Coastwise Lighterage Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Pag-asa Sales, Inc. entered into a contract of affreightment with Coastwise Lighterage Corporation (Coastwise) for the transport of molasses from Negros to Manila using Coastwise's dumb barges towed by its tugboat MT Marica. Upon reaching Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object, causing a hole in the buoyancy compartment. The molasses became contaminated and were rendered unfit for use, leading the consignee, Pag-asa Sales, Inc., to reject the shipment as a total loss. Procedural History: Pag-asa Sales, Inc. filed a claim with its insurer, Philippine General Insurance Company (PhilGen), and against the carrier, Coastwise. PhilGen paid Pag-asa Sales, Inc. P700,000.00 for the lost cargo. PhilGen then filed an action against Coastwise to recover the amount paid, claiming subrogation to the consignee's rights. The Regional Trial Court (RTC) ruled in favor of PhilGen, ordering Coastwise to pay P700,000.00 plus legal interest and attorney's fees. The Court of Appeals affirmed the RTC's decision. The Petition: Coastwise Lighterage Corporation filed a petition for review, questioning its liability and the applicability of subrogation.
Issue(s)
Whether Coastwise Lighterage was transformed into a private carrier by the contract of affreightment, and if so, whether it exercised the required diligence of a common carrier. Whether, upon payment for the lost cargo, the insurer was subrogated to the rights of the consignee against the carrier.
Ruling
The petition is DENIED. The decision of the Court of Appeals affirming the order of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay respondent Philippine General Insurance Company the principal amount of P700,000.00 plus legal interest and P100,000.00 as attorney's fees and costs is AFFIRMED.
Ratio Decidendi
On the first issue (Carrier Status and Diligence): The Court held that a contract of affreightment does not convert a common carrier into a private carrier because the owner retains possession, command, and navigation of the vessel. Coastwise Lighterage remained a common carrier and was presumed negligent when the cargo was lost. This presumption was not overcome because Coastwise failed to exercise extraordinary diligence, as evidenced by the vessel being navigated by an unlicensed patron, violating the Code of Commerce. The failure to use a licensed patron contributed to the accident, negating the argument of an unforeseeable navigational hazard. On the second issue (Subrogation): The Court affirmed the principle of subrogation under Article 2207 of the Civil Code. Upon payment to the insured for damaged or lost property due to a third party's wrong or breach of contract, the insurer is subrogated to the insured's rights against the wrongdoer. This principle applies regardless of privity of contract or written assignment. Since PhilGen paid Pag-asa Sales, Inc. for the lost cargo, it was subrogated to all the rights Pag-asa Sales, Inc. had against Coastwise Lighterage.
Main Doctrine
A contract of affreightment does not convert a common carrier into a private carrier; the carrier remains liable as such and is presumed negligent if cargo is lost or damaged, unless it proves extraordinary diligence. An insurer who pays the insured's loss is subrogated to the insured's rights against the carrier.