LITONJUA SHIPPING COMPANY INC., PETITIONER, VS. NATIONAL SEAMEN BOARD AND GREGORIO P. CANDONGO, RESPONDENTS.

In this Petition for Certiorari, petitioner Litonjua Shipping Company, Inc. (“Litonjua“)
seeks to annul and set aside a decision dated 31 May 1979 of the National
Seamen Board (“NSB”) in NSB Case No. 1331-77 affirming the decision
dated 17 February 1977 of the NSB hearing officer which adjudged petitioner Litonjua liable to private respondent for violation of the
latter’s contract of employment and which ordered petitioner to pay damages.

Petitioner Litonjua
is the duly appointed local crewing Managing Office of the Fairwind
Shipping Corporation (“Fairwind“).  The M/V Dufton Bay
is an ocean-going vessel of foreign registry owned by the R.D. Mullion Ship
Broking Agency Ltd. (“Mullion”). 
On 11 September 1976,
while the Dufton Bay was in the port
of Cebu
and while under charter by Fairwind, the vessel’s
master contracted the services of among others, private respondent Gregorio Candongo to serve as Third Engineer for a period of twelve
(12) months with a monthly wage of US$500.00. 
This agreement was executed before the Cebu
Area Manning Unit of the NSB. 
Thereafter, private respondent boarded the vessel.  On 28
December 1976, before expiration of his contract, private
respondent was required to disembark at Port Kelang, Malaysia,
and was returned to the Philippines
on 5 January 1977.  The cause of the discharge was described in
his Seaman’s Book as ‘by owner’s arrange”.^[1]

Shortly after returning to the Philippines, private respondent
filed a complaint before public respondent NSB, which complaint was docketed as
NSB-1331-77, for violation of contract, against Mullion as
the shipping company and petitioner Litonjua as agent
of the shipowner and of the charterer
of the vessel.

At the initial hearing, the NSB hearing officer held a conference
with the parties, at which conference petitioner Litonjua
was represented by one of its supercargos, Edmond
Cruz.  Edmond Cruz asked, in writing,
that the hearing be postponed for a month upon the ground that the employee of Litonjua in charge of the case was out of town.  The hearing officer denied this request and
then declared petitioner Litonjua in default.  At the hearing, private respondent testified
that when he was recruited by the Captain of the Dufton
Bay, the latter was accompanied to the NSB Cebu
Area Manning Unit by two (2) supercargos sent by
petitioner Litonjua to Cebu,
and that the two (2) supercargos Edmond Cruz and Renato Litonjua assisted private
respondent in the procurement of his National Investigation and Security Agency
(NISA) clearance.  Messrs. Cruz and Litonjua were also present during private respondent’s
interview by Captain Ho King Yiu of the Dufton Bay.

On 17 February 1977,
the hearing officer of the NSB rendered a judgment by default,^[2]
the dispositive portion of which read:

“Wherefore, premises considered, judgment is hereby rendered
ordering the respondents R.D. Mullion Shipbrokers Co., Ltd., and Litonjua Shipping Co., Inc., jointly and solidarily to pay the complainant the sum of four thousand
six hundred fifty seven dollars and sixty three cents ($4,657.63) or its
equivalent in the Phil. currency within 10 days from receipt of the copy of
this Decision the payment of which to be coursed through the then NSB.”

The above conclusion was rationalized in the following terms:

“From the evidence on record it clearly appears that there was
no sufficient or valid cause for the respondents to terminate the services of
complainant prior to 17 September 1977,
which is the expiry date of the contract. 
For this reason the respondents have violated the conditions of the
contract of employment which is a sufficient justification for this Board to
render award in favor of the complainant of the unpaid salaries due the latter
as damages corresponding to the unexpired portion of the contract including the
accrued leave pay computed on the basis of five (5) days pay for every month of
service based at $500.00 monthly salary. 
Complainant’s wages account further show that he has an undrawn wage amounting to US$13.19 to be paid by the
respondents Philippine agency together with his accrued leave pay.”^[3]

Petitioner Litonjua filed a motion for
reconsideration of the hearing officer’s decision; the motion was denied.  Petitioner next filed an “Appeal and/or
Motion for Reconsideration of the Default Judgment dated 9 August 1977” with the central office of the
NSB.  NSB then suspended its hearing
officer’s decision and lifted the order of default against petitioner Litonjua, thereby allowing the latter to adduce evidence in
its own behalf.

