FACTS:

Planters Products, Inc. (PPI), purchased from Mitsubishi 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk aboard the cargo vessel M/V “Sun Plum” owned by private respondent KKKK from Alaska, U.S.A., to La Union, Philippines.

Prior to its voyage, a time charter-party on the vessel M/V “Sun Plum” was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner.
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.

Upon arrival of the vessel at her port of call, the steel pontoon hatches were opened with the use of the vessel’s boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party. The hatches remained open throughout the duration of the discharge.
The Urea was transported to the consignee’s warehouse located some fifty meters from the wharf.
It took eleven days for PPI to unload the cargo. A private marine and cargo surveyor, CSCI, was hired by PPI to determine the “outturn” of the cargo shipped. The survey report submitted by CSCI to the consignee (PPI) revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. In the Certificate of Shortage/Damaged Cargo, PPI declared the shortage of 94.839 M/T and that about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt.

PPI sent a claim letter to SSA, the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt.
Respondent SSA explained this “request” was denied by them because they “had nothing to do with the discharge of the shipment.” Hence, PPI filed an action for damages with the CFI of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged.
On appeal, the CA reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. The appellate court ruled that the cargo vessel M/V “Sun Plum” was a private carrier and not a common carrier by reason of the time charterer-party.

ISSUE:

Whether a common carrier becomes a private carrier by reason of a charter-party.

RULING:

A “charter-party” is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight;
Charter parties are of two types:
(a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants.

Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.

On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter.

It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence.

The master of the carrying vessel, Captain Bo testified that before the fertilizer was loaded, the four hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with three layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship’s boom.

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel.

Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo.

On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

In LEA MER INDUSTRIES, INC., v. MALAYAN INSURANCE G.R. No. 161745 September 30, 2005

A demise or bareboat charter indicates a business undertaking that is private in character.  Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.