he has not yet paid his fare, then he is not considered a passenger and the common carrier will not be liable to him; but if he has an intention to pay even if he has not yet paid, then he can still be considered as a passenger.

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If the passenger was not aware that he rode the wrong bus, he is still considered as a passenger.

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If the passenger pretended to be the owner of a plane ticket and boarded the plane, he cannot be considered as passenger because there was fraud on his part.

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In the case of gratuitous passenger, the common carrier is still liable; but the liability may be limited depending upon the stipulation of the passenger and the common carrier. However in the case of an ordinary passenger, the liability of the common carrier cannot be lessened or diminished by stipulation.

Transportation Law – Atty Palabrica (FINAL REVIEWER) Note that the stipulated limitation of liability in the case of gratuitous passengers shall only be valid in ordinary negligence. It is not valid if the cause of injury is willful act of gross negligence. Cause of action if the passenger is injured: 1. Culpa Contractual (breach of contract) - Case against the common carrier only. Cannot be filed against the driver because he is only an agent. Preponderance of evidence is needed to establish liability. 2. Quasi-delict - Case against the driver and the common carrier; based on torts.

Dugie & Mela (2011) , Diato & Cagampan (updates) • • • • •

Limited liability only applies to maritime transaction/ business... Elements of real and hypothetical in nature: The vessel is totally or partially loss Done through negligence or fault of the captain and not the owner E.g. the real and hypo in nature will not apply: Negros navigation v Miranda During the voyage, there was a collision of negros navigation and an oil tanker because of the negligence of the captain... but the cause is that the boat is not sea worthy because it sunk within 5-10 minutes where in many people died. And allowing the boat to be overloaded with people, that is why there was negligence on the part of the owner and not only to the negligence of the captain... That is why the limited liability rule will no longer apply in this case. • Limited liability rule: Vessel, appearance, freight and insurance 3. Culpa Criminal It does not violate the civil code. - Case against the driver. Common carrier is subsidiarily liable if the driver is • • In order to avail limited liability in partial loss there must be a written notice of insolvent. abandonment. That the owner is turning over to the predator possessor of the Possible damages: thing or abandoning the vessel.  Actual damages • Principle of Limited liability rule (LLR): no vessel, no liability... o (life expectancy=2/3 x 80 – age) x income and expenses • Is there a need of abandonment? No there is no need because there is nothing to  Moral damages abandon. o Hurt feelings, sleepless nights, mental anguish Exception of LLR: o In culpa contractual, moral damage is not awarded except in the case of • If there is a concurrence of owner or agent of the vessel death or bad faith. • In case if the vessel is insured  Exemplary damages • The nature of the claim is in special law that the workers who died in the o Awarded if there is one or more aggravating circumstances performance of their duties. It is Workmen’s compensation claim.  Nominal damages • When all the expenses for repair incurred prior to the voyage, because there was o Awarded to vindicate the right of the plaintiff. obligation already arise. • The freight that was paid will not be included in the LLR. It is only the value of the vessel will be extinguished. Protests: Transportation Laws – Dec. 10, 2010 Within 24hrs Code of commerce/ Maritime Law: Or to the first point of entry in the Philippines Corporation A - has bus1, bus 2, and bldg. It is not applicable to all case... Only if the vessel was shipwreck, hurricane, arrival under The owners of corporation A are: stress, in case of maritime collision (take note of this, because it involves maritime B – who has a house and lot vessels and it should be both maritime vessel) C- who has a car D – who has a car • Corporation has a distinct and separate personality. So the liability of A cannot Where to file? In 1981, the jurisdiction is regarding to the amount involved In Metro Manila: RTC – exceeds 400k be transfer to B, C ,D... Outside MM: RTC- exceeds 300k Nature of liability under maritime law: it is real and hypothetical in nature... Below this amount above stated: will in Metropolitan Trial Court. Maritime Collision- there is a need to protest What does real and hypothetical in nature mean? It is limited liability. Vessel – any barge, lighter, bulk vessel, freighter, passenger freighter, tanker, fishing Limited liability- in case the vessel is totally loss through the fault or negligence of the boats, contrabands... design and capable of transporting person or cargo from one coast to another. captain, the liability of ship owner is extinguished. • Authority: Art. 837 under code of commerce: the owner shall be civilly liable for the acts of the captain up to the actual value of the ship, freight...

Transportation Law – Atty Palabrica (FINAL REVIEWER) Not vessel: If the vessel is operated under Arm forces of the Philippines, all foreign , Bangka, sailing boats, less than 3 gross tons, boats that are accessory, yachts, health service, floating store houses Requisites of maritime vessel: 1 Not accessory 2 Has a license to engage in the transportation 3 Using to transport crates or people by sea

Dugie & Mela (2011) , Diato & Cagampan (updates) Scrapping or decommission of the vessel (no longer to be used) Constructive or total loss

