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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 85141 November 28, 1989 FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs. COURT OF APPEALS !" CHOA TIE# SENG, respondents. Balgos & Perez Law Offices for petitioner. Lapuz Law office for private respondent. REGALA$O, J.: his is a revie! of the decision of the Court of "ppeals, pro#ul$ated on %ul& '(,'()), the dispositive part of !hich reads* +,ERE-ORE, the .ud$#ent appealed fro# is affir#ed insofar as it orders defendant -ilipino Merchants Insurance Co#pan& to pa& the plaintiff the su# of P/',/0).01 !ith interest at le$al rate fro# the date of filin$ of the co#plaint, and is #odified !ith respect to the third part& co#plaint in that 2'3 third part& defendant E. Ra4on, Inc. is ordered to rei#burse third part& plaintiff the su# of P1/,56'.)7 !ith le$al interest fro# the date of pa&#ent until the date of rei#burse#ent, and 213 the third8part& co#plaint a$ainst third part& defendant Co#pa$nie Mariti#e Des Char$eurs Reunis is dis#issed. 1 he facts as found b& the trial court and adopted b& the Court of "ppeals are as follo!s* his is an action brou$ht b& the consi$nee of the ship#ent of fish#eal loaded on board the vessel SS 9ou$ainville and unloaded at the Port of Manila on or about Dece#ber '', '(60 and see:s to recover fro# the defendant insurance co#pan& the a#ount of P/',/0).01 representin$ da#a$es to said ship#ent !hich has been insured b& the defendant insurance co#pan& under Polic& No. M8106). he defendant brou$ht a third part& co#plaint a$ainst third part& defendants Co#pa$nie Mariti#e Des Char$eurs Reunis and;or E. Ra4on, Inc. see:in$ .ud$#ent a$ainst the third 2sic3 defendants in case %ud$#ent is rendered a$ainst the third part& plaintiff. It appears fro# the evidence presented that in Dece#ber '(60, plaintiff insured said ship#ent !ith defendant insurance co#pan& under said car$o Polic& No. M8106) for the su# of P106,0/<./( for the $oods described as 077 #etric tons of fish#eal in ne! $unn& ba$s of (7 :ilos each fro# 9an$:o:, hailand to Manila a$ainst all ris:s under !arehouse to !arehouse ter#s. "ctuall&, !hat !as i#ported !as /(.(57 #etric tons not 077 tons at =<(/.51 a ton CN- Manila. he fish#eal in 000 ne! $unn& ba$s !ere unloaded fro# the ship on Dece#ber '', '(60 at Manila unto the arrastre contractor E. Ra4on, Inc. and defendant>s surve&or ascertained and certified that in such dischar$e '7/ ba$s !ere in bad order condition as .ointl& surve&ed b& the ship>s a$ent and the arrastre contractor. he condition of the bad order !as reflected in the turn over surve& report of 9ad Order car$oes Nos. '17<17 to '17<11, as E?hibit C85 consistin$ of three 2<3 pa$es !hich are also E?hibits 5, / and 08 Ra4on. he car$o !as also surve&ed b& the arrastre contractor before deliver& of the car$o to the consi$nee and the condition of the car$o on such deliver& !as reflected in E. Ra4on>s 9ad Order Certificate No. '5)/(, '5)0< and '5)0( coverin$ a total of 116 ba$s in bad order condition. Defendant>s surve&or has conducted a final and detailed surve& of the car$o in the !arehouse for !hich he prepared a surve& report E?hibit !ith the findin$s on the e?tent of shorta$e or loss on the bad order ba$s totallin$ 116 ba$s a#ountin$ to '1,'5) :ilos, E?hibit -8'. 9ased on said co#putation the plaintiff #ade a for#al clai# a$ainst the defendant -ilipino Merchants Insurance Co#pan& for P/',/0).01 2E?hibit C3 the co#putation of !hich clai# is contained therein. " for#al clai# state#ent !as also presented b& the plaintiff a$ainst the vessel

