NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.

No. L-49469 August 19, 1988

(CASE 103)
CASE TITLE MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.

GR G.R. No. L-49407 August 19, 1988

h. Collisions

TOPIC iii. Rules on Liability (Art 826—832 CC; see doctrine of inscrutable fault)
CASES 103-104)

DOCTRINE

These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R
entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the
Philippines and National Development Company defendant-appellants," affirming in toto the
decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered ordering the defendants National Development

Company and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff
Development Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR
THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the filing of plaintiffs complaint on April 22, 1965
until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for
BRIEF attorney's fee.

On defendant Maritime Company of the Philippines' cross-claim against the defendant National
Development Company, judgment is hereby rendered, ordering the National Development
Company to pay the cross-claimant Maritime Company of the Philippines the total amount that the
Maritime Company of the Philippines may voluntarily or by compliance to a writ of execution pay to
the plaintiff pursuant to the judgment rendered in this case.

With costs against the defendant Maritime Company of the Philippines.

(pp. 34-35, Rollo, GR No. L-49469)

The facts of these cases as found by the Court of Appeals, are as follows:

FACTS The evidence before us shows that in accordance with a memorandum agreement
entered into between defendants NDC and MCP on September 13, 1962,
defendant NDC as the first preferred mortgagee of three ocean going vessels
ABADILLA, JESSICA C.
 including one with the name 'Dona Nati' appointed defendant MCP as its agent to
manage and operate said vessel for and in its behalf and account (Exh. A). Thus,
on February 28, 1964 the E. Philipp Corporation of New York loaded on board the
vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of American
raw cotton consigned to the order of Manila Banking Corporation, Manila and the
People's Bank and Trust Company acting for and in behalf of the Pan Asiatic
Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2
to K7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo, Japan, were the
cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a
collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel
'SS Yasushima Maru' as a result of which 550 bales of aforesaid cargo of American
raw cotton were lost and/or destroyed, of which 535 bales as damaged were
landed and sold on the authority of the General Average Surveyor for Yen 6,045,-
500 and 15 bales were not landed and deemed lost (Exh. G). The damaged and
lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to
the Riverside Mills Corporation as holder of the negotiable bills of lading duly
endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also
considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd.,
consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon,
Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon
as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the
plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged cargoes. Hence, plaintiff
filed this complaint to recover said amount from the defendants-NDC and MCP as
owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469,
p.38)

Petitioner's
Contention

Respondent's
Contention

On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court
of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's
fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).

Interposing the defense that the complaint states no cause of action and even if it does, the action
RTC/CA has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14).
DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on
Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to
dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its
answer with counterclaim and cross-claim against NDC.

ABADILLA, JESSICA C.
 NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-
24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40).
However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record
for its failure to answer DISC's written interrogatories and to comply with the trial court's order
dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement
it executed with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on
Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the order of October 16, 1965,
but the trial court denied it in its order dated September 21, 1966.

On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC
the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the
complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim against NDC.

MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17,
1970 after its motion to set aside the decision was denied by the trial court in its order dated
February 13,1970.

On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision
of the trial court.

ISSUE
Hence these appeals by certiorari.

NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No.
49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103).
On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and
submitted for decision on February 29, 1980 (Rollo, p. 136).

In its brief, NDC cited the following assignments of error:

Supreme THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF
COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE
Court KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR
LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH
THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL
JURISDICTION OF THE PHILIPPINES.

II

THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR

REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).

ABADILLA, JESSICA C.
 On its part, MCP assigned the following alleged errors:

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING
THE COMPLAINT.

II

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF
ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF
ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES
IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.

III

THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE

RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE
COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT
OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE
FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA
MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA
NATI

IV

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A
SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT
NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS
SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA
MARU.

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR

DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE
CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER
BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT
PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE
THERE BEING NO GENERAL AVERAGE TO SPEAK OF.

VI

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS

NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY
JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE
ABADILLA, JESSICA C.
 FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS
FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the
Philippines; p. 121, Rollo)

The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability
as well as the rules of prescription provided thereunder.

