Q.

A. A loan in which, under any

condition whatsoever, the
repayment of the sum loaned and
of the premium stipulated
depends upon the safe arrival in
port of the effects (“efectos”) oh
which it is made, or of the value
in case of accident, shall be
considered a loan on bottomry or
respondentia (Art. 719, Code of Commerce).
It is also defined as a loan
with things exposed to
maritime risks as
collateral to be paid if the
collateral are safely
transported and the lender
shall lose his money if the
latter are lost.
It is a loan on bottomry
where the security is a
vessel, and respondentia
where the security is
cargo (Perez, Insurance Code and
Insolvency Law, 1999 Ed., p. 207,
citing Black’s Law Dictionary; Asked,
1961 and 1966 Bar Exams.)
Q.
A. No. To apply usury law, the
principal sum should be
absolutely and in all events
repayable and therefore, the
usury statute has no application
to those instances where the
repayment of the amount
borrowed is contingent upon
conditions beyond the control of
the parties (Laughlin v. Irwin, 262 III. App. 40)
such as a loan on
bottomry or respondentia
since the lender is, to the
extent of his loan, insurer
of the vessel (or cargo) for
the voyage (Cole v. White,
26 Wend. 511).
Q.
A. Loans on bottomry or
respondentia may be executed:
1. By means of a public
instrument.
2. By means of a policy signed
by the contracting parties and
the broker taking part therein.
3. By means of a private
instrument.
Under whichever of these
forms the contract is
executed, it shall be entered
in the certificate of the
registry of the vessel and
shall be recorded in the
registry of vessels, without
which requisites,
the credits of this kind shall
not have, with regard to
other credits, the preference
which, according to their
nature, they should have
although the obligation shall
be valid between the
contradicting parties.
The contracts made during a
voyage shall be governed by
the provisions of Articles
583 and 611, and shall be
effective with regard to
third persons from the date
of their execution,
if they should be
recorded in the registry
of vessels of the port of
registry of the vessel
before the lapse of eight
days from the date of her
arrival.
Should the said eight days
elapse without the record
having been made in the
registry of vessels, the
contracts made during the
voyage of the vessel shall
produce no effect with regard to
third persons, except from the
day and date of their
inscription.
In order that the policy of the
contracts executed in accordance
with No. 2 may have binding
force, they must conform to the
registry of the broker who took
part therein. With respect to
those executed in accordance
with No. 3, the acknowledgment
of the signature shall be
required.
Contracts which are
not reduced to
writing shall not give
rise to judicial
action (Art. 720,
Code of Commerce).
Q.
A. The following are
the distinctions
between an ordinary
loan and a loan on
bottomry or
respondentia:
1. An ordinary loan
may or may not have
a collateral, while a
loan on bottomry or
respondentia must
have a collateral (Art.
721[61, Code of Commerce).
2. The collateral of an
ordinary loan may be any
property, real or
personal, while the
collateral of a loan on
bottomry or respondentia
must be a vessel or cargo
subject to maritime risks.
3. An ordinary loan is
absolutely repayable,
while payment of a loan
on bottomry or
respondentia depends
upon the safe arrival at
the port of the collateral
of the loan.
4. An ordinary loan
is subject to usury
law, while a loan on
bottomry or
respondentia is not
subject to usury law.
5. An ordinary loan need not
be in writing but interest
shall not be due unless
expressly stipulated in
writing (Art. 1956, Civil
Code), while a loan on
bottomry or respondentia
must be in writing (Art. 720,
Code of Commerce).
6. To be binding on third
persons, an ordinary loan
need not be registered,
while a loan on bottomry or
respondentia must be
recorded in the registry of
vessels of the port of
registry of the vessel (Art.
720, Code of Commerce).
7. The loss of the collateral if
any, in an ordinary loan
does not extinguish the
same, while the loss of the
collateral in loan on
bottomry or respondentia
extinguishes the same
(Art. 731, Code of
Commerce).
Q.
A. In a contract
on bottomry or
respondentia,
the following
must be stated:
1. The kind, name,
and registry of the
vessel.
2. The name,
surname, and domicile
of the captain.
3. The names, surnames,
and domiciles of the
person giving and the
person receiving the loan.
4. The amount of the loan
and the premium
stipulated.
5. The time for
repayment.
6. The objects pledged to
secure repayment.
7. The voyage during
which the risk is run
(Art. 721, Code of Commerce).
Q.
A. The contracts may be
made to order, in which case
they shall be transferable by
indorsement, and the
indorsee shall acquire all the
rights and shall incur all the
risks corresponding to the
indorser (Art. 722, Code of Commerce).
However, a bottomry
obligation, payable to order
on arrival at the port of
destination, is not such a
negotiable instrument as to
give the indorsee any better
rights than those of the
payee (The Lykus, D.C.N.Y., 36 F. 919).
Nonetheless, the
bottomry obligation is
assignable (Burke v.
The M. P. Rich.,
C.C.Mass., 4 F.Cas.
No.2, 161, 1 Cliff. 308).
Q.
A. Loans may be
made in effects and in
goods by fixing their
value in order to
determine the
principal of the loan.
The loans may be constituted
jointly or separately:
1. On the hull of the vessel,
2. On the rigging.
3. On the equipment,
provisions, and fuel.
4. On the engine, if the vessel
is a steamer.
5. On the goods loaded.
If the loan is constituted on the
hull of the vessel, it shall also
be considered that the rigging,
equipment and other effects,
provisions, fuel steam engines,
and the freight earned during
the voyage on which the loan is
made, are included in the
liability for the loan.
If the loan is made on the
cargo, all that which
constitutes the same shall be
subject to the repayment; and
if on a particular object of the
vessel or of the cargo, only
the object concretely and
specifically mentioned shall
be liable (Art. 724, Code of Commerce).
