8/21/2017 Delsan Transport Lines Inc vs CA : 127897 : November 15, 2001 : J.

De Leon, Jr : Second Division

SECONDDIVISION

[G.R.No.127897.November15,2001]

DELSAN TRANSPORT LINES, INC., petitioner, vs.THE HON. COURT OF APPEALS

andAMERICANHOMEASSURANCECORPORATION,respondents.

DECISION
DELEON,JR.,J.:

BeforeusisapetitionforreviewoncertiorarioftheDecision[1]oftheCourtofAppealsinCAG.R.CV
No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of Makati City,
Branch 137, ordering petitioner to pay private respondent the sum of Five Million NinetySix Thousand Six
Hundred ThirtyFive Pesos and FiftySeven Centavos (P5,096,635.57) and costs and the Resolution[2] dated
January21,1997whichdeniedthesubsequentmotionforreconsideration.
ThefactsshowthatCaltexPhilippines(Caltexforbrevity)enteredintoacontractofaffreightmentwiththe
petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to
transportCaltexsindustrialfueloilfromtheBatangasBataanRefinerytodifferentpartsofthecountry.Under
thecontract,petitionertookonboarditsvessel,MTMaysun,2,277.314kilolitersofindustrialfueloilofCaltex
to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private
respondent,AmericanHomeAssuranceCorporation.
OnAugust14,1986,MTMaysunsetsailfromBatangasforZamboangaCity.Unfortunately,thevesselsank
intheearlymorningofAugust16,1986nearPanayGulfintheVisayastakingwithittheentirecargooffueloil.
Subsequently, private respondent paid Caltex the sum of Five Million NinetySix Thousand Six Hundred
ThirtyFive Pesos and FiftySeven Centavos (P5,096,635.57) representing the insured value of the lost cargo.
ExercisingitsrightofsubrogationunderArticle2207oftheNewCivilCode,theprivaterespondentdemanded
ofthepetitionerthesameamountitpaidtoCaltex.
Duetoitsfailuretocollectfromthepetitionerdespitepriordemand,privaterespondentfiledacomplaint
withtheRegionalTrialCourtofMakatiCity,Branch137,forcollectionofasumofmoney.Afterthetrialand
uponanalyzingtheevidenceadduced,thetrialcourtrenderedadecisiononNovember29,1990dismissingthe
complaintagainsthereinpetitionerwithoutpronouncementastocost.Thetrialcourtfoundthatthevessel,MT
Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey
Certificate Report No. M5016MH upon inspection during its annual drydocking and that the incident was
causedbyunexpectedinclementweatherconditionorforcemajeure,thusexemptingthecommoncarrier(herein
petitioner)fromliabilityforthelossofitscargo.[3]
The decision of the trial court, however, wasreversed, on appeal, bythe Court of Appeals.The appellate
courtgavecredencetotheweatherreportissuedbythePhilippineAtmospheric,GeophysicalandAstronomical
Services Administration (PAGASA for brevity) which showed that from 2:00 oclock to 8:00 oclock 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 two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in
contrast to herein petitioners allegation 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
improperlymanned,theappellatecourtruledthatthepetitionerisliableonitsobligationascommoncarrier[4]to

http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/127897.htm 1/5
8/21/2017 Delsan Transport Lines Inc vs CA : 127897 : November 15, 2001 : J. De Leon, Jr : Second Division

hereinprivaterespondentinsurancecompanyassubrogeeofCaltex.Thesubsequentmotionforreconsideration
ofhereinpetitionerwasdeniedbytheappellatecourt.
Petitionerraisedthefollowingassignmentsoferrorinsupportoftheinstantpetition,[5]towit:
I

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL
COURT.
II

THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL
PRESUMPTION THAT THE VESSEL MT MAYSUN WAS SEAWORTHY.

III

THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN
THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS.

