Oriental v CA G.R. No.
94052 August 9, 1991 Only one premium was paid for the entire shipment, making for only
J. Melencio-Herrera
Facts:
Panama Sawmill shipped 1208 pieces of apitog logs to Manila and
insured the logs with Oriental for the value of Php 1 million. Two
barges were loaded with 610 and 598 logs. At sea, typhoons ravaged
one of the barges, resulting in the loss of 497 of 598 of the logs.
The Insurance contract provided for indemnity under the following
conditions:
Warranted that this Insurance is against TOTAL LOSS ONLY. Subject
to the following clauses:
— Civil Code Article 1250 Waiver clause
— Typhoon warranty clause
— Omnibus clause.
Oriental didn’t give an indemnity because there wasn’t total loss of the
shipment.
The sawmill filed a civil case against Oriental and the court ordered it
to pay 410,000 as value for the missing logs. The CA affirmed the
lower court judgment but reduced the legal interest. Hence
this appeal by Oriental.
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. Petition granted.
Ratio:
Perla v CA- The terms of the contract constitute the measure of the
insurer liability and compliance therewith is a conditionprecedent to
the insured's right to recovery from the insurer.
“Whether a contract is entire or severable is a question of intention to
be determined by the language employed by the parties. 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.
one cause or consideration. The insurance contract must, therefore,
be considered indivisible.”
Also, the insurer's liability was for "total loss only" as stipulated. A total
loss may be either actual or constructive. An actual total loss under
Sec 130 of the Insurance Code 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.
A constructive total loss, gives to a person insured a right
to abandon and it means:
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 appellate court considered the cargo in one barge as separate
from the other and ruled that 497 of 598 was more than ¾ of the
amount lost, showing a constructive total loss.
The SC, however, said that although the logs were placed in two
barges, they were not separately valued by the policy, nor separately
insured. Of the entirety of 1,208, pieces of logs, only 497 pieces
thereof were lost or 41.45% of the entire shipment. Since the cost of
those 497 pieces does not exceed 75% of the value of all 1,208 pieces
of logs, the shipment can not be said to have sustained a constructive
total loss under Section 139(a) of the Insurance Code
30 Roque vs. Intermediate Appellate Court [GR L-66935, 11
November 1985] First Division, Gutierrez (J): 5 concur, 1 on leave
Facts: On 19 February 1972, the Manila Bay Lighterage Corporation
(MBLC) a common carrier, entered into a contract with Isabela Roque
(doing business under the name and style of Isabela Roque Timber
Enterprises) and Ong Chiong 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. Roque and
Ong insured the logs against loss for P100,000.00 with the Pioneer
Insurance and Surety Corporation (Pioneer). On 29 February 1972,
Roque and Ong 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. The barge where the logs were loaded
was apparently not seaworthy such that it developed a leak. 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. On 8 March 1972, Roque and Ong wrote a letter to MBLC
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.
Another letter was sent to Pioneer claiming the full amount of
P100,000.00 under the insurance policy but Pioneer refused to pay on
the ground that its liability depended upon the "Total loss by Total Loss
of Vessel only". Hence, Roque and Ong commenced Civil Case 86599
against MBLC and Pioneer Pioneer. During the initial stages of the
hearing, MBLC informed the trial court that it had salvaged part of the
logs. The court ordered them to be sold to the highest bidder with the
funds to be deposited in a bank in the name of Civil Case 86599. After
hearing, the trial court found in favor of Roque and Ong, condemning
MBLC and Pioneer to pay Roque and Ong, jointly and severally, the
sum of P100,000.00; sentencing MBLC to pay Roque and Ong, in
addition, the sum of P50,000.00, plus P12,500.00, that the latter
advanced to the former as down payment for transporting the logs in
question; ordering the counterclaim of Pioneer against Roque and
Ong, dismissed, for lack of merit, but as to its cross-claim against its
MBLC, the latter is ordered to reimburse the former for whatever
amount it may pay Roque and Ong as such surety; ordering the
counterclaim of MBLC against Roque and Ong, dismissedfor lack of
merit; dismissing Roque's and Ong's claim of not less than
P100,000.00 and P75,000.00 as exemplary damages, for lack of
merit; granting Roque's and Ong's claim for attorney's fees in the sum
of P10,000.00; ordering MBLC and Pioneer to pay the costs; and
holding that the sum of P150,000.00 award to Roque and Ong, shall
bear interest of 6% from 25 March 1975, until amount is fully paid.
