GR No.

127897
DELSAN TRANSPORT vs. CA
FACTS:
Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines,
Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport
Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the
country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314
kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with private respondent, American Home
Assurance Corporation (American Home)
The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil.
Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the
insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New
Civil Code, the American Home demanded the Delsan the same amount it paid to Caltex.
Due to its failure to collect from Delsan despite prior demand,
complaint with the RTC of Makati for collection of a sum of money.

American Home filed a

The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun,
was seaworthy and that the incident was caused by unexpected inclement weather
condition or force majeure, thus exempting the common carrier from liability for the loss of
its cargo.
The CA reversed. It gave credence to the weather report issued by PAGASA which stated that
the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the
ship sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.
Delsan contends the following
1 Delsan theorized that when the American Home paid Caltex the value of its lost
cargo, the act of American Home is equivalent to a tacit recognition that the illfated vessel was seaworthy; otherwise, American Home was not legally liable to
Caltex due to the latters breach of implied warranty under the marine insurance
policy that the vessel was seaworthy.
2 Delsan avers that although chief officer had merely a 2 nd officers license, he was
qualified to act as the vessels chief officer. In fact, all the crew and officers of
MTT Maysun were exonerated in the administrative investigation.
ISSUES
1
2
Held:

W/N the payment made by American Home to Caltex for the insured value of the lost
cargo amounted to an admission that the vessel was seaworthy, thus precluding any
action for recovery against the petitioner. NO
W/N the non-presentation of the marine insurance policy bars the complaint for
recovery of sum of money for lack of cause of action. NO

1.The payment made by American Home for the insured value of the lost cargo operates as
waiver of its right to enforce the term of the implied warranty against Caltex under the
marine insurance policy. However, the same cannot be validly interpreted as an automatic
admission of the vessels seaworthiness by American Home as to foreclose recourse against
Delsan for any liability under its contractual obligation as a common carrier. The fact of
payment grants American Home subrogatory right which enables it to exercise legal
remedies that would otherwise be available to Caltex as owner of the lost cargo against
Delsan, the common carrier.
From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety
of passengers transported by them, according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the insured goods, common carriers shall be
responsible unless the same is brought about, among others, by flood, storm, earthquake,
lightning or other natural disaster or calamity. In all other cases, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove they observed extraordinary diligence.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex,
Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although
the testimony of the captain and chief mate that there were strong winds and waves 20 feet
high was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA
correctly ruled, Delsans vessel, MT Maysun, sank with its entire cargo for the reason that it
was not seaworthy. There was no squall or bad weather or extremely poor sea condition in
the vicinity where the said vessel sank.
Additionally, the exoneration of MT Maysuns officers and crew merely concern their
respective administrative liabilities. It does not in any way operate to absolve Delsan the
common carrier from its civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and for the negligent acts or
omissions of its employees, the determination of which properly belongs to the courts. In the
case at bar, Delsan is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as common
carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.

2.It is the view of the SC that the presentation in evidence of the marine insurance policy is
not indispensable in this case before the insurer may recover from the common carrier the
insured value of the lost cargo in the exercise of its subrogatory right. The subrogation
receipt, by itself, is sufficient to establish not only the relationship of American Home as
insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply upon
payment by the insurance company of the insurance claim.