1. THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. vs.
s. with, therefore, PHILAMGEN was not properly subrogated to the
CA and FELMAN SHIPPING LINES
[G.R. No. 116940. June 11, 1997] (TOPIC: SEAWORTHINIESS)
Facts:
1. In 1983, Coca-Cola Bottlers Philippines, Inc. loaded on board ​MV Asilda​, a
vessel owned by respondent, Felman Shipping Lines (FELMAN), 7,500 cases
of 1-liter softdrink bottles to be transported from Zamboanga City to Cebu City.
2. The shipment was insured with petitioner, Philippine American General
Insurance Co., Inc. (PHILAMGEN) under a Marine Open Policy.
3. In July 1983, ​MV Asilda after leaving the port of Zamboanga, sank in the
waters of Zamboanga del Norte bringing down her entire cargo including the
7,500 cases.
4. Coca-Cola Bottlers filed a claim with FELMAN for recovery of damages.
5. FELMAN denied the claim.
6. Coca-Cola Bottlers filed an insurance claim with PHILAMGEN which paid its
claim of P755,250.0
7. PHILAMGEN, claiming its right of subrogation, filed a petition for sum of money
and damages against FELMAN. PHILAMGEN claimed that the sinking and
total loss of ​MV Asilda was due to the vessels unseaworthiness as she was put
to sea in an unstable condition. Moreover, the vessel was improperly manned
and its officers grossly negligent.
8. FELMAN filed a Motion to Dismiss on the following grounds:
a. That no right of subrogation accrued to PHILAMGEN.
b. FELMAN abandoned all its rights, interests, and ownership over the
vessel, together with freight and appurtenances for the purpose of
limiting and extinguishing its liability under Art. 587 of the Code of
Commerce.
9. The Trial Court, granted the MTD and dismissed the complaint of
PHILAMGEN.
10. On appeal, the CA set aside the dismissal and remanded the case to the lower
court for trial.
11. After trial on the merits, the Trial Court then ruled in favor of FELMAN and held
that:
a. MV Asilda was seaworthy when it left the Zamboanga based on
certificates issued by the Philippine Coast Guard. Hence the loss of
the vessel could only be attributed to a fortuitous event, in which
case, no liability should attach unless there is a stipulation to the
negligence of the captain and his crew, in which case, Art. 587 should
apply.
b. Even assuming MV Asilda was unseaworthy, PHILAMGEN cannot
recover from FELMAN since Coca-Cola breached its implied warranty
of seaworthiness. Therefore, payment by PHILAMGEN to Coca-cola
was wrong and mistaken payment. No right of subrogation exists.
12. On appeal, the CA held that:
a. The vessel was unseaworthy for being top heavy, as 2,500 cases
were improperly stowed on deck. So, while the vessel was certified by
the Coast Guard indicating seaworthiness, it was not seaworthy with
respect to the cargo.
b. Nonetheless, the CA denied PHILAMGEN’s claim on the ground that
Coca-Cola’s implied warranty of seaworthiness was not complied
rights and interests of Coca-Cola.
c. Furthermore, the filing of notice of abandonment by FELMAN had
absolved the shipowner from liability under the limited liability rule.
13. Hence this petition.
Issues:
1. W/N ​MV Asilda ​was seaworthy when it left the port of Zamboanga. ​NO
2. W/N PHILAMGEN can be subrogated to the rights of Coca-Cola against
FELMAN. ​YES
3. W/N the limited liability rule under Art. 587 of the Code of Commerce applies
NO.
Held:
1. W/N ​MV Asilda ​was seaworthy when it left the port of Zamboanga. NO
The vessel was unseaworthy because:
1. The ship Captain and Chief Mate confirmed that when they left Zamboanga
port the weather was fine and admitted that empty boxes of fresh eggs and
500 cases of Coca-Cola were put on deck. And during their voyage the boat hit
a log, and after that there was a series of listing which eventually lead to the
sinking of the vessel.
2. The Elite Adjusters, Inc. submitted a report re: sinking of vessel wherein they
found that reason for the lists was due to the vessel being ​top-heavy​, meaning,
the distribution or stowage of cargo lead to the vessel being unstable and
unseaworthy for voyage.
3. The vessel was designed as a fishing vessel and not designed to carry a
substantial amount of cargo on deck. the moment that the vessel was utilized
to load heavy cargo on its deck, the vessel was rendered unseaworthy for the
purpose of carrying the type of cargo because the weight of the deck cargo so
decreased the vessels metacentric height as to cause it to become unstable.
4. the marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at
least two (2) instances has dispensed with the usual warranty of worthiness.
Paragraph 15 of the Marine Open Policy No. 100367-PAG reads: (t)he liberties
as per Contract of Affreightment the presence of the Negligence Clause and/or
Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract
of Affreightment as between the Assured and the Company shall not prejudice
the insurance. The seaworthiness of the vessel as between the Assured and
the Assurers is hereby admitted.
5. The result of the admission of seaworthiness by the assurer PHILAMGEN may
mean one or two things: (a) that the warranty of the seaworthiness is to be
taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the
insurance company. The insertion of such waiver clauses in cargo policies is in
recognition of the realistic fact that cargo owners cannot control the state of the
vessel. Thus it CAN be said that with such categorical waiver, PHILAMGEN
has accepted the risk of unseaworthiness so that if the ship should sink by
unseaworthiness, as what occurred in this case, PHILAMGEN is liable. Having
disposed of this matter, we move on to the legal basis for subrogation.
2. W/N PHILAMGEN can be subrogated to the rights of Coca-Cola against
FELMAN. YES
a. 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 deficiency from the person causing the
loss or injury.
b. Applying, Pan Malayan Insurance Corporation v. CA, “payment by the assurer to the
assured operates as an equitable assignment to the assurer of all the remedies which
the assured may have against the third party whose negligence or wrongful act caused
the loss. The right of subrogation is not dependent upon, nor does it grow out of any
privity of contract or upon payment by the insurance company of the insurance claim. It
accrues simply upon payment by the insurance company of the insurance claim.”
c. Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines,
Inc., gave the former the right to bring an action as subrogee against FELMAN. Having
failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500
cases of 1-liter Coca-Cola softdrink bottles is inevitable.
3. W/N the limited liability rule under Art. 587 of the Code of Commerce Applies.
NO. it does not apply.
a. The ship agent is liable for the negligent acts of the captain in the care of goods
loaded on the vessel. This liability can be limited through abandonment of the vessel, its
equipment and freightage as provided under Art. 587.
b. Nonetheless, there are exceptional circumstances wherein the ship agent could still
be held answerable despite the abandonment, as where the loss or injury was due to
the fault of the shipowner and the captain.
c. The international rule is that the right of abandonment of vessels, as a legal limitation
of a shipowners liability, does not apply to cases where the injury or average was
occasioned by the shipowners own fault.
d. Art. 587 speaks only of situations where the fault or negligence is committed solely by
the captain.
e. Where the shipowner is likewise to be blamed, Art. 587 will not apply.