PetitionerDelsanTransportLines,Inc.invokestheprovisionofSection113oftheInsuranceCodeofthe
Philippines,whichstatesthatineverymarineinsuranceuponashiporfreight,orfreightage,oruponanything
whichisthesubjectofmarineinsurancethereisanimpliedwarrantybytheshipperthattheshipisseaworthy.
Consequently,theinsurerwillnotbeliabletotheassuredforanylossunderthepolicyincasethevesselwould
lateronbefoundasnotseaworthyattheinceptionoftheinsurance.It theorized that when private respondent
paidCaltexthevalueofitslostcargo,theactoftheprivaterespondentisequivalenttoatacitrecognitionthatthe
illfatedvesselwasseaworthyotherwise,privaterespondentwasnotlegallyliabletoCaltexduetothelatters
breachofimpliedwarrantyunderthemarineinsurancepolicythatthevesselwasseaworthy.
ThepetitioneralsoallegesthattheCourtofAppealserredinrulingthatMTMaysunwasnotseaworthyon
thegroundthatthemarineofficerwhoservedasthechiefmateofthevessel,FranciscoBerina,wasallegedlynot
qualified.UnderSection116oftheInsuranceCodeofthePhilippines,theimpliedwarrantyofseaworthinessof
the vessel, which the private respondent admitted as having been fulfilled by its payment of the insurance
proceedstoCaltexofitslostcargo,extendstothevesselscomplement.Besides,petitioneraversthatalthough
Berina had merely a 2nd officers license, he was qualified to act as the vessels chief officer under Chapter
IV(403),CategoryIII(a)(3)(ii)(aa)ofthePhilippineMerchantMarineRulesandRegulations.Infact,allthecrew
and officers of MT Maysun were exonerated in the administrative investigation conducted by the Board of
MarineInquiryafterthesubjectaccident.[6]
In any event, petitioner further avers that private respondent failed, for unknown reason, to present in
evidenceduringthetrialoftheinstantcasethesubjectmarinecargoinsurancepolicyitenteredintowithCaltex.
By virtue of the doctrine laid down in the case of Home Insurance Corporation vs. CA,[7] the failure of the
privaterespondenttopresenttheinsurancepolicyinevidenceisallegedlyfataltoitsclaiminasmuchasthereis
nowaytodeterminetherightsofthepartiesthereto.
Hence,thelegalissuesposedbeforetheCourtare:
I

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.

II

http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/127897.htm 2/5
8/21/2017 Delsan Transport Lines Inc vs CA : 127897 : November 15, 2001 : J. De Leon, Jr : Second Division

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

Weruleinthenegativeonbothissues.
Thepaymentmadebytheprivaterespondentfortheinsuredvalueofthelostcargooperatesaswaiverofits
(privaterespondent)righttoenforcethetermoftheimpliedwarrantyagainstCaltexunderthemarineinsurance
policy.However,thesamecannotbevalidlyinterpretedasanautomaticadmissionofthevesselsseaworthiness
by the private respondent 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 subrogatory right which
enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo
againstthepetitionercommoncarrier.[8]Article2207oftheNewCivilCodeprovidesthat:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deciency from the person causing the loss or injury.