Transpo Lecture- Jan 7 Charter Party - a special contract in maritime commerce. It is not the contracting parties but the contract itself. It is a contract by which the owner or agent of the vessel leases the whole or part of the vessel to another for transportation of the cargo or passengers from Under code of commerce Art.835 regarding the person capability to protest and that it one place to another for a certain price. should be both maritime vessels. Governing laws: • Registration and extraordinary diligence Common Carrier- civil code Private Carrier- Code of Commerce Vessel – is personal property. It is registered with conveyance and customs The moment CC becomes a private carrier- Code of Commerce Importance of determining whether common carrier is considered a private carrier: MARINA RULES IN REGISTRATION- it is the one who set the rules 1. To know which law will govern 2. Stipulation that limits liability is valid in a private carrier but not in a common How to acquire? Good faith with valid title: 3yrs carrier. When is a common carrier considered as private carrier? BARE BOAT CHARTER GF without valid title with adverse possession: 10 yrs BARE BOAT CHARTER It is when a vessel is hired (including the crew and everything). The control, Through sale management, and possession is with the charterer. Can you sell a vessel while in voyage? Yes Article 652 of the code of commerce: Contents and formalities of the chartered parties Who will pay the payment of wages? Purchaser 1. The charter parties has to be drawn in duplicates, signed by the parties. Who will collect the freight earn? Pertains to purchaser 2. Charter parties should also specify: Can you sell a vessel when you reach in the San Francisco or destination? Yes * the kind, the name, and the tonnage of the vessel. Who will collect? The Seller because he already finished the transaction * the origin of registry of the vessel. Who will pay the wages? Seller * The name of the shipper, the owner, and the charterer. Who will abandon the ship? The ship owner or agent but not the chartered.. Co-owner * Port of loading and unloading. can abandon it only in proportion of his share. * Capacity and the carriage agreed upon by the parties to be loaded. * The freightage All vessels must be registered. * the primage What are the vessels need to be registered? * lay days. Owned by the Philippine citizen or Phil. Companies that atleast 60% owned by  Freight-fare or kind of cargo to be loaded Phil. Citizen  Primage- fee given for the special care given to the cargo or by using the More 15 gross tons in capacity equipment Optional registration: 15 tons or less  Lay days- allowable number of days that a charterer may load or unload the Not required: war vessels, boats of private 3 tons or less, non-motorize boats, cargo Temporary certificate: Why is this important to know? May be given incase of charter or Marina - Because we are dealing with cargoes and vessels, and they are always in transit Charter must not be less than 1yr.. operation entirely by Filipino citizens and man by and delay would cause a lot of money for additional charge for demorage Filipino citizens - Demorage- fee charged in excess of the number of days allowed to load and When can you delete/cancel the registration? unload Phil.; incase of bare boat chartered by a foreign Requisites for a valid charter party: Pre-termination of chartered agreement 1. Consent of the contracting parties Sale of the vessel to a foreigner 2. Existence of the vessel at the disposal of the charterer

Transportation Law – Atty Palabrica (FINAL REVIEWER) 3. 4.

Stipulation as to the freightage Compliance with Art. 652 o the Code of Commerce

What is the indication of Art 652- the charter party has to be in writing as general rule EXP: Art 653, if the cargoes be received and the charter party has not yet been signed then it is understood that it has been executed and the one that will govern the obligation of the parties are the stipulations in the bill of lading Kinds of Charter Party: 1. Bare Boat Charter Party or Demise Charter Party - a person hires the vessel and the crew, and so the charterer would be the one who would take charge in paying the wages of the crew and in control of provisioning everything in the vessel, in effect, the crew became the employees of the charterer - charterer party would be liable to third persons - charterer has command, possession and navigation of the vessel; he acts as owner who handles everything - only instance where common carrier would be a private carrier 2. Contract of Afreightment – charterer hires the vessel either for a deteminate period of time or per voyage or successive voyages a. Voyage Charter – per voyage or successive voyages b. Time Voyage – fixed time

Dugie & Mela (2011) , Diato & Cagampan (updates) Art 659-if the cargoes are placed on the vessel, the captain may sell the cargos subject to the following conditions: 1. if the money from the sale will be needed for the repair of the problem of the vessel. 2. Unavoidable and urgent expenses Effect- if after the repair, the cargo was able to reach the point of destination, then the captain will pay the owner based on the price in the place of destination. Same goes with if the vessel did not reach the destination. Will the cargo be liable for the freight? If the vessel was not able to reach the destination, its liability shall be proportionate to the distance. If it reaches the destination, it will be liable for the whole value. Art. 659- partial freight  if the vessel was lost or did not reach the destination. Art. 662- shipwreck but cargo was recovered= liable only up to the extent of the damage (partial freight) Art. 665 the moment the cargo is placed in the vessel, the common carrier is already liable. There is already a lien created in the cargo. 

What are the liabilities? o Freight o Expenses Can a ship captain enter a charter party? o Average (expense that inure to the benefit of cargo holders) accorded to - Art. 655, the ship captain can enter a charter party provided, in the absence of a him. Ex: Jettison. ship agent, even if it is in contravention or against the instruction of the ship If you cannot pay the liabilities, then under… agent or owner – still valid - But the owner may go against the ship captain for damages Art 668 the cargos be sold in the auction. Cargos to be sold in auction by the captain: Contract of Towage  contract of service where the barge is towed by a vessel

Art. 656 as to determine when demorage shall be given - if there is no time stipulated in the charter party then the usage of the port shall be used

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cargos under 665 and 666 if the cargo is at the risk of deteriorating consignee cannot be found or refuses to claim the cargo if it is very expensive to preserve the cargo.

What if during the chartering, the vessel was found later on not seaworthy anymore? Instances where cargo is liable for full freight: art 659 - Art 657, the captain is obligated to look for a vessel and continue the voyage  The cargo was sold for the repair, and the vessel reached the destination. within 150 kilometers from port - If the captain cant find vessel to deliver – he may apply for deposit of the cargo  Under 662, when the vessel was repaired but after the repair the cargo was not sold and the vessel reached the destination. Art 658, the freight shall accrue as stipulated in the contract. But if the stipulation is not  Under 663, deterioration due to packing clear, the rule will be, if on the charter there is a month or a date, then the freight will  Fortuitous event accrue during the time of the loading. If there is a fixed period, then the fright accrues on that very date. When not required to pay a freight?

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

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Goods pledged to secure repayment Under 661, when for reasons of shipwreck or stranding, or when the goods were Voyage during which the risk is run confiscated by enemies or pirates.  Under 660, when the cargo was thrown overboard and was never recovered. (jettison) LOB/LOR vs Simple Loan LOR/LOB Simple Loan Rate of interest is not subject to the Rate of interest must not exceed the Transpo Lecture – Loan on Respondentia and Bottomry (January 28, 2011 / usury law – extraordinary risks ceiling fixed by the usury law January 2015) involved LOAN ON RESPONDENTIA AND BOTTOMRY - it is a contract of loan in the nature of mortgage - subject matter in RESPONDENTIA: Cargo || BOTTOMRY: Vessel - there should be marine risk - unlike other loans, may assume higher interest and not covered by any regulation or usury law because of the risk the lender is taking the moment the vessel goes on voyage - obligation is paid only if the subject matter is lost (respondentia), or extinguishment of obligation to pay when lost (bottomry), so when payment should be made at all costs, then it is an ordinary loan Definition

Who may contract?

Common Elements

Loan on Bottomry Loan on Respondentia Loan made by ship owner or Loan taken on security of ship agent guaranteed by the cargo laden on a vessel, vessel itself and repayable and repayable upon safe upon arrival of the vessel at arrival of cargo at destination destination Ship owner Owner of the cargo Ship agent Outside of the residence of the owners - captain Elements Exposure of security to marine peril Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination Forms Public instrument Policy signed by the contracting parties and the broker taking part therein Private instrument Contents Kind, name and registry of vessel Name, surname and domicile of the captain Names, surnames and domiciles of the borrower and lender Amount of the loan and the premium stipulated Time for repayment

Marine risk is necessary and be duly established Executed in accordance with the form and manner required in the code of commerce Recorded in the registry of vessels in order to bind third persons Preference is extended to the last lender – theory that if not for the last lender, then the prior lenders would not have benefited from the preservation of the security. Who has authority to constitute LOR / LOB Loan on Bottomry Ship owner - may secure a lon upon his ship Part Owner – may secure a contract only up to the extent of his interest in the vessel Ship Captain & Part Owner – may obtain a loan only to the extent of his interest Ship Captain (NOT Owner) 1. Extreme necessity – may borrow by means of LOB in order to comply with the obligations 2. No loans may be made on the salaries of the crew nor of the profits which may be expected

WHAT DOES LOR/LOB COVER?

No need of such risk Formal requisites regarding contracts in general would apply No registration is required First lender enjoys preference (general rule)

Loan on Respondentia Cargo owner – have the right to enter into a LOR Captain - NOT owner of cargo thus they cannot contract a LOR. If he does such then he shall be chargeable solely for the LOR.

Transportation Law – Atty Palabrica (FINAL REVIEWER) -

Dugie & Mela (2011) , Diato & Cagampan (updates)

GR: it is presumed that LOR or LOB covers round trip What if the captain sees that the ship is not seaworthy anymore? The captain has the responsibility to look for another ship within 150km. (Art  EXP: when it is expressly stipulated that a particular trip is covered by loan 657) REQUIRED TO REGISTER VESSEL TO AFFECT LOR/LOB? - Should be recorded in the registry of vessel, but failure to register the same does Charges to Cargo? (Art 665) Freightage not invalidate the contract Expenses and duties arising therefrom - Effect of the non-recording  it will not bind third parties and you will lose as a Part of the general average lender, your preference of credit (note: LOB or LOR has preference of credit EXAMPLE (GENERAL AVERAGE) over ordinary loans) 1. Cargo worth 1M, loan on respondentia is 500k, General Average is 100k, How Loan of Respondentia: (for MARINE PERILS ONLY) much should the lender pay? – his interest is one half. Then he should pay 50k - GR: When cargo is lost, then the LOR is extinguished  the borrower will no 2. in the case of shipwreck, and the vessel is stranded but some of the goods were longer pay the lender because the subject matter is lost salvaged or recovered, there is salvaging expenses in doing the same, What is - What if: the basis of determining the payment of the borrower? – Not the original value 1. If cargo lost, vessel saved? Still liable? – NOT liable, the security of the loan. Law states that in shipwreck it is based on the value of the goods was saved saved minus the expensed for salvaging or saving the same 2. If cargo was saved, vessel lost? Still liable? – LIABLE, security 3. Cargo is worth 1M, salvaged cargo is worth 500k, salvaging expenses of 100k still exists then 400k would be the basis of loan on respondentia and not 1M Loan on Bottomry (for MARINE PERILS ONLY) - GR: When vessel is lost, then the LOB is extinguished  the borrower will no Where goods or vessel is covered by insurance: longer pay the lender because the subject matter is lost - General Rule: if it is 100% covered by loan it cannot be covered by insurance - What if because there is no more insurable interest on the part of the owner 1. If cargo lost, vessel saved? Still liable? – LIABLE, security still EXception: Insurance and LOB/LOR may co-exist but there should be a exists determination of the insurable interest. How to determine? – if the value of the 2. If cargo was saved, vessel lost? Still liable? - NOT liable, the goods or vessel is 1M and subject to LOB/LOR for 700k, How much is security was saved insurable interest of insurance company? 300k only EXCEPTION TO THE GENERAL RULE ON EXTINGUISHMENT UPON LOSS Is insurance company also liable in case of damage? OF THE CARGO/VESSEL – Yes. Because it has interest in the subject matter 1. if the loss is caused by the inherent defect of the cargo Insurance and loan Co exist 2. fault of borrower himself Once insurance and loan co-exist, both shall be liable for damages in proportion 3. Barratry or malice on the part of the captain of the vessel to their interest 4. If the damage was caused because the borrower was engaging in contraband Difference of Insurance and LOB/LOR: goods Insurance LOR/LOB 5. If the goods loaded were different from that designated in the contract in case of loss, may be paid anytime in LOB/LOR: there should be the presence RULE ON OBLIGATION: GENERAL AVERAGE all events even without marine risk of marine risk; in case of loss, loan is - RULE in obligation when it comes to General Average (expense on extinguished deterioration): incurred to save cargo or vessel by jettisoning  owners and lender benefited from such Preference of Credit LENDER : GENERAL AVERAGE Ex. Series of loans were made = Manila  Iloilo  Cebu (100k)  CDO; vessel - Lender shall suffer or share in proportion to their respective interest in General not longer worthy to travel and so was sold for 110k Average which may take place in the goods in which the loan is made (Art. 732) - first to be paid in the loan made in Cebu (100k) then pay Iloilo (10k) don’t Instances when the charterer will not pay freight anymore? proportionate anymore, pay everything that is left if the loan is bigger than the If goods were lost on account of: difference 1. Shipwreck or stranding - last one has preference, because of the principle that the last loan incurred saved 2. Due to seizure by pirates or enemies the cargo or vessel and so preference must be given since first loan also If paid in advance – then it shall be returned UNLESS there is an agreement to benefited the contrary

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

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Inverted Order - Important thing to determine is the kind of average because if it is an average 1. Loan contracted during voyage has preference over those contracted before then the next thing you should think of is “who will bear the loss?” the voyage 2. Loan contracted during last voyage take preference over earlier voyage 2 KINDS OF AVERAGE 3. Different loans made on the same port shall be paid on a pro rate basis I. Simple or Particular Average – - Example: expenses or damages to the vessel or her cargo which do not inure the common benefit of those who are interested; loss borne by the owner of the cargo or LOAN vessel itself; MANILA – Php 20,000 a. Art. 809: losses suffered by the cargo from the time of its embarkation ILOILO Php 10,000 until it is unloaded either by the inherent defect of the cargo or through CEBU Php 100,000 force majeure VESSEL SOLD IN AN AUCTION: b. wages and victuals or provisions of the workers  depends whether CDO - Php 110,000 the vessel is chartered on a fixed voyage or a monthly charter - During quarantine, wages and victuals are only Particular Averages APPLYING RULE: CEBU  ILOILO MANILA a. Damages inflicted upon the vessel or cargo by reason of impact or collision with another if it is accidental and inevitable b. Damages suffered by the cargo through the fault or negligence of the captain of the vessel, the owner of cargo bears loss Loan Php 70M without prejudice in filing a case against the owner of the vessel Actual Value Php 50M EXAMPLE: Then Php 50M shall be a valid loan but the Php20M will be converted into a simple loan Ex: American corporation loaded equipment and agricultural machineries on a German vessel for Russia but during the voyage, a war brought out in Russia and Germany, so the vessel decided to go to Philippine port to seek refuge. Who would bear the expenses Due to Fraud acquired a high loan than the actual amount of the goods secured while in the Phils? General or Particular? - Particular only, the risk is not common (because of war, and so safety to the vessel only and not the cargo because the latter is a legal material, therefore, Transpo Lecture - Average and Collision (February 4, 2011) owner of vessel shall incur loss) AVERAGE II. General or Gross Average- Art 811: expenses or losses deliberately incurred - Expenses and damages of the vessel or to the cargo (ex. Extraordinary, for the purpose of saving the vessel or cargo or both from real marine risk; accidental expenses, loss or deterioration) not accidental - Who will shoulder loss in damages and expenses? Identify what kind of average NOTES ON GENERAL & PARTICULAR first! - if monthly then wages and victuals of the crew for the reason that the vessel - GR: nothing more than expenses and damages was detained, then General Average - EXP: Art. 806  technical meanings: - if fixed voyage charter, only Particular Average 1. Average is all extraordinary and accidental expenses incurred during the Magsaysay case: SC gave requisites of General Average (TAKE NOTE AND voyage for the preservation of the vessel, cargo or both MEMORIZE) 2. Average refers to damages and deterioration suffered by the vessel from the a. There must be a common risk which is certain and imminent time it is put in sea until it arrives at the port of destination and also those b. Part of the vessel or cargo or both is sacrificed deliberately suffered by the cargo from the time it is loaded to the vessel until it arrives c. The sacrifice was successful in the place of destination for unloading d. The expenses or damages should be incurred or inflicted after taking Art. 807 proper judicial steps; captain cannot do it discriminately - Petty and ordinary expenses or expenses incidental to navigation (pilotage, i. There must be an assembly of saving made with the captain lighterage, inspection, health, maritime fee) should be borne by the owner of the ii. Coming out with a resolution ship because these are expenses in order to travel or have a voyage

