Case Digest: Delsan Transport v. American Home, G.R. No. 149019

Delsan Transport v. American Home, G.R. No. 149019, August 15, 2006.

Subject: Transportation Law

FACTS

Delsan is a domestic corporation which owns and operates the vessel MT Larusan while respondent American Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business in the Philippines through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring cargoes for transportation within the Philippines.

In Aust 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland Floater Policy and Marine Risk Note.

The shipment arrived in Bacolod City. The discharging of the diesel oil started at about 1:30 PM, however, at about 10:30 PM, the discharging had to be stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted westward, dragged and stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the tanker from the main delivery line at seabed level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the vessel’s crew tried water flushing to clear the line of the diesel oil but to no avail. In the meantime, the shore tender, who was waiting for the completion of the water flushing, was surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of what happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that was earlier discharged from the vessel into the shore tank backflowed.

As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex for spillage and for backflow pursuant to Marine Risk Note and Inland Floater Policy respectively. Subsequently, AHAC, as subrogee to Caltex, instituted two separate civil cases against Delsan before the Manila RTC for the loss caused by the spillage and for the backflow.

In August 1989, RTC rendered its decision in favor of AHAC holding Delsan liable for the loss of the cargo for its negligence in its duty as a common carrier. On appeal, CA affirmed the decision of RTC hence this petition.

Delsan insists that the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot exculpate it from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow occurred when the diesel oil was already completely delivered to Caltex.

ISSUE

Whether or not, Delsan, as common carrier, is absolve from liability.

RULING

No.

Under the law, the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to receive them.

In this case, SC held that Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. The subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee. The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.