Myline Cordial

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,

Coastwise Lighterage Corp. vs. Court of Appeals, et al. G.R. No. 114167, July 12, 1995