PRESUMPTION OF NEGLIGENCE

Eastern Shipping Lines, Inc. v. CA and The First Nationwide Assurance Corp.
G.R. No. 97412 July 12, 1994
Vitug, J.

FACTS:
 13 coils of uncoated 7-wire stress relieved wire strand for pre-stressed concrete were shipped on board a
vessel owned and operated by Eastern Shipping Lines at Kobe, Japan, for delivery to Stresstek Post-
Tensioning Phils., Inc. in Manila
 while en route from Kobe to Manila, the carrying vessel encountered very rough seas and stormy weather; the
coils wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel
which was flooded with water; the water entered the hatch when the vessel encountered heavy weather en
route to Manila; upon request, a survey of bad order cargo was conducted at the pier in the presence of the
representatives of the consignee and E. Razon, Inc. and it was found that 7 coils were rusty on one side each;
upon survey conducted at the consignee’s warehouse it was found that the wetting of the cargo was caused
by fresh water that entered the hatch when the vessel encountered heavy weather; all 13 coils were extremely
rusty and totally unsuitable for the intended purpose
 The First Nationwide Assurance Corp. indemnified the consignee in the amount of P171,923.00 for damage
and loss to the insured cargo

ISSUE: WON Eastern Shipping Lines is liable

HELD: Yes.
 under Art. 1733, common carriers are bound to observe extra-ordinary vigilance over goods according to all
circumstances of each case
 Art. 1735: In all cases other than those mentioned in Art. 1734, 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
 Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the
part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence
required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods
that it had admittedly carried in this case. But no evidence was presented; hence, the carrier cannot escape
liability.
Philippine Home Assurance Corp (PHAC) vs. CA

Facts:
Eeastern Shipping Lines Inc. (ESLI) loaded on board a vessel (SS Easter Explorer) several shipment for
carriage to several consignees. While the vessel was off Okinawa, Japan, a small fire was detected on the
acetylene cylinder located in the accommodation area near the engine room. This resulted in a flash of flame
throughout the accommodation area. The vessel was abandoned. All the cargoes of ESLI were delivered to
their respective consignees but with corresponding additional freight and salvage charges. All the charges
were paid by PHAC. Thus, PHAC now seeks recovery from ESLI alleging that they were negligent. ESLI
argues, among others, that the fire was a fortuitous event.

Issue:
WON the fire was a fortuitous event.
WON ESLI should be held liable for the additional charges.

Held: No, the fire cannot be considered as a fortuitous event. Thus, it is presumed that ESLI was negligent and
should be held liable to PHAC.

In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises
from some act of man or by human means.
It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human
agency.
There is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence
of respondent ESLI, its captain and its crew:
(1) The acetylene cylinder which was fully loaded should not have been stored in the accommodation area
near the engine room where the heat generated therefrom could cause the acetylene cylinder to explode by
reason of spontaneous combustion;
(2) Respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area
supposed to be reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury.
(3) The fact that the acetylene cylinder was checked, tested and examined and subsequently certified as
having complied with the safety measures and standards by qualified experts before it was loaded in the
vessel only shows to a great extent that negligence was present in the handling of the acetylene cylinder after
it was loaded and while it was on board the ship.
Coastwise Lighterage Corp. vs. Court of Appeals and Philippine General Insurance Company
G.R. No. 114167, July 12, 1995
245 SCRA 796

FACTS:
The consignee entered into a contract of affreightment which is to transport molasses from the province of
Negros to Manila with the carrier using the latter’s barges. The barges were towed in tandem by the tugboat
MT Marica, also owned by the carrier. While approaching the pier of destination, one of the barges, “Coastwise
9” was struck and as a result, the molasses at the cargo tanks were contaminated and rendered unfit for the
use it was intended. The consignee rejected the shipment of molasses as a total loss. The insurer paid the
consignee the amount representing the value of the damaged cargo of molasses.
Parties:
Consignee – Pag-asa Sales, Inc.
Carrier – Coastwise Lighterage Corporation (Coastwise)
Insurer of the cargo – Philippine General Insurance Company (PhilGen)
ISSUES:
1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment
which it entered into with the consignee, Pag-asa Sales, Inc. What is the extent of its liability over the lost,
damaged and deteriorated cargo?
2. WON the insurer was subrogated into the rights of the consignee against the carrier, upon payment by the
insurer of the value of the consignee’s goods lost while on board one of the carrier’s vessels.
RULING:
1. No. The contract of affreightment entered into between the consignee and the carrier did not convert the
latter into a private carrier, but remained a common carrier and was still liable as such. The consignee 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 carrier.
As a common carrier, the presumption of negligence attaches to it when the goods it transports are lost,
destroyed or deteriorated. This presumption may be overcame only by proof of the exercise of extraordinary
diligence such as placing a person with navigational skills. However, the carrier failed to overcome this
presumption of negligence as the patron did not possess the necessary license to navigate.
2. Petitioner carrier was liable for breach of the contract of carriage it entered into with the consignee. In
accordance with Art. 2207, 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. 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.

NOTES:
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of
affreightment) –
Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for
the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the
owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the
owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to
the charterer, anything short of such a complete transfer is a contract of affreightment (time or voyage charter
party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of 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. . . .
– Puromines, Inc. vs. Court of Appeals,
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD. vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS

[G.R. No. 119197. May 16, 1997]

FACTS:
Petitioners are insurers of a shipment of sacks of corn grains consigned to Republic Flour Mills Corporation in
Manila. The cargo was shipped by North Front Shipping Services, Inc. The consignee was advised of its arrival
but the unloading was delayed for six days for unknown reason, and the merchandise was already moldy,
rancid and deteriorating.

The moisture content and the wetting was due to contact with salt water but the mold growth was only incipient
and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be
arrested by drying. However, Republic Flour rejected the entire cargo which therefore forced the petitioners to
pay the former.

