Is the charterer of a sea-going vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship?
This was the issue which the Supreme Court had to resolve when the High Tribunal was asked to decide who was ultimately liable for the damages claimed by the heirs of some of the passengers who perished in the tragic collision between MV Vector, a tramping motor tanker owned and operated by Vector Shipping Corp., and MV Doña Paz, which was owned and operated by Sulpicio Lines.
On Dec. 19, 1987, MT Vector left Limay, Bataan for Masbate, carrying barrels of petroleum shipped by Caltex Philippines by virtue of a charter contract between Vector Shipping as the shipowner and Caltex as the charterer.
Meanwhile, on Dec. 20, 1987, passenger ship MV Doña Paz left the Port of Tacloban headed for Manila, carrying with it 59 crew members and 1,493 passengers as indicated in the Coast Guard clearance.
At about 10:30 pm of Dec. 20, the two vessels collided. All the crew members of MV Doña Paz died while two from MT Vector survived. Of the 4,000 passengers which Doña Paz actually carried, most of whom were not in the passenger manifest, only 24 survived.
The heirs of two passengers who perished sued Sulpicio Lines, which in turn filed a third-party complaint against Vector Shipping and Caltex.
Here, the Supreme Court held that Caltex as the charterer was not liable for damages under Philippine maritime laws.
In this particular case, what Caltex and Vector Shipping entered into is what is known as a contract of affreightment which is a kind of charter party.
A contract of affreightment is one by which the owner of a vessel leases the whole of part of the vessel to a merchant or other person for the conveyance of goods in consideration of the payment of freight. It can either be a time charter, wherein the vessel is leased for a fixed period of time, or a voyage charter, wherein the ship is leased for a single voyage.
But whether it be a time charter or a voyage charter, the ship owner supplies the ship’s store, pays for the wages of the master and the crew, and pays for the expenses for the maintenance of the ship.
In a contract of affreightment, the shipowner remains the owner in possession and control of the ship and the navigation. The charterer is free from liability to third persons as a consequence of that particular voyage of the vessel covered by the charter party or contract.
In a voyage charter, the master and crew remain in the employ of the owner of the vessel while in a bareboat charter, the master and crew are employees of the charterer.
The High Court also explained that in a voyage charter such as the one entered into between Caltex and Vector Shipping, the shipowner remains as a common carrier which impliedly warrants the seaworthiness of the vessel as a consequence of which, a passenger or a shipper of goods has no obligation to conduct an inspection of the ship and its crew.
It pointed out that a charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered is seaworthy or complied with all legal requirements since the law requires common carrier for simply being engaged in public service to observe extraordinary diligence in the carriage of both passengers and goods.
Because of this implied warranty of seaworthiness, the court emphasized that shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel’s seaworthiness, genuineness of its licenses, and compliance with all maritime laws.
Such a practice, it emphasized, would be an absurdity in a business where time is always of the essence.
As a mere voyage charterer, Caltex, the SC noted, had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness, allowing it to undertake the voyage in the first place.
In this particular case, the court concluded the Caltex is not liable to reimburse Sulpicio Lines for the damages which the latter is adjudged to pay the heirs.
As a common carrier, the shipowner is presumed negligent unless it can prove that it exercised extraordinary diligence in the transport of passengers and goods, or that the loss or damage was due to fortuitous events or other exempting circumstances as enumerated in the Civil Code.
Just recently, oil tanker MT Princess Empress, owned by RDC Reield Marine Services sank off Oriental Mindoro while carrying 800,000 liters of industrial fuel oil under a voyage charter contract with the shipper or charterer. The resulting oil spill has since then reached the shores of several nearby fishing villages and is now threatening coral reefs, mangroves, and marine life.
Since it remains as a common carrier by virtue of the charter party, RDC is presumed to be negligent and liable for the damages resulting from the sinking of the ship unless it can prove that it exercised extraordinary diligence which includes maintaining the seaworthiness of the vessel or that the sinking was due to fortuitous events or exempting circumstances such as unusually violent actions of the sea or other natural disasters.
The charterer or owner of the industrial fuel oil, as the Supreme Court has repeatedly explained, has no liability under a voyage charter.
Meanwhile, if RDC as a shipowner and common carrier was just carrying the industrial oil by virtue of a bill of lading or other shipping documents on behalf of the shipper to be delivered to the consignee, then all the more the owner of the goods cannot be held liable for any damage which the vessel may cause as a result of the voyage, unless of course an act of the owner of the goods was the proximate and only cause of the damage. And more so if by virtue of a special provision in the shipping contract, ownership of the goods is transferred to RDC, in which case RDC is again solely liable.
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