Professional Documents
Culture Documents
Four our review under Rule 45 of the Rules of On 27 May 1990, fire of accidental origin broke
Court is the decision1 of the Court of Appeals in out at around 7:30 p.m. at the public market of
CA-G.R. SP No. 31916, entitled "Country San Francisco, Agusan del Sur. The petitioner's
Bankers Insurance Corporation versus Armando insured stock-in-trade were completely destroyed
Geagonia," reversing the decision of the prompting him to file with the private respondent
Insurance Commission in I.C. Case No. 3340 a claim under the policy. On 28 December 1990,
which awarded the claim of petitioner Armando the private respondent denied the claim because
Geagonia against private respondent Country it found that at the time of the loss the petitioner's
Bankers Insurance Corporation. stocks-in-trade were likewise covered by fire
insurance policies No. GA-28146 and No. GA-
The petitioner is the owner of Norman's Mart 28144, for P100,000.00 each, issued by the Cebu
located in the public market of San Francisco, Branch of the Philippines First Insurance Co., Inc.
Agusan del Sur. On 22 December 1989, he (hereinafter PFIC). 3 These policies indicate that
obtained from the private respondent fire the insured was "Messrs. Discount Mart (Mr.
insurance policy No. F-146222 for P100,000.00. Armando Geagonia, Prop.)" with a mortgage
The period of the policy was from 22 December clause reading:
1989 to 22 December 1990 and covered the
following: "Stock-in-trade consisting principally of MORTGAGE: Loss, if any shall
dry goods such as RTW's for men and women be payable to Messrs. Cebu
wear and other usual to assured's business." Tesing Textiles, Cebu City as
their interest may appear subject
The petitioner declared in the policy under the to the terms of this policy. CO-
subheading entitled CO-INSURANCE that INSURANCE DECLARED:
Mercantile Insurance Co., Inc. was the co-insurer P100,000. — Phils. First CEB/F
for P50,000.00. From 1989 to 1990, the petitioner 24758.4
had in his inventory stocks amounting to
P392,130.50. The basis of the private respondent's denial was
the petitioner's alleged violation of Condition 3 of
The policy contained the following condition: the policy.
3. The insured shall give notice The petitioner then filed a complaint 5 against the
to the Company of any insurance private respondent with the Insurance
or insurances already affected, Commission (Case No. 3340) for the recovery of
or which may subsequently be P100,000.00 under fire insurance policy No. F-
effected, covering any of the 14622 and for attorney's fees and costs of
property or properties consisting litigation. He attached as Annex "AM"6 thereof his
of stocks in trade, goods in letter of 18 January 1991 which asked for the
process and/or inventories only reconsideration of the denial. He admitted in the
hereby insured, and unless such said letter that at the time he obtained the private
notice be given and the respondent's fire insurance policy he knew that
particulars of such insurance or the two policies issued by the PFIC were already
insurances be stated therein or in existence; however, he had no knowledge of
the provision in the private respondent's policy knew of the existence of the two other policies
requiring him to inform it of the prior policies; this issued by the PFIC. It said:
requirement was not mentioned to him by the
private respondent's agent; and had it been It is apparent from the face of
mentioned, he would not have withheld such Fire Policy GA 28146/Fire Policy
information. He further asserted that the total of No. 28144 that the insurance
the amounts claimed under the three policies was was taken in the name of private
below the actual value of his stocks at the time of respondent [petitioner herein].
loss, which was P1,000,000.00. The policy states that
"DISCOUNT MART (MR.
In its answer,7 the private respondent specifically ARMANDO GEAGONIA,
denied the allegations in the complaint and set up PROP)" was the assured and
as its principal defense the violation of Condition that "TESING TEXTILES" [was]
3 of the policy. only the mortgagee of the goods.
