LOSSG.R. No. L-20853 May 29, 1967BONIFACIO BROS., INC., ET
AL.,plaintiffs-appellants,vs.ENRIQUE MORA, ET
AL.,defendants-appellees.G. Magsaysay for
plaintiffs-appellants.Abad Santos and Pablo for defendant-appellee
H. E. Reyes, Inc.J. P. Santilla and A. D. Hidalgo, Jr. for other
defendant-appellee.CASTRO,J.:This is an appeal from the decision of
the Court of First Instance of Manila, Branch XV, in civil case
48823, affirming the decision of the Municipal Court of Manila,
declaring the H.S. Reyes, Inc. as having a better right than the
Bonifacio Bros., Inc. and the Ayala Auto Parts Company, appellants
herein, to the proceeds of motor insurance policy A-0615, in the
sum of P2,002.73, issued by the State Bonding & Insurance Co.
Inc., and directing payment of the said amount to the H. Reyes,
Inc.Enrique Mora, owner of Oldsmobile sedan model 1956, bearing
plate No. QC- mortgaged the same to the H.S. Reyes, Inc., with the
condition that the former would insure the automobile with the
latter as beneficiary. The automobile was thereafter insured on
June 23, 1959 with the State Bonding & Insurance Co., Inc., and
motor car insurance policy A-0615 was issued to Enrique Mora, the
pertinent provisions of which read:1. The Company (referring to the
State Bonding & Insurance Co., Inc.) will, subject to the
Limits of Liability, indemnify the Insured against loss of or
damages to the Motor Vehicle and its accessories and spare parts
whilst thereon; (a) by accidental collision or overturning or
collision or overturning consequent upon mechanical breakdown or
consequent upon wear and tear,x x x x x x x x x2. At its own option
the Company may pay in cash the amount of the loss or damage or may
repair, reinstate, or replace the Motor Vehicle or any part thereof
or its accessories or spare parts. The liability of the Company
shall not exceed the value of the parts whichever is the less. The
Insured's estimate of value stated in the schedule will be the
maximum amount payable by the Company in respect of any claim for
loss or damage.1wph1.tx x x x x x x x x4. The Insured may authorize
the repair of the Motor Vehicle necessitated by damage for which
the Company may be liable under this Policy provided that: (a) The
estimated cost of such repair does not exceed the Authorized Repair
Limit, (b) A detailed estimate of the cost is forwarded to the
Company without delay, subject to the condition that "Loss, if any
is payable to H.S. Reyes, Inc.," by virtue of the fact that said
Oldsmobile sedan was mortgaged in favor of the said H.S. Reyes,
Inc. and that under a clause in said insurance policy, any loss was
made payable to the H.S. Reyes, Inc. as Mortgagee;x x x x x x x x
xDuring the effectivity of the insurance contract, the car met with
an accident. The insurance company then assigned the accident to
the Bayne Adjustment Co. for investigation and appraisal of the
damage. Enrique Mora, without the knowledge and consent of the H.S.
Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the
labor and materials, some of which were supplied by the Ayala Auto
Parts Co. For the cost of labor and materials, Enrique Mora was
billed at P2,102.73 through the H.H. Bayne Adjustment Co. The
insurance company after claiming a franchise in the amount of P100,
drew a check in the amount of P2,002.73, as proceeds of the
insurance policy, payable to the order of Enrique Mora or H.S.
Reyes,. Inc., and entrusted the check to the H.H. Bayne Adjustment
Co. for disposition and delivery to the proper party. In the
meantime, the car was delivered to Enrique Mora without the consent
of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros.
Inc. and the Ayala Auto Parts Co. of the cost of repairs and
materials.Upon the theory that the insurance proceeds should be
paid directly to them, the Bonifacio Bros. Inc. and the Ayala Auto
Parts Co. filed on May 8, 1961 a complaint with the Municipal Court
of Manila against Enrique Mora and the State Bonding &
Insurance Co., Inc. for the collection of the sum of P2,002.73 The
insurance company filed its answer with a counterclaim for
interpleader, requiring the Bonifacio Bros. Inc. and the H.S.
Reyes, Inc. to interplead in order to determine who has better
right to the insurance proceeds in question. Enrique Mora was
declared in default for failure to appear at the hearing, and
evidence against him was receivedex parte. However, the counsel for
the Bonifacio Bros. Inc., Ayala Auto Parts Co. and State Bonding
& Insurance Co. Inc. submitted a stipulation of facts, on the
basis of which are Municipal Court rendered a decision declaring
the H.S. Reyes, Inc. as having a better right to the disputed
amount and ordering State Bonding & Insurance Co. Inc. to pay
to the H. S. Reyes, Inc. the said sum of P2,002.73. From this
decision, the appellants elevated the case to the Court of First
Instance of Manila which the stipulation of facts was reproduced.
On October 19, 1962 the latter court rendered a decision, affirming
the decision of the Municipal Court. The Bonifacio Bros. Inc. and
the Ayala Auto Parts Co. moved for reconsideration of the decision,
but the trial court denied the motion. Hence, this appeal.The main
issue raised is whether there is privity of contract between the
Bonifacio Bros. Inc. and the Ayala Auto Parts Co. on the one hand
and the insurance company on the other. The appellants argue that
the insurance company and Enrique Mora are parties to the repair of
the car as well as the towage thereof performed. The authority for
this assertion is to be found, it is alleged, in paragraph 4 of the
insurance contract which provides that "the insured may authorize
the repair of the Motor Vehicle necessitated by damage for which
the company may be liable under the policy provided that (a) the
estimated cost of such repair does not exceed the Authorized Repair
Limit, and (b) a detailed estimate of the cost is forwarded to the
company without delay." It is stressed that the H.H. Bayne
Adjustment Company's recommendation of payment of the appellants'
bill for materials and repairs for which the latter drew a check
for P2,002.73 indicates that Mora and the H.H. Bayne Adjustment Co.
acted for and in representation of the insurance company.This
argument is, in our view, beside the point, because from the
undisputed facts and from the pleadings it will be seen that the
appellants' alleged cause of action rests exclusively upon the
terms of the insurance contract. The appellants seek to recover the
insurance proceeds, and for this purpose, they rely upon paragraph
4 of the insurance contract document executed by and between the
State Bonding & Insurance Company, Inc. and Enrique Mora. The
appellants are not mentioned in the contract as parties thereto nor
is there any clause or provision thereof from which we can infer
that there is an obligation on the part of the insurance company to
pay the cost of repairs directly to them. It is fundamental that
contracts take effect only between the parties thereto, except in
some specific instances provided by law where the contract contains
some stipulation in favor of a third person.1Such stipulation is
known as stipulationpour autruior a provision in favor of a third
person not a pay to the contract. Under this doctrine, a third
person is allowed to avail himself of a benefit granted to him by
the terms of the contract, provided that the contracting parties
have clearly and deliberately conferred a favor upon such
person.2Consequently, a third person not a party to the contract
has no action against the parties thereto, and cannot generally
demand the enforcement of the same.3The question of whether a third
person has an enforcible interest in a contract, must be settled by
determining whether the contracting parties intended to tender him
such an interest by deliberately inserting terms in their agreement
with the avowed purpose of conferring a favor upon such third
person. In this connection, this Court has laid down the rule that
the fairest test to determine whether the interest of a third
person in a contract is a stipulationpour autruior merely an
incidental interest, is to rely upon the intention of the parties
as disclosed by their contract.4In the instant case the insurance
contract does not contain any words or clauses to disclose an
intent to give any benefit to any repairmen or materialmen in case
of repair of the car in question. The parties to the insurance
contract omitted such stipulation, which is a circumstance that
supports the said conclusion. On the other hand, the "loss payable"
clause of the insurance policy stipulates that "Loss, if any, is
payable to H.S. Reyes, Inc." indicating that it was only the H.S.
Reyes, Inc. which they intended to benefit.We likewise observe from
the brief of the State Bonding & Insurance Company that it has
vehemently opposed the assertion or pretension of the appellants
that they are privy to the contract. If it were the intention of
the insurance company to make itself liable to the repair shop or
materialmen, it could have easily inserted in the contract a
stipulation to that effect. To hold now that the original parties
to the insurance contract intended to confer upon the appellants
the benefit claimed by them would require us to ignore the
indespensable requisite that a stipulationpour autruimust be
clearly expressed by the parties, which we cannot do.As regards
paragraph 4 of the insurance contract, a perusal thereof would show
that instead of establishingprivity betweenthe appellants and the
insurance company, such stipulation merely establishes the
procedure that the insured has to follow in order to be entitled to
indemnity for repair. This paragraph therefore should not be
construed as bringing into existence in favor of the appellants a
right of action against the insurance company as such intention can
never be inferred therefrom.Another cogent reason for not
recognizing a right of action by the appellants against the
insurance company is that "a policy of insurance is a distinct and
independent contract between the insured and insurer, and third
persons have no right either in a court of equity, or in a court of
law, to the proceeds of it, unless there be some contract of trust,
expressed or implied between the insured and third person."5In this
case, no contract of trust, expressed or implied exists. We,
therefore, agree with the trial court that no cause of action
exists in favor of the appellants in so far as the proceeds of
insurance are concerned. The appellants' claim, if at all, is
merely equitable in nature and must be made effective through
Enrique Mora who entered into a contract with the Bonifacio Bros.
Inc. This conclusion is deducible not only from the principle
governing the operation and effect of insurance contracts in
general, but is clearly covered by the express provisions of
section 50 of the Insurance Act which read:The insurance shall be
applied exclusively to the proper interests of the person in whose
name it is made unless otherwise specified in the policy.The policy
in question has been so framed that "Loss, if any, is payable to
H.S. Reyes, Inc.," which unmistakably shows the intention of the
parties.The final contention of the appellants is that the right of
the H.S. Reyes, Inc. to the insurance proceeds arises only if there
was loss and not where there is mere damage as in the instant case.