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

iii. Resolution and minutes be entered in a log book stating General Average? –Yes. Because it was deliberately made to save the other vessels and reasons or basis of action or vote; although majority would their cargoes not vote for the jettisoning of the cargoes, the captain has the last say or decision, but he would be accountable to the cargo  When the vessel was close to the port, and because it is shallow, some of the owners cargoes need to be unloaded to barges in preparation of a coming storm, in iv. Objects to be jettisoned should be identified in the log book doing that there are expenses and there is a risk that those you unloaded would and the injuries if kept on board suffer from loss or deterioration. General Average? –Yes. It is for the benefit of v. Within 24 hours upon arrival at the first port, the captain everybody. Vessel was saved, and so cargoes were saved because of jettisoning shall deliver a copy of the minutes to the judicial authority the same - The captains vote still prevail over the others COLLISION NO DELIBERATE INTENT TO THROW = Not General Average - an impact or sudden contact between the moving vessels, or one moving  if the cargo accidentally fell, vessel benefited because of weight loss which and another in stationary stabilized the same during the storm (incidental only), still no General Average because no deliberate sacrifice to save V or C or both  applies only to maritime vessels  fishing boats are not maritime vessels, not  despite the cargo being jettisoned, the rest of the cargo still was destroyed, no covered here General Average because sacrifice was not successful  RULE: if in collision, a vessel is at fault and the other is not, and it is due to the  If vessel was saved because the cargos were jettisoned, voyage continued and negligence or want of skill of the captain, who will be liable for damages? another accident happened, saved cargoes were exposed again to marine risk -Owner of the vessel at fault and was also destroyed, but those destroyed cargoes were salvaged or saved  If both vessels are at fault  each one will bear its own loss but as far as the because of previous jettisoning, owner of jettisoned cargo asked for contribution cargoes are concerned, they are solidarily liable (plaintiff may file another for which is proper. How much is the basis of contribution? – the cost of the cargo the whole amount of loss, and such person may ask for reimbursment)  owner after it was salvaged less the salvage expenses of cargoes may claim from any of the vessels  If the liability is not clear as to who is negligent  same rule as when both are JETTISON – throwing out of cargoes at fault  you cannot jettison a cargo because of hearsay or speculative, there should be  Vessel A has proximate negligence and Vessel B has contributory negligence clear and imminent risk only, who is liable? – same rule when both are at fault because the proximate  Who directs the jettison? Captain principle does not apply to maritime collision, it only applies in ordinary  Hierarchy of Jettisoning Cargoes (first to last) collision a. heavy, less valued cargoes which impels the maneuvering of the vessel  What if Vessel A has the last clear chance to avoid the accident but it did not b. cargoes which deloads the upper deck, always beginning with the biggest avail the same, liable? – No. The principle of last clear chance is not applicable weight and smallest value in maritime collision, considered as though both vessels are at fault  If it is caused by force majeure  each owner of the vessels will bear its own Ex. On a fair weather, vessel was stranded, crew needed to do something to keep it afloat, loss, same rule as to the owners of cargoes incurred expenses or averages to keep afloat. Is it a General Average? –No. Particular  Zone of Time Collision (law governing) Average only because there was no common peril  the weather was good. It only a. Zone 1- all the time up to the time when the risk starts benefits the vessel and not the cargo. Only personal obligation on the part of the owner to b. Zone 2- when the risk starts up to the time the risk is particularly certain to continue the voyage. happen c. Zone 3- when collision is certain up to the time the collision happened  Usually, General Average happens during the voyage but it also happens in the - Only in Zone 3, the vessel was about to collide and it is inevitable that they port. have to collide, the privileged vessel swerved to the right but there was another vessel on its right and so it also swerved. Who is liable? – the one Art. 817 or 818: when there are lots of vessels and a vessel caught fire then it was made who caused the privileged vessel to cause such error or swerving (“error in to sink in order to save the others and it did together with her cargoes, is it considered extremis”)

Transportation Law – Atty Palabrica (FINAL REVIEWER)    

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Dugie & Mela (2011) , Diato & Cagampan (updates)

