Here’s a digest of the case:

G.R. No. L-4566
YUENG SHENG EXCHANGE AND TRADING COMPANY, plaintiff-appellant, vs. G. URRUTIA & CO., defendants-appellees.
February 9, 1909

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FACTS:

On July 21, 1906, the steamer Cebu collided with the steamer Minas de Batan in Manila Bay while attempting to take on cargo, causing the Cebu‘s anchor to penetrate the Minas de Batan. This resulted in water entering the Minas de Batan and ruining 5,008 sacks of rice, valued at P27,193.93. The plaintiff, Yueng Sheng Exchange and Trading Company, as an insurance company, paid P15,995.85 to the rice owner (Y.B. Sontua) and also acquired the rights from another insurer (Hip On Insurance Company, Limited) who paid the remaining P11,198.08.

The plaintiff filed suit against G. Urrutia & Co., considering them responsible for the acts of the Cebu‘s officers and crew, whose recklessness and negligence caused the damages. It was established that G. Urrutia & Co. were not the owners of the Cebu but had chartered her from Smith, Bell & Co., the agents of the vessel.

Under the charter party:
1. G. Urrutia & Co. paid P3,150 monthly, covering the charter fee (P2,500) and an amount for ship’s stores paid by Smith, Bell & Co.
2. G. Urrutia & Co. paid for coal, salaries of officers and crew, water, pilotage, subsistence, and loading/unloading expenses.
3. Smith, Bell & Co. paid for the ship’s stores and maintenance (repairs, sails, etc.).
4. The captain and crew were under the orders of G. Urrutia & Co. for trips, stopping places, freight, and loading/unloading.
5. Critically, G. Urrutia & Co. could not discharge the captain or dismiss the engineer; they could only report any faults to Smith, Bell & Co.

The Court of First Instance absolved G. Urrutia & Co., holding that they were mere charterers and not the shipowner or agent responsible for the captain’s acts.

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ISSUE:

Is a charterer of a vessel, under the terms of the charter party in this case, considered the owner pro hac vice and thus civilly liable for damages caused by the fault or negligence of the vessel’s captain and crew?

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RULING:

No. The Supreme Court affirmed the lower court’s decision, holding that G. Urrutia & Co., as mere charterers, were not the owners pro hac vice and therefore not civilly liable for the damages.

The Court reasoned that under the Code of Commerce (particularly Articles 826 and 586), the owner or the agent of the vessel is civilly responsible for the acts of the captain. G. Urrutia & Co. could not be considered the agent or owner pro hac vice because they lacked the essential powers and rights that pertain to ownership and agency, such as:
1. Power to appoint or discharge the captain and crew: This right remained with Smith, Bell & Co. (the agents), as G. Urrutia & Co. could only report faults.
2. Representation of ownership: G. Urrutia & Co. could not represent the ownership of the vessel in commercial or judicial matters (Art. 595, par. 2).
3. Right to abandon the vessel: The ultimate right of an agent to abandon the vessel to limit civil liability (Art. 587) did not pertain to G. Urrutia & Co.

The Court clarified that G. Urrutia & Co.’s possession of the Cebu was merely a lease for specific voyages, granting them the use of the vessel and the right to transport cargo and earn freight. The captain maintained material possession of the vessel in the name of Smith, Bell & Co. and represented them regarding the vessel’s substance, preservation, and management. While the captain was under the charterer’s orders for operational aspects (trips, cargo), his fundamental responsibility for navigation and management, and thus liability for negligence, remained with the actual agent (Smith, Bell & Co.) and owner.

Therefore, the responsibility for the management of the vessel, and for the fault or negligence of the captain or crew, rested with the agents (Smith, Bell & Co.), not with the charterers (G. Urrutia & Co.). The judgment absolving G. Urrutia & Co. was affirmed.