Pioneer appealed to the Intermediate Appellate Court. MBLC did not
appeal, as allegedly, the transportation company is no longer doing
business and is without funds. On 30 January 1984, the appellate
court modified the trial court's decision and absolved Pioneer from
liability after finding that there was a breach of implied warranty of
seaworthiness on the part of Roque and Ong 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. After the appellate court denied their motion for
reconsideration, Roque and Ong filed the petition for certiorari. Issue
[1]: Whether there is a warranty of seaworthiness by the cargo owner
in cases of marine cargo insurance. Held [1]: YES. There is no dispute
over the liability of the common carrier MBLC. In fact, it did not bother
to appeal the questioned decision. However, Roque and Ong state
that MBLC has ceased operating as a firm and nothing may be
recovered from it. They are, therefore, trying to recover their losses
from the insurer. 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 any thing 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 that
"Marine insurance includes: (1) Insurance against loss of or damage
to: (a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
merchandise..." 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. As ruled in the case of Go Tiaoco
y Hermanos v. Union Insurance Society of Canton (40 Phil. 40), "it is
universally accepted that in every contract of insurance upon anything
which is the subject of marine insurance, a warranty is implied that the
ship shall be seaworthy at the time of the inception of the voyage. This
rule is accepted in our own Insurance Law (Act No. 2427, sec. 106)."
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. As was held in Richelieu and Ontario Nav. Co. v.
Boston Marine, Inc., Co. (136 U.S. 406), "the exception of losses
occasioned by unseaworthiness was in effect a warranty that a loss
should not be so occasioned, and whether the fact of unseaworthiness
were known or unknown would be immaterial." 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. The Court was constrained to apply Section 113 of the Insurance
Code to the facts of this case. "In marine cases, the risks insured
against are 'perils of the sea' (Chute v. North River Ins. Co., Minn. 214
NW 472, 55 ALR 933). The purpose of such insurance is protection
against contingencies and against possible damages and such a
policy does not cover a loss or injury which must inevitably take place
in the ordinary course of things. 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. They insure against losses from extraordinary occurrences
only, such as stress of weather, winds and waves, lightning, tempests,
rocks and the like. These are understood to be the 'perils of the sea'
referred in the policy, and not those ordinary perils which every vessel
must encounter. 'Perils of the sea' has been 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. Damage done to a
vessel by perils of the sea includes every species of damages done to
a vessel at sea, as distinguished from the ordinary wear and tear of
the voyage, and distinct from injuries suffered by the vessel in
consequence of her not being seaworthy at the outset of her voyage
(as in this case). 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. (14 RCL on 'Insurance', Sec. 384, pp. 1203-1204; Cia.
de Navegacion v. Firemen's Fund Ins. Co., 277 US 66, 72 L. ed. 787,
48 S. Ct. 459)." Issue [2]: Whether the loss of the cargo was due to
the perils of the ship rather than the perils of the sea. Held [2]: PERILS
OF THE SHIP. At the time Mable 10 sank, there was no typhoon but
ordinary strong wind and waves, a condition which is natural and
normal in the open sea. The evidence shows that the sinking of Mable
10 was due to improper loading of the logs on one side so that the
barge was tilting on one side and for that it did not navigate on even
keel; that it was no longer seaworthy that was why it developed leak;
that the personnel of the tugboat and the barge committed a mistake
when it turned loose the barge from the tugboat east of Cabuli point
where it was buffeted by storm and waves, while the tugboat
proceeded to west of Cabuli point where it was protected by the
mountain side from the storm and waves coming from the east
direction. In fact, in Roque's and Ong's complaint, it is alleged that the
barge Mable 10 of MBLC developed a leak which allowed water to
come in and that one of the hatches of said barge was negligently left
open by the person in charge thereof causing more water to come in",
and that "he loss of their cargo was due to the fault, negligence, and/or
lack of skill of MBLC and/or MBLC's representatives on barge Mable
10. It is quite unmistakable that the loss of the cargo was due to the
perils of the ship rather than the perils of the sea. The facts clearly
negate Roque's and Ong's claim under the insurance policy. In the
case of Go Tiaoco y Hermanos v. Union Ins. Society of Canton, the
Court had occasion to elaborate on the term "perils of the ship" when
it ruled that "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. As was well said by Lord Herschell in Wilson, Sons & Co. v.
