Comm2 Reviewer — Part II-F: Maritime Law

PART 1 — SYLLABUS

1. Coverage Map

2. Learning Objectives

1. Define the vessel as an instrument of maritime commerce and run every transfer, prescription, and co-owner dispute through Arts. 573, 575, and 585 before reaching for anything else.
2. State the real and hypothecary nature cold by explaining why liability travels with the vessel and dies with it, then name who may invoke abandonment and what exactly is abandoned under Arts. 587 and 590.
3. Defeat the limited liability shield on sight by proving concurrent fault of the shipowner, following Phil-Am General Insurance Co., Inc. v. Court of Appeals (G.R. No. 116940, June 11, 1997).
4. Place every protest, arrest, and forfeiture in its forum by separating the twenty-four-hour captain declarations from in rem admiralty suits and from customs forfeiture with mortgagee protection.
5. Keep domestic cargo on Philippine bottoms by applying the cabotage reservation and the four narrow permissions for foreign co-loading under R.A. No. 10668.
6. Sort every person aboard and ashore by authority, holding the agent inside Arts. 597 and 598 and the captain inside Arts. 610, 612, and 618 to 620.
7. Decide charter disputes by control, applying the demise against affreightment test from Planters Products v. Court of Appeals (G.R. No. 101503, September 15, 1993) and the private-carrier charter rules from National Steel Corporation v. Court of Appeals (G.R. No. 112287, December 12, 1997).
8. Run any sacrifice, collision, stress arrival, or wreck through the correct Code track, and walk a mortgaged vessel from recordation to arrest to the Sec. 17 priority ladder without skipping a grade.

3. Authority Inventory

A. Cases

B. Laws & Rules

4. Three-Pass Study Plan

Why this order: the examiner grades provision-first answers, so the authority filter comes before doctrine. Then confusion pairs win marks because Part II-F questions punish merged ideas of demise with affreightment, accidental stranding with general average, and co-loading with domestic carriage.

5. Syllabus Self-Check

1. What paper must a vessel sale carry to bind third persons and how is ownership by prescription won or lost. (§1)
2. A part owner sells his share to an outsider without telling the others. What right ripens on record and within how many days. (§1)
3. The vessel sinks with all hands and no owner fault is shown. What survives of the cargo claims and why. (§2)
4. The owner skimped on stability calculations before sailing and the captain also navigated poorly. May either invoke Art. 587. (§2)
5. Cargo is damaged while the hatch is still open and the stevedore points at the arrastre operator. Who answers under Art. 619. (§2)
6. The captain reaches a strange port with a sprung mast and no agent in sight. What must he file within twenty-four hours and before whom. (§3)
7. A vessel caught running untaxed cigarettes is forfeited. The mortgagee financed the vessel in good faith. Does his lien survive. (§3)
8. A foreign vessel wants to lift Manila to Cebu boxes between foreign legs. May it load them and what paper must its operator file. (§4)
9. The ship agent orders a new voyage and insures the vessel on his own signature. Which acts bind the ownership and which expose him personally. (§5)
10. The charterer mans, victuals, and navigates with its own crew while the owner only collects hire. Who answers the injured passenger. (§6)
11. The consignee lost the original bill but holds a signed delivery receipt. Is the carrier discharged under Art. 353. (§6)
12. The captain borrows on respondentia for voyage repairs. Is the contract valid and who pays. (§6)
13. The master jettisons deck-stowed drums to save ship and hold cargo from an imminent storm. Who contributes and who does not. (§7)
14. Two vessels collide at dawn and each blames the other without witnesses. How does the Code split the loss and what protest clock runs. (§7)
15. A bank records a whole-vessel mortgage with a good-faith affidavit and keeps preference. On foreclosure sale, name the seven grades that beat it in order. (§8)
16. A fishing crew tows a burning yacht to port and claims salvage. May the crew share with the volunteering tug. (§9)

PART 2 — BOOK + AUTHORITY REVIEWER

0. One-Page Outline

Framing questions: what juridical relation binds the parties. What elements trigger liability. What exceptions and defenses defeat it. What remedy pays and what clock kills it. Mnemonic for the Sec. 17 ladder: courts pay crew before average and salvage, then prior liens, tort, and mortgages, since the grades run court costs and taxes, crew wages, general average, salvage, earlier liens, tort damages, and earlier mortgages. Mnemonic for clocks: 24 marks protest and claim, 8 holds the cargo lien, 9 frees the co-owner sale, 3 and 10 prescribe the vessel, since Art. 366 and Art. 612 run twenty-four hours, Art. 375 runs eight days, Art. 575 runs nine days, and Art. 573 runs three years with title and ten without.