The NSB hearing officer, on 26 April 1978, made the following findings:

“While it appears that in the preparation of the employment
papers of the complainant, what was indicated therein was R.D. Mullion Co. (HK)
Ltd. referring to Exhibit “B” (Standard Format of a Service
Agreement) and Exhibit “C” (Affidavit of Undertaking), as the company
whom Captain Ho King Yiu, the Master of the vessel Dufton Bay, was representing to be the shipowner,
the fact remains that at the time of the recruitment of the complainant, as
duly verified by the National Seamen Board, Cebu Area
Manning Unit, the Litonjua Shipping Company was the
authorized agent of the vessel’s charterer, the Fairwind Shipping Corporation, and that in the recruitment
process, the Litonjua Shipping Company through its supercargos in the persons of Edmund Cruz and Renato Litonjua, had knowledge
thereof and in fact assisted in the interviews conducted by the Master of the
crew applicants as admitted by Renato Litonjua including the acts of facilitating the crew’s NISA
clearances as testified to by complainant. 
Moreover, the participation of the Litonjua Shipping
Corporation in the recruitment of complainant, together with the other
crewmembers, in Cebu in September 1976 can be traced
to the contents of the letter of April 5, 1976 by the Fairwind
Shipping Limited, thru its Director David H.L. Wu addressed to the National
Seamen Board, copy of which is on file with Contracts and Licensing Division,
quote:

‘This is to certify that Messrs. Litonjua
Shipping, Inc. is duly appointed local crewing Managing Office to attend on our
Crew requirements as well as attend to our ship’s requirements when in
Philippine ports.

We further authorized Litonjua Shipping
co., Inc. to act as local representative who can sue
and be sued, and to bind and sign contracts for our behalf.’”^[4]

The NSB then lifted the suspension of the hearing officer’s 17 February 1977 decision.

Petitioner Litonjua once more moved for
reconsider­ation.  On 31 May 1979, public respondent NSB
rendered a decision^[5]
which affirmed its hearing officer’s decision of 17 February 1977 and which read in part as follows:

“It is clear that respondent Litonjua
Shipping Co., Inc. is the authorized Philippine agent of Fairwind
Shipping Corporation, charterer of the vessel ‘Dufton Bay‘,
wherein complainant served as 3rd Engineer from 17 September until
disembarkation on December 28, 1976.  It is also clear from the complainant’s wages
account bearing the heading ‘Fairwind Shipping
Corporation’, signed by the Master of the vessel that the Philippine agency
referred to herein directed to pay the said withdrawn wages of $13.19 is
no other than Litonjua Shipping Company, Inc.

From this observation, it can be reasonably inferred that the
master of the vessel acted for and in behalf of Fairwind
Shipping Corporation who had the obligation to pay the salary of the
complainant.  It necessarily follows
that Fairwind Shipping Corporation is the
employer of said complainant. 
Moreover, it had been established by complainant that Litonjua Shipping Company, Inc., had knowledge of
and participated, through its employee, in the recruitment of herein
complainant.

x x x                             x x x                             x x x

In view of the foregoing, and pursuant to Art.
3 of the New Labor Code of the Philippines, which provides that, ‘The state
shall afford protection to labor x x x’ as well as
the provisions of Art 4 thereof, that ‘all doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules
and regulations, shall be resolved in favor of labor’, it is our conclusion,
that the decision dated February 17, 1977, is based on evidence formally
offered and presented during the hearing and that there was no grave abuse
of discretion committed by the hearing officer in finding respondent Litonjua Shipping Company, Inc., liable to complainant.”
(Underscoring supplied)

In the instant Petition for Certiorari, petitioner Litonjua assails the decision of public respondent NSB
declaring the charterer Fairwind
as employer of private respondent, and for whose liability petitioner was made
responsible, as constituting a grave abuse of discretion amounting to lack of
jurisdiction.  The principal if not the
sole issue to be resolved here is whether or not the charterer
Fairwind was properly regarded as the employer of
private respondent Candongo.

