Petitioner Vs Vs Respondents Diosdado Z. Reloj, Jr. Del Rosario & Del Rosario

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FIRST DIVISION

[G.R. No. 106999. June 20, 1996.]

PHILIPPINE HOME ASSURANCE CORPORATION , petitioner, vs . COURT


OF APPEALS and EASTERN SHIPPING LINES, INC. , respondents.

Diosdado Z. Reloj, Jr. for petitioner.


Del Rosario & Del Rosario for private respondent.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FINDINGS OF TRIAL COURT, GENERALLY


RESPECTED; EXCEPTIONS. — While it is well-settled rule that only questions of law may be
raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled
that the same admits of the following exceptions, namely: (a) when the conclusion is a
nding grounded entirely on speculation, surmises or conjectures; (b) when the inference
made is manifestly mistaken, absurd or impossible; (c) where there is a grave abuse of
discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the
ndings of fact are con icting; (f) when the Court of Appeals, in making its ndings, went
beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (g) when the ndings of the Court of Appeals are contrary to those
of the trial court; (h) when the ndings of fact are conclusions without citation of speci c
evidence on which they are based; (i) when the facts set forth in the petition as well as in
the petitioners' main and reply briefs are not disputed by the respondents; and (j) when the
nding of fact of the Court of Appeals is premised on the supposed absence of evidence
and is contradicted by the evidence on record. Thus, if there is a showing, as in the instant
case, that the ndings complained of are totally devoid of support in the records, or that
they are so glaringly erroneous as to constitute grave abuse of discretion, the same may
be properly reviewed and evaluated by this Court.
2. COMMERCIAL LAW; COMMON CARRIER; LIABILITY FOR EXPENSES IN
SALVAGE OPERATION AND TRANSSHIPMENT OF GOODS VIA DIFFERENT CARRIER; CASE
AT BAR. — What is at issue here is who, among the carrier, consignee or insurer of the
goods, is liable for the additional charges or expenses incurred by the owner of the ship in
the salvage operations and in the transshipment of the goods via a different carrier. In our
jurisprudence, re may not be considered a natural disaster or calamity since it almost
always arises from some act of man or by human means. It cannot be an act of God unless
caused by lightning or a natural disaster or casualty not attributable to human agency. In
the case at bar, it is not disputed that a small ame was detected on the acetylene cylinder
and that by reason thereof, the same exploded despite efforts to extinguish the re.
Neither is there any doubt that the acetylene cylinder, obviously fully loaded, was stored in
the accommodation area near the engine room and not in a storage area considerably far,
and in a safe distance, from the engine room. Moreover, there was no showing, and none
was alleged by the parties, that the re was caused by a natural disaster or calamity not
attributable to human agency. On the contrary, there is strong evidence indicating that the
acetylene cylinder caught re because of the fault and negligence of respondent ESLI, its
captain and its crew. As a rule, general or gross averages include all damages and
expenses which are deliberately caused in order in order to save the vessel, its cargo, or
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both at the same time, from a real and known risk. While the instant case may technically
fall within the purview of the said provision, the formalities prescribed under Articles 813
and 814 of the Code of Commerce in order to incur the expenses and cause the damage
corresponding to gross average were not complied with. Consequently, respondent ESLI's
claim for contribution from the consignees of the cargo at the time of the occurrence of
the average turns to naught. Hence, cargo consignees cannot be made liable to
respondent carrier for additional freight and salvage charges. Respondent carrier must
refund the amount paid under protest for additional freight and salvage charges.
3. REMEDIAL LAW; EVIDENCE; RULES OF ADMISSIBILITY; TESTIMONY
GENERALLY CONFINED TO PERSONAL KNOWLEDGE; HEARSAY EXCLUDED. — The
Statement of Facts and the Marine Note of Protest issued by Captain Licaycay are hearsay
evidence. He who issued the said documents was not presented in court to testify to the
truth of the facts he stated therein. Section 36, Rule 130 of the Rules of Court provides that
any evidence, whether oral or documentary, is hearsay if its probative value is not based on
the personal knowledge of the witness but on the knowledge of some other person not on
the witness stand. Consequently, hearsay evidence, whether objected to or not, has no
probative value unless the proponent can show that the evidence falls within the
exceptions to the hearsay evidence rule. It is excluded because the party against whom it
is presented is deprived of his right and opportunity to cross-examine the persons to
whom the statements or writings are attributed.