Examining the policy sued upon in the present On September 21, 1946, after Roosevelt
case, we find that its prescriptive clause, if given Steamship Agency Inc., and Manila
effect in accordance with the terms of the policy, Terminal Co., Inc., denied plaintiff's
would reduce the period allowed the insured for claim, a formal insurance claim was filed
bringing his action to less than one year. This is with Kerr & Co., Ltd., local agents of
so because the said clause makes the Eagle Star Insurance Co., Ltd., (Exh.
prescriptive period begin from the happening of L.)Kerr & Co., Ltd., referred the insurance
the loss and at the same time provides that the no claim to Eagle Star Insurance Co., Ltd. in
suit on the policy shall be sustainable in any court London but the latter, after insistent
unless the insured shall have first fully complied request of plaintiffs for action, rejected
with all the terms and conditions of the policy, the claim on April 22, 1948, giving as its
among them that which requires that, as so as the reasons the lapse of the expiry day of the
loss is determined, written claim therefor be filed risks covered by the policy and returned
with the carrier and that the letter to the carrier the claim documents only in August of
and the latter's reply should be attached to the 1948. (pp. 87-88, Record on Appeal.)
claim papers to be sent to the insurer. It is obvious
that compliance with this condition precedent will Furthermore, there is nothing in the record to
necessarily consume time and thus shorten the show that the claim was rejected in the year 1947,
period for bringing suit to less than one year if the either by the insurance company in London or its
period is to begin, as stated in the policy, from settling agents in the Philippines, while on the
"the happening of the loss." Being contrary to the other hand defendant's own Exhibit L-1 is
law of the forum, such stipulation cannot be given indisputable proof that it was on 22nd April 1948"
effect. that the settling agents informed the claimant
"that after due and careful consideration, our
It may perhaps be suggested that the policy Principals confirm our declination of this claim." It
clause relied on by the insurer for defeating not appearing that the settling agents' decision on
plaintiff's action should be given the construction claims against their principals were not subject to
reversal or modification by the latter, while on the G.R. No. L-24566 July 29, 1968
contrary the insurance policy expressly
stipulates, under the heading "Important Notice," AGRICULTURAL CREDIT & COOPERATIVE
that the said agents "have authority to certify only FINANCING ADMINISTRATION
as to the nature, cause and extent of the (ACCFA), plaintiff-appellant,
damage," and it furthermore appearing that a vs.
reiteration of plaintiffs claim was made to the ALPHA INSURANCE & SURETY CO.,
principals and the latter gave it due course since INC., defendant-appellee,
only "after due and careful consideration" did they RICARDO A. LADINES, ET AL., third party-
confirm the action taken by the agents, we defendants-appellees.
conclude that, for the purpose of the present
action, we should consider plaintiff's claim to have Deogracias E. Lerma and Esmeraldo U. Guloy for
been finally rejected by the insurer on April 22, plaintiff-appellant.
1948. Having been filed within twelve months L. L. Reyes for defendant-appellee.
form that date, the action cannot be deemed to Geronimo F. Abellera for third party defendants-
have prescribed even on the supposition that the appellees.
period given the insured for bringing suit under
the prescriptive clause of the policy is twelve
months after the accrual of the cause of action. REYES, J.B.L., J.:
In concluding, we may state that contractual Appeal, on points of law, against a decision of the
limitations contained in insurance policies are Court of First Instance of Manila, in its Case No.
regarded with extreme jealousy by courts and will 43372, upholding a motion to dismiss.
be strictly construed against the insurer and
should not be permitted to prevent a recovery At issue is the question whether or not the
when their just and honest application would not provision of a fidelity bond that no action shall be
produce that result. (46 C. J. S. 273.) had or maintained thereon unless commenced
within one year from the making of a claim for the
Wherefore, the judgment appealed from is loss upon which the action is based, is valid or
reversed with respect to the carrier and its agents void, in view of Section 61-A of the Insurance Act
but affirmed with respect to the insurance invalidating stipulations limiting the time for
company and its agents, with costs against the commencing an action thereon to less than one
latter. year from the time the cause of action accrues.
