G.R. No. 141716 & G.R. No. 142025; July 4, 2002
SAN MIGUEL CORPORATION, petitioner, vs. HEIRS OF SABINIANO INGUITO, and JULIUS OUANO, respondents. JULIUS C. OUANO, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION and THE HEIRS OF SABINIANO INGIUTO, et al., respondents.

FACTS

San Miguel Corporation (SMC) entered into a Time Charter Party Agreement with Julius Ouano, owner of M/V Doña Roberta. The contract explicitly stipulated that the vessel’s crew, including Captain Sabiniano Inguito, remained employees of Ouano, who warranted the vessel’s seaworthiness and assumed responsibility for all damages arising from crew negligence. On November 11, 1990, SMC issued sailing orders to Captain Inguito to transport cargo from Mandaue to Opol, instructing him to observe weather conditions and exercise utmost precaution. The vessel departed on November 12, 1990, despite typhoon warnings. SMC’s radio operator repeatedly advised Captain Inguito to seek shelter as the typhoon approached, but the captain insisted on proceeding. The vessel subsequently sank in the typhoon, resulting in the deaths of Captain Inguito and crew members and the total loss of SMC’s cargo.
The heirs of the deceased crew filed a complaint for damages against SMC and Ouano. SMC cross-claimed against Ouano for indemnification for the lost cargo. The Regional Trial Court held both SMC and Ouano solidarily liable. The Court of Appeals modified the decision, absolving SMC of liability to the heirs and holding Ouano solely liable for all damages, including indemnification to SMC.

ISSUE

The primary issue is whether SMC, as the time charterer, can be held liable for the damages arising from the sinking of the M/V Doña Roberta, or if liability rests solely with the vessel owner, Julius Ouano, based on the terms of the charter party and the circumstances of the loss.

RULING

The Supreme Court affirmed the Court of Appeals, ruling that Julius Ouano, as the vessel owner, is solely and exclusively liable for all damages. The legal logic rests on the nature of a time charter and the specific contractual allocations of risk and responsibility. A time charter involves the lease of the vessel itself, with the owner retaining possession, command, and navigation through its master and crew. The charterer merely acquires the right to direct the vessel’s commercial employment within the agreed period.
The Charter Party Agreement unequivocally placed the responsibility for the crew’s actions and the vessel’s condition on Ouano. Clauses 9, 10, and 11 explicitly state that the crew are Ouano’s employees, that no employer-employee relationship exists with SMC, and that Ouano shall indemnify SMC for losses due to crew negligence. The sinking was directly attributable to the captain’s negligence in disregarding typhoon warnings and SMC’s specific advisories to seek shelter. This negligence fell within Ouano’s warranty of seaworthiness and his duty to exercise extraordinary diligence as a common carrier. SMC’s issuance of sailing orders and weather advisories did not constitute actual interference with the vessel’s navigation; it was a proper exercise of its contractual right as charterer to specify the voyage, and its repeated warnings demonstrated prudence. Therefore, Ouano breached his contractual and legal duties, bearing full liability for the resulting loss of life and cargo.