DECISION

KAPUNAN , J : p

Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe,
Japan, the following shipment for carriage to Manila and Cebu, freight pre-paid and in
good order and condition, viz: (a) two (2) boxes internal combustion engine parts,
consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (10) metric
tons (334 bags) ammonium chloride, consigned to Orca's Company under Bill of Lading
No. KCE-12; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental Match
Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo
under Bills of Lading Nos. KMA-73 and KMA-74.
While the vessel was off Okinawa, Japan, a small ame was detected on the
acetylene cylinder located in the accommodation area near the engine room on the
main deck level. As the crew was trying to extinguish the re, the acetylene cylinder
suddenly exploded sending a ash of ame throughout the accommodation area, thus
causing death and severe injuries to the crew and instantly setting re to the whole
superstructure of the vessel. The incident forced the master and the crew to abandon
the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its
voyage was declared abandoned.
Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived
near the vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire ghting operations were again conducted at the said port. After the re was
extinguished, the cargoes which were saved were loaded to another vessel for delivery
to their original ports of destination. ESLI charged the consignees several amounts
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corresponding to additional freight and salvage charges, as follows: (a) for the goods
covered by Bill of Lading No. 042283, ESLI charged the consignee the sum of
P1,927.65, representing salvage charges assessed against the goods; (b) for the
goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of
P2,980.64 for additional freight and P826.14 for salvage charges against the goods;
(c) for the goods covered by Bill of Lading No. KCE-8, ESLI charged the consignee the
sum of P3,292.26 for additional freight and P4,130.68 for salvage charges against the
goods; and (d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI
charged the consignee the sum of P8,337.06 for salvage charges against the goods.
The charges were all paid Philippine Home Assurance Corporation (PHAC) under
protest for and in behalf of the consignees.
PHAC, as subrogee of the consignees, thereafter led a complaint before the
Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under
protest on the ground that the same were actually damages directly brought about by
the fault, negligence, illegal act and/or breach of contract of ESLI.
In its answer, ESLI contended that it exercised the diligence required by law in the
handling, custody and carriage of the shipment; that the re was caused by an
unforeseen event; that the additional freight charges are due and demandable pursuant
to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No.
2616, known as the Salvage Law.
The trial court dismissed PHAC's complaint and ruled in favor of ESLI
ratiocinating thus:
The question to be resolved is whether or not the re on the vessel which
was caused by the explosion of an acetylene cylinder loaded on the same was the
fault or negligence of the defendant.

Evidence has been presented that the SS "Eastern Explorer" was a


seaworthy vessel (Deposition of Jumpei Maeda, October 23, 1980, p. 3) and
before the ship loaded the Acetylene Cylinder No. NCW 875, the same has been
tested, checked and examined and was certi ed to have complied with the
required safety measures and standards (Deposition of Senjei Hayashi, October
23, 1980, pp. 2-3). When the re was detected by the crew, re ghting operations
was immediately conducted but due to the explosion of the acetylene cylinder, the
crew were unable to contain the re and had to abandon the ship to save their
lives and were saved from drowning by passing vessels in the vicinity. The
burning of the vessel rendering it a constructive total loss and incapable of
pursuing its voyage to the Philippines was, therefore, not the fault or negligence
of defendant but a natural disaster or calamity which nobody would like to
happen. The salvage operations conducted by Fukuda Salvage Company
(Exhibits "4-A" and "6-A") was perfectly a legal operation and charges made on the
goods recovered were legitimate charges.
Act No. 2616, otherwise known as the Salvage Law, is thus applicable to
the case at bar. Section 1 of Act No. 2616 states:
"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.
Those who, not being included in the above paragraph, assist in
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saving a vessel or its cargo from shipwreck, shall be entitled to like
reward."

In relation to the above provision, the Supreme Court has ruled in Erlanger
& Galinger v. Swedish East Asiatic Co., Ltd ., 34 Phil. 178, that three elements are
necessary to a valid salvage claim, namely (a) a marine peril (b) service
voluntarily rendered when not required as an existing duty or from a special
contract and (c) success in whole or in part, or that the service rendered
contributed to such success.
The above elements are all present in the instant case. Salvage charges
may thus be assessed on the cargoes saved from the vessel. As provided for in
Section 13 of the Salvage Law, "The expenses of salvage, as well as the reward
for salvage or assistance, shall be a charge on the things salvaged or their value."
In Manila Railroad Co. v. Macondray Co ., 37 Phil. 583, it was also held that "when
a ship and its cargo are saved together, the salvage allowance should be charged
against the ship and cargo in the proportion of their respective values, the same
as in a case of general average . . ." Thus, the "compensation to be paid by the
owner of the cargo is in proportion to the value of the vessel and the value of the
cargo saved." ( Atlantic Gulf and Paci c Co. v. Uchida Kisen Kaisha , 42 Phil. 321).
(Memorandum for Defendant, Records, pp. 212-213).