Owners of Cargo per the Xantho ([1887], 12 A. C., 503, 509), 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.”
3 Filipino Merchants Insurance Co. Inc. vs. Court of Appeals [GR
85141, 28 November 1989] Second Division, Regalado (J): 3 concur,
1 on leave Facts: In December 1976, Choa Tiek Seng insured said
shipment with Filipino Merchants Insurance Company (FMICI) under
cargo Policy M-2678 for the sum of P267,653.59 for the goods
described as 600 metric tons of fishmeal in new gunny bags of 90 kilos
each from Bangkok, Thailand to Manila against all risks under
warehouse to warehouse terms. Actually, what was imported was
59.940 metric tons not 600 tons at $395.42 a ton CNF Manila. The
fishmeal in 666 new gunny bags were unloaded from the ship on 11
December 1976 at Manila unto the arrastre contractor E. Razon, Inc.
and FMICI's surveyor ascertained and certified that in such discharge
105 bags were in bad order condition as jointly surveyed by the ship's
agent and the arrastre contractor. The condition of the bad order was
reflected in the turn over survey report of Bad Order cargoes 120320
to 120322, consisting of 3 pages. The cargo was also surveyed by the
arrastre contractor before delivery of the cargo to the consignee and
the condition of the cargo on such delivery was reflected in E. Razon's
Bad Order Certificates 14859, 14863 and 14869 covering a total of
227 bags in bad order condition. FMICI's surveyor has conducted a
final and detailed survey of the cargo in the warehouse for which he
prepared a survey report with the findings on the extent of shortage or
loss on the bad order bags totalling 227 bags amounting to 12,148
kilos. Based on said computation, Choa made a formal claim against
FMICI for P51,568.62 the computation of which claim is contained
therein. A formal claim statement was also presented by the Choa
against the vessel dated 21 December 1976, but FMICI refused to pay
the claim. Consequently, an action was brought by the consignee
(Choa Tiek Seng) of the shipment of fishmeal loaded on board the
vessel SS Bougainville and unloaded at the Port of Manila on or about
11 December 1976 and seeks to recover from FMICI the amount of
P51,568.62 representing damages to said shipment which has been
insured by FMICI under Policy M-2678. FMICI brought a third party
complaint against third party defendants Compagnie Maritime Des
Chargeurs Reunis and/or E. Razon, Inc. seeking judgment against the
third party defendants in case judgment is rendered against FMICI.
The court below, after trial on the merits, rendered judgment in favor
of Choa, ordering FMICI to pay Choa the sum of P51,568.62 with
interest at legal rate from the date of the filing of the complaint; and,
on the third party complaint, the third party defendant Compagnie
Maritime Des Chargeurs Reunis and third party defendant E. Razon,
Inc. are ordered to pay FMICI jointly and severally reimbursement of
the amounts paid by FMICI with legal interest from the date of such
payment until the date of such reimbursement; without
pronouncement as to costs. On appeal, and on 18 July 1988, the Court
of Appeals affirmed the decision of the lower court insofar as the
award on the complaint is concerned and modified the same with
regard to the adjudication of the third-party complaint. A motion for
reconsideration of the aforesaid decision was denied, hence FMICI
filed the petition for review. Issue [1]: Whether 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. Held [1]: NO. The "all risks clause" of the Institute Cargo
Clauses read as follows "5. This insurance is against all risks of logs
or damage to the subject-matter insured but shall in no case be
deemed to extend to cover loss, damage, or expense proximately
caused by delay or inherent vice or nature of the subject-matter
insured. Claims recoverable hereunder shall be payable irrespective
of percentage." An "all risks policy" should be read literally as meaning
all risks whatsoever and covering all losses by an accidental cause of
any kind. The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning. They are
construed by the courts in their ordinary and common acceptance.
Thus, the terms havebeen taken to mean that which happens by
chance or fortuitously, without intention and design, and which is
unexpected, unusual and unforeseen. An accident is an event that
takes place without one's foresight or expectation; an event that
proceeds from an unknown cause, or is an unusual effect of a known
cause and, therefore, not expected. The very nature of the term "all
risks" must be given a broad and comprehensive meaning as covering
any loss other than a wilful and fraudulent act of the insured. This is
pursuant to the very purpose of an "all risks" insurance to give
protection to the insured in those cases where difficulties of logical
explanation or some mystery surround the loss or damage to property.
An "all risks" policy has been evolved to grant greater protection than
that afforded by the "perils clause," in order to assure that no loss can
happen through the incidence of a cause neither insured against nor
creating liability in the ship; it is written against all losses, that is,
attributable to external causes. The term "all risks" cannot be given a
strained technical meaning, the language of the clause under the
Institute Cargo Clauses being unequivocal and clear, to the effect that
it extends to all damages/losses suffered by the insured cargo except
(a) loss or damage or expense proximately caused by delay, and (b)
loss or damage or expense proximately caused by the inherent vice
or nature of the subject matter insured. Issue [2]: Whether the failure
of Choa 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. Held [2]: NO. Although generally, the
burden of proof is upon the insured to show that a loss arose from a
covered peril, under an "all risks" policy the burden is not on the
insured to prove the precise cause of loss or damage for which it seeks
compensation. The insured under an "all risks insurance policy" has
the initial burden of proving that the cargo was in good condition when
the policy attached and that the cargo was damaged when unloaded
from the vessel; thereafter, the burden then shifts to the insurer to
show the exception to the coverage. As held in Paris-Manila
Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that
the insurance company has the burden of proving that the loss is
caused by the risks excepted and for want of such proof, the company
is liable. Coverage under an "all risks" provision of a marine insurance
policy creates a special type of insurance which extends coverage to
risks not usually contemplated and avoids putting upon the insured the
burden of establishing that the loss was due to the peril falling within
the policy's coverage; the insurer can avoid coverage upon
demonstrating that a specific provision expressly excludes the loss
from coverage. 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. Issue [3]:
Whether the insurer is liable Issue [4]: There being no showing that
the loss was caused by any of the excepted perils, the insurer is liable
under the policy. It is believed that in the absence of any showing that
the losses/damages were caused by an excepted peril, i.e. delay or
the inherent vice or nature of the subject matter insured, and there is
no such showing, the loss was covered by the policy. Herein, there is
no evidence presented to show that the condition of the gunny bags
in which the fishmeal was packed was such that they could not hold
their contents in the course of the necessary transit, much less any
evidence that the bags of cargo had burst as the result of the
weakness of the bags themselves. Had there been such a showing
that spillage would have been a certainty, there may have been good
reason to plead that there was no risk covered by the policy (See Berk
vs. Style [1956] cited in Marine Insurance Claims, p. 125). Under an
“all risks” policy, it was sufficient to show that there was damage
occasioned by some accidental cause of any kind, and there is no
necessity to point to any particular cause. Contracts of insurance are
contracts of indemnity upon the terms and conditions specified in the
policy. The agreement has the force of law between the parties. The
terms of the policy constitute themeasure of the insurer's liability. If
such terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense. Issue [4]:
Whether the consignee (Choa) has an insurable interest in said goods.
Held [4]: Choa, as consignee of the goods in transit under an invoice
containing the terms under "C & F Manila," has insurable interest in risk of loss or damage to the goods is transferred from the seller to the
said goods. Section 13 of the Insurance Code defines insurable buyer when the goods pass the ship's rail in the port of shipment.
interest in property as every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured. In
principle, anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction
whether he has or has not any title in, or lien upon or possession of
the property. Insurable interest in property may consist in (a) an
existing interest; (b) an inchoate interest founded on an existing
interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises. As vendee/consignee of the goods
in transit has such existing interest therein as may be the subject of a
valid contract of insurance. His interest over the goods is based on the
perfected contract of sale. The perfected contract of sale between him
and the shipper of the goods operates to vest in him an equitable title
even before delivery or before he performed the conditions of the sale.
The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as
in the present case, is immaterial in the determination of whether the
vendee has an insurable interest or not in the goods in transit. The
perfected contract of sale even without delivery vests in the vendee
an equitable title, an existing interest over the goods sufficient to be
the subject of insurance. Further, Article 1523 of the Civil Code
provides that where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for, the purpose
of transmission to the buyer is deemed to be a delivery of the goods
to the buyer, the exceptions to said rule not obtaining in the present
case. The Court has heretofore ruled that the delivery of the goods on
board the carrying vessels partake of the nature of actual delivery
since, from that time, the foreign buyers assumed the risks of loss of
the goods and paid the insurance premium covering them. C & F
contracts are shipment contracts. The term means that the price fixed
includes in a lump sum the cost of the goods and freight to the named
destination. It simply means that the seller must pay the costs and
freight necessary to bring the goods to the named destination but the
G.R. No. 84507 March 15, 1990
CHOA TIEK SENG, doing business under the name and style of
SENG'S COMMERCIAL ENTERPRISES, petitioner,
vs.
HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE
COMPANY, INC., BEN LINES CONTAINER, LTD. AND E. RAZON,
INC., respondents.
Lapuz Law Office for petitioner.
De Santos, Balgoz & Perez for respondent Filipino Merchants'
Insurance Company, Inc.
Marilyn Cacho-Noe for respondent Ben Lines Container, Ltd.
GANCAYCO, J.:
This is an appeal from a decision of the Court of Appeals dated
February 18, 1988 in CA-G.R. CV No. 09627 which affirmed the
decision of the Regional Trial Court (RTC) of Manila which in turn
dismissed the complaint. 1
On November 4, 1976 petitioner imported some lactose crystals from
Holland. The importation involved fifteen (15) metric tons packed in
600 6-ply paper bags with polythelene inner bags, each bag at 25 kilos
net. The goods were loaded at the port at Rotterdam in sea vans on
board the vessel "MS Benalder' as the mother vessel, and thereafter
aboard the feeder vessel "Wesser Broker V-25" of respondent Ben
Lines Container, Ltd. (Ben Lines for short). The goods were insured
by the respondent Filipino Merchants' Insurance Co., Inc. (insurance
company for short) for the sum of P98,882.35, the equivalent of
US$8,765.00 plus 50% mark-up or US$13,147.50, against all risks
under the terms of the insurance cargo policy. Upon arrival at the port
of Manila, the cargo was discharged into the custody of the arrastre
operator respondent E. Razon, Inc. (broker for short), prior to the
delivery to petitioner through his broker. Of the 600 bags delivered to
petitioner, 403 were in bad order. The surveys showed that the bad
order bags suffered spillage and loss later valued at P33,117.63.
Petitioner filed a claim for said loss dated February 16, 1977 against
respondent insurance company in the amount of P33,117.63 as the
insured value of the loss.
Respondent insurance company rejected the claim alleging that
assuming that spillage took place while the goods were in transit,
petitioner and his agent failed to avert or minimize the loss by failing
to recover spillage from the sea van, thus violating the terms of the
insurance policy sued upon; and that assuming that the spillage did
not occur while the cargo was in transit, the said 400 bags were loaded
in bad order, and that in any case, the van did not carry any evidence
of spillage.
Hence, petitioner filed the complaint dated August 2, 1977 in the
Regional Trial Court of Manila against respondent insurance company
seeking payment of the sum of P33,117.63 as damages plus
attorney's fees and expenses of litigation. In its answer, respondent
insurance company denied all the material allegations of the complaint
and raised several special defenses as well as a compulsory
counterclaim. On February 24, 1978, respondent insurance company
filed a third-party complaint against respondents Ben Lines and
broker. Respondent broker filed its answer to the third-party complaint
denying liability and arguing, among others, that the petitioner has no
valid cause of action against it. Similarly, Ben Lines filed its answer
denying any liability and a special defense arguing that respondent
insurance company was not the proper party in interest and has no
connection whatsoever with Ben Lines Containers, Ltd. and that the
third-party complaint has prescribed under the applicable provisions
of the Carriage of Goods by Sea Act.
On November 6, 1979, respondent Ben Lines filed a motion for
preliminary hearing on the affirmative defense of prescription. In an
order dated February 28, 1980, the trial court deferred resolution of
the aforesaid motion after trial on the ground that the defense of
prescription did not appear to be indubitable.
After the pre-trial conference and trial on the merits, on March 31,
1986, the court a quo rendered a judgment dismissing the complaint,
the counterclaim and the third-party complaint with costs against the
petitioner.
Hence, the appeal to the Court of Appeals by petitioner which, in due
course, as aforestated, affirmed the judgment of the trial court.
A motion for reconsideration of said judgment was denied by the
appellate court in a resolution dated August 1, 1988.
