Cebu Salvage Corporation v. Philippine Home Assurance Corporation

On November 12, 1984, Cebu Salvage Corporation, as carrier, and Maria Cristina Chemicals Industries, Inc. (MCCII), as charterer, entered into a voyage charter under which Cebu Salvage would load 800 to 1,100 metric tons of silica quartz at Ayungon, Negros Occidental for delivery to Ferrochrome Phils., Inc. at Tagoloan, Misamis Oriental. Cebu Salvage had solicited the account and, because the vessels first named had broken down, proposed to use the M/T Espiritu Santo, owned by ALS Timber Enterprises. The charter denominated Cebu Salvage as 'owner/operator' of the vessel and stated that cargo insurance was for the charterer's account. On December 23, 1984, 1,100 metric tons were loaded; the vessel sank the next afternoon off Opol, Misamis Oriental, and the cargo was totally lost. MCCII's insurer, Philippine Home Assurance Corporation, paid P211,500, was subrogated, and sued Cebu Salvage. The RTC of Makati ordered Cebu Salvage to pay P211,500 with legal interest, attorney's fees and costs, and the Court of Appeals affirmed. Cebu Salvage argued that the agreement was a mere hire of ALS's vessel, over which it had no control, and that any contract of carriage was between MCCII and ALS, which issued the bill of lading.

1. 1Whether Cebu Salvage may be held liable as carrier for the loss of cargo resulting from the sinking of a vessel it did not own.
2. 2Whether the bill of lading issued by the vessel owner, or the charter's cargo-insurance clause, relieves Cebu Salvage of liability.

Petition denied. The agreement was a voyage charter, a contract of affreightment in which the ship is leased for a single voyage and the shipowner retains possession, command and navigation; an owner who retains possession remains liable as carrier. Cebu Salvage signed a contract of carriage with MCCII: it negotiated and solicited the account, offered its services, and proposed the vessel. It was undisputedly a common carrier, bound by Articles 1733 to 1735 of the Civil Code to observe extraordinary diligence and presumed at fault for loss unless it proved extraordinary diligence or a cause under Article 1734. It controlled the choice of vessel and held itself out as a common carrier; the fact that it did not own the vessel did not negate its character and duties as such. The shipper could not be expected to inquire into vessel ownership, and the charter itself named Cebu Salvage 'owner/operator'. The bill of lading issued by ALS was merely a receipt signed by ALS's supercargo; where a charter party exists, the bill of lading does not vary it, and the charter party is the law between the parties. The clause placing cargo insurance on the charterer's account only meant the charterer would insure the goods; a stipulation exempting the carrier is prohibited as unjust and contrary to public policy (Article 1745). With the contract, loading and loss proven, and no showing of extraordinary diligence or force majeure, Cebu Salvage was liable. Allowing a carrier to escape by alleging non-ownership would derogate from its duty of extraordinary diligence and invite collusion. The petition was denied with costs.