With respect to the additional freight charged by defendant from the consignee of
the goods, the same are also validly demandable.
As provided by the Civil Code:
"Article 1174.Except in cases expressly speci ed by law, or when it is
otherwise declared by stipulation, or when the nature of the obligation require the
assumption of risk, no person shall be responsible for those events which could
not be foreseen, or which though foreseen, were inevitable."

"Article 1266. The debtor in obligations to do shall also be released


when the prestation becomes legally or physically impossible without the fault of
the obligor."

The burning of "EASTERN EXPLORER" while off Okinawa rendered it physically


impossible for defendant to comply with its obligation of delivering the goods to their port
of destination pursuant to the contract of carriage. Under Article 1266 of the Civil Code,
the physical impossibility of the prestation extinguished defendant's obligation.
It is but legal and equitable for the defendant therefore, to demand additional freight
from the consignees for forwarding the goods from Naha, Japan to Manila and Cebu City
on board another vessel, the "EASTERN MARS." This nds support under Article 844 of the
Code of Commerce which provides as follows:
"Article 844. 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
should deposit the same, with judicial intervention at the disposal of their
legitimate owners. . . .

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 fixed by agreement or by a judicial decision."

Furthermore, the terms and conditions of the Bill of Lading authorize the imposition
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of additional freight charges in case of forced interruption or abandonment of the voyage.
At the dorsal portion of the Bills of Lading issued to the consignees is this stipulation:
"12. All storage, transshipment, forwarding or other disposition of
cargo at or from a port of distress or other place where there has been a forced
interruption or abandonment of the voyage shall be at the expense of the owner,
shipper, consignee of the goods or the holder of this bill of lading who shall be
jointly and severally liable for all freight charges and expenses of every kind
whatsoever, whether payable in advance or not that may be incurred by the cargo
in addition to the ordinary freight, whether the service be performed by the named
carrying vessel or by carrier's other vessels or by strangers. All such expenses and
charges shall be due and payable day by day immediately when they are
incurred."

The bill of lading is a contract and the parties are bound by its terms (Govt. of the
Philippine Islands vs. Ynchausti and Co., 40 Phil. 219). The provision quoted is binding
upon the consignee.
Defendant therefore, can validly require payment of additional freight from the
consignee. Plaintiff can not thus recover the additional freight paid by the consignee to
defendant. (Memorandum for Defendant, Record, pp. 215-216). 2
On appeal to the Court of Appeals, respondent court a rmed the trial court's
ndings and conclusions, 3 hence, the present petition for review before this Court on
the following errors:
I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH
APPROVAL THE TRIAL COURT'S FINDING THAT THE BURNING OF THE SS
"EASTERN EXPLORER", RENDERING IT A CONSTRUCTIVE TOTAL LOSS, IS A
NATURAL DISASTER OR CALAMITY WHICH NOBODY WOULD LIKE TO HAPPEN,
DESPITE EXISTING JURISPRUDENCE TO THE CONTRARY.

II. THE RESPONDENT COURT ARBITRARILY RULED THAT THE


BURNING OF THE SS "EASTERN EXPLORER" WAS NOT THE FAULT AND
NEGLIGENCE OF RESPONDENT EASTERN SHIPPING LINES.
III. THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF
DISCRETION IN RULING THAT DEFENDANT HAD EXERCISED THE
EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AS
REQUIRED BY LAW.