In turn, PhilGen then filed an action against The distinction between the two kinds of charter
Coastwise Lighterage before the Regional Trial parties (i.e. bareboat or demise and contract of
Court of Manila, seeking to recover the amount of affreightment) is more clearly set out in the case
P700,000.00 which it paid to Pag-asa Sales, Inc. of Puromines, Inc. vs. Court of Appeals,4 wherein
for the latter's lost cargo. PhilGen now claims to we ruled:
be subrogated to all the contractual rights and
claims which the consignee may have against the Under the demise or bareboat
carrier, which is presumed to have violated the
charter of the vessel, the
contract of carriage.
charterer will generally be
regarded as the owner for the
The RTC awarded the amount prayed for by voyage or service stipulated. The
PhilGen. On Coastwise Lighterage's appeal to charterer mans the vessel with
the Court of Appeals, the award was affirmed. his own people and becomes the
owner pro hac vice, subject to
Hence, this petition. liability to others for damages
caused by negligence. To create
There are two main issues to be resolved herein. a demise, the owner of a vessel
First, whether or not petitioner Coastwise must completely and exclusively
Lighterage was transformed into a private carrier, relinquish possession, command
by virtue of the contract of affreightment which it and navigation thereof to the
entered into with the consignee, Pag-asa Sales, charterer, anything short of such
Inc. Corollarily, if it were in fact transformed into a a complete transfer is a contract
private carrier, did it exercise the ordinary of affreightment (time or voyage
diligence to which a private carrier is in turn charter party) or not a charter
bound? Second, whether or not the insurer was party at all.
subrogated into the rights of the consignee
against the carrier, upon payment by the insurer On the other hand a contract of
of the value of the consignee's goods lost while affreightment is one in which the
on board one of the carrier's vessels. owner of the vessel leases part
or all of its space to haul goods
On the first issue, petitioner contends that the for others. It is a contract for
RTC and the Court of Appeals erred in finding that special service to be rendered by
it was a common carrier. It stresses the fact that the owner of the vessel and
it contracted with Pag-asa Sales, Inc. to transport under such contract the general
the shipment of molasses from Negros Oriental to owner retains the possession,
Manila and refers to this contract as a "charter command and navigation of the
agreement". It then proceeds to cite the case ship, the charterer or freighter
of Home Insurance Company vs. American merely having use of the space
Steamship Agencies, Inc.2 wherein this Court in the vessel in return for his
held: ". . . a common carrier undertaking to carry payment of the charter hire. . . . .
a special cargo or chartered to a special person
only becomes a private carrier."
. . . . An owner who retains accidents"6 effectively contributed to the
possession of the ship though happening of this mishap. Thus, being unaware
the hold is the property of the of the hidden danger that lies in its path, it
charterer, remains liable as became impossible for the petitioner to avoid the
carrier and must answer for any same. Nothing could have prevented the event,
breach of duty as to the care, making it beyond the pale of even the exercise of
loading and unloading of the extraordinary diligence.
cargo. . . .
However, petitioner's assertion is belied by the
Although a charter party may transform a evidence on record where it appeared that far
common carrier into a private one, the same from having rendered service with the greatest
however is not true in a contract of affreightment skill and utmost foresight, and being free from
on account of the aforementioned distinctions fault, the carrier was culpably remiss in the
between the two. observance of its duties.
Petitioner admits that the contract it entered into Jesus R. Constantino, the patron of the vessel
with the consignee was one of affreightment.5 We "Coastwise 9" admitted that he was not licensed.
agree. Pag-asa Sales, Inc. only leased three of The Code of Commerce, which subsidiarily
petitioner's vessels, in order to carry cargo from governs common carriers (which are primarily
one point to another, but the possession, governed by the provisions of the Civil Code)
command and navigation of the vessels remained provides:
with petitioner Coastwise Lighterage.
Art. 609. — Captains, masters,
Pursuant therefore to the ruling in the or patrons of vessels must be
aforecited Puromines case, Coastwise Filipinos, have legal capacity to
Lighterage, by the contract of affreightment, was contract in accordance with this
not converted into a private carrier, but remained code, and prove the skill capacity
a common carrier and was still liable as such. and qualifications necessary to
command and direct the vessel,
The law and jurisprudence on common carriers as established by marine and
both hold that the mere proof of delivery of goods navigation laws, ordinances or
in good order to a carrier and the subsequent regulations, and must not be
arrival of the same goods at the place of disqualified according to the
destination in bad order makes for a prima same for the discharge of the
facie case against the carrier. duties of the position. . . .