The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should
apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of
said Act, the carrier is not responsible for the loss or damage resulting from the "act, neglect or
default of the master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial court which were
adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and negligent,
NDC would have been relieved of liability under the Carriage of Goods by Sea Act. Instead, Article
287 of the Code of Commerce was applied and both NDC and MCP were ordered to reimburse the
insurance company for the amount the latter paid to the consignee as earlier stated.

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50
SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the common carrier in case of their
loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid
down that for cargoes transported from Japan to the Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of commerce and by laws (Article
1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to
the provision of the Civil Code.

In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a
collision which was found to have been caused by the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and
it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.

Under Article 1733 of the Civil Code, common carriers from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them according to all circumstances of
each case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned is
Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted
negigently, unless it proves that it has observed the extraordinary diligence required by law.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code,
so that no reversible error can be found in respondent courses application to the case at bar of
Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of
vessels.

More specifically, Article 826 of the Code of Commerce provides that where collision is imputable
to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and
damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of
the same Code, which provides that if the collision is imputable to both vessels, each one shall
ABADILLA, JESSICA C.
 suffer its own damages and both shall be solidarily responsible for the losses and damages
suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault
or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition
of the universally accepted doctrine that the shipmaster or captain is merely the representative of
the owner who has the actual or constructive control over the conduct of the voyage (Y'eung
Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only
to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea
Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no
uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing
in this Act shall be construed as repealing any existing provision of the Code of Commerce which
is now in force, or as limiting its application." By such incorporation, it is obvious that said law not
only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor
limit its application.

On the other hand, Maritime Company of the Philippines claims that Development Insurance and
Surety Corporation, has no cause of action against it because the latter did not prove that its
alleged subrogers have either the ownership or special property right or beneficial interest in the
cargo in question; neither was it proved that the bills of lading were transferred or assigned to the
alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff-
appellee in this case. (Brief for the Maritime Company of the Philippines, p. 16).

The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the
duly endorsed bills of lading covering the shipments in question and an examination of the invoices
in particular, shows that the actual consignees of the said goods are the aforementioned
companies. Moreover, no less than MCP itself issued a certification attesting to this fact.
Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount of
P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that said
plaintiff-appellee has a cause of action to recover (what it has paid) from defendant-appellant MCP
(Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).

MCP next contends that it can not be liable solidarity with NDC because it is merely the manager
and operator of the vessel Dona Nati not a ship agent. As the general managing agent, according
to MCP, it can only be liable if it acted in excess of its authority.

As found by the trial court and by the Court of Appeals, the Memorandum Agreement of
September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad
enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all
the powers of the owner of the vessel, including the power to contract in the name of the NDC
(Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP
cannot escape liability.

It is well settled that both the owner and agent of the offending vessel are liable for the damage
done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]);
that in case of collision, both the owner and the agent are civilly responsible for the acts of the
captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the
Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that
ABADILLA, JESSICA C.
 while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly
provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine
of jurisprudence under the Civil Code but more specially as regards contractual obligations in
Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent
(Naviero) should be declared jointly and severally liable, since the obligation which is the subject of
the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz,
Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not
be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for
losses and damages occasioned to such cargo, without prejudice, however, to his rights against
the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn
Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).

As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per
package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP
argues that the law on averages should be applied in determining their liability.

MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of
lading and corroborated no less by invoices offered as evidence ' during the trial. Besides, common
carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90
[1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was caused by
its own negligence." Negligence of the captains of the colliding vessel being the cause of the
collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial
court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to
818, Code of Commerce).

MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be
discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary to
the factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots were
at fault for not changing their excessive speed despite the thick fog obstructing their visibility.

Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow
trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on
April 18,1964 was merely tentative to give allowances for such contingencies that said vessel
might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of
cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo
which was supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and
July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived
in Manila on the above-mentioned dates. Accordingly, the complaint in the instant case was filed
on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged
cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of
Goods by Sea Act.

PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed
decision of the respondent Appellate Court is AFFIRMED.

SO ORDERED.

Melencio-Herrera, (Chairperson), Padilla, and Sarmiento, JJ., concur.

ABADILLA, JESSICA C.
ABADILLA, JESSICA C.