Page 2 of 5 dated Dece#ber 1', '(60, E?hibit 9, but the defendant -ilipino Merchants Insurance Co#pan& refused to pa& the clai#. Conse@uentl&, the plaintiff brou$ht an action a$ainst said defendant as adverted to above and defendant presented a third part& co#plaint a$ainst the vessel and the arrastre contractor. 2 he court belo!, after trial on the #erits, rendered .ud$#ent in favor of private respondent, the decretal portion !hereof reads* +,ERE-ORE, on the #ain co#plaint, .ud$#ent is hereb& rendered in favor of the plaintiff and a$ainst the defendant -ilipino Merchant>s 2sic3 Insurance Co., orderin$ the defendants to pa& the plaintiff the follo!in$ a#ount* he su# of P/',/0).01 !ith interest at le$al rate fro# the date of the filin$ of the co#plaintA On the third part& co#plaint, the third part& defendant Co#pa$nie Mariti#e Des Char$eurs Reunis and third part& defendant E. Ra4on, Inc. are ordered to pa& to the third part& plaintiff .ointl& and severall& rei#burse#ent of the a#ounts paid b& the third part& plaintiff !ith le$al interest fro# the date of such pa&#ent until the date of such rei#burse#ent. +ithout pronounce#ent as to costs. % On appeal, the respondent court affir#ed the decision of the lo!er court insofar as the a!ard on the co#plaint is concerned and #odified the sa#e !ith re$ard to the ad.udication of the third8part& co#plaint. " #otion for reconsideration of the aforesaid decision !as denied, hence this petition !ith the follo!in$ assi$n#ent of errors* '. he Court of "ppeals erred in its interpretation and application of the Ball ris:sB clause of the #arine insurance polic& !hen it held the petitioner liable to the private respondent for the partial loss of the car$o, not!ithstandin$ the clear absence of proof of so#e fortuitous event, casualt&, or accidental cause to !hich the loss is attributable, thereb& contradictin$ the ver& precedents cited b& it in its decision as !ell as a prior decision of the sa#e Division of the said court 2then co#posed of %ustices Cacdac, Castro8 9artolo#e, and Pronove3A 1. he Court of "ppeals erred in not holdin$ that the private respondent had no insurable interest in the sub.ect car$o, hence, the #arine insurance polic& ta:en out b& private respondent is null and voidA <. he Court of "ppeals erred in not holdin$ that the private respondent !as $uilt& of fraud in not disclosin$ the fact, it bein$ bound out of ut#ost $ood faith to do so, that it had no insurable interest in the sub.ect car$o, !hich bars its recover& on the polic&. 4 On the first assi$n#ent of error, petitioner contends that an Ball ris:sB #arine polic& has a technical #eanin$ in insurance in that before a clai# can be co#pensable it is essential that there #ust be Bso#e fortuit&, B Bcasualt&B or Baccidental causeB to !hich the alle$ed loss is attributable and the failure of herein private respondent, upon !ho# la& the burden, to adduce evidence sho!in$ that the alle$ed loss to the car$o in @uestion !as due to a fortuitous event precludes his ri$ht to recover fro# the insurance polic&. +e find said contention untenable. he Ball ris:s clauseB of the Institute Car$o Clauses read as follo!s* /. his insurance is a$ainst all ris:s of loss or da#a$e to the sub.ect8#atter insured but shall in no case be dee#ed to e?tend to cover loss, da#a$e, or e?pense pro?i#atel& caused b& dela& or inherent vice or nature of the sub.ect8#atter insured. Clai#s recoverable hereunder shall be pa&able irrespective of percenta$e. 5 "n Ball ris:s polic&B should be read literall& as #eanin$ all ris:s !hatsoever and coverin$ all losses b& an accidental cause of an& :ind. he ter#s BaccidentB and BaccidentalB, as used in insurance contracts, have not ac@uired an& technical