WHEREFORE, petition GRANTED. FELMAN is ordered to pay PHILAMGEN
P755,250.00
2. Caltex Phil v. Sulpicio Lines REPEATED
Facts:
1. MT Vector is a motor tanker engaged in the business of transporting fuel
products and it carried on board gasoline and other oil products owned by
Caltex. While, MV Dona Paz, is a passenger ship operated by Sulpicio line -
carrying a total of 1,493 passengers according to the Coast Guard.
2. At about 10:30PM, the two vessels collided in the open sea within the vicinity
of Dumali Point between Marinduque and Oriental Mindoro. An estimated
4,000 unmanifested passengers were aboard Dona Paz and only 24 survived.
3. Teresita Canezal and Sotera Canezal filed with the RTC a complaint for
Damages arising from Breach of Contract of Carriage against Sulpicio Lines
and in turn, Sulpicio lines filed a third party complaint against Vector Shipping
Corporation alleging that Caltex chartered MT Vector with gross and evident
bad faith knowing fully well that MT Vector was improperly manned, ill
equipped, unseaworthy and a hazard to safe navigation.
4. Trial Court dismissed the third party complaint but the CA modified the TCs
ruling and included Caltex as one of those liable.
Issue: Is the charterer of a sea vessel liable for damages resulting from a collision
between the chartered vessel and a passenger ship
Held: NO
1. THe charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all the legal requirements.
The duty rests upon the common carrier simply for being engaged in public
service.
2. Because of the implied warranty of seaworthiness, shipper of goods, when
transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime
laws.
3. We cannot expect passengers to inquire every time they board a common
carrier, whether the carrier possesses the necessary papers or that all the
carriers employees are qualified.
Notes:
1. A ​charter party​ is a contract by which an entire ship, or some principal part
thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment​ is one by which the owner of a ship or other vessel
lets the whole or part of her to a merchant or other person for the conveyance
of goods, on a particular voyage, in consideration of the payment of freight.
2. If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and responsibilities
of ownership rest on the owner. The charterer is free from liability to third
persons in respect of the ship.
3. Delsan Transport Lines, Inc. v. CA and American Home Assurance
Corporation, G.R. No. 127897, November 15, 2001 REPEATED
Facts:
1. Caltex Phl. entered into a contract of affreightment with Delsan Transport
Lines, Inc., for 1 year whereby Delsan agreed to transport Caltex’s industrial
fuel oil from the Batangas-Bataan Refinery to different parts of the country.
2. Under the contract, Delsan took on board its vessel (MT Maysun) 2,277.314
kiloliters of industrial fuel oil of Caltex to be delivered to Zamboanga City. The
shipment was insured with American Home Assurance (AHA) Corporation.
Unfortunately, the vessel sank taking with it the entire cargo of fuel oil.
3. Subsequently, AHA paid Caltex P5,096,635.67 (insured value of the lost
cargo). Exercising its right of subrogation under Article 2207 of the New Civil
Code, AHA demanded of Delsan the same amount it paid to Caltex.
4. Delsan invokes the provision of Section 113 of the Insurance Code:
● that in every marine insurance upon a ship or freight, or freightage, or
upon any thing which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is seaworthy.
 ● Consequently, the insurer will not be liable to the assured for any loss
under the policy in case the vessel would later on be found as not
seaworthy at the inception of the insurance.
● It theorized that when AHA paid Caltex the value of its lost cargo, the
act of AHA is equivalent to a tacit recognition that the ill-fated vessel
was seaworthy; otherwise, AHA was not legally liable to Caltex due to
the latter’s breach of implied warranty under the marine insurance
policy that the vessel was seaworthy.
5. Delsan further avers that AHA failed to present in evidence during the trial, the
subject marine cargo insurance policy it entered into with Caltex. That this is
fatal to its claim as there is no way to determine the rights of the parties.
Issue: Whether the payment made by AHA 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 Delsan? - NO.
Held: Petition Denied. SC ruled in favor of AHA.
1. The payment made by AHA for the insured value of the lost cargo operates as
waiver of AHA’s 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 AHA as to foreclose
recourse against Delsan for any liability under its contractual
obligation as a common carrier.
2. The fact of payment grants AHA subrogatory right which enables it to exercise
legal remedies that would otherwise be available to Caltex as owner of the lost
cargo against Delsan.
3. In order to escape liability, Delsan attributes the sinking of MT Maysun to
fortuitous even or force majeure.
● From the testimonies of its captain and chief mate, a sudden and
unexpected change of weather condition occurred, that a squall
("unos") carrying strong winds with an approximate velocity of 30
knots per hour and big waves averaging 18 to 20 feet high, repeatedly
buffeted MT Maysun causing it to tilt, take in water and eventually
sink with its cargo.
● This tale was rebutted and belied by the weather report from
PAGASA, showing that the wind speed remained at 10 to 20 knots
per hour while the height of the waves ranged from .7 to 2 meters.
● Thus, 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 condition in the vicinity when the vessel sank.
4. Neither may Delsan 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. Seaworthiness relates
to a vessel’s actual condition, which is not established by mere issuance of
certificates.
5. Delsan 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.
Notes: Anent the second issue, the presentation in evidence of the marine insurance
policy is not indispensable before the insurer may recover from the common carrier in
the exercise of its subrogatory right.
● The subrogation receipt, by itself, is sufficient to establish not only the
relationship of AHA (as insurer) and Caltex (as assured), 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.
4. MADRIGAL, TIANGCO & CO. v. HANSON, ORTH & STEVENSON, INC.​,
G.R. Nos. L-6106-07. April 18, 1958
Facts:
On 6 January 1948, for and in consideration of the sum of P1,750 to be paid monthly as
rental, a motor launch named "Isla Verde" owned by the plaintiffs was chartered by the
defendant for six months from the date of actual delivery and acceptance, under and by
virtue of a contract which, among other terms, required delivery thereof on 20 January
1948, in seaworthy condition together with the necessary documents to enable her to
navigate.
Delivery of the motor launch was not made as agreed upon, because it was on 12
January 1948 only that the motor launch was dry-docked at Malabon to undergo
repairs; and on 28 January 1948 she was transferred to the dock of the defendant near
the Hospicio de San José of the Isla Convalesencia and there some additional
improvements were made on the motor launch.
On the 29th, manned by a complement engaged by the defendant, the motor launch
was put to sea and at 5:00 o’clock a.m. of the following day she sank off the coast of
Limay, province of Bataan, becoming a total loss. To recover P50,000, the estimated
value of the motor launch with all equipment and tackle and a monthly rental of P1,750,
the plaintiffs brought this action.
The Rehabilitation Finance Corporation, successor to the Agricultural & Industrial Bank,
was allowed to intervene to recover P10,745.06, together with a daily interest thereon of
P1.77 from 18 January 1950 until the date of payment thereof, from the plaintiffs, should
they be successful in their claim against either the defendant or the insurance company,
against which an action was also brought by the plaintiff to recover the amount for which
the motor launch was insured under a policy issued by the insurance company.
The defendant in his answer denies liability for the sinking of the motor launch and
claims in a counterclaim P5,000 for unrealized profits; P2,500 for equipment and fishing
tackle; P1,086.16 for the cost of repairs of four sets of nets and the value of the new
ropes; and P1,485.28 for the value of 5 blocks of ice, 2,754 gallons of crude oil, 3 drums
of motor oil and 300 fish boxes.