Suffice it to say that any attempt to draw a distinction between
"loss" and "damage" is uncalled for, because the word "loss" in
insurance law embraces injury or damage.Loss in insurance, defined.
The injury or damage sustained by the insured in consequence of the
happening of one or more of the accidents or misfortune against
which the insurer, in consideration of the premium, has undertaken
to indemnify the insured. (1 Bouv. Ins. No. 1215; Black's Law
Dictionary; Cyclopedic Law Dictionary, cited in Martin's Phil.
Commercial Laws, Vol. 1, 1961 ed. p. 608).Indeed, according to sec.
120 of the Insurance Act, a loss may be either total or
partial.Accordingly, the judgment appealed from is hereby affirmed,
at appellants' cost.
LOSS (EFFECT OF GROSS NEGLIGENCE)G.R. No. 137775. March 31,
2005FGU INSURANCE CORPORATION,Petitioners,vs.THE COURT OF APPEALS,
SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by
LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO
TO,Respondents.G.R. No. 140704. March 31, 2005ESTATE OF ANG GUI,
Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO
TO,Petitioners,vs.THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP.,
and FGU INSURANCE CORP.,Respondents.D E C I S I O
NCHICO-NAZARIO,J.:Before Us are two separate Petitions for review
assailing the Decision1of the Court of Appeals in CA-G.R. CV No.
49624 entitled, "San Miguel Corporation, Plaintiff-Appellee versus
Estate of Ang Gui, represented by Lucio, Julian and Jaime, all
surnamed Ang, and Co To, Defendants-Appellants, ThirdParty
Plaintiffs versus FGU Insurance Corporation, Third-Party
Defendant-Appellant," which affirmedin totothe decision2of the
Regional Trial Court of Cebu City, Branch 22. The dispositive
portion of the Court of Appeals decision reads:WHEREFORE, for all
the foregoing, judgment is hereby rendered as follows:1) Ordering
defendants to pay plaintiff the sum of P1,346,197.00 and an
interest of 6% per annum to be reckoned from the filing of this
case on October 2, 1990;2) Ordering defendants to pay plaintiff the
sum of P25,000.00 for attorneys fees and an additional sum of
P10,000.00 as litigation expenses;3) With cost against
defendants.For the Third-Party Complaint:1) Ordering third-party
defendant FGU Insurance Company to pay and reimburse defendants the
amount of P632,700.00.3The FactsEvidence shows that Anco
Enterprises Company (ANCO), a partnership between Ang Gui and Co
To, was engaged in the shipping business. It owned the M/T ANCO
tugboat and the D/B Lucio barge which were operated as common
carriers. Since the D/B Lucio had no engine of its own, it could
not maneuver by itself and had to be towed by a tugboat for it to
move from one place to another.On 23 September 1979, San Miguel
Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B
Lucio, for towage by M/T ANCO, the following cargoes:Bill of Lading
No. Shipment Destination1 25,000 cases Pale Pilsen Estancia,
Iloilo350 cases Cerveza Negra Estancia, Iloilo2 15,000 cases Pale
Pilsen San Jose, Antique200 cases Cerveza Negra San Jose,
AntiqueThe consignee for the cargoes covered by Bill of Lading No.
1 was SMCs Beer Marketing Division (BMD)-Estancia Beer Sales
Office, Estancia, Iloilo, while the consignee for the cargoes
covered by Bill of Lading No. 2 was SMCs BMD-San Jose Beer Sales
Office, San Jose, Antique.The D/B Lucio was towed by the M/T ANCO
all the way from Mandaue City to San Jose, Antique. The vessels
arrived at San Jose, Antique, at about one oclock in the afternoon
of 30 September 1979. The tugboat M/T ANCO left the barge
immediately after reaching San Jose, Antique.When the barge and
tugboat arrived at San Jose, Antique, in the afternoon of 30
September 1979, the clouds over the area were dark and the waves
were already big. The arrastre workers unloading the cargoes of SMC
on board the D/B Lucio began to complain about their difficulty in
unloading the cargoes. SMCs District Sales Supervisor, Fernando
Macabuag, requested ANCOs representative to transfer the barge to a
safer place because the vessel might not be able to withstand the
big waves.ANCOs representative did not heed the request because he
was confident that the barge could withstand the waves. This,
notwithstanding the fact that at that time, only the M/T ANCO was
left at the wharf of San Jose, Antique, as all other vessels
already left the wharf to seek shelter. With the waves growing
bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790)
cases of beer were discharged into the custody of the arrastre
operator.At about ten to eleven oclock in the evening of 01 October
1979, the crew of D/B Lucio abandoned the vessel because the barges
rope attached to the wharf was cut off by the big waves. At around
midnight, the barge run aground and was broken and the cargoes of
beer in the barge were swept away.As a result, ANCO failed to
deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten
(29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of
Cerveza Negra. The value per case of Pale Pilsen was Forty-Five
Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza
Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs
claim against ANCO amounted to One Million Three Hundred Forty-Six
Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).As a
consequence of the incident, SMC filed a complaint for Breach of
Contract of Carriage and Damages against ANCO for the amount of One
Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven
Pesos (P1,346,197.00) plus interest, litigation expenses and
Twenty-Five Percent (25%) of the total claim as attorneys fees.Upon
Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26
January 1993, SMC filed a second amended complaint which was
admitted by the Court impleading the surviving partner, Co To and
the Estate of Ang Gui represented by Lucio, Julian and Jaime, all
surnamed Ang. The substituted defendants adopted the original
answer with counterclaim of ANCO "since the substantial allegations
of the original complaint and the amended complaint are practically
the same."ANCO admitted that the cases of beer Pale Pilsen and
Cerveza Negra mentioned in the complaint were indeed loaded on the
vessel belonging to ANCO. It claimed however that it had an
agreement with SMC that ANCO would not be liable for any losses or
damages resulting to the cargoes by reason of fortuitous event.
Since the cases of beer Pale Pilsen and Cerveza Negra were lost by
reason of a storm, a fortuitous event which battered and sunk the
vessel in which they were loaded, they should not be held liable.
ANCO further asserted that there was an agreement between them and
SMC to insure the cargoes in order to recover indemnity in case of
loss. Pursuant to that agreement, the cargoes to the extent of
Twenty Thousand (20,000) cases was insured with FGU Insurance
Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight
Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance
Policy No. 29591.Subsequently, ANCO, with leave of court, filed a
Third-Party Complaint against FGU, alleging that before the vessel
of ANCO left for San Jose, Antique with the cargoes owned by SMC,
the cargoes, to the extent of Twenty Thousand (20,000) cases, were
insured with FGU for a total amount of Eight Hundred Fifty-Eight
Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance
Policy No. 29591. ANCO further alleged that on or about 02 October
1979, by reason of very strong winds and heavy waves brought about
by a passing typhoon, the vessel run aground near the vicinity of
San Jose, Antique, as a result of which, the vessel was totally
wrecked and its cargoes owned by SMC were lost and/or destroyed.
According to ANCO, the loss of said cargoes occurred as a result of
risks insured against in the insurance policy and during the
existence and lifetime of said insurance policy. ANCO went on to
assert that in the remote possibility that the court will order
ANCO to pay SMCs claim, the third-party defendant corporation
should be held liable to indemnify or reimburse ANCO whatever
amounts, or damages, it may be required to pay to SMC.In its answer
to the Third-Party complaint, third-party defendant FGU admitted
the existence of the Insurance Policy under Marine Cover Note No.
29591 but maintained that the alleged loss of the cargoes covered
by the said insurance policy cannot be attributed directly or
indirectly to any of the risks insured against in the said
insurance policy. According to FGU, it is only liable under the
policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case
of any of the following:a) total loss of the entire shipment;b)
loss of any case as a result of the sinking of the vessel; orc)
loss as a result of the vessel being on fire.Furthermore, FGU
alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC
failed to exercise ordinary diligence or the diligence of a good
father of the family in the care and supervision of the cargoes
insured to prevent its loss and/or destruction.Third-Party
defendant FGU prayed for the dismissal of the Third-Party Complaint
and asked for actual, moral, and exemplary damages and attorneys
fees.The trial court found that while the cargoes were indeed lost
due to fortuitous event, there was failure on ANCOs part, through
their representatives, to observe the degree of diligence required
that would exonerate them from liability. The trial court thus held
the Estate of Ang Gui and Co To liable to SMC for the amount of the
lost shipment. With respect to the Third-Party complaint, the court
a quo found FGU liable to bear Fifty-Three Percent (53%) of the
amount of the lost cargoes. According to the trial court:. . .
Evidence is to the effect that the D/B Lucio, on which the cargo
insured, run-aground and was broken and the beer cargoes on the
said barge were swept away.It is the sense of this Court that the
risk insured against was the cause of the loss.. . .Since the total
cargo was 40,550 cases which had a total amount of P1,833,905.00
and the amount of the policy was only for P858,500.00,defendants as
assured, therefore, were considered co-insurers of third-party
defendant FGU Insurance Corporation to the extent of 975,405.00
value of the cargo.Consequently, inasmuch as there was partial loss
of only P1,346,197.00, the assured shall bear 53% of the
loss4[Emphasis ours]The appellate court affirmedin totothe decision
of the lower court and denied the motion for reconsideration and
the supplemental motion for reconsideration.Hence, the
petitions.The IssuesIn G.R. No. 137775, the grounds for review
raised by petitioner FGU can be summarized into two: 1) Whether or
not respondent Court of Appeals committed grave abuse of discretion
in holding FGU liable under the insurance contract considering the
circumstances surrounding the loss of the cargoes; and 2) Whether
or not the Court of Appeals committed an error of law in holding
that the doctrine ofres judicataapplies in the instant case.In G.R.
No. 140704, petitioner Estate of Ang Gui and Co To assail the
decision of the appellate court based on the following assignments
of error: 1) The Court of Appeals committed grave abuse of
discretion in affirming the findings of the lower court that the
negligence of the crewmembers of the D/B Lucio was the proximate
cause of the loss of the cargoes; and 2) The respondent court acted
with grave abuse of discretion when it ruled that the appeal was
without merit despite the fact that said court had accepted the
decision in Civil Case No. R-19341, as affirmed by the Court of
Appeals and the Supreme Court, asres judicata.Ruling of the
CourtFirst, we shall endeavor to dispose of the common issue raised
by both petitioners in their respective petitions for review, that
is, whether or not the doctrine ofres judicataapplies in the
instant case.It is ANCOs contention that the decision in Civil Case
No. R-19341,5which was decided in its favor, constitutesres
judicatawith respect to the issues raised in the case at bar.The
contention is without merit. There can be nores judicataas between
Civil Case No. R-19341 and the case at bar. In order forres
judicatato be made applicable in a case, the following essential
requisites must be present: 1) the former judgment must be final;
2) the former judgment must have been rendered by a court having
jurisdiction over the subject matter and the parties; 3) the former
judgment must be a judgment or order on the merits; and 4)there
must be between the first and second action identity of parties,
identity of subject matter, and identity of causes of action.6There
is no question that the first three elements of res judicata as
enumerated above are indeed satisfied by the decision in Civil Case
No. R-19341. However, the doctrine is still inapplicable due to the
absence of the last essential requisite of identity of parties,
subject matter and causes of action.The parties in Civil Case No.
R-19341 were ANCO as plaintiff and FGU as defendant while in the
instant case, SMC is the plaintiff and the Estate of Ang Gui
represented by Lucio, Julian and Jaime, all surnamed Ang and Co To
as defendants, with the latter merely impleading FGU as third-party
defendant.The subject matter of Civil Case No. R-19341 was the
insurance contract entered into by ANCO, the owner of the vessel,
with FGU covering the vessel D/B Lucio, while in the instant case,
the subject matter of litigation is the loss of the cargoes of SMC,
as shipper, loaded in the D/B Lucio and the resulting failure of
ANCO to deliver to SMCs consignees the lost cargo. Otherwise
stated, the controversy in the first case involved the rights and
liabilities of the shipownervis--visthat of the insurer, while the
present case involves the rights and liabilities of the
shippervis--visthat of the shipowner. Specifically, Civil Case No.
R-19341 was an action for Specific Performance and Damages based on
FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the
vessel D/B Lucio, while the instant case is an action for Breach of
Contract of Carriage and Damages filed by SMC against ANCO based on
Bill of Lading No. 1 and No. 2, with defendant ANCO seeking
reimbursement from FGU under Insurance Policy No. MA-58486, should
the former be held liable to pay SMC.Moreover, the subject matter
of the third-party complaint against FGU in this case is different
from that in Civil Case No. R-19341. In the latter, ANCO was suing
FGU for the insurance contract over the vessel while in the former,
the third-party complaint arose from the insurance contract
covering the cargoes on board the D/B Lucio.The doctrine ofres
judicataprecludes the re-litigation of a particular fact or issue
already passed upon by a court of competent jurisdiction in a
former judgment, in another action between the same parties based
on a different claim or cause of action. The judgment in the prior
action operates as estoppel only as to those matters in issue or
points controverted, upon the determination of which the finding or
judgment was rendered.7If a particular point or question is in
issue in the second action, and the judgment will depend on the
determination of that particular point or question, a former
judgment between the same parties or their privies will be final
and conclusive in the second if that same point or question was in
issue and adjudicated in the first suit.8Since the case at bar
arose from the same incident as that involved in Civil Case No.
R-19341, only findings with respect to matters passed upon by the
court in the former judgment are conclusive in the disposition of
the instant case. A careful perusal of the decision in Civil Case
No. R-19341 will reveal that the pivotal issues resolved by the
lower court, as affirmed by both the Court of Appeals and the
Supreme Court, can be summarized into three legal conclusions: 1)
that the D/B Lucio before and during the voyage was seaworthy; 2)
that there was proper notice of loss made by ANCO within the
reglementary period; and 3) that the vessel D/B Lucio was a
constructive total loss.Said decision, however, did not pass upon
the issues raised in the instant case. Absent therein was any
discussion regarding the liability of ANCO for the loss of the
cargoes. Neither did the lower court pass upon the issue of the
alleged negligence of the crewmembers of the D/B Lucio being the
cause of the loss of the cargoes owned by SMC.Therefore, based on
the foregoing discussion, we are reversing the findings of the
Court of Appeals that there isres judicata.Anent ANCOs first
assignment of error,i.e., the appellate court committed error in
concluding that the negligence of ANCOs representatives was the
proximate cause of the loss, said issue is a question of fact
assailing the lower courts appreciation of evidence on the
negligence or lack thereof of the crewmembers of the D/B Lucio. As
a rule, findings of fact of lower courts, particularly when
affirmed by the appellate court, are deemed final and conclusive.
The Supreme Court cannot review such findings on appeal, especially
when they are borne out by the records or are based on substantial
evidence.9As held in the case ofDonato v. Court of Appeals,10in
this jurisdiction, it is a fundamental and settled rule that
findings of fact by the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent
reasons because the trial court is in a better position to examine
real evidence, as well as to observe the demeanor of the witnesses
while testifying in the case.11It is not the function of this Court
to analyze or weigh evidence all over again, unless there is a
showing that the findings of the lower court are totally devoid of
support or are glaringly erroneous as to constitute palpable error
or grave abuse of discretion.12A careful study of the records shows
no cogent reason to fault the findings of the lower court, as
sustained by the appellate court, that ANCOs representatives failed
to exercise the extraordinary degree of diligence required by the
law to exculpate them from liability for the loss of the
cargoes.First, ANCO admitted that they failed to deliver to the
designated consignee the Twenty Nine Thousand Two Hundred Ten
(29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of
Cerveza Negra.Second, it is borne out in the testimony of the
witnesses on record that the barge D/B Lucio had no engine of its
own and could not maneuver by itself. Yet, the patron of ANCOs
tugboat M/T ANCO left it to fend for itself notwithstanding the
fact that as the two vessels arrived at the port of San Jose,
Antique, signs of the impending storm were already manifest. As
stated by the lower court, witness Mr. Anastacio Manilag testified
that the captain or patron of the tugboat M/T ANCO left the barge
D/B Lucio immediately after it reached San Jose, Antique, despite
the fact that there were already big waves and the area was already
dark. This is corroborated by defendants own witness, Mr. Fernando
Macabueg.13The trial court continued:At that precise moment, since
it is the duty of the defendant to exercise and observe
extraordinary diligence in the vigilance over the cargo of the
plaintiff, the patron or captain of M/T ANCO, representing the
defendant could have placed D/B Lucio in a very safe location
before they left knowing or sensing at that time the coming of a
typhoon. The presence of big waves and dark clouds could have
warned the patron or captain of M/T ANCO to insure the safety of
D/B Lucio including its cargo. D/B Lucio being a barge, without its
engine, as the patron or captain of M/T ANCO knew, could not
possibly maneuver by itself. Had the patron or captain of M/T ANCO,
the representative of the defendants observed extraordinary
diligence in placing the D/B Lucio in a safe place, the loss to the
cargo of the plaintiff could not have occurred. In short,
therefore, defendants through their representatives, failed to
observe the degree of diligence required of them under the
provision of Art. 1733 of the Civil Code of the
Philippines.14Petitioners Estate of Ang Gui and Co To, in
theirMemorandum, asserted that the contention of respondents SMC
and FGU that "the crewmembers of D/B Lucio should have left port at
the onset of the typhoon is like advising the fish to jump from the
frying pan into the fire and an advice that borders on
madness."15The argument does not persuade. The records show that
the D/B Lucio was the only vessel left at San Jose, Antique, during
the time in question. The other vessels were transferred and
temporarily moved to Malandong, 5 kilometers from wharf where the
barge remained.16Clearly, the transferred vessels were definitely
safer in Malandong than at the port of San Jose, Antique, at that
particular time, a fact which petitioners failed to disputeANCOs
arguments boil down to the claim that the loss of the cargoes was
caused by the typhoonSisang, a fortuitous event (caso fortuito),
and there was no fault or negligence on their part. In fact, ANCO
claims that their crewmembers exercised due diligence to prevent or
minimize the loss of the cargoes but their efforts proved no match
to the forces unleashed by the typhoon which, in petitioners own
words was, by any yardstick, a natural calamity, a fortuitous
event, an act of God, the consequences of which petitioners could
not be held liable for.17The Civil Code provides:Art. 1733. Common
carriers, from the nature of their business and for reasons of
public policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each
case.Such extraordinary diligence in vigilance over the goods is
further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7
. . .Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:(1) Flood, storm, earthquake,
lightning, or other natural disaster or calamity;. . .Art. 1739.In
order that the common carrier may be exempted from responsibility,
the natural disaster must have been the proximate and only cause of
the loss. However, the common carrier must exercise due diligence
to prevent or minimize loss before, during and after the occurrence
of flood, storm, or other natural disaster in order that the common
carrier may be exempted from liability for the loss, destruction,
or deterioration of the goods . . . (Emphasis supplied)Caso
fortuitoorforce majeure(which in law are identical insofar as they
exempt an obligor from liability)18by definition, are extraordinary
events not foreseeable or avoidable, events that could not be
foreseen, or which though foreseen, were inevitable. It is
therefore not enough that the event should not have been foreseen
or anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid.19In this case, the calamity
