G.R. No. 424 - U.S. vs. Penalosa

May 17, 1974: GENCON time charter-party executed in Tokyo.
June 16, 1974: Bill of Lading No. KP-1 issued; cargo loaded at Kenai, Alaska.
July 3–18, 1974: Arrival at Poro Point, La Union; cargo discharged under F.I.O.S. clause.
July 18, 1974: Survey report and internal certificate document shortage (~~100 M/T) and contamination (~~18–23 M/T).
December 18, 1974: Claim letter for P245,969.31 sent to carrier’s agent.
July 18, 1975: PPI files suit for damages in CFI Manila.
March 24, 1980: CFI Manila rules for PPI, applying presumption of negligence against carrier.
August 13, 1991: Court of Appeals reverses, treating carrier as private and shifting burden to PPI.
September 15, 1993: Supreme Court affirms CA decision and dismisses PPI’s petition.

1987 Constitution: Guarantees due process and property rights.
Civil Code (Arts. 1732–1735):
• Art. 1732 defines common carriers as those publicly offering transport for compensation.
• Art. 1733 requires common carriers to exercise extraordinary diligence.
• Art. 1735 presumes negligence by common carriers unless they prove diligence or exempting cause.
Code of Commerce (Arts. 361–362): Allocates risk of fortuitous events and inherent defects to shippers; carrier liable only upon proven negligence.

Charter required vessel holds to be cleaned, swept, dried, inspected by charterer’s appointee (par. 16).
F.I.O.S. clause made loading/unloading the risk and expense of shipper/consignee.
Holds were cleaned, fumigated, sealed with steel lids and triple tarpaulins; remained sealed in transit.
Discharge over eleven days amid windy, rainy, and sandy conditions; cargo handled via ship’s gear into covered dump trucks then to warehouse.

Issue: Does a time charter convert a common carrier into a private carrier, negating the statutory presumption of negligence?
Petitioner’s stance: Vessel remained a public carrier; presumption applies.
Respondents’ stance: Charter-party rendered them private carriers; PPI must prove negligence.

Charter-party: Lease of entire vessel or space for a voyage or time.
Time/Voyage Charter: Owner retains navigation control, crew, and maintenance; charterer uses holds.
Demise/Bareboat Charter: Charterer takes vessel possession, appoints crew, controls navigation.
Common Carrier: Offers public transport services for compensation; bound to extraordinary diligence.
Private Carrier: Single or special transaction; bound only to ordinary diligence; no negligence presumption.

Time and voyage charters do not transfer vessel command or crew control from owner.
Shipowner maintains possession, navigation authority, and responsibility for crew.
Only a bareboat (demise) charter—transferring crew control—can convert common carrier into private carrier.
M/V “Sun Plum” remained a common carrier despite time charter.

Home Insurance Co. v. American Steamship Agencies (U.S.) concerned liability-limitation clauses, not carrier classification.
Philippine admiralty law requires stricter interpretation, preserving common carrier responsibilities under affreightment charters.

As a common carrier, once shipment and loss are shown, the burden shifts to carrier to prove extraordinary diligence or exempting cause.
The CA erred in treating the carrier as private and placing the onus on PPI to prove negligence.

Captain’s deposition: Holds cleaned, dried, fumigated; hatches sealed with steel lids and tarpaulins; hull seaworthy.
Discharge supervised by ship’s officers, charterer’s representative, stevedores, and surveyor.

Planters Products, Inc. (PPI) bought 9,329.7069 metric tons of urea 46% fertilizer from Mitsubishi International Corporation in New York, to be shipped in bulk aboard M/V “Sun Plum.”
On 17 May 1974, Mitsubishi (as charterer) and Kyosei Kisen Kabushiki Kaisha (KKKK, as shipowner) entered into a GENCON time charter-party in Tokyo, with riders (paras. 16–40) and four addenda (Nos. 1–4).
Four holds of the vessel were inspected by the charterer’s representative and certified fit; hatches were cleaned, dried, sealed under tarpaulin and steel bonds.
Voyage commenced 16 June 1974 from Kenai, Alaska; holds remained sealed until arrival at Poro Point, La Union, Philippines on 3 July 1974.
Discharge under an F.I.O.S. clause: hatches opened, cargo scooped into steel-bodied dump trucks, covered in transit to PPI’s warehouse some 50 m from the berth.
Unloading took eleven days (5–18 July 1974, excluding certain dates); port conditions were windy, occasionally rainy, with sandy routes.
Survey by Cargo Superintendents Co., Inc. (CSCI) found an alleged shortage of 106.726 M/T and contamination of about 18 M/T; PPI’s certificate and survey showed 94.839 M/T short and 23 M/T unfit.
PPI sent a claim letter (18 December 1974) to Soriamont Steamship Agencies (SSA), agent of KKKK, for P245,969.31; SSA denied receipt of a formal claim.
PPI filed suit on 18 July 1975 before the CFI of Manila for damages against the carrier.

Trial Court (CFI, Manila, Br. 27) ruled in favor of PPI, applying Civil Code’s presumption of negligence against a common carrier and shifting the burden of proof to the carrier.
Court of Appeals (12th Div., 13 August 1991) reversed, holding that under the time charter-party M/V “Sun Plum” became a private carrier and the common‐carrier presumption did not apply; burden remained on PPI to prove negligence.
PPI elevated the case via petition for review to the Supreme Court.

Whether a time or voyage charter-party converts a common carrier into a private carrier, thereby negating the statutory presumption of negligence in the event of cargo loss or damage.
If no conversion occurs, whether the carri