Trial Court Dismissed the complaint on the ground that although it found that there had
been delivery of the motor launch to the defendant, yet she was unseaworthy.
The plaintiffs contend that, as found by the trial court, there was delivery of the motor
launch to the defendant and that this finding not having been appealed by the defendant
is now final. On the other hand, the defendant claims that the sinking of the motor
launch off the coast of Limay, Bataan, was due to her unseaworthiness and not to the
incompetence or negligence of the complement engaged by him (the defendant) to man
her.
Issue​: Whether or not the motor launch was seaworthy
Held​: NO. The preponderance of evidence leans towards the conclusion that there was
no delivery of the motor launch in accordance with the terms of the contract, because
there was no license issued by the Bureau of
Customs, the license of the motor launch having expired on 6 June 1947 and the
special permit, on 15 December 1947;
There was no license issued by the Bureau Fisheries authorizing the motor launch to
engage in deep sea fishing; and the defendant refused to sign a document, dated 28
January 1948 purporting to acknowledge receipt or
acceptance of the motor launch and to waive the delivery thereof on 20 January 1948 in
accordance with the terms of the contract.
Nevertheless, ​even if the motor launch was not delivered on the date agreed upon, the
fact that the defendant took possession thereof when she was put to on 29 January
1948; and that if on that trip the motor launch sank due to the negligence or
incompetence of the patron, engineer, or crew engaged by the defendant to manger,
provided that she was seaworthy, the defendant would still be responsible for the
sinking of the motor launch, because he has to answer for the negligent acts of his
agents. ​Hence whether there was actual delivery or it was merely a trial run becomes
unimportant if the motor launch was unseaworthy.
Again the preponderance of evidence leans toward the conclusion that the motor launch
was unseaworthy. And this conclusion is supported by the fact that there was no
typhoon; that the waves were those that were caused by the
monsoon winds of the season; and that the or hit anything during her cruise in the bay.
The claim of the plaintiffs that the big waves of the sea filled the engine room with water,
one and one-half or two feet high, as a result of which the engine stopped, and that the
water could not be pumped out by the bilge pump, cannot be believed, because
according to Pedro Ala and Eugenio Maraginot they saw the water bubbling in the
engine room and this testimony is corroborated by Zoilo Belale, the patron, who said
that he thought the water entered the engine room through the tail shaft but that he was
wondering why it was filled with water so soon.
They conclude that the uneven keel of the motor launch constitutes negligence on the
part of the complement and the direct cause of the sinking thereof. The fact that the
motor launch was run and operated for 17 hours in the bay without mishap is strong
proof that the cause of the sinking was not the uneven keel. It was a different cause
which as above stated is inferred from established facts which need not be restated.
Another contention is that the motor launch was thoroughly repaired and overhauled.
But such repair did not include the hull.​ If only water entered the engine room through
the tail shaft, it would not have been bubbling
and could have been pumped out easily.
The finding that the motor launch was unseaworthy at the time she sank precludes
recovery by the plaintiffs of the amount for which the motor launch was insured under
the policy issued by the insurance company.
5. ISABELA ROQUE v. IAC, ​G.R. No. L-66935, November 11, 1985 REPEATED
FACTS:
1. 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.
2. The petitioners insured the logs against loss for P100,000.00 with respondent
Pioneer Insurance and Surety Corporation.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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".
8. Hence, petitioners commenced a civil case against Manila Bay and respondent
Pioneer.
9. IAC: 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.
ISSUE:
1. WON in cases of marine insurance, there is a warranty of seaworthiness
by the cargo owner
2. WON the loss of the cargo was due to perils of the sea, not perils of the
ship
HELD:
1.​ YES​, there is. The liability of the insurance company is governed by law.
Section 113 of the Insurance Code provides that: “In every marine insurance upon a
ship or freight, or freightage, or upon anything which is the subject of marine insurance,
a warranty is implied that the ship is seaworthy.”
· Section 99 of the same Code also provides in part.
Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, ...
Hence, there can be no mistaking the fact that the term "cargo" can be the subject of
marine insurance and that once it is so made, the implied warranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the ship owner or
not.
● Moreover, the fact that the unseaworthiness of the ship was unknown to the
insured is immaterial in ordinary marine insurance and may not be used by
him as a defense in order to recover on the marine insurance policy.
2. As to the second issue, by applying Sec. 113 of the Insurance Code, there is no
doubt that the term 'perils of the sea' extends only to losses caused by sea damage, or
by the violence of the elements, and does not embrace all losses happening at sea; it is
said to include only such losses as are of extraordinary nature, or arise from some
overwhelming power, which cannot be guarded against by the ordinary exertion of
human skill and prudence.
● It is also the general rule that everything which happens thru the inherent
vice of the thing, or by the act of the owners, master or shipper, shall not be
reputed a peril, if not otherwise borne in the policy.
● It must be considered to be settled, furthermore, that a loss which, in the
ordinary course of events, results from the natural and inevitable action of
the sea, from the ordinary wear and tear of the ship, or from the negligent
failure of the ship's owner to provide the vessel with proper equipment to
convey the cargo under ordinary conditions, is not a peril of the sea. Such a
loss is rather due to what has been aptly called the "peril of the ship."
● The insurer undertakes to insure against perils of the sea and similar perils,
not against perils of the ship. Neither barratry can be used as a ground by
Roque.
● Barratry as defined in American Insurance Law is "any willful misconduct on
the part of master or crew in pursuance of some unlawful or fraudulent
purpose without the consent of the owners, and to the prejudice of the
owner's interest." Barratry necessarily requires a willful and intentional act in
its commission. No honest error of judgment or mere negligence, unless
criminally gross, can be barratry.
● In the case at bar, there is no finding that the loss was occasioned by the
willful or fraudulent acts of the vessel's crew. There was only simple
negligence or lack of skill.
6. San Miguel v. Heirs of Sabiniano Inguito REPEATED
Facts:
1.San Miguel Corporation entered into a Time Charter Party Agreement with Julius
Ouano, doing business under the name and style J. Ouano Marine Services.
2. Under the terms of the agreement, SMC chartered the M/V Doña Roberta owned by
Julius Ouano for a period of two years, from June 1, 1989 to May 31, 1991, for the
purpose of transporting SMC’s beverage products from its Mandaue City plant to
various points in Visayas and Mindanao.
3. Among the warranties of the Owner are as follows:
● That there is no employee-employer relationship between the charterer and
the crew of the vessel.
● OWNER warrants that the vessel is seaworthy and in proper, useful and
operational condition and in the event that CHARTERER finds any defect in
the vessel with regards to its working order, condition and function,
CHARTERER shall immediately notify OWNER of this fact;
● The OWNER shall undertake to pay all compensation of all the vessel’s crew,
including the benefits, premia and protection
● The OWNER shall be responsible to and shall indemnify the CHARTERER for
damages and losses arising from the incompetence and/or negligence of,
and/or the failure to observe the required extraordinary diligence by the crew.
During the term of the charter, SMC issued sailing orders to the Master of the M/V
Doña Roberta, Captain Sabiniano Inguito, instructing him of the time of arrival
and departure.
