Litonjua Shipping Co., Inc. vs. National Seamen Board

In a demise or bareboat charter, the charterer is treated as owner pro hac vice and is liable for the wages of the crew and other expenses of the voyage; the Philippine agent of the charterer that participates in recruitment and benefits from the seafarer’s services may be held liable on the contract of employment, especially where the seafarer would otherwise be left without effective recourse against foreign shipowners or charterers.

In September 1976, the M/V Dufton Bay, a foreign-registered vessel owned by R.D. Mullion Ship Broking Agency Ltd. and under charter by Fairwind Shipping Corporation, put into the port of Cebu. Fairwind had previously appointed petitioner Litonjua Shipping Company, Inc. as its local crewing managing office and authorized Philippine representative. On 11 September 1976, the vessel’s master, Captain Ho King Yiu, recruited private respondent Gregorio Candongo and ten other Filipino seamen for a twelve-month engagement. Litonjua’s supercargos assisted the master in the recruitment process, including facilitating NISA clearances. Candongo boarded as Third Engineer at a monthly wage of US$500.00. On 28 December 1976, before the contract’s expiry, he was required to disembark in Port Kelang, Malaysia, and was repatriated to the Philippines on 5 January 1977. His Seaman’s Book stated the discharge was “by owner’s arrange.” Candongo thereafter filed a complaint with the National Seamen Board for violation of his employment contract.

• Nature: Private respondent Gregorio Candongo was hired on 11 September 1976 by Captain Ho King Yiu, master of the foreign-flagged M/V Dufton Bay, to serve as Third Engineer for twelve months at a monthly wage of US$500.00. The agreement was executed before the NSB Cebu Area Manning Unit.
• Recruitment and Employment: The vessel was under charter by Fairwind Shipping Corporation at the time. Petitioner Litonjua Shipping was the duly appointed local crewing managing office of Fairwind. Petitioner’s supercargos, Edmond Cruz and Renato Litonjua, assisted the master in recruiting the crew in Cebu, including attending interviews, facilitating NISA clearances, and accompanying the master to the NSB office.
• Documents: Candongo’s service agreement and affidavit of undertaking identified R.D. Mullion Co. (HK) Ltd. as the company the master represented. The seafarer’s wages account bore the heading “Fairwind Shipping Corporation” and was signed by the master, referencing a Philippine agency to pay undrawn wages of US$13.19.
• Discharge: On 28 December 1976, before the contract expired, Candongo was discharged at Port Kelang, Malaysia, and repatriated to the Philippines. His Seaman’s Book described the reason as “by owner’s arrange.” No valid cause for termination was shown.
• Complaint: Candongo filed a complaint for violation of contract against Mullion (shipowner) and Litonjua (agent of the charterer). Petitioner denied liability, contending the shipowner alone was responsible for the crew’s wages.

• Liability of Charterer vs. Shipowner: Petitioner maintained that under admiralty law as embodied in the Philippine Code of Commerce, liability for crew wages attaches to the shipowner, not the charterer. It pointed to Candongo’s contract and affidavit of undertaking identifying Mullion as the shipowner and the Seaman’s Book notation “by owner’s arrange.”
• Inadequacy of Evidence: Petitioner argued that its supercargos merely assisted the master in the recruitment process and that no evidence existed sufficient to shift employer-liability from the foreign shipowner to the charterer or to petitioner, a mere agent.

• Employer Status of Charterer: Respondent NSB, supported by private respondent, countered that Fairwind, as charterer, was the employer because the charter party was in the nature of a demise or bareboat charter, rendering the master the agent of the charterer. The NSB pointed to Fairwind’s letter appointing petitioner as local crewing managing officer with authority to bind and sign contracts.
• Agent’s Participation and Liability: Respondents argued that petitioner had actual knowledge of and directly participated in the recruitment through its supercargos, thereby rendering it liable as the Philippine agent of the employer-charterer. The wages account bearing Fairwind’s name and referencing a Philippine agency further indicated petitioner’s responsibility.

• Employer-Employee Relationship: Whether the charterer Fairwind Shipping Corporation, rather than the foreign shipowner Mullion, was the employer of private respondent Candongo for purposes of liability for breach of the employment contract.
• Liability of Agent: Whether petitioner Litonjua, as the Philippine agent of the charterer, could be held jointly and solidarily liable for the seafarer’s money claims arising from the unjust dismissal.

• Employer-Employee Relationship: Fairwind was properly regarded as the employer. The charter party between Mullion and Fairwind was treated as a demise or bareboat charter because petitioner, who had access to the charter party, failed to present it in evidence. Pursuant to the presumption that willfully suppressed evidence would be adverse if produced, the charter was taken to be one where the charterer became owner pro hac vice, possessing full control of the vessel and making the master the charterer’s agent. In a demise or bareboat charter, the charterer — not the shipowner — is liable for the expenses of the voyage, including crew wages. Accordingly, Fairwind, as demise charterer, stood as the employer of private respondent.
• Liability of Agent: Petitioner, as the authorized Philippine agent of the charterer, was liable to Candongo. The NSB’s finding that petitioner actively participated in recruiting Candongo — through its supercargos who facilitated interviews and NISA clearances — was sustained. The wages account identified the Philippine agency as the party responsible for paying undrawn wages. Equitable considerations compelled liability: the foreign vessel was beyond the practical reach of Philippine jurisdiction, while petitioner could readily seek reimbursement from Fairwind, which in turn could recover from the shipowner Mullion. Substantial justice required that the local agent that benefited from and facilitated the employment bear responsibility.

• Doctrine of Charterer as Owner Pro Hac Vice — In a demise or bareboat charter, full possession and control of the vessel are transferred to the charterer, who is considered owner pro hac vice; the master and crew become the charterer’s agents, and the charterer assumes the customary rights and liabilities of the shipowner, including liability for the wages of seamen engaged during the charter period. (Citing Reed v. The Yaka, 373 U.S. 410; U.S. v. Shea, 152 U.S. 178; Aird v. Weyerhauser S.S. Co., 169 F.2d 606; and Schoenbaum, Admiralty and Maritime Law.)
• Presumption on Suppressed Evidence — Under Section 5(e), Rule 131 of the Revised Rules of Court, the non-production of evidence that a party would naturally be expected to produce gives rise to the presumption that such evidence, if produced, would be adverse to that party’s interest. Applied here, petitioner’s failure to introduce the charter party supported the inference that it was a demise charter.
• Equitable Liability of Local Agent — Where the foreign employer is beyond the effective reach of Philippine courts, the local agent that participated in the recruitment and benefited from the seafarer’s services may be held liable for breach of the employment contract to prevent the seafarer from being left without any effective recourse. The local agent may then seek reimbursement from its foreign principal, which in turn is better positioned to recover from the shipowner.

• “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. In such case, the Master of the vessel is the agent of the charterer and not of the shipowner. 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.”
• “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.”
• “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.”

• Reed v. The Yaka, 373 U.S. 410 (1963); U.S. v. Shea, 152 U.S. 178 (1894); Aird v. Weyerhauser S.S. Co., 169 F.2d 606 (1948) — These American admiralty cases were cited as persuasive authority establishing that in a bareboat or demise charter, the charterer is owner pro hac vice and liable for crew wages and vessel operations, while the shipowner is generally not liable in personam.
• Schoenbaum, Admiralty and Maritime Law — Relied upon for the distinction among demise, time, and voyage charters and for the rule that the demise charterer, not the shipowner, bears liability to third parties for the operation of the vessel.

• Article 3, New Labor Code of the Philippines — The NSB invoked the state policy of affording protection to labor; the Court treated this as consistent with the equitable result.
• Article 4, New Labor Code of the Philippines — The NSB cited the mandate that doubts in the implementation and interpretation of the Labor Code and its regulations be resolved in favor of labor; this underpinned the resolution in favor of the dismissed seafarer.
• Section 5(e), Rule 131, Revised Rules of Court — The presumption that evidence willfully suppressed would be adverse if produced was applied to infer that the undisclosed charter party was a demise charter.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concurred.