Title
Planters Products, Inc. vs. Court of Appeals
Case
G.R. No. 101503
Decision Date
Sep 15, 1993
PPI sued KKKK for urea fertilizer loss and contamination during shipment. Courts ruled carrier exercised extraordinary diligence; loss attributed to cargo's inherent nature, absolving KKKK of liability.
common carrier
private carrier
negligence

Case Summary (G.R. No. 101503)

Factual Background

PPI purchased 9,329.7069 metric tons of urea 46% fertilizer from Mitsubishi International Corporation which shipped the cargo in bulk aboard M/V “Sun Plum,” owned by KKKK, evidenced by Bill of Lading No. KP-1 dated 16 June 1974. Prior to the voyage, Mitsubishi as charterer entered into a time charter-party with KKKK on 17 May 1974 incorporating the GENCON form and several riders and addenda. The charter provided, among other provisions, that the vessel’s holds were to be cleaned, dried and presented fit to carry bulk urea to the satisfaction of an inspector appointed by the charterer.

Charter-party and Pre-shipment Inspection

Under paragraph 16 of the charter-party the vessel’s readiness at the loading port was to be certified by an inspector, and the vessel’s holds were to be swept, cleaned and dried at the vessel’s expense and presented clean for use in bulk. A purported inspection by the charterer’s representative preceded loading and the four holds used were found fit to receive bulk urea, consistent with the charter-party terms.

Loading, Stowage and Sealing

After loading by stevedores hired and supervised by the shipper, the vessel’s steel pontoon hatches were closed and sealed with heavy iron lids, overlaid with three layers of tarpaulin and tied with steel bonds. The hatches remained closed and tightly sealed during the voyage, and the vessel’s hull was shown to be in good condition.

Voyage, Arrival and Unloading

The vessel arrived at Poro Point, La Union, on 3 July 1974. At berthing the hatches were opened with the vessel’s boom in the presence of shipowner and consignee representatives. Under the charter’s F.I.O.S. clause the consignee (PPI) performed unloading using dump trucks parked alongside the berth. The hatches remained open during discharge. Each filled truck’s load was tarpaulin-covered for transit to PPI’s warehouse some fifty meters from the wharf; the route crossed wind-blown and sandy areas and weather was variable with intermittent rain.

Survey Findings and Claim

A private surveyor, Cargo Superintendents Company, Inc., conducted draft surveys before and after discharge and prepared a report dated 19 July 1974 showing a shortage of 106.726 M/T and approximately 18 M/T contaminated with dirt. PPI’s Certificate of Shortage/Damaged Cargo dated 18 July 1974 recorded a shortage of 94.839 M/T and about 23 M/T unfit for commerce. PPI submitted a claim to SSA, the shipowner’s agent, for P245,969.31 but alleged correspondence with the agent did not produce payment.

Procedural History and Trial Court Ruling

PPI filed an action for damages in the Court of First Instance of Manila on 18 July 1975. The trial court ruled for PPI, applying the Civil Code presumption that a common carrier is negligent when goods are lost or damaged, and found that the carrier failed to discharge the burden of proof to show that loss or contamination was due to causes exempting it from liability.

Court of Appeals Ruling

The Court of Appeals reversed. Relying on Home Insurance Co. v. American Steamship Agencies, Inc., the appellate court concluded that by reason of the time charter-party the vessel had become a private carrier for the voyage and thus the statutory presumption of negligence applicable to common carriers did not apply. The appellate court held that, in the absence of that presumption, PPI bore the burden to prove carrier negligence, which it failed to do, and accordingly absolved the carrier.

Issues Presented on Appeal

The central issue presented to the Supreme Court was whether a time charter-party converting the vessel’s use for a particular voyage transforms a common carrier into a private carrier such that the statutory presumption of negligence under Art. 1735 no longer applies; and, subsidiary, whether the carrier had proved the exercise of the extraordinary diligence required of a common carrier.

Legal Definitions and Distinctions

The Court reviewed definitions: a charter-party is a contract letting the ship or part thereof for a specified time or voyage; charter parties may be time charters, voyage charters, or demise/bareboat charters. Art. 1732 defines a common carrier as one holding out services to the public; Art. 1733 requires extraordinary diligence from common carriers; and Art. 1735 creates the presumption of fault where goods are lost, destroyed or deteriorated, unless the carrier proves it observed extraordinary diligence. The Court distinguished time and voyage charters, under which the shipowner retains possession and control of the vessel and supplies master and crew, from a demise or bareboat charter wherein command and possession transfer to the charterer.

Presumption of Negligence and Burden of Proof

The Court held that the presumption of negligence in Art. 1735 applies to those who in the ordinary course of business act as common carriers, and that the character of the business, not a single transaction, determines the carrier’s status. A shipowner who in ordinary course acts as a common carrier remains such despite hiring its vessel under a time or voyage charter-party that is limited to the ship itself; only a demise or bareboat charter that transfers possession and control of the vessel and crew converts the shipowner into a private carrier for the voyage.

Carrier’s Evidence of Extraordinary Diligence

The Court found that KKKK and its master furnished clear and convincing proof overcoming the prima facie presumption of negligence. The master testified that the holds were cleaned, dried and fumigated prior to loading, that hatches were sealed with steel covers and tarpaulins which remained intact in transit, and that the hull was seaworthy. The vessel’s officers supervised unloading, and witnesses including PPI’s own testified that seals found intact and that hatches were steel-covered with tarpaulins.

Inherent Nature of the Cargo and Risk Allocation

The Court considered expert testimony describing urea’s physical and chemical properties, its high solubility and susceptibility to loss during bulk handling, and the accepted one percent tolerable loss in clamped-shell bulk unloading. The Court observed that bulk shipment of highly soluble goods exposed the cargo to

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