It follows then that the presumption of negligence Clearly, petitioner Coastwise Lighterage's
that attaches to common carriers, once the goods embarking on a voyage with an unlicensed patron
it transports are lost, destroyed or deteriorated, violates this rule. It cannot safely claim to have
applies to the petitioner. This presumption, which exercised extraordinary diligence, by placing a
is overcome only by proof of the exercise of person whose navigational skills are
extraordinary diligence, remained unrebutted in questionable, at the helm of the vessel which
this case. eventually met the fateful accident. It may also
logically, follow that a person without license to
The records show that the damage to the barge navigate, lacks not just the skill to do so, but also
the utmost familiarity with the usual and safe
which carried the cargo of molasses was caused
routes taken by seasoned and legally authorized
by its hitting an unknown sunken object as it was
ones. Had the patron been licensed, he could be
heading for Pier 18. The object turned out to be a
presumed to have both the skill and the
submerged derelict vessel. Petitioner contends
that this navigational hazard was the efficient knowledge that would have prevented the
cause of the accident. Further it asserts that the vessel's hitting the sunken derelict ship that lay
on their way to Pier 18.
fact that the Philippine Coastguard "has not
exerted any effort to prepare a chart to indicate
the location of sunken derelicts within Manila As a common carrier, petitioner is liable for
North Harbor to avoid navigational breach of the contract of carriage, having failed to
overcome the presumption of negligence with the former of all remedies which the
loss and destruction of goods it transported, by latter may have against the third
proof of its exercise of extraordinary diligence. party whose negligence or
wrongful act caused the loss.
On the issue of subrogation, which petitioner The right of subrogation is not
contends as inapplicable in this case, we once dependent upon, nor does it
more rule against the petitioner. We have already grow out of, any privity of
found petitioner liable for breach of the contract of contract or upon written
carriage it entered into with Pag-asa Sales, Inc. assignment of claim. It accrues
However, for the damage sustained by the loss of simply upon payment of the
the cargo which petitioner-carrier was insurance claim by the insurer.
transporting, it was not the carrier which paid the
value thereof to Pag-asa Sales, Inc. but the Undoubtedly, upon payment by respondent
latter's insurer, herein private respondent insurer PhilGen of the amount of P700,000.00 to
PhilGen. Pag-asa Sales, Inc., the consignee of the cargo
of molasses totally damaged while being
Article 2207 of the Civil Code is explicit on this transported by petitioner Coastwise Lighterage,
point: the former was subrogated into all the rights
which Pag-asa Sales, Inc. may have had against
Art. 2207. If the plaintiffs property the carrier, herein petitioner Coastwise
Lighterage.
has been insured, and he has
received indemnity from the
insurance company for the injury WHEREFORE, premises considered, this petition
or loss arising out of the wrong or is DENIED and the appealed decision affirming
breach of contract complained the order of Branch 35 of the Regional Trial Court
of, the insurance company shall of Manila for petitioner Coastwise Lighterage to
be subrogated to the rights of the pay respondent Philippine General Insurance
insured against the wrongdoer or Company the "principal amount of P700,000.00
the person who violated the plus interest thereon at the legal rate computed
contract. . . . from March 29, 1989, the date the complaint was
filed until fully paid and another sum of
P100,000.00 as attorney's fees and costs"10 is
This legal provision containing the equitable
likewise hereby AFFIRMED
principle of subrogation has been applied in a
long line of cases including Compania Maritima v.
Insurance Company of North SO ORDERED.
America;7 Fireman's Fund Insurance Company v.
Jamilla & Company, Inc.,8 and Pan Malayan
Insurance Corporation v. Court of
Appeals,9 wherein this Court explained: