G.R. No. 188118 , November 23, 2015
Federal Phoenix Assurance Co., Ltd., Petitioner, vs. Fortune Sea Carrier, Inc., Respondent.

FACTS

On March 9, 1994, respondent Fortune Sea Carrier, Inc. (Fortune Sea) leased its vessel M/V Ricky Rey to Northern Mindanao Transport Co., Inc. (Northern Transport) under a Time Charter Party agreement for 90 days, later extended, to transport cement. In June 1994, Northern Transport ordered the shipment of 2,069 bales of abaca fibers on board M/V Ricky Rey, consigned to Newtech Pulp Inc. (Newtech). The shipment was insured by petitioner Federal Phoenix Assurance Co., Ltd. (Federal Phoenix). Upon arrival at Iligan City port, a fire damaged 60 bales. Federal Phoenix paid Newtech’s insurance claim and, as subrogee, demanded payment from Fortune Sea. After Fortune Sea refused, Federal Phoenix filed a Complaint for Sum of Money. Fortune Sea defended that the Time Charter Party agreement placed the vessel under the complete control of Northern Transport, making it a private carrier at the time of the incident. The Regional Trial Court (RTC) ruled in favor of Federal Phoenix. The Court of Appeals (CA) reversed the RTC, dismissing the complaint, finding the charter to be a bareboat or demise charter, thus converting the vessel into a private carrier.

ISSUE

Whether the Court of Appeals erred in declaring that Fortune Sea was converted into a private carrier by virtue of the charter party agreement it entered into with Northern Transport.

RULING

No, the Court of Appeals did not err. The Supreme Court affirmed the CA’s decision. While Fortune Sea is a common carrier by nature, the Time Charter Party agreement with Northern Transport effectively converted M/V Ricky Rey into a private carrier. In determining the nature of a contract, the intention of the parties, as shown by their conduct and the agreement’s provisions, is decisive, not merely its title. The charter party provisions demonstrated that Northern Transport assumed operational control, the Master was under its orders, and it furnished instructions and sailing directions, establishing that Fortune Sea had completely relinquished possession, command, and navigation of the vessel. The testimony of the vessel’s captain confirmed that Northern Transport gave orders for the voyage and controlled the crew. Therefore, the agreement was in reality a bareboat or demise charter, making the vessel a private carrier. Consequently, the Complaint for Sum of Money was correctly dismissed for lack of merit.