Q.
A. No loans on
bottomry may be made
on the salaries of the
crew, or on the profits
which may be expected
(Art. 725, Code of
Commerce).
The reason for this rule is
that the salaries of the crew
are not part of the capital of
the shipowner, nor are
future profits or commercial
effects that could be given
as collateral (Del Viso, p.
593).
Q.
A. If the lender should prove
that the loaned an amount
larger than the value of the
object liable for the bottomry
loan on account of fraudulent
means employed by the
borrower, the loan shall be
valid only for the amount at
which said object is appraised
by experts.
The surplus principal
shall be returned with
legal interest for the
entire time required for
the repayment (Art.
726, Code of Commerce).
Q.
A. If the full amount of
the loan contracted in
order to load the vessel
should not be used for
the cargo, the balance
shall be returned before
starting the voyage.
The same procedure
shall be observed with
regard to the goods
taken as a loan if all of
them could not have
been loaded (Art. 727, Code
of Commerce).
Q.
A. The loan which the captain
takes at the point of residence of
the owners of the vessel shall
only affect that part of the vessel
which belongs to the captain, if
the other owners or their agents
should not have given their
express authorization therefor or
should not have taken part in the
transaction.
If one or more of the owners
should be requested to furnish
the amount necessary to repair
or provision the vessel and
they should not do so within
twenty-four hours, the interest
which the parties in default
may have in the vessel shall be
liable for the loan in the proper
proportion.
Outside the residence of
the owners the captain
may contract loans in
accordance with the
provisions of Articles 583
and 611 (Art. 728, Code of
Commerce).
Q.
In the following
instances, the contract
is considered a simple
loan and not a loan on
bottomry or
respondentia:
1. When the loan on bottomry
is larger than the value of the
object liable for the loan on
bottomry on account of
fraudulent means employed by
the borrower, the loan on the
amount in excess of the value
of the object as appraised by
experts is a simple loan (Art. 726, Code
of Commerce).
2. If the amount of the
loan contracted in order
to load the vessel should
be used for the cargo, the
balance shall be
considered as a simple
loan (Art. 727, Code of Commerce).
3. Should the effects on which
money is taken is not subjected
to risk, the contract shall be
considered a simple loan, with
the obligation on the part of
the borrower to return the
principal and interest at the
legal rate, if that agreed upon
should not be lower (Art. 729, Code
of Commerce).
Q.
A. Loans made during the
voyage shall have
preference over those
made before the clearing
of the vessel, and they
shall be graduated in the
inverse order of their
dates.
The loans for the
last voyage shall
have preference
over the prior
ones.
Should several loans have
been made at the same
port of arrival under
stress and for the same
purpose, all of them shall
be paid pro rata (Art. 730,
Code of Commerce).
Q.
A. The reason for the law
in giving preference to
later loans is that without
the said loans, the prior
loans would have gone
into the bottom of the sea
together with the vessel.
Thus, by virtue of the
subsequent loans, the vessel
is saved and the previous
loans are able to exist and
subsist (The Mary,
C.C.Conn., 16 F. Cas. No. 9,
187, 1 Paine 671; Del Viso,
p. 596).
Q.
A. The actions pertaining to
the lender shall be
extinguished by the absolute
loss of the effects on which the
loan was made, if it arose from
an accident of the sea at the
time and during the voyage
designated in the contract, and
it is proven that the cargo was
on board;
but this shall take place if the
loss was caused by the inherent
defect of the thing, or through
the fault or malice of the
borrower, or through barratry on
the part of the captain, or if it
was caused by damages suffered
by the vessel as a consequence
of being engaged in contraband,
or if it arose from having
loaded the goods on a vessel
different from that
designated in the contract,
unless this change should
have been made by reason of
force majeure.
Proof of the loss as well as of
the existence in the vessel
of the effects declared to the
lender as the object of the
loan, is incumbent upon him
who received the loan (Art.
731, Code of Commerce).
Q.
A. As stated in the foregoing
provision, the total loss of the
collateral of the loan on
respondentia extinguishes the
same if it arose from an
accident of the sea at the time
and during the voyage
designated in the contract, and
it is proven that the cargo was
on board (Art. 731, Code of Commerce).
The exceptions are:
(1) If the loss was
caused by the inherent
defect of the thing;
(2) If the loss was
caused by the fault or
malice of the borrower;
(3) If the loss was
caused by barratry of the
captain;
(4) If it was caused by
damages suffered by the
vessel as a consequence of
being engaged in
contraband;
(5) If it arose from having
loaded the goods on a vessel
different from that
designated in the contract,
unless the change should
have been made by reason of
force majeure (Art. 731,
Code of Commerce).
Q.
A. Barratry is any willful
misconduct on the part of
the master or crew in
pursuance of some unlawful
or fraudulent purpose
without the consent of the
owners, and to the prejudice
of the owner’s interest (Perez,
Insurance Code and Insolvency Law, 1999 Ed., p. 202).
Q.
A. Lenders on bottomry or
respondentia shall suffer
in proportion to their
respective interest, the
general average which
may take place in the
things on which the loan
was made.
In particular averages, in the
absence of an express agreement
between the contracting parties,
the lender on bottomry or
respondentia shall also
contribute in proportion to his
respective interest, should it not
belong to the kind of risks
excepted in the preceding article
(Art. 732, Code of Commerce).
Q.
A. (a) The general average
contribution of A’s cargo that
was saved, to the owners of the
other cargoes that were thrown
overboard to lighten the load of
the vessel, shall be shared
between A, as owner and B, as
lender on respondentia, in
proportion to their respective
interests.
Since the loan amounts to
2/3 of the value of the
cargo, the lender, B must
share the general average in
the same proportion, while A
shall bear 1/3 of the general
average. Thus, A shall share
P10,000 while B shall share
P20,000.
(b) For the particular
average, the owner of the
cargo and the lender on
respondentia shall likewise
share the damage to the
extent of their respective
interests unless otherwise
agreed upon by the parties.
Thus, A’s share is
1/3 of the damage or
P40,000 while B’s
share is 2/3 of the
particular average or
P80,000.
Q.
A. Should the period during
which the lender shall run the
risk not have been started in
the contract, it shall last, with
regard to the vessel, engines,
rigging, and equipment, from
the moment said vessel puts to
sea until she drops anchor in
the port of destination;
and with regard to the
goods, from the time they
are loaded on the shore or
wharf of the port of
shipment until they are
unloaded in the port of
consignment (Art. 733, Code
of Commerce).
Q.
A. In case of shipwreck,
the amount for the
payment of the loan shall
be reduced to the
proceeds of the effects
saved, after deducting the
costs of the salvage.
If the loan should be on the
vessel or any of her parts,
the freight earned during
the voyage for which said
loan was contracted shall
also be liable for its
payment, as far as it may
reach (Art. 734, Code of Commerce).
Q.
A. If the same vessel or
cargo should be the object of
a loan on bottomry or
respondentia and marine,
insurance, the value of what
may be saved in case of
shipwreck shall be divided
between the lender and the
insurer,
in proportion to the legitimate
interest of each one, taking
into consideration, for this
purpose, only the principal
with respect to the loan, and
without prejudice to the right
of preference of other creditors
in accordance with Article 580
(Art. 735, Code of Commerce).
Q.
A. If there should be
delay in the repayment
of the principal and
premiums of the loan,
only the former shall
bear legal interest (Art.
736, Code of Commerce).
Section III — Marine
Insurance
This portion is now
governed by the
Insurance Code.
Q.
A. For the purpose of this
Code the following shall be
considered averages:
1. All extraordinary or
accidental expenses which
may be incurred during the
voyage for the preservation
of the vessel or cargo, or
both.
2. All damages or
deterioration which the
vessel may suffer from the
time she puts to sea at
the port of departure until
she casts anchor at the
port of destination,
and those suffered by the
goods from the time they
are loaded in the port of
shipment until they are
unloaded in the port of their
consignment (Art. 806, Code
of Commerce; Asked, 1961
Bar Exams.).
Q.
A. The petty and ordinary
expenses incident to
navigation, such as those of
pilotage of coast and ports,
lighterage and towage,
anchorage, inspection, health,
quarantine, lazaretto, and other
so- called port expenses, costs
of barges, and
unloading, until the goods are
placed on the wharf, and
other usual expenses of
navigation shall be considered
ordinary expenses to be
defrayed by the shipowner,
unless there is an express
agreement to the contrary (Art.
807, Code of Commerce).
Q.
A. Averages shall be:
1. Simple or
particular.
2. General or
gross (Art. 808, Code of
Commerce).
Q.
A. As a general rule, simple or
particular averages include all
the expenses and damage
caused to the vessel or to her
cargo which have not inured to
the common benefit and profit
of all the persons interested in
the vessel and her cargo,
especially the following:
1. The damage suffered by the
cargo from the time of its
embarkation until it is
unloaded, either on account
of the inherent defect of the
goods or by reason of a
marine accident or force
majeure, and the expenses
incurred to avoid and repair
the same.
2. The damage and expenses
suffered by the vessel in her
hull, rigging, arms, and
equipment, for the same
causes and reasons, from
the time she puts to sea
from the port of departure
until she anchors in the
port of destination.
3. The damage suffered by
the goods loaded on
deck, except in
coastwise navigation, if
the marine ordinances
allow it.
4. The wages and victuals of
the crew when the vessel
is detained or embargoed
by a legitimate order or
force majeure, if the
charter has been
contracted for a fixed
sum for the voyage.
5. The necessary
expenses on
arrival at a port,
in order to make
repairs or secure
provisions.
6. The lowest value of the
goods sold by the captain
in arrivals under stress for
the payment of provisions
and to save the crew, or to
meet any other need of
the vessel against which
the proper amount shall be
charged.
7. The victuals
and wages of
the crew while
the vessel is in
quarantine.
8. The damage inflicted upon
the vessel or cargo by reason
of an impact or collision with
another, if it is accidental
and inevitable. If the accident
should occur through the
fault or negligence of the
captain, the latter shall be
liable for all the damage
caused.
9. Any damage suffered by the
cargo through the fault,
negligence, or barratry of
the captain or of the crew,
without prejudice to the
right of the owner to
recover the corresponding
indemnity from the captain,
the vessel, and the freight
(Art. 809, Code of Commerce).
Q.
A. The owner of the
things which gave rise
to the expenses or
suffered the damage
shall bear the simple or
particular averages (Art.
810, Code of Commerce).
Q.
A. General or gross averages
shall, as a general rule,
include all the damages and
expenses which are
deliberately caused in order
to save the vessel, her cargo,
or both at the same time,
from a real known risk, and
particularly the following:
1. The effects or cash invested
in the redemption of the
vessel or the cargo captured
by enemies, privateers, or
pirates, and the provisions,
wages, and expenses of the
vessels detained during the
time the settlement or
redemption is being made.
2. The effects jettisoned to
lighten the vessel,
whether they belong to
the cargo, to the vessel,
or to the crew, and the
damage suffered through
said act by the effects
which are kept on board.
3. The cables and masts
which are cut or
rendered useless, the
anchors and the chains
which are abandoned,
in order to save the
cargo, the vessel, or
both.
4. The expenses of removing
or transferring a portion of
the cargo in order to lighten
the vessel and place it in
condition to enter a port or
roadstead, and the damage
resulting therefrom to the
effects removed or
transferred.
5. The damage suffered
by the effects loaded
as cargo by the
opening made in the
vessel in order to
drain her and prevent
her from sinking.
6. The expenses
caused in order to
float a vessel
intentionally
stranded for the
purpose of saving
her.
7. The damage caused
to the vessel which
had to be opened,
scuttled or broken
in order to save
the cargo.
8. The expenses for the
treatment and
subsistence of the
members of the crew
who may have been
wounded or crippled in
defending or saving the
vessel.
9. The wages of any member of
the crew held as hostage by
enemies, privateers, or
pirates, and the necessary
expenses which he may
incur in his imprisonment,
until he is returned to the
vessel or to his domicile,
should he prefer it.
10. The wages and victuals
of the crew of a vessel
chartered by the month,
during the time that she is
embargoed or detained by
force majeure or by order of
the Government, or in order
to repair the damage caused
for the common benefit.
11. The depreciation
resulting in the value
of the goods sold at
arrivals under stress
in order to repair the
vessel by reason of
gross average.
12. The expenses of
the liquidation
of the average
(Art. 811, Code of
Commerce; Asked, 1955
Bar Exams.).
Q.
A. In order to satisfy the
amount of the gross or
general averages, all the
persons having an interest
in the vessel and cargo
therein at the time of the
occurrence of the average
shall contribute (Art. 812, Code of
Commerce).
Q.
A. The following
are the distinctions
between particular
or simple averages
and general or gross
averages:
1. Particular or simple
averages have not inured to the
common benefit and profit of
all persons interested in the
vessel and her cargo, while
general or gross averages are
caused for the benefit of those
interested in the vessel and her
cargo (Art. 809 and Art. 811, Code of Commerce).
2. General or gross
averages are deliberately
caused in order to save
the vessel and/or her
cargo, while particular or
simple averages may be
due to causes other than a
deliberate act (Ibid.).
3. Particular or simple
averages are borne by the
owner of the things damaged,
while general or gross
averages shall be shared and
contributed by all persons
having an interest in the
vessel and cargo (Art. 810 and Art.
812, Code of Commerce).
Q.
A. In order to incur
the expenses and cause
the damage
corresponding to gross
average, the following
formalities must be
followed:
1. There must be a
resolution of the captain,
adopted after
deliberation with the
sailing mate and other
officers of the vessel, and
after hearing the persons
interested in the cargo
who may be present.
If the latter should object,
and the captain and
officers of a majority of
them, or the captain, if
opposed to the majority,
should consider certain
measures necessary,
they may be executed under his
responsibility, without
prejudice to the right of the
shippers to proceed against the
captain before the competent
judge or court, if they can
prove that he acted with
malice, lack of skill, or
negligence.
If the persons interested in the
cargo, being on board the vessel,
have not been heard, they shall
not contribute to the gross
average, their share being
chargeable against the captain,
unless the urgency of the case
should be such that the time
necessary for previous
deliberation was wanting
(Art. 813, Code of Commerce).
If the persons interested in the
cargo, being on board the vessel,
have not been heard, they shall
not contribute to the gross
average, their share being
chargeable against the captain,
unless the urgency of the case
should be such that the time
necessary for previous
deliberation was wanting
(Art. 813, Code of Commerce).
2. The resolution adopted to
cause the damage which
constitutes general average
must necessarily be entered
in the log books, stating the
motives and reasons on
which it is based, the votes
against it and the reason for
the dissent,
should there be any, and
the irresistible and
urgent causes which
impelled the captain, if
he acted of his own
accord (Par. 1, Art. 814, Code of
Commerce).
3. In the first case
mentioned above, the
minutes shall be signed
by all the persons present
who could do so before
taking action, if possible,
and if not, at the first
opportunity.
In the second case,
it shall be signed by
the captain and
officers of the vessel
(Par. 2, Art. 814, Code of
Commerce).
4. In the minutes, and
after the resolution,
shall be stated in detail
all the objects
jettisoned, and mention
shall be made of the
injuries caused to those
kept on board.
The captain shall be obliged to
deliver one copy of these
minutes to the maritime or
judicial authority of the first
port he may make, within
twenty-four hours after his
arrival, and to ratify it
immediately under oath (Par. 3,
Art. 814, Code of Commerce).
Q.
A. The captain
shall direct the
jettison, and shall
order the effects cast
overboard in the
following order:
1. Those which are on
deck, beginning with
those which embarrass
the maneuver or damage
the vessel, preferring, if
possible, the heaviest
ones with the least
utility and value.
2. Those which are below
the upper deck, always
beginning with those of
the greatest weight and
smallest value, to the
amount and number
absolutely indispensable
(Art. 815, Code of Commerce).
Q.
A. In order that the effects
jettisoned may be included in
the gross average and the
owners thereof be entitled to
indemnity, it shall be necessary
in so far as the cargo is
concerned that their existence
on board be proven by means of
the bill of lading;
and, with regard to those
belonging to the vessel, by
means of the inventory
prepared before the
departure, in accordance
with the first paragraph of
Article 612 (Art. 816, Code
of Commerce).
Q.
A. If in lightening a vessel
on account of storm, in
order to facilitate her
entry into a port or
roadstead, part of her
cargo should be
transferred to lighters or
barges and be lost,
the owner of said part
shall be entitled to
indemnity, as if the loss
had originated from a
gross average, the amount
thereof being distributed
between the vessel and
cargo from which it came.
If, on the contrary, the
goods transferred
should be saved and
the vessel should be
lost, no liability may be
demanded of the
salvage (Art. 817, Code of Commerce).
Q.
A. If, as a necessary measure
to extinguish a fire in a port,
roadstead, creek, or bay, it
should be decided to sink
any vessel, this loss shall be
considered gross average, to
which the vessels saved shall
contribute (Art. 808, Code of Commerce).
