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Transpo - #02 - Cebu Salvage Corp. v Phil. Assurance Corp.

[G.R. NO. 150403 : January 25, 2007] the payment of freight.14 Under a voyage charter, the shipowner retains the possession,
command and navigation of the ship, the charterer or freighter merely having use of the space in
CEBU SALVAGE CORPORATION, Petitioner, v. PHILIPPINE HOME ASSURANCE the vessel in return for his payment of freight.15 An owner who retains possession of the ship
CORPORATION,Respondent. remains liable as carrier and must answer for loss or non-delivery of the goods received for
transportation.16
DECISION
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it
CORONA, J.: entered into with MCCII was a contract of carriage.17 It insists that the agreement was merely a
contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises
(ALS).18 Not being the owner of the M/T Espiritu Santo, petitioner did not have control and
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not supervision over the vessel, its master and crew.19 Thus, it could not be held liable for the loss of
own? the shipment caused by the sinking of a ship it did not own.

This is the issue presented for the Court's resolution in this Petition for Review We disagree.
on Certiorari 1 assailing the March 16, 2001 decision2 and September 17, 2001 resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 40473 which in turn affirmed the December 27, 1989
Based on the agreement signed by the parties and the testimony of petitioner's operations
decision4 of the Regional Trial Court (RTC), Branch 145, Makati, Metro Manila.5
manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively
negotiated and solicited MCCII's account, offered its services to ship the silica quartz and
The pertinent facts follow. proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as
previously agreed upon in the voyage charter) since these vessels had broken down.20
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter 6 wherein There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it
petitioner was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu was engaged in the business of carrying and transporting goods by water, for compensation,
Santo7 at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis and offered its services to the public.21
Oriental to consignee Ferrochrome Phils., Inc.8
From the nature of their business and for reasons of public policy, common carriers are bound to
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric observe extraordinary diligence over the goods they transport according to the circumstances of
tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next each case.22 In the event of loss of the goods, common carriers are responsible, unless they can
day.9 The shipment never reached its destination, however, because the M/T Espiritu Santo prove that this was brought about by the causes specified in Article 1734 of the Civil Code. 23 In
sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in all other cases, common carriers are presumed to be at fault or to have acted negligently, unless
the total loss of the cargo.10 they prove that they observed extraordinary diligence. 24

