TRANSPORTATION | B2015 CASE DIGESTS

Caltex vs. Sulpicio Lines

Sept. 30, 1999 Pardo, J. Francis

SUMMARY: Sulpicios ship collided with Vectors ship. Vectors ship was chartered by Caltex at the time of collision. The heirs of Sulpicios passengers sued Sulpicio. Sulpicio filed a 3rd party complaint against Vector and Caltex. SC held that Caltex is not liable. DOCTRINE: A charter party is 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 is one by which the owner of a ship or other vessel lets the whole or 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. A contract of affreightment may be either time charter, wherein the leased 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 the vessel only, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. Under a demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. FACTS: The motor tanker, MT Vector, owned and operated by Vector Shipping Corporation, left Bataan enroute to Masbate loaded with 8,800 barrels of petroleum products shipped by Caltex. During that particular voyage, the MT

Vector carried oil products owned by Caltex by virtue of a charter contract between them. The passenger ship MV Doa Paz, owned by Sulpicio Lines, left Tacloban headed for Manila with crew and passengers totalling 1,493 as indicated in the Coast Guard Clearance. The two vessels collided in the open sea between Marinduque and Oriental Mindoro. The MV Doa Paz carried an estimated 4,000 passengers. Many were not in the passenger manifest. Only 24 survived. The board of marine inquiry found that the MT Vector and Vector Shipping Corporation were at fault for the collision. The wife and mother of Sebastian Caezal, one of the passengers of MV Doa Paz, filed with the RTC a complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio. Sulpicio filed a third party complaint against Vector and Caltex alleging that Caltex chartered MT Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo ablaze. The RTC dismissed the third party complaint against Caltex. The CA ordered Sulpicio to pay the heirs. Vector and Caltex are equally liable to reimburse Sulpicio. ISSUES: Whether or not Caltex is liable as charterer of the vessel. RATIO: No, a shippers liability depends on the kind of charter. RULING: The respective rights and duties of a shipper and the carrier does not depend on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other.

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Caltex and Vector entered into a contract of affreightment, also known as a voyage charter. See Doctrine Does a charter party agreement turn the common carrier into a private one? The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of Appeals the SC held that 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. In Coastwise Lighterage Corporation vs. Court of Appeals, the SC held that Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment. Under the Carriage of Goods by Sea Act, Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an unseaworthy vessel such as the MT Vector when Caltex: (1)Did not take steps to have M/T Vectors certificate of inspection and coastwise license renewed; (2)Proceeded to ship its cargo despite defects found by Mr. Tan of Bataan Refinery Corporation; (3) Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard; (4) The master of M/T Vector did not posses the required Chief Mate license to command and navigate the vessel; (5)The second mate had the license of a Minor Patron, authorized to navigate only in bays and rivers; (6)The Chief Engineer had no license to operate the engine of the vessel; (7) The vessel did not have a Third Mate, a radio operator and a lookout; and (8)The vessel had a

defective main engine. Sulpicio relied on Articles 20 and 2176 of the Civil Code on its claim against Caltex SC: The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in public service. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. Also, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carriers employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Caltex and Vector had been doing business for about two years before the incident occurred. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. As a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. DISPOSITIVE: The petition is GRANTED. Caltex is absolved from liability.