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Magellan Manufacturing v.

CA shipping as well as the seaworthiness of the vessel which

FACTS is to carry the goods.
• plaintiff-appellant Magellan Manufacturers Marketing Keng Hua v. CA
Corp. (MMMC) entered into a contract with Choju Co. of
Yokohama, Japan to export 136,000 anahaw fans Everett Steamship v. CA
• James Cu, MMMC then contracted F.E. Zuellig, a shipping
agent, through its solicitor, one Mr. King, to ship the Unsworth Transpo v. CA
anahaw fans
• The bank then credited the amount of US$23 ,220.00 National Union v. CA
covered by the letter of credit to appellant's account.
• when appellant's president James Cu, went back to the Provident Insurance v. CA
bank later, he was informed that the payment was refused
by the buyer allegedly because there was no on-board bill Bartolome v. Maranan
of lading, and there was a transshipment of goods
• the parties admitted that a shipment of 1,047 cartons of
136,000 pieces was loaded at Manila on board the MV
`Pacific Despatcher PHILAMGEN CASE

A charter party has two types. First, it could be a contract of

• An on board bill of lading is one in which it is stated that affreightment whereby the use of shipping space on vessels is leased
the goods have been received on board the vessel which is in part or as a whole, to carry goods for others. The charter-party
to carry the goods, whereas a received for shipment bill of provides for the hire of vessel only, either for a determinate period
lading is one in which it is stated that the goods have been of time (time charter) or for a single or consecutive voyage (voyage
received for shipment with or without specifying the charter). The shipowner supplies the ship's stores, pay for the wages
vessel by which the goods are to be shipped. Received for of the master and the crew, and defray the expenses for the
shipment bills of lading are issued whenever conditions maintenance of the ship. 37 The voyage remains under the
are not normal and there is insufficiency of shipping space. responsibility of the carrier and it is answerable for the loss of goods
29 received for transportation. The charterer is free from liability to third
• An on board bill of lading is issued when the goods have persons in respect of the ship.
been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on Second, charter by demise or bareboat charter under which the
its way. 30 It is, therefore, understandable that a party to whole vessel is let to the charterer with a transfer to him of its entire
a maritime contract would require an on board bill of command and possession and consequent control over its
lading because of its apparent guaranty of certainty of navigation, including the master and the crew, who are his servants.
39 The charterer mans the vessel with his own people and becomes, apply. The CA, therefore, did not err in ruling that HEUNG-A, WALLEM
in effect, the owner for the voyage or service stipulated and hence and PROTOP's liability is limited to $500 per package or pallet
liable for damages or loss sustained by the goods transported
Clearly then, despite its contract of affreightment with DONGNAMA,
Preliminarily, the thesis of petitioner that the aforestated fixture note
HEUNG-A remained responsible as the carrier, hence, answerable for
executed by Rafols and MADE was in derogation of the prohibition
the damages incurred by the goods received for transportation.
against the subletting or sub-chartering of the vessel has been duly
"[C]ommon carriers, from the nature of their business and for
confuted by respondent court. It pointed out that Rafols did not, by
reasons of public policy, are bound to observe extraordinary
entering into said contract of transportation of the cement cargo,
sdiligenceand vigilance with respect to the safety of the goods and
thereby sublease the vessel. The possession, operation, and
the passengers they transport. Thus, common carriers are required
management of the vessel was not transferred to MADE but
to render service with the greatest skill and foresight and 'to use all
remained with Rafols as the lessee or charterer. Rafols, as such
reasonable means to ascertain the nature and characteristics of the
lessee, was the one who bound himself to transport, as he did
goods tendered for shipment, and to exercise due care in the
transport, the cargo of cement for a fixed price.
handling and stowage, including such methods as their nature

The act of the charterer in sub-chartering the vessel, in spite of a

categorical prohibition may be a violation of the contract, but the
PROTOP is solidarily liable with HEUNG-A for the lost/damaged
owner's right of recourse is against the original charterer, either for
shipment in view of the bill of lading the former issued to NOVARTIS.
rescission or fulfillment, with the payment of damages in either case.
"A bill of lading is a written acknowledgement of the receipt of goods
and an agreement to transport and to deliver them at a specified The obligation of contracts is limited to the parties making them and,
place to a person named or on his or her order. It operates both as a ordinarily, only those who are parties to contracts are liable for their
receipt and as a contract. It is a receipt for the goods shipped and a breach. Parties to a contract cannot thereby impose any liability on
contract to transport and deliver the same as therein stipulated." 43 one who, under its terms, is a stranger to the contract, and, in any
PROTOP breached its contract with NOVARTIS when it failed to event, in order to bind a third person contractually, an expression of
deliver the goods in the same quantity, quality and description as agent by such person is necessary
stated in Bill of Lading No
Also, herein petitioner is deemed to have ratified the supposed sub-
Hence, when there is a loss/damage to goods covered by contracts of charter contract entered into by MADE and Rafols when he
carriage from a foreign port to a Philippine port and in the absence a demanded the payment of the second freight installment as provided
shipper's declaration of the value of the goods in the bill of lading, as in the agreement and, later, received the same by virtue of the
in the present case, the foregoing provisions of the COGSA shall decision of the Court of First Instance of Cebu
Now, even on petitioner's theory that there was a sublease, it must Therefore, where the charter constitutes a demise of the ship and the
be stressed that in a sublease arrangement, the basic principles of charterer is the owner for the voyage, and that is the kind of charter
which are applicable in the present case, there are two distinct leases party involved in the instant case, the general owner has no lien on
involved, that is, the principal lease and the sublease. There are two the cargo for the hire of the vessel, in the absence of an express
juridical relationships which co-exist and are intimately related to provision therefor 19 as in the case at bar
each other, but which are nonetheless distinct one from the other. In
such arrangement, the personality of the lessee qua lessee does not
disappear; his rights and obligations vis-a-vis the lessor are not
passed on to nor acquired by the sublessee.

Herein petitioner, as owner of the vessel, has no lien on the cargo. A

charter party may, among other classifications, be of two kinds: One
is where the owner agrees to carry a cargo which the charterer agrees
to provide, and the second is where there is an entire surrender by
the owner of the vessel to the charterer, who hires the vessel as one
hires a house, takes her empty, and provides the officers and
provisions, and, in short, the entire outfit. In such a contract, the
charterer is substituted in place of the owner and becomes the owner
for the voyage. 16 This second type is also known as a bareboat
charter or otherwise referred to as a demise of the vessel.

In a charter party of the second kind, not only the entire capacity of
the ship is let but the ship itself, and the possession is passed to the
charterer. The entire control and management of it is given up to him.
The general owner loses his lien for freight, but the lien itself is not
destroyed, the charterer is substituted in his place, in whose favor
the lien continues to exist when goods are taken on freight. The
general owner, however, has no remedy for the charter of his vessel
but his personal action on the covenants of the charter party. It is a
contract in which he trusts in the personal credit of the charterer.