Page 3 of 5 #eanin$. he& are construed b& the courts in their ordinar& and co##on acceptance. hus, the ter#s have been ta:en to #ean that !hich happens b& chance or fortuitousl&, !ithout intention and desi$n, and !hich is une?pected, unusual and unforeseen. "n accident is an event that ta:es place !ithout one>s foresi$ht or e?pectationA an event that proceeds fro# an un:no!n cause, or is an unusual effect of a :no!n cause and, therefore, not e?pected. & he ver& nature of the ter# Ball ris:sB #ust be $iven a broad and co#prehensive #eanin$ as coverin$ an& loss other than a !illful and fraudulent act of the insured. ' his is pursuant to the ver& purpose of an Ball ris:sB insurance to $ive protection to the insured in those cases !here difficulties of lo$ical e?planation or so#e #&ster& surround the loss or da#a$e to propert&. 8 "n Ball as:sB polic& has been evolved to $rant $reater protection than that afforded b& the Bperils clause,B in order to assure that no loss can happen throu$h the incidence of a cause neither insured a$ainst nor creatin$ liabilit& in the shipA it is !ritten a$ainst all losses, that is, attributable to e?ternal causes. 9 he ter# Ball ris:sB cannot be $iven a strained technical #eanin$, the lan$ua$e of the clause under the Institute Car$o Clauses bein$ une@uivocal and clear, to the effect that it e?tends to all da#a$es;losses suffered b& the insured car$o e?cept 2a3 loss or da#a$e or e?pense pro?i#atel& caused b& dela&, and 2b3 loss or da#a$e or e?pense pro?i#atel& caused b& the inherent vice or nature of the sub.ect #atter insured. Cenerall&, the burden of proof is upon the insured to sho! that a loss arose fro# a covered peril, but under an Ball ris:sB polic& the burden is not on the insured to prove the precise cause of loss or da#a$e for !hich it see:s co#pensation. he insured under an Ball ris:s insurance polic&B has the initial burden of provin$ that the car$o !as in $ood condition !hen the polic& attached and that the car$o !as da#a$ed !hen unloaded fro# the vesselA thereafter, the burden then shifts to the insurer to sho! the e?ception to the covera$e. 1( "s !e held in Paris-Manila Perfumery Co. vs. Phoeni !ssurance Co." Ltd. 11 the basic rule is that the insurance co#pan& has the burden of provin$ that the loss is caused b& the ris: e?cepted and for !ant of such proof, the co#pan& is liable. Covera$e under an Ball ris:sB provision of a #arine insurance polic& creates a special t&pe of insurance !hich e?tends covera$e to ris:s not usuall& conte#plated and avoids puttin$ upon the insured the burden of establishin$ that the loss !as due to the peril fallin$ !ithin the polic&>s covera$eA the insurer can avoid covera$e upon de#onstratin$ that a specific provision e?pressl& e?cludes the loss fro# covera$e. 12 " #arine insurance polic& providin$ that the insurance !as to be Ba$ainst all ris:sB #ust be construed as creatin$ a special insurance and e?tendin$ to other ris:s than are usuall& conte#plated, and covers all losses e?cept such as arise fro# the fraud of the insured. 1% he burden of the insured, therefore, is to prove #erel& that the $oods he transported have been lost, destro&ed or deteriorated. hereafter, the burden is shifted to the insurer to prove that the loss !as due to e?cepted perils. o i#pose on the insured the burden of provin$ the precise cause of the loss or da#a$e !ould be inconsistent !ith the broad protective purpose of Ball ris:sB insurance. In the present case, there bein$ no sho!in$ that the loss !as caused b& an& of the e?cepted perils, the insurer is liable under the polic&. "s aptl& stated