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DSR-SENATOR LINES v. FEDERAL PHOENIX ASSURANCE CO.

FACTS:

Berde Plants, Inc. delivered 632 units of artificial trees to C.F. Sharp and Company, Inc., the General Ship Agent of DSR-Senator Lines, for transportation and delivery to the consignee in Saudi Arabia. C.F. Sharp issued an International Bill of Lading for the cargo, and Federal Phoenix Assurance Company insured the cargo against all risks. The cargo was loaded onto the vessel M/S "Arabian Senator" and was bound for Riyadh, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire. DSR-Senator Lines informed Berde Plants of the incident and C.F. Sharp issued a certification confirming the loss of the cargo. Federal Phoenix Assurance then paid Berde Plants the amount of insurance for the cargo and obtained a subrogation receipt. Federal Phoenix Assurance subsequently demanded payment from C.F. Sharp but was denied on the grounds that their liability was extinguished due to the fire. Federal Phoenix Assurance filed a complaint for damages against DSR-Senator Lines and C.F. Sharp, and the RTC rendered a decision in favor of Federal Phoenix Assurance. The Court of Appeals affirmed the decision, ruling that C.F. Sharp's liability as a ship agent continued until the cargo was delivered to the consignee. C.F. Sharp and DSR-Senator Lines filed a petition for review before the Supreme Court, which was denied.

ISSUES:

  1. Whether C.F. Sharp and Company, Inc. (C.F. Sharp) is liable for damages arising from the loss of cargo while in transit.

  2. Whether the liability of C.F. Sharp as ship agent subsisted and continued until the cargo was delivered to the consignee.

RULING:

  1. Yes, C.F. Sharp is liable for damages arising from the loss of cargo while in transit. The Court ruled that the peril of fire is not among the enumerated exceptions in Article 1734 of the Civil Code, which exempts a carrier from liability for loss or destruction of goods. Thus, the common carrier shall be presumed to have been at fault or negligent unless it proves that it has observed the extraordinary diligence required by law. In this case, C.F. Sharp failed to prove that it exercised extraordinary diligence to prevent the loss of the cargo.

  2. Yes, the liability of C.F. Sharp as ship agent subsisted and continued until the cargo was delivered to the consignee. The Court held that the status of C.F. Sharp as ship agent was co-terminous with and subsisted as long as the cargo was not delivered to the consignee under the terms of the Bill of Lading.

PRINCIPLES:

  • Common carriers are responsible for the loss, destruction, or deterioration of goods unless exempted by the exceptions enumerated in Article 1734 of the Civil Code.

  • Fire is not exempted as a cause of loss or destruction of goods under Article 1734, thus the common carrier is presumed to have been at fault or to have acted negligently.

  • A common carrier's duty to observe diligence in the shipment of goods lasts from the time the articles are surrendered to the carrier until they are delivered or until a reasonable time for their acceptance by the person entitled to receive them.

  • Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them and a presumption of negligence arises against them if the goods are lost or damaged unless they can prove that they exercised extraordinary diligence.