Q.
A. Arrival under stress
means the arrival of the
vessel at the nearest and
most convenient port
because the vessel cannot
continue the trip to the port
of destination on account of
the lack of provisions,
well-founded fear of
seizure, privateers, or
pirates, or by reason of
any accident of the sea
disabling her to
navigate (Art. 819, Code of
Commerce).
Q.
A. Arrival under stress
may be made if the
captain should believe
that the vessel cannot
continue the trip to the
port of destination on
account of any of the
following reasons:
1. Lack of
provisions;
2. Well-founded
fear of seizure,
privateers, or
pirates; or
3. Accident of the
sea disabling
the vessel to
navigate (Art. 819,
Code of Commerce).
Q.
A. The captain shall
assemble the officers and
shall summon the persons
interested in the cargo
who may be present, and
who may attend the
meeting without the right
to vote;
and if, after examining the
circumstances of the case, the
reason should be considered
well-founded, the arrival at the
nearest and most convenient
port shall be agreed upon,
drafting and entering in the log
book the proper minutes, which
shall be signed by all.
The captain shall have
the deciding vote, and
the persons interested
in the cargo may make
the objections and
protests they may
deem proper,
which shall be entered
in the minutes in order
that they may make
use thereof in the
manner they may
consider advisable (Art.
819, Code of Commerce).
Q.
A. An arrival
shall not be
considered lawful
in the following
cases:
1. If the lack of provisions
should arise from the failure
to take the necessary
provisions for the voyage
according to usage and
custom, or if they should
have been rendered useless
or lost through bad stowage
or negligence in their care.
2. If the risk of
enemies, privateers,
or pirates should not
have been well-
known, manifest, and
based on positive and
provable acts.
3. If the defect of the vessel
should have arisen from
the fact that she wants
not repaired, rigged,
equipped, and prepared in
a manner suitable for the
voyage, or from some
erroneous orders of the
captain.
4. Whenever malice,
negligence, lack of
foresight, or want of
skill on the part of the
captain exists in the
act causing the damage
(Art. 820, Code of Commerce).
Q.
A. The expenses of an arrival
under stress shall always be
for the account of the
shipowner or ship agent, but
they shall not be liable for the
damage which may be caused
the shippers by reason of the
arrival, provided the latter is
lawful.
Otherwise, the ship
agent and the
captains shall be
jointly liable (Art.
821, Code of
Commerce).
Q.
A. If in order to make
repairs to the vessel or
because there is danger that
the cargo may suffer
damage, it should be
necessary to unload, the
captain must request
authorization from the
competent judge or
court for the removal,
and carry it out with
the knowledge of the
person interested in
the cargo, or his
representative, if there
be any.
In a foreign port, it
shall be the duty of
the Filipino consul,
where there is one,
to give the
authorization.
In the first case, the
expenses shall be for the
account of the ship agent or
owner and in the second,
they shall be chargeable
against the owners of the
goods for whose benefit the
act was performed.
If the unloading should
take place for both
reasons, the expenses
shall be divided
proportionately between
the value of the vessel and
that of the cargo (Art. 822,
Code of Commerce).
Q.
A. The custody and
preservation of the cargo
which has been unloaded
shall be entrusted to the
captain, who shall be
responsible for the same,
except in cases of force
majeure (Art. 823, Code of Commerce).
Q.
A. If the entire cargo or part
thereof should appear to be
damaged, or there should be
imminent danger of its being
damaged, the captain may
request of the competent judge
or court, or of the consul in a
proper case, the sale of all or of
part of the former,
and the person taking
cognizance of the matter shall
authorize it, after an
examination and declaration of
experts, advertisements, and
other formalities required by
the case, and an entry in the
book, in accordance with the
provisions of Article 624.
The captain shall, in proper
case, justify; the legality of
his conduct, under the
penalty of answering to the
shipper for the price the
goods would have brought if
they had arrived in good
condition at the port of
destination (Art. 824, Code of Commerce).
Q.
A. The captain shall be
liable for the damage
caused by his delay, if
after the cause of the
arrival under stress has
ceased, he should not
continue the voyage.
If the cause of the arrival
should have been the fear of
enemies, privateers, or
pirates, a deliberation and
resolution in a meeting of
the officers of the vessel and
persons interested in the
cargo who may be present,
in accordance with the
provisions contained in
Article 819, shall
precede the departure
(Art. 825, Code of
Commerce).
Section III
Collisions
Q.
A. In the strict sense,
collision means the impact
of two vessels both moving,
and is distinguished from
allision, which designates
the striking of a moving
vessel against one that is
stationary.
But collision is used in a
broad sense to include
allision, and perhaps another
species of encounters
between vessels, or a vessel
and other floating, though
non-navigable, objects (Blacks
Law Dictionary, citing Wright v. Brown,
4 Ind. 97, 58 Am. Dec. 622).
Q.
A. In collisions
between vessels,
there exist three
divisions of time or
zones:
The first division covers
all the time up to the
moment when the risk of
collision may be said to
have begun. Within this
zone, no rule is applicable
because none is necessary.
Each vessel is free to
direct its course as it
deems best, without
reference to the
movement of the other
vessel.
The second division
covers the time between
the moment when the risk
of collision begins and the
moment when it has
became a practical
certainty.
The third division covers
the time between the
moment when collision
had become a practical
certainty and the moment
of actual contact (Urrutia & Co.
vs. Baco River Plantation, 26 Phil. 632, 636).
Q.
A. The fundamental
principle is to keep out of
the way by a prudent and
safe margin, having
reference to all the
contingencies of
navigation (The Yuma, 132
Fed. 964, 66 CCA 74).
The specific
rules are as
follows:
(a) Crossing Ahead — The
rules direct that the vessel
required to keep out of
the way shall, if the
circumstances of the case
admit, avoid coming
ahead of the other.