b& the respondent Court of "ppeals, upon due consideration of the authorities and .urisprudence it discussed D ... it is believed that in the absence of an& sho!in$ that the losses;da#a$es !ere caused b& an e?cepted peril, i.e. dela& or the inherent vice or nature of the sub.ect #atter insured, and there is no such sho!in$, the lo!er court did not err in holdin$ that the loss !as covered b& the polic&. here is no evidence presented to sho! that the condition of the $unn& ba$s in !hich the fish#eal !as pac:ed !as such that the& could not hold their contents in the course of the necessar& transit, #uch less an& evidence that the ba$s of car$o had burst as the result of the !ea:ness of the ba$s the#selves. ,ad there been such a sho!in$ that spilla$e !ould have been a certaint&, there #a& have been $ood reason to plead that there !as no ris: covered b& the polic& 2See 9er: vs. St&le E'(/0F cited in Marine Insurance Clai#s, #$id, p. '1/3. Gnder an >all ris:s> polic&, it !as sufficient to sho! that there !as da#a$e occasioned b& so#e accidental cause of an& :ind, and there is no necessit& to point to an& particular cause. 14

Page 4 of 5 Contracts of insurance are contracts of inde#nit& upon the ter#s and conditions specified in the polic&. he a$ree#ent has the force of la! bet!een the parties. he ter#s of the polic& constitute the #easure of the insurer>s liabilit&. If such ter#s are clear and una#bi$uous, the& #ust be ta:en and understood in their plain, ordinar& and popular sense. 15 "nent the issue of insurable interest, !e uphold the rulin$ of the respondent court that private respondent, as consi$nee of the $oods in transit under an invoice containin$ the ter#s under BC H - Manila,B has insurable interest in said $oods. Section '< of the Insurance Code defines insurable interest in propert& as ever& interest in propert&, !hether real or personal, or an& relation thereto, or liabilit& in respect thereof, of such nature that a conte#plated peril #i$ht directl& da#nif& the insured. In principle, an&one has an insurable interest in propert& !ho derives a benefit fro# its e?istence or !ould suffer loss fro# its destruction !hether he has or has not an& title in, or lien upon or possession of the propert& &. 1& Insurable interest in propert& #a& consist in 2a3 an e?istin$ interestA 2b3 an inchoate interest founded on an e?istin$ interestA or 2c3 an e?pectanc&, coupled !ith an e?istin$ interest in that out of !hich the e?pectanc& arises. 1' ,erein private respondent, as vendee;consi$nee of the $oods in transit has such e?istin$ interest therein as #a& be the sub.ect of a valid contract of insurance. ,is interest over the $oods is based on the perfected contract of sale. 18 he perfected contract of sale bet!een hi# and the shipper of the $oods operates to vest in hi# an e@uitable title even before deliver& or before be perfor#ed the conditions of the sale. 19 he contract of ship#ent, !hether under -.O.9., C.I.-., or C. H -. as in this case, is i##aterial in the deter#ination of !hether the vendee has an insurable interest or not in the $oods in transit. he perfected contract of sale even !ithout deliver& vests in the vendee an e@uitable title, an e?istin$ interest over the $oods sufficient to be the sub.ect of insurance. -urther, "rticle '/1< of the Civil Code provides that !here, in pursuance of a contract of sale, the seller is authori4ed or re@uired to send the $oods to the bu&er, deliver& of the $oods to a carrier, !hether na#ed b& the bu&er or not, for, the purpose of trans#ission to the bu&er is dee#ed to be a deliver& of the $oods to the bu&er, the e?ceptions to said rule not obtainin$ in the present case. he Court has heretofore ruled that the deliver& of the $oods on board the carr&in$ vessels parta:e of the nature of actual deliver& since, fro# that ti#e, the forei$n bu&ers assu#ed the ris:s of loss of the $oods and paid the insurance pre#iu# coverin$ the#. 