Petitioner now filed this petition for review on certiorari in this Court
predicated on the following grounds:
I damages while still in the possession of the carrying
RESPONDENT COURT ERRED IN HOLDING THAT
THE INSURED SHIPMENT DID NOT SUSTAIN ANY
DAMAGE/LOSS DESPITE ADMISSION THEREOF
ON THE PART OF RESPONDENT INSURANCE
COMPANY AND THE FINDING OF THE LATTER'S
SURVEYORS.
II
RESPONDENT COURT ERRED IN HOLDING THAT
AN "ALL RISKS" COVERAGE COVERS ONLY
LOSSES OCCASIONED BY OR RESULTING FROM
"EXTRA AND FORTUITOUS EVENTS" DESPITE
THE CLEAR AND UNEQUIVOCAL DEFINITION OF
THE TERM MADE AND CONTAINED IN THE
POLICY SUED UPON.
III
THE HOLDING OF RESPONDENT COURT THAT
AN "ALL RISKS" COVERAGE COVERS LOSSES
OCCASIONED BY AND RESULTING FROM
"EXTRA AND FORTUITOUS EVENTS"
CONTRADICTS THE RULING OF THE SAME
COURT IN ANOTHER CASE WHERE THE
DEFINITION OF THE TERM "ALL RISKS"/ STATED
IN THE POLICY WAS MADE TO CONTROL HENCE
THE NEED FOR REVIEW. 2
The petition is impressed with merit.
The appellate court, in arriving at the conclusion that there was no
damage suffered by the cargo at the time of the devanning thereof,
held as follows:
Appellant argued that the cargo in question sustained
vessel, because as his appointed surveyor reported,
Worldwide Marine Survey Corporation, at the time of
devanning at the pier, 403 bags were already in bad
order and condition. Appellant found support to this
contention on the basis of the survey report of
Worldwide Marine Survey Corporation of the
Philippines and of the Adjustment Corporation of the
Philippines which were identified by his sole witness,
Jose See. It must be pointed out, however, that
witness Jose See was incompetent to identify the two
survey reports because he was not actually present
during the actual devanning of the cargo, which fact
was admitted by him, hence, he failed to prove the
authenticity of the aforesaid survey reports.
On the other hand, the evidence submitted by the
appellee would conclusively establish the fact that
there was no damage suffered by the subject cargo
at the time of the devanning thereof. The cargo, upon
discharge from the vessel, was delivered to the
custody of the arrastre operator (E. Razon) under
clean tally sheet (Exh. 6-FMIC). Moreover, the
container van containing the cargo was found with
both its seal and lock intact. Article IV, paragraph 4 of
the Management Contract (Exh. 5) signed between
the Bureau of Customs and the Arrastre Operator
provides:
4. Tally Sheets for Cargo Vans or
Containers — The contractor shall
give a clean tally sheet for cargo
vans received by it in good order and
condition with locks, and seals intact.
The same cargo was in turn delivered into the
possession of the appellant by the arrastre operator
at the pier in good order and condition as shown by
the clean gate passes (Exhs. 2 and 3) and the
delivery permit (Exh. 4). The clean gate passes were
issued by appellee arrastre operator covering the
shipment in question, with the conformity of the
appellant's representative. The clean gate passes
provide in part:
. . . issuance of this Gate Pass
constitutes delivery to and receipt by
consignee of the goods as described
above, in good order and condition,
unless an accompanying B.O. (Bad
Order) Certificate duly issued and
noted on the face of this Gate Pass
appears.
These clean gate passes are undoubtedly important
and vital pieces of evidence. They are noted in the
dorsal side of another important piece of document
which is the permit to deliver (Exh. 4) issued by the
Bureau of Customs to effect delivery of the cargo to
the consignee. The significance and value of these
documents is that they bind the shipping company
and the arrastre operator whenever a cargo sustains
damage while in their respective custody. It is worthy
of note that there was no turn over survey executed
between the vessel and the arrastre operator,
indicating any damage to the cargo upon discharge
from the custody of the vessel. There was no bad
order certificate issued by the appellee arrastre
operator, indicating likewise that there was no
damage to the cargo while in its custody.
