1. G.R. No. L-66935, Roque vs.

IAC

Facts:

 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.
 The petitioners insured the logs against loss for P100,000.00 with respondent Pioneer Insurance and Surety
Corporation.
 The petitioners loaded on the barge pieces of logs but the shipment never reached its destination because the
barge sank with the pieces of logs. As alleged by the respondent, he barge where the logs were loaded was not
seaworthy such that it developed a leak.
 The petitioners demanded to Manila Bay payment of P150,000 for the loss of shipment plus P100,000 as
unrealized profit.
 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".
 The respondent court 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: won the respondent company was liable to pay for the insurance

Held: Petition Denied. Insurance company not liable

 Section 113 of the Insurance Code provides In every marine insurance upon a ship or freight, or freightage, or
upon any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.
 From the above-quoted provisions, 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 shipowner 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.
 Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance, it
becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy
condition. The shipper of cargo may have no control over the vessel but he has full control in the choice of the
common carrier that will transport his goods. Or the cargo owner may enter into a contract of insurance which
specifically provides that the insurer answers not only for the perils of the sea but also provides for coverage of
perils of the ship.
 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.
 There must, in order to make the insurer liable, be some casualty, something which could not be foreseen as one
of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents
which may happen, not against events which must happen.
 In the present case the entrance of the sea water into the ship’s hold through the defective pipe already described
was not due to any accident which happened during the voyage, but to the failure of the ship’s owner properly to
repair a defect of the existence of which he was apprised. The loss was therefore more analogous to that which
directly results from simple unseaworthiness than to that which result from the perils of the sea.
 Suffice it to say that upon the authority of those cases there is no room to doubt the liability of the shipowner for
such a loss as occurred in this case. By parity of reasoning the insurer is not liable; for generally speaking, the
shipowner excepts the perils of the sea from his engagement under the bill of lading, while this is the very perils
against which the insurer intends to give protection.

2. G.R 85141, Filipino Merchants Insurance vs. CA

FACTS:

 In 1976, private respondent insured its shipment with petitioner insurance company for the sum of P267,653.59
for the goods described as 60 metric tons of fishmeal in new gunny bags of 90 kilos each from Thailand to Manila
against all risks under warehouse to warehouse terms.
 The fishmeal in 666 new gunny bags were unloaded from the ship at Manila unto the arrastre contractor E. Razon,
Inc. and defendant’s surveyor ascertained and certified that 227 bags were in bad order condition as jointly
surveyed by the ship’s agent and the arrastre contractor.
 Consequently, the private respondent made a formal claim against the petitioner Filipino Merchants Insurance
Company for P51,568.62. A formal claim statement was also presented by the private respondent against the
vessel, but the petitioner Filipino Merchants Insurance Company refused to pay the claim.
 Later, the court rendered judgment in favor of private respondent.
  On appeal, the respondent court affirmed the decision of the lower court.
 A motion for reconsideration of the aforesaid decision was denied, hence this petition.

ISSUE: Whether or not the insurer is liable under an “all risks” policy.

RULING:

 Yes.
 Petitioner contends that an “all risks” marine policy has a technical meaning in insurance in that before a claim
can be compensable it is essential that there must be “some fortuity, ” “casualty” or “accidental cause” to which the
alleged loss is attributable and the failure of herein private respondent, upon whom lay the burden, to adduce
evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to
recover from the insurance policy. However, the SC ruled that the above contention is untenable.
 A marine insurance policy providing that the insurance was to be “against all risks” must be construed as creating
a special insurance and extending to other risks than are usually contemplated, and covers all losses except such
as arise from the fraud of the insured. The burden of the insured, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to prove that
the loss was due to excepted perils. To impose on the insured the burden of proving the precise cause of the loss or
damage would be inconsistent with the broad protective purpose of “all risks” insurance.
 In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is
liable under the policy.

3. G.R No. 131166, Caltex v. Sulpicio Lines

Facts:

 MT Vector carrying petroleum products of Caltex collided with MV Dona Paz killing almost all the passengers and
crew members of both ships, and thus resulting in one of the country's worst maritime disasters.
 The board of marine inquiry in BMI Case No. 659-87 after investigation found that the MT Vector, its registered
operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and
responsible for its collision with MV Doña Paz.
 Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother respectively, filed with the Regional
Trial Court, Branch 8, Manila, a complaint for "Damages Arising from Breach of Contract of Carriage" against
Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco Soriano,
Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged 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; as a result, it rammed against MV Doña Paz in the open sea setting MT Vector's
highly flammable cargo ablaze.
 The lower Courts held Suspiccio Lines liable for the damages, and on appeal, Caltex was likewise made liable.
Hence, this petition.

Issue: WON THE CHARTERER/SHIPPER IS LIABLE FOR BREACH OF WARRANTY OF SEAWORTHINESS.

Held:

NO. 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.

A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage,
the ship owner to supply the ship’s store, pay for the wages of the master of the crew, and defray the expenses for the
maintenance of the ship.

Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.
prLL

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 the responsibilities of ownership rest on the owner. The charterer is free from liability to third
persons in respect of the ship.

