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Philippine Home Assurance Corp v. CA and Eastern Shipping Lines (1996) Kapunan, J. A boat burned down and its cargo was subsequently salvaged. The shipping company asked for additional payment from the people who were supposed to get the shipment of the cargo (the consignees) for the salvage of the cargo. The charges were all paid b y Phil Home Assurance. Phil Home Assurance, as subrogee of the rights of the people who were supposed to get the shipment, now wants to seek reimbursement from the shipping company. Issue: Is Phil Assurance entitled to the reimbursement? SC says yes they are. The fire occurred because of the negligence of the shipping company and its captain and crew. It stored a cylinder with flammable substances close to the engine room, which is heat producing. This caused an explosion. And so, the fire was not a natural calamity. Therefore, the liable one is the shipping company. Eastern Shipping Lines loaded the following to boat SS Eastern Explorer in Kobe, Japan for shipping to Manila and Cebu, (all with their corresponding Bills of lading): o 2 boxes internal combustion engine parts, consigned to William Lines o 10 tons (or 334 bags) ammonium chloride, consigned to Orca's Company o 200 bags of Glue 300, consigned to Pan Oriental Match Company o Some garments, consigned to Ding Velayo While the boat was in Okinawa, a small flame started on the acetylene cylinder in the accomodation area near the engine room. As the crew tried to extinguish the fire, the acetylene cylinder suddenly exploded, causing fire in the accommodation area. Death and severe injuries happened. The whole boat was on fire. This forced the master and the crew to abandon ship. Thereafter, the boat was found to be a constructive total loss and its voyage was declared abandoned. After several hours, a tugboat arrived near the boat and towed the boat for the port of Naha, Japan. Fire fighting operations were again conducted at the port. After the fire was put out, the cargos which were saved were loaded to another boat for delivery to Manila and/or Cabu. Eastern Shipping charged the consignees some amounts corresponding to additional freight and salvage charges, The charges were all paid by Philippine Home Assurance Corp under protest. Phil Assurance, as subrogee of the consignees, filed a complaint in RTC-Manila against Eastern Shipping to recover the sum paid under protest. Phil Assurance says: o The charges were actually damages directly brought about by the fault and/or breach of contract of Eastern Shipping. Eastern Shipping says: o That it exercised the diligence required by law in the handling of the shipment; o That the fire was caused by an unforeseen event o That the additional freight charges are due and demandable pursuant to the Bill of Lading; o That salvage charges are properly collectible under the Salvage Law. RTC dismissed Phil Assurances complaint. CA affirmed. In the SC, Phil Assurance questions the finding of the RTC and CA that the fire was a natural disaster.

Issue: Is Phil Assurance entitled to recover what it had paid? Held: Yes. Ratio:

(First, the SC says the assignment of errors by the petitioners in this case by raising the case to the SC are challenges to findings of fact. And it is well settled that this Court is not a trier of factsblah blah blah)

Re: What is the issue in this case? The goods were not lost or damaged by the fire. The goods were all delivered to the consignees, even if the transshipment took longer. What is at issue, therefore, is NOT whether or not the carrier is liable for the loss, damage, or deterioration of the goods but WHO, among the carrier, consignee or insurer of the goods, is liable for the additional charges incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different carrier. Re: Natural disaster CA affirmed RTC ruling that the fire was a natural disaster or calamity. Phil Assurance questions this, and SC agrees with Phil Assurance. In Phil jurisprudence, fire may not be considered a natural disaster since it almost always arises from some act of man. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency. In this case, there was no showing, and none was alleged by the parties, that the fire was caused by a natural. Actually, there is strong evidence indicating that the acetylene cylinder caught fire because of the negligence of Eastern Shipping, its captain, and its crew: o First, the acetylene cylinder should not have been stored in the accommodation area near the engine room where the heat generated could cause the cylinder to explode by spontaneous combustion. Eastern Shipping should have foreseen that since the cylinder contained highly flammable material it was in danger of exploding, being close to the engine room.

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Second, Eastern Shipping should have known that by storing the cylinder in the accommodation area for passengers, it unnecessarily exposed its passengers to grave danger. Curious passengers, ignorant might have handled the cylinder or could have smoked cigarettes while in the accommodation area. Third, the fact that the cylinder was examined and certified as having complied with the safety measures by qualified expertsbefore it was loaded in the boat only shows that negligence was present in the handling of the cylinder AFTER it was loaded and WHILE it was on board the ship.

Re: whether or not expenses incurred in saving the cargo are considered general average, SC says yes. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk. While this case may technically fall within general averages, the formalities prescribed under Article 813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were NOT complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. In conclusion: Cargo consignees cannot be made liable to Eastern Shipping for additional freight and salvage charges. Eastern Shipping must refund to the insurer, Phil Assurance, the amount it paid under protest Judgment reversed.