Case Digest: Philippine Home Assurance vs. Court of Appeals, 257 SCRA 468, G.R. No. 196999

 

Philippine Home Assurance vs. Court of Appeals, 257 SCRA 468, G.R. No. 196999, June 20, 1996

Subject: Transportation Law

FACTS

Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, a shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition. While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder. As the crew was trying to extinguish the fire, the acetylene cylinder exploded causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship.

Several hours later, a tugboat pulled the ship to port, and firefighting operations were again conducted. After the fire was extinguished, the cargoes were saved and loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges.

The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees.

PHAC, as subrogee of the consignees, filed a complaint before the RTC of Manila against ESLI to recover the sum paid under protest on the ground that the same were damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI.

ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable under the Bill of Lading; and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law.

The trial court dismissed PHAC's complaint and ruled in favor of ESLI. On appeal, the CA affirmed RTC's findings and conclusions. Hence, this petition for review.

ISSUE

Whether or not the expenses or averages incurred in saving the cargo constitute a general average.

RULING

No, the expenses incurred in saving the cargo do not constitute a general average.

Under the law, general or gross averages include all damages and expenses that are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk.

In this case, strong evidence indicates that the acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain, and its crew. While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Articles 813 and 814 of the Code of Commerce to incur expenses and cause damage corresponding to the gross average were not complied with. The cargo consignees cannot be made liable to the respondent carrier for additional freight and salvage charges. Therefore, the respondent carrier must refund the petitioner the amount it paid under protest for additional freight and salvage charges on behalf of the consignees.