In accordance with the sailing orders, Captain Inguito obtained the necessary
sailing clearance from the Philippine Coast Guard.3 Loading of the cargo on
the M/V Doña Roberta was completed at 8:30 p.m. of November 11, 1990.
However, the vessel did not leave Mandaue City until 6:00 a.m. of the following
day, November 12, 1990.
Meanwhile, at 4:00 a.m. of
November 12, 1990, typhoon Ruping was spotted.
At 7:00 a.m., November 12, 1990, one hour after the M/V Doña Roberta departed
from Mandaue City and while it was abeam Cawit Island off Cebu, SMC Radio
Operator Rogelio P. Moreno contacted Captain Inguito through the radio and
advised him to take shelter. Captain Inguito replied that they will proceed since
the typhoon was far away from them, and that the winds were in their favor.
Moreno communicated with Captain Inguito twice and advised him to take
shelter. The captain responded that they can manage.
At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the radio and
requested him to contact Rico Ouano, son of Julius Ouano, because they needed a
helicopter to rescue them. The vessel was about 20 miles west of Sulauan Point.
At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta sank. Out of the 25 officers
and crew on board the vessel, only five survived, namely, Fernando Bucod, Rafael
Macairan, Chenito Sugabo, Ramil Pabayo and Gilbert Gonzaga.
On November 24, 1990, shipowner Julius Ouano, in lieu of the captain who perished in
the sea tragedy, filed a Marine Protest.
The heirs of the deceased captain and crew, as well as the survivors,17 of the ill-fated
M/V Doña Roberta filed a complaint for tort against San Miguel Corporation and Julius
Ouano.
Julius Ouano filed an answer with cross-claim, alleging that the proximate cause of the
loss of the vessel and its officers and crew was the fault and negligence of SMC, which
had complete control and disposal of the vessel as charterer and which issued the
sailing order for its departure despite being forewarned of the impending typhoon.
Thus, he prayed that SMC indemnify him for the cost of the vessel and the unrealized
rentals and earnings thereof.
In its answer to the complaint and answer to the cross-claim, SMC countered that it was
Ouano who had the control, supervision and responsibilities over the navigation of the
vessel.
a. This notwithstanding, and despite his knowledge of the incoming typhoon, Ouano
never bothered to initiate contact with his vessel.
b. Contrary to his allegation, SMC argued that the proximate cause of the sinking was
Ouano’s breach of his obligation to provide SMC with a seaworthy vessel duly manned
by competent crew members. SMC interposed counterclaims against Ouano for the
value of the cargo lost in the sea tragedy.
After trial, the court a quo rendered judgment finding that the proximate cause of the
loss of the M/V Doña Roberta was attributable to SMC.
Issue: Whether or not the contract was of an affreightment, thus relieving SMC from
liability.Issue:
Whether or not the contract is an affreightment, making
Held: YES. It appearing that Ouano was the employer of the captain and crew of
the M/V Doña Roberta during the term of the charter, he therefore had command
and control over the vessel. His son, Rico Ouano, even testified that during the
period that the vessel was under charter to SMC, the Captain thereof had control
of the navigation of all voyages.
Under the foregoing definitions, as well as the clear terms of the Charter Party
Agreement between the parties, the charterer, SMC, should be free from liability for any
loss or damage sustained during the voyage, unless it be shown that the same was due
to its fault or negligence.
The evidence does not show that SMC or its employees were amiss in their duties.
In a contract of affreightment, the owner of the vessel leases part or all of its
space to haul goods for others. It is a contract for special service to be rendered
by the owner of the vessel. Under such contract the ship owner retains the
possession, command and navigation of the ship, the charterer or freighter
merely having use of the space in the vessel in return for his payment of the
charter hire.
We likewise agree with the Court of Appeals that Ouano is vicariously liable for the
negligent acts of his employee, Captain Inguito. Under Articles 2176 and 2180 of the
Civil Code, owners and managers are responsible for damages caused by the
negligence of a servant or an employee, the master or employer is presumed to be
negligent either in the selection or in the supervision of that employee.
This presumption may be overcome only by satisfactorily showing that the employer
exercised the care and the diligence of a good father of a family in the selection and the
supervision of its employee.
Ouano miserably failed to overcome the presumption of his negligence. He failed
to present proof that he exercised the due diligence of a ​bonus paterfamilias i​ n
the selection and supervision of the captain of the M/V Doa Roberta. Hence, he is
vicariously liable for the loss of lives and property occasioned by the lack of care
and negligence of his employee.
However, we cannot sustain the appellate courts finding that SMC was likewise liable
for the losses. The contention that it was the issuance of the sailing order by SMC which
was the proximate cause of the sinking is untenable.
The fact that there was an approaching typhoon is of no moment. It appears that on one
previous occasion, SMC issued a sailing order to the captain of the M/V Doa Roberta,
but the vessel cancelled its voyage due to typhoon. Likewise, it appears from the
records that SMC issued the sailing order on November 11, 1990, before typhoon
Ruping was first spotted at 4:00 a.m. of November 12, 1990.
Consequently, Ouano should answer for the loss of lives and damages suffered by the
heirs of the officers and crew members who perished on board the M/V Doa Roberta,
except Captain Sabiniano Inguito. The award of damages granted by the Court of
Appeals is affirmed only against Ouano, who should also indemnify SMC for the cost of
the lost cargo, in the total amount of P10,278,542.45.
7. PHILIPPINE MANUFACTURING CO. v. UNION INSURANCE SOCIETY OF
CANTON, LTD.,​ ​G.R. No. L-16473, November 22, 1921
Facts:
1. Philippine Manufacturing owned the steel tank lighter named ​Philmaco​.
2. Union Insurance insured the Philippine Mfg.’s lighter for P16,000. The Policy
recites that the steel tank lighter ​Philmaco is insured "... upon the hull,
machinery, tackle, apparel, boats or other furniture of the good ship or vessel",
... ​Warranted against the absolute total loss of the lighter only. Warranted
trading between Bitas, Tondo, or Pasig River and steamers in the Bay of
Manila or harbor."
3. During the life of the policy and as a result of a typhoon, the lighter was sunk in
the Manila Bay, of which Philippine Mfg. notified and demanded payment from
Union Insurance of the full amount of its policy.
4. Union Insurance refused the offer, and instructed Philippine Mfg. to salvage
the wreck, if possible. Under such instructions, Philippine Mfg. employed a
third party to proceed with the salvage. After several attempts, the
storm-beaten hull was finally raised and between two barges was taken to the
Pandacan Slipway.
5. Philippine Mfg. alleged that the steel tank lighter ​Philmaco b​ ecame a total loss
by sinking in the waters of the Bay of Manila while operating within the places
noted in the said insurance policy.
6. Union Insurance alleged that it was only liable for an absolute total loss, and
that there was not a total destruction of the lighter considering ​Philippine Mfg.
reconstructed a new lighter out the remains of the old one, it cannot claim or
assert that the old one was a total loss.
Issue: Whether the loss is an absolute total loss within the terms of the policy? YES.
Held:
1. An act revising the insurance laws in the Philippine Islands, No. 2427, was
enacted by the Philippine Legislature December 12, 1914, and, under the
heading of "Loss", contains the following provisions:
SEC. 120. A loss may be either total or partial.
SEC. 121. Every loss which is not total is partial.
SEC. 122. A total loss may be either actual or constructive.
SEC. 123. An actual total loss is caused by:
(​a​) A total destruction of the thing insured;
(​b​) The loss of the thing by sinking, or by being broken up;
c​) Any damage to the thing which renders it valueless to the owner for
the purpose for which he held it. . . .
2. Thus, Section 122 specifically states: "a total loss may be either actual or
constructive," and that "the loss of the thing by sinking, or being broken up," is
an actual loss or that "any damage to the thing which renders it valueless to
the owner for the purposes for which he held it" is an actual loss.
3. Through the violence of the storm and the action of the waves, a large portion
of its machinery and other equipment were lost or destroyed.
4. At the time the lighter was sunk and in the bottom of the bay under the
conditions then there existing, it was of no value to the owner, and, if it was of
no value to the owner, it would be a actual total loss. To render it valueless to
the owner, it is not necessary that there should be an actual or total loss or
destruction of all the different parts of the entire vessel.
5. If it was not of any value to the owner, then there was an actual loss or a "total
destruction of the thing insured" within the meaning of the above sections of
Act No. 2427 of the insurance code.
6. Upon raising the sunken lighter, it is fair to assume that in its then condition
much further time would be required to make the necessary repairs and install
the new machinery before it could again be placed in commission. During all
that time the owner would be deprived of the use of its vessel or the interest on
its investment.
Notes: Union Insurance point out that the policy itself provides that it "shall be of as
much force and effect as the surest writing or policy of insurance made in London," and
contend that the policy should be construed under the Marine Law of Great Britain, but
as to what may be the law there is not alleged or proven.
● The law of Great Britain since the Declaration of Independence is the law of a
foreign country, and, like any other foreign law, is matter of fact, which the
courts of this country cannot be presumed to be acquainted with, or to have
judicial knowledge of, unless it is pleaded and proved.
● The rule that the courts of one country cannot take cognizance of the law of
another without plea and proof.
8. MALAYAN INSURANCE CORPORATION vs. THE HON. COURT OF
APPEALS and TKC MARKETING CORPORATION, G.R. No. 119599. March
20, 1997
FACTS:
1. Private respondent TKC Marketing Corp. was the owner/consignee of some
3,189.171 metric tons of soya bean meal which was loaded on board the ship MV Al
Kaziemah on or about September 8, 1989 for carriage from the port of Rio del Grande,
Brazil, to the port of Manila.
2. Said cargo was insured against the risk of loss by petitioner Malayan Insurance
Corporation for which it issued two (2) Marine Cargo Policies amounting to
P18,986,902.45 and P1,195,005.45.
3. While the vessel was docked in Durban, South Africa on September 11, 1989 enroute
to Manila, the civil authorities ​arrested and detained it because of a lawsuit on a
question of ownership and possession.
4. As a result, private respondent notified of the arrest of the vessel and made a formal
claim for the amount of US$916,886.66, representing the dollar equivalent on the
policies, for non-delivery of the cargo. Private respondent likewise sought the
assistance of petitioner on what to do with the cargo.
5. Petitioner replied that the arrest of the vessel by civil authority was not a peril covered
by the policies.
6. Private respondent, accordingly, advised petitioner that it might tranship the cargo
and requested an extension of the insurance coverage until actual transhipment, which
extension was approved upon payment of additional premium.
7. The insurance coverage was extended under the same terms and conditions
embodied in the original policies while in the process of making arrangements for the
transhipment of the cargo from Durban to Manila, covering the period October
4-December 19, 1989.
8. However, on December 11, 1989, the cargo was sold in Durban, South Africa, for
US$154.40 per metric ton or a total of P10,304,231.75 due to its perishable nature
which could no longer stand a voyage of twenty days to Manila and another twenty days
for the discharge thereof.
9. On January 5, 1990, private respondent forthwith reduced its claim to
US$448,806.09 (or its peso equivalent of P9,879,928.89 at the exchange rate of
P22.0138 per $1.00) representing private respondent's loss after the proceeds of the
sale were deducted from the original claim of $916,886.66 or P20,184,159.55.
10. Petitioner maintained its position that the arrest of the vessel by civil authorities on a
question of ownership was an excepted risk under the marine insurance policies.
11. This prompted private respondent to file a complaint for damages praying that aside
from its claim, it be reimbursed the amount of P128,770.88 as legal expenses, interests
and other expenses.
12. LC: decided in favor of private respondent and required petitioner to pay, aside
from the insurance claim, damages.
13. CA: affirmed the decision under the reason that clause 12 of the policy regarding an
excepted risk due to arrest by civil authorities was deleted by Section 1.1 of the Institute
War Clauses which covered ordinary arrests by civil authorities. Failure of the cargo to
arrive was also covered by the Theft, Pilferage, and Non-delivery Clause of the contract.
14. Furthermore, the appellate court contended that since the vessel was prevented at
an intermediate port from completing the voyage due to its seizure by civil authorities, a
peril insured against, the liability of petitioner continued until the goods could have been
transhipped. But due to the perishable nature of the goods, it had to be promptly sold to
minimize loss. Accordingly, the sale of the goods being reasonable and justified, it
should not operate to discharge petitioner from its contractual liability.
ISSUE: ​WON the arrest of the vessel was a risk covered under the subject insurance
policies.
HELD: YES. ​This Court cannot agree with petitioner's assertions, particularly when it
alleges that in the "Perils" Clause, it assumed the risk of arrest caused solely by
executive or political acts of the government of the seizing state and thereby excludes
"arrests" caused by ordinary legal processes, such as in the instant case.
● Section 12 or the "Free from Capture & Seizure Clause" states: ​"Warranted
free of capture, seizure, arrest, restraint or detainment, and the consequences
thereof or of any attempt thereat… Should Clause 12 be deleted, the relevant
current institute war clauses shall be deemed to form part of this insurance.”
● This was really ​replaced by the subsection 1.1 of section 1 of Institute War
Clauses (Cargo) which included ​“the risks excluded from the standard form of
English Marine Policy by the clause warranted free of capture, seizure, arrest,
restraint or detainment, and the consequences thereof of hostilities or warlike
operations, whether there be a declaration of war or not.”
● The petitioner’s claim that the Institute War Clauses can be operative in case
of hostilities or warlike operations on account of its heading "Institute War
Clauses" is not tenable. It reiterated the CA’s stand that “its interpretation in
recent years to include seizure or detention by civil authorities seems
consistent with the general purposes of the clause.” This interpretation was
regardless of the fact whether the arrest was in war or by civil authorities.
● The petitioner was said to have confused the Institute War clauses and the
F.C.S. in English law.
● “It stated that "the F.C. & S. Clause was "originally incorporated in insurance
policies to eliminate the risks of warlike operations". It also averred that the
F.C. & S. Clause applies even if there be no war or warlike operations.