1. Maritime law defined with the vessel, the Philippine flag, registry, prescription, and co-owner rights

ARTICLE 573. Merchant vessels constitute property which may be acquired and transferred by any of the means recognized by law. The acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if not recorded in the mercantile registry.

The ownership of a vessel shall also be acquired by the possession thereof in good faith for three years, with a good title duly recorded.

In the absence of any of these requisites, uninterrupted possession for ten years shall be necessary in order to acquire ownership.

A captain can not acquire by prescription the ship of which he is in command.

Maritime law is the system of rules on vessels and navigation found principally in Book III of the Code of Commerce as supplemented by special laws like the Ship Mortgage Decree and the Salvage Law. The vessel is both the object of commerce and the security for maritime obligations, so every question on ownership, transfer, and co-ownership runs through Article 573 before any other provision.

Case: Compañia Maritima v. Insurance Company of North America, G.R. No. L-18965, October 30, 1964

Facts: Macleod contracted Compañia Maritima to carry hemp from Davao to Manila for transshipment to Boston, and the carrier received the bales on its own lighters through its patrons before the ocean vessel arrived.

Issue: The lone issue is whether a contract of carriage already bound the carrier although the hemp rested on a lighter and no bill of lading had yet issued.

Held: The Court held that a complete contract of carriage existed upon delivery to the carrier lighter, that a bill of lading is not indispensable under Article 350, and that the cracked lighter was unseaworthy so no force majeure excused the loss.

Doctrine: Delivery of goods to a carrier lighter in the customary course of loading perfects the contract of carriage, and the carrier answers for the cargo from that receipt under the extraordinary diligence of the Civil Code.

Case: Ganzon v. Court of Appeals, G.R. No. L-48757, May 30, 1988

Facts: The shipper delivered goods on the carrier lighter for loading, and the goods were lost when events attended by an allegedly superior order intervened before the ocean carriage began.

Issue: The lone issue is whether the carrier was already in possession and whether the mayoral order that caused the loss qualified as an act of competent authority.

Held: The Court held that receipt on the lighter placed the goods in carrier possession and that an illegal order of a municipal mayor is not the order of competent authority that Article 1734 requires for exemption.

Doctrine: Carrier responsibility attaches upon receipt of the goods by its lighter, and only a lawful order of a competent public authority breaks the presumption of fault for loss.

Q: A part owner of a merchant vessel sells his undivided share to a stranger without telling the other part owners, and the sale is recorded in the mercantile registry on June 1. On June 8 the remaining part owners tender the price and claim the share. Is their claim timely and what must they still do to perfect it?

A: Yes, the remaining part owners acted in time and they perfect their right by delivering the price at once and anchoring their claim on the record of the sale. Article 575 gives part owners the right of option of purchase and withdrawal in sales made to strangers, exercisable within nine days following record of the sale in the registry by delivering the price at once. The June 8 tender falls on the seventh day from the June 1 record, so it is well within the nine-day window and the recorded sale is the exact trigger the law names. The part owners therefore take the stranger share upon prompt delivery of the price, and the stranger buyer cannot keep what the law reserves to the ownership.

2. Real and hypothecary nature with maritime lien and the limited liability rule of no vessel, no liability

ARTICLE 587. The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage.

A vessel is real and hypothecary in nature because the liability for maritime obligations travels with the vessel itself and dies with it. The owner and agent answer for the captain in the care of cargo, yet they may buy peace by surrendering the vessel, its equipment, and earned freight. A maritime lien is the privileged claim that attaches to the vessel from the moment it arises, without need of possession or record.

Case: Phil-Am General Insurance Co., Inc. v. Court of Appeals, G.R. No. 116940, June 11, 1997

Facts: Felman Shipping Lines loaded 7,500 cases of softdrink bottles on MV Asilda for carriage from Zamboanga to Cebu, stowing about 2,500 cases on deck although the vessel was designed as a fishing vessel. The vessel sank in ordinary heavy weather the next morning, the insurer paid the shipper P755,250, and the shipowner invoked abandonment of the vessel under Article 587.

Issue: The decisive issue is whether the shipowner may escape through abandonment when the sinking traces to unseaworthiness at sailing shared by the owner and the captain.

Held: The Court held that MV Asilda was top-heavy and unseaworthy at departure, that closer supervision by the owner could have prevented the fatal miscalculation, and that Article 587 cannot save a concurrently negligent shipowner, so the insurer as subrogee recovered the full payment with interest.

Doctrine: Deck stowage that destroys stability raises the presumption of unseaworthiness, and abandonment under Article 587 protects only the owner whose hands are clean of the fault that caused the loss.

Case: Regional Container Lines v. Netherlands Insurance Co. (Phils.), Inc., G.R. No. 168151, September 4, 2009

Facts: Containerized cargo was damaged while still being unloaded from the vessel, and the carrier pointed at the arrastre operator as the party in actual custody.

Issue: The lone issue is whether the carrier already ceased to answer once the arrastre operator handled the cargo during discharge.

Held: The Court held that the cargo remained in carrier custody through unfinished discharge and that shifting blame to the arrastre operator does not rebut the presumption of negligence.

Doctrine: Carrier custody under Article 587 endures from receipt through complete delivery, and the carrier must prove extraordinary diligence instead of pointing at the hands that helped unload.

2017 Bar Q: Absolute Timber Co. (ATC) has been engaged in the logging business in Isabela. To secure one of its shipments of logs to be transported by Andok Shipping Co., ATC purchased a marine policy with an “all risks” provision. Because of a strong typhoon then hitting Northern Luzon, the vessel sank and the shipment of logs was totally lost. ATC filed its claim, but the insurer denied the claim on several grounds, namely: (1) the vessel had not been seaworthy; (2) the vessel’s crew had lacked sufficient training; (3) the improper loading of the logs on only one side of the vessel had led to the tilting of the ship to that side during the stormy voyage; and (4) the extremely bad weather had been a fortuitous event. ATC now seeks your legal advice to know if its claim was sustainable. What is your advice? Explain your answer. (3%)

A: I advise ATC that its claim is sustainable and that the four grounds for denial all fail against the carrier negligence shown. A common carrier must observe extraordinary diligence and a typhoon that regularly visits Northern Luzon is an ordinary vicissitude of the voyage rather than a fortuitous event once unseaworthiness, an untrained crew, and one-sided loading concurred to sink the vessel. The unseaworthy condition at sailing, the lack of crew training, and the improper stowage point to concurrent fault of the shipowner, so the defense of force majeure collapses and the limited liability rule of no vessel and no liability cannot shelter the owner under the doctrine of Phil-Am General Insurance Co., Inc. v. Court of Appeals (G.R. No. 116940, 1997). ATC therefore recovers on the all-risks policy and the insurer as subrogee takes the same action against Andok Shipping, because the proximate cause of the total loss was carrier fault and not the weather alone.

3. Protests with admiralty jurisdiction, smuggling forfeiture, and marine pollution

ARTICLE 612. The following obligations are inherent in the office of captain: 8. To present himself, when making a port in distress, to the maritime authority if in the Philippines and to the consul of the Republic of the Philippines if in a foreign country, before twenty-four hours have elapsed, and make a statement of the name, registry, and port of departure of the vessel, of its cargo, and reason of arrival, which declaration shall be vised by the authority or by the consul if after examining the same it is found to be acceptable, giving the captain the proper certificate in order to show his arrival under stress and the reasons therefor. In the absence of marine officials or of the consul, the declaration must be made before the local authority.

The captain speaks to authority within twenty-four hours whenever the voyage breaks, and that protest opens the door to admiralty. A preferred mortgagee enforces his lien by suit in rem in admiralty with arrest of the vessel under Sections 10 and 11 of Presidential Decree No. 1521, while customs forfeiture takes a smuggling vessel subject to the lien of a mortgagee who never joined the wrongdoing. Marine pollution is punished under Presidential Decree No. 979, which penalizes the discharge of oil and wastes into Philippine waters.