- In Zone 1 and 2, the one who made an error should be the one liable If it is an arrival under stress, CC will not be liable for the damages suffered by In Manila, the vessel arrives to port, captain would delegate the anchoring and the cargo/ vessel. If it is not a legitimate arrival under stress, ship owner will suffer the positioning to a pilot because he is more eligible in maneuvering big vessels If accident happens during the maneuvering of the pilot, is captain still liable? – damage as to the vessel; and cargo owner as to the cargo. Yes. But captain has recourse against the pilot. Because the captain is still there Even the presence of valid reasons will not automatically mean an arrival under to ensure that maneuvering is done properly stress because there are formalities that must be observed. GR: Protest is always needed in maritime collision. No damages without protest. Given within 24 hours at the place of collision or at the port of destination. Steps to be taken to determine the propriety of arrival under stress: (MEMORIZE) (condition precedent) 1. Determination must be made by the Captain Other instances wherein Protests are needed before filing for reconveyance: 2. Summon all officers and those who have interest over the vessel; but the latter needed only in maritime vessels have no voting rights a. arrival and distress 3. Deliberation and objections b. shipwreck 4. In case there will be disagreements, decision of the captain will still prevail c. collision d. when the vessel has gone through a hurricane Instances when arrival under stress is not valid: contributory negligence – NOT APPLICABLE – both are still at fault 1. If the lack of provision is caused by failure of the captain to EXP: Case: Ferry carrying passengers to Iloilo. There is a small vessel carrying observe the usage and the customs of the particular place, and the distance of the passengers to the Ferry. Due to the fault of the one handling the small vessel, it voyage. went near the propeller of the ferry and so it sunk and one of the passengers was 2. No well-founded fear of seizure by pirates and priviteer severely injured. They filed a case against the vessel but the latter argued that 3. Vessel is defective caused by the fact that it was not maintained case would not prosper because there was no protest.  SC ruled that protest is nor repaired prior to the voyage. not needed when there is injuries to persons or passengers and what was involved is not a maritime vessel since it is only a small vessel Article 822: The scenario is that there is a need to repair the vessel but the cargo is - Other EXPs: already loaded. The cargo should be unloaded from the vessel. Who will shoulder the a. the one involved (cargo) is not on board the vessel expenses? b. the person involved is not in the capacity to make the protest (applicable  The owner of the vessel if the purpose is to preserve the vessel. also in the said case because the victim was in the hospital for 6 months)  If the purpose is to protect the cargo=the owner of the cargo. c. the means used is not a maritime vessel  If the reason is for both= both of them proportionally

TRANSPO LECTURE: February 18 Arrival under stress and Shipwreck

Article 823: Custody of the cargo after temporarily unloaded is still under the captain, which makes him liable in case of damages or loss. (EXCEPTION: if due to force majeure)

If the cargo was already damaged (partly or wholly), the captain has to apply in If the common carrier (cc) is bound to travel, the route stipulated shall not be the proper judicial authority for the sale of the cargo. In order to effect the sale, captain violated. Otherwise, there will be deviation. If there is deviation, cc will be liable even if must comply with certain formalities such as publishing, acquiring consent from persons loss or damage was due to a fortuitous event. It is the same thing with delay. who have interests over the cargoes. In arrival under stress, vessel does not reach its destination. It anchors to the nearest port or most convenient port. This is not considered deviation.

The captain shall be responsible for delay. If the cause of arrival under stress has ceased, he shall continue with the voyage. If he does not continue, then there is delay.

Valid reasons for Arrival under stress 1. Well founded fear of seizure by priviteer or pirates 2. Accident at sea disabling the vessel to continue voyage

What should the captain do after the “reasons” for AUS ceases to exists - After the fear already ceases the captain shall decide after following the steps (steps…determine the propriety…)

Transportation Law – Atty Palabrica (FINAL REVIEWER) -

Then he shall continue the voyage. Upon delay the captain shall be liable (823)

Dugie & Mela (2011) , Diato & Cagampan (updates) -

Exception to DEVIATION

When is salvage necessary? If there is a derelict-- cargo or vessel has been abandoned by the captain and the crew, without intention of recovering the same or when safety is already beyond their control. If there is till intention to recover, it is not considered a derelict. - It can be a subject to salvage if it is a derelict Who will shoulder the damages? - Derelict: abandonment + no intent to recover 1. Ship owner as to the vessel; - NOTE: intention to recover must be from the beginning 2. Cargo owner as to the cargo - Example: If the crew abandoned the ship and had originally not intent to assuming that there was no malice, negligence, lack of foresight, or lack of recover but later on when they arrive on the shore they saw useful items to skill on the part of the captain. Otherwise, indemnity may be demanded help in salvaging. Thus they decided to return, upon returning they saw from him. salvager. In this case the ship was already considered derelict since intent must be from the time the ship circumstance for abandonment happened. Captain will be personally liable if: Salvage in this case is valid. 1. there is malice, negligence, lack of foresight, lack of skill - QUASI DERELICT – vessel is not valid but it is already beyond the power the vessel that was put to sea was insufficiently repaired. of the crew to save (ex: vessel is already at the mercy of the sea) Shipwreck Injuries or loss suffered by the vessel because of the swallowing by the waves, or grounding or running an object in the sea, rendering it incapable for navigation.

Grounds

Shipwreck 1. swallowing of waves 2. grounding or running an object in the sea (marine perils)

Circumstance – vessel

Ship is stranded thus not navigable

Liability

Shouldered by the individual owners

Arrival Under Stress 1. Well founded fear of seizure by privateer or pirates 2. Accident at sea disabling the vessel to continue voyage Ship is navigable but due to circumstances it limits the movement of the ship GR: Shouldered by owner/agent (expenses for arrival NOT for damages)

TRANSPO LECTURE: February 25 SALVAGE LAW and COGSA Salvage Law

What are the subjects of salvage? 1. Vessel itself 2. Jettisoned 3. Goods floating at the sea 4. Laigon- goods attached to the buoy Jetsam and Flotsam – unless abandoned still the property of their original owners 1. Jetsam – goods that were thrown off a ship which was in danger 2. Flotsam – are goods that floated off the ship while the ship was in danger or when it sank 3. Ligan – goods left at sea on the wreck or tied to a buoy so that they can be recovered later What is the nature of the possession of the finder of derelict? - The finder has possession but not ownership. Even the owner may take back the derelict without paying the expenses of salvage. - Finder has the right to keep the derelict until the owner posts a bond. (salvage lien) Elements of valid salvage: 1. marine peril 2. service is voluntary 3. successful in whole or in part 4. vessel is abandoned

Salvage- Saving the vessel and saving the cargo - Contract or service which one person renders to the owner of the ship or goods, that by his own labor it preserves the goods or ship, which the owner Liability: Valid and Invalid Salvage or those entrusted with the care of them either abandon, or during distress at Valid Salvage sea, were not able to protect them.

