LEA MER INDUSTRIES, INC. vs. MALAYAN INSURANCE CO., INC.

PRINCIPLE: Common carriers are bound to observe extraordinary diligence in their vigilance
over the goods entrusted to them, as required by the nature of their business and for
reasons of public policy.
PRESUMPTION: Common carriers are at fault or negligent for any loss or damage to the goods
that they transport.

FACTS:
1. A mining corporation entered into a contract of carriage with Lea Mer Industries, Inc. for
the shipment of silica sand from Palawan to Manila. The sand was on board a barge leased
by Lea Mer. During the voyage, the vessel sank, resulting in the loss of the cargo.
2. Malayan Insurance Co., Inc., as insurer, paid the consignee the value of the lost cargo. To
recover the amount paid and in the exercise of its right of subrogation, Malayan demanded
reimbursement from Lea Mer, who refused to comply.
3. RTC: dismissed the Complaint, because the loss was due to a fortuitous event. The vessel
had sunk because of the bad weather condition brought about by a typhoon. Lea Mer had
no advance knowledge of the incoming typhoon, and that the vessel had been cleared by
the Philippine Coast Guard to travel from Palawan to Manila.
4. CA: reversed RTC; vessel was not seaworthy when it sailed for Manila. Loss of the cargo
was occasioned by petitioner’s fault, not by a fortuitous event.

ISSUE: whether petitioner is liable for the loss of the cargo; WON the loss of the cargo was due
to a fortuitous event

RULING: Yes. Petitioner is liable for the loss of cargo because it failed to exercise the
extraordinary diligence required from common carriers and it was unable to overcome the
presumption.

I. Rule on Common Carriers

1. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods, or both -- by land, water, or air -- when this
service is offered to the public for compensation.
2. Petitioner is clearly a common carrier, because it offers to the public its business of transporting
goods through its vessels.
3. The Contract in the present case was one of affreightment, as shown by the fact that it was
petitioner’s crew that manned the tugboat and controlled the barge. Necessarily, petitioner was
a common carrier, and the pertinent law governs the present factual circumstances.

II. Extraordinary Diligence Required. Common carriers are presumed to have been at fault or to
have acted negligently for loss or damage to the goods that they have transported. This
presumption can be rebutted only by proof that they observed extraordinary diligence, or that
the loss or damage was occasioned by any of the following causes:

1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
 4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.

A. Rule on Fortuitous Events. To excuse the common carrier fully of any liability, the fortuitous
event must have been the proximate and only cause of the loss. Moreover, it should have
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.
B. Loss in this Case. Petitioner bore the burden of proving that it had exercised extraordinary
diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an
exempting circumstance.

1. Evidence was presented to show that petitioner had not been informed of the incoming
typhoon, and the PCG had given it clearance to begin the voyage.>> Sorely Insufficient
2. As required by the pertinent law, it was not enough for the common carrier to show that
there was an unforeseen or unexpected occurrence. It had to show that it was free from
any fault -- a fact it miserably failed to prove.
a. First, petitioner presented no evidence that it had attempted to minimize or
prevent the loss before, during or after the alleged fortuitous event.
b. Second, the alleged fortuitous event was not the sole and proximate cause of the
loss.
i. There is a preponderance of evidence that the barge was not seaworthy
when it sailed for Manila. It was proved that, in the hull of the barge,
there were holes that might have caused or aggravated the sinking. No
evidence was presented to rebut the existence of the holes.
ii. The submission of the PCG’s Certificate of Inspection of the barge did not
conclusively prove that the barge was seaworthy. This evidence did not
necessarily take into account the actual condition of the vessel at the time
of the commencement of the voyage.