Q: The captain limps into a strange Philippine port with a sprung mast and no ship agent in sight, fearing seizure by privateers reported along his course. What must he file within twenty-four hours and before whom, and what paper proves he complied?

A: The captain must present himself to the maritime authority within twenty-four hours and file a sworn declaration of the vessel name, registry, port of departure, cargo, and cause of arrival. Article 612 makes this protest an inherent duty of the captain whenever he makes a port in distress, and the authority vises the declaration when found acceptable. The vised certificate proving arrival in distress and its reasons is the paper that proves compliance, and it anchors the later ruling on whether the arrival was proper or improper. Without that timely protest the shipowner loses the evidentiary root of a proper arrival and stays exposed to the cargo claims the voyage break caused.

4. Cabotage and co-loading

Foreign ship operators shall submit their cargo manifest to the Port Authorities to ensure that no domestic cargoes are carried by the foreign ship. No foreign vessel shall be allowed to carry any domestic cargo or domestic container van, whether loaded or empty, even if such domestic container van may contain foreign cargo.

Domestic cargo rides only on Philippine bottoms. No franchise, certificate, or other authorization for carriage in the domestic trade issues except to domestic ship owners or operators, and no foreign vessel may move passengers or cargo between ports or places within Philippine territorial waters without a Maritime Industry Authority special permit issued only where no domestic vessel is available or suitable and the public interest warrants it.

Republic Act No. 10668 opens one narrow foreign-cargo-only window for transshipment. The law applies exclusively to foreign vessels carrying foreign container vans or foreign cargoes, and co-loading means two or more sea carriers agreeing that a carrier bound for a stated destination loads, transports, and unloads the van or cargo of another carrier bound for the same destination.

Section 4 gives four permissions and nothing more. A foreign vessel arriving from abroad may carry import cargo to its Philippine port of final destination after entry clearance, or through another foreign vessel calling at the same port of entry. A foreign vessel departing from a Philippine port of origin may carry export cargo through another Philippine port to its foreign destination, or through a domestic transshipment port where a second foreign vessel lifts it onward. Empty foreign vans moving between two Philippine ports may transship. Carriage under the law is not a public service and the vessel is not a common carrier, and the operator files its manifest with the Port Authorities to prove that no domestic cargo is aboard.

Cabotage keeps the domestic trade closed while co-loading opens only the foreign-cargo transshipment lane.

Q: A foreign vessel on a Singapore to Manila run loads Manila to Cebu boxes between foreign legs and files no transshipment manifest. May it carry them?

A: No because the Manila to Cebu leg is domestic cargo reserved to Philippine bottoms under R.A. No. 9295. R.A. No. 10668 allows a foreign vessel to co-load only foreign cargo for transshipment and never domestic cargo under Secs. 4 and 8. The operator without a manifest and without a Marina special permit therefore has no paper for the domestic lift. The boxes must move on a Philippine vessel while the foreign vessel keeps only its foreign cargo.

5. Persons in maritime commerce with ship agents, captains, and officers

The ship agent may not order a new voyage, or make contracts for a new charter, or insure the vessel, without the authorization of its owner or resolution of the majority of the coowners, unless these powers were granted him in the certificate of his appointment. If he insures the vessel without authorization therefor, he shall be subsidiarily liable for the solvency of the insurer.

The shipowner and the ship agent answer civilly for the acts of the captain and for obligations the captain contracts to repair, equip, and provision the vessel once the creditor proves the amount went to the benefit of the vessel. A ship agent is the person entrusted with provisioning the vessel or representing her in the port where she is found.

The agent designates and deals with the captain and contracts in the owners name for repairs, equipment details, armament, food and fuel provisions, freight, and all navigation needs. He may not order a new voyage, make a new charter, or insure the vessel without the owner or the majority of coowners behind him, and an unauthorized insurer leaves him subsidiarily liable for the underwriter.