A crossing vessel on the
starboard side is
privileged but waives her
privilege by assenting to
the crossing of the other
vessel across her bows
(International Rules Art. 22, 26 U.S. St. at L.
327, p. 802; The Albatross, 184 Fed. 363).
However, where the
burdened vessel attempts to
cross the other’s bows, she
assumes the risk of the
maneuver, and the privileged
vessel will not be held at
fault for not stopping, unless
danger is apparent (The Captain
Bennett, 171 Fed. 973; The Zouave, 90 Fed. 440).
(b) Duty of privileged vessel —
It is the duty of the vessel
having the right of way, when
approaching another vessel
charged with the obligation of
avoiding her, to keep her
course, to enable the other
vessel to keep out of the way
(International Rules Art. 21, 26 US. St. at L.
327, p. 802).
Q.
A. (a) Starboard is the right-
hand side of a vessel when
the observer faces forward.
“Starboard tack” is the
course of vessel when she
has the wind on her
starboard bow (Black’s Law
Dictionary, citing Burrows v. Gower,
D.C.Mass., 119 F. 617).
(b) Port is the left-
hand side of a ship or
airplane as one faces
forward, toward the
bow. Port is the
opposite of starboard.
(c) Bow is the
front part of
the ship or
airplane.
Q.
A. Where a navigator, suddenly
realizing that a collision is
imminent by no fault of his
own, in confusion and
excitement of the moment does
something which contributes to
the collision or omits to do
something by which the
collision might be avoided,
such act or omission is
ordinarily considered to be
in extremis and the ordinary
rules of strict accountability
do not apply (The Norne, C.C.A.La.,
59 F. 2d 145 — Royal Mall Steam
Packet Co. v. Cornapnhia De Navegacao
Lloyd Brasileiro, D.C.N.Y., 50 F.2d 207).
Q.
A. Before the rule of “error
in extremis” can be allowed
it must appear that there
was an imminent danger, for
the error of judgment is
excusable only if it was
committed during such peril
(The William A. Paine, C.C.A. Ohio, 39 F.2d 586).
Furthermore, it is the
actual risk of danger and
not apprehension merely
that determines the
question whether the
error is one in extremis
(The Pangussett, D.C.N.Y., 9 F. 109).
What the rule does mean is
that a navigator handling a
ship in extremis is not to be
held to the exercise of that
cool and deliberate judgment
which facts developing later
indicate to have been the
proper or better course (A. H. Bull
S.S. Co. v. U.S., C.C.A.N.Y., 34 F.2d 614).
It should not be
overlooked that in case of
an imminent peril it is
proper for a navigator to
disregard regulations in
order to avert disaster (The
Wyomissing, D.C.N.J., 2 F.Supp. 954).
Q.
A. If a vessel should collide
with another, through the fault,
negligence, or want of skill of
the captain, sailing mate, or
any other member of the
complement, the owner of the
vessel at fault shall indemnify
the damages suffered, after an
expert appraisal (Art. 826, Code of
Commerce).
Q.
A. M/V Don Sulpicio must
assume responsibility as it
was in a better position to
avoid the collision. It should
have blown its horn or given
signs to warn the other
vessel that it was to
overtake it.
Assuming argumenti ex
gratia that F/B Aquarius
“G” had no lookout during
the collision, the omission
does not suffice to
exculpate Sulpicio Lines
from liability.
M/V Don Sulpicio
cannot claim that it
was a privileged vessel
being in the portside
which can maintain its
course and speed
during the collision.
When it overtook F/B
Aquarius “G”, it was duty
bound to slacken its speed
and keep away from other
vessels, which it failed to
do (Sulpicio Lines, Inc. vs. Court of
Appeals, G. R. No. 93291, March 29,
1999, 105 SCAD 259).
Q.
A. If the collision is
imputable to both vessels,
each one shall suffer her
own damage, and both shall
be solidarily liable for the
damages occasioned to
their cargoes (Art. 827, Code of
Commerce; Asked, 1980, 1987, 1991 and 1995 Bar
Exams.).
Q.
A. The doctrine of
“Inscrutable Fault” means
that the court can see
that a fault has been
committed, but is unable,
from the conflict of
testimony, or otherwise to
locate it.
Hence, when it is
impossible to determine to
what direct and specific
acts the collision is
attributable, it is a case of
damage arising from a
cause that is inscrutable
(The Fern and The Swann, Fed, Cas. #8,588).
Q.
A. In case it cannot be
determined which of the two
vessels has caused the
Collision, each one shall
suffer her own damage and
both shall be solidarily liable
for the damages occasioned
to their Cargoes (Art. 828, Code of
Commerce; Asked, 1980 and 1995 Bar Exams.).
In other words, the same
rule shall apply in case the
collision is imputable to both
vessels or it cannot be
determined which of the two
vessels has caused the
collision, i.e., each one shall
suffer her own damage.
Q.
A. If a vessel should
collide with another
through fortuitous event
or force majeure, each
vessel and her cargo shall
suffer their own respective
damage (Art. 830, Code of Commerce;
Asked, 1966, 1987 and 1995 Bar Exams.).
Q.
A. If a vessel should be
forced by a third vessel to
collide with another, the
shipowner of the third vessel
shall indemnify the damages
caused, the captain thereof
being civilly liable to said
owner (Art. 831, Code of
Commerce).
Q.
A. No. The carrier, not the
charterer warrants impliedly
the seaworthiness of the
ship. The failure of the
carrier to maintain the
vessel in a seaworthy
condition is a breach of its
obligation.
The charterer of a vessel has
no obligation before
transporting its cargo to
ensure that the vessel it
chartered complied with all
legal requirements. The duty
rests upon the common
carrier simply for being
engaged in “public service.”
