Case Digest: Delsan Transport Lines, Inc. v. American Homes Assurance Corporation, G.R. No. 149019, August 15, 2006

Commercial Laws 2: Common Carriers

Garcia, J.

Recit Ver:

On August 5, 1984, MT Larusan, operated by Delsan Transport Lines, Inc., received a shipment of diesel oil insured by American Home Assurance Corporation (AHAC) under two policies. However, on August 7, while unloading in Bacolod, the vessel's port bow mooring was cut or stolen, causing the vessel to drift. This resulted in the spillage of 113.788 kiloliters of diesel oil and 435,081 kiloliters of oil backing up into the shore tank.

Caltex, the consignee, sought damages from Delsan, which refused to compensate. AHAC, having paid Caltex for the spillage and backflow losses, filed two civil cases against Delsan for over P2 million. The Supreme Court found no reversible error in the lower courts’ decision in favor of AHAC, finding Delsan negligent. Delsan's arguments—that the loss was partly due to Caltex's contributory negligence and that the backflow loss occurred after delivery—were rejected.  The courts found that the primary cause of the loss was the severance of the vessel's port bow mooring line and the shore tender's failure to properly close the storage tank valve. As the cargo discharge was incomplete when the backflow occurred, Delsan remained responsible for guarding and preserving the goods until actual or constructive delivery was complete. Delsan, a common carrier, was required to exercise extraordinary diligence and failed to prove any excepted cause of liability. Therefore, Delsan remained responsible for the damages resulting from the incident.

Facts: 

• Delsan Transport Lines, Inc. is a domestic corporation operating the vessel MT Larusan.

• American Home Assurance Corporation (AHAC) is a foreign insurance company insuring cargo for transportation in the Philippines.

• On August 5, 1984, MT Larusan received a shipment of diesel oil from Bataan Refinery Corporation for delivery to Caltex's Bacolod City depot.

• The shipment was insured by AHAC under two policies: 

1. Inland Floater Policy No. AH-IF64-1011549P and 

2. Marine Risk Note No. 34-5093-6.

• On August 7, 1984, during unloading in Bacolod, the vessel’s port bow mooring was cut or stolen, causing the vessel to drift.

• The drifting vessel stretched and broke a rubber hose, spilling 113.788 k/l of diesel oil into the sea and causing 435,081 k/l of oil to backflow into the shore tank.

• Caltex sought damages from Delsan, but Delsan refused to pay. 

• AHAC, as Caltex’s insurer, paid Caltex P479,262.57 for spillage and P1,939,575.37 for backflow.

• AHAC, as subrogee, filed two civil cases against Delsan for the spillage and backflow losses, totaling over P2 million.

RTC-Manila:

• Consolidated the case and ruled in favor of AHAC, finding Delsan negligent in handling the cargo.

• Delsan was ordered to pay P1,939,575.37 and P479,262.57 with interest, as well as attorney's fees.

CA:

• Affirmed the trial court’s decision, stating Delsan failed to exercise the required diligence.

Issue: Whether the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot exculpate it from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow occurred when the diesel oil was already completely delivered to Caltex. NO

Held:

We are not persuaded.

In resolving this appeal, the Court reiterates the oft-stated doctrine that factual findings of the CA, affirmatory of those of the trial court, are binding on the Court unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness or palpable error. 

Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. 

1. First, the loss through spillage was partly due to the contributory negligence of Caltex; and 

2. Second, the loss through backflow should not be borne by Delsan because it was already delivered to Caltex’s shore tank.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers 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;

2) Act of the public enemy in war, whether international or civil;

3) Act or omission of the shipper or owner of the goods;

4) The character of the goods or defects in the packing or in the containers;

5) Order or act of competent public authority.

Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory negligence on the part of the owner of the goods – Caltex. We see no reason to depart therefrom. As aptly pointed out by the CA, it had been established that the proximate cause of the spillage and backflow of the diesel oil was due to the severance of the port bow mooring line of the vessel and the failure of the shore tender to close the storage tank gate valve even as a check on the drain cock showed that there was still a product on the pipeline. To the two courts below, the actuation of the gauger and the escort surveyor, both personnel from the Caltex Bulk Depot, negates the allegation that Caltex was remiss in its duties. As we see it, the crew of the vessel should have promptly informed the shore tender that the port mooring line was cut off. However, Delsan did not do so on the lame excuse that there was no available banca. As it is, Delsan’s personnel signaled a "red light" which was not a sufficient warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the blowing of whistle suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make inquiries, the shore tender would have not known what really happened. The crew of the vessel should have exerted utmost effort to immediately inform the shore tender that the port bow mooring line was severed.

To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted causes if it were to seek exemption from responsibility. Unfortunately, it miserably failed to discharge this burden by the required quantum of proof.

Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.

To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability. 

All told, Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties. Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to seek exemption from responsibility. Having failed to do so, Delsan must bear the consequences.

WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto.

Cost against petitioner.

SO ORDERED.