VOL. 454, MARCH 31, 2005 337 FGU Insurance Corporation vs. Court of Appeals

6/3/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 454
VOL. 454, MARCH 31, 2005 337

FGU Insurance Corporation vs. Court of Appeals
*
G.R. No. 137775. March 31, 2005.
FGU INSURANCE CORPORATION, petitioner, vs. THE

COURT OF APPEALS, SAN MIGUEL CORPORATION,
and ESTATE OF ANG GUI, represented by LUCIO,
JULIAN, and JAIME, all surnamed ANG, and CO TO,
respondents.
*
G.R. No. 140704. March 31, 2005.
ESTATE OF ANG GUI, Represented by LUCIO, JULIAN

and JAIME, all surnamed ANG, and CO TO, petitioners,
vs. THE HONORABLE COURT OF APPEALS, SAN
MIGUEL CORP., and FGU INSURANCE CORP.,
respondents.
Remedial Law; Actions; Judgments; Res Judicata; Essential

requisites in order for res judicata to be made applicable in a case.
— In order for res judicata to be made applicable in a case, the
following essential requisites must be present: 1) the former
judgment must be final; 2) the former judgment must have been
rendered by a court having jurisdiction over the subject matter
and the parties; 3) the former judgment must be a judgment or
order on the merits; and 4) there must be between the first and
second action identity of parties, identity of subject matter, and
identity of causes of action.
Same; Same; Same; Same; The doctrine of res judicata
precludes the relitigation of a particular fact or issue already
passed upon by a court of competent jurisdiction in a former
judgment, in another action between the same parties based on a
different claim or cause of action.—The doctrine of res judicata
precludes the relitigation of a particular fact or issue already
passed upon by a court of competent jurisdiction in a former
judgment, in another action between the same parties based on a
different claim or cause of action. The judgment in the prior
action operates as estoppel only as to those matters in issue or
points controverted, upon the determination of which the finding
or judgment was rendered. If a particular point or question is in
issue in the second action, and the judgment will depend on the
www.central.com.ph/sfsreader/session/0000016b1d8431793e0b2cd0003600fb002c009e/t/?o=False 1/19
determination of that particular point or question, a former

judgment between the same parties or their privies
_______________
* SECOND DIVISION.
338
338 SUPREME COURT REPORTS ANNOTATED
will be final and conclusive in the second if that same point or

question was in issue and adjudicated in the first suit.
Civil Law; Obligations; Force Majeure; By definition, caso
fortuito or force majeure are extraordinary events not foreseeable
or avoidable, events that could not be foreseen, or which though
foreseen, were inevitable; It is not enough that the event should not
have been foreseen or anticipated, as is commonly believed but it
must be one impossible to foresee or to avoid.—Caso fortuito or
force majeure (which in law are identical insofar as they exempt
an obligor from liability) by definition, are extraordinary events
not foreseeable or avoidable, events that could not be foreseen, or
which though foreseen, were inevitable. It is therefore not enough
that the event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to
avoid.
Same; Same; Same; To be exempted from responsibility, the
natural disaster should have been the proximate and only cause of
the loss.—While the loss of the cargoes was admittedly caused by
the typhoon Sisang, a natural disaster, ANCO could not escape
liability to respondent SMC. The records clearly show the failure
of petitioners’ representatives to exercise the extraordinary
degree of diligence mandated by law. To be exempted from
responsibility, the natural disaster should have been the
proximate and only cause of the loss. There must have been no
contributory negligence on the part of the common carrier.
Same; Same; Same; Insurance Law; It is a basic rule in
insurance that the carelessness and negligence of the insured or
his agents constitute no defense on the part of the insurer; The rule
presupposes that the loss occurred due to the causes which could
not have been prevented by the insured despite the exercise of due
diligence.—One of the purposes for taking out insurance is to
protect the insured against the consequences of his own
negligence and that of his agents. Thus, it is a basic rule in
insurance that the carelessness and negligence of the insured or
his agents constitute no defense on the part of the insurer. This
rule however presupposes that the loss has occurred due to causes
which could not have been prevented by the insured, despite the
exercise of due diligence.
Same; Same; Same; Same; When the evidence show that the
insured’s negligence or recklessness is so gross as to be sufficient to
339
VOL. 454, MARCH 31, 2005 339
constitute a willful act, the insurer must be exonerated.—The

question now is whether there is a certain degree of negligence on
the part of the insured or his agents that will deprive him the
right to recover under the insurance contract. We say there is.
However, to what extent such negligence must go in order to
exonerate the insurer from liability must be evaluated in light of
the circumstances surrounding each case. When evidence show
that the insured’s negligence or recklessness is so gross as to be
sufficient to constitute a willful act, the insurer must be
exonerated.
PETITIONS for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.