It is surprising to the point that one could not believe
that if indeed there was really damage affecting the
403 bags out of the 600, with an alleged estimated
spillage of 240%, this purportedly big quantity of
spillage was never recovered which could have been
easily done considering that the shipment was in a
container van which was found to be sealed and
intact. 3
However, in the same decision of the appellate court, the following
evidence of the petitioner on this aspect was summarized as follows:
The 600 bags which the original carrier received in
apparent good order condition and certified to by the
vessel's agent to be weighing 15,300 kg. gross, were
unloaded from the transhipment vessel "Wesser
Broker" stuffed in one container and turned over to
the arrastre operator, third party defendant-appellee
E. Razon, Inc. A shipboard surveyor, the Worldwide
Marine Cargo Surveyor, as well as a representative
of the vessel "Wesser Broker" and a representative of
the arrastre operator attended the devanning of the
shipment and the said shipboard surveyor certified
that 403 bags were in bad order condition with
estimated spillage as follows:
65 P/bags each of 20%
78 P/bags each of 35%
79 P/bags each of 45%
87 P/bags each of 65%
94 P/bags each of 75%
(Exh. F-1)
 Defendant and third-party plaintiff-appellee's
protective surveyor determined the exact spillage
from the bad order bags as found by the shipboard
surveyor at the consignee's warehouse by weighing
the bad order bags. Said protective surveyor found
after weighing the 403 bags in bad order condition
that an aggregate of 5,173 kilos were missing
therefrom (Exh. F). 4
The assertion of the appellate court that the authenticity of the survey
reports of the Worldwide Marine Cargo Survey Corporation and the
Adjustment Corporation of the Philippines were not established as
Jose See who identified the same was incompetent as he was not
actually present during the actual devanning of the cargo is not well
taken.
In the first place it was respondent insurance company which
undertook the protective survey aforestated relating to the goods from
the time of discharge up to the time of delivery thereof to the
consignee's warehouse, so that it is bound by the report of its surveyor
which is the Adjustment Corporation of the Philippines. 5 The
Worldwide Marine Cargo Survey Corporation of the Philippines was
the vessel's surveyor. The survey report of the said Adjustment
Corporation of the Philippines reads as follows:
During the turn-over of the contents delivery from the
cargo sea van by the representative of the shipping
agent to consignee's representative/ Broker (Saint
Rose Forwarders), 403 bags were bursted and/or
torn, opened on one end contents partly spilled. The
same were inspected by the vessel's surveyor
(Worldwide Marine & Cargo Survey Corporation),
findings as follows:
One (1) Container
No. 2987789
Property locked and
secured with Seal
No. 18880.
FOUND:
197-Paper Bags (6-Ply each with
One inner Plastic Lining Machine
Stitched with cotton Twine on Both
ends. Containing Lactose Crystal 25
mesh Sep 061-09-03 in good order.
403-Bags, 6-ply torn and/or opened
on one end, contents partly spilled,
estimated spillages as follows:
65 P/bags each of
20%
78 P/bags each of
35%
79 P/bags each of
45%
87 P/bags each of
65%
94 P/bags each of
75%
(emphasis
supplied) 6
The authenticity of the said survey report need not be established in
evidence as it is binding on respondent insurance company who
caused said protective survey.
Secondly, contrary to the findings of the appellate court that
petitioner's witness Jose See was not present at the time of the actual
devanning of the cargo, what the record shows is that he was present
when the cargo was unloaded and received in the warehouse of the
consignee. He saw 403 bags to be in bad order. Present then was the
surveyor, Adjustment Corporation of the Philippines, who surveyed
the cargo by segregating the bad order cargo from the good order and
determined the amount of loss. 7 Thus, said witness was indeed
competent to identify the survey report aforestated.
Thirdly, in its letter dated May 26, 1977 to petitioner, respondent
insurance company admitted in no uncertain terms, the damages as
indicated in the survey report in this manner:
We do not question the fact that out of the 600 bags
shipment 403 bags appeared to be in bad order or in
damaged condition as indicated in the survey report
of the vessel surveyor. . . . 8
This admission even standing alone is sufficient proof of loss or
damage to the cargo.
The appellate court observed that the cargo was discharged from the
vessel and delivered to the custody of the broker under the clean tally
sheet, that the container van containing the cargo was found with both
its seal and lock intact; and that the cargo was delivered to the
possession of the petitioner by the broker in good order and condition
as shown by the clean gate passes and delivery permit.
