Case Digest: Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No. 150751

 

Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No. 150751, September 20, 2004.

Subject: Transportation Law

FACTS

In July 1990 at Puerto Princesa, Palawan, Central Shipping received on board its vessel, the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. Upon completion of loading of the cargo, the vessel left Palawan and commenced the voyage to Manila. However, the vessel sunk while in route to Manila on July 26, 1990 and the cargo was totally lost due to the shifting of logs in hold.

Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain and as direct consequence thereof the consignee suffered damage. Alaska Lumber Co. Inc. presented a claim for the value of the shipment to the [petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as against the [petitioner].

Petitioner raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen."

RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. CA affirmed RTC’s decisions and concluded that the doctrine of limited liability was not applicable, in view of petitioner’s negligence—particularly its improper stowage of the logs. Hence, this Petition.

ISSUE

1. Whether the carrier is liable for the loss of the cargo.

2. Whether the doctrine of limited liability is applicable.

RULING

1. Yes, the carrier is liable for the loss of the cargo.

Under the law, common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and, (5) Order or act of competent public authority.

In this case, the weather condition encountered by petitioner’s vessel was not a "storm" or a natural disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.

2. No. The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. "Closer supervision on the part of the shipowner could have prevented this fatal miscalculation." As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

Case Digest: Coastwise Lighterage Corp. v. CA, G.R. No. 114167

 

Coastwise Lighterage Corp. v. CA, G.R. No. 114167, July 12, 1995

Subject: Transportation Law

FACTS

Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches long". As consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private respondent, Philippine General Insurance Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.

As subrogee, PhilGen then filed an action against Coastwise Lighterage before the RTC of Manila, seeking to recover the amount it paid to Pag-asa Sales, Inc.,

RTC awarded the amount prayed for by PhilGen. On appeal, CA affirmed RTC’s decision. Hence, this petition.

ISSUE

1. Whether or not petitioner Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it entered with the consignee, Pag-asa Sales, Inc.

2. Whether or not, if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier is in turn bound.

RULING

1. No, Coastwise Lighterage was not transformed into a private carrier.  

In Puromines case, a contract of affreightment is one in which the owner of the vessel lease part or all its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire.  An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. 

In this case, SC held that a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of aforementioned definition. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage. Pursuant to existing jurisprudence, Coastwise Lighterage was not converted to private carrier. Hence, the presumption of negligence remains to the common carrier.

2. No, it was not diligent in the exercise of its duties.

Under the law, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.

In this case, petitioner’s contention that nothing could have prevented the event because of PCG’s failure to chart sunken derelicts in the Manila North Harbor, making it beyond the pale of even the exercise of extraordinary diligence because of uncharted sunken derelicts in the Manila harbor was the cause of the mishap was trashed by SC. Based on record, Coastwise Lighterage embarks on a voyage with an unlicensed patron, a clear violation of Article 609 of the Civil Code. It appeared that the carrier was culpably remiss in the observance of its duties.

Case Digest: Mirasol v. The Robert Dollar Co., G.R. No. L-29721

 

Mirasol v. The Robert Dollar Co., G.R. No. L-29721, March 27, 1929

Subject: Transportation Law

FACTS

Plaintiff alleges that he is the owner and consignee of two cases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila.

The two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. Hence, plaintiff filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question "was caused by sea water."

Defendant made a general and specific denial and alleged the following: 

1. that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage; hence they are not liable on the grounds of being unseaworthy.

2. that in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should not be "held liable for any loss of, or damage to, any of said merchandise resulting from “Acts of God, perils of the sea or other waters," and that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea."

3. defendant quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in respect to said merchandise or property beyond the sum of $250 for any piece, package or any article not enclosed in a package, unless a higher value is stated herein and ad valorem freight paid or assessed thereon," and that there was no other agreement.

4. defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable.

After trial, RTC rendered judgment in favor of plaintiff.

ISSUE

Whether or not defendant has presented sufficient evidence to prove its exercise of extraordinary diligence required of a common carrier to merit its exemption from liability given the conditions stated on the bill of lading.

RULING

No, there was no sufficient proof to merit defendant’s exemption from liability.

Under the law, even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.

In this case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all such questions, there is a failure of proof. Hence, defendant shall not be exempt from liability.

Case Digest: Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761

 

Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17, 1993.

Subject: Transportation Law

FACTS

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas. Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manufacturer of pharmaceutical products.

Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000 capsules each, were shipped on board MV "Anders Maerskline"  for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.

For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date specified in the memorandum. As a consequence, private respondent as consignee refused to take delivery of the goods on account of its failure to arrive on time.

Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before RTC for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants.

Denying that it committed breach of contract, petitioner alleged in its that answer that the subject shipment was transported in accordance with the provisions of the covering bill of lading and that its liability under the law on transportation of good attaches only in case of loss, destruction or deterioration of the goods as provided for in Article 1734 of Civil Code.

Defendant Eli Lilly, Inc. filed its answer with compulsory and crossclaim alleging that the delay in the arrival of the subject merchandise was due solely to the gross negligence of petitioner Maersk Line. The issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc. on the ground that the evidence on record shows that the delay in the delivery of the shipment was attributable solely to petitioner. Responding to this, RTC dismissed the complaint against Eli Lilly, Inc.

After trial RTC rendered judgment in favor of respondent Castillo. On appeal, CA affirmed the decision of RTC with modification as to the awarding of corresponding damages and attorney’s fees. Hence this appeal.

ISSUE

Whether or not Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery.

RULING

Yes, Castillo is entitled to damages despite absence in the bill of lading of a stipulation on the period of delivery.

Under the law and existing jurisprudence, common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a reasonable time.

In this case, a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness for it was through petitioner's negligence that the cargo was mishipped to Richmond, Virginia. Hence, petitioner's insistence that it cannot be held liable for the delay finds no merit. While there was no special contract (aside from the bill of lading which is a contract of adhesion) entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. SC held that there is no need to execute another contract for the purpose as it would be a mere superfluity.

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.

Case Digest: Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R. No. 165647

 

Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R. No. 165647, March 26, 2009

Subject: Transportation Law

FACTS

In October 1995, Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of Lading. The Owner and/or Charterer of M/V Offshore Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing business in the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem).

The shipment arrived at the port of Manila and was subsequently discharged. It was disclosed that during the discharge of shipment, 2,426 poly bags (bags) were in bad order and condition, having sustained various degrees of spillages and loss.

Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignee’s warehouse in Quezon City, where final inspection was conducted jointly by the consignee’s representative and the cargo surveyor. Upon inspection, it was discovered that 63,065.00 kilograms of the shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been exposed and contaminated, resulting in losses due to depreciation and downgrading.

In April 1996, the consignee filed a formal claim with Wallem for the value of the damaged shipment, to no avail. Thus, consignee filed a formal claim with petitioner Philippines First Insurance Co., Inc., insurer of goods, for the damage and losses sustained by the shipment and the latter signed a subrogation receipt. In the exercise of its right of subrogation, petitioner sent a demand letter to Wallem for the recovery of the amount paid by petitioner to the consignee. However, despite receipt of the letter, Wallem did not settle nor even send a response to petitioner’s claim.

Consequently, petitioner instituted an action before the RTC for damages against respondents. RTC held the shipping company and the arrastre operator solidarily liable since both the arrastre operator and the carrier are charged with and obligated to deliver the goods in good order condition to the consignee. In an appeal, CA reversed and set aside the RTC’s decision holding that there is no solidary liability between the carrier and the arrastre operator because it was clearly established by the court a quo that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. Hence this petition.

ISSUE

Whether or not the common carrier’s duties extend to the obligation to safely discharge the cargo from the vessel; Whether or not the carrier should be held liable for the cost of the damaged shipment.

RULING                                   

Yes.

Section 3(2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In this case, the bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier designated area before and after discharged that cause the bags to torn while under the supervision of Wallem. It is undisputed that the damage or losses were incurred during the discharge of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment.

Case Digest: SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, G.R. No. 140349

SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, G.R. No. 140349, June 29, 2005

Subject: Transportation Law

 

FACTS

In February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd.

Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier) to ship the goods from Cebu City to Manila. During unloading, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City.

The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. The owner sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer). As subrogee, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. Hence they filed a suit for damages in the RTC.

Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except that "2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging list."

ISSUE

Whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-insurer’s predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same.

RULING

Yes, petitioner-carrier is liable.

Under the law, a common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all circumstances." The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."

In this case, petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Petitioner-carrier contention’s that its liability, if any, is only to the extent of the cargo damage or loss and should not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing is erroneous. SC affirms CA’s findings that there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore. The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.