The captain must be Filipino with capacity to contract and proven fitness to command as marine and navigation laws require. His inherent powers are to contract the crew, command her to destination on the agent instructions, keep discipline aboard, charter in the absence of the agent, take on supplies where instructions cannot wait, and order urgent hull and engine repairs on the voyage.

The captain keeps three books with the log of navigation incidents, the accounting of collections and expenses with the crew list, and the freight record of goods and passengers, and he makes his protest with declarations within twenty-four hours of the casualty. He answers for cargo from turnover at the loading dock or alongside until delivery on the shore or discharging wharf at unloading unless otherwise agreed. Force majeure excuses him but never his own fault, and mates, engineers, and crew serve under his command.

The agent binds ownership from shore within granted powers while the captain governs from the bridge within voyage powers.

Case: Westwind Shipping Corp. v. UCPB General Insurance Co., Inc., G.R. No. 200289, November 25, 2013

Facts: Steel skids shipped from Kobe arrived in Manila and six were dented and punctured during unfinished unloading while still under carrier discharge, and the customs broker that undertook delivery to the consignee warehouse received the rest in good order yet delivered nine more skids in bad order.

Issue: The issues were whether carrier custody survived unfinished discharge into arrastre hands and whether a customs broker that undertakes delivery answers as a common carrier.

Held: The Court held the carrier still in custody since discharge was unfinished with no actual or constructive delivery to the arrastre operator, and held the broker a common carrier for the warehouse leg since it undertook transport for consideration and never rebutted presumed fault.

Doctrine: Article 619 custody locks on the carrier through unfinished discharge, and a broker that undertakes delivery is itself a carrier under Article 1732.

Q: A ship agent without owner authority orders the vessel on a new voyage and insures her with an unsound underwriter. The venture fails. Who bears the loss?

A: The agent bears it because a new voyage with new insurance needs owner or majority authority under Art. 598. Acts inside repairs, equipment, and navigation needs bind ownership, but unauthorized new voyages and charters stay personal to the agent. The insurer insolvency therefore falls subsidiarily on the agent who insured without authority. The owner answers only for authorized navigation needs proved to benefit the vessel.

6. Special contracts with charter parties, bills of lading, and bottomry and respondentia

The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which the disputes which may arise regarding their execution and performance shall be decided, no exceptions being admissible other than those of falsity and material error in the drafting. In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading.

Control decides charter character. A time or voyage charter leaves possession, navigation, and crew with the owner so the owner stays carrier, while a bareboat or demise transfers command, possession, and control including the master and crew so the charterer answers as owner pro hac vice under Planters Products, Inc. v. Court of Appeals (G.R. No. 101503, 1993).

A tramping vessel on voyage charter is a private carrier governed by the charter with Articles 361 to 362, so merchandise moves at shipper risk against accident, force majeure, and inherent vice with proof of the accident on the carrier. Laytime qualified as weather working days tolls in bad weather, so no demurrage accrues until laytime truly lapses under National Steel Corporation v. Court of Appeals (G.R. No. 112287, 1997).

The bill of lading starts carrier responsibility at receipt and ends it at delivery, hidden damage claims run twenty-four hours from receipt, and the goods answer for freight and charges with an eight-day lien after delivery. A captain who must raise voyage money goes through the judge or consul formalities, and a loan on respondentia secured by cargo that he makes without authority is void.

The whole charter field turns on who mans, victuals, and navigates the vessel.

Case: National Steel Corporation v. Court of Appeals, G.R. No. 112287, December 12, 1997

Facts: National Steel voyage-chartered the tramping MV Vlasons I for Iligan to Manila steel carriage on a free-in-and-out basis with weather working days laytime, then sued for rust and seawater wetting while the owner counterclaimed unpaid freight with eleven days of demurrage for rain-delayed discharge.

Issue: The issues were whether Civil Code presumed-fault rules or the charter with Articles 361 to 362 governed a tramping voyage charter and whether demurrage accrued where weather stopped the discharge work.

Held: The Court held the vessel a private carrier outside presumed fault so the charter with Articles 361 to 362 governed with the shipper carrying proof of willful negligence or unseaworthiness, and held the weather-tolled laytime unexpired so the demurrage award was deleted in full.