IV. THE RESPONDENT COURT ARBITRARILY RULED THAT THE


MARINE NOTE OF PROTEST AND STATEMENT OF FACTS ISSUED BY THE
VESSEL'S MASTER ARE NOT HEARSAY DESPITE THE FACT THAT THE
VESSEL'S MASTER, CAPT. LICAYLICAY WAS NOT PRESENTED IN COURT,
WITHOUT EXPLANATION WHATSOEVER FOR HIS NON-PRESENTATION, THUS,
PETITIONER WAS DEPRIVED OF ITS RIGHT TO CROSS-EXAMINE THE AUTHOR
THEREOF.
V. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH
APPROVAL THE TRIAL COURT'S CONCLUSION THAT THE EXPENSES OR
AVERAGES INCURRED IN SAVING THE CARGO CONSTITUTE GENERAL AVERAGE.
VI. THE RESPONDENT COURT ERRONEOUSLY ADOPTED THE TRIAL
COURT'S RULING THAT PETITIONER WAS LIABLE TO RESPONDENT CARRIER
FOR ADDITIONAL FREIGHT AND SALVAGE CHARGES. 4
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It is quite evident that the foregoing assignment of errors challenges the ndings
of fact and the appreciation of evidence made by the trial court and later a rmed by
respondent court. While it is a well-settled rule that only questions of law may be raised
in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that
the same admits of the following exceptions, namely: (a) when the conclusion is a
nding grounded entirely on speculation, surmises or conjectures; (b) when the
inference made is manifestly mistaken, absurd or impossible; (c) where there is a grave
abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e)
when the ndings of fact are con icting; (f) when the Court of Appeals, in making its
ndings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (g) when the ndings of the Court of
Appeals are contrary to those of the trial court; (h) when the ndings of fact are
conclusions without citation of speci c evidence on which they are based; (i) when the
facts set forth in the petition as well as in the petitioners' main and reply briefs are nor
disputed by the respondents; and (j) when the nding of fact of the Court of Appeals is
premised on the supposed absence of evidence and is contradicted by the evidence on
record. 5 Thus, if there is a showing, as in the instant case, that the ndings complained
of are totally devoid of support in the records, or that they are so glaringly erroneous as
to constitute grave abuse of discretion, the same may be properly reviewed and
evaluated by this Court.
It is worthy to note at the outset that the goods subject of the present
controversy were neither lost nor damaged in transit by the re that razed the carrier. In
fact, the said goods were all delivered to the consignees, even if the transshipment
took longer than necessary. What is at issue therefore is not whether or not the carrier
is liable for the loss, damage, or deterioration of the goods transported by them but
who, among the carrier, consignee or insurer of the goods, is liable for the additional
charges or expenses incurred by the owner of the ship in the salvage operations and in
the transshipment of the goods via a different carrier.
In absolving respondent carrier of any liability, respondent Court of Appeals
sustained the trial court's finding that the fire that gutted the ship was a natural disaster
or calamity. Petitioner takes exception to this conclusion and we agree.
In our jurisprudence, re may not be considered a natural disaster or calamity
since it almost always arises from some act of man or by human means. It cannot be
an act of God unless caused by lightning or a natural disaster or casualty not
attributable to human agency. 6
In the case at bar, it is not disputed that a small ame was detected on the
acetylene cylinder and that by reason thereof, the same exploded despite efforts to
extinguish the re. Neither is there any doubt that the acetylene cylinder, obviously fully
loaded, was stored in the accommodation area near the engine room and not in a
storage area considerably far, and in a safe distance, from the engine room. Moreover,
there was no showing, and none was alleged by the parties, that the re was caused by
a natural disaster or calamity not attributable to human agency. On the contrary, there is
strong evidence indicating that the acetylene cylinder caught re because of the fault
and negligence of respondent ESLI, its captain and its crew.
First, the acetylene cylinder which was fully loaded should not have been stored
in the accommodation area near the engine room where the heat generated therefrom
could cause the acetylene cylinder to explode by reason of spontaneous combustion.
Respondent ESLI should have easily foreseen that the acetylene cylinder, containing
highly in ammable material, was in a real danger of exploding because it was stored in
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close proximity to the engine room.
Second, respondent ESLI should have known that by storing the acetylene
cylinder in the accommodation area supposed to be reserved for passengers, it
unnecessarily exposed its passengers to grave danger and injury. Curious passengers,
ignorant of the danger the tank might have on humans and property, could have handled
the same or could have lighted and smoked cigarettes while repairing in the
accommodation area.
Third, the fact that the acetylene cylinder was checked, tested and examined and
subsequently certi ed as having complied with the safety measures and standards by
quali ed experts 7 before it was loaded in the vessel only shows to a great extent that
negligence was present in the handling of the acetylene cylinder after it was loaded and
while it was on board the ship. Indeed, had the respondent and its agents not been
negligent in storing the acetylene cylinder near the engine room, then the same would
not have leaked and exploded during the voyage.
Verily, there is no merit in the nding of the trial court to which respondent court
erroneously agreed that the re was not fault or negligence of respondent but a natural
disaster or calamity. The records are simply wanting in this regard.
Anent petitioner's objection to the admissibility of Exhibits "4" and "5", the
Statement of Facts and the Marine Note of Protest issued by Captain Tiburcio A.
Licaylicay, we nd the same impressed with merit because said documents are hearsay
evidence. Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said
documents, was not presented in court to testify to the truth of the facts he stated
therein; instead, respondent ESLI presented Junpei Maeda, its Branch Manager in
Tokyo and Yokohama, Japan, who evidently had no personal knowledge of the facts
stated in the documents at issue. It is clear from Section 36, Rule 130 of the Rules of
Court that any evidence, whether oral or documentary, is hearsay if its probative value is
not based on the personal knowledge of the witness but on the knowledge of some
other person not on the witness stand. Consequently, hearsay evidence, whether
objected to or not, has no probative value unless the proponent can show that the
evidence falls within the exceptions to the hearsay evidence rule. 8 It is excluded
because the party against whom it is presented is deprived of his right and opportunity
to cross-examine the persons to whom the statements or writings are attributed.
On the issue of whether or not respondent court committed an error in
concluding that the expenses incurred in saving the cargo are considered general
average, we rule in the a rmative. As a rule, general or gross averages include all
damages and expenses which are deliberately caused in order to save the vessel, its
cargo, or both at the same time, from a real and known risk. 9 While the instant case
may technically fall within the purview of the said provision, the formalities prescribed
under Article 813 1 0 and 8 1 4 1 1 of the Code of Commerce in order to incur the
expenses and cause the damage corresponding to gross average were not complied
with. Consequently, respondent ESLI's claim for contribution from the consignees of
the cargo at the time of the occurrence of the average turns to naught.
Prescinding from the foregoing premises, it indubitably follows that the cargo
consignees cannot be made liable to respondent carrier for additional freight and
salvage charges. Consequently, respondent carrier must refund to herein petitioner the
amount it paid under protest for additional freight and salvage charges in behalf of the
consignee.
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE.
Respondent Eastern Shipping Lines, Inc. is ORDERED to return to petitioner Philippine
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Home Assurance Corporation the amount it paid under protest in behalf of the
consignees herein.
SO ORDERED.
Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ ., concur.

