Study Guide # 3

MARITIME COMMERCE

I. Vessels (Article 573 – 585)

 Definition
Vessel - Any watercraft used for water transportation, delivery of services and those used
for scientific, educational and research purposes, including fishing vessels. (Marina
Circular No. 90)

 Augusto Lopez v. Juan Duruelo (G.R. No. L-29166, October 22, 1928) –

The word "vessel"used in the section referred to was not intended to include all
ships, craft or floating structures of every kind without limitation, and the
provisions of that section should not be held to include minor craft engaged only
in river and bay traffic. Vessels which are licensed to engage in maritime
commerce, or commerce by sea, whether in foreign or coastwise trade, are no
doubt regulated by Book III of the Code of Commerce. Other vessels of a minor
nature not engaged in maritime commerce, such as river boats and those
carrying passengers from ship to shore, must be governed, as to their liability to
passengers, by the provisions of the Civil Code or other appropriate special
provisions of law.

Art 835 does not apply to small boats engaged in river and bay traffic. This articles
apply to merchant vessels. When the mercantile codes speak of vessels, they refer
solely and exclusively to merchant ships, as they do not include war ships
furthermore, they almost always refer to craft which are not accessory to another as
is the case of launches, lifeboats, etc. Moreover, the mercantile laws, in making use
of the words ship, vessels, boat, embarkation, etc., refer exclusively to those which
are engaged in the transportation of passengers and freight from one port to
another or from one place to another; in a word, they refer to merchant vessels and
in no way can they or should they be understood as referring to pleasure craft,
yachts, pontoons, health service and harbor police vessels, floating storehouses,
warships or patrol vessels, coast guard vessels, fishing vessels, towboats, and other
craft destined to other uses. (Lopez v. Duruelo)

 What is the applicable law if this case is to be decided today?

Effect of the new Civil Code: vessels engaged in the business of carrying or transporting passengers or
goods, for compensation, offering their services to the public are common carriers; governed primarily by
the provisions of the new Civil Code on common carriers, and subsidiarily by the provisions of the Code of
Commerce and by special laws

Vessels governed by the Code of Commerce: merchant ships; do not include war
ships; craft that are not accessory to another as in the case of launches, lifeboats, etc.

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 Vessels not included under the Code of Commerce: pleasure craft, yacht, pontoons,
health service and harbor police vessels, floating storehouses, warships or patrol
vessels, coast guard vessels, fishing vessels, towboats, and other craft destined to
other uses

 Vessel as Property
 Philippine Refining Co., Inc. v. Francisco Jarque (G.R. No. L-41506, March 25, 1935)

Vessels are considered personal property under the civil law. (Code of
Commerce, article 585.) Similarly under the common law, vessels are personal
property although occasionally referred to as a peculiar kind of personal
property.

 Registration
 Fausto Rubiso v. Florentino E. Rivera (G.R. No. L-11407, October 30, 1917)
The requisite of registration in the registry, of the purchase of a vessel, is
necessary and indispensable in order that the purchaser's rights may be
maintained against a claim filed by a third person. Such registration is required
both by the Code of Commerce and by Act No. 1900. The amendment solely
consisted in charging the Insular Collector of Customs, as at present, with the
fulfillment of the duties of the commercial register concerning the registering of
vessels; so that the registration of a bill of sale of a vessel shall be made in the
office of the insular Collector of Customs, who, since May 18, 1909, has been
performing the duties of the commercial register in place of this latter official.

 Simplicia Lima v. Isidoro Lim Chu Kao (G.R. No. 28203, February 6, 1928)
The person in whose name a vessel is registered and to whom
is issued a certificate of ownership is presumed to have the
legal title thereto. (Martinez vs. Martinez [1903], 1 Phil., 647.)
Even where a Filipino and a Spaniard became the owners of a
certain vessel which was licensed in the name of the Filipino as
the sole owner in order to thwart the provisions of the
Coastwise Law, it was yet held that the plaintiff could recover
his share of the earnings, notwithstanding the illegal
agreement, because he was able to establish his right
independently thereof.