Doctrine: A voyage charter of a vessel that does not hold out to the public creates private carriage outside presumed fault, and weather working days laytime tolls in bad weather.

Case: Planters Products, Inc. v. Court of Appeals, G.R. No. 101503, September 15, 1993

Facts: Bulk urea moved under a time charter with the owner keeping the master and crew, and shortage with contamination followed discharge handled by the consignee under a free-in-and-out clause.

Issue: The issue was whether the time charter made the charterer the carrier or left the owner as carrier.

Held: The Court held the owner stayed carrier since only a demise transferring command and control shifts carrier character, and held the carrier to have rebutted presumed fault through the inherent character of the goods with inadequate packaging.

Doctrine: Time and voyage charters keep the owner as carrier while a demise makes the charterer answer as owner pro hac vice.

Case: National Trucking and Forwarding Corporation v. Lorenzo Shipping Corporation, G.R. No. 153563, February 7, 2005

Facts: The carrier delivered milk bags to the shipper consignee employee without the original bills and took signed delivery receipts, and the shipper later claimed non-delivery after its employee resigned.

Issue: The issue was whether surrender of the original bill was a condition for discharge where signed receipts existed.

Held: The Court held the signed receipts substantially complied with Article 353 and produced the effects of a returned bill, and held the carrier to have proved extraordinary diligence so presumed fault fell.

Doctrine: Surrender of the original bill is not a condition for discharge since a signed receipt for delivered goods has equal effect under Article 353.

Case: Lu Do and Lu Ym Corporation v. I. V. Binamira, G.R. No. L-9840, April 22, 1957

Facts: Films discharged in good order into customs arrastre custody were pilfered before the consignee took them three days later.

Issue: The issue was whether the carrier answered for loss after turnover to customs and whether the bill clause ending responsibility at customs custody was valid.

Held: The Court held the carrier not liable since extraordinary responsibility lasts only while goods sit in carrier possession, and held the stipulation ending responsibility on turnover to customs valid for the interregnum.

Doctrine: Carrier custody ends at turnover to customs authorities, and a bill stipulation fixing that cutoff validly limits responsibility to the period of actual control.

2017 Bar Q: Onassis Shipping, Inc. (Onassis) operated passenger vessels and cargo trucks, and offered its services to the general public. In line with its vision and mission to protect the environment, Go-Green Asia (Go-Green), an NGO affiliated with Greenpeace, entered into a contract with Onassis whereby Go-Green would operate with its own crew the MN Dolphin, an ocean-going passenger vessel of Onassis. While on its way to Palawan carrying Go-Green’s invited guests who were international and local observers desirous of checking certain environmental concerns in the area, the MN Dolphin encountered high waves and strong winds caused by a typhoon in the West Philippine Sea. The rough seas led to serious physical injuries to some of the guests. Discuss the liabilities of Onassis and Go-Green to the passengers of the M/V Dolphin. Explain briefly your answer. (3%)

A: Go-Green answers as owner pro hac vice because it ran the vessel with its own crew and full command, which is a demise shifting carrier character to the charterer under Planters Products (G.R. No. 101503, 1993). Onassis kept bare ownership but ran no navigation on that voyage, so it does not answer as carrier for the onboard injuries. Go-Green must therefore meet carrier diligence for its guests and rebut presumed fault with seaworthiness and storm unavoidability. Onassis pays nothing absent its own fault since control decides everything in charter liability.

7. Risks — Averages (general; simple vs general); Collision (zones, error in extremis, applicable law, COLREGS, liability rules, contributory negligence/last clear chance inapplicable, Code of Commerce rules, statutory violation, sinking, protest, limited liability); Arrival under Stress (propriety, protest, improper arrival, expenses, unloading, custody, captain liability); Shipwrecks

ARTICLE 811. General or gross averages shall be, as a general rule, 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 and known risk, and particularly the following:

ARTICLE 812. 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.

Averages divide the sea perils into deliberate sacrifice shared by all and accidental loss borne alone. Collision allocates fault under its own Code rules without quasi-delict apportionment, arrival under stress tests whether the captain followed the Articles 819 to 825 sequence, and shipwreck assigns each owner his own loss under Articles 840 to 845.

