G.R. 168151     Sept 4, 2009


RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent, EDSA Shipping, a domestic corporation organized and existing under Philippine laws. Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation engaged in the marine underwriting business.

October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore to Manila for Temic Telefunken Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.3 (U-Freight Singapore), a forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo was highly perishable, the inside of the container had to be kept at a temperature of 0º Celsius. Pacific Eagle then loaded the refrigerated container on board the M/V Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter agreement. RCL duly issued its own Bill of Lading in favor of Pacific Eagle.

To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of Temic to cover all losses/damages to the shipment.

On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was plugged to the power terminal of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-President for Operations of Marines Adjustment Corporation, accompanied by two surveyors, conducted a protective survey of the cargo. They found that based on the temperature chart, the temperature reading was constant from October 18, 1995 to October 25, 1995 at 0º Celsius. However, at midnight of October 25, 1995 – when the cargo had already been unloaded from the ship – the temperature fluctuated with a reading of 33º Celsius. Rocha believed the fluctuation was caused by the burnt condenser fan motor of the refrigerated container.

November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a claim for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the sum of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in favor of Netherlands Insurance.

June 4, 1996, Netherlands Insurance filed a complaint for subrogation of insurance settlement with the RTC Manila, against "the unknown owner of M/V Piya Bhum" and TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhum’s unknown owner.

The trial court ruled that while there was valid subrogation, the defendants could not be held liable for the loss or damage, as their respective liabilities ended at the time of the discharge of the cargo from the ship at the Port of Manila.


Whether or not the CA correctly held RCL and EDSA Shipping liable as common carriers under the theory of presumption of negligence.


Yes. A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. When the goods shipped are either lost or arrived in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.

To overcome the presumption of negligence, the common carrier must establish by adequate proof that it exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be responsible for the damage.

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required by law over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the temperature in the refrigerated container van, as recorded in the temperature chart, occurred after the cargo had been discharged from the vessel and was already under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the condenser fan – which caused the fluctuation of the temperature in the refrigerated container – was not damaged while the cargo was being unloaded from the ship. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier; RCL and EDSA Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan did not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while they were delivering it actually or constructively to the consignee. They could have presented proof to show that they exercised extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to have waived their right to present evidence, and the presumption of negligence must stand.

It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss or damage to the cargo was caused by a defect in the packing or in the containers. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the causes in Article 1734 of the Civil Code claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent. RCL and EDSA Shipping, however, failed to satisfy this standard of evidence and in fact offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence bars the defendant from presenting evidence supporting its allegations.

What is alluvium or alluvion?



It is the gradual deposit of sediment by natural action of a current of fresh water (not sea water), the original identity of the deposit being lost. Where is by sea water, it belongs to the State. (Government of Philippine Islands v. Cabangis, G.R. No. L-­‐28379, Mar. 27, 1929)


Note: Art. 457 states “To the owners of the lands adjoining the banks of the rivers belong the accretion which they gradually receive from the effects of the current of the waters.


Distinguish accretion from alluvium?

Accretion is the process whereby the soil is deposited while alluvium is the soil deposited.


What are the requisites of alluvium?


1. Deposit is Gradual and imperceptible

2. Made through the effects of the current of the water

3. The land where the accretion takes place is Adjacent to the banks of the river


When does the alluvion start to become the property of the riparian owner?


From the time that the deposit created by the current of water becomes manifest. (Heirs of Navarro v. IAC, GR. No. 68166, Feb. 12, 1997)


To what does the rule on alluvion not apply?


The rule does not apply to man-­‐made or artificial accretions to lands that adjoin canals or esteros or artificial drainage system (Ronquillo vs. CA, G.R. No 43346, Mar. 20, 1991).


What if the riparian owner fails to register the deposits within the prescriptive period?


Failure to register the alluvial deposit acquired by accretion for a period of 50 years subjects said accretion to acquisition thru prescription by third persons. (Reynante v. CA, G.R. No. 95907, Apr. 8, 1992)


Note: Registration under the Torrens System does not protect the riparian owner against the diminution of the area of his registered land through gradual changes in the course of an adjoining stream.


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