4. Coastwise Lighterage Corporations vs.
CA and Philippine General Insurance It is a contract for special service rendered by the owner where the
Company; G.R. No. 114167; 12 July 1995 ; Presumption of Negligence
1. Pag-asa Sales & Coastwise Lighterage Corporation (Coastwise) entered into
a contract of affreightment wherein Coastwise would transport molasses
from Negros to MNL using its dumb barges. The barges were towed by a
tugboat MT Marica, also owned by Coastwise
2. 1 of the barges struck an unknown sunken object upon reaching Manila
Bay. Water gushed in thru a hole (2 inches wide & 22 inches long). The
molasses which were inside the cargo tanks were contaminated & was
unfit for the use it was intended.
3. Pag-asa (consignee) rejected the shipment as a total loss and filed a claim
w/ its insurer (PhilGen) and also against the Coastwise (carrier).
4. Coastwise denied claim & the insurance company paid Pag-asa the amount
of P700k representing the value of the damaged cargo of molasses.
5. Insurance company filed an action against carrier Coastwise before the RTC
seeking to recover the P700k it paid to Pag-asa due to the loss of the cargo
claiming it was surrogated of all the contractual rights & claims which
consignee Pag-asa may have against Coastwise, the latter presumed to
have violated the contract of carriage.
6. RTC: awarded the 700k to the insurance company
7. CA: Affirmed RTC ruling
ISSUES:
1. W/N carrier Coastwise was transformed into a private carrier due to the
contract of affreightment it entered w/ consignee Pag-asa? NO. Still a common
carrier. It was not able to overcome the presumption of negligence. It was not able
to prove that it exercised extraordinary diligence to overcome such presumption.
2. Was the insurer suborogated into the rights of consignee Pag-asa against the
carrier Coastwise upon its payment of the value of the goods of consignee Pag-asa
while on board of one the vessels of Coastwise? Yes, principle of subrogation.
HELD:
There are two kinds of charter parties: (Puromines vs. CA)
o Demise or bareboat charter of vessel: (private carrier)
Charterer is regarded as the owner for the voyage stipulated. He
mans the vessel with his own people and becomes the owner pro hac
vice, subject to liability for damages caused by negligence.
The owner of a vessel completely relinquishes possession, command
and navigation to the charterer. Anything short of such transfer is a
contract of affreightment or not a charter party at all.
o Contract of affreightment/time or voyage charter party: (common carrier)
The owner of the vessel leases its space to haul goods for others.
owner retains possession, command and navigation of the ship.
The charterer or freighter is merely given use of the space.
Owner remains liable as the carrier.
The case at bar involves a contract of affreightment. Pag-asa only leased three
vessels (the barges?) but the command remained with Coastwise. Under the
said contract, Coastwise is liable for breach of the contract of carriage.
The law and jurisprudence on common carriers both hold that the mere proof of
delivery of goods in good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima facie case against
the carrier.
o The presumption of negligence that attaches to common carriers, once
the goods it transports are lost, destroyed or deteriorated, applies to the
Coastwise. The presumption can be overcome only by proof of exercise
of extraordinary diligence. In this case, the presumption remained
unrebutted.
o Here, the damage to the bard carrying the cargoes was caused by its
hitting an unknown sunken object as it was heading for Pier 18. The object
turned out to be a submerged derelict vessel.
Coastwise is now saying that:
o this navigational hazard was the efficient cause of the accident; and
o that the Phil. Coastguard didnt exert any effort to prepare a chart to
indicate the location of sunken derelicts within Manila North Harbor to
avoid navigational accidents and this contributed to the mishap
o that being unaware of the hidden danger, it was impossible for Coastwise
to avoid it
o that nothing could have prevented the event making it beyond the pale of
even the exercise of extraordinary diligence.
BUT THE SC held: Constantino, the patron of the vessel, admitted the he was NOT
licensed.
o Art 609, Code of Commerce (w/c subsidiarily governs common carriers;
primarily by NCC) provides: Captains, masters, or patrons of vessels must
be Filipinos, have legal capacity to contract in accordance with this code,
and prove the skill capacity and qualifications necessary to command and
direct the vessel, as established by marine and navigation laws, ordinances
or regulations, and must not be disqualified according to the same for the
discharge of the duties of the position.
Coastwise embarking on a voyage with an unlicensed patron violates this
rule. It cannot safely claim to have exercised extraordinary diligence, by
 placing a person whose navigational skills are questionable, at the helm
of the vessel which eventually met the fateful accident.
It may also logically, follow that a person without license to navigate,
lacks not just the skill to do so, but also the utmost familiarity with the
usual and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed, he could be presumed to have both the
skill and the knowledge that would have prevented the vessels hitting
the sunken derelict ship that lay on their way to Pier 18.

2. There is subrogation in this case. Coastwise is liable for breach of contract of

carriage it entered w/ Pag-asa. The damage due to the loss of the cargo which
carrier Coastwise was transporting was not paid by Coastwise but by the insurance
company PhilGen.

Art 2206 NCC: If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the
wrongdoer or the person who violated the contract.

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.
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.
The right of subrogation is not dependent upon, nor does it grow out of,
any privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.

Note:
P700k principal amount + interest computed from the date the complaint
was filed until fully paid
P100k attys fees + cost