Consignee Carrier Tugboat MT Marica

(21) COASTWISE LIGHTERAGE CORPORATION V. CA In accordance with Art.
2207, payment by the insurer to the assured operated

as an equitable assignment to the former of all remedies which the latter may
FACTS: have against the third party whose negligence or wrongful act caused the loss.
The consignee entered into a contract of affreightment which is to transport molasses from
the province of Negros to Manila with the carrier using the latter’s barges. 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
The barges were towed in tandem by the tugboat MT Marica, also owned by the carrier. be subrogated to the rights of the assured to recover from the wrongdoer to the
extent that the insurer has been obligated to pay.
While approaching the pier of destination, one of the barges, “Coastwise 9” was struck
and as a result, the molasses at the cargo tanks were contaminated and rendered unfit
for the use it was intended. The consignee rejected the shipment of molasses as a total
loss. The insurer paid the consignee the amount representing the value of the damaged NOTES:
cargo of molasses. The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) – Under the demise or bareboat charter of the vessel, the charterer
PARTIES: will generally be regarded as the owner for the voyage or service stipulated. The charterer
 Consignee – Pag-asa Sales, Inc. mans the vessel with his own people and becomes the owner pro hac vice, subject to liability
 Carrier – Coastwise Lighterage Corporation (Coastwise) to others for damages caused by negligence. To create a demise, the owner of a vessel must
 Insurer of the cargo – Philippine General Insurance Company (PhilGen) completely and exclusively relinquish possession, command and navigation thereof to the
charterer, anything short of such a complete transfer is a contract of affreightment (time or
ISSUES: voyage charter party) or not a charter party at all.
1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the
contract of affreightment which it entered into with the consignee, Pag-asa Sales, Inc. On the other hand a contract of affreightment is one in which the owner of the vessel leases
What is the extent of its liability over the lost, damaged and deteriorated cargo? part or all of its space to haul goods for others. It is a contract for special service to be rendered
by the owner of the vessel and under such contract the general owner retains the possession,
2. WON the insurer was subrogated into the rights of the consignee against the carrier, command and navigation of the ship, the charterer or freighter merely having use of the space
upon payment by the insurer of the value of the consignee’s goods lost while on board in the vessel in return for his payment of the charter hire. . . . . . . . . An owner who retains
one of the carrier’s vessels. possession of the ship though the hold is the property of the charterer, remains liable as
carrier and must answer for any breach of duty as to the care, loading and unloading of the
cargo. . . – Puromines, Inc. vs. Court of Appeals
RULING:
1. No. The contract of affreightment entered into between the consignee and the
carrier did not convert the latter into a private carrier, but remained a common
carrier and was still liable as such.
The consignee only leased three of petitioner’s vessels, in order to carry cargo
from one point to another, but the possession, command and navigation of the
vessels remained with petitioner carrier.
As a common carrier, the presumption of negligence attaches to it when the

goods it transports are lost, destroyed or deteriorated.
This presumption may be overcome only by proof of the exercise of

extraordinary diligence such as placing a person with navigational skills.
However, the carrier failed to overcome this presumption of negligence as the

patron did not possess the necessary license to navigate.
2. Petitioner carrier was liable for breach of the contract of carriage it entered into
with the consignee.
(21) COASTWISE LIGHTERAGE CORPORATION V. CA (2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other than
FACTS: 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
Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to pay. Payment by the insurer to the assured operated as an equitable assignment to the
to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's former of all remedies which the latter may have against the third party whose negligence or
dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow
owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9", struck an out of, any private of contract or upon written assignment of, claim. It accrues simply upon
unknown sunken object. The forward buoyancy compartment was damaged, and water payment of the insurance claim by the insurer.
gushed in through a hole "two inches wide and twenty-two inches long". As a consequence,
the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against Philippine
General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.
Philgen then filed an action against Coastwise to recover the money it paid, claiming to be
subrogated to the claims which the consignee may have against the carrier. Both the trial
court and the Court of Appeals ruled against Coastwise.
ISSUES:
(1) Whether Coastwise was transformed into a private carrier by virtue of the contract
it entered into with Pag-asa, and whether it exercised the required degree of diligence
(2) Whether Philgen was subrogated into the rights of the consignee against the carrier
HELD:
(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from
one point to another, but the possession, command mid navigation of the vessels remained
with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of affreightment,
was not converted into a private carrier, but remained a common carrier and was still liable
as such. 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. It follows
then that the presumption of negligence that attaches to common carriers, once the goods it
is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which
is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in
this case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. Coastwise Lighterage 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 vessel's hitting the sunken derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the contract of carriage, having failed
to overcome the presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.

Consignee Carrier Tugboat MT Marica

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(21) COASTWISE LIGHTERAGE CORPORATION V. CA In accordance with Art.

2207, payment by the insurer to the assured operated

As a common carrier, the presumption of negligence attaches to it when the

This presumption may be overcome only by proof of the exercise of

However, the carrier failed to overcome this presumption of negligence as the

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