● In the same vein, it contended that subsection 1.1 of Section 1 of the Institute
War Clauses (Cargo) "pertained exclusively to warlike operations" and yet it
also stated that "the deletion of the F.C. & S. Clause and the consequent
incorporation of subsection 1.1 of Section 1 of the Institute War Clauses
(Cargo) was to include "arrest, etc. even if it were not a result of hostilities or
warlike operations."
● The court found that the insurance agency tried to interpret executive and
political acts as those not including ordinary arrests in the exceptions of the
FCS clause , and claims that the War Clauses now included executive and
political acts without including ordinary arrests in the new stipulation.
● “A strained interpretation which is unnatural and forced, as to lead to an absurd
conclusion or to render the policy nonsensical, should, by all means, be
avoided.”
● If a marine insurance company desires to limit or restrict the operation of the
general provisions of its contract by special proviso, exception, or exemption, it
should express such limitation in clear and unmistakable language.
● Obviously, the deletion of the F.C. & S. Clause and the consequent
incorporation of subsection 1.1 of Section 1 of the Institute War Clauses
(Cargo) gave rise to ambiguity. If the risk of arrest occasioned by ordinary
judicial process was expressly indicated as an exception in the subject
policies, there would have been no controversy with respect to the
interpretation of the subject clauses.
9. PAN MALAYAN INSURANCE v. CA and THE FOOD AND AGRICULTURAL
ORGANIZATION OF THE UNITED NATIONS (FAO)
G.R. No. 95070, September 5, 1991
Facts:
1. Luzon Stevedoring Corporation (LUZTEVECO) offered FAO to ship 3,000
metric petitions in two lots of rice seeds, to Vietnam Ocean Shipping Industry
in Vaung Tau, Vietnam. FAO accepted the offer. The cargo was loaded on
board LUZTEVECO Barge and consisted of 34,122 bags of IR-36 certified rice
seeds.
2. FAO secured insurance coverage of P5,250,000.00 from Pan Malayan
Insurance, as evidenced by the Marine Cargo Policy.
3. FAO was advised of the sinking of the barge in the China Sea. FAO informed
Pan Malayan and formally filed a claim under the marine insurance policy.
4. FAO was informed by LUSTEVECO of the recovery of the lost shipment, for
which reason FAO formally filed its claim with LUZTEVECO for compensation
of damage to its cargo. LUSTEVECO refused to pay.
5. Pan Malayan likewise failed to pay by reason of its inability to recover the
value of the shipment from LUZTEVECO.
a. Apparently, Pan Malayan’s adjuster, Pan Asiatic Adjustment Co.,
recommended to deny FAO's claim because the partial damage
suffered by the shipment is not compensable under the policy.
6. FAO then instituted a Civil Case against LUZTEVECO and/or Pan Malayan.
Issues:
1. Whether there is a total loss of the shipment? - YES
2. Whether Pan Malayan is liable to pay FAO P5,250,000.00 representing the full
insured value of the rice seeds? - YES
Held:
1. The law classifies loss into either total or partial. Total loss may be actual or
absolute,​ ​or it may otherwise be constructive or technical.
 a. Pan Malayan submits that CA erred in ruling that there was total loss
of the shipment despite the fact that only 27,922 bags of rice seeds
out of 34,122 bags were rendered valueless to FAO and the shipment
sustained only a loss of 78%.
b. FAO claims that it has practically lost its ​total or ​entire shipment in this
case, inclusive of expenses, premium fees, and so forth, despite the
alleged recovery by LUZTEVECO.
2. Under Sections 129 and 130, a total loss may either be actual or constructive.
In case of total loss in Marine Insurance, the assured is entitled to recover from
the underwriter the whole amount of his subscription.
3. It is a fact that FAO formally filed its claim under the marine insurance policy.
FAO thus claims actual loss under paragraphs (c) and (d) of Section 130 of the
Insurance Code which provides:
a. SEC. 130. An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken
up;
(c) Any damage to the thing which renders it valueless to the
owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the
possession, at the port of destination of the thing insured.
4. There was indeed actual total or entire loss of the shipment, thus holding Pan
Malayan liable for the entire amount of the insurance coverage:
a. First: the fact of sinking of the as the occurrence of the risk insured
against under the marine insurance: ​If the barge was made to refloat,
it cannot be denied that it sank, otherwise, what is the use of
refloating the barge? What is mentioned in the law as the risk or ​peril
insured against is ​sinking​.
b. Second: there is the direct testimony of Mr. Fritz Keiner (FAO OIC):
“The 27,922 damaged/lost bags were rendered valueless to FAO for
planting or seeding purposes since the wetting or contact with water
had definitely activated their tendency to germinate. Moreover, all of
said damaged/lost bags were no longer available for reshipment to
Vietnam because the same were disposed of by LUZTEVECO
without authorization from FAO, to answer for alleged salvage
charges, while the others were lost/shortlanded.
c. Third: the testimony of Mr. Conrado Catalan (FAO’s surveyor) that the
shipment sustained a loss of 78% is not speculative.
i. Catalan no longer saw the 23,510 bad order/damaged bags
as these were already sold at public auction by
LUZTEVECO, while 983 more were shortlanded/missing.
ii. Of the 9,629 bags presumed to be in good order, he
discovered that "an additional 2,629 bags were found
damaged/wetted, with the estimated 6,947 bags in
apparently external good order condition".
iii. However, out of these 6,947 bags only 6,200 bags were
counted by Catalan.
iv. It is even more than 78% per testimony of Catalan but at
least 82%.
5. Said rice seeds were fragile and would germinate upon mere contact with
water. The rule is that where the cargo by the process of decomposition or
other chemical agency no longer remains the same kind of thing as before, an
actual total loss has been suffered....
6. However, the complete physical destruction of the subject matter is not
essential to constitute an actual total loss. Such a loss may exist where the
form and specie of the thing is destroyed, although the materials of which it
consisted still exist, as where the cargo by the process of decomposition or
other chemical agency no longer remains the same kind of thing as before.
7. No replacement whatsoever or any payment whatsoever of the value of said
lost cargo was made to FAO by Pan Malayan or LUZTEVECO. It is thus clear
that ​FAO suffered actual total loss under Section 130 of the Insurance
Code, specifically under paragraphs (c) and (d) thereof, recompense for
which it has been denied up to the present.
8. Section 135 of the Insurance Code explicitly provides that "(u)pon an actual
total loss, a person insured is entitled to payment without notice of
abandonment." Thus, in case of actual total loss, the right of the insured to
claim the whole insurance is absolute, without need of a notice of
abandonment.
10. Philippine American General Insurance v. CA​ ​(limited liability)
REPEATED Refer to #1
11. MANILA STEAMSHIP CO., INC. v. INSA ABDULHAMAN (MORO) and LIM
HONG TO ​[G.R. No. L-9534. September 29, 1956.]
Facts:
1. This case was begun in the CFI by Insa Abdulhaman against the Manila
Steamship Co., owner of the M/S "Bowline Knot", and Lim Hong To, owner
of the M/L "Consuelo V", to recover damages for the death of his 5 children
and loss of personal properties on board the M/L "Consuelo V" as a result of
a maritime collision between said vessel and the M/S "Bowline Knot."