Second: MT Vector is a common carrier

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage charter. Does a
charter party agreement turn the common carrier into a private one? We need to answer this question in order to shed
light on the responsibilities of the parties.

In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered
into a voyage charter, which retains the character of the vessel as a common carrier.

Under the Carriage of Goods by Sea Act:

SECTION 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The
failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear
breach of its duty prescribed in Article 1755 of the Civil Code.

The provisions owed their conception to the nature of the business of common carriers. This business is impressed
with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance
over the goods and safety of the passengers, especially because with the modern development of science and
invention, transportation has become more rapid, more complicated and somehow more hazardous. For these
reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the
carrier being obliged by law to impliedly warrant its seaworthiness.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic
incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence.

Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the
Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold
petitioner liable for damages.

As Vector Shipping Corporation did not appeal from the Court of Appeals’ decision, we limit our ruling to the liability
of Caltex alone. However, we maintain the Court of Appeals’ ruling insofar as Vector is concerned.

4. G.R. No. 127897,

FACTS:

Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., for a period of one year whereby the
said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different
parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of
industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured
with the private respondent, American Home Assurance Corporation.

On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the
early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
The Respondent (insurance) paid the Caltex the amount of P5,096,635.57 representing the amount of the value of the
lost cargo.

ISSUE:

1. Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the
petitioner.

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

RULING:

No, under the law, extra ordinary diligence is required by the common carrier in taking good care of the goods. The
common carrier is presumed negligent unless the contrary provides otherwise. The right of subrogation has its roots
in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the
ultimate payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does
it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the
insurance company of the insurance claim.

The presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may
recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The
subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer
and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, 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.

5. G. R No. 94052, Oriental Assurance Corporation v. CA

Facts:

 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). There is a
claim 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.
 Thereafter, the two barges were towed by one tug-boat, the MT 'Seminole' But, as fate would have it, during the
voyage, rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of logs
out of the 598 pieces loaded thereon.
 Panama demanded payment for the loss but Oriental Assurance refuse on the ground that its contracted liability
was for "TOTAL LOSS ONLY."
 Hence,Panama filed a complaint against Oriental Assurance
 Both lower Courts ruled that the insurance contract should be liberally construed in order to avoid a denial of
substantial justice; and that the logs loaded in the two barges should be treated separately such that the loss
sustained by the shipment in one of them may be considered as "constructive total loss" and correspondingly
compensable.

Issue: whether or not Oriental Assurance can be held liable under its marine insurance policy based on the theory of a
divisible contract of insurance and, consequently, a constructive total loss.

Held:

No, there is no liability.

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 insurer

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.

More importantly, the insurer's liability was for "total loss only." A total loss may be either actual or constructive (Sec.
129, Insurance Code). 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. (Section 130, Insurance Code).
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 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 can not 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. In the absence of either actual or
constructive total loss, there can be no recovery by the insured Panama against the insurer, Oriental
Assurance.

6. G.R no. 116940

Facts:
 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent
Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported
from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.1 The shipment was
insured with petitioner Philippine American General Insurance Co., Inc., petitioner herein
 MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around
eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing
down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
 Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages
it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the claim
thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00.
 Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed
any liability for the loss. Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money
and damages.
 HILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's
unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly
manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby
port or beach after the vessel started to list.
 The lower court further ruled that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could not recover
from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the
vessel's seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and
mistaken payment. Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to
permit it to bring an action in court as a subrogee.
Issue: whether "MV Asilda" was seaworthy when it left the port of Zamboanga; (b) whether the limited liability under
Art. 587 of the Code of Commerce should apply; and, (c) whether PHILAMGEN was properly subrogated to the rights
and legal actions which the shipper had against FELMAN,
Ruling: FELMAN is liable

(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc., is the vessel's being
top-heavy. Evidence shows that days after the sinking coca-cola bottles were found near the vicinity of the sinking
which would mean that the bottles were in fact stowed on deck which the vessel was not designed to carry substantial
amount of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric
height thus making it unstable.
(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of the captain in the
care of the goods. This liability however can be limited through abandonment of the vessel, its equipment and
freightage. Nonetheless, there are exceptions 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 ship owner and the captain. The international rule
is that the right of abandonment of vessels, as legal limitation of liability, does not apply to cases where the injury was
occasioned by the fault of the ship owner. Felman was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the vessel is
seaworthy and such warranty is as much a term of the contract as if expressly written on the face of
the policy. However, the implied warranty of seaworthiness can be excluded by terms in writing in
the policy of the clearest language. The marine policy issued by Philamgen to cocacola has dispensed
that the "seaworthiness of the vessel as between the assured and the underwriters in hereby
admitted."

The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty of
seaworthiness is fulfilled and (2) the risk of unseaworthiness is assumed by the insurance company.
This waiver clause would mean that Philamgen has accepted the risk of unseaworthiness, therefore
Philamgen is liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's 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.

Pan Malayan Insurance Corp. vs CA: 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.

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 soft drink bottles is inevitable.