Petitioner Litonjua makes two (2)
principal submissions in support of its contention, to wit:

“1)  As a general rule,
admiralty law as embodied in the Philippine Code of Commerce fastens liability
for payment of the crew’s wages upon the ship owner, and not the charterer; and

2)  The
evidence of record is grossly inadequate to shift such liability from the shipowner to the petitioner.”^[6]

Petitioner Litonjua contends that the shipowner, not the charterer,
was the employer of private respondent; and that
liability for damages cannot be imposed upon petitioner which was a mere agent
of the charterer. 
It is insisted that private respondent’s contract of employment and
affidavit of undertaking clearly showed that the party with whom he had
contracted was none other than Mullion, the shipowner,
represented by the ship’s master.^[7]
Petitioner also argues that its supercargos merely
assisted Captain Ho King Yiu of the Dufton Bay
in hiring private respondent as Third Engineer. 
Petitioner also points to the circumstance that the discharge and the
repatriation of private respondent was specified in
his Seaman’s Book as having been “by owner’s arrange.” Petitioner Litonjua thus argues that being the agent of the charterer and not of the shipowner,
it accordingly should not have been held liable on the contract of employment
of private respondent.

We are not persuaded by petitioner’s argument.  We believe that there are two (2) grounds
upon which petitioner Litonjua may be held liable to
the private respondent on the contract of employment.

The first basis is the charter party which existed between
Mullion, the shipowner, and Fairwind,
the charterer. 
In modern maritime law and usage, there are three (3) distinguishable
types of charter parties:  (a) the
“bareboat” or “demise” charter; (b) the “time”
charter; and (c) the “voyage” or “trip” charter.  A bareboat or demise charter is a demise of a
vessel, much as a lease of an unfurnished house is a demise of real property.  The shipowner turns
over possession of his vessel to the charterer, who
then undertakes to provide a crew and victuals and supplies and fuel for her
during the term of the charter.  The shipowner is not normally required by the terms of a demise
charter to provide a crew, and so the charterer gets
the “bare boat”, i.e., without a crew.^[8]
Sometimes, of course, the demise charter might provide that the shipowner is to furnish a master and crew to man the vessel
under the charterer’s direction, such that the
master and crew provided by the shipowner become the
agents and servants or employees of the charterer,
and the charterer (and not the owner) through the
agency of the master, has possession and control of the vessel during the
charter period.  A time charter, upon the
other hand, like a demise charter, is a contract for the use of a vessel for a
specified period of time or for the duration of one or more specified
voyages.  In this case, however, the
owner of a time-chartered vessel (unlike the owner of a vessel under a demise
or bare-boat charter), retains possession and control through the master and
crew who remain his employees.  What the
time charterer acquires is the right to utilize the
carrying capacity and facilities of the vessel and to designate her
destinations during the term of the charter. 
A voyage charter, or trip charter, is simply a contract of affreightment, that is, a contract for the carriage of
goods, from one or more ports of loading to one or more ports of unloading, on
one or on a series of voyages.  In a
voyage charter, master and crew remain in the employ of the owner of the
vessel.^[9]

It is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of the vessel, the charterer assuming in large measure the customary rights
and liabilities of the shipowner in relation to third
persons who have dealt with him or with the vessel.^[10]
In such case, the Master of the vessel is the agent of the charterer
and not of the shipowner.^[11]
The charterer or owner pro hac
vice, and not the general owner of the vessel, is held liable for
the expenses of the voyage including the wages of the seamen.^[12]