Invalid Salvage

Transportation Law – Atty Palabrica (FINAL REVIEWER) Common Carrier – not liable for damages (if they followed the formalities stated in the law) Expenses for the Salvage – shipowner / shipagent – receive compensation by way of reward

Liability of damages 3. vessel – shipowner 4. cargo - cargo owner Sued for damages (captain/agent)

Dugie & Mela (2011) , Diato & Cagampan (updates) People who cannot validly conduct salvage 1. Crew of the vessel shipwrecked or salvaged. (he has a duty to take care and save the cargo) 2. If there was an objection by the captain, the person still insists. 3. If the person who salvaged did not deposit it to the collector of customs.

How much salvaged to be given will be based on: Examples: 1. Labor  Vessel is floating in distress, beyond the control of the crew, then one swimmer 2. Competence and Skill a member of the crew, was able to save cargoes. Is he entitled to reward? No, 3. Value of the materials being used to salvaged because it has to be done voluntarily. He is a crew, and it is part of his duty to 4. Risk being assumed save the cargo. 5. Value of the goods being salvaged 

Actual case: M/V Alfonso owned by William Lines was giving distress signals.  Salvage reward must not exceed 50% of the value of the goods salvaged. The engine stopped causing the vessel to drift away. The weather was perfectly fine. Capt. Barios, captain of another vessel M/V Henry, responded to the signals and towed the vessel to a safer place and the vessel was saved. William Things that have to be paid by the owner:  Expenses for custody Lines waived renumeration. Capt. Barios filed a case for a salvage reward. Is he  Advertisement entitled to a reward? Court said that there is no marine peril. (Barrios vs Go Thong)  auction sale  taxes over the goods when it was brought to the country  He, who shall save merchandise at sea, has the obligation to deliver it to the  expenses for salvage collector of custom or treasurer or mayor. Otherwise, he can be held criminally  salvage reward liable or will not be rewarded salvage fee. Contract of towage vs. salvage If the one who salvaged sought for the help of another vessel but the shipowner was Salvage Towage not there, then 50% of the salvage fee will go to the owner, 25% will go to the captain, Towing in order to that it may be Towing may be an act of salvaging another 25% will go to the crew of the vessel. (Sec 13 Act No 2616 Salvage Law) considered salvage unless all requisites of salvage concur No claim 3 months after publication by the authorities of salvage report all the crew of the vessel who undertook In towage, they will not a receive a - the things saved shall be sold at a public auction, proceeds of which shall be the salvage will receive a reward reward, only their salaries (fees belong to deposited in the National Treasury after deducting the expenses and the the owner of the tugboat) proper reward to which the salvor is entitled. Requires success, otherwise no payment Success is not required Vessel must be involved in an accident Vessel need not be involved in an No claim after 3 years of the deposit accident - 50/50 - half of the proceeds will go to the finder and half will go to the government. How to determine the bond to be posted? Customs or the judge of the RTC where the goods where recovered will be the one to determine the amount of bond. COGSA Carriage of Goods by Sea Act (enacted by US Govt. Act. 521, 1936) Obligation of collector of custom Primary Law that will govern transportation by sea is the Civil Code. Why Civil 1. safeguard and inventory of goods Code? Latest law will be the governing law. 2. subject the goods to public auction if the conservation is prejudicial to the owner and when no objection was made. a. advertisement (30 days after salvage)

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

COGSA is suppletory. In international shipment, COGSA could be the primary law, if it was stipulated by the parties. Note that it does not apply to coastwise shipment even if it was stipulated.

demand in May 4, 1972? No. The moment extrajudicial demand was filed, it interrupts the prescriptive period. Prescriptive period will then again start on May 4, 1972 and not December 18, 1972.

Responsibilities and liabilities of parties 

Implied warranty of the ship’s seaworthiness o When the cargo was loaded to the vessel, it is presumed that it is seaworthy. The owner of cargo does not have the obligation to check or validate its seaworthiness.

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Recovery of loss or damage o There should be notice of damage. Common carrier has to file the notice of damage immediately upon the receipt of goods if the damage is apparent. If it is not apparent, it should be filed within 3 days. 

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Effect if there is no notice of damage: presumption (ONLY) that the goods delivered are in the same condition as it appeared in the bill of lading. Thus, a case of recovery of loss or recovery filed beyond three days will still prosper. 

Supposing in the bill of lading it was stated that primary law is COGSA, and it was stipulated that no case will prosper unless the notice is filed within 30 days. Is it valid? No… because under COGSA, notice shall only be filed within 3 days.

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What if it was stipulated that before the case must prosper notice within 3 days must be filed. Is it valid? No… because notice is not a prerequisite to be able to file a case.

Case for recovery of loss or damage AGAINST THE VESSEL shall be filed within one year from delivery. Except in cases of loss or damage because of misdelivery and conversion, which under 1144 of the Civil Code, the prescriptive period is 10 years. 

Filing within one year period may be extended if there is agreement between the parties.