 MARINA Memorandum Circular No. 90

Register of Vessels
1. The MARINA shall maintain a registry of vessels to be
known as “REGISTER OF PHILIPPINE VESSELS” which shall
be kept open to free inspection by the public during regular office
hours or when the exigency of the service so requires. Separate

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 registers shall be maintained for overseas and domestic vessels.

The following vessels shall not be covered:

1. Warships and naval vessels; 2
2. . All vessels of foreign registry temporarily used in the Philippine waters for less
than one year;
3. 3. Non-motorized bancas, sailboats, and other waterborne contrivance or less than
three gross tons capacity.

Requirements For Registration of Vessels

The following requirements shall have been complied with prior to registration of a
vessel, if applicable:

1. Existing vessels
a. Plans approval
b. Admeasurement
c. Presentation of photocopies of valid trading certificates

2. New buildings
a. MARINA approval to acquire vessel
b. Approval of complete plans of hull and machineries
c. Authority issued to a classification society to inspect/supervise
the construction of the vessel.

Transfer of Rights and Encumbrances

Any rights affecting the vessel or the ownership thereof shall be
registered in the Book of Transfer and Encumbrances provided the same is
annotated in the Certificate of Vessel Registry of Philippine Vessels.

Deletion of Vessels
Vessels registered under the Philippine flag shall be deleted from the Register of
Philippine vessels under any of the following circumstances:

1. Bareboat chartering out to foreign nationals, unless the charterer opts to fly the
Philippine flag
2. Pre-termination/termination of charter agreement under PDs 760/866/1711
3. Sale of foreign buyers
4. Scrapping/Decommissioning of vessel
5. Constructive or total loss of vessel

 Mortgage/ Lien upon Vessels

 Jose McMicking v. Banco Españ ol-Filipino (G.R. No. 5029, April 1, 1909)
 Article 646 of the Code of Commerce creates a statutory lien upon a ship in
favor of the crew engaged in operating the same, and this lien takes certain
preference in accordance with the provisions of article 580. The wages due the

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 crew and the expenses incurred in maintaining the vessel during the last voyage
constitute a lien which takes preference over a lien created by pledging the ship
as security for money borrowed. But there is no provision of law which
authorizes the use of funds received from the sale of a mortgaged vessel to pay
prior liens.

 Presidential Decree No. 1521

Who may Constitute a Ship Mortgage. Any citizen of the Philippines, or any association or
corporation organized under the laws of the Philippines, at least sixty per cent of the capital
of which is owned by citizens of the Philippines may, for the purpose of financing the
construction, acquisition, purchase of vessels or initial operation of vessels, freely constitute
a mortgage or any other lien or encumbrance on his or its vessels and its equipment with any
bank or other financial institutions, domestic or foreign.

 Tsuneishi Heavy Industries (Cebu), Inc. v. MIS Maritime Corporation (G.R. No.
193572, April 4, 2018)
Sec. 21. Maritime Lien for Necessaries; Persons entitled to such Lien. – Any
person furnishing repairs, supplies, towage, use of dry dock or marine railway, or
other necessaries to any vessel, whether foreign or domestic, upon the order of
the owner of such vessel, or of a person authorized by the owner, shall have a
maritime lien on the vessel, which may be enforced by suit in rem  and it shall be
necessary to allege or prove that credit was given to the vessel.

In practical terms, this means that the holder of the lien has the right to bring an
action to seek the sale of the vessel and the application of the proceeds of this
sale to the outstanding obligation. Through this lien, a person who furnishes
repair, supplies, towage, use of dry dock or marine railway, or other necessaries
to any vessel, in accordance with the requirements under Section 21, is able to
obtain security for the payment of the obligation to him.

A party who has a lien in his or her favor has a remedy in law to hold the
property liable for the payment of the obligation. A lienholder has the remedy of
filing an action in court for the enforcement of the lien. In such action, a
lienholder must establish that the obligation and the corresponding lien exist
before he or she can demand that the property subject to the lien be sold for the
payment of the obligation. Thus, a lien functions as a form of security for an
obligation.

Liens, as in the case of a maritime lien, arise in accordance with the provision of
particular laws providing for their creation, such as the Ship Mortgage Decree
which clearly states that certain persons who provide services or materials can
possess a lien over a vessel.

 Crescent Petroleum, Ltd. v. M/V “Lok Maheshwari (G.R. No. 155014, November 11,
2005)

The various tests used in the U.S. to determine whether a maritime lien exists
are the following:(1) place of the wrongful act;(2) law of the flag; (3)
allegiance or domicile of the injured; (4) allegiance of the defendant

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 shipowner; (5) place of contract; (6) inaccessibility of foreign forum;
and (7) law of the forum.

 Presidential Decree No. 214 (vessels exclusively engaged in overseas shipping)

Sec. 11-1/2.a. Any citizen of the Philippines, or any association or corporation

organized under the laws of the Philippines, at least seventy-five per cent of the
capital of which is owned by citizens of the Philippines, engaged or which shall
engage exclusively in the overseas shipping business may, for the purpose of
financing the construction, acquisition or purchase of vessels for use in overseas
shipping, freely constitute a mortgage or any other lien or encumbrance on
such vessels and its equipment with any bank or other financial institution,
domestic or foreign.

 D.P Lub Oil Marketing Center, Inc. v. Raul Nicolas (G.R. No. 76113< November 16,
1990)
Articles 580 and 584 of the Code of Commerce had been expressly repealed by
the provisions of Presidential Decree (PD) No. 214 thereby rendering the former
abrogated and of no more force and effect. Section 2 of PD No. 214, which is the
repealing clause is crystal clear. No interpretation is necessary. It is plain, as
plain as ordinary and simple words can ever be, that Articles 580 and 584 of the
Code of Commerce were expressly referred to and repealed by Section 2 of PD
214. Ita lex scripta est.

II. Persons Who Take Part In Maritime Commerce (Article 586 – 651)

1. Shipowners/Ship Agents (Article 586 – 608)

 Macondray & Co., Inc. v. Provident Insurance Corporation (G.R. No. 154305,
December 9, 2004)

 Limited Liability Rule/Real and hypothecary nature of liability (Article 587)

 Chua Yek Hong v. IAC (G.R. No. 74811, September 30 1988)
 Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. (G.R. No. 100446, January 21, 1993)
 Note that the primary law is the NCC, and in the absence of applicable provisions –
the Code of Commerce and other special laws apply.

 Exceptions to the limited liability rule

 Manila Steamship Co., Inc. v. Insa Abdulhaman (G.R. No. L-9534, September 29,
1956)
 Dionisia Abueg v. Bartolome San Diego (G.R. No. L-773, December 17, 1946)
 Luzon Stevedoring Corporation v. CA (G.R. No. 58897, December 3, 1987)
 The Philippine American General Insurance Company, Inc. v. CA (G.R. No. 116940,
June 11, 1997)
 Phil-Nippon Kyoei, Corp. v. Rosalia T. Gudelosao (G.R. No. 181375, July 13, 2016)

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 Pedro Vasquez v. CA (G.R. No. L-42926, September 13, 1985)
 Monarch Insurance Co., Inc. v. CA (G.R. No. 92735, June 8, 2000)
 Aboitiz Shipping Corporation v. New India Assurance Co., Ltd. (G.R. No. 156978, May
2, 2006)
 Aboitiz Shipping Corporation v. CA (G.R. No. 121833, October 17, 2008)

 Who may invoke the rule?

 Agustin P. Dela Torre v. CA (G.R. No. 160088, July 13, 2011)

2. Captains and Masters of the Vessel (Article 609 – 625)

 Inter-Orient Maritime Enterprises, Inc. v. NLRC (G.R. No. 115286, August 11, 1994)

3. Officers and crew of the vessel (Article 626 – 648)

 Centennial Transmarine, Inc. v. Ruben G. Dela Cruz (G.R. No. 180719, August 22,
2008)

4. Supercargoes (Article 649 – 651)