Tuesday, February 21, 2012

Eastern Shipping Lines vs Intermediate Appellate Court

Facts: On June, 1977 M/S ASIATICA, a Vessel operated by Eastern Shipping Lines was bound for Manila from Kobe, Japan. It loaded , 5,000 pieces of colorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both were insured from marine risks with Development Insurance and Surety Corp. It also took 128 cartoons of garment fabrics and accessories in 2 containers consigned to Mariveles Apparel Corp and 2 Cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The shipments were insured with DOWA Fire and Marine Insurance Co. and Nisshin Fire and marine Insurance Co. respectably. En Route from Kobe to Manila the vessel caught fire and sank losing all its shipment. The insurance companies paid for the insurance of the above mentioned shipments. They Then instituted a case to redeem the insurance that they paid to the various companies against Eastern Shipping Lines. They contend that Eastern should not be exempted from liability because it was not able to exercise due diligence in preventing the occurrence of the fire as well as its unseaworthiness. 

Eastern Shipping invoked the Carriage of Goods by Sea Act as a defense wherein it is said to be exempt from the said liability. The Fire was said to be one of the exempting circumstance under the act. It also contended that it the fire occurred as a fortuitous event such as a natural disaster or calamity which leads them to conclude that they should not be made liable. 

Issues: Which law should govern the case is it the Civil Code provisions or the specific law which is the Carriage of Goods by Sea Act? Who has the burden of proof to show the negligence of the carrier? 

Held: It is the law of the country to which the goods are to be transported which shall apply in this case. The Carriage of Goods by Sea Act will be supplementary to the Civil Code provision. 

Common carriers are bound to observe extraordinary diligence when transporting goods. Common carriers are responsible for the loss, destruction, or deterioration of the goods unless it is due to the ff events: flood, storm, earthquake, lightning, or other natural disaster or calamity. In this case fire may not be considered a natural disaster or calamity. This is because the occurrence may be due to an act by man or the actual fault of the carrier. The common carrier is presumed to have been at fault or have acted negligently unless it proves that it has observed the extraordinary diligence required by law. Evidence presented by the witness failed to establish the extraordinary diligence which was required of the carrier. The fire started 24 hours before discovery and upon discovery it was already too big to suppress. It appears that after the cargoes were stored no regular inspections were done to see to it that the cargoes are well kept. The crew could not even explain how the fire started. Because of this the carrier was not able to prove that it has exercised extraordinary diligence making it liable of the costs and damages. Even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. They are bound to pay the insurance companies as well as 5K for attorney’s fees.

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