Shippers of goods when
transacting with common
carriers, are not expected to
inquire into the vessel’s
seaworthiness, genuineness
of its licenses and
compliance with all maritime
laws (Caltex [Phils.], Inc. vs. Sulpicio Lines, Inc.,
G. R. No. 131166, Sept. 30, 1999, 113 SCAD 471).
Q.
A. If, by reason of a storm or
other cause of force majeure, a
vessel which is properly
anchored and moored should
collide with those nearby,
causing them damage, the
injury occasioned shall be
considered as particular average
of the vessel run into (Art. 832,
Code of Commerce).
Q.
A. A vessel which, upon
being run into, sinks
immediately, as well as
that which, having been
obliged to make a port to
repair the damage caused
by the collision,
is lost during the
voyage or is obliged to
be stranded in order to
be saved, shall be
presumed as lost by
reason of collision (Art.
833, Code of Commerce).
Q.
A. If the vessels colliding
with each other should
have pilots on board
discharging their duties at
the time of the collision,
their presence shall not
exempt the captains from
the liabilities they incur,
but the latter shall have
the right to be
indemnified by the pilots,
without prejudice to the
criminal liability which
the latter may incur (Art.
834, Code of Commerce).
Q.
A. The action for the recovery
of damages arising from
collisions cannot be admitted
if a protest or declaration is
not presented within twenty-
four hours before the
competent authority of the
point where the collision took
place,
or that of the first port of
arrival of the vessel, if in
Philippine territory, and to
the Filipino consul if it
occurred in a foreign country
(Art. 835, Code of
Commerce; Asked, 1969 Bar
Exams.).
However, with respect to the
damage caused to persons to
the cargo, the absence of a
protest may not prejudice
the persons interested who
were not on board or were
not in a condition to make
known their wishes (Art. 836,
Code of Commerce).
Q.
A. Protest after a
collision shall not be
necessary in the
following instances:
1. In case the basis
of the action is quasi-
delicts (Lopez vs. Duruelo, 52 Phil. 229).
2. In case of collision of a
motor boat engaged in
conveying passengers
between the ship and the
shore, and a larger vessel,
since the provision on
collision is intended to
cover collisions of sea-going
vessels (Lopez vs. Duruelo, supra).
3. In case the person
interested in the
damage was not on
board or was not in a
condition to make
known his wishes (Art.
836, Code of Commerce; Asked,
1977 Bar Exams.).
Q.
A. The civil liability incurred
by the shipowners in the cases
prescribed in this section,
shall be understood as limited
to the value of the vessel with
all her appurtenances and
freight earned during the
voyage (Art. 837, Code of Commerce; Asked,
1978 and 1991 Bar Exams.).
Thus, the shipowner or ship
agent of a vessel causing the
loss of another vessel by
collision is not liable beyond
the vessel itself causing the
collision and other things
appertaining thereto (Philippine
Shipping Co. vs. Vergara, 6 Phil.
281).
The loss of the vessel
extinguishes the
liability of the
shipowner or ship
agent of a vessel for the
damage caused by
collision.
However, where such vessel is
insured and the insurance is
collected by the shipowner,
the insurance substitutes the
vessel and the shipowner
becomes liable to the extent
of the insurance collected
(Urrutia & Co. vs. Baco River Plantation Co.,
26 Phil. 362),
and if the vessel was not
insured, then the freights
earned shall answer for
the civil liability of the
shipowner (Guan vs.
Compania Maritima, 38
O.G. 2536).
Q.
A. The defense is tenable.
Assuming that the shipowner is
liable for a breach of contract of
carriage, the exclusively “real
and hypothecary nature” of
maritime law operates to limit
such liability to the value of the
vessel, or to the insurance
thereon.
The liability of the shipowner or
ship agent for injury to or death
of passengers arising from the
negligence of the captain in cases
of collisions or shipwrecks, is
merely co-existent with his
interest in the vessel such that a
total loss thereof results in its
extinction (Yangco vs. Laserna, 40 O.G.
4296; Asked, 1991 Bar Exams.).
Q.
A. When the value of the
vessel and her
appurtenances should not be
sufficient to cover all the
liabilities, the indemnity due
by reason of the death or
injury of persons shall have
preference (Art. 838, Code of Commerce).
Q.
A. If the collision should take
place between Philippine
vessels in foreign waters, or if
having taken place in the open
seas, and the vessels should
make a foreign port the Filipino
consul in said port shall hold a
summary investigation of the
accident,
forwarding the
proceedings to the
Secretary of the
Department of Foreign
Affairs for continuation
and conclusion (Art. 839,
Code of Commerce).
 Section IV
Shipwrecks
Q.
A. Shipwreck is the
demolition or shattering
of a vessel, caused by her
driving ashore or on rocks
and shoals in the midseas,
or by the violence of winds
and waves in tempest
(Black’s Law Dictionary, citing 2 Am.
Ins., p. 734).
Q.
A. The damage and
deteriorations suffered by a
vessel and her cargo by reason
of shipwreck or stranding shall
be individually for the account
of the owners, the part which
may be saved belonging to them
in the same proportion (Art.
840, Code of Commerce).
Q.
A. If the wreck or stranding
should be caused by the
malice, negligence, or lack of
skill of the captain, or
because the vessel put to sea
was insufficiently repaired
and equipped, the ship agent
or
the shippers may demand
indemnity of the captain for
the damage caused to the
vessel or to the cargo by the
accident, in accordance with
the provisions contained in
Articles 610, 612, 614, and
621 (Art. 841, Code of Commerce).
The general rule is that the
damage due to shipwreck or
stranding shall be borne by
the respective owners (Art.