Mercedita S. Nolledo for FGU Insurance Corp.
Estenzo, Paloma, Jamora and Solon for San Miguel
Corp.
Recto A. de Dios for petitioners Estate of Ang Gui.
CHICONAZARIO, J.:
Before Us are1
two separate Petitions for review assailing
the Decision of the Court of Appeals in CAG.R. CV No.
49624 entitled, “San Miguel Corporation, PlaintiffAppellee
versus Estate of Ang Gui, represented by Lucio, Julian and
Jaime, all surnamed Ang, and Co To, Defendants
Appellants, Third–Party Plaintiffs versus FGU Insurance
Corporation, ThirdParty 2 DefendantAppellant,” which
affirmed in toto the decision of the Regional Trial Court of
Cebu City, Branch 22. The dispositive portion of the Court
of Appeals decision reads:
“WHEREFORE, for all the foregoing, judgment is hereby

rendered as follows:
_______________
1 Penned by Associate Justice Buenaventura J. Guerrero, with
Associate Justices Portia AliñoHormachuelos and Teodoro P. Regino,
concurring.
2 Civil Case No. R19710, Judge Pampio A. Abarintos, ponente.
340

1) Ordering defendants to pay plaintiff the sum of

P1,346,197.00 and an interest of 6% per annum to be
reckoned from the filing of this case on October 2, 1990;
2) Ordering defendants to pay plaintiff the sum of
P25,000.00 for attorney’s fees and an additional sum of
P10,000.00 as litigation expenses;
3) With cost against defendants.
For the ThirdParty Complaint:
1) Ordering thirdparty defendant FGU Insurance Company

to pay and reimburse defendants the amount of
3
P632,700.00.”
The Fa cts
Evidence shows that Anco Enterprises Company (ANCO), a

partnership between Ang Gui and Co To, was engaged in
the shipping business. It owned the M/T ANCO tugboat
and the D/B Lucio barge which were operated as common
carriers. Since the D/B Lucio had no engine of its own, it
could not maneuver by itself and had to be towed by a
tugboat for it to move from one place to another.
On 23 September 1979, San Miguel Corporation (SMC)
shipped from Mandaue City, Cebu, on board the D/B Lucio,
for towage by M/T ANCO, the following cargoes:
Bill of Lading Shipment Destination

No.
1 25,000 cases Pale Estancia, Iloilo
Pilsen
350 cases Cerveza Estancia, Iloilo
Negra
2 15,000 cases Pale San Jose,
Pilsen Antique
200 cases Cerveza San Jose,
Negra Antique
The consignee for the cargoes covered by Bill of Lading No.

1 was SMC’s Beer Marketing Division (BMD)Estancia
Beer Sales Office, Estancia, Iloilo, while the consignee for
the car
_______________
3 Rollo, G.R. No. 140704, p. 72.
341
VOL. 454, MARCH 31, 2005 341

goes covered by Bill of Lading No. 2 was SMC’s BMDSan

Jose Beer Sales Office, San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way
from Mandaue City to San Jose, Antique. The vessels
arrived at San Jose, Antique, at about one o’clock in the
afternoon of 30 September 1979. The tugboat M/T ANCO
left the barge immediately after reaching San Jose,
Antique.
When the barge and tugboat arrived at San Jose,
Antique, in the afternoon of 30 September 1979, the clouds
over the area were dark and the waves were already big.
The arrastre workers unloading the cargoes of SMC on
board the D/B Lucio began to complain about their
difficulty in unloading the cargoes. SMC’s District Sales
Supervisor, Fernando Macabuag, requested ANCO’s
representative to transfer the barge to a safer place
because the vessel might not be able to withstand the big
waves.
ANCO’s representative did not heed the request because
he was confident that the barge could withstand the waves.
This, notwithstanding the fact that at that time, only the
M/T ANCO was left at the wharf of San Jose, Antique, as
all other vessels already left the wharf to seek shelter.
With the waves growing bigger and bigger, only Ten
Thousand Seven Hundred Ninety (10,790) cases of beer
were discharged into the custody of the arrastre operator.
At about ten to eleven o’clock in the evening of 01
October 1979, the crew of D/B Lucio abandoned the vessel
because the barge’s rope attached to the wharf was cut off
by the big waves. At around midnight, the barge run
aground and was broken and the cargoes of beer in the
barge were swept away.
As a result, ANCO failed to deliver to SMC’s consignee
TwentyNine Thousand Two Hundred Ten (29,210) cases of
Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra. The value per case of Pale Pilsen was FortyFive
Pesos and Twenty Centavos (P45.20). The value of a case of
Cerveza Negra was FortySeven Pesos and Ten Centavos

