DELSAN TRANSPORT LINES INC. v.

AMERICAN HOME ASSURANCE CORPORATION

GR NO. 149019, August 15, 2006

Garcia, J.

Facts of the Case:

Petitioner, Delsan Transport Lines Inc. (DELSAN) is a domestic corporation which owns and operates
the vessel MT Larusan. On the other hand, defendant American Home Assurance Corporation (AHAC) is a
foreign insurance company licensed to do business in the Philippines thru its agent, American-International
Underwriters, Inc. it is engaged in insuring cargoes for transportation within the PH.

On August 4, 1984 Delsan received on board MT Larusan a shipment of automotive diesel at the
Bataan Refinery Corp. for transportation and delivery to the bulk depot of Bacolod City of Caltex Phils. Inc.
(Caltex) pursuant to a contract of afreightment. The shipment was insured by AHAC.

On August 7, 1984, the shipment arrived at Bacolod and unloading operations commenced at 1:30pm.
At about 10:30pm the discharging had to be stopped because the port bow mooring of the vessel was
intentionally cut or stolen by unknown persons. Because of such, the vessel drifted westward dragged and
severed the rubber hose, causing the diesel oil to spill into the sea. To avoid further spillage, the vessel’s crew
tried water flushing but to no avail. The shore tender, who was waiting for the completion of the water flushing
was surprised when the tanker signaled a red light which meant stop pumping. Unaware of what happened,
the shore tender did not shut the tank gate valve. Because the gates remained open, the diesel previously
discharged from the vessel into the shore tank backflowed. The vessel crew was not able to inform the people
at the depot about the incident due to the non-availability of a pump boat. After almost an hour, the gauger and
an assistant surveyor from Caltex depot boarded the vessel and it was only then that they found out about
what happened.

Caltex then sought recovery of the loss but Delsan refused to pay. As insurer, AHAC paid Caltex.
AHAC, as the subrogee of Caltex instituted civil cases against Delsan for the loss. The trial court rendered
decision in favor of AHAC. Delsan appealed the decision to the CA. The latter affirmed the findings of the lower
court ruling that Delsan failed to exercise the extraordinary diligence of a good father of a family in the handling
of its cargo and applied Article 1736 that since the discharging of the diesel was not completed, there was
actual delivery of the Cargo to Caltex. Delsan contends that there was contributory negligence on the part of
Caltex and that the loss due to backflow occurred when the diesel oil was already completely delivered to
Caltex. Hence, this petition.

Issues:

a. Whether or not the spillage was due to the contributory negligence of Caltex;
b. Whether or not the loss through backflow should not be borne by Delsan because it was already
delivered to Caltex shore tank;

Ruling:

a. There is no contributory negligence on the part of Caltex. Common carriers are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. They are presumed to
have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To
overcome the presumption of negligence in case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence. the proximate cause of the
spillage and backflow of the diesel oil was due to the severance of the port bow mooring line of the
vessel and the failure of the shore tender to close the storage tank gate valve. Upon boarding on
the vessel by the two personnel of Caltex, they immediately reported the same. The crew of the
vessel should have exerted its most effort to inform the shoe tender about the port bow mooring line
was severed.

b. No, Delsan should bear the loss. The cargo was still in the custody of Delsan because the
discharging has not yet been finished when the backflow occurred. Article 1736 provides that the
extraordinary responsibility of common carrier last from the time the goods are unconditionally
placed in the possession of, and received by, the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right
to receive them. Since the discharging has not yet been finished the carrier still has the
responsibility to guard and preserve the goods.