G.R. No. 150751 Case Digest

G.R. No. 150751, September 20, 2004

Central Shipping Company, Inc.

vs Insurance Company of North America

Ponente: Panganiban

Facts:

July 25, 1990, Central Shipping received on board its vessel 276 pieces of round logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co. The cargo was insured for P3m against total loss. While on voyage, the vessel completely sank.

Insurance Company alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner. The consignee, Alaska presented a claim for the value of the shipment against the petitioner but the latter failed and refused to settle the claim, hence being the insurer, Insurance company paid and now seeks to be subrogated by the shipping company.

The shipping company argues that the ship was seaworthy and properly manned, putting defense that the proximate cause of the sinking vessel and the loss was a natural disaster which could have not been foreseen. RTC was unconvinced and favoured the insurance company.

CA affirmed the RTC finding that the south western monsoon encountered by the vessel was not unforeseeable.

Issues:

(1) Whether the carrier is liable for the loss of the cargo; and (2) whether the doctrine of limited liability is applicable. These issues involve a determination of factual questions of whether the loss of the cargo was due to the occurrence of a natural disaster; and if so, whether its sole and proximate cause was such natural disaster or whether petitioner was partly to blame for failing to exercise due diligence in the prevention of that loss.

Ruling:

Petition is devoid of merit.

(1) Liability for lost cargo: 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.

In the present case, petitioner has not given the Court sufficient cogent reasons to disturb the conclusion of the CA that the weather encountered by the vessel was not a storm as contemplated by Article 1734(1). Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a south western monsoon in the course of its voyage.

(2) Doctrine of Limited Liability: 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 ship owner 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 ship owner could have prevented this fatal miscalculation. As such, the ship owner was equally negligent. It cannot escape liability by virtue of the limited liability rule.