TRANSPO Carrier: Governing Law

EASTERN SHIPPING LINES, INC., GR Nos. L-69044 & 71478

petitioner, May 29, 1987
vs.
(G.R. No. L-69044) MELENCIO-HERRERA, J.:
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION,
respondents.

(G.R. No. No. 71478)

THE NISSHIN FIRE AND MARINE INSURANCE CO., and
DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.

Nature of the case: This is a petition for review on Certiorari.

FACTS
1. G.R. No. 69044
a. Around June 1977, the M/S ASIATICA, a vessel operated by Petitioner Carrier was going to transport
lance pipes from Kobe, Japan to Manila. The pipes are consigned to Phil. Blooming Mills Co., Inc and
Central Textile Mills, Inc. and insured against marine risk with respondent Insurance Corp.
2. G.R. No. 71478
a. At the same time, the vessel took on board 128 cartons of garment fabrics and accessories, consigned to
Mariveles Apparel Corp. and insured by Nisshin Fire. As well as surveying instruments consigned to Aman
Ent. & General Mdse. and insured by Dowa Fire.
3. Enroute, the vessel caught fire and sank which resulted to the loss of the ship and cargo. The respective
respondent Insurers paid the consignees and was subrogated to their rights.
4. G.R. NO. 69044
a. On May 1978, respondent Insurance Corp. filed a suit against petitioner Carrier to recover but the latter
refused to pay claiming that the loss was due to an extraordinary fortuitous event, hence, it is not liable
under the law.
b. On August 1979, the Trial Court rendered judgment, which was later affirmed by the CA, in favor of
Insurance Corp.
5. G.R. NO. 71478
a. On June 1978, respondents Nisshin Fire and Dowa Fire filed suit against Petitioner Carrier to recover,
imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner
Carrier.
b. Petitioner Carrier denied liability on the grounds that:
i. The fire is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act
(COGSA); and
ii. That when the loss of fire is established, the burden of proving negligence of the vessel is shifted
to the cargo shipper.
c. On September 1980, the Trial Court rendered judgment in favor of Nisshin Fire and Dowa Fire which was
later affirmed by the CA.
6. Hence, this Petition for Review on certiorari by Petitioner Carrier.
ISSUE/S
(1) Which law should govern — the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act?
(2) Who has the burden of proof to show negligence of the carrier?
RATIO
1. As to the governing law
a. The law of the country to which the goods are to be transported governs the liability of the common
carrier. Since the cargoes were transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the
Code of Commerce and special laws (e.g. Carriage of Goods by Sea Act) will be suppletory.
 2. On the Burden of Proof
a. Under the Civil Code, common carriers are bound to observe extraordinary diligence and are responsible
for the loss, destruction, or deterioration of the goods unless the same is due to any of the following
causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

b. Contrary to Petitioner’s claims, the Court held that fire is not a natural disaster or calamity because it
arises almost always from some act of man or by human means. It is not an act of God except if caused
by lightning or other natural disaster or calamity. There is therefore a presumption of negligence on the
carrier.
c. In this case, the boat was already on fire for almost 24 hours before it was noticed by the Boatswain
Ernesto Pastrana. As a result, they were no longer able to contain the fire.
d. The defendant failed to show that extraordinary vigilance was observed:
i. No regular inspection was made as to their condition during the voyage.
ii. The crew couldn’t even explain what could have caused the fire.
e. Even under the Carriage of Goods by Sea Act, the Petitioner Carrier is liable:

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from

(b) Fire, unless caused by the actual fault or privity of the carrier.

3. As to Liability
a. Article 1749 of the New Civil Code expressly permits a stipulation limiting the liability of the carrier. Thus,
the COGSA which is suppletory to the provisions of the Civil Code, may provide for the stipulations on the
limited liability. Applying this, Petitioner Carrier's liability should only be the amount of damage actually
sustained with the additional limitation afforded by section 4(5) of the COGSA which provides that the
carrier shall not in any event be liable for any loss or damage to or in connection with the transportation
of goods in an amount exceeding $500 per package.

RULING
WHEREFORE,

1) In G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the
Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of
calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the
date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.

2) In G.R.No.71478, the judgment is hereby affirmed

(C.H.SALAMAT)