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1) The case involved a shipment by Eastern Shipping Lines that was damaged when a fire broke out aboard the ship while at sea. Eastern Shipping Lines sought to recover additional freight and salvage charges from the insurer Philippine Home Assurance. 2) The Court of Appeals had affirmed the trial court's finding that the expenses incurred in saving the cargo constituted general average under maritime law. 3) The Supreme Court reversed, finding that the formalities required under the Code of Commerce for claims of general average were not followed. Therefore, Eastern Shipping Lines could not recover contributions from the consignees or their insurer.

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94 views2 pages

Average

1) The case involved a shipment by Eastern Shipping Lines that was damaged when a fire broke out aboard the ship while at sea. Eastern Shipping Lines sought to recover additional freight and salvage charges from the insurer Philippine Home Assurance. 2) The Court of Appeals had affirmed the trial court's finding that the expenses incurred in saving the cargo constituted general average under maritime law. 3) The Supreme Court reversed, finding that the formalities required under the Code of Commerce for claims of general average were not followed. Therefore, Eastern Shipping Lines could not recover contributions from the consignees or their insurer.

Uploaded by

Chin Martinz
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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American Home Assurance vs.

CA Case Digest
American Home Assurance vs. Court of Appeals (208 SCRA 343) Facts: On or about June 19, 1998, Cheng Hwa Pulp Corp. shipped 5,000 bales of bleached kraft pulp from Haulien, Taiwan on board SS Kaunlaran (owned by National Marine Corporation). The shipment was consigned to Mayleen Paper, Inc. which insured the same with American Home Assurance Co. On June 22, 1998, the shipment arrived in manila and was discharged onto the custody of the Marina Port Services, Inc. However, upon delivery to Mayleen Paper Inc., it was found that 122 bales had either been damaged or lost with the value of P61, 263.41. Mayleen Paper Inc, duly demanded indemnification from NMC but was not heeded. Mayleen then sought recovery from American Home Assurance, the insurer, which was adjusted to P31, 506.75. As subrogee, American Home then filed a suit against NMC for the recovery of the said amount. NMC filed a motion to dismiss on the ground that there was no cause of action based on Art 848 of the Code of Commerce which provides that claims for averages shall not be admitted if they do not exceed 5% of the interest which the claimant may have in the vessel or in the cargo if it be gross average and 1% of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary. NMC contended that based on the allegations of the complaint, the loss sustained in the case was P35, 506.75 which is only .18% of P17.420.000.00, the total value of the cargo. The trial court dismissed the case for lack of cause of action. American Home then filed a petition for certiorari with the Court of Appeals which later dismissed as constituting plain errors of law. Hence, this petition. Issue: Whether or not the law on averages applies when there is negligence? Held: NO. Common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence. It is reasonable to conclude that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied. Instead of presenting proof of the exercise of extraordinary diligence as requires by law, NMC filed its motion to dismiss, hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC.

Philippine Home Assurance vs. CA Case Digest


Philippine Home Assurance vs. Court of Appeals (257 SCRA 468) Facts: Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, a shipment for carriage to Manila and Cebu freight prepaid and in good order and condition. While the vessel is off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forces the master and the crew to abandon the ship. Thereafter, SS Eastern Explorer was found to be constructive total loss and its voyage was declared abandoned. Several hours later, a

tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery for their original of port of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges. The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees. PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI. In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading, and that salvage charges are properly collectible under Act. No. 2616, known as the Salvage Law. The trial court dismissed the PHACs complaint and ruled in favor of ESLI. The court said that the Supreme Court has ruled in Erlanger and Galinger vs. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are (1) a marine peril (2) service voluntary rendered when not required as an existing duty or from a special contract and (3) success in whole or in part, or that the service rendered contributed to such success. The court said that the above elements are all present in the instant case. Salvage charges may thus be assessed on the cargoes saved from the vessel. As provided for in Section 13 of the Salvage Law, The expenses of salvage, as well as the reward for salvage or assistance shall be a charge on the things salvaged or their value. In Manila Railroad Co. vs. Macondray Co., 37 Phil. 583. It was also held that When a ship and its cargo are saved together, the salvage allowance should be charged against the ship and the cargo in the proportion of their respective values, the same as in the case of general average Thus, the compensation to be paid by the owner of the cargo is in proportion to the value of the vessel and the value of the cargo saved. On appeal to the Court of Appeals, respondent court affirmed the trial courts findings and conclusion; hence, the present petition for review before this Court on the following error, among others: Issue: Whether or not the respondent Court erroneously adopted with approval the Trial Courts conclusion that the expenses or averages incurred in saving the cargo constitute general average? Held: On the issue whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average, we rule in the affirmative. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save vessels, its cargo or both at the same time, from a real and known risk. While the instant case may technically fall within the purview of the said provision, 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 ESLIs claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. The Court reversed and set aside the judgment of the respondent court and ordered respondent Eastern Shipping Lines. Inc. to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the consignees.

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