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A case has been filed in December 18, 1972. Claim for damages was filed in May 4, 1973. Does the action prescribe if there was a filing of extrajudicial

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Supposing A insured his cargo to B insurance company. Cargo arrived in 2009 in the Philippines and there were damages. A filed a demand letter to B, but the latter did not respond to the demand. So three years after, he filed for a case against B. B invokes prescription of action. Is B correct? NO, B is not correct because A’s claim is against an insurance company and not the vessel. According to the Insurance Code, the prescriptive period for money claims is 10 years.

Transportation Law – Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates) Obligations of common carrier A. General rule: accept goods and passenger without discrimination Exception: 1. If the goods are contraband. 2.livestock exposed to diseases 3.subject to capture, accepting the passenger or goods will result to overloading. (pls refer to the civil code) B. Deliver the goods/ Transport the passengers Where? in the place stipulated in the bill of lading. When? Reasonable time. To whom? Authorized person, consignee. How? Delivery must be done without delay.

TRANSPO: March 11 FINAL REVIEW Parties:  Shipper vs Passenger  Common Carrier vs Consignee Laws governing conduct of transportation: 1. In coastwise shipping: Civil Law, Code of Commerce, Special Laws 2. International Shipping: Law of the particular country where the goods are to be delivered COGSA: Carriage of Goods by Sea Act From abroad to the Phil- civil code; code of commerce; COGSA (primary if stipulated)

C. Exercise extraordinary diligence Sea transportation- the vessel must be seaworthy (fit, properly manned, adequately equipped) cargo-worthy. In transportation of passengers, common carrier must observe safety as far as human care and foresight can provide. Coverage of observance of extraordinary diligence: It starts from the time the goods are unconditionally placed in the possession of the common carrier and accepted by the same; and delivered actually or constructively to the consignee or authorized person. (Notice of delivery is important) General Rule: Even if the goods are temporarily unloaded, extraordinary diligence must still be observed. Exception: stoppage in transitu (right of the creditor to stop the transportation). Defenses of the common carrier:

COGSA- General Rule: Only for international shipment (not for coastwise) Exception: when there is a stipulated transshipment

1. Article 1734 of the Civil Code

Note: transshipment is not valid unless stipulated.

2.Defective packing of cargo The moment the common carrier accepts the defective packing of the cargo, it already assumes liability. Except when it has done something to prevent or forestall damages.

For Force Majeure to be considered to be a valid defense it must be the proximate cause. Common carrier must have exercised due diligence before, during, and Ex: from San Francisco-Cebu (There was a stipulation that COGSA will apply)after. Also, that common carrier did not incur delay and overloading. then the vessel ducted in Manila. Then COGSA will still apply.

3. Land transportation: Civil Code and code of commerce

4. Air transportation: Civil Code and Code of commerce (local); or Warsaw Convention (international) especially when the parties are highly contracting parties. If the flight is Special Contracts from a country that the parties are not highly contracting…Warsaw convention will not Charter party apply.

Transportation Law – Atty Palabrica (FINAL REVIEWER) 1.Bare boat/ demise -provide for the crew, including their salaries -responsible to pay damages 2. Contract of Afreightment time charter and voyage charter

Liabilities of common carrier

Dugie & Mela (2011) , Diato & Cagampan (updates) - Without malice of the cc, expenses shall be borne by the ship owner. There should be a protest. -Vessel, common carrier, cargo owner shall bear the loss. Captain shall be liable if there is malice, negligence, and the vessel was insufficiently repaired. Salvage - saving the cargo Requisites: 1. Marine risk 2. Voluntary 3. Successful 4. Abandoned or beyond the control

1. Transportation of cargoes Stipulation as to the liability is valid: must be in writing, must be reasonable, must be for a consideration other than the freight.

When? If the shipment is derilict OR If the vessel is already abandoned (totally).

2. Transportation of passengers Generally, limiting the liability is void except for gratuitous passenger. Exception to the exception: if there is negligence but not for gross negligence or willful act.

General- inures to the benefit of everyone. All who benefited must share to pay the expenses. Special/Particular- expense inures only to the benefit of a particular person.

*If the person is not a passenger…then CC is not liable. Basis: contract of carriage.

COGSA

Obligation to conduct inspection

Average

-Applies to International voyage. -Applies to local if there is stipulated transshipment. -Implied Warranty

1. Land: visible only to the naked eye unless there is imminent danger or strong suspicion 2. Airline: it is a must * If the damage is apparent, notice of damage must be filed. Not apparent=notice of damage must be filed within 3 days. Law on bottomry (vessel) and respondentia (cargo) -A loan, payment of which is subject to marine risk * Failure to file within 3 days does not bar one to file a case. The purpose of the notice is -If the cargo or vessel is safe then the debtor is obligated to pay. to show that there was damage. If it was not filed, then there is a presumption that the -If there is no stipulation then it is presumed that it is a roundtrip risk. cargo was received in the same condition as it was loaded. * Loan more than the value of the cargo or vessel through fraud is still valid but only up to the amount of the cargo or vessel. * Must be filed within 1 year even without notice of damage in case of Common Carrier. If filing for recovery for damage against insurance company, the prescription period is 10 Order of payment years. -Those transactions made during the voyage has preference than those made before the boat was put into voyage. -Inverse preference. -Those loans taken in the same place and time during the shipwreck, the debtors will share payment pro rata. Shipwreck