Therightofsubrogationhasitsrootsinequity.Itisdesignedtopromoteandtoaccomplishjusticeandisthe
modewhichequityadoptstocompeltheultimatepaymentofadebtbyonewhoinjusticeandgoodconscience
ought to pay.[9] 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.[10]
Consequently,thepaymentmadebytheprivaterespondent(insurer)toCaltex(assured)operatesasanequitable
assignmenttotheformerofalltheremedieswhichthelattermayhaveagainstthepetitioner.
Fromthenatureoftheirbusinessandforreasonsofpublicpolicy,commoncarriersareboundtoobserve
extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them,
accordingtoallthecircumstancesofeachcase.[11]Intheeventofloss,destructionordeteriorationoftheinsured
goods,commoncarriersshallberesponsibleunlessthesameisbroughtabout,amongothers,byflood,storm,
earthquake,lightningorothernaturaldisasterorcalamity.[12]Inallothercases,ifthegoodsarelost,destroyed
or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they
provethattheyobservedextraordinarydiligence.[13]
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner
attributesthesinkingofMTMaysuntofortuitouseventorforcemajeure.FromthetestimoniesofJaimeJarabe
and Francisco Berina, captain and chief mate, respectively of the illfated vessel, it appears that a sudden and
unexpectedchangeofweatherconditionoccurredintheearlymorningofAugust16,1986thatataround3:15
oclockinthemorningasquall(unos)carryingstrongwindswithanapproximatevelocityof30knotsperhour
andbigwavesaveragingeighteen(18)totwenty(20)feethigh,repeatedlybuffetedMTMaysuncausingittotilt,
takeinwaterandeventuallysinkwithitscargo.[14]Thistaleofstrongwindsandbigwavesbythesaidofficers
of the petitioner however, was effectively rebutted and belied by the weather report[15] from the Philippine
Atmospheric,GeophysicalandAstronomicalServicesAdministration(PAGASA),theindependentgovernment
agencychargedwithmonitoringweatherandseaconditions,showingthatfrom2:00oclockto8:00oclockinthe
morningonAugust16,1986,thewindspeedremainedatten(10)totwenty(20)knotsperhourwhiletheheight
ofthewavesrangedfrom.7totwo(2)metersinthevicinityofCuyoEastPassandPanayGulfwherethesubject
vessel sank. Thus, as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its entire
cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea
conditioninthevicinitywhenthesaidvesselsank.
Theappellatecourtalsocorrectlyopinedthatthepetitionerswitnesses,JaimeJarabeandFranciscoBerina,
shipcaptainandchiefmate,respectively,ofthesaidvessel,couldnotbeexpectedtotestifyagainsttheinterest
oftheiremployer,thehereinpetitionercommoncarrier.

http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/127897.htm 3/5
8/21/2017 Delsan Transport Lines Inc vs CA : 127897 : November 15, 2001 : J. De Leon, Jr : Second Division

Neithermaypetitionerescapeliabilitybypresentinginevidencecertificates[16]thattendtoshowthatatthe
timeofdrydockingandinspectionbythePhilippineCoastGuard,thevesselMTMaysun,wasfitforvoyage.
Thesepiecesofevidencedonotnecessarilytakeintoaccounttheactualconditionofthevesselatthetimeofthe
commencementofthevoyage.AscorrectlyobservedbytheCourtofappeals:

At the time of dry-docking and inspection, the ship may have appeared t. The certicates issued, however, do
not negate the presumption of unseaworthiness triggered by an unexplained sinking. Of certicates issued in this
regard, authorities are likewise clear as to their probative value, (thus):

Seaworthiness relates to a vessels actual condition. Neither the granting of classication or the issuance of
certicates establishes seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62)

And also:

Authorities are clear that diligence in securing certicates of seaworthiness does not satisfy the vessel owners
obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel
or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no
obligation in relation to seaworthiness. (Ibid.)[17]