(P47.10), hence, SMC’s claim against ANCO amounted to
One Million
342

Three Hundred FortySix Thousand One Hundred Ninety

Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a complaint
for Breach of Contract of Carriage and Damages against
ANCO for the amount of One Million Three Hundred
FortySix Thousand One Hundred NinetySeven Pesos
(P1,346,197.00) plus interest, litigation expenses and
TwentyFive Percent (25%) of the total claim as attorney’s
fees.
Upon Ang Gui’s death, ANCO, as a partnership, was
dissolved hence, on 26 January 1993, SMC filed a second
amended complaint which was admitted by the Court
impleading the surviving partner, Co To and the Estate of
Ang Gui represented by Lucio, Julian and Jaime, all
surnamed Ang. The substituted defendants adopted the
original answer with counterclaim of ANCO “since the
substantial allegations of the original complaint and the
amended complaint are practically the same.”
ANCO admitted that the cases of beer Pale Pilsen and
Cerveza Negra mentioned in the complaint were indeed
loaded on the vessel belonging to ANCO. It claimed
however that it had an agreement with SMC that ANCO
would not be liable for any losses or damages resulting to
the cargoes by reason of fortuitous event. Since the cases of
beer Pale Pilsen and Cerveza Negra were lost by reason of
a storm, a fortuitous event which battered and sunk the
vessel in which they were loaded, they should not be held
liable. ANCO further asserted that there was an agreement
between them and SMC to insure the cargoes in order to
recover indemnity in case of loss. Pursuant to that
agreement, the cargoes to the extent of Twenty Thousand
(20,000) cases was insured with FGU Insurance
Corporation (FGU) for the total amount of Eight Hundred
FiftyEight Thousand Five Hundred Pesos (P858,500.00)
per Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third
Party Complaint against FGU, alleging that before the
vessel of ANCO left for San Jose, Antique with the cargoes
owned by
343
VOL. 454, MARCH 31, 2005 343

SMC, the cargoes, to the extent of Twenty Thousand

(20,000) cases, were insured with FGU for a total amount
of Eight Hundred FiftyEight Thousand Five Hundred
Pesos (P858,500.00) under Marine Insurance Policy No.
29591. ANCO further alleged that on or about 02 October
1979, by reason of very strong winds and heavy waves
brought about by a passing typhoon, the vessel run
aground near the vicinity of San Jose, Antique, as a result
of which, the vessel was totally wrecked and its cargoes
owned by SMC were lost and/or destroyed. According to
ANCO, the loss of said cargoes occurred as a result of risks
insured against in the insurance policy and during the
existence and lifetime of said insurance policy. ANCO went
on to assert that in the remote possibility that the court
will order ANCO to pay SMC’s claim, the thirdparty
defendant corporation should be held liable to indemnify or
reimburse ANCO whatever amounts, or damages, it may
be required to pay to SMC.
In its answer to the ThirdParty complaint, thirdparty
defendant FGU admitted the existence of the Insurance
Policy under Marine Cover Note No. 29591 but maintained
that the alleged loss of the cargoes covered by the said
insurance policy cannot be attributed directly or indirectly
to any of the risks insured against in the said insurance
policy. According to FGU, it is only liable under the policy
to Thirdparty Plaintiff ANCO and/or Plaintiff SMC in case
of any of the following:
a) total loss of the entire shipment;

b) loss of any case as a result of the sinking of the
vessel;
or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the ThirdParty Plaintiff

ANCO and Plaintiff SMC failed to exercise ordinary
diligence or the diligence of a good father of the family in
the care and supervision of the cargoes insured to prevent
its loss and/or destruction.
344

ThirdParty defendant FGU prayed for the dismissal of the

ThirdParty Complaint and asked for actual, moral, and
4
4
exemplary damages and attorney’s fees.
The trial court found that while the cargoes were indeed
lost due to fortuitous event, there was failure on ANCO’s
part, through their representatives, to observe the degree
of diligence required that would exonerate them from
liability. The trial court thus held the Estate of Ang Gui
and Co To liable to SMC for the amount of the lost
shipment. With respect to the ThirdParty complaint, the
court a quo found FGU liable to bear FiftyThree Percent
(53%) of the amount of the lost cargoes. According to the
trial court:
. . . Evidence is to the effect that the D/B Lucio, on which the

cargo insured, runaground and was broken and the beer cargoes
on the said barge were swept away. It is the sense of this Court
that the risk insured against was the cause of the loss.
...
Since the total cargo was 40,550 cases which had a total
amount of P1,833,905.00 and the amount of the policy was only
for P858,500.00, defendants as assured, therefore, were considered
coinsurers of thirdparty defendant FGU Insurance Corporation
to the extent of 975,405.00 value of the cargo. Consequently,
inasmuch as there was partial loss of only P1,346,197.00, the
5
assured shall bear 53% of the loss . . . [Emphasis ours]
The appellate court affirmed in toto the decision of the

lower court and denied the motion for reconsideration and
the supplemental motion for reconsideration. Hence, the
petitions.
The Issues
In G.R. No. 137775, the grounds for review raised by

petitioner FGU can be summarized into two: 1) Whether or
not
_______________
4 RTC Decision, pp. 14; Rollo, G.R. No. 137775, pp. 4043.
5 RTC Decision, pp. 78; Ibid., at pp. 4647.
345
VOL. 454, MARCH 31, 2005 345

