YUENG SHENG EXCHANGE AND TRADING COMPANY, PLAINTIFF AND APPELLANT, VS. G. URRUTIA & CO., DEFENDANTS AND APPELLEES.

Yueng Sheng Exchange and Trading Company versus G. Urrutia and Company

The Case

This is a civil action for damages arising from a maritime collision in the inner harbor of Manila. The Yueng Sheng Exchange and Trading Company sues G. Urrutia and Company to recover the value of a cargo of rice ruined when the steamer Cebu struck the steamer Minas de Batan. The plaintiff paid the shipper as insurer and took an assignment of the shipper's rights, and it now seeks to hold the defendant liable as charterer of the offending vessel. The case matters because it fixes, under the old Code of Commerce, the precise line between a charterer who merely leases a ship and one who steps into the shoes of the owner, and it teaches that liability for a collision follows the management of the vessel, not the bare use of it.

Procedural History

The action was commenced in the Court of First Instance of the city of Manila. The parties submitted the case on an agreed statement of facts, and the trial court held that G. Urrutia and Company were not the owners but mere charterers of the Cebu. Reasoning that the shipowner or agent remains responsible for the acts of the captain where the charterer has no power to appoint or discharge him, the trial court absolved the defendants, with costs against the plaintiffs. The plaintiffs excepted to the judgment and filed a bill of exceptions, bringing the case to the Supreme Court by appeal.

Facts

Y. B. Sontua loaded rice on the steamer Minas de Batan, which sailed from Saigon and arrived at the port of Manila with her cargo safe and in good condition. On July 21, 1906, while the Minas de Batan lay in the inner harbor of Manila, the steamer Cebu approached her carrying her port anchor hanging over the load line. The fluke of that anchor penetrated the starboard side of the Minas de Batan, water entered, and a portion of the rice was wet. Five thousand and eight sacks, valued at 27,193 pesos and 93 centavos, were completely ruined.

The Yueng Sheng Exchange and Trading Company, as insurer, paid Sontua 15,995 pesos and 85 centavos, and the Hip On Insurance Company paid him 11,198 pesos and 8 centavos. The plaintiff then sued G. Urrutia and Company for the full amount, partly on its own contract and partly on the rights transferred to it by the other insurer, on the theory that the defendant, as charterer, was responsible for the steamer Cebu and for the recklessness and negligence of her officers and crew.

Two facts were admitted. First, G. Urrutia and Company were not the owners of the Cebu but had chartered her. Second, the captain and engineer had been engaged, on the date of the charter, by Smith, Bell and Company, a partnership organized under the laws of the Philippine Islands, from whom the defendant chartered the steamer; the captain and engineer in turn hired the crew. Under the charter party, the defendant was to pay the coal, the salaries of the officers and crew, water, pilotage, and subsistence, and both captain and crew were to be under the orders of the charterers as to the trips to be made, the stopping places, the freight to be received, and the work of loading and unloading. But the charterers could not discharge the captain nor dismiss the engineer; if those officers committed a punishable fault, the charterers were merely to inform the agents of the vessel. On the day in question the second typhoon signal had been hoisted, warning of a distant typhoon, and while the Cebu approached the Minas de Batan, another vessel, the Buen Viaje, approached the other side for the same purpose and caused no damage.

Issues

• Whether or not the charterer of a vessel, under the terms of the charter party in question, becomes the owner for the time being, what the law calls the owner pro hac vice, and takes upon itself the responsibilities of the owner.
• Whether or not G. Urrutia and Company, as charterers, are liable for the damages caused by the fault, negligence, or lack of skill of the captain and crew of the Cebu in colliding with the Minas de Batan.

Applicable Provisions

Article 826 of the Code of Commerce provides:

If a vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing master, or any other member of the complement, the owner of the vessel at fault shall indemnify the loss and damage suffered, after an expert appraisal.

This fixes the person liable for a collision as the owner of the vessel at fault, so the whole question becomes whether the charterer stands in the owner's place.

Article 586 of the Code of Commerce, cited by the Court, provides:

The owner and the agent shall be civilly liable for the acts of the captain.

The Court uses this to show that liability attaches to the owner or the agent, and that the charterer must therefore have become an agent to be liable.

Article 587 of the Code of Commerce, cited by the Court, provides:

The agent shall be civilly liable for the acts of the captain, and shall be entitled to abandon the vessel with all her equipments and the proceeds of the freight, should the indemnity be claimed on account of the acts of the captain in the care of the freight carried by the vessel.

The Court notes that this right of abandonment never pertained to the defendant under its contract, which shows the defendant was never placed in the agent's position.

Article 618 of the Code of Commerce, cited by the Court, provides:

The captain shall be civilly liable to the agent for the damages caused by him in the management of the vessel, and the agent shall be liable to third persons for the acts of the captain.

This is the chain of responsibility the Court applies: the captain answers to the agent, and the agent answers to the third party injured.

Ruling

On the first issue, the Court held that the charterer did not become owner for the time being. The charter party did not put G. Urrutia and Company in the place of Smith, Bell and Company, nor make them agents of the owners. The charterers could not represent the ownership of the vessel, could not take judicial or extrajudicial steps in their own name in matters of commerce, could not secure the release of the vessel if attached, and could not discharge the captain or dismiss the engineer. Their possession was the uncertain title of a lease, not the possession that represents the true and real possession of the owner, such as that of the agent, who is fully subrogated to the owner in regard to dominion, possession, free administration, and navigation. The material possession was held by the captain in the name of Smith, Bell and Company, and only as to the use and enjoyment of the ship was he placed under the orders of the lessees.

On the second issue, the Court held the charterers not liable. The law applicable, since the collision occurred in the inner waters of Manila Bay, is the Code of Commerce, and under Article 826 the owner of the vessel at fault must indemnify the loss. If the charterers had become agents, they would have had to respond, because the owner and the agent are civilly responsible for the acts of the captain. But they could not exercise the powers or rights of an agent. The responsibility in this action derives from the management of the vessel, which was defective through the lack of skill, negligence, or fault of the captain or crew, for which the captain is responsible to the agent, who in turn is responsible to the third party prejudiced. The rule laid down by the lower court is the same international rule adopted by the Congress of Antwerp, and it is a logical corollary of the precise provisions of the Code of Commerce in force.

Doctrine

A charterer does not become the owner for the time being, the owner pro hac vice, unless the charter party places the vessel's management and navigation in its hands. The test is control over the officers: where the charterer cannot appoint or discharge the captain, and the captain holds the vessel in the name of the owner or the owner's agent, the charterer has only the use and enjoyment of the ship under a contract of lease. Liability for a collision under Article 826 rests on the owner of the vessel at fault, and under Articles 586 and 618 the captain answers to the agent and the agent answers to the injured third party. The charterer who is not an agent falls outside that chain and bears no liability for the fault or negligence of the captain and crew.

Disposition

The Supreme Court affirmed the judgment appealed from, absolving G. Urrutia and Company, with the costs of the appeal against the plaintiff Yueng Sheng Exchange and Trading Company.

Remember This

Memorize the line that the charterer under this contract held only the uncertain title of a lease, not the possession of an owner, so the owner and agent alone answer for the captain's fault. Examiners use this case to test the owner pro hac vice doctrine and the chain of maritime liability under the Code of Commerce.