2( C H - contracts are ship#ent contracts. he ter# #eans that the price fi?ed includes in a lu#p su# the cost of the $oods and frei$ht to the na#ed destination. 21 It si#pl& #eans that the seller #ust pa& the costs and frei$ht necessar& to brin$ the $oods to the na#ed destination but the ris: of loss or da#a$e to the $oods is transferred fro# the seller to the bu&er !hen the $oods pass the ship>s rail in the port of ship#ent. 22 Moreover, the issue of lac: of insurable interest !as not a#on$ the defenses averred in petitioners ans!er. It !as neither an issue a$reed upon b& the parties at the pre8trial conference nor !as it raised durin$ the trial in the court belo!. It is a settled rule that an issue !hich has not been raised in the court a %uo cannot be raised for the first ti#e on appeal as it !ould be offensive to the basic rules of fair pla&, .ustice and due process. 2% his is but a per#uted restate#ent of the lon$ settled rule that !hen a part& deliberatel& adopts a certain theor&, and the case is tried and decided upon that theor& in the court belo!, he !ill not be per#itted to chan$e his theor& on appeal because, to per#it hi# to do so, !ould be unfair to the adverse part&. 24 If despite the funda#ental doctrines .ust stated, !e nevertheless decided to indite a dis@uisition on the issue of insurable interest raised b& petitioner, it !as to put at rest all doubts on the #atter under the facts in this case and also to dispose of petitioner>s third assi$n#ent of error !hich conse@uentl& needs no further discussion. +,ERE-ORE, the instant petition is DENIED and the assailed decision of the respondent Court of "ppeals is "--IRMED in toto. SO ORDERED. Paras" Padilla and &armiento" ''." concur. ( Melencio-)errera *Chairperson+" '." is on leave.

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Footnotes
1 Rollo, 41; Justice Gonzaga-Reyes, ponente, with Justices Serafin E. Camilon an !e ro ". Ramirez concurring. # Rollo, #$-#%. & Ibid., %-#'. 4 Ibid., 1(-11. ) *riginal Recor , Ci+il Case ,o. -11#('1. R-%1-/)(, #$. $ #'" "m. Jur., &(%-&('. / !hoeni0 1ns. Co. +s. 2ranch -3la. "44. #&4 So # &'$. % 5orrison Grain Co. +s. 6tica 5ut. 1ns. Co. -.1 '%(, C" S 3la.. $&# 3. # 4#4 ' Gilmore an 2lac7, 8he 9aw of " miralty, $%,1$'. 1( See 3ootnote %, ante. 11 4' !hil. /)& -1'#$.. 1# :al7er +s. 8ra+eller;s 1n emnity Co., -9a. "44.. #%' So. #n %$4,%$'. 1& Goi0 +s. <no0, 1 Johns. Cas. &&/, cite in :or s an !hrases, !ermanent E ., =ol. &, -1')& e .. &1(. 14 Rollo, &#. 1) !acific 2an7ing Cor4. +s. Court of "44eals, G.R. ,o. 41(14, ,o+. #%,1'%%. 1$ 4& "m. Jur. # , )(/-)(%. 1/ Sec. 14, 1nsurance Co e. 1% *riginal Recor , 3ol er of E0hi>its, E0h. C-#, $. 1' 4& "m. Jur. # , )##; =ance on 1nsurance, 1$4-1$%. #( Rattan "rts ? @ecorations, 1nc. +s. Collector of 1nternal Re+enue, et al., 1& SCR" $#$ -1'$).. #1 2usiness 9aw !rinci4les an Cases >y Aarol 9uc7, Charles 5. Aewitt, John @. @onnel, an ". James 2arns, Secon 6niform Commercial Co e E ition, /)1-/)#. ## Gui e to 1,C* 8erms, 1'%( E ., 4%-)(. #& @e 9os Santos +s. Court of "44eals, et al., 14( SCR" 44 -1'%).; @ulos Realty ? @e+elo4ment Cor4. +s. Court of "44eals, et al., 1)/ SCR" 4#) -1'%%.; Ramos, et al. +s. 1nterme iate "44ellate Court, et. al. G.R. ,o. /%#%#, July ),1'%'. #4 5olina +s. Somes, #4 !hil. 4' -1'1&.; "goncillo, et al. +s. Ja+ier, &% !hil, 4#4 -1'1%.