840, Code of Commerce),
except in case of malice,
negligence or lack of skill of
the captain or
because the vessel put to sea
was insufficiently repaired
and equipped, in which case
the captain shall be liable for
the damage caused to the
vessel or the cargo (Art. 841,
Code of Commerce).
Q.
A. The goods saved from the
wreck shall be especially
bound for the payment of
the expenses of the
respective salvage, and the
amount thereof must be paid
by the owners of the former
before they are delivered to
them,
and with preference
over any other
obligation if the goods
should be sold (Art.
842, Code of
Commerce).
Q.
A. If several vessels sail
under convoy, and any of
them should be wrecked, the
cargo saved shall be
distributed among the rest in
proportion to the amount
which each one is able to
take.
If any captain should
refuse, without sufficient
cause, to receive what
may correspond to him,
the captain of the wrecked
vessel shall enter a protest
against him, before two
sea officials,
of the losses and damages
resulting therefrom ratifying
the protest within twenty-four
hours after arrival at the first
port, and including it in the
proceedings he must institute
in accordance with the
provisions contained in Article
612.
If it is not possible to transfer
to the other vessels the entire
cargo of the vessel wrecked, the
goods of the highest value and
the smallest volume shall be
saved first, the designation
thereof to be made by the
captain with the concurrence of
the officers of his vessel (Art.
843, Code of Commerce).
Q.
A. A captain who may have
taken on board the goods
saved from the wreck shall
continue his course to the
port of destination, and on
arrival shall deposit the same,
with judicial intervention, at
the disposal of their
legitimate owners.
In case he changes his course,
if he can unload them at the
port to which they were
consigned, the captain may
make said port if the shippers
or supercargoes present and the
officers and passengers of the
vessel consent thereto;
but he may not do so,
even with the said
consent, in time of war
or when the port is
difficult and dangerous
to make.
The owners of the cargo shall
defray all the expenses of this
arrival as well as the payment
of the freight which, after
taking into consideration the
circumstances of the case,
may be filed by agreement or
by a judicial decision (Art. 844,
Code of Commerce).
Q.
A. If on the vessel there
should be no person
interested in the cargo who
can pay the expenses and
freight corresponding to the
salvage, the competent judge
or court may order the sale
of the part necessary to
cover the same.
This shall also be done
when its preservation is
dangerous, or when in a
period of one year it
should not have been
possible to ascertain who
are its legitimate owners.
In both cases, the proceedings
shall be with the publicity and
formalities prescribed in Article
579, and the net proceeds of
the sale shall be safely
deposited, in the discretion of
the judge or court, so that they
may be delivered to the
legitimate owners thereof (Art.
845, Code of Commerce).
 Title V
PROVISIONS
COMMON TO ALL
KINDS OF
AVERAGES
Q.
A. Those interested in the
proof and liquidation of
averages may mutually
agree and bind themselves
at any time with regard to
the liability, liquidation
and payment thereof.
In the absence of
agreements, the
following rules
shall be observed:
1. The proof of the
average shall take place
in the port where the
repairs are made,
should any be
necessary, or in the
port of unloading.
2. The liquidation
shall be made in
the port of
unloading, if it is a
port in the
Philippines.
3. If the average occurred
outside of the
jurisdictional waters of the
Philippines, or the cargo
has been sold in a foreign
port by reason of an arrival
under stress, the
liquidation shall be made
in the port of arrival.
4. If the average has
occurred near the port of
destination, so that said
port can be made, the
proceedings mentioned in
Rules 1 and 2 shall be
held there (Art. 846, Code
of Commerce).
Q.
A. In the case where the
liquidation of the averages is
made privately by virtue of
agreement, as well as when a
judicial authority intervenes at
the request of any of the parties
interested who do not agree
thereto, all of them shall be cited
and heard, should they not have
renounced this right.
Should they not be present or
should they have no legal
representative, the liquidation
shall be made by the consul in a
foreign port, and where there is
none, by the competent judge
or court, according to the laws
of the country and for the
account of the proper party.
When the representative is a
person well-known in the place
where the liquidation is made,
his intervention shall be
admitted and shall produce
legal effects, even though he be
authorized only by a letter of
the ship agent, the shipper, or
the insurer (Art. 847, Code of Commerce).
Q.
A. Claims for averages
shall not be admitted if
they do not exceed 5 per
cent of the interest which
the claimant may have in
the vessel or in the cargo
if it be gross average,
and 1 per cent of the goods
damaged if particular
average, deducting in both
cases the expenses of
appraisal, unless there is an
agreement to the contrary
(Art. 848, Code of
Commerce).
Q.
A. The damages, averages,
loans on bottomry and
respondentia and their
premiums, and any other
losses, shall not earn
interest by reason of delay
until after the lapse of the
period of three days,
to be counted from the day
on which the liquidation
may have been concluded
and communicated to the
persons interested in the
vessel, in the cargo, or in
both at the same time (Art.
849, Code of Commerce).
Q.
A. If by reason of one or
more accidents of the sea,
particular and gross
average of the vessel, of
the cargo, or of both,
should take place on the
same voyage,
the expenses and damages
corresponding to each
average shall be
determined separately in
the port where the repairs
are made, or where the
goods are discharged, sold,
or utilized.
For this purpose the captains
shall be obliged to demand of
the expert appraisers and of
the contractors making the
repairs, as well as of those
appraising and taking part in
the unloading, repairs, sale, or
utilization of the goods, that
in their appraisements or
estimates and accounts they
set down separately and
accurately the expenses and
damages pertaining to each
average, and in those of each
average those corresponding
to the vessels and to the
cargo,
also stating separately
whether or not there
are damages
proceeding from
inherent defect of the
thing and not from
accident of the sea;
and in case there should be
expenses common to the
different averages and to
the vessel and her cargo,
the amount corresponding
to each must be estimated
and stated distinctly (Art.
850, Code of Commerce).