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LEA MER INDUSTRIES v. MALAYAN INSURANCE CO.

FACTS:

Ilian Silica Mining contracted Lea Mer Industries, Inc. for the shipment of 900 metric tons of silica sand from Palawan to Manila. The cargo was consigned to Vulcan Industrial and Mining Corporation. On October 25, 1991, the cargo was placed on board the barge Judy VII, which was leased by Lea Mer. However, during the voyage, the vessel sank, resulting in the loss of the cargo. Malayan Insurance Co., Inc. as the insurer, paid Vulcan the value of the lost cargo and sought reimbursement from Lea Mer. Lea Mer refused to comply, prompting Malayan to file a Complaint with the Regional Trial Court (RTC) of Manila. The RTC dismissed the Complaint, ruling that the sinking of the vessel was a fortuitous event. On appeal, the Court of Appeals (CA) reversed the RTC, holding that the loss of the cargo was due to Lea Mer's fault and not a fortuitous event. This prompted Lea Mer to file a Petition for Review before the Supreme Court.

ISSUES:

  1. Whether the loss of the cargo was due to a fortuitous event.

  2. Whether the petitioner is liable for the loss of the cargo.

  3. Whether petitioner attempted to minimize or prevent the loss before, during or after the alleged fortuitous event?

  4. Whether the alleged fortuitous event was the sole and proximate cause of the loss?

  5. Whether the Survey Report prepared by Jesus Cortez should have been admitted in evidence?

RULING:

  1. The Court ruled against the petitioner and held that the loss of the cargo was not due to a fortuitous event. As a common carrier, the petitioner is bound to observe extraordinary diligence in the transportation and safety of the goods entrusted to them. They are presumed to be at fault or negligent for any loss or damage to the goods, unless they can prove that they observed extraordinary diligence or that the loss was due to any of the exempting circumstances provided by law.

  2. n this case, the petitioner failed to prove that the loss of the cargo was due to a fortuitous event. The evidence presented by the petitioner was insufficient to show that they were free from any fault. They claimed that the loss was due to bad weather brought about by a typhoon, but failed to show that they were not informed about the typhoon or that they took reasonable measures to prevent or minimize the loss. Therefore, the petitioner is liable for the loss of the cargo.

  3. The petitioner failed to present evidence that it attempted to minimize or prevent the loss before, during or after the alleged fortuitous event. The witness of the petitioner could not remember whether any other precautionary measures were taken to prevent the sinking of the barge. Therefore, the petitioner did not fulfill its burden of proving that it took reasonable steps to prevent or minimize the loss.

  4. The alleged fortuitous event was not the sole and proximate cause of the loss. There was evidence presented that the barge was not seaworthy when it sailed for Manila. The existence of holes in the barge's hull, which may have caused or aggravated the sinking, was proven by the respondent. The petitioner failed to provide evidence to rebut the existence of the holes. Therefore, the petitioner did not prove that the alleged fortuitous event was the sole cause of the loss.

  5. The Survey Report prepared by Jesus Cortez should not have been admitted in evidence as it was hearsay. However, the report was used in the testimonies of other witnesses who attested to the existence of the holes in the barge's hull. The admissibility of the Survey Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court.

PRINCIPLES:

  • Common carriers are liable for the loss or damage to the goods they transport and are required to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers.

  • Common carriers are presumed to be at fault or negligent for any loss or damage to the goods, unless they can prove that they observed extraordinary diligence or that the loss was due to any of the exempting circumstances provided by law.

  • To be exempted from liability due to a fortuitous event, the common carrier must prove that the event was the proximate and only cause of the loss and that they exercised due diligence to prevent or minimize the loss before, during, and after the occurrence of the event.

  • Common carriers have the burden of proving that they took reasonable steps to prevent or minimize loss or damage to the cargo.

  • The alleged fortuitous event must be the sole and proximate cause of the loss for the common carrier to be exempt from liability.

  • Hearsay evidence is generally inadmissible, but there are exceptions for independently relevant statements.

  • The testimony of witnesses must be based on personal knowledge and derived from their own perception.