The clean tally sheet referred to by the appellate court covers the van
container and not the cargo stuffed therein. 9 The appellate court
clearly stated that the clean tally sheet issued by the broker covers the
cargo vans received by it in good order and condition with lock and
seal intact. Said tally sheet is no evidence of the condition of the cargo
therein contained. Even the witness of the respondent insurance
company, Sergio Icasiano, stated that the clean gate passes do not
reflect the actual condition of the cargo when released by the broker
as it was not physically examined by the broker. 10
There is no question, therefore, that there were 403 bags in damaged
condition delivered and received by petitioner.
Nevertheless, on the assumption that the cargo suffered damages, the
appellate court ruled:
Even assuming that the cargo indeed sustained
damage, still the appellant cannot hold the appellee
insurance company liable on the insurance policy. In
the case at bar, appellant failed to prove that the
alleged damage was due to risks connected with
navigation. A distinction should be made between
"perils of the sea" which render the insurer liable on
account of the loss and/or damage brought about
thereof and "perils of the ship" which do not render
the insurer liable for any loss or damage. Perils of the
sea or perils of navigation embrace all kinds of marine
casualties, such as shipwreck, foundering, stranding,
collision and every specie of damage done to the ship
or goods at sea by the violent action of the winds or
waves. They do not embrace all loses happening on
the sea. A peril whose only connection with the sea is
that it arises aboard ship is not necessarily a peril of
the sea; the peril must be of the sea and not merely
one accruing on the sea (The Phil. Insurance Law, by
Guevarra, 4th ed., 1961, p. 143). In Wilson, Sons and
Co. vs. Owners of Cargo per the Xantho (1887) A.C.
503, 508, it was held:
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.
Moreover, the cargo in question was insured in an
"against all risk policy." Insurance "against all risk"
has a technical meaning in marine insurance. Under
an "all risk" marine policy, there must be a general
rule be a fortuitous event in order to impose liability
on the insurer; losses occasioned by ordinary
circumstances or wear and tear are not covered, thus,
while an "all risk" marine policy purports to cover
losses from casualties at sea, it does not cover losses
occasioned by the ordinary circumstances of a
 voyage, but only those resulting from extra and
fortuitous events.
It has been held that damage to a cargo by high seas
and other weather is not covered by an "all risk"
marine policy, since it is not fortuitous, particularly
where the bad weather occurs at a place where it
could be expected at the time in question. (44 Am.
Jur. 2d. 216) In Go Tiaoco y Hermanas vs. Union
Insurance Society of Canto, 40 Phil. 40, it was held:
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 whose results, from
perils of the sea. 11
The Court disagrees.
In Gloren Inc. vs. Filipinas Cia. de Seguros, 12 it was held that an all
risk insurance policy insures against all causes of conceivable loss or
damage, except as otherwise excluded in the policy or due to fraud or
intentional misconduct on the part of the insured. It covers all losses
during the voyage whether arising from a marine peril or not, including
pilferage losses during the war.
In the present case, the "all risks" clause of the policy sued upon reads
as follows:
5. This insurance is against all risks of loss or damage
to the subject matter insured but shall in no case be
deemed to extend to cover loss, damage, or expense
proximately caused by delay or inherent vice or
nature of the subject matter insured. Claims
recoverable hereunder shall be payable irrespective
of percentage. 13
The terms of the policy are so clear and require no interpretation. The
insurance policy covers all loss or damage to the cargo except those
caused by delay or inherent vice or nature of the cargo insured. It is
the duty of the respondent insurance company to establish that said
loss or damage falls within the exceptions provided for by law,
otherwise it is liable therefor.
An "all risks" provision of a marine policy creates a special type of
insurance which extends coverage to risks not usually contemplated
and avoids putting upon the insured the burden of establishing that the
loss was due to peril falling within the policy's coverage. The insurer
can avoid coverage upon demonstrating that a specific provision
expressly excludes the loss from coverage. 14
In this case, the damage caused to the cargo has not been attributed
to any of the exceptions provided for nor is there any pretension to this
effect. Thus, the liability of respondent insurance company is clear.
WHEREFORE, the decision appealed from is hereby REVERSED
AND SET ASIDE and another judgment is hereby rendered ordering
the respondent Filipinas Merchants Insurance Company, Inc. to pay
the sum of P33,117.63 as damages to petitioner with legal interest
from the filing of the complaint, plus attorney's fees and expenses of
litigation in the amount of P10,000.00 as well as the costs of the suit.
SO ORDERED.