Delsan Transport Inc. vs. Court of Appeals (Insurance Law)

 

Delsan Transport Inc. vs. Court of Appeals

(Insurance Law)

369 SCRA 24 (G.R. No. 127897)

November 15, 2001

 

Petitioners:	Delsan Transport Lines, Inc.
Respondents:	Court of Appeals and American Home Assurance Corporation

 

J. De Leon, Jr.:

 

FACTS:

 

Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract the Petitioner took on board its vessel, MT Maysun 2, 277.314 kilolitres of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance.

 

On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

 

Subsequently, AHA paid Caltex the sum of ₱5,096,635.67 representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, AH demanded of the petitioner the same amount it paid to Caltex.

 

Due to its failure to collect, AHA filed a complaint with the RTC of Makati, Branch137 for collection of sum of money. The trial court dismissed the complaint on the ground that the vessel was seaworthy as determined by PCG per Survey Certificate Report No. M5-016-MH upon inspection during its annual drydocking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting DELSAN (Petitioner) from liability for the loss of the cargo.

 

On appeal, the Court of Appeals reversed the trial courts decision, giving credence to the weather report issued by the PAGASA which showed that from 2:00 o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from 7 to 2 meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioners allegations that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrier to herein private respondent insurance company as subrogee of Caltex.

 

Hence this petition for review on certiorari.

 

ISSUE:

 

1.  Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.

 

2.  Whether or not the non-representation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action.

 

HELD:

 

1.  Yes. The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the respondents as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier the fact of payment grants the private respondent of subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.

 

The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim. Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner.

 

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance of their own goods and for the safety of passengers transported by them according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carrier shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.

 

Neither may petitioner escape liability by presenting in evidence certificates that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun was fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. As correctly observed by the Court of Appeals. At the time of drydocking and inspection, the ship may have appeared fit. The certificates issued in this regard, authorities are likewise clear as to their probative value, (thus) Seaworthiness relates to a vessel’s actual condition. Neither the granting of classification or the issuance of certificates establishes seaworthiness. (2-A Benedict on Admiralty, 7 – 3, Sec. 62) And also: Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel’s owner’s obligation. Also securing the approved of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establishes due diligence if the vessel was in unseaworthy, for the cargo owner has no obligation in relation to seaworthiness.

 

Additionally, the exoneration of MT Maysuns officer’s and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts. In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.

 

2.  No. Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo in the exercise of its subrogatory receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

 

Filipino Merchants Insurance Co. Inc. vs. Court of Appeals (Insurance Law)

 

Filipino Merchants Insurance Co. Inc. vs. Court of Appeals

(Insurance Law)

179 SCRA 638 (G.R. No. 85141)

November 28, 1989

 

Petitioners:	Filipino Merchants Insurance Co., Inc.
Respondents:	Court of Appeals and Choa Tiek Seng

 

J. Regalado:

 

FACTS:

 

This is an action brought by Choa Tiek Seng the consignee of the shipment of fishmeal loaded on board the SS Bouganville and unloaded at the Port of Manila on or about December 11, 1976 and seeks to recover from defendant Filipino Merchants Inc., Co. the amount of ₱51,568.62 representing damages to said shipment which has been insured by the defendant insurance company.

 

ISSUE:

 

1.  Whether an “all risks” policy covers all losses other than those caused by the willful and fraudulent act of insured.

 

2.  Whether a perfected contract of sale ever without delivery vests in the vendee an existing interest over the goods sufficient to be subject of insurance.

 

HELD:

 

1.  No. The very nature of the term “all risks” must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. This is pursuant to the very purpose of an “all risks” insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. An “all risk” policy has been evolved to grant greater protection than that afforded by the “perils clause” in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the ship; it is written against losses, that is, attributable to external causes.

 

Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an “all risks”, policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an “all risks insurance policy” has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. As we held in Paris-Manila Perfumery Co., vs. Phoenix Assurance Co., Ltd the basic rule is that the insurance company has the burden of proving that the loss is caused by the risks excepted and for want of such proof, the company is liable.

 

2.  Yes. Herein private respondent, as vendee/consignee of the goods in transit has such existing interest therein as may be subject of a valid contract of insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before the performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C&F as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance.

 

Further, Article 1523 of the Civil Code provides that where in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the insurance premium covering them.

