#1

G.R. No. 181300. September 18, 2009.*

MALAYAN INSURANCE CO., INC., petitioner, vs.JARDINE DAVIES TRANSPORT
SERVICES, INC. andASIAN TERMINALS, INC., respondents.

FACTS:

On July 23, 1994, Petrosul shipped on board the vessel MVHoegh from Vancouver, Canada
yellow crude sulphur “said to weigh 6,599.23 metric tons as per draft survey” for transportation to
Manila, consigned to LMG.

Upon arrival of the MV Hoegh in Manila, the stevedores of respondent ATI undertook
discharging operations of the shipment or cargo from the vessel directly onto the steel barges of CCBI,
which barges were later towed upriver and arrived at the consignee LMG’s storagearea in Pasig, Manila.

The consignee’s hired workers thereupon received and unloaded the cargo with the use of an
overhead crane and clamshell grab.

During the discharge of the cargo “ex vessel” onto CCBI’s barges, SMS, LMG’s appointed
surveyors, reported the Outturn Quantity/Weight of the cargo at 6,247.199 Metric Tons(MT), hence,
given that as indicated in the Bill of Lading the weight was 6,599.23 MT, there was a shortage of 352.031
MT.

Once on board the barges, the weight of the cargo was again taken and recorded at 6,122.023
MT,3 thus reflecting a shortage of 477.207 MT.

The weight of the cargo, taken a third time upondischarge at LMG’s storage area, was recorded at
6,206.748 MT to thus reflect a shortage of 392.482 MT. The cargo having been insured, LMG filed a
claim for the value of shortage of cargo with its insurer Malayan Insurance.

Petitioner as subrogee filed on September 5, 1995 a Complaint against herein respondents ATI
and Jardine Davies

As the identities and addresses of CCBI and the “Unknown Owner andU nknown Shipagent”
could not be ascertained, only Jardine Davies and ATI were served with summons.

The case elevated to the court of appeals and decided in favor of the respondents.

Issue: 1. Whether or not the petitioner is entitled to restitution

2. Whether or not the petitioner discharged its burden of proving by clear, competent
and convincing evidence that there was shortage in the shipment of yellow crude sulphur to the
consignee LMG.

HELD: 1. No. Since the right of subrogation in favor of an insurer arises only upon payment of a valid
insurance claim, the appellate court held that petitioner was not entitled to restitution, the insurance policy
between LMG and petitioner having already expired on December 31, 1993 or seven (7) months prior to the
loading of the shipment on July 23, 1994; and that the premium for Marine Risk Note RN-0001-17551 and/or
the Endorsements which purportedly extended the effectivity of the policy was paid only on October 6,1994 or
a month after the arrival of the cargo.

Jurisprudence mandates the presentation in evidence of the marine insurancepolicy so that its terms and
conditions can be scrutinized and the extent of coverage can be determined. Respondents were thus well within
their rights to scrutinize the contents thereof for the purpose of determining the terms of its validity or
effectivity, among other things. Given that it is respondents who stand to be prejudiced by any claims for
restitution arising from petitioner’s right of subrogation under the open policy, it is, at best specious to insist
that they are barred from invoking any contractual defect as a defense under the pretext that they were not
privy to the insurance contract.

Recall that petitioner’s main cause of action under the complaint was based on both theMarine Risk Note and
the Open Policy. The Subrogation Receipt clearly states that the amount paid was in full settlement of LMG’s
claim under petitioner’s Marine Risk Note Number RN-001-17551. The Marine Risk Note, however, is not the
insurance policy. It merely constitutes an acknowledgment or declaration ofthe shipper about the specific
shipment covered by the marineinsurance policy, the evaluation of the cargo and the chargeable premium. The
marine open policy is the blanket insurance to be undertaken by the insurer on all goods to be shipped by the
consignee during the existence of the contract.

Apart from not being a legal source of subrogation, the Marine Risk Note is invalid for, as earlier stated, it was
issued only on July 20, 1994or after the main insurance contract had already lapsed (by the end of December
1993), and the insurance premium on this risk note was paid only on October 6, 1994 or a month after the
shipment had already arrived in Manila, a peculiarity that noneof petitioner’s witnesses has endeavored to
explain. Petitioner’s marine insurance policy explicitly states under its effectivity clause that it shall cover “all
shipments effective January 10,1993 sailings and all shipments made thereafter until December31, 1993
sailings.” Coverage had, therefore, expired almost seven(7) months prior to the loading of the shipment on July
23, 1994.

