Week 5 Case 11. GR Nos. 160088 and 160565 Flashcards
“Indeed, where the reason for the rule ceases, the rule itself does not apply.”
- Chief Justice Artemio V. Panganiban
charter:
a written instrument or contract; a mercantile lease of a ship or some principal part of it
Hypothecary:
In civil law, it means of or relating to an obligation, right, or security in property of a debtor given to a creditor by contract or by operation of law without transfer of possession or title to the creditor.
Hypothecation:
the pledging of property or mortgage as surety for a loan.
pro hac vice:
For or on this occasion only
Crisostomo G. Concepcion –> Owner
Roland de la Torre (son) & Philippine Trigon Shipyard Corporation (PTSC) –> Charterer
Agustin de la Torre (father) & Trigon Shipping Line (TSL) –> Sub-charterer
Ramon Larrazabal –> Sub-charterer
Summary as to why LLR is not applicable to petitioner:
It should be Concepcion to which LLR is applicable.
What is the limited liability rule?
The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agent’s liability is held as merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction.
What three (3) articles in the Code of Commerce are in support of the limited liability rule?
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage.
How do Articles 587, 590 & 837 discuss the limited liability rule?
Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provision – Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587.
Should the limited liability rule be applied in this case?
No.
Now, Article 587 of the Code of Commerce is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are the – “indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel.” Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the charterer in case of demise or bareboat charter.
The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect.
In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited Liability Rule against him who, in the first place, should be the one benefitting from the said rule.
Therefore, even if the contract is for a bareboat or demise charter where possession, free administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of the former, can never set up the Limited Liability Rule against the very owner of the vessel.
What is the jurisprudential ruling regarding the limited liability rule in Yangco v. Laserna?
The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce.
x x x.
‘Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master, x x x.
What is the jurisprudential ruling in Monarch Insurance Co., Inc. v. CA?
‘No vessel, no liability,’ expresses in a nutshell the limited liability rule. The shipowner’s or agent’s liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any.
What is the jurisprudential ruling on the distinguishing factors between the rights of a shipowner and a charterer, as discussed in Yueng Sheng Exchange and Trading Co. v. Urrutia & Co.?
The whole ground of this assignment of errors rests on the proposition advanced by the appellant company that ‘the charterer of a vessel, under the conditions stipulated in the charter party in question, is the owner pro hac vice of the ship and takes upon himself the responsibilities of the owner.’
x x x
If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of the Cebu, then they must respond for the damages claimed, because the owner and the agent are civilly responsible for the acts of the captain.
But G. Urrutia & Co. could not in any way exercise the powers or rights of an agent. They could not represent the ownership of the vessel, nor could they, in their own name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce; thus if the Cebu were attached, they would have no legal capacity to proceed to secure its release; speaking generally, not even the fines could or ought to be paid by them, unless such fines were occasioned by their orders. x x x.
The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia & Co., as charterers of the vessel, did not put the latter in the place of the former, nor make them agents of the owner or owners of the vessel. With relation to those agents, they retained opposing rights derived from the charter party of the vessel, and at no time could they be regarded by the third parties, or by the authorities, or by the courts, as being in the place of the owners or the agents in matters relating to the responsibilities pertaining to the ownership and possession of the vessel. x x x.
Were the mentioned provisions in the Code of Commerce applied? If not, what statutory provisions were applied instead?
Although certain statutory rights and obligations of charter parties are found in the Code of Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the present case. Indeed, none of the provisions found in the Code of Commerce deals with the specific rights and obligations between the real shipowner and the charterer obtaining in this case. Necessarily, the Court looks to the New Civil Code to supply the deficiency. Thus, the RTC and the CA were both correct in applying the statutory provisions of the New Civil Code in order to define the respective rights and obligations of the opposing parties.
Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion for the dry-docking and repair of LCT-Josephine, is liable under Article 1189 of the New Civil Code. There is no denying that the vessel was not returned to Concepcion after the repairs because of the provision in the Preliminary Agreement that the same “should” be used by Roland for the first two years. Before the vessel could be returned, it was lost due to the negligence of Agustin to whom Roland chose to sub-charter or sublet the vessel.
PTSC is liable to Concepcion under Articles 1665 and 1667 of the New Civil Code. As the charterer or lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to return the thing leased and it was liable for the deterioration or loss of the same.
Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under Article 1651 of the New Civil Code. Although he was never privy to the contract between PTSC and Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his non-inclusion in the complaint of Concepcion, it was deemed amended so as to include him because, despite or in the absence of that formality of amending the complaint to include him, he still had his day in court as he was in fact impleaded as a third-party defendant by his own son, Roland – the very same person who represented him in the Contract of Agreement with Larrazabal.
In any case, all three petitioners are liable under Article 1170 of the New Civil Code. The necessity of insuring the LCT-Josephine, regardless of who will share in the payment of the premium, is very clear under the Preliminary Agreement and the subsequent Contracts of Agreement dated June 20, 1984 and August 1, 1984, respectively. The August 17, 1984 letter of Concepcion’s representative, Rogelio L. Martinez, addressed to Roland in his capacity as the president of PTSC inquiring about the insurance of the LCT-Josephine as well as reiterating the importance of insuring the said vessel is quite telling.
Can the charterer step into the shoes of the shipowner?
No.
In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step into the shoes of the shipowner or even the ship agent because there remains conflicting rights between the former and the real shipowner as derived from their charter agreement.
Their (the charterer’s) possession was, therefore, the uncertain title of lease, not a possession of the owner, such as is that of the agent, who is fully subrogated to the place of the owner in regard to the dominion, possession, free administration, and navigation of the vessel.
How was the issue of the charterer and sub-charterer resolved?
In the present case, the charterer and the sub-charterer through their respective contracts of agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise manned by the charterer and later by the sub-charterer’s people. With the complete and exclusive relinquishment of possession, command and navigation of the vessel, the charterer and later the sub-charterer became the vessel’s owner pro hac vice. Now, and in the absence of any showing that the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter parties are that of a private carriage where the rights of the contracting parties are primarily defined and governed by the stipulations in their contract.
Who was obligated to insure the ship?
Clearly, the petitioners, who are the charterers and sub-charterers, to whom the possession of LCT Josephine had been entrusted as early as the time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to do so in clear contravention of their respective agreements. Certainly, they should now all answer for the loss of the vessel.