 

Oriental Assurance Corporation vs. Court of Appeals (Insurance Law)

 

Oriental Assurance Corporation vs. Court of Appeals

(Insurance Law)

200 SCRA 459 (G.R. No. 94052)

August 9, 1991

 

Petitioners:	Oriental Assurance Corporation
Respondents:	Court of Appeals and Panama Saw Mill Co., Inc.

 

J. Melencio - Herrera:

 

FACTS:

 

Private respondent Panama Sawmill Co. (Panama) bought, in Palawan, 1208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by the sea to Manila and insured it against loss for ₱ 1 million pesos with petitioner Oriental Assurance Corp.

 

The logs were loaded on 2 barges: 1) on barge PCT-7000, 610 pieces of logs with a volume of 1000 cubic meters; and 2) Barge TPAC-1000, 598 pieces of logs, also with a volume of 1000 cubic meters. The two barges were towed by the tugboat, MT “Seminole.” During the voyage rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon.

 

Panama demanded payment for the loss but Oriental refused on the ground that its contract liability on the ground that its contract liability was to “TOTAL LOSS ONLY.”

 

ISSUE:

 

Whether or not Oriental Insurance can be held liable under its marine insurance policy based on the theory of a divisible contract of insurance and, consequently, a constructive loss.

 

HELD:

 

Yes. The terms of the contract constitute the measure of the insurer’s liability and compliance therewith is a condition precedent to the insured’s right to recovery from the insurer. (Perla Compania de Seguros, Inc. vs. Court of Appeals, G.R. No. 78860, May 28, 1990, 185 SCRA 741). Whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract, therefore, be considered indivisible.

 

The basis thus used is, in our opinion, reversible error. The requirements for the application of Section 139 of the Insurance Code, quoted above, have not been met. The logs involved, although place in two barges, were not separately valued by the policy, nor separately insure. Resultantly, the logs lost in barge TPAC-1000 in relation to the total number of logs loaded on the same barge can not be made the basis for determining the constructive total loss. The logs having been insured as one inseparable unit, the correct basis for determining the existence of constructive total loss is the totality of the shipment of logs. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the entire shipment. Since the cost of those 497 pieces does not exceed 75% of the value of all 1,200 pieces of logs, the shipment can not be said to has sustained a constructive total loss under Section 139 (a) of the Insurance Code.

 

Geagonia vs. Court of Appeals (Insurance Law)

 

Geagonia vs. Court of Appeals

(Insurance Law)

241 SCRA 152 (G.R. No. 114427)

February 6, 1995

 

Petitioners:	Armando Geagonia
Respondents:	Court of Appeals and Country Bankers Insurance Corpoation

 

J. Davide, Jr.:

 

FACTS:

 

The Petitioner’s is the owner of Norman’s Mart located at the public market. He obtained from the private respondent’s Country Banker’s Insurance Corp. fire insurance policy No. F-14622 for ₱100,000.00.

 

The Petitioner declared in the policy under the subheading entitled co-insurance that Mercantile Insurance Co. Inc., was the co-insurer for ₱50,000.00.

 

The policy contained the following condition:

 

“3. The insured shall give notice to the Company of any insurance or insurances already effected, and unless such notice be given and the particulars of such insurance or insurances be stated therein, all benefits under this policy shall be deemed forfeited.”

 

When a fire of accidental origin broke out at the public market, petitioner’s insured stocks-in-trade were completely destroyed prompting him to file with private respondent a claim under the policy. Private respondent denied the claim because it found that at the time of loss the petitioner’s stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144 for ₱100,000.00 each issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). These policies indicate that the insured was “Messrs. Discount Mart (Mr. Armando Geagonia, Prop.) with a mortgage clause reading: “Mortgagee; loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy.

 

ISSUE:

 

Whether or not the incorporation of Condition 3 in the policy is allowed by Sec. 75 of the Insurance Code which precludes the petitioner to recover from the two insurance policies.

 

HELD:

 

Yes. Condition 3 of the private respondent’s Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that “[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.” Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or “other insurance” clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid policy. However, in order to constitute a violation, the other insurance must be upon the same subject matter, the same interest therein, and the same risk.

 

As to a mortgaged property, the mortgagor and mortgagee have each an independent insurable interest therein and both interests may be covered by one policy, or each may take out a separate policy covering his interest, either at the same or at a separate times. The mortgagor’s insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee’s insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee.

 

It is a cardinal rule in insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture.

 

 

 

Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc. (Insurance Law)

Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc.