respondent Court of Appeals committed grave abuse of

discretion in holding FGU liable under the insurance
contract considering the circumstances surrounding the
loss of the cargoes; and 2) Whether or not the Court of
Appeals committed an error of law in holding that the

doctrine of res judicata applies in the instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co
To assail the decision of the appellate court based on the
following assignments of error: 1) The Court of Appeals
committed grave abuse of discretion in affirming the
findings of the lower court that the negligence of the
crewmembers of the D/B Lucio was the proximate cause of
the loss of the cargoes; and 2) The respondent court acted
with grave abuse of discretion when it ruled that the
appeal was without merit despite the fact that said court
had accepted the decision in Civil Case No. R19341, as
affirmed by the Court of Appeals and the Supreme Court,
as res judicata.
Ruling of the Court
First, we shall endeavor to dispose of the common issue

raised by both petitioners in their respective petitions for
review, that is, whether or not the doctrine of res judicata
applies in the instant case.
It is ANCO’s
6
contention that the decision in Civil Case
No. R19341, which was decided in its favor, constitutes
res judicata with respect to the issues raised in the case at
bar.
The contention is without merit. There can be no res
judicata as between Civil Case No. R19341 and the case at
bar. In order for res judicata to be made applicable in a
case, the following essential requisites must be present: 1)
the former
_______________
6 Complaint for Specific Performance with Damages filed by ANCO

against FGU based on an insurance contract procured by ANCO from
FGU over the vessel D/B Lucio, wherein defendant FGU was adjudged to
pay the insurance indemnity for the constructive total loss of the vessel.
346

judgment must be final; 2) the former judgment must have

been rendered by a court having jurisdiction over the
subject matter and the parties; 3) the former judgment
must be a judgment or order on the merits; and 4) there
must be between the first and second action identity of
parties,7 identity of subject matter, and identity of causes of
action.
There is no question that the first three elements of res

judicata as enumerated above are indeed satisfied by the
decision in Civil Case No. R19341. However, the doctrine
is still inapplicable due to the absence of the last essential
requisite of identity of parties, subject matter and causes of
action.
The parties in Civil Case No. R19341 were ANCO as
plaintiff and FGU as defendant while in the instant case,
SMC is the plaintiff and the Estate of Ang Gui represented
by Lucio, Julian and Jaime, all surnamed Ang and Co To as
defendants, with the latter merely impleading FGU as
thirdparty defendant.
The subject matter of Civil Case No. R19341 was the
insurance contract entered into by ANCO, the owner of the
vessel, with FGU covering the vessel D/B Lucio, while in
the instant case, the subject matter of litigation is the loss
of the cargoes of SMC, as shipper, loaded in the D/B Lucio
and the resulting failure of ANCO to deliver to SMC’s
consignees the lost cargo. Otherwise stated, the controversy
in the first case involved the rights and liabilities of the
shipowner visàvis that of the insurer, while the present
case involves the rights and liabilities of the shipper visà
vis that of the shipowner. Specifically, Civil Case No. R
19341 was an action for Specific Performance and Damages
based on FGU Marine Hull Insur
_______________
7 Padillo v. Court of Appeals, 422 Phil. 334, 350; 371 SCRA 27, 40
(2001); Vda. de Salanga v. Alagar, G.R. No. 134089, 14 July 2000, 335
SCRA 728, 736; Gardose v. Tarroza, G.R. No. 130570, 19 May 1998, 290
SCRA 186, 193; Carlet v. Court of Appeals, G.R. No. 114275, 07 July 1997,
175 SCRA 97, 106; Allied Banking Corporation v. Court of Appeals, G.R.
No. 108089, 10 January 1994, 229 SCRA 252, 258.
347
VOL. 454, MARCH 31, 2005 347

ance Policy No. VMFMH13519 covering the vessel D/B

Lucio, while the instant case is an action for Breach of
Contract of Carriage and Damages filed by SMC against
ANCO based on Bill of Lading No. 1 and No. 2, with
defendant ANCO seeking reimbursement from FGU under
Insurance Policy No. MA58486, should the former be held
liable to pay SMC.
Moreover, the subject matter of the thirdparty
complaint against FGU in this case is different from that in
Civil Case No. R19341. In the latter, ANCO was suing
FGU for the insurance contract over the vessel while in the
former, the thirdparty complaint arose from the insurance

contract covering the cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the relitigation of
a particular fact or issue already passed upon by a court of
competent jurisdiction in a former judgment, in another
action between the same parties based on a different claim
or cause of action. The judgment in the prior action
operates as estoppel only as to those matters in issue or
points controverted, upon the determination
8
of which the
finding or judgment was rendered. If a particular point or
question is in issue in the second action, and the judgment
will depend on the determination of that particular point or
question, a former judgment between the same parties or
their privies will be final and conclusive in the second if
that same point9
or question was in issue and adjudicated in
the first suit.
Since the case at bar arose from the same incident as
that involved in Civil Case No. R19341, only findings with
respect to matters passed upon by the court in the former
judgment
_______________
8 Rizal Surety & Insurance Company v. Court of Appeals, G.R. No.

