Cebu Salvage Corporation vs Philippine Home Assurance Corp. | Corona, J.

January 25, 2007| NATURE Petition for review on certiorari to review CAs decision FACTS - Petitioner Cebu Salvage Corp. (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter where petitioner was to load 800-1,100 metric tons of silica quartz on board M/T Espiritu Santo for transport and discharge from Negros Occidental to Misamis Oriental, to consignee Ferrochrome Phils., Inc. -However, the shipment never reached its destination because the vessel sank resulting in the total loss of the cargo. -MCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corp. -Respondent paid the claim and was subrogated to the rights of MCCII, after which it filed a case against petitioner for reimbursement of the amount it paid MCCII. -TC and CA: ordered petitioner to pay respondent ISSUES & ARGUMENTS WoN a carrier may be held liable for the loss of cargo resulting from the sinking of a ship it doesnt own? YES Petitioner argues the agreement was just a contract of hire where MCCII hired the vessel from its owner, ALS Timber. Since it wasnt the owner of the vessel, it didnt have control and supervision over it and its crew. Thus, it shouldnt be held liable. RATIONALE 1. Petitioner and MCCII entered into a voyage charter, a.k.a contract of affreightment where the ship was leased for a single voyage for the conveyance of the goods, in consideration of the payment of freight. Under a voyage charter, the shipowner retains possession, command and navigation of the ship, the charterer/freighter just has the 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.

2. The agreement parties signed was a contract of carriage under which the petitioner was a common carrier. From the nature of their business and 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 case of loss of the goods, the common carriers are responsible, unless they can prove the causes under Art. 1734 CC or that they observed extraordinary diligence. 3. In this case, Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. The fact that it did not own the vessel it decided to use to consummate the contract of carriage didnt negate its character and duties as a common carrier. The bill of lading issued by ALS was just a receipt to evidence the fact that the goods have been received for transportation. It is true that 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. The voyage charter stipulated that cargo insurance was for the charterers account, accdg to petitioner. This just means that the charterer would have the goods insured. It couldnt exculpate the carrier from liability for the breach of its contract of carriage. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss. To permit a common carrier to escape its responsibility for the goods it agreed to transport would derogate from the carriers duty of extraordinary diligence.

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