Footnotes

1.Section 12. All storage, transshipment, forwarding or other disposition of cargo at or


from port of distress or other place where there has been a forced interruption or
abandonment of the voyage shall be at the expense of the owner, shipper, consignee
of the goods or the holder of this bill of lading who shall be jointly and severally liable
for all freight charges and expenses of every kind whatsoever, whether payable in
advance or not that may be incurred by the cargo in addition to the ordinary freight,
whether the service be performed by the named carrying vessel or by carrier's other
vessels or by strangers. All such expenses and charges shall be due and payable day
by day immediately when they are incurred.

2.Original Records, pp. 240-243.


3.Rollo, pp. 29-39.
4.Id., at 12-13.
5.Geronimo v. Court of Appeals, 224 SCRA 494, 498-499 [1993]; BPI Credit Corporation v.
Court of Appeals, 204 SCRA 601, 608-609 [1991]; Medina v. Asistio, Jr., 191 SCRA 218,
223-224 [1990].
6.Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 463 [1987]; Africa v.
Caltex, 16 SCRA 448 [1966]; See also 4 Agbayani, Commentaries and Jurisprudence on
the Commercial Laws of the Philippines, 1993 Edition, p. 44.

7.Original Records, p. 171.


8.Baguio v. Court of Appeals, 226 SCRA 366, 370 [1993].
9.Article 811, Code of Commerce.
10.ARTICLE 813. In order to incur the expenses and cause the damages corresponding to
gross average, there must be a resolution of the captain, adopted after deliberation
with the sailing mate and other o cers of the vessel, and after hearing the persons
interested in the cargo who may be present.

If the latter shall object, and the captain and officers or 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 deliberations was wanting.
11. ARTICLE 814. The resolution adopted to cause the damages which constitute general
average must be necessarily be entered in the log book, stating the motives and
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reasons for the dissent, should there be any, and the irresistible and urgent causes
which impelled the captain if he acted of his own accord.
In the rst case the minutes shall be signed by all the persons present who could do so
before taking action, if possible; and if not, at the rst opportunity. In the second case,
it shall be signed by the captain and by the officers of the vessel.

In the minutes, and after the resolution, shall be stated in detail all the goods 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 judicial authority
of the rst port he may make, within twenty-four hours after his arrival, and to ratify it
immediately under oath.

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