112360, 18 July 2000, 336 SCRA 12, 22, citing Smith Bell and Company
(Phils.) Inc. v. Court of Appeals, G.R. No. 56294, 20 May 1991, 197 SCRA
201, 209; Tiongson v. Court of Appeals, G.R. No. L35059, 22 February
1973, 49 SCRA 429.
9 Calalang v. Register of Deeds of Quezon City, G.R. No. 76265, 11
March 1994, 231 SCRA 88.
348

are conclusive in the disposition of the instant case. A

careful perusal of the decision in Civil Case No. R19341
will reveal that the pivotal issues resolved by the lower
court, as affirmed by both the Court of Appeals and the
Supreme Court, can be summarized into three legal
conclusions: 1) that the D/B Lucio before and during the
voyage was seaworthy; 2) that there was proper notice of
loss made by ANCO within the reglementary period; and 3)
that the vessel D/B Lucio was a constructive total loss.
Said decision, however, did not pass upon the issues
raised in the instant case. Absent therein was any
discussion regarding the liability of ANCO for the loss of
the cargoes. Neither did the lower court pass upon the
issue of the alleged negligence of the crewmembers of the
D/B Lucio being the cause of the loss of the cargoes owned
by SMC.
Therefore, based on the foregoing discussion, we are
reversing the findings of the Court of Appeals that there is
res judicata.
Anent ANCO’s first assignment of error, i.e., the
appellate court committed error in concluding that the
negligence of ANCO’s representatives was the proximate
cause of the loss, said issue is a question of fact assailing
the lower court’s appreciation of evidence on the negligence
or lack thereof of the crewmembers of the D/B Lucio. As a
rule, findings of fact of lower courts, particularly when
affirmed by the appellate court, are deemed final and
conclusive. The Supreme Court cannot review such findings
on appeal, especially when they are borne 10out by the
records or are based on substantial evidence.
11
As held in
the case of Donato v. Court of Appeals, in
_______________
10 Potenciano v. Reynoso, G.R. No. 140707, 22 April 2003, 401 SCRA

391, citing Milestone Realty Co., Inc v. Court of Appeals, G.R. No. 135999,
19 April 2002, 381 SCRA 406; Donato C. Cruz Trading Corp. v. Court of
Appeals, G.R. No. 129189, 05 December 2000, 347 SCRA 13; Baylon v.
Court of Appeals, G.R. No. 109941, 17 August 1999, 312 SCRA 502.
11 G.R. No. 102603, 18 January 1993, 217 SCRA 196.
349
VOL. 454, MARCH 31, 2005 349

this jurisdiction, it is a fundamental and settled rule that

findings of fact by the trial court are entitled to great
weight on appeal and should not be disturbed unless for
strong and cogent reasons because the trial court is in a
better position to examine real evidence, as well as to
observe the
12
demeanor of the witnesses while testifying in
the case.
It is not the function of this Court to analyze or weigh
evidence all over again, unless there is a showing that the
findings of the lower court are totally devoid of support or
are glaringly erroneous as 13
to constitute palpable error or
grave abuse of discretion.
A careful study of the records shows no cogent reason to
fault the findings of the lower court, as sustained by the
appellate court, that ANCO’s representatives failed to
exercise the extraordinary degree of diligence required by
the law to exculpate them from liability for the loss of the
cargoes.
First, ANCO admitted that they failed to deliver to the

designated consignee the Twenty Nine Thousand Two
Hundred Ten (29,210) cases of Pale Pilsen and Five
Hundred Fifty (550) cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses
on record that the barge D/B Lucio had no engine of its own
and could not maneuver by itself. Yet, the patron of
ANCO’s tugboat M/T ANCO left it to fend for itself
notwithstanding the fact that as the two vessels arrived at
the port of San Jose, Antique, signs of the impending storm
were already manifest. As stated by the lower court,
witness Mr. Anastacio Manilag testified that the captain or
patron of the tugboat M/T ANCO left the barge D/B Lucio
immediately after it reached San Jose, Antique, despite the
fact that there were already big
_______________
12Ibid., at p. 203.
13Supra, note 10, citing Fortune Guarantee and Insurance Corp. v.
Court of Appeals, G.R. No. 110701, 12 March 2002, 379 SCRA 7.
350

waves and the area was already dark. This is corroborated

14
by defendants’ own witness, Mr. Fernando Macabueg.
The trial court continued:
At that precise moment, since it is the duty of the defendant to

exercise and observe extraordinary diligence in the vigilance over
the cargo of the plaintiff, the patron or captain of M/T ANCO,
representing the defendant could have placed D/B Lucio in a very
safe location before they left knowing or sensing at that time the
coming of a typhoon. The presence of big waves and dark clouds
could have warned the patron or captain of M/T ANCO to insure
the safety of D/B Lucio including its cargo. D/B Lucio being a
barge, without its engine, as the patron or captain of M/T ANCO
knew, could not possibly maneuver by itself. Had the patron or
captain of M/T ANCO, the representative of the defendants
observed extraordinary diligence in placing the D/B Lucio in a
safe place, the loss to the cargo of the plaintiff could not have
occurred. In short, therefore, defendants through their
representatives, failed to observe the degree of diligence required
of them under the provision of Art. 1733 of the Civil Code of the
15
Philippines.
Petitioners Estate of Ang Gui and Co To, in their