Now, as subrogees, they lodged a complaint for damages against respondents claiming that the loss was
exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the
insurance companies conducted a survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The
tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping
Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge
was rusty.

The trial court dismissed the complaint and ruled that the contract entered into between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary
diligence in the care of goods was required. On the other hand, the Court of Appeals ruled that as a common
carrier required to observe a higher degree of diligence North Front 777 satisfactorily complied with all the
requirements hence was issued a Permit to Sail after proper inspection.

ISSUE:
Whether or not a charter-party agreement between P and R requires extraordinary diligence.

HELD:
Yes. The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills
Corporation did not in any way convert the common carrier into a private carrier.

North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers
its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe
extraordinary diligence in its vigilance over the goods it transports. When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently. North Front Shipping
Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo.

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the
arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the
consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the
loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the
corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn
grains were not yet toxic or unfit for consumption.
REGIONAL CONTAINER LINES (RCL) OF SINGAPORE vs. THE NETHERLANDS INSURANCE CO.
(PHILIPPINES), INC.
FACTS:

 405 cartons of Epoxy molding compound were consigned to be shipped from Singapore to Manila for TEMIC.
U-Freight Singapore contracted Pacific Eagle to transport cargo. It was stored in its refrigerated container as cargo
is highly perishable. Pacific Eagle loaded it to M/V Piya Bhum owned by RCL which the former had a slot charter
agreement with.
 RCL issued Bill of Lading in favor of Pacific Eagle. Netherlands Insurance issued a Marine Open Policy to insure
cargo in favor of Temic to cover loss/damages. Upon arrival at Manila, the cargoes were surveyed and it was found
to be at the constant required temperature for several days. But later on, it was found out that the temperature
changed when the cargo had already been unloaded, to 33º Celsius. Surveyor believed the fluctuation was
caused by the burnt condenser fan motor of the refrigerated container.
 Temic received the shipment and found it to be damaged. Temic filed a claim for cargo loss against Netherlands
Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the sum ofP1,036,497.00
under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in favor of
Netherlands Insurance.
 Seven months from delivery of the cargo - Netherlands Insurance filed a complaint for subrogation of insurance
settlement with the Regional Trial Court, RCL and TMS Ship Agencies (TMS) thought to be the local agent of M/V
Piya, EDSA Shipping, Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean).
RCL and EDSA Shipping filed motion to dismiss based on demurer to evidence. They attributed negligence to their
co-defendants, that fluctuation of temperature occurred after cargo has been discharged from vessel but in the
reefer van and that Netherlands is not party in interest hence has no cause of action. RTC found RCL and EDSA
Shipping not liable but this was reversed by CA and barred them from presenting evidence since they filed for
demurer.

Defense of RCL and EDSA Shipping:

1. They attributed any negligence that may have caused the loss of the shipment to their co- defendants.

a. They contend that the cause of the damage to the cargo was the “fluctuation of the temperature in the reefer
van,” which fluctuation occurred after the cargo had already been discharged from the vessel; no fluctuation, they point out,
arose when the cargo was still on board M/V Piya Bhum.

b. As the cause of the damage to the cargo occurred after the same was already discharged from the vessel and
was under the custody of the arrastre operator (International Container Terminal Services, Inc. or ICTSI), RCL and EDSA
Shipping posit that the presumption of negligence provided in Article 1735 of the Civil Code should not apply. What
applies in this case is Article 1734, particularly paragraphs 3 and 4 thereof, which exempts the carrier from liabili ty for
loss or damage to the cargo when it is caused either by an act or omission of the shipper or by the character of the goods
or defects in the packing or in the containers.

2. They likewise asserted that no valid subrogation exists, as the payment made by Netherlands Insurance to the consignee
was invalid.

3. That the Netherland Insurance has no cause of action, and is not the real party-in-interest,

4. The claim is barred by laches/prescription.

ISSUE: Whether the RCL and EDSA Shipping liable as common carriers under the theory of presumption of
negligence.

RULING: Yes. RCL and EDSA Shipping failed to satisfy this standard of evidence and in fact offered no evidence at all
on this point; a reversal of a dismissal based on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations. The CA correctly ruled that they are deemed to have waived their right to present evidence,
and the presumption of negligence must stand. It is for this reason as well that the court finds RCL and EDSA Shipping’s
claim that the loss or damage to the cargo was caused by a defect in the packing or in the containers.

Arguments of RCL and EDSA Shipping are not meritorious.

A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. When the goods shipped are either lost or arrived in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to
hold it liable.

To overcome the presumption of negligence, the common carrier must establish by adequate proof that
it exercised extraordinary diligence over the goods. It must do more than merely show that some other party
could be responsible for the damage.

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence
required by law over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation
of the temperature in the refrigerated container van, as recorded in the temperature chart, occurred after the cargo had
been discharged from the vessel and was already under the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan – which caused the fluctuation of the temperature in the refrigerated
container – was not damaged while the cargo was being unloaded from the ship. It is settled in maritime law jurisprudence
that cargoes while being unloaded generally remain under the custody of the carrier; RCL and EDSA

Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan
did not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while
they were delivering it actually or constructively to the consignee. They could have presented proof to show that they
exercised extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As
the order granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to have
waived their right to present evidence, and the presumption of negligence must stand.

It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss or damage to the cargo
was caused by a defect in the packing or in the containers. To exculpate itself from liability for the loss/damage
to the cargo under any of the causes, the common carrier is burdened to prove any of the causes in Article 1734 of the
Civil Code claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the
shipper to prove that the carrier is negligent. RCL and EDSA Shipping, however, failed to satisfy this standard of
evidence and in fact offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence
bars the defendant from presenting evidence supporting its allegations.