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CALTEX v. SULPICIO LINES

FACTS:

The case involves a collision between the motor tanker MT Vector and the passenger ship MV Doña Paz, resulting in one of the country's worst maritime disasters. MT Vector was owned and operated by Vector Shipping Corporation and was chartered by Caltex (Philippines), Inc. to transport petroleum products. MV Doña Paz, on the other hand, was owned and operated by Sulpicio Lines, Inc. and was carrying passengers and cargo. The collision occurred in the open sea between Marinduque and Oriental Mindoro, resulting in the death of almost all passengers and crew members of both ships except for two survivors from MT Vector. After an investigation by the board of marine inquiry, MT Vector and its operator and owner were found to be at fault for the collision. Subsequently, the heirs of one of the deceased passengers filed a complaint for damages against Sulpicio Lines, Inc., who then filed a third-party complaint against Vector Shipping Corporation and Caltex (Philippines), Inc. alleging that Caltex chartered an unseaworthy vessel that caused the collision. The trial court dismissed the third-party complaint against Caltex, but the Court of Appeals modified the decision and held Caltex equally liable for damages.

This case involves a contract of affreightment or a voyage charter entered into between Petitioner and Vector. A contract of affreightment is a contract by which the owner of a ship or vessel lets the whole or part of it to a merchant or other person for the conveyance of goods on a particular voyage, in consideration of the payment of freight.

Under the charter party agreement, the ship owner is responsible for supplying the ship's store, paying for the wages of the master and crew, and defraying the expenses for the maintenance of the ship. The charterer, on the other hand, is not liable to third persons with respect to the ship.

The issue in this case is whether the charter party agreement converted MT Vector, the vessel involved, into a private carrier or if it maintained its character as a common carrier. According to previous jurisprudence, a charter party may transform a common carrier into a private one, but in the case of a contract of affreightment, it does not have that effect.

MT Vector is considered a common carrier under Article 1732 of the Civil Code, which defines common carriers as persons, corporations, and firms whose regular business is to carry passengers or property for all persons who may choose to employ and remunerate them.

ISSUES:

  1. Whether MT Vector is considered a common carrier.

  2. Whether Caltex is liable for damages under the Civil Code.

  3. Whether the charterer of a vessel, in this case Caltex, has the obligation to ensure that the vessel complies with all legal requirements.

  4. Whether Caltex should be held liable for negligence in the performance of its obligation as a shipper.

  5. Whether petitioner should be held liable for damages in the case.

  6. Whether the liability of Caltex should be affirmed.

  7. Whether Vector Shipping Corporation and Francisco Soriano should be held liable to reimburse/indemnify Sulpicio Lines, Inc. for damages.

RULING:

  1. MT Vector is considered a common carrier. The Supreme Court ruled that a charter party may transform a common carrier into a private one, but this is not true in a contract of affreightment. Based on Article 1732 of the Civil Code, a common carrier is defined as a person or corporation engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the public. The Court held that MT Vector fits this definition.

  2. Caltex is not liable for damages under the Civil Code. The Court relied on Articles 20 and 2176 of the Civil Code, which state that a person who causes damage to another, whether willfully or negligently, shall indemnify the latter. However, the Court found that there was no pre-existing contractual relation between Caltex and Sulpicio, so the quasi-delict provisions of the Civil Code do not apply. Thus, Caltex is not liable for damages.

  3. The duty to ensure that a vessel complies with all legal requirements before transporting cargo rests upon the common carrier engaged in "public service" and not the charterer. Therefore, the liability of Caltex is without basis.

  4. Caltex, as a shipper, is only required to exercise ordinary diligence like any other shipper in shipping its cargoes. The past services rendered between Caltex and Vector Shipping Corporation showed no reason for Caltex to observe a higher degree of diligence. Therefore, Caltex should not be held liable for negligence.

  5. The Supreme Court grants the petition and sets aside the Court of Appeals' decision insofar as it held Caltex liable under the third-party complaint to reimburse/indemnify Sulpicio Lines, Inc. The Court affirms the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay damages to the heirs of Sebastian E. Cañezal and Corazon Cañezal. The Court further holds Vector Shipping Corporation and Francisco Soriano liable to reimburse/indemnify Sulpicio Lines, Inc. for any damages, attorneys' fees, and costs it is adjudged to pay the plaintiffs.

PRINCIPLES:

  • A charter party may transform a common carrier into a private one, but this is not true in a contract of affreightment.

  • A common carrier is defined as a person or corporation engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the public. This definition does not make any distinction between the principal business activity of the carrier or the number of customers served.

  • A common carrier is obligated to exercise due diligence to make the ship seaworthy and properly equipped. The failure to do so is a breach of duty.

  • Common carriers have a special public duty to ensure the safety and vigilance over goods and passengers. They are therefore under no obligation to conduct an inspection of the ship and its crew; rather, the carrier is presumed to warrant the seaworthiness of the vessel.

  • Liability for damages under the Civil Code requires a pre-existing contractual relation between the parties. Without such relation, the quasi-delict provisions of the Civil Code do not apply.

  • Negligence consists of the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, time, and place. When negligence shows bad faith, Article 1171 and 2201 paragraph 2 of the Civil Code shall apply.

  • The duty of diligence required in the performance of an obligation is that which is expected of a good father of a family.

  • Negligence is conduct that naturally or reasonably creates undue risk or harm to others, and it may be the failure to observe the degree of care, precaution, and vigilance demanded by the circumstances.

  • Shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel's seaworthiness, licenses, and compliance with maritime laws because of the implied warranty of seaworthiness.

  • Passengers and shippers alike customarily presume that common carriers possess all the legal requisites in their operation, considering the nature of the transportation business.

  • The determination of liability for damages depends on the presence of a legal basis. (Implied in the ruling)

  • Parties who do not appeal from a decision are bound by its ruling. (Implied in the ruling)