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PHILIPPINE HOME ASSURANCE CORPORATION v. CA

FACTS:

Eastern Shipping Lines, Inc. (ESLI) loaded various shipments on board SS Eastern Explorer for carriage to Manila and Cebu. During the voyage, a fire broke out on the vessel due to an explosion of an acetylene cylinder, causing it to become a constructive total loss. A tugboat arrived to tow the vessel to port, where fire-fighting operations were conducted. The saved cargoes were loaded onto another vessel for delivery to their original ports. ESLI charged the consignees additional freight and salvage charges for the goods. The charges were paid by Philippine Home Assurance Corporation (PHAC) under protest. PHAC, as subrogee of the consignees, filed a complaint to recover the amount paid under protest from ESLI, alleging fault, negligence, illegal act, and breach of contract. The trial court dismissed PHAC's complaint, ruling in favor of ESLI, stating that the fire was an unforeseen event and that the additional freight charges were demandable under the Bill of Lading.

ISSUES:

  1. Whether the fire on SS Eastern Explorer was a natural disaster or calamity which absolved the carrier from liability.

  2. Whether the carrier exercised extraordinary diligence in the handling, custody, and carriage of the shipment.

  3. Whether the Marine Note of Protest and Statement of Facts are admissible as evidence.

  4. Whether the expenses incurred in saving the cargo constituted general average.

  5. Whether the consignees or the insurer of the goods are liable for the additional freight and salvage charges.

RULING:

  1. The fire on SS Eastern Explorer was not considered a natural disaster or calamity. The explosion and subsequent fire were due to the fault and negligence of Eastern Shipping Lines, Inc. (ESLI), its captain, and its crew.

  2. ESLI did not exercise the extraordinary diligence required by law. The improper storage of the acetylene cylinder near the engine room constitutes negligence.

  3. The Marine Note of Protest and Statement of Facts issued by the vessel’s Master are hearsay evidence and thus not admissible.

  4. The expenses incurred in saving the cargo do not constitute a general average since the required formalities under Articles 813 and 814 of the Code of Commerce were not followed.

  5. The cargo consignees and the insurer (petitioner) are not liable for additional freight and salvage charges. ESLI must refund the amount paid under protest by the petitioner.

PRINCIPLES:

  1. Fire may not be considered a natural disaster or calamity but rather an act of man or human means.

  2. Extraordinary diligence in maritime transportation requires proper handling and storage of hazardous materials.

  3. Hearsay evidence lacks probative value unless it falls within specific exceptions.

  4. General average requires compliance with specific formalities as per the Code of Commerce.

  5. Carrier’s liability for additional charges must be scrutinized in the context of their diligence and adherence to contractual and statutory obligations.