Additionally, the exoneration of MT Maysuns officers 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
commoncarrierfromitscivilliabilityarisingfromitsfailuretoobserveextraordinarydiligenceinthevigilance
overthegoodsitwastransportingandforthenegligentactsoromissionsofitsemployees,thedeterminationof
whichproperlybelongstothecourts.[18]Inthecaseatbar,petitionerisliablefortheinsuredvalueofthelost
cargoofindustrialfueloilbelongingtoCaltexforitsfailuretorebutthepresumptionoffaultornegligenceas
commoncarrier[19]occasionedbytheunexplainedsinkingofitsvessel,MTMaysun,whileintransit.
Anentthesecondissue,itisourviewandsoholdthatthepresentationinevidenceofthemarineinsurance
policyisnotindispensableinthiscasebeforetheinsurermayrecoverfromthecommoncarriertheinsuredvalue
of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to
establishnotonlytherelationshipofhereinprivaterespondentasinsurerandCaltex,astheassuredshipperof
the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of
subrogationaccruessimplyuponpaymentbytheinsurancecompanyoftheinsuranceclaim.[20]
ThepresentationoftheinsurancepolicywasnecessaryinthecaseofHomeInsuranceCorporationv.CA[21]
(acasecitedbypetitioner)becausetheshipmenttherein(hydraulicengines)passedthroughseveralstageswith
differentpartiesinvolvedineachstage.First,fromtheshippertotheportofdeparturesecond,fromtheportof
departuretotheM/SOrientalStatesmanthird,fromtheM/SOrientalStatesmantotheM/SPacificConveyor
fourth, from the M/S Pacific Conveyor to the port of arrival fifth, from the port of arrival to the arrastre
operator sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent
therein)andlastly,fromthehaulertotheconsignee.Weemphasizedinthatcasethatintheabsenceofproofof
stipulationstothecontrary,thehaulercanbeliableonlyforanydamagethatoccurredfromthetimeitreceived
thecargountilitfinallydeliveredittotheconsignee.Ordinarily,itcannotbeheldresponsibleforthehandlingof
thecargobeforeitactuallyreceivedit.Theinsurancecontract,whichwasnotpresentedinevidenceinthatcase
wouldhaveindicatedthescopeoftheinsurersliability,ifany,sincenoevidencewasadducedindicatingatwhat
stageinthehandlingprocessthedamagetothecargowassustained.
Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance
Corporationisnotapplicabletothecaseatbar.Incontrast,thereisnodoubtthatthecargoofindustrialfueloil
belongingtoCaltex,inthecaseatbar,waslostwhileonboardpetitionersvessel,MTMaysun,whichsankwhile
intransitinthevicinityofPanayGulfandCuyoEastPassintheearlymorningofAugust16,1986.

http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/127897.htm 4/5
8/21/2017 Delsan Transport Lines Inc vs CA : 127897 : November 15, 2001 : J. De Leon, Jr : Second Division

WHEREFORE,theinstantpetitionisDENIED.TheDecisiondatedJune17,1996oftheCourtofAppeals
inCAG.R.CVNo.39836isAFFIRMED.Costsagainstthepetitioner.
SOORDERED.
Bellosillo,(Chairman),Mendoza,Quisumbing,andBuena,JJ.,concur.

[1]Penned by Associate Justice Hilarion L. Aquino and concurred in by Associate Justices Jainal D. Rasul and Hector L. Hofilea.
AnnexA.Rollo,pp.4349.
[2]Rollo,pp.5559.

[3]AnnexF.Rollo,pp.6479.

[4]SeeNoteNo.1.

[5]Rollo,pp.1841.

[6]Exhibits1111Jinclusive.

[7]225SCRA411(1993).

[8]CebuShipyardandEngineeringWorks,Inc.v.WilliamLines,Inc.,306SCRA762,778(1999).

[9] Philippine American General Insurance Co., Inc. v. Court of Appeals, 273 SCRA 262, 275 (1997) citing Boney, Insurance
Commissionerv.CentralMutualIns.Co.ofChicago,197S.E.122.
[10] Pan Malayan Insurance Corporation v. Court of Appeals, 184 SCRA 54, 58 (1990) citing Compania Maritima v. Insurance
CompanyofNorthAmerica,G.R.No.L18965,October30,1964FiremansFundInsuranceCompanyv.JamillaandCo.,Inc.,G.R.
No.L27427,April7,1976.
[11]Article1733,NewCivilCode.

[12]Article1734,NewCivilCode.

[13]Article1735,NewCivilCodeBenedictov.IntermediateAppellateCourt,187SCRA547,554(1990).

[14]T.S.N.datedApril25,1988,p.19T.S.N.datedMay9,1988,pp.2124T.S.N.datedAugust1,1988,p.32T.S.N.datedAugust
15,1988,pp.1617.
[15]ExhibitY.

[16]Exhibits1235withsubmarkings.

[17]AnnexA.Rollo,pp.4647.

[18]Aradav.CourtofAppeals,210SCRA624,633(1992).

[19]SeeNoteNo.13.

[20]SeeNoteNo.10.

[21]Supra,p.415.

http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/127897.htm 5/5