which caused the loss of the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of San Jose,
Antique, managed to transfer to another place, a circumstance which
prompted SMCs District Sales Supervisor to request that the D/B
Lucio be likewise transferred, but to no avail. The D/B Lucio had
no engine and could not maneuver by itself. Even if ANCOs
representatives wanted to transfer it, they no longer had any means
to do so as the tugboat M/T ANCO had already departed, leaving the
barge to its own devices. The captain of the tugboat should have
had the foresight not to leave the barge alone considering the
pending storm.While the loss of the cargoes was admittedly caused
by the typhoonSisang, a natural disaster, ANCO could not escape
liability to respondent SMC. The records clearly show the failure
of petitioners representatives to exercise the extraordinary degree
of diligence mandated by law. To be exempted from responsibility,
the natural disaster should have been the proximate and only cause
of the loss.20There must have been no contributory negligence on
the part of the common carrier. As held in the case ofLimpangco
Sons v. Yangco Steamship Co.:21. . . To be exempt from liability
because of an act of God, the tug must be free from any previous
negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of the
loss in any given instance may have been what is termed an act of
God, yet, if the tug unnecessarily exposed the two to such accident
by any culpable act or omission of its own, it is not
excused.22Therefore, as correctly pointed out by the appellate
court, there was blatant negligence on the part of M/T ANCOs
crewmembers, first in leaving the engine-less barge D/B Lucio at
the mercy of the storm without the assistance of the tugboat, and
again in failing to heed the request of SMCs representatives to
have the barge transferred to a safer place, as was done by the
other vessels in the port; thus, making said blatant negligence the
proximate cause of the loss of the cargoes.We now come to the issue
of whether or not FGU can be held liable under the insurance policy
to reimburse ANCO for the loss of the cargoes despite the findings
of the respondent court that such loss was occasioned by the
blatant negligence of the latters employees.One of the purposes for
taking out insurance is to protect the insured against the
consequences of his own negligence and that of his agents. Thus, it
is a basic rule in insurance that the carelessness and negligence
of the insured or his agents constitute no defense on the part of
the insurer.23This rule however presupposes that the loss has
occurred due to causes which could not have been prevented by the
insured, despite the exercise of due diligence.The question now is
whether there is a certain degree of negligence on the part of the
insured or his agents that will deprive him the right to recover
under the insurance contract. We say there is. However, to what
extent such negligence must go in order to exonerate the insurer
from liability must be evaluated in light of the circumstances
surrounding each case. When evidence show that the insureds
negligence or recklessness is so gross as to be sufficient to
constitute a willful act, the insurer must be exonerated.In the
case ofStandard Marine Ins. Co. v. Nome Beach L. & T. Co.,24the
United States Supreme Court held that:The ordinary negligence of
the insured and his agents has long been held as a part of the risk
which the insurer takes upon himself, and the existence of which,
where it is the proximate cause of the loss, does not absolve the
insurer from liability.But willful exposure, gross negligence,
negligence amounting to misconduct, etc., have often been held to
release the insurer from such liability.25[Emphasis ours]. . .In
the case of Williams v. New England Insurance Co., 3 Cliff. 244,
Fed. Cas. No. 17,731, the owners of an insured vessel attempted to
put her across the bar at Hatteras Inlet. She struck on the bar and
was wrecked. The master knew that the depth of water on the bar was
such as to make the attempted passage dangerous. Judge Clifford
held that, under the circumstances, the loss was not within the
protection of the policy, saying:Authorities to prove that persons
insured cannot recover for a loss occasioned by their own wrongful
acts are hardly necessary, as the proposition involves an
elementary principle of universal application. Losses may be
recovered by the insured, though remotely occasioned by the
negligence or misconduct of the master or crew, if proximately
caused by the perils insured against, because such mistakes and
negligence are incident to navigation and constitute a part of the
perils which those who engage in such adventures are obliged to
incur;but it was never supposed that the insured could recover
indemnity for a loss occasioned by his own wrongful act or by that
of any agent for whose conduct he was responsible.26[Emphasis
ours]From the above-mentioned decision, the United States Supreme
Court has made a distinction between ordinary negligence and gross
negligence or negligence amounting to misconduct and its effect on
the insureds right to recover under the insurance contract.
According to the Court, while mistake and negligence of the master
or crew are incident to navigation and constitute a part of the
perils that the insurer is obliged to incur, such negligence or
recklessness must not be of such gross character as to amount to
misconduct or wrongful acts; otherwise, such negligence shall
release the insurer from liability under the insurance contract.In
the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the D/B
Lucio and the M/T ANCO were blatantly negligent. To wit:There
wasblatant negligenceon the part of the employees of
defendants-appellants when the patron (operator) of the tug boat
immediately left the barge at the San Jose, Antique wharf despite
the looming bad weather. Negligence was likewise exhibited by the
defendants-appellants representative who did not heed Macabuags
request that the barge be moved to a more secure place. The prudent
thing to do, as was done by the other sea vessels at San Jose,
Antique during the time in question, was to transfer the vessel to
a safer wharf.The negligence of the defendants-appellants is proved
by the fact that on 01 October 1979, the only simple vessel left at
the wharf in San Jose was the D/B Lucio.27[Emphasis ours]As stated
earlier, this Court does not find any reason to deviate from the
conclusion drawn by the lower court, as sustained by the Court of
Appeals, that ANCOs representatives had failed to exercise
extraordinary diligence required of common carriers in the shipment
of SMCs cargoes. Such blatant negligence being the proximate cause
of the loss of the cargoes amounting to One Million Three Hundred
Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00)This Court, taking into account the circumstances
present in the instant case, concludes that the blatant negligence
of ANCOs employees is of such gross character that it amounts to a
wrongful act which must exonerate FGU from liability under the
insurance contract.WHEREFORE, premises considered, the Decision of
the Court of Appeals dated 24 February 1999 is hereby AFFIRMED with
MODIFICATION dismissing the third-party complaint.
PROOF OF LOSSRepublic of the PhilippinesSUPREME COURTManilaFIRST
DIVISIONG.R. No. 138737July 12, 2001FINMAN GENERAL ASSURANCE
CORPORATION,petitioner,vs.COURT OF APPEALS and USIPHIL
INCORPORATED,respondents.KAPUNAN,J.:Through this petition for
review on certiorari Finman General Assurance Corporation
(petitioner) seeks to reverse and set aside the Decision, dated
January 14, 1999, of the Court of Appeals (CA) in CA-G.R. CV No.
46721 directing petitioner to pay the insurance claim of Usiphil
Incorporated (private respondent). The appellate courts Resolution,
dated May 13, 1999, which denied petitioners motion for
reconsideration, is likewise sought to be reversed and set
aside.The antecedent facts, as culled from the decision of the
trial court and the CA, are as follows:On September 15, 1981,
private respondent obtained a fire insurance policy from petitioner
(then doing business under the name Summa Insurance Corporation)
covering certain properties, e.g., office, furniture, fixtures,
shop machinery and other trade equipment. Under Policy No. F3100
issued to private respondent, petitioner undertook to indemnify
private respondent for any damage to or loss of said properties
arising from fire.Sometime in 1982, private respondent filed with
petitioner an insurance claim amounting to P987,126.11 for the loss
of the insured properties due to fire. Acting thereon, petitioner
appointed Adjuster H.H. Bayne to undertake the valuation and
adjustment of the loss. H.H. Bayne then required private respondent
to file a formal claim and submit proof of loss. In compliance
therewith, private respondent submitted its Sworn Statement of Loss
and Formal Claim, dated July 22, 1982, signed by Reynaldo Cayetano,
private respondents Manager. Respondent likewise submitted Proof of
Loss signed by its Accounting Manager Pedro Palallos and
countersigned by H.H. Baynes Adjuster F.C. Medina.Palallos
personally followed-up private respondents claim with petitioners
President Joaquin Ortega. During their meeting, Ortega instructed
their Finance Manager, Rosauro Maghirang, to reconcile the records.
Thereafter, Maghirang and Palallos signed a Statement/Agreement,
dated February 28, 1985, which indicated that the amount due
respondent was P842,683.40.Despite repeated demands by private
respondent, petitioner refused to pay the insurance claim. Thus,
private respondent was constrained to file a complaint against
petitioner for the unpaid insurance claim. In its Answer,
petitioner maintained that the claim of private respondent could
not be allowed because it failed to comply with Policy Condition
No. 13 regarding the submission of certain documents to prove the
loss.Trial ensued. On July 6, 1994, the trial court rendered
judgment in favor of private respondent. The dispositive portion of
the decision reads:WHEREFORE, in view of the above observations and
findings, judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter:1. To pay the plaintiff
the sum of P842,683.40 and to pay 24% interest per annum from
February 28, 1985 until fully paid (par. 29 of Exh. K);2. To pay
the plaintiff the sum equivalent to 10% of the principal obligation
as and for attorneys fees, plus P1,500.00 per court appearance of
counsel;3. To pay the plaintiff the amount of P30,000.00 as
exemplary damages in addition to the actual and compensatory
damages awarded;4. Dismissing the claim of P30,000.00 for actual
damages under par. 4 of the prayer, since the actual damages has
been awarded under par. 1 of the decisions dispositive portion;5.
Dismissing the claim of interest under par. 2 of the prayer, there
being no agreement to such effect;6. Dismissing the counter-claim
for lack of merit;7. Ordering the defendant to pay the cost of
suit.SO ORDERED.1On appeal, the CA substantially affirmed the
decision of the trial court. The dispositive portion of the CA
decision reads:WHEREFORE, the appealed decision is hereby AFFIRMED
with the modification that defendant-appellant is ordered to pay
plaintiff-appellee the sum of P842,683.40 and to pay 24% interest
per annum from 03 May 1985 until fully paid. In all other respects,
the appealed decision is AFFIRMEDIN TOTO.SO ORDERED.2Petitioner now
comes to this Court assailing the decision of the appellate court.
Petitioner alleges that:Respondent Court of Appeals erred in
finding that there is evidence sufficient to justify the Decision
of the lower court;Respondent Court of Appeals erred in failing to
consider the fact that Private Respondent committed a violation of
the Insurance Policy which justifies the denial of the claim by
Petitioner;Respondent Court of Appeals further erred in finding
that Petitioner is liable to pay the respondent, Usiphil, Inc., an
interest of 24% per annum in addition to the principal amount of
P842,683.40.3Essentially, petitioner argues that the disallowance
of private respondents claim is justified by its failure to submit
the required documents in accordance with Policy Condition No. 13.
Said requirements were allegedly communicated to private respondent
in the two letters of H.H. Bayne to private respondent. The first
letter stated:To be able to expedite adjustment of this case,
please submit to us without delay the following documents and/or
particulars:For FFF, Machineries/Equipment Claims1. Your formal
claim (which may be accomplished in the enclosed form) accompanied
by a detailed inventory of the documents submitted.2. Certification
from the appropriate government office indicating the date of the
occurrence of the fire, the property involved, its location and
possible point of origin.3. Proof of premium payment.4. Three color
photographs of the debris properly captioned/identified/dated and
initiated by the claimant at the back.4.1 Close-up (not more than 2
meters away) of themostseverely damaged.4.2 Close-up (not more than
2 meters away) of theleastdamaged.4.3. Original view of the debris
(may be from farther than 2 meters away); splice two or more frames
if necessary.Though our adjusters will also take photographs in the
manner prescribed above, please do not rely on his photographs in
the preservations of your evidence of loss thru pictures.5. Copies
of purchase invoices.6. In the absence of No. 5, suppliers
certificates of sales and delivery.7. Appraisal report, if any.8.
Where initial estimated loss is exceeding P20,000.00, submit
estimate by at least 2 contractors/suppliers.9. Others (to be
specified)1. Repairs cost of the affected items including quotation
orinvoices in support thereof;2. Complete lists of furniture,
fixtures & fittings including date and cost of acquisition,
and;3. Statement of salvage on burneditems.Your preferential
attention to this request will be fully appreciated.4While the
other letter stated:Please submit to us without delay the following
documents and/or particulars.For Stock Claim1. Your formal claim
(which may be accomplished in the enclosed), accompanied by a
detailed inventory of the documents submitted.2. Certification from
the appropriate government office showing that the Insureds
property was involved in the fire as a consequence of which the
claim is being filed.3. Proof of premium payment.4. Three colored
photographs of the debris, property captioned/identified/dated and
initiated by the claimant at the back; in a floor plan, indicate
the point from where the picture was taken and by an arrow where
the camera was facing.4.1. Close-up (not more than 2 meters away)
of themost severely damaged.4.2. Close-up (not more than 2 meters
away) of the least damaged.4.3. Overall view of the debris (may be
from farther than 2 meters away); splice two or more frames if
necessary.Our adjuster will also take photographs.5. Books of
accounts bill, invoices and other vouchers, or certified copies
thereof if originals be lost. This requirement includes, but is not
limited to, purchase and sales invoices, delivery6. Certified
copies of income tax returns for the last three years and the
accompanying financial statements.7. Latest inventory of
merchandise filed with a financial institution, the Bureau of
Internal Revenue or any government entity prior to the loss.8. A
detailed inventory of the articles damaged or destroyed, showing
the cost price of each, extent of loss, if any, if the risk
sustained partial or water damaged.9. Certificates of
registration.10. Bank Statements.11. For losses where the estimated
value of stocks claimed which are burned out of sight and/or which
may no longer be subject to actual physical count exceeds
P50,000.00, a CPAs detailed computations in support of such
estimated value.12. In the absence of purchase invoices/delivery
receipts (state reason for absence), submit suppliers certificate
of sales and delivery.13. Others (to be specified).Statement of
salvage of the affected stocks in trade.Your compliance with this
request will enable us to expedite adjustment of the loss in
caption.5According to petitioner, in complete disregard of the
foregoing requirements, private respondent never submitted any of
the documents mentioned therein. Further, petitioner assails the
award in favor of private respondent of an interest rate of 24% per
annum. Since there was allegedly no express finding that petitioner
unreasonably denied or withheld the payment of the subject
insurance claim, then the award of 24% per annum is not proper.
Petitioner opines that the judgment should only bear the legal
interest rate of 12% per annum for the delay in the payment of the
claim.The petition is bereft of merit.Well-settled is the rule that
factual findings and conclusions of the trial court and the CA are
entitled to great weight and respect, and will not be disturbed on
appeal in the absence of any clear showing that the trial court
overlooked certain facts or circumstances which would substantially
affect the disposition of the case.6There is no cogent reason to
deviate from this salutary rule in the present case.Both the trial
court and the CA concur in holding that private respondent had
substantially complied with Policy Condition No. 13 which reads:13.
The insured shall give immediate written notice to the Company of
any loss, protect the property from further damage, forthwith
separate the damaged and undamaged personal property, put it in the
best possible order, furnish a complete inventory of the destroyed,
damaged, and undamaged property, showing in detail quantities,
costs, actual cash value and the amount of loss claimed; AND WITHIN
SIXTY DAYS AFTER THE LOSS, UNLESS SUCH TIME IS EXTENDED IN WRITING
BY THE COMPANY, THE INSURED SHALL RENDER TO THE COMPANY A PROOF OF
LOSS, signed and sworn to by the insured, stating the knowledge and
belief of the insured as to the following: the time and origin of
the loss, the interest of the insured and of all others in the
property, the actual cash value of each item thereof and the amount
of loss thereto, all encumbrances thereon, all other contracts of
insurance, whether valid or not, covering any of said property, any
changes in the title, use, occupation, location, possession or
exposures of said property since the issuing of this policy by whom
and for what purpose any buildings herein described and the several
parts thereof were occupied at the time of loss and whether or not
it then stood on leased ground, and shall furnish a copy of all the
descriptions and schedules in all policies, and if required
verified plans and specifications of any building, fixtures, or
machinery destroyed or damaged. The insured, as often as may be
reasonably required, shall exhibit to any person designated by the
company all that remains of any property herein described, and
submit to examination under oath by any person named by the
Company, and subscribe the same; and, as often as may be reasonably
required, shall produce for examination all books of account,
bills, invoices, and other vouchers or certified copies thereof if
originals be lost, at such reasonable time and place as may be
designated by the Company or its representative and shall permit
extracts and copies thereof to be made.No claim under this policy
shall be payable unless the terms of this condition have been
complied with.7A perusal of the records shows that private
respondent, after the occurrence of the fire, immediately notified
petitioner thereof. Thereafter, private respondent submitted the
following documents: (1) Sworn Statement of Loss and Formal Claim
(Exhibit C) and; (2) Proof of Loss (Exhibit D). The submission of
these documents, to the Courts mind, constitutes substantial
compliance with the above provision. Indeed, as regards the
submission of documents to prove loss, substantial, not strict as
urged by petitioner, compliance with the requirements will always
be deemed sufficient.8In any case, petitioner itself acknowledged
its liability when through its Finance Manager, Rosauro Maghirang,
it signed the document indicating that the amount due private
respondent is P842,683.40 (Exhibit E). As correctly held by the
appellate court:Under the aforequoted provision of the insurance
policy, the insured was required to submit to the insurer written
notice of the loss; and a complete inventory of the properties
damaged within 60 days after the fire, as well as a signed and
sworn statement of Proof of Loss. It is admitted by all parties
that plaintiff-appellee notified the insurer Summa Corporation of
the fire which occurred on 27 May 1982. It is likewise admitted by
all parties that plaintiff-appellee submitted the following
documents in support of its claim: (1) Sworn Statement of Loss
(Exhibit C); (2) formal claim dated 22 July 1982; (3) unnotarized
sworn statement of proof of loss (Exhibit D). There was, therefore,
sufficient compliance with the requirements in Section 13 of the
policy. But, even assuming that plaintiff-appellee indeed failed to
submit certain required documents as proof of loss per Section 13,
such violation was waived by the insurer Summa when it signed the
document marked Exhibit E, a breakdown of the amount due to
plaintiff-appellee as of February 1985 on the insurance claim. By
such act, defendant-appellant acknowledged its liability under the
insurance policy.Antecedent to the execution of Exhibit E, there
was a conference between Pallalos, representing plaintiff-appellee
and Ortega representing Summa Insurance. There is no evidence that
in that meeting, Summa Insurance questioned plaintiff-appellees
submission of the required documents. What happened was that Ortega
summoned Maghirang so that he could settle with Pallalos regarding
the amount due to plaintiff-appellee from insurance claim. The
result is a reconciliation of claim in Exhibit E which shows that
as of February 1985, the net due sum is
P842,683.49.Defendant-appellant alleges that Maghirang was without
authority to sign Exhibit E, and therefore without authority to
bind defendant-appellant corporation. We do not agree. The evidence
indicate that at a meeting between plaintiff-appellees corporate
president Pedro Pallalos and his counterpart in defendant-appellant
corporation, Joaquin Ortega, the latter summoned Rosauro Maghirang
to reconcile the claims of plaintiff-appellee. One who clothes
another with apparent authority as his agent and holds him to the
public as such, cannot later be allowed to deny the authority of
such person to act as his agent when such third person entered into
the contract in good faith and in an honest belief that he is such
agent. Witness for defendant-appellant Luis Manapats testimony that
Maghirang was without authority to bind the defendant-appellant
cannot be given credence because, as he himself testified, he was
not yet part of the Summa Corporation at the time the negotiations
in question were going on.9Anent the payment of 24% interest per
annum computed from May 3, 1985 until fully paid, suffice it to say
that the same is authorized by Sections 243 and 244 of the
Insurance Code:Sec. 243. The amount of any loss or damage for which
an insurer may be liable, under any policy other than life
insurance policy, shall be paid within thirty days after proof of
loss is received by the insurer and ascertainment of the loss or
damage is made either by agreement between the insured and the
insurer or by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the insurer of the
proof of loss, then the loss or damage shall be paid within ninety
days after such receipt. Refusal or failure to pay the loss or
damage within the time prescribed herein will entitle the assured
to collect interest on the proceeds of the policy for the duration
of the delay at the rate of twice the ceiling prescribed by the
Monetary Board, unless such failure or refusal to pay is based on
the ground that the claim is fraudulent.Sec. 244. In case of any
litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court,
as the case may be, to make a finding as to whether the payment of
the claim of the insured has been unreasonably denied or withheld;
and in the affirmative case, the insurance company shall be
adjudged to pay damages which shall consist of attorneys fees and
other expenses incurred by the insured person by reason of such
unreasonable denial or withholding of payment plus interest of
twice the ceiling prescribed by the Monetary Board of the amount of
the claim due the insured, from the date following the time
prescribed in section two hundred forty-two or in section two
hundred forty-three, as the case may be, until the claim is fully
satisfied:Provided, That the failure to pay any such claim within
the time prescribed in said sections shall be consideredprima
facieevidence of reasonable delay in payment.Notably, under Section
244, aprima facieevidence of unreasonable delay in payment of the
claim is created by the failure of the insurer to pay the claim
within the time fixed in both Sections 243 and 244.10Further,
Section 29 of the policy itself provides for the payment of such
interest:29. Settlement of claim clause. The amount of any loss or
damage for which the company may be liable, under this policyshall
be paid within thirty days after proof of loss is received by the
company and ascertainment of the loss or damage is made either in
an agreement between the insured and the company or by arbitration;
but if such ascertainment is not had or made within sixty days
after such receipt by the company of the proof of loss, then the
loss or damage shall be paid within ninety days after such
receipt.Refusal or failure to pay the loss or damage within the
time prescribed herein will entitle the assured to collect interest
on the proceeds of the policy for the duration of the delay at the
rate of twice the ceiling prescribed by the Monetary Board, unless
such failure or refusal to pay is based on the grounds (sic) that
the claim is fraudulent.11The policy itself obliges petitioner to
pay the insurance claim within thirty days after proof of loss and
ascertainment of the loss made in an agreement between private
respondent and petitioner. In this case, as found by the CA,
petitioner and private respondent signed the agreement (Exhibit E)
indicating that the amount due private respondent was P842,683.40
on April 2, 1985. Petitioner thus had until May 2, 1985 to pay
private respondents insurance.12For its failure to do so, the CA
and the trial court rightfully directed petitioner to pay,inter
alia, 24% interest per annum in accordance with the above quoted
provisions.1wphi1.ntWHEREFORE, the instant petition is
herebyDENIEDfor lack of merit. The Decision, dated January 14,
1999, of the Court of Appeals in CA-G.R. CV No. 46721 and its
Resolution, dated May 13, 1999, areAFFIRMEDIN TOTO.SO
ORDERED.Davide, Jr., C.J., Puno, Pardo, Ynares-Santiago, JJ.,c
EFFECT OF DELAY OF INSURERG.R. No. 76101-02 September 30,
1991TIO KHE CHIO,petitioner,vs.THE HONORABLE COURT OF APPEALS and
EASTERN ASSURANCE AND SURETY CORPORATION,respondents.Rodolfo M.
Morelos for petitioner.Ferrer, Mariano, Sangalang & Gatdula for
private respondent.FERNAN,C.J.:pThe issue in this petition
forcertiorariand prohibition is the legal rate of interest to be
imposed in actions for damages arising from unpaid insurance
claims. Petitioner Tio Khe Chio claims that it should be twelve
(12%) per cent pursuant to Articles 243 and 244 of the Insurance
Code while private respondent Eastern Assurance and Surety
Corporation (EASCO) claims that it should be six (6%) per cent
under Article 2209 of the Civil Code.The facts are as follows: On
December 18, 1978, petitioner Tio Khe Chio imported one thousand
(1,000) bags of fishmeal valued at $36,000.30 from Agro Impex,
U.S.A. Dallas, Texas, U.S.A. The goods were insured with respondent
EASCO and shipped on board the M/V Peskov, a vessel owned by Far
Eastern Shipping Company. When the goods reached Manila on January
28, 1979, they were found to have been damaged by sea water which
rendered the fishmeal useless. Petitioner filed a claim with EASCO
and Far Eastern Shipping. Both refused to pay. Whereupon,
petitioner sued them before the then Court of First Instance of
Cebu, Branch II for damages. EASCO, as the insurer, filed a
counterclaim against the petitioner for the recovery of P18,387.86
representing the unpaid insurance premiums.On June 30, 1982, the
trial court rendered judgment ordering EASCO and Far Eastern
Shipping to pay petitioner solidarily the sum of P105,986.68 less
the amount of P18,387.86 for unpaid premiums with interest at the
legal rate from the filing of the complaint, the sum of P15,000.00
as attorney's fees and the costs.1The judgment became final as to
EASCO but the shipping company appealed to the Court of Appeals and
was absolved from liability by the said court in AC-G.R. No. 00161,
entitled"Tio Khe Chio vs. Eastern Assurance and Surety
Corporation."The trial court, upon motion by petitioner, issued a
writ of execution against EASCO. The sheriff enforcing the writ
reportedly fixed the legal rate of interest at twelve (12%).
Respondent EASCO moved to quash the writ alleging that the legal
interest to be computed should be six (6%) per cent per annum in
accordance with Article 2209 of the Civil Code and not twelve (12%)
per cent as insisted upon by petitioner's counsel. In its order of
July 30, 1986, the trial court denied EASCO's motion. EASCO then
filed a petition for certiorari and prohibition before the Court of
Appeals.On July 30, 1986, the Appellate Court rendered the assailed
judgment, the dispositive part of which states:WHEREFORE, the order
dated July 30, 1986 is hereby SET ASIDE in so far as it fixes the
interest at 12% on the principal amount of P87,598.82 from the date
of filing of the complaint until the full payment of the amount,
and the interest that the private respondent is entitled to collect
from the petitioner is hereby reduced to 6% per annum.No
pronouncement as to costs.2
MARINE INSURANCEG.R. No. 84507 March 15, 1990CHOA TIEK SENG,
doing business under the name and style of SENG'S COMMERCIAL
ENTERPRISES,petitioner,vs.HON. COURT OF APPEALS, FILIPINO
MERCHANTS' INSURANCE COMPANY, INC., BEN LINES CONTAINER, LTD. AND
E. RAZON, INC.,respondents.Lapuz Law Office for petitioner.De
Santos, Balgoz & Perez for respondent Filipino Merchants'
Insurance Company, Inc.Marilyn Cacho-Noe for respondent Ben Lines
Container, Ltd.GANCAYCO,J.:This is an appeal from a decision of the
Court of Appeals dated February 18, 1988 in CA-G.R. CV No. 09627
which affirmed the decision of the Regional Trial Court (RTC) of
Manila which in turn dismissed the complaint.1On November 4, 1976
petitioner imported some lactose crystals from Holland. The
importation involved fifteen (15) metric tons packed in 600 6-ply
paper bags with polythelene inner bags, each bag at 25 kilos net.
The goods were loaded at the port at Rotterdam in sea vans on board
the vessel "MS Benalder' as the mother vessel, and thereafter
aboard the feeder vessel "Wesser Broker V-25" of respondent Ben
Lines Container, Ltd. (Ben Lines for short). The goods were insured
by the respondent Filipino Merchants' Insurance Co., Inc.
(insurance company for short) for the sum of P98,882.35, the
equivalent of US$8,765.00 plus 50% mark-up or US$13,147.50, against
all risks under the terms of the insurance cargo policy. Upon
arrival at the port of Manila, the cargo was discharged into the
custody of the arrastre operator respondent E. Razon, Inc. (broker
for short), prior to the delivery to petitioner through his broker.
Of the 600 bags delivered to petitioner, 403 were in bad order. The
surveys showed that the bad order bags suffered spillage and loss
later valued at P33,117.63.Petitioner filed a claim for said loss
dated February 16, 1977 against respondent insurance company in the
amount of P33,117.63 as the insured value of the loss.Respondent
insurance company rejected the claim alleging that assuming that
spillage took place while the goods were in transit, petitioner and
his agent failed to avert or minimize the loss by failing to
recover spillage from the sea van, thus violating the terms of the
insurance policy sued upon; and that assuming that the spillage did
not occur while the cargo was in transit, the said 400 bags were
loaded in bad order, and that in any case, the van did not carry
any evidence of spillage.Hence, petitioner filed the complaint
dated August 2, 1977 in the Regional Trial Court of Manila against
respondent insurance company seeking payment of the sum of
P33,117.63 as damages plus attorney's fees and expenses of
litigation. In its answer, respondent insurance company denied all
the material allegations of the complaint and raised several
special defenses as well as a compulsory counterclaim. On February
24, 1978, respondent insurance company filed a third-party
complaint against respondents Ben Lines and broker. Respondent
broker filed its answer to the third-party complaint denying
liability and arguing, among others, that the petitioner has no
valid cause of action against it. Similarly, Ben Lines filed its
answer denying any liability and a special defense arguing that
respondent insurance company was not the proper party in interest
and has no connection whatsoever with Ben Lines Containers, Ltd.
and that the third-party complaint has prescribed under the
applicable provisions of the Carriage of Goods by Sea Act.On
November 6, 1979, respondent Ben Lines filed a motion for
preliminary hearing on the affirmative defense of prescription. In
an order dated February 28, 1980, the trial court deferred
resolution of the aforesaid motion after trial on the ground that
the defense of prescription did not appear to be indubitable.After
the pre-trial conference and trial on the merits, on March 31,
1986, the courta quorendered a judgment dismissing the complaint,
the counterclaim and the third-party complaint with costs against
the petitioner.Hence, the appeal to the Court of Appeals by
petitioner which, in due course, as aforestated, affirmed the
judgment of the trial court.A motion for reconsideration of said
judgment was denied by the appellate court in a resolution dated
August 1, 1988.Petitioner now filed this petition for review
oncertiorariin this Court predicated on the following
grounds:IRESPONDENT COURT ERRED IN HOLDING THAT THE INSURED
SHIPMENT DID NOT SUSTAIN ANY DAMAGE/LOSS DESPITE ADMISSION THEREOF
ON THE PART OF RESPONDENT INSURANCE COMPANY AND THE FINDING OF THE
LATTER'S SURVEYORS.IIRESPONDENT COURT ERRED IN HOLDING THAT AN "ALL
RISKS" COVERAGE COVERS ONLY LOSSES OCCASIONED BY OR RESULTING FROM
"EXTRA AND FORTUITOUS EVENTS" DESPITE THE CLEAR AND UNEQUIVOCAL
DEFINITION OF THE TERM MADE AND CONTAINED IN THE POLICY SUED
UPON.IIITHE HOLDING OF RESPONDENT COURT THAT AN "ALL RISKS"
COVERAGE COVERS LOSSES OCCASIONED BY AND RESULTING FROM "EXTRA AND
FORTUITOUS EVENTS" CONTRADICTS THE RULING OF THE SAME COURT IN
ANOTHER CASE WHERE THE DEFINITION OF THE TERM "ALL RISKS"/ STATED
IN THE POLICY WAS MADE TO CONTROL HENCE THE NEED FOR REVIEW.2The
petition is impressed with merit.The appellate court, in arriving
at the conclusion that there was no damage suffered by the cargo at
the time of the devanning thereof, held as follows:Appellant argued
that the cargo in question sustained damages while still in the
possession of the carrying vessel, because as his appointed
surveyor reported, Worldwide Marine Survey Corporation, at the time
of devanning at the pier, 403 bags were already in bad order and
condition. Appellant found support to this contention on the basis
of the survey report of Worldwide Marine Survey Corporation of the
Philippines and of the Adjustment Corporation of the Philippines
which were identified by his sole witness, Jose See. It must be
pointed out, however, that witness Jose See was incompetent to
identify the two survey reports because he was not actually present
during the actual devanning of the cargo, which fact was admitted
by him, hence, he failed to prove the authenticity of the aforesaid
survey reports.On the other hand, the evidence submitted by the
appellee would conclusively establish the fact that there was no
damage suffered by the subject cargo at the time of the devanning
thereof. The cargo, upon discharge from the vessel, was delivered
to the custody of the arrastre operator (E. Razon) under clean
tally sheet (Exh. 6-FMIC). Moreover, the container van containing
the cargo was found with both its seal and lock intact. Article IV,
paragraph 4 of the Management Contract (Exh. 5) signed between the
Bureau of Customs and the Arrastre Operator provides:4. Tally
Sheets for Cargo Vans or Containers The contractor shall give a
clean tally sheet for cargo vans received by it in good order and
condition with locks, and seals intact.The same cargo was in turn
delivered into the possession of the appellant by the arrastre
operator at the pier in good order and condition as shown by the
clean gate passes (Exhs. 2 and 3) and the delivery permit (Exh. 4).
The clean gate passes were issued by appellee arrastre operator
covering the shipment in question, with the conformity of the
appellant's representative. The clean gate passes provide in part:.
. . issuance of this Gate Pass constitutes delivery to and receipt
by consignee of the goods as described above, in good order and
condition, unless an accompanying B.O. (Bad Order) Certificate duly
issued and noted on the face of this Gate Pass appears.These clean
gate passes are undoubtedly important and vital pieces of evidence.
They are noted in the dorsal side of another important piece of
document which is the permit to deliver (Exh. 4) issued by the
Bureau of Customs to effect delivery of the cargo to the consignee.
The significance and value of these documents is that they bind the
shipping company and the arrastre operator whenever a cargo
sustains damage while in their respective custody. It is worthy of
note that there was no turn over survey executed between the vessel
and the arrastre operator, indicating any damage to the cargo upon
discharge from the custody of the vessel. There was no bad order
certificate issued by the appellee arrastre operator, indicating
likewise that there was no damage to the cargo while in its
custody.It is surprising to the point that one could not believe
that if indeed there was really damage affecting the 403 bags out
of the 600, with an alleged estimated spillage of 240%, this
purportedly big quantity of spillage was never recovered which
could have been easily done considering that the shipment was in a
container van which was found to be sealed and intact.3However, in
the same decision of the appellate court, the following evidence of
the petitioner on this aspect was summarized as follows:The 600
bags which the original carrier received in apparent good order
condition and certified to by the vessel's agent to be weighing
15,300 kg. gross, were unloaded from the transhipment vessel
"Wesser Broker" stuffed in one container and turned over to the
arrastre operator, third party defendant-appellee E. Razon, Inc. A
shipboard surveyor, the Worldwide Marine Cargo Surveyor, as well as
a representative of the vessel "Wesser Broker" and a representative
of the arrastre operator attended the devanning of the shipment and
the said shipboard surveyor certified that 403 bags were in bad
order condition with estimated spillage as follows:65 P/bags each
of 20%78 P/bags each of 35%79 P/bags each of 45%87 P/bags each of
65%94 P/bags each of 75%(Exh. F-1)Defendant and third-party
plaintiff-appellee's protective surveyor determined the exact
spillage from the bad order bags as found by the shipboard surveyor
at the consignee's warehouse by weighing the bad order bags. Said
protective surveyor found after weighing the 403 bags in bad order
condition that an aggregate of 5,173 kilos were missing therefrom
(Exh. F).4The assertion of the appellate court that the
authenticity of the survey reports of the Worldwide Marine Cargo
Survey Corporation and the Adjustment Corporation of the
Philippines were not established as Jose See who identified the
same was incompetent as he was not actually present during the
actual devanning of the cargo is not well taken.In the first place
it was respondent insurance company which undertook the protective
survey aforestated relating to the goods from the time of discharge
up to the time of delivery thereof to the consignee's warehouse, so
that it is bound by the report of its surveyor which is the
Adjustment Corporation of the Philippines.5The Worldwide Marine
Cargo Survey Corporation of the Philippines was the vessel's
surveyor. The survey report of the said Adjustment Corporation of
the Philippines reads as follows:During the turn-over of the
contents delivery from the cargo sea van by the representative of
the shipping agent to consignee's representative/ Broker (Saint
Rose Forwarders), 403 bags were bursted and/or torn, opened on one
end contents partly spilled. The same were inspected by thevessel's
surveyor (Worldwide Marine & Cargo Survey Corporation),
findings as follows:One (1) Container No. 2987789Property locked
and secured with Seal No. 18880.FOUND:197-Paper Bags (6-Ply each
with One inner Plastic Lining Machine Stitched with cotton Twine on
Both ends. Containing Lactose Crystal 25 mesh Sep 061-09-03 in good
order.403-Bags, 6-ply torn and/or opened on one end, contents
partly spilled, estimated spillages as follows:65 P/bags each of
20%78 P/bags each of 35%79 P/bags each of 45%87 P/bags each of
65%94 P/bags each of 75%(emphasis supplied)6The authenticity of the
said survey report need not be established in evidence as it is
binding on respondent insurance company who caused said protective
survey.Secondly, contrary to the findings of the appellate court
that petitioner's witness Jose See was not present at the time of
the actual devanning of the cargo, what the record shows is that he
was present when the cargo was unloaded and received in the
warehouse of the consignee. He saw 403 bags to be in bad order.
Present then was the surveyor, Adjustment Corporation of the
Philippines, who surveyed the cargo by segregating the bad order
cargo from the good order and determined the amount of loss.7Thus,
said witness was indeed competent to identify the survey report
aforestated.Thirdly, in its letter dated May 26, 1977 to
petitioner, respondent insurance company admitted in no uncertain
terms, the damages as indicated in the survey report in this
manner:We do not question the fact that out of the 600 bags
shipment 403 bags appeared to be in bad order or in damaged
condition as indicated in the survey report of the vessel surveyor.
. . .8This admission even standing alone is sufficient proof of
loss or damage to the cargo.The appellate court observed that the
cargo was discharged from the vessel and delivered to the custody
of the broker under the clean tally sheet, that the container van
containing the cargo was found with both its seal and lock intact;
and that the cargo was delivered to the possession of the
petitioner by the broker in good order and condition as shown by
the clean gate passes and delivery permit.The clean tally sheet
referred to by the appellate court covers the van container and not
the cargo stuffed therein.9The appellate court clearly stated that
the clean tally sheet issued by the broker covers the cargo vans
received by it in good order and condition with lock and seal
intact. Said tally sheet is no evidence of the condition of the
cargo therein contained. Even the witness of the respondent
insurance company, Sergio Icasiano, stated that the clean gate
passes do not reflect the actual condition of the cargo when
released by the broker as it was not physically examined by the
broker.10There is no question, therefore, that there were 403 bags
in damaged condition delivered and received by
petitioner.Nevertheless, on the assumption that the cargo suffered
damages, the appellate court ruled:Even assuming that the cargo
indeed sustained damage, still the appellant cannot hold the
appellee insurance company liable on the insurance policy. In the
case at bar, appellant failed to prove that the alleged damage was
due to risks connected with navigation. A distinction should be
made between "perils of the sea" which render the insurer liable on
account of the loss and/or damage brought about thereof and "perils
of the ship" which do not render the insurer liable for any loss or
damage. Perils of the sea or perils of navigation embrace all kinds
of marine casualties, such as shipwreck, foundering, stranding,
collision and every specie of damage done to the ship or goods at
sea by the violent action of the winds or waves. They do not
embrace all loses happening on the sea. A peril whose only
connection with the sea is that it arises aboard ship is not
necessarily a peril of the sea; the peril must be of the sea and
not merely one accruing on the sea (The Phil. Insurance Law, by
Guevarra, 4th ed., 1961, p. 143). InWilson, Sons and Co.vs.Owners
of Cargo per the Xantho(1887) A.C. 503, 508, it was held:There
must, in order to make the insurer liable be "some casualty,"
something which could not be foreseen as one of the necessary
incidents of the adventure. The purpose of the policy is to secure
an indemnity against accidents which may happen, not against events
which must happen.Moreover, the cargo in question was insured in an
"against all risk policy." Insurance "against all risk" has a
technical meaning in marine insurance. Under an "all risk" marine
policy, there must be a general rule be afortuitouseventin order to
impose liability on the insurer; losses occasioned by ordinary
circumstances or wear and tear are not covered, thus, while an "all
risk" marine policy purports to cover losses from casualties at
sea, it does not cover losses occasioned by the ordinary
circumstances of a voyage, but only those resulting from extra and
fortuitous events.It has been held that damage to a cargo by high
seas and other weather is not covered by an "all risk" marine
policy, since it is not fortuitous, particularly where the bad
weather occurs at a place where it could be expected at the time in
question. (44 Am. Jur. 2d. 216) InGo Tiaoco y Hermanas vs.Union
Insurance Society of Canto, 40 Phil. 40, it was held:In the present
case, the entrance of the sea water into the ship's hold through
the defective pipe already described was not due to any accident
which happened during the voyage, but to the failure of the ship's
owner properly to repair a defect of the existence of which he was
apprised. The loss was therefore more analogous to that which
directly results from simple unseaworthiness than to that whose
results, from perils of the sea.11The Court disagrees.InGloren
Inc.vs.Filipinas Cia.de Seguros,12it was held that anall
riskinsurance policy insures against all causes of conceivable loss
or damage, except as otherwise excluded in the policy or due to
fraud or intentional misconduct on the part of the insured. It
covers all losses during the voyage whether arising from a marine
peril or not, including pilferage losses during the war.In the
present case, the "all risks" clause of the policy sued upon reads
as follows:5. This insurance is against all risks of loss or damage
to the subject matter insured but shall in no case be deemed to
extend to cover loss, damage, or expense proximately caused by
delay or inherent vice or nature of the subject matter insured.
Claims recoverable hereunder shall be payable irrespective of
percentage.13The terms of the policy are so clear and require no
interpretation. The insurance policy covers all loss or damage to
the cargo except those caused by delay or inherent vice or nature
of the cargo insured. It is the duty of the respondent insurance
company to establish that said loss or damage falls within the
exceptions provided for by law, otherwise it is liable therefor.An
"all risks" provision of a marine policy creates a special type of
insurance which extends coverage to risks not usually contemplated
and avoids putting upon the insured the burden of establishing that
the loss was due to peril falling within the policy's coverage. The
insurer can avoid coverage upon demonstrating that a specific
provision expressly excludes the loss from coverage.14In this case,
the damage caused to the cargo has not been attributed to any of
the exceptions provided for nor is there any pretension to this
effect. Thus, the liability of respondent insurance company is
clear.WHEREFORE, the decision appealed from is hereby REVERSED AND
SET ASIDE and another judgment is hereby rendered ordering the
respondent Filipinas Merchants Insurance Company, Inc. to pay the
sum of P33,117.63 as damages to petitioner with legal interest from
the filing of the complaint, plus attorney's fees and expenses of
litigation in the amount of P10,000.00 as well as the costs of the
suit.SO ORDERED.
PERILS OF THE SEA vs. PERILS OF THE SHIPG.R. No. L-66935
November 11, 1985ISABELA ROQUE, doing busines under the name and
style of Isabela Roque Timber Enterprises and ONG
CHIONG,petitioners,vs.HON. INTERMEDIATE APPELATE COURT and PIONEER
INSURANCE AND SURETY CORPORATION,respondent.GUTIERREZ, JR.,J.:This
petition for certiorari asks for the review of the decision of the
Intermediate Appellate Court which absolved the respondent
insurance company from liability on the grounds that the vessel
carrying the insured cargo was unseaworthy and the loss of said
cargo was caused not by the perils of the sea but by the perils of
the ship.On February 19, 1972, the Manila Bay Lighterage
Corporation (Manila Bay), a common carrier, entered into a contract
with the petitioners whereby the former would load and carry on
board its barge Mable 10 about 422.18 cubic meters of logs from
Malampaya Sound, Palawan to North Harbor, Manila. The petitioners
insured the logs against loss for P100,000.00 with respondent
Pioneer Insurance and Surety Corporation (Pioneer).On February 29,
1972, the petitioners loaded on the barge, 811 pieces of logs at
Malampaya Sound, Palawan for carriage and delivery to North Harbor,
Port of Manila, but the shipment never reached its destination
because Mable 10 sank with the 811 pieces of logs somewhere off
Cabuli Point in Palawan on its way to Manila. As alleged by the
petitioners in their complaint and as found by both the trial and
appellate courts, the barge where the logs were loaded was not
seaworthy such that it developed a leak. The appellate court
further found that one of the hatches was left open causing water
to enter the barge and because the barge was not provided with the
necessary cover or tarpaulin, the ordinary splash of sea waves
brought more water inside the barge.On March 8, 1972, the
petitioners wrote a letter to Manila Bay demanding payment of
P150,000.00 for the loss of the shipment plus P100,000.00 as
unrealized profits but the latter ignored the demand. Another
letter was sent to respondent Pioneer claiming the full amount of
P100,000.00 under the insurance policy but respondent refused to
pay on the ground that its hability depended upon the "Total loss
by Total Loss of Vessel only". Hence, petitioners commenced Civil
Case No. 86599 against Manila Bay and respondent Pioneer.After
hearing, the trial court found in favor of the petitioners. The
dispositive portion of the decision reads:FOR ALL THE FOREGOING,
the Court hereby rendered judgment as follows:(a) Condemning
defendants Manila Bay Lighterage Corporation and Pioneer Insurance
and Surety Corporation to pay plaintiffs, jointly and severally,
the sum of P100,000.00;(b) Sentencing defendant Manila Bay
Lighterage Corporation to pay plaintiff, in addition, the sum of
P50,000.00, plus P12,500.00, that the latter advanced to the former
as down payment for transporting the logs in question;(c) Ordering
the counterclaim of defendant Insurance against plaintiffs,
dismissed, for lack of merit, but as to its cross-claim against its
co-defendant Manila Bay Lighterage Corporation, the latter is
ordered to reimburse the former for whatever amount it may pay the
plaintiffs as such surety;(d) Ordering the counterclaim of
defendant Lighterage against plaintiffs, dismissed for lack of
merit;(e) Plaintiffs' claim of not less than P100,000.00 and
P75,000.00 as exemplary damages are ordered dismissed, for lack of
merits; plaintiffs' claim for attorney's fees in the sum of
P10,000.00 is hereby granted, against both defendants, who are,
moreover ordered to pay the costs; and(f) The sum of P150,000.00
award to plaintiffs, shall bear interest of six per cent (6%) from
March 25, 1975, until amount is fully paid.Respondent Pioneer
appealed to the Intermediate Appellate Court. Manila Bay did not
appeal. According to the petitioners, the transportation company is
no longer doing business and is without funds.During the initial
stages of the hearing, Manila Bay informed the trial court that it
had salvaged part of the logs. The court ordered them to be sold to
the highest bidder with the funds to be deposited in a bank in the
name of Civil Case No. 86599.On January 30, 1984, the appellate
court modified the trial court's decision and absolved Pioneer from
liability after finding that there was a breach of implied warranty
of seaworthiness on the part of the petitioners and that the loss
of the insured cargo was caused by the "perils of the ship" and not
by the "perils of the sea". It ruled that the loss is not covered
by the marine insurance policy.After the appellate court denied
their motion for reconsideration, the petitioners filed this
petition with the following assignments of errors:ITHE INTERMEDIATE
APPELLATE COURT ERRED IN HOLDING THAT IN CASES OF MARINE CARGO
INSURANCE, THERE IS A WARRANTY OF SEAWORTHINESS BY THE CARGO
OWNER.IITHE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE
LOSS OF THE CARGO IN THIS CASE WAS CAUSED BY "PERILS OF THE SHIP"
AND NOT BY "PERILS OF THE SEA."IIITHE INTERMEDIATE APPELLATE COURT
ERRED IN NOT ORDERING THE RETURN TO PETITIONER OF THE AMOUNT OF
P8,000.00 WHICH WAS DEPOSITED IN THE TRIAL COURT AS SALVAGE VALUE
OF THE LOGS THAT WERE RECOVERED.In their first assignment of error,
the petitioners contend that the implied warranty of seaworthiness
provided for in the Insurance Code refers only to the
responsibility of the shipowner who must see to it that his ship is
reasonably fit to make in safety the contemplated voyage.The
petitioners state that a mere shipper of cargo, having no control
over the ship, has nothing to do with its seaworthiness. They argue
that a cargo owner has no control over the structure of the ship,
its cables, anchors, fuel and provisions, the manner of l