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control
Assurance Corporation.11 Respondent paid the claim in the amount of P211,500 and was over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a
subrogated to the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against petitioner for common carrier. The fact that it did not own the vessel it decided to use to consummate the
reimbursement of the amount it paid MCCII. contract of carriage did not negate its character and duties as a common carrier. The MCCII
(respondent's subrogor) could not be reasonably expected to inquire about the ownership of the
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay vessels which petitioner carrier offered to utilize. As a practical matter, it is very difficult and often
respondent P211,500 plus legal interest, attorney's fees equivalent to 25% of the award and impossible for the general public to enforce its rights of action under a contract of carriage if it
costs of suit. should be required to know who the actual owner of the vessel is.25 In fact, in this case, the
voyage charter itself denominated petitioner as the "owner/operator" of the vessel. 26
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment ALS as evidenced by the bill of lading ALS issued.27
wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of
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Transpo - #02 - Cebu Salvage Corp. v Phil. Assurance Corp.
Again, we disagree. SO ORDERED.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had
been received for transportation. It was not signed by MCCII, as in fact it was simply signed by CASE DIGEST
the supercargo of ALS.28 This is consistent with the fact that MCCII did not contract directly with
ALS. While it is true that a bill of lading may serve as the contract of carriage between the FACTS:
parties,29 it cannot prevail over the express provision of the voyage charter that MCCII and
petitioner executed: NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc.
[MCCII] (as charterer) entered into a voyage charter wherein CSC was to load 800 to 1,100
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for
vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc
lading operates as the receipt for the goods, and as document of title passing the property of the · DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T
goods, but not as varying the contract between the charterer and the shipowner." The Bill of Espiritu Santo which left for Misamis the next day à M/T Espiritu Santo sank off the beach of
Lading becomes, therefore, only a receipt and not the contract of carriage in a charter of the Opol, Misamis Oriental, resulting in the total loss of the cargo.
entire vessel, for the contract is the Charter Party, and is the law between the parties who are · MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance
bound by its terms and condition provided that these are not contrary to law, morals, good Corporation à paid the claim of P211,500 and was subrogated to the rights of MCCII
customs, public order and public policy.30 · PHAC filed a case against CSC for reimbursement of the amount it paid MCCII à WON IN
THE RTC! CSC ordered to reimburse
· CA affirmed à CSC appealed
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage
charter stipulated that cargo insurance was for the charterer's account.31 This deserves scant
ISSUE:
consideration. This simply meant that the charterer would take care of having the goods insured.
It could not exculpate the carrier from liability for the breach of its contract of carriage. The law,
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
in fact, prohibits it and condemns it as unjust and contrary to public policy.32
RULING:
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on
board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein
it exercised extraordinary diligence to prevent such loss or that it was due to some casualty the ship was leased for a single voyage for the conveyance of goods, in consideration of the
or force majeure. The voyage charter here being a contract of affreightment, the carrier was payment of freight. Under a voyage charter, the shipowner retains the possession, command
answerable for the loss of the goods received for transportation. 33 and navigation of the ship, the charterer or freighter merely having use of the space in the vessel
in return for his payment of freight. An owner who retains possession of the ship remains liable
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a as carrier and must answer for loss or non-delivery of the goods received for transportation.
carrier that enters into a contract of carriage is not liable to the charterer or shipper if it does not
own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that · CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the
MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS
escape its responsibility for the goods it agreed to transport (by the expedient of alleging non- Timber Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have
ownership of the vessel it employed) would radically derogate from the carrier's duty of control and supervision over the vessel, its master and crew thus, it could not be held liable for
extraordinary diligence. It would also open the door to collusion between the carrier and the the loss of the shipment
supposed owner and to the possible shifting of liability from the carrier to one without any · SC DISAGREES! à Based on the agreement signed by the parties and the testimony of CSC’s
financial capability to answer for the resulting damages.34 operations manager, it is clear that it was a contract of carriage.
· There is no dispute that CSC was a common carrier. At the time of the loss of the cargo, it was
WHEREFORE, the petition is hereby DENIED. engaged in the business of carrying and transporting goods by water, for compensation, and
offered its services to the public.
Costs against petitioner. · From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport according to the circumstances
of each case. In the event of loss of the goods, common carriers are responsible, unless they
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Transpo - #02 - Cebu Salvage Corp. v Phil. Assurance Corp.
can prove that this was brought about by the causes specified in Article 1734. In all other cases,
common carriers are presumed to be at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence.
· IN THIS CASE à CSC was the one which contracted with MCCII for the transport of the cargo.
It had control over what vessel it would use. All throughout its dealings with MCCII, it
represented itself as a common carrier. The fact that it did not own the vessel it decided to
use to consummate the contract of carriage did not negate its character and duties as a
common carrier.
· Court did said it is not reasonable to expect MCCII to ask about ownership of vesselà As a
practical matter, it is very difficult and often impossible for the general public to enforce its rights
of action under a contract of carriage if it should be required to know who the actual owner of the
vessel is. In fact, in this case, the voyage charter itself denominated petitioner as the
"owner/operator" of the vessel

· CSC says if there was a contract of carriage à it was between MCCII and ALS as evidenced
by the bill of lading ALS issuedà SC DISAGREES AGAIN
o A bill of lading may serve as the contract of carriage between the parties BUT it cannot prevail
over the express provision of the voyage charter à[I]n cases where a Bill of Lading has been
issued by a carrier covering goods shipped aboard a vessel under a charter party, and the
charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for the
goods, and as document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner."

· Coastwise asserts that MCCII should be held liable for its own loss since the voyage charter
stipulated that cargo insurance was for the charterer’s account. à This deserves scant
consideration. à This simply meant that the charterer would take care of having the goods
insured. It could not exculpate the carrier from liability for the breach of its contract of carriage.
The law, in fact, prohibits it and condemns it as unjust and contrary to public policy.