Case: A. Magsaysay, Inc. v. Agan, G.R. No. L-6393, January 31, 1955

Facts: A vessel stranded accidentally without any imminent common danger to vessel and cargo together, and the shipowner spent for refloating so the voyage could be completed.

Issue: The lone issue is whether refloat expenses incurred to finish the voyage after accidental stranding constitute general average shared by the cargo.

Held: The Court held that the expenses were particular average on the ship alone, because voyage completion by itself is not a voluntary sacrifice against a common peril and no imminent common danger ever threatened the venture.

Doctrine: Accidental stranding without a real and known common risk produces only particular average, and the cost of putting the vessel back in motion stays with the shipowner.

Q: The master faces an imminent storm and deliberately jettisons hold bales to save ship and remaining cargo, then brings the venture safely to port. The shippers of the saved bales refuse to contribute, arguing that only the shipowner should pay for saving his own vessel. Who contributes and on what basis?

A: All saved interests contribute, and the objecting shippers pay their proportionate share of the jettison. The jettison was a deliberate sacrifice against a real and known common peril threatening vessel and cargo together, which is the textbook definition of general average under Article 811. Article 812 makes every person with an interest in vessel and cargo at the time contribute, with the vessel, the saved cargo, and half the freight forming the contributing capital. The saved shippers therefore share the indemnity of the jettisoned bales pro rata, because general average spreads a sacrifice made for all upon all whom it saved.

8. Ship Mortgage Decree 1978 (preferred mortgage meaning/requirements, preferred claims, executory contract doctrine, prescription/laches, necessaries liens, maritime tort, salvage lien, subrogation, mortgage with other properties, arrest/foreclosure)

A valid mortgage which at the time it is made includes the whole of any vessel of domestic ownership shall have, in respect to such vessel and as of the date of recordation, the preferred status given by the provisions of Section 17 hereof, if (1) the mortgage is recorded as provided in Section 3 of Presidential Decree No. 1521, (2) an affidavit is filed with the record of such mortgage to the effect that the mortgage is made in good faith and without any design to hinder, delay, or defraud any existing or future creditor of the mortgagor or any lien of the mortgaged vessel, and (3) the mortgage does not stipulate that the mortgagee waives the preferred status thereof.

Presidential Decree No. 1521 of 1978 creates the preferred mortgage as a lien on the mortgaged vessel enforceable by suit in rem in admiralty with arrest. The preference is never absolute, because the seven grades of Section 17 defeat it in exact order. As special legislation on vessels, the Decree prevails over the Civil Code mortgage rules and over Article 580 of the Code of Commerce, which Section 17 repealed for mortgaged vessels.

Q: A bank records a whole-vessel mortgage with the good-faith affidavit and keeps its preference. On foreclosure the proceeds cannot pay everyone. Name in exact order the seven grades that beat the bank mortgage.

A: The seven grades that beat the foreclosing mortgage run courts and taxes, crew, average, salvage, prior liens, tort, and prior mortgages. Section 17 of Presidential Decree No. 1521 gives the preferred mortgage priority over all claims except the following in the order stated, namely court costs and taxes, crew wages, general average, salvage with contract salvage, maritime liens prior in time to recordation, tort damages, and earlier recorded preferred mortgages. The bank mortgage therefore pays only after every one of these grades is satisfied in full, with claimants inside the same grade sharing pro rata when proceeds fall short. This fixed ladder is why a mortgagee searches the record and demands disclosure of prior liens before parting with the loan.

9. Salvage Law (kinds, compensation, limit, excluded persons, jetsam/flotsam, rights/obligations)

Section 1. When, in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage.

Act No. 2616 of 1916 pays strangers who voluntarily save sea property and secures them with a salvage lien that sits in the fourth grade of Section 17. Salvage rests on success and on the absence of any prior duty, so that the reward induces hardy mariners to risk themselves and their vessels for property in marine peril.

Q: A fishing crew spots a burning yacht abandoned by its panic-stricken owner, and a passing tug that owes the yacht nothing tows her to port while the crew helps lash the line. Both claim salvage. Who earns and who is excluded?

