CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case

Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUE

Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?

HELD
Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the principle, of a consignee in a bill of lading to recover from
the carrier or shipper for loss of, or damage to goods being transported under the said
bill, although that document may have been-as in practice it oftentimes is-drawn up only
by the consignor and the carrier without the intervention of the consignee.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.

(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 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. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 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. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. 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 goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. 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.

Coastwise Lighterage Corporation v. CA

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, 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 a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) 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 mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.

CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case

Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUE
Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?

HELD

Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the principle, of a consignee in a bill of lading to recover from
the carrier or shipper for loss of, or damage to goods being transported under the said
bill, although that document may have been-as in practice it oftentimes is-drawn up only
by the consignor and the carrier without the intervention of the consignee.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.
(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 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. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 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. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. 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 goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. 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.

Coastwise Lighterage Corporation v. CA

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, 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 a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) 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 mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.
(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.

CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case

Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.
ISSUE

Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?

HELD

Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the principle, of a consignee in a bill of lading to recover from
the carrier or shipper for loss of, or damage to goods being transported under the said
bill, although that document may have been-as in practice it oftentimes is-drawn up only
by the consignor and the carrier without the intervention of the consignee.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.

(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 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. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 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. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. 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 goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. 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.

Coastwise Lighterage Corporation v. CA

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, 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 a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) 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 mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.