2. Around 7/8PM, The M/L "Consuelo V", laden with cargoes and passengers
left the port of Zamboanga City bound for Siokon under the command of
Faustino Macrohon. Among her passengers were the plaintiff Insa
Abdulhaman, his wife Carimla Mora and their 5 children.
3. On that same night the M/S "Bowline Knot" was navigating from Maribojoc
towards Zamboanga.
4. When some of the passengers of the M/L "Consuelo V" were then sleeping
and some were lying down awake, all of a sudden they felt the shocking
collision of the M/L "Consuelo V" and a big motorship, which later on was
identified as the M/V "Bowline Knot".
5. M/L "Consuelo V" capsized, her crew and passengers were then swimming
and floating. As a result, 9 passengers were either dead or missing and all the
cargoes carried on said boat, including those of Insa’s, were also lost.
6. Manila Steamship Co. (owner of Bowline Knot) pleads that it is exempt from
any liability to Insa under Article 1903 of the Civil Code because it had
exercised the diligence of a good father of a family in the selection of its
employees at the time of the collision.
Issue: Whether Manila Steamship is liable? - YES.
Held:
1. Manila Steamship’s defense is untenable. While it is true that Insa’s action is
based on a tort or quasi-delict, the tort in question is not a civil tort under the
Civil Code but a maritime tort resulting in a collision at sea, governed by
Articles 826-939 of the Code of Commerce.
2. Under Article 827 of the Code of Commerce, in case of collision between two
vessels imputable to both of them, each vessel shall suffer her own damage
and both shall be solidarity liable for the damages occasioned to their
cargoes.
3. Under Article 618 of the Code of Commerce, the captain shall be civilly
liable to the ship agent, and the latter is the one liable to third persons.
4. "The responsibility involved in the present action is that derived from the
management of the vessel, which was defective on account of lack of skill,
negligence, or fault, either of the captain or of the crew, for which the captain
is responsible to the agent,'who in his turn is responsible to the third party
prejudiced or damaged. (Article 618, Code of Commerce)."
5. In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain
(Code of Commerce, Article 586) and for the indemnities due the third persons
(Article 587); so that injured parties may immediately look for reimbursement
to the owner of the ship, it being universally recognized that the ship master
or captain is primarily the representative of the owner.
6. This direct liability, moderated and limited by the owner's right of abandonment
of the vessel and earned freight (Article 587), has been declared to exist, not
only in case of breached contracts, but also in cases of tortious negligence.
7. Where the vessel is one Of freight, a public concern or public utility, its owner
or agents is liable for the tortious acts of his agents.
8. Manila Steamship Co. is NOT exempt from liability for the collision with the
M/L "Consuelo V" due to the presence of negligence on its parts in the
selection and supervision of the officers and crew of the M/S "Bowline Knot".
9. However, Lim Hong To, owner of the M/L "Consuelo V" is NOT exempt from
liability to Insa. It is to be noted that both the master and the engineer of
the motor launch "Consuelo V" were not duly licensed as such.
a. In applying for permission to operate, despite the lack of properly
trained and experienced, crew, Lim Hong To gave as a reason
"that the income derived from the vessel is insufficient to pay
licensed officers who demand high salaries", and expressly declared:
"That in case of any accident, damage or loss, I shall assume full
risk and responsibility for all the consequences thereof."
10. His permit to operate, in fact, stipulated “that in case of any accident, damage
or loss, the registered owner thereof shall assume full risk and responsibility
for all the consequences thereof…”
11. Neither the letter nor the permit contained any waiver of the right of Lim
Hong To to limit his liability to the value of his motor launch and that he did not
lose the statutory right to limit his liability by abandonment of the vessel, as
conferred by Article 587 of the Code of Commerce.
12. The fact remains that by operating with an unlicensed master, Lim Hong To
deliberately increased the risk to which the passengers and shippers of cargo
aboard the "Consuelo V" would be subjected. Lim Hong To willfully
augmented the dangers and hazards to his 'vessel's unwarry passengers, who
would normally assume that the launch officers possessed the necessary skill
and experience to evade the perils of the sea.
13. Hence, the liability of Lim can not be the identical to that of a shipowner. To
hold that Lim Hong To may limit his liability to the value of his vessels, is to
erase all difference between compliance with law and the deliberate disregard
thereof. To such proposition we can not assent.
To conclude:
(1) That the Manila Steamship Co., owner of the M/S "Bowline Knot", is directly and
primarily responsible in tort for the injuries caused to Insa.
(2) That Lim Hong To, as owner of the motor launch "Consuelo V", having caused the
same to sail without licensed officers, is liable for the injuries caused by the collision
over and beyond the value of said launch;
(3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship
Co. to Insa is in solidum, as prescribed by Article 827 of the Code of Commerce.
12. Philippine Home Assurance v. CA, G.R. No. 106999, June 20, 1996
Facts:
1. Eastern Shipping Lines loaded on board SS Eastern Explorer in Japan several
shipments (engine parts, chloride, glue 300, garments) for carriage to Manila
and Cebu.
2. While the vessel was off Okinawa, Japan, a small flame was detected on the
acetylene cylinder located in the accommodation area near the engine room.
3. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly
exploded resulting to death and injuries to the crew and instantly setting fire to
the whole superstructure of the vessel.
4. SS Eastern Explorer was found to be a constructive total loss and its voyage
was declared abandoned.
5. After the fire was extinguished, the cargoes which were saved were loaded to
another vessel. ESLI charged the consignees several amounts corresponding
to additional freight and salvage charges.
6. The charges were all paid by Philippine Home Assurance Corporation (PHAC)
under protest for and in behalf of the consignees.
7. PHAC, as subrogee of the consignees, thereafter filed a complaint before the
Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum
paid under protest on the ground that the same were actually damages directly
brought about by the fault, negligence, illegal act and/or breach of contract of
ESLI.
8. In its answer, ESLI contended that it exercised the diligence required by law in
the handling, custody and carriage of the shipment; that the fire was caused by
an unforeseen event; that the additional freight charges are due and
demandable pursuant to the Bill of Lading; and that salvage charges are
properly collectible under Act No. 2616, known as the Salvage Law.
ISSUE: Who, among the carrier, consignee or insurer of the goods, is liable for the
additional charges or expenses incurred by the owner of the ship in the salvage
operations and in the transshipment of the goods via a different carrier?
HELD: The cargo consignees cannot be made liable to respondent carrier for additional
freight and salvage charges.
1. In absolving respondent carrier of any liability, respondent Court of Appeals
sustained the trial court's finding that the fire that gutted the ship was a natural
disaster or calamity. Petitioner takes exception to this conclusion and [the
Court] agree.
2. In our jurisprudence, fire may not be considered a natural disaster or calamity
since it almost always arises from some act of man or by human means.
3. It cannot be an act of God unless caused by lightning or a natural disaster or
casualty not attributable to human agency.
4. It is not disputed that a small flame was detected on the acetylene cylinder and
that by reason thereof, the same exploded despite efforts to extinguish the fire.
Neither is there any doubt that the acetylene cylinder, obviously fully loaded,
was stored in the accommodation area near the engine room and not in a
storage area considerably far, and in a safe distance, from the engine room.