(Insurance Law)

47 SCRA 271 (G.R. No. L-27932)

October 30, 1972

Petitioners:	Republic Bank
Respondents:	Philippine Guaranty Co., Inc.

J. Fernando:

FACTS:

On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic Bank in the total sum of ₱415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage on certain properties.

The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for ₱500,000.00 over the properties of the UMC, as described in defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendants’ Fire Insurance Policy Form.

On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground: “Policy Condition No. 3 and/or the other Insurance Clause of the policy was violated because you did not give notice to us of the other insurance which you had taken from New India for ₱ 80,000.00. Sincere Insurance for ₱ 25,000.00 and Manila Insurance for ₱ 200,000.00 with the result that these insurances, of which we became aware of only after the fire were not endorsed on our policy.

ISSUE:

Whether or not Republic Bank can recover.

HELD:

No. Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).

If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out the contracts actually made.

While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense.

The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. xxx The materiality of non-disclosure of other insurance policies is not open to doubt.

The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties.

Pioneer Insurance and Surety Corporation vs. Yap (Insurance Law)

Pioneer Insurance and Surety Corporation vs. Yap

(Insurance Law)

61 SCRA 426 (G.R. No. L-36232)

December 19, 1974

Petitioners:	Pioneer Insurance and Surety Corporation
Respondents:	Oliva Yap, represented by her attorney-in-fact, Chua Soon Poon

J. Fernandez:

FACTS:

Respondent Oliva Yap was the owner of a store in a two-storey building located in Manila.

On April 19, 1962, respondent Yap took out a fire policy from Pioneer Insurance for ₱25,000.00 covering her stocks, officer furniture fixtures and fittings of every kind and description. Among the conditions in the policy was:

“The Insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited.” (Italics supplied)”

At the time of the insurance on April 19, 1962 of Policy No. 4219 in favor of respondent Yap, an insurance policy for P20,000.00 issued by the Great American Insurance Company covering the same properties was noted on said policy as co-insurance.

On September 26, 1962, respondent Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties, this time from the Federal Insurance Company, Inc., which new policy was, however, procured without notice to and the written consent of petitioner Pioneer Insurance & Surety Corporation and, therefore, was not noted as a co-insurance in Policy No. 4219.

On December 19, 1962, a fire broke out in the building housing respondent Yap’s above-mentioned store, and the said store was burned. Respondent Yap filed an insurance claim, but the same was denied in petitioner’s letter of May 17, 1963, on the ground of “breach and/or violation of any and/or all terms and conditions” of Policy No. 4219.

ISSUE:

Whether or not petitioner should be absolved from liability on the policy.

HELD:

Yes. By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance.

The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured.

Philippine Pryce Assurance Corporation vs. Court of Appeals (Insurance Law)

Philippine Pryce Assurance Corporation vs. Court of Appeals

(Insurance Law)

230 SCRA 164 (G.R. No. 107062)

February 21, 1994

Petitioners:	Philippine Pryce Assurance Corporation
Respondents:	Court of Appeals, (Fourteenth Division) and Gregoco, Inc.

J. Nocon:

FACTS:

Petitioner, Interworld Assurance Corporation (the company now carries the corporate name Philippine Pryce Assurance Corporation), was the butt of the complaint for collection of sum of money by Gregoco, Inc. before the RTC of Makati Branch 138. The complaint alleged that petitioner issued two surety bonds (No. 0029 dated July 24, 1987 and No. 0037, dated October 7, 1987) in behalf of its principal Sagum General Merchandise for five hundred thousand pesos (₱500,000.00) and one million pesos (₱1,000,000.00) respectively.

In its Answer, petitioner admitted having executed the said bonds, but denied liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of its principal obligation, thus, excussion is necessary.

ISSUE:

Whether or not there is a valid contract of surety between Philippine Pryce and Sagum despite, the bouncing of check, supposed to pay for the premium.

HELD:

Yes. Finally, there is reason to believe that petitioner does not really have a good defense. Petitioner hinges its defense on two arguments, namely: a) that the checks issued by its principal which were supposed to pay for the premiums, bounced, hence there is no contract of surety to speak of; and 2) that as early as 1986 and covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not yet authorized by the Insurance Commission to issue such bonds. The Insurance Code states that: “SECTION 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. x x x” (emphasis added) The above provision outrightly negates petitioner’s first defense. In a desperate attempt to escape liability, petitioner further asserts that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are on record.

On the other hand, petitioner’s defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon.