On 21 May 1996, the M/V Meryem Ana received a shipment of 21,857 mt of urea fertiliser from Helm Duengemittel GmbH at Odessa, Ukraine. The shipment was covered by two bills of lading and consigned to Fertiphil for delivery to two ports in the Philippines. Fertiphil insured the cargo against all risks with the respondent. When the cargo was discharged, a shortage of 349.65 mt was discovered. The respondent paid out on Fertiphil's claim, and demanded reimbursement from the petitioner on the basis of the right of subrogation. The regional trial Court (RTC) ruled in favour of the respondent and ordered the petitioner to pay PHP 1,617,527.37. In its decision, the RTC found that there was indeed a shortage in the cargo delivered, for which the common carrier must be held responsible under art 1734 of the Civil Code. The CA affirmed the ruling of the RTC and denied the petitioner's appeal. The petitioner appealed to the Supreme Court, arguing that it was not liable for the shortage, because the loss or damage was caused by bad weather. It insisted that the dispute was governed by s 4 of COGSA, which exempts the carrier from liability for any loss or damage arising from 'perils, dangers and accidents of the sea'.

Held: The petition is denied. The CA judgment is affirmed.

Although the CA decision has become final and executory, this Court has decided to review the merits of this case in the interest of justice.

The provisions of the Civil Code on common carriers are applicable. The petitioner initially argued that the CA erred in applying the provisions of the Civil Code to this case. It insisted that the contract of carriage between the parties was governed by COGSA, the law applicable to 'all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade'. This assertion is bereft of merit. This Court upholds the ruling of the CA with respect to the applicable law. As expressly provided in art 1753 of the Civil Code, '[t]he law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration'. Since the cargo in this case was transported from Ukraine to the Philippines, the petitioner's liability for the shortage must be determined in accordance with the provisions of the Civil Code on common carriers. In Eastern Shipping Lines Inc v BPI/MS Insurance Corp, GR No 182864, 12 January 2015, 745 SCRA 98 (CMI1501), this Court declared:

According to the New Civil Code, the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. The Code takes precedence as the primary law over the rights and obligations of common carriers with the Code of Commerce and COGSA applying suppletorily.

The petitioner itself later conceded that the Civil Code provisions on common carriers are primarily applicable to the present dispute, while COGSA only applies in a suppletory manner.

Further, the petitioner cites both the Civil Code and COGSA, particularly the provisions absolving a carrier from loss or damage sustained as the result of a 'storm' or a 'peril of the sea', and contends that damage to the cargo was the result of the melting of the fertiliser after seawater entered Hatch No 1 of the vessel as a result of the bad weather conditions at sea. However, the petitioner failed to prove the existence of a storm or a peril of the sea within the context of art 1734(1) of the Civil Code or s 4(2)(c) of COGSA. Furthermore, there was no sufficient proof that the damage to the shipment was solely and proximately caused by bad weather.

Not all instances of bad weather may be categorised as 'storms' or 'perils of the sea' within the meaning of the provisions of the Civil Code and COGSA on common carriers. To be considered absolutory causes under either statute, bad weather conditions must reach a certain threshold of severity. With respect to storms, this Court has explained the difference between a storm and ordinary weather conditions in Central Shipping Co Inc v Insurance Co of North America, 481 Phil 868 (2004):

Nonetheless, to our mind it would not be sufficient to categorize the weather condition at the time as a 'storm' within the absolutory causes enumerated in the law. Significantly, no typhoon was observed within the Philippine area of responsibility during that period.

According to PAGASA [the Philippine Atmospheric, Geophysical and Astronomical Services Administration], a storm has a wind force of 48 to 55 knots, equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the strong winds accompanying the southwestern monsoon could not be classified as a 'storm'. Such winds are the ordinary vicissitudes of a sea voyage. [Emphasis added by the Court.]

The phrase 'perils of the sea' carries the same connotation. Although the term has not been definitively defined in Philippine jurisprudence, courts in the United States of America generally limit the application of the phrase to weather that is 'so unusual, unexpected and catastrophic as to be beyond reasonable expectation': 13 ALR Fed 323 (originally published in 1972). Accordingly, strong winds and waves are not automatically deemed perils of the sea, if these conditions are not unusual for that particular sea area at that specific time, or if they could have been reasonably anticipated or foreseen. While cases decided by US courts are not binding precedents in this jurisdiction, the Court considers these pronouncements persuasive in light of the fact that COGSA was originally a US statute that was merely adopted by the Philippine legislature in 1936.

In this case, the evidence cited by the petitioner indicates that the vessel faced winds of only up to 40 knots while at sea. This wind force clearly fell short of the 48-55 knots required for 'storms' under art 1734(1) of the Civil Code based on the threshold established by PAGASA. The petitioner also failed to prove that the inclement weather encountered by the vessel was unusual, unexpected, or catastrophic. In particular, the strong winds and waves, which allegedly assaulted the ship, were not shown to be worse than what should have been expected in that particular location during that time of the year. Consequently, this Court cannot consider these weather conditions as 'perils of the sea' that would absolve the carrier from liability.

Common carriers are automatically presumed to have been at fault or to have acted negligently if the goods they were transporting were lost, destroyed, or damaged while in transit. This presumption can only be rebutted by proof that the carrier exercised extraordinary diligence and caution to ensure the protection of the shipment in the event of foul weather. In this case, there is absolutely no evidence that the petitioner satisfied the two requisites. Before the RTC, the petitioner limited itself to the defence of denial. As a result, the evidence that it submitted was severely limited. Evidence was not presented to demonstrate either the proximate and exclusive cause of the loss or the extraordinary diligence of the carrier.