It is important to note that petitioner Litonjua
did not place into the record of this case a copy of the charter party covering
the M/V Dufton Bay.  We must assume that petitioner Litonjua was aware of the nature of a bareboat or demise
charter and that if petitioner did not see fit to include in the record a copy
of the charter party, which had been entered into by its principal, it was
because the charter party and the provisions thereof were not supportive of the
position adopted by petitioner Litonjua in the
present case, a position diametrically opposed to the legal consequence of a
bareboat charter.^[13]
Treating Fairwind as owner pro hac vice, petitioner Litonjua
having failed to show that it was not such, we believe and so hold that
petitioner Litonjua, as Philippine agent of the charterer, may be held liable on the contract of employment
between the ship captain and the private respondent.

There is a second and ethically more compelling basis for holding
petitioner Litonjua liable on the contract of
employment of private respondent.  The charterer of the vessel, Fairwind,
clearly benefitted from the employment of private
respondent as Third Engineer of the Dufton
Bay, along with the ten (10) other Filipino crewmembers recruited by
Captain Ho in Cebu at the same occasion.^[14]
If private respondent had not agreed to serve as such Third Engineer, the ship
would not have been able to proceed with its voyage.  The equitable consequence of this benefit to
the charterer, is moreover, reinforced by convergence
of other circumstances of which the Court must take account.  There is the circumstance that only the charterer, through the petitioner, was present in the Philippines.  Secondly, the scope of authority or the
responsibility of petitioner Litonjua was not clearly
delimited.  Petitioner as noted, took the position that its commission was limited to
taking care of vessels owned by Fairwind.  But the documentary authorization read into
the record of this case does not make that clear at all.  The words – “our ships” may well be
read to refer both to vessels registered in the name of Fairwind and vessels owned by others but chartered by Fairwind.  Indeed the
commercial, operating requirements of a vessel for crew members and for
supplies and provisions have no relationship to the technical character­ization
of the vessel as owned by or as merely chartered by Fairwind.  In any case, it is not clear from the authori­zation
given by Fairwind to petitioner Litonjua
that vessels chartered by Fairwind (and owned by some
other companies) were not to be taken care of by petitioner Litonjua should such vessels put into a Philippine
port.  The statement of account which the
Dufton
Bay‘s Master had
signed and which pertained to the salary of private respondent had referred to
a Philippine agency which would take care of disbursing or paying such
account.  There is no question that that,
Philippine agency was the Philippine agent of the charterer
Fairwind. 
Moreover, there is also no question that petitioner Litonjua
did assist the Master of the vessel in locating and recruiting private
respondent as Third Engineer of the vessel as well as ten (10) other Filipino
seamen as crew members.  In so doing,
petitioner Litonjua certainly in effect represented
that it was taking care of the crewing and other requirements of a vessel
chartered by its principal, Fairwind.^[15]

Last, but certainly not least, there is the circumstance that
extreme hardship would result for the private respondent if petitioner Litonjua, as Philippine agent of the charterer,
is not held liable to private respondent upon the contract of employment.  Clearly, the private respondent, and the
other Filipino crew members of the vessel, would be defenseless against a
breach of their respective contracts. 
While wages of crew members constitute a maritime lien upon the vessel,
private respondent is in no position to enforce that lien, if only because the
vessel, being one of foreign registry and not ordinarily doing business in the
Philippines or making regular calls on Philippine ports cannot be effectively
held to answer for such claims in a Philippine forum.  Upon the other hand, it seems quite clear
that petitioner Litonjua, should it be held liable to
private respondent for the latter’s claims, would be better placed to secure
reimbursement from its principal Fairwind.  In turn, Fairwind
would be in an infinitely better position (than private respondent) to seek and
obtain recourse from Mullion, the foreign shipowner,
should Fairwind feel entitled to reimbursement of the
amounts paid to private respondent through petitioner Litonjua.

We conclude that private respondent was properly regarded as an
employee of the charterer Fairwind
and that petitioner Litonjua may be held to answer to
private respondent for the latter’s claims as the agent in the Philippines of Fairwind.  We think
this result, which public respondent reached, far from constituting a grave
abuse of discretion, is compelled by equitable principles and by the demands of
substantial justice.  To hold otherwise
would be to leave private respondent (and others who may find themselves in his
position) without any effective recourse for the unjust dismissal and for the
breach of his contract of employment.