Memorandum, asserted that the contention of respondents
SMC and FGU that “the crewmembers of D/B Lucio should
have left port at the onset of the typhoon is like advising

the fish to jump from the frying16pan into the fire and an
advice that borders on madness.”
The argument does not persuade. The records show that
the D/B Lucio was the only vessel left at San Jose, Antique,
during the time in question. The other vessels were
transferred and temporarily moved to Malandong, 17 5
kilometers from the wharf where the barge remained.
Clearly, the transferred vessels were definitely safer in
Malandong than
_______________
14 RTC Decision, p. 5, Rollo, G.R. No. 137775, p. 44.

15Ibid.
16 Rollo, p. 17.
17 TSN, dated 14 December 1988, pp. 918.
351
VOL. 454, MARCH 31, 2005 351

at the port of San Jose, Antique, at that particular time, a

fact which petitioners failed to dispute.
ANCO’s arguments boil down to the claim that the loss
of the cargoes was caused by the typhoon Sisang, a
fortuitous event (caso fortuito), and there was no fault or
negligence on their part. In fact, ANCO claims that their
crewmembers exercised due diligence to prevent or
minimize the loss of the cargoes but their efforts proved no
match to the forces unleashed by the typhoon which, in
petitioners’ own words was, by any yardstick, a natural
calamity, a fortuitous event, an act of God, the
consequences
18
of which petitioners could not be held liable
for.
The Civil Code provides:
Art. 1733. Common carriers, from the nature of their business

and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in vigilance over the goods is
further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and
7...
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
...
Art. 1739. In order tha t the common ca rrier ma y be
exempted from responsibility, the na tura l disa ster must
ha ve been the proxima te a nd only ca use of the loss. However,
the common carrier must exercise due diligence to prevent or
minimize loss before, during and after the occurrence of flood,
storm, or other natural disaster in order that the common carrier
may be exempted from liability for the loss, destruction, or
deterioration of the goods . . . (Emphasis supplied)
_______________
18 Rollo, p. 16.
352

Caso fortuito or force majeure (which in law are identical

19
insofar as they exempt an obligor from liability) by
definition, are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or which
though foreseen, were inevitable. It is therefore not enough
that the event should not have been foreseen or
anticipated, as is commonly believed
20
but it must be one
impossible to foresee or to avoid.
In this case, the calamity which caused the loss of the
cargoes was not unforeseen nor was it unavoidable. In fact,
the other vessels in the port of San Jose, Antique, managed
to transfer to another place, a circumstance which
prompted SMC’s District Sales Supervisor to request that
the D/B Lucio be likewise transferred, but to no avail. The
D/B Lucio had no engine and could not maneuver by itself.
Even if ANCO’s representatives wanted to transfer it, they
no longer had any means to do so as the tugboat M/T
ANCO had already departed, leaving the barge to its own
devices. The captain of the tugboat should have had the
foresight not to leave the barge alone considering the
pending storm.
While the loss of the cargoes was admittedly caused by
the typhoon Sisang, a natural disaster, ANCO could not
escape liability to respondent SMC. The records clearly
show the failure of petitioners’ representatives to exercise
the extraordinary degree of diligence mandated by law. To
be exempted from responsibility, the natural disaster
should
21
have been the proximate and only cause of the
loss. There must have been no contributory negligence on
the part of the common carrier. As held 22
in the case of
Limpangco Sons v. Yangco Steamship Co.:
_______________
19Lasam v. Smith, 45 Phil. 661.

20Republic of the Philippines v. Luzon Stevedoring Corp., 128 Phil. 313,
citing Art. 1179 of the Philippine Civil Code.
21 Art. 1739, Philippine Civil Code.
22 34 Phil. 597 (1916).
353
VOL. 454, MARCH 31, 2005 353