2.NO. In the absence of clear, convincing and competent evidence to prove that the cargo indeed weighed,
albeit the Bill of Lading qualified it by the phrase“said to weigh,” 6,599.23 MT at the port of origin when it
was loaded onto the MV Hoegh, the fact of loss or shortage in the cargoupon its arrival in Manila cannot be
definitively established.

The legal basis for attributing liability to either of the respondents is thus sorely wanting.

Petitioner points out, however, that the shipment was covered not only by the Marine Risk Note but also by
Open Marine Insurance Policy which, it explains, means that the value of the thing insured has not been agreed
upon but left tobe ascertained in the event of loss and, therefore, covered by ac ontinuing insurance long before
the cargo even loaded on board; and that Jardine Davies cannot set up any defect in the insurance policy as a
defense since it is not privy to the contract of insurance between it (petitioner) and LMG.

#9
MADRIGAL, TIANGCO & Co., plaintiff and appellant, vs.HANSON, ORTH &
STEVENSON, INC., defendant andappellee.

MADRIGAL, TIANGCO & Co., ET AL., plaintiff s andappellants, vs. ROMÁN MABANTA,
defendant andappellant. REHABILITATION FINANCECORPORATION, intervenor.

FACTS:
SHORT FORM

FACTS: A motor launch owned by the plaintiffs was chartered by the defendant from the date of actual
delivery thereof in seaworthy condition with the necessary documents to enable her to navigate. Delivery
of the motor launch was made after the date agreed upon. While manned by a complement engaged by the
defendant, the motor launch sank. Plaintiffs brought thepresent action to recover the value of the motor
launch. The 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. Plaintiffs have appealed.

Held: Whether or not there was delivery of the motor launch on the date agreed upon becomes
unimportant if the motor launch was unseaworthy. The preponderance of evidence leans to the conclusion
that the motor launch was unseaworthy, because at the time it sank there was no typhoon; the waves were
those that were caused by the monsoon winds of the season; the motor launch did not touch bottom or hit
anything during her cruise in the bay; and the water was bubbling in the engine room, from which it may
be inferred that the underneath plankings gave way. This finding that the motor launch was unseaworthy
precludes recovery by the plaintiffs of the amount for which the motor was insured.

LONG FORM:
 On 6 January 1948, in consideration of money 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, by virtue of a contract which 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 drydocked 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 the estimated value of the motor launch with all equipment and tackle and
monthly rental, the plaintiffs brought this action.

The defendant in his answer denies liability for the sinking of the motor launch and claims in
a counterclaim.

After hearing the Court rendered judgment dismissing the complaint without pronouncement
as to costs, on the ground that although it found that there had been delivery of the motor launch to
the defendant, yet she was unseaworthy. For the same reason the action against Hanson, Orth &
Stevenson, Inc. to recover the amount for which the motor launch was insured under a policy
issuedby it was dismissed with costs against the plaintiff.

HELD: The finding that the motor launch was unseaworthy atthe time she sank precludes recovery
by the plaintiffs ofthe amount for which the motor launch was insured underthe policy issued by the
insurance company (paragraph 7 ofthe Marine Hull Policy, Annex A to the complaint filed incivil
case
No. 5756).

The preponderance of evidence leans towards theconclusion that there was no delivery of the
motor launchin accordance with the terms of the contract, because therewas no license issued by the
Bureau of Customs, the licenseof 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 of 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

Nevertheless, even if the motor launch was not delivered on the date agreed upon, the fact
that the defendant took possession thereofwhen she was put to sea 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 bythe defendant to man her, provided that she was seaworthy, the defendant would still
be responsible for thesinking of the motor launch, because he has to answer forthe negligent acts of
his agents.

Hence whether there wasactual delivery or it was merely a trial run becomesunimportant if
the motor launch was unseaworthy.

Again the preponderance of evidence leans toward the conclusionthat 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 bythe monsoon winds of the season (Exhibit 13-E); and that the motor
launch did not touch bottom.
 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 thesinking was not the uneven
keel. It was a different cause which as above stated is inferred from established factswhich need not
be restated.