WHEREFORE, the Petition for Certiorari is DISMISSED
and the Decision of the then National Seamen Board dated 31 May 1979 is hereby AFFIRMED.  No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., (Chairman), Gutierrez,
Jr., Bidin, and
Cortes, JJ., concur.

^[1]
Annex “D” of Petition, Rollo, p. 25.

^[2] Id.,
pp. 24-26.

^[3] Id.,
p. 25.

^[4]
Annex “C” of Petition, Rollo, pp.
38-39.

^[5]
Annex “I” of Petition, Rollo, pp. 50-52.

^[6]
Petition, Rollo, p. 11.

^[7] Id.,
p. 14.

^[8] Scrutton on Charter Parties, Section 4, p. 45 (18th ed.,
1974).

^[9] See,
generally, Healy and Sharpe, Cases and Materials on Admiralty (2nd ed., 1986),
pp. 262-263.

^[10] Reed v. The Yaka, 373 U.S.
410, 10 L. Ed. 2d 448 (1963):  U.S.
v. Shea, 152 U.S.
178.  38 L. Ed. 403
(1893).

^[11] Aird v. Weyerhauser S.S.
Co. 169 Fed (2d) 606 (1948).

^[12]
A standard text sets forth the following explanation:

“Concerning liability to third
parties, a basic distinction is whether the charter is a demise or bareboat
charter, on the one hand, or a time or voyage charter, on the other.  The vital distinction between a demise and other charter parties is whether the charterer is given the exclusive control of the
vessel.  In a demise, in contrast to
other charters, the charterer is considered the owner
pro hac vice.  The charterer is
accordingly liable in personam for all
liabilities arising out of the operation of the vessel; he is responsible for
the actions of the master and crew.  The shipowner is generally not liable in personam, although the ship may be liable in rem.  Even in
this case, the charterer is obliged to indemnify the
owner against liability suffered by the vessel as a consequence of the charterer’s negligence. 
The shipowner may be liable, however, where
liability or injury results from unseaworthiness or
negligence which existed prior to delivery of the vessel to the demise charterer.” (Schoenbaum,
Admiralty and Maritime Law, pp. 402-403 [1987]; citations omitted)

^[13] Section 5 (e), Rule 131, Revised Rules of Court.

^[14] Resolution of NSB hearing officer, dated 26 April 1978; Rollo, p. 38.

^[15] In
its decision dated 31 May 1979,
the NSB made the following findings of fact:

“1.  When the vessel ‘Dufton
Bay’, reached port in Cebu sometime in 1976, Litonjua Shipping Company sent and assigned its employee,
Edmund Cruz, to Cebu as its supercargo to supervise
the servicing and loading operation of the vessel; Renato
Litonjua of the same company was also sent to Cebu to assist Edmund Cruz;

2.   In view of the need of the Master of the
vessel to hire new crew members, Edmund Cruz accompanied him to the Officer-in-Charge
of the Cebu Area Manning Unit of the National Seamen
Board, for the purpose;

3.   In the recruitment process, Litonjua Shipping Co., Inc., through its super cargo,
Edmund Cruz and Renato Litonjua,
had knowledge thereof and in fact were present in the hotel where the
applicants were interviewed by the Master of the vessel; both parties performed
their duties as super cargo only for one day, but stayed in Cebu
for 15 days; and it was Mr. Cruz who gave the complainant the forms for his
NISA clearance and his seamen’s continuous discharge book (SCDB);

4.   The participation of Litonjua
Shipping Company, Inc., through its employees, can be traced from the fact that
said company is the duty appointed local crewing manning officer of Fairwind Shipping Corporation with powers to act as the
latter’s local representative who can sue and be sued and to bind and sign
contracts for and in behalf of said Fairwind Shipping
Corporation.” (Rollo, p. 51)