Planters Products, Inc. vs. Court of Appeals

A common carrier does not cease to be a public carrier and become a private carrier merely by entering into a time or voyage charter-party; the presumption of negligence under Article 1735 of the Civil Code applies unless the charter is a bareboat or demise charter where both vessel and crew are transferred to the charterer. The carrier may rebut this presumption by proving extraordinary diligence or that the loss falls under the excepted causes in Article 1734.

Planters Products, Inc. (PPI), purchased 9,329.7069 metric tons of urea fertilizer from Mitsubishi International Corporation, which shipped the cargo aboard the M/V "Sun Plum," owned by Kyosei Kisen Kabushiki Kaisha (KKKK). A time charter-party was executed between Mitsubishi (as charterer) and KKKK (as shipowner). Upon arrival at Poro Point, San Fernando, La Union, PPI found a shortage of approximately 106.726 metric tons and contamination of about 18-23 metric tons with dirt, sand, and rust. PPI filed a damages claim against the carrier, arguing negligence.

• Nature of the Action: PPI sought damages from the carrier (KKKK and its agent, Soriamont Steamship Agencies) for shortage and contamination of a bulk urea fertilizer shipment.
• The Charter-Party: Prior to the voyage, a time charter-party was entered into between Mitsubishi (shipper/charterer) and KKKK (shipowner) under the "GENCON" form. An F.I.O.S. (Free In and Out Stevedoring) clause provided that loading, stowage, trimming, and discharge were the charterer's responsibility.
• Loading and Voyage: The vessel's holds were inspected and certified clean. The fertilizer was loaded in bulk, and the hatches were sealed with steel lids, tarpaulin, and steel bonds. The hatches remained sealed during the voyage.
• Discharge and Discovery of Loss: Upon arrival, PPI's personnel and a surveyor (CSCI) were present during discharge. PPI's stevedores unloaded the cargo using the ship's gear into dump trucks, which were then covered with tarpaulin and transported to a nearby warehouse. The discharge took 11 days in variable, sometimes rainy and windy, weather. CSCI's survey later noted a shortage of 106.726 M/T and contamination of approximately 18 M/T.
• Carrier's Defense: The carrier argued it became a private carrier due to the charter-party, thus negating the presumption of negligence. It also presented evidence of its seaworthiness and proper care, attributing the loss to the inherent nature of the bulk cargo, the F.I.O.S. clause, and the conditions during discharge.

• Applicability of Presumption of Negligence: PPI argued that the carrier remained a common carrier despite the charter-party, and thus the presumption of negligence under the Civil Code should apply. It contended the Court of Appeals erred in shifting the burden of proof to PPI.
• Control and Supervision: PPI maintained that since possession and control of the vessel remained with the shipowner, the shipowner should be liable for the negligence of the captain and crew.
• Distinguishing Precedent: PPI argued that the Home Insurance Co. v. American Steamship Agencies case cited by the Court of Appeals was inapplicable, as it concerned a different issue (validity of a liability-limitation clause).

• Private Carrier Status: Respondent carrier contended that the time charter-party transformed the vessel into a private carrier for that voyage, thereby removing the statutory presumption of negligence.
• Exercise of Due Diligence: The carrier argued it presented sufficient evidence of extraordinary diligence: the holds were properly cleaned and sealed, the vessel was seaworthy, and the crew supervised the discharge.
• Causes of Loss: Respondent attributed the shortage and contamination to the inherent nature of urea (highly soluble, prone to spillage in bulk), the F.I.O.S. clause (placing discharge risks on the charterer), and the weather conditions during unloading.

• Common Carrier Status: Whether a common carrier becomes a private carrier by reason of a time charter-party, thereby negating the presumption of negligence under the Civil Code.
• Burden of Proof and Negligence: Assuming the presumption applies, whether the carrier successfully rebutted the presumption of negligence and proved that the loss was due to an excepted cause.

• Common Carrier Status: The charter-party did not convert the common carrier into a private one. A common carrier remains as such notwithstanding a time or voyage charter, as the shipowner retains possession, command, and navigation of the vessel. It is only in a bareboat or demise charter, where both vessel and crew are transferred to the charterer, that the carrier becomes private. The presumption of negligence under Article 1735 therefore applied.
• Rebuttal of Presumption: The carrier successfully overcame the presumption of negligence through clear and convincing evidence. The evidence showed the holds were properly cleaned, sealed, and inspected; the vessel was seaworthy; and the crew exercised supervision. The loss was due to the inherent nature of the goods (bulk, soluble fertilizer), the inadequacy of packaging, and the risks during discharge conducted by the charterer's stevedores under the F.I.O.S. clause. These circumstances fell under the excepted causes in Article 1734 of the Civil Code (defect in the goods/charterer's fault) and Articles 361-362 of the Code of Commerce.

• Common Carrier vs. Private Carrier by Charter — A common carrier does not lose its public character by entering into a time or voyage charter-party. The strict liability and presumption of negligence under Articles 1733 and 1735 of the Civil Code continue to apply. The carrier becomes private only under a bareboat or demise charter, where the charterer gains full control and possession of the vessel and crew.
• Presumption of Negligence and Burden of Proof — In actions against common carriers, the shipper must first prove delivery of the goods to the carrier and their loss, damage, or deterioration. The burden then shifts to the carrier to prove extraordinary diligence or that the loss was due to an excepted cause (e.g., fortuitous event, inherent defect of the goods, fault of the shipper/charterer).

• "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."
• "The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading."

• Home Insurance Co. v. American Steamship Agencies, Inc., No. L-25599, April 4, 1968, 23 SCRA 24 — Cited by the Court of Appeals but distinguished by the Supreme Court. The issue in that case was the validity of a stipulation limiting liability, not the effect of a charter-party on the carrier's status.
• De Guzman v. Court of Appeals, No. L-47822, December 22, 1988, 168 SCRA 612 — Cited for the definition and distinction between common and private carriers.
• Ynchausti Steamship Co. v. Dexter, No. 15652, 41 Phil. 289 (1920) and Mirasol v. Robert Dollar Co., No. 29721, 53 Phil. 124 (1929) — Cited for the rule on burden of proof in actions against carriers.

• Article 1732, Civil Code — Defines common carriers.
• Article 1733, Civil Code — Mandates extraordinary diligence for common carriers.
• Article 1734, Civil Code — Enumerates causes where common carriers are not responsible (e.g., flood, storm, earthquake, act of the shipper, inherent defect of goods).
• Article 1735, Civil Code — Establishes the presumption of negligence against common carriers in case of loss, destruction, or deterioration of goods, unless they prove extraordinary diligence or an excepted cause.
• Articles 361 & 362, Code of Commerce — Provide that losses due to fortuitous event, inherent defect, or the shipper's fault are for the shipper's account, but the carrier remains liable if it failed to take customary precautions.

• Justice Flerida Ruth P. Romero (Ponente in the Court of Appeals case, but not listed in the SC division)
• Justice Jose C. Campos, Jr. (Not listed in the provided text; the decision lists Davide, Jr. and Quiason, JJ. as concurring, and Cruz, J. took no part, Griño-Aquino, J. on leave) Note: The decision states: "Davide, Jr. and Quiason, JJ., concur. Cruz, J., took no part. Griño-Aquino, J., is on leave."

N/A — No dissenting opinion is recorded in the provided text.