. . . To be exempt from liability because of an act of God, the tug

must be free from any previous negligence or misconduct by which
that loss or damage may have been occasioned. For, although the
immediate or proximate cause of the loss in any given instance
may have been what is termed an act of God, yet, if the tug
unnecessarily exposed the two to such accident by any culpable
23
act or omission of its own, it is not excused.
Therefore, as correctly pointed out by the appellate court,

there was blatant negligence on the part of M/T ANCO’s
crewmembers, first in leaving the engineless barge D/B
Lucio at the mercy of the storm without the assistance of
the tugboat, and again in failing to heed the request of
SMC’s representatives to have the barge transferred to a
safer place, as was done by the other vessels in the port;
thus, making said blatant negligence the proximate cause
of the loss of the cargoes.
We now come to the issue of whether or not FGU can be
held liable under the insurance policy to reimburse ANCO
for the loss of the cargoes despite the findings of the
respondent court that such loss was occasioned by the
blatant negligence of the latter’s employees.
One of the purposes for taking out insurance is to
protect the insured against the consequences of his own
negligence and that of his agents. Thus, it is a basic rule in
insurance that the carelessness and negligence of the
insured or his
24
agents constitute no defense on the part of
the insurer. This rule however presupposes that the loss
has occurred due to causes which could not have been
prevented by the insured, despite the exercise of due
diligence.
The question now is whether there is a certain degree of
negligence on the part of the insured or his agents that will
deprive him the right to recover under the insurance
contract. We say there is. However, to what extent such
negligence
_______________
23Id., at p. 604, citing Manresa, Vol. 8, pp. 91, et seq.
24Chandler v. Worcester Mutual Fire Ins. Co., 3 Cush. 328.
354

must go in order to exonerate the insurer from liability

must be evaluated in light of the circumstances
surrounding each case. When evidence show that the
insured’s negligence or recklessness is so gross as to be
sufficient to constitute a willful act, the insurer must be
exonerated.
In the case
25
of Standard Marine Ins. Co. v. Nome Beach
L. & T. Co., the United States Supreme Court held that:
The ordinary negligence of the insured and his agents has long
been held as a part of the risk which the insurer takes upon
himself, and the existence of which, where it is the proximate
cause of the loss, does not absolve the insurer from liability. But
willful exposure, gross negligence, negligence amounting to
misconduct, etc., have often been held to release the insurer from
26
such liability. [Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff.
244, Fed. Cas. No. 17,731, the owners of an insured vessel
attempted to put her across the bar at Hatteras Inlet. She struck
on the bar and was wrecked. The master knew that the depth of
water on the bar was such as to make the attempted passage
dangerous. Judge Clifford held that, under the circumstances, the
loss was not within the protection of the policy, saying:
Authorities to prove that persons insured cannot recover for a loss

occasioned by their own wrongful acts are hardly necessary, as the
proposition involves an elementary principle of universal application.
Losses may be recovered by the insured, though remotely occasioned by
the negligence or misconduct of the master or crew, if proximately caused
by the perils insured against, because such mistakes and negligence are
incident to navigation and constitute a part of the perils which those who
engage in such adventures are obliged to incur; but it was never supposed
that the insured could recover indemnity for a loss occasioned by his own
wrongful act or by
_______________
25 133 Fed R. 636 (1904).

26 Id., at p. 647, citing McKenzie v. Scottish U. & N. Ins. Co., 112 Cal. 548, 557,
44 Pac. 922.
355
VOL. 454, MARCH 31, 2005 355

27
that of any agent for whose conduct he was responsible. [Emphasis ours]
From the abovementioned decision, the United States

Supreme Court has made a distinction between ordinary
negligence and gross negligence or negligence amounting to
misconduct and its effect on the insured’s right to recover
under the insurance contract. According to the Court, while
mistake and negligence of the master or crew are incident
to navigation and constitute a part of the perils that the
insurer is obliged to incur, such negligence or recklessness
must not be of such gross character as to amount to
misconduct or wrongful acts; otherwise, such negligence
shall release the insurer from liability under the insurance
contract.
In the case at bar, both the trial court and the appellate
court had concluded from the evidence that the
crewmembers of both the D/B Lucio and the M/T ANCO
were blatantly negligent. To wit:
There was blatant negligence on the part of the employees of

defendantsappellants when the patron (operator) of the tug boat
immediately left the barge at the San Jose, Antique wharf despite
the looming bad weather. Negligence was likewise exhibited by
the defendantsappellants’ representative who did not heed
Macabuag’s request that the barge be moved to a more secure
place. The prudent thing to do, as was done by the other sea
vessels at San Jose, Antique during the time in question, was to
transfer the vessel to a safer wharf. The negligence of the
defendantsappellants is proved by the fact that on 01 October
1979, the only simple vessel left at the wharf in San Jose was the
28
D/ B Lucio. [Emphasis ours]
As stated earlier, this Court does not find any reason to

deviate from the conclusion drawn by the lower court, as
sustained by the Court of Appeals, that ANCO’s
representatives
_______________
27Id., at p. 649, citing Thompson v. Hopper, 6 El. & Bl. 944; American
Ins. Co. v. Ogden, 20 Wend. 305; Bell v. Carstairs, 14 East. 374;Cleveland
v. Union Ins. Co., 8 Mass. 308.
28 CA Decision, p. 11; Rollo, G.R. No. 137775, p. 37.
356