Moreover, there was no showing, and none was alleged by the parties, that the
fire was caused by a natural disaster or calamity not attributable to human
agency. On the contrary, there is strong evidence indicating that the acetylene
cylinder caught fire because of the fault and negligence of respondent ESLI, its
captain and its crew.
a. Respondent ESLI should have easily foreseen that the acetylene
cylinder, containing highly inflammable material was in real danger of
exploding because it was stored in close proximity to the engine
room.
b. Respondent ESLI should have known that by storing the acetylene
cylinder in the accommodation area supposed to be reserved for
passengers, it unnecessarily exposed its passengers to grave danger
and injury.
c. The fact that the acetylene cylinder was checked, tested and
examined and subsequently certified as having complied with the
safety measures and standards by qualified experts before it was
loaded in the vessel only shows to a great extent that negligence was
present in the handling of the acetylene cylinder after it was loaded
and while it was on board the ship.
5. Whether or not respondent court committed an error in concluding that the
expenses incurred in saving the cargo are considered general average, we
rule in the affirmative.
a. As a rule, general or gross averages include all damages and
expenses which are deliberately caused in order to save the vessel,
its cargo, or both at the same time, from a real and known risk. While
the instant case may technically fall within the purview of the said
provision, the formalities prescribed under Articles 813 and 814 of the
Code of Commerce in order to incur the expenses and cause the
damage corresponding to gross average were not complied with.
Consequently, respondent ESLI's claim for contribution from the
consignees of the cargo at the time of the occurrence of the average
turns to naught.
6. The cargo consignees cannot be made liable to respondent carrier for
additional freight and salvage charges. Consequently, respondent carrier must
refund to herein petitioner the amount it paid under protest for additional freight
and salvage charges in behalf of the consignees.
13. Jarque v. Smith Bell (average)
Facts:
1. Francisco Jarque (Jarque) was the owner of a motorboat ​Pandan and held an
insurance policy issued by National Union Fire Insurance (Insurer). According to
the provisions of a “rider” attached to the policy, the insurance was against the
“absolute total loss of the vessel only”.
2. Ship ran into a heavy sea off the Island of Ticlin and became necessary to jettison
a portion of the cargo. In result of it, Insurer was assessed as its contribution to the
general average.
3. Insurer refused to contribute to the settlement of the general average
● It insisted that its obligation did not extend beyond the insurance of the
“absolute total loss of the vessel only, and to pay proportionate salvage of the
declared.
4. Jarque filed an action in the trial court and the TC rendered judgment in Jarque’s
favor ordering Insurer to pay Jarque.
5. Hence the present action.
Issue: WON the insurer is liable to Jarque
Held: YES
1. In the absence of positive legislation to the contrary, the liability of the defendant
insurance company on its policy would, perhaps, be limited to "absolute loss of the
vessel only, and to pay proportionate salvage of the declared value."
2. But the policy was executed in this jurisdiction and "warranted to trade within the
waters of the Philippine Archipelago only." Here the liability for contribution in
general average is not based on the express terms of the policy, but rests upon the
theory that from the relation of the parties and for their benefit, a quasi contract is
implied by law. ​It simply places the insurer on the same footing as other persons
who have an interest in the vessel, or the cargo therein, at the time of the
occurrence of the general average and who are compelled to contribute.
"ART. 859. The underwriters of the vessel, of the freight, and of the cargo shall be
obliged to pay for th e indemnity of the gross average in so far as is required of
each one of these objects respectively."
3. In the present case it is not disputed that the ship was in grave peril and that the
jettison of part of the cargo was necessary. If the cargo was in peril to the extent of
call for general average, the ship must also have been in great danger, possibly
sufficient to cause its absolute loss. The jettison was therefore as much to the
benefit of the underwriter as to the owner of the cargo. The latter was compelled to
contribute to the indemnity; why should not the insurer be required to do likewise? If
no jettison had taken place and if the ship by reason thereof had foundered, the
underwriter's loss would have been many times as large as the contribution now
demanded.
 14. Oriental Assurance v. CA
Facts:
1. An action to recover on a marine insurance policy, issued by petitioner in favor
of private respondent, arising from the loss of a shipment of apitong logs from
Palawan to Manila.
2. Private respondent Panama Sawmill Co., Inc. (Panama) bought, in Palawan,
1,208 pieces of Apitong logs, with a total volume of 2,000 cubic meters. It hired
Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it
against loss for P1-M with petitioner Oriental Assurance Corporation (Oriental
Assurance).
3. There is aclaim by Panama, however, that the insurance coverage should
have been for P3-M were it not for the fraudulent act of one Benito Sy Yee
Long to whom it had entrusted the amount of P6,000.00 for the payment of the
premium for a P3-M policy.
4. The logs were loaded on two (2) barges: (1) on one barge, 610 pieces of logs
with a volume of 1,000 cubicmeters; and (2) on another barge, 598 pieces of
logs, also with a volume of 1,000 cubic meters.
5. The two barges were towed by one tug-boat, but during the voyage, rough
seas and strong winds caused damage to one of the barges resulting in the
loss of 497 pieces of logs out of the 598 pieces loaded thereon. Panama then
demanded payment for the loss but Oriental Assurance refused on the ground
that its contracted liability was for "TOTAL LOSS ONLY."
6. Unable to convince Oriental Assurance to pay its claim, Panama filed a
Complaint for Damages against Ever Insurance Agency (allegedly, also liable),
Benito Sy Lee Yong and Oriental Assurance, before the RTC, Kalookan. RTC
rendered a decision in favor of plaintiff.
(c) Any damage to the thing which renders it valueless to the owner for the purpose for
which he held it; or
(d) Any other event, which effectively deprives the owner of the possession, at the port
of destination, of the thing insured.
A constructive total loss is one, which gives to a person insured a right to abandon,
under Section 139 of the Insurance Code. This provision reads:
SECTION 139. A person insured by a contract of marine insurance may abandon the
thing insured, or any particular portion thereof separately valued by the policy, or
otherwise separately insured, and recover for a total loss thereof, when the cause of
the loss is a peril injured against,
(a) If more than three-fourths thereof in value is actually lost, or would have to be
expended to recover it from the peril;
(b) If it is injured to such an extent as to reduce its value more than three-fourths;
● The requirements for the application of Section 139 of the Insurance Code,
quoted above, have not been met. The logs involved, although placed in two
barges, were not separately valued by the policy, nor separately insured.
Resultantly, the logs lost in barge TPAC-1000 in relation to the total number of
logs loaded on the same barge cannot be made the basis for determining
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.

Issue​: Whether or not Oriental Assurance can be held liable under its marine insurance ● In the absence of either actual or constructive total loss, there can be no
policy based on the theory of a divisible contract of insurance and, consequently, a recovery by the insured Panama against the insurer, Oriental Assurance.
constructive total loss.

Held: ​NO. ​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 must, therefore, be considered
indivisible.

● The terms of the contract constitute the measure of the insurer liability and
compliance therewith is a condition precedent to the insured's right to recovery
from the. Whether a contract is entire or severable is a question of intention to
be determined by the language employed by the parties.

● More importantly, the insurer's liability was for "total loss only." A total loss may
be either actual or constructive. An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;