A: The passing tug earns the reward and the fishing crew shares only if its help went beyond crew duty and the tug accepts it. Section 8 denies reward to the crew of the vessel in danger, while a stranger who voluntarily conveys abandoned sea property to safety with success earns under Section 1. The tug as pure salvor takes a court-measured reward up to the fifty percent limit secured by a fourth-grade salvage lien, and the crew members who merely did their duty take nothing. Only voluntary extra help accepted by the salvor can share in the award, because salvage pays successful strangers and never the hands already bound to the imperiled vessel.

Quick-Recall Tables

Exam Traps

1. A written sale of a vessel binds the parties at once but binds third persons only upon record in the mercantile registry, so an unrecorded buyer loses to a later recorded lienor.
2. Three years of good-faith possession with recorded title vests ownership, while ten years are needed when any requisite is missing, and the captain can never prescribe his own command.
3. The nine-day co-owner withdrawal runs from record of the stranger sale and not from knowledge, so a late tender fails even with prompt discovery.
4. Total loss of the vessel without owner fault ends the cargo claim with it, because liability under the real and hypothecary rule dies with the vessel.
5. Abandonment under Article 587 answers only for fault solely of the captain, and any concurrent owner fault like sailing unseaworthy destroys the shield.
6. A part owner abandons only his own share and only before a notary, so an unnotarized declaration saves nothing.
7. Pointing at the arrastre operator never ends carrier custody before complete discharge, and the carrier must still prove extraordinary diligence.
8. The captain protest belongs before the maritime authority within twenty-four hours, while the consignee claim belongs against the carrier within the same hours, and confusing the two recipients voids the act.
9. Co-loading under Republic Act No. 10668 covers only foreign cargo for transshipment and never authorizes a foreign vessel to lift domestic cargo between Philippine ports.
10. The ship agent binds the ownership for repairs, equipment, and freight but cannot order a new voyage, a new charter, or insurance without owner or majority authority.
11. Demise turns the charterer into owner pro hac vice for liability while affreightment keeps the owner as carrier, so control over crew and navigation decides every charter dispute.
12. A signed delivery receipt can substitute for surrender of the bill under Article 353 doctrine, but only where it proves the same discharge the bill would evidence.
13. Bottomry binds the vessel and respondentia binds the cargo, and the captain borrows in the Article 611 order with judicial or consular leave for the last two modes.
14. Refloat costs after accidental stranding are particular average on the ship, because finishing the voyage is not a deliberate sacrifice against a common peril.
15. Deck cargo jettisoned for common safety earns no indemnity though saved deck cargo contributes, unless coastwise ordinances allowed the deck stowage.
16. Between two negligent vessels each bears his own hull damage with joint cargo liability, and neither contributory negligence nor last clear chance changes that split.

Key Authorities Cited

Source and Verification Note

The primary texts were read directly and quoted verbatim: the Code of Commerce from the eCodal transcription cross-checked against the Aquino 2024 Chapter 13 optical-character extract of pages 879 to 914, Presidential Decree No. 1521 from the LawPhil statute page, Act No. 2616 from its LawPhil statute page, and Republic Act Nos. 10668 and 9295 from their official texts. Case doctrine and dates come from the Batch 2 digests in the vault, with full digest cards for Phil-Am General Insurance (G.R. No. 116940, 1997), National Steel (G.R. No. 112287, 1997), and Magsaysay (G.R. No. L-6393, 1955) and short cards cross-referring the full Batch 2 digests for the remaining decisions. The historic questions are the 2017 questions I.A. and XII transcribed verbatim from the 2016 to 2025 bar question bank, and no year was invented or reassigned. The Aquino 2024 textbook PDF is a scanned image, so Chapter 13 pages 829 to 878 were rebuilt from the Code, the Decree, and the digests rather than quoted from the scan. Amendatory dating was kept current: Act No. 2616 of 1916, Presidential Decree No. 1521 of 1978, Presidential Decree No. 979 of 1976, Republic Act No. 9295 of 2004, and Republic Act No. 10668 of 2015. Charter-party requisite and rescission article numbers and bottomry detail rest on a single secondary transcription and should be rechecked against Aquino Chapter 13 before examination use. Nothing in this reviewer was invented to complete a sentence.