had failed to exercise extraordinary diligence required

ofcommon carriers in the shipment of SMC’s cargoes.
Suchblatant negligence being the proximate cause of the
loss of thecargoes amounting to One Million Three
Hundred FortySixThousand One Hundred NinetySeven
Pesos (P1,346,197.00)
This Court, taking into account the circumstances present
in the instant case, concludes that the blatant negligence of
ANCO’s employees is of such gross character that it
amounts to a wrongful act which must exonerate FGU from
liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the
Court of Appeals dated 24 February 1999 is hereby
AFFIRMED with MODIFICATION dismissing the third
party complaint.
SO ORDERED.
Puno (Chairman), AustriaMartinez, Callejo, Sr.,

and Tinga, JJ., concur.
Judgment affirmed with modification.
Note.—The negligence of the obligor in the performance

of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. (Bayne Adjusters and
Surveyors, Inc. vs. Court of Appeals, 323 SCRA 231 [2000])
——o0o——
357
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6/3/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 454

VOL. 454, MARCH 31, 2005 337

FGU INSURANCE CORPORATION, petitioner, vs. THE

ESTATE OF ANG GUI, Represented by LUCIO, JULIAN

Remedial Law; Actions; Judgments; Res Judicata; Essential

determination of that particular point or question, a former

338 SUPREME COURT REPORTS ANNOTATED

FGU Insurance Corporation vs. Court of Appeals

will be final and conclusive in the second if that same point or

VOL. 454, MARCH 31, 2005 339

FGU Insurance Corporation vs. Court of Appeals

constitute a willful act, the insurer must be exonerated.—The

PETITIONS for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

“WHEREFORE, for all the foregoing, judgment is hereby

340 SUPREME COURT REPORTS ANNOTATED

1) Ordering defendants to pay plaintiff the sum of

For the Third­Party Complaint:

1) Ordering third­party defendant FGU Insurance Company

Evidence shows that Anco Enterprises Company (ANCO), a

Bill of Lading Shipment Destination

The consignee for the cargoes covered by Bill of Lading No.

3 Rollo, G.R. No. 140704, p. 72.

VOL. 454, MARCH 31, 2005 341

goes covered by Bill of Lading No. 2 was SMC’s BMD­San

Cerveza Negra was Forty­Seven Pesos and Ten Centavos

342 SUPREME COURT REPORTS ANNOTATED

Three Hundred Forty­Six Thousand One Hundred Ninety­

VOL. 454, MARCH 31, 2005 343

SMC, the cargoes, to the extent of Twenty Thousand

a) total loss of the entire shipment;

Furthermore, FGU alleged that the Third­Party Plaintiff

344 SUPREME COURT REPORTS ANNOTATED

Third­Party defendant FGU prayed for the dismissal of the

. . . Evidence is to the effect that the D/B Lucio, on which the

The appellate court affirmed in toto the decision of the

In G.R. No. 137775, the grounds for review raised by

VOL. 454, MARCH 31, 2005 345

respondent Court of Appeals committed grave abuse of

Appeals committed an error of law in holding that the

Ruling of the Court

First, we shall endeavor to dispose of the common issue

6 Complaint for Specific Performance with Damages filed by ANCO

346 SUPREME COURT REPORTS ANNOTATED

judgment must be final; 2) the former judgment must have

There is no question that the first three elements of res

VOL. 454, MARCH 31, 2005 347

ance Policy No. VMF­MH­13519 covering the vessel D/B

former, the third­party complaint arose from the insurance

8 Rizal Surety & Insurance Company v. Court of Appeals, G.R. No.

348 SUPREME COURT REPORTS ANNOTATED

are conclusive in the disposition of the instant case. A

10 Potenciano v. Reynoso, G.R. No. 140707, 22 April 2003, 401 SCRA

VOL. 454, MARCH 31, 2005 349

this jurisdiction, it is a fundamental and settled rule that

First, ANCO admitted that they failed to deliver to the

350 SUPREME COURT REPORTS ANNOTATED

waves and the area was already dark. This is corroborated

At that precise moment, since it is the duty of the defendant to

Petitioners Estate of Ang Gui and Co To, in their

have left port at the onset of the typhoon is like advising

14 RTC Decision, p. 5, Rollo, G.R. No. 137775, p. 44.

VOL. 454, MARCH 31, 2005 351

For the ThirdParty Complaint:

1) Ordering thirdparty defendant FGU Insurance Company

goes covered by Bill of Lading No. 2 was SMC’s BMDSan

Cerveza Negra was FortySeven Pesos and Ten Centavos

Three Hundred FortySix Thousand One Hundred Ninety

Furthermore, FGU alleged that the ThirdParty Plaintiff

ThirdParty defendant FGU prayed for the dismissal of the

ance Policy No. VMFMH13519 covering the vessel D/B

former, the thirdparty complaint arose from the insurance

From the abovementioned decision, the United States

Puno (Chairman), AustriaMartinez, Callejo, Sr.,