[Digest] Cebu Salvage Corporation vs Philippine Home Assurance (2007)

CEBU SALVAGE CORPORATION,   vs. PHILIPPINE HOME ASSURANCE CORPORATION (2007)

CORONA, J.:

·         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 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc

·         DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left for Misamis the next day à M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.

·         MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance Corporation à paid the claim of P211,500 and was subrogated to the rights of MCCII

·         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

ISSUE: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?

·         CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of freight. 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 the vessel in return for his payment of freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation.

·         CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew thus, it could not be held liable for the loss of the shipment

·         SC DISAGREES! à Based on the agreement signed by the parties and the testimony of CSC’s 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 engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to the public.

·         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 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.