G.R. No. 137775.
March 31, 2005 2 15,000 cases Pale Pilsen San Jose, Antique
FGU INSURANCE CORPORATION, Petitioners,
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.
DECISION
CHICO-NAZARIO, J.:
Before Us are two separate Petitions for review assailing
the Decision1 of the Court of Appeals in CA-G.R. CV No.
49624 entitled, "San Miguel Corporation, Plaintiff-Appellee
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, Third-Party Defendant-Appellant," which
affirmed in toto the decision2 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) 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 Third-Party Complaint:
1) Ordering third-party defendant FGU Insurance
Company to pay and reimburse defendants the amount of
P632,700.00.3
The Facts
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 No. Shipment Destination
1 25,000 cases Pale Pilsen Estancia, Iloilo
350 cases Cerveza Negra Estancia, Iloilo
200 cases Cerveza Negra San Jose, 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 cargoes covered by Bill of Lading No. 2 was SMC’s
BMD-San 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
Twenty-Nine 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
Forty-Five Pesos and Twenty Centavos (P45.20). The
value of a case of Cerveza Negra was Forty-Seven Pesos
and Ten Centavos (P47.10), hence, SMC’s claim against
ANCO amounted to One Million Three Hundred Forty-Six
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 Forty-
Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00) plus interest, litigation expenses and
Twenty-Five 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
Fifty-Eight 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 SMC, the cargoes, to the extent of Twenty
Thousand (20,000) cases, were insured with FGU for a
total amount of Eight Hundred Fifty-Eight 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 third-
party 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 Third-Party complaint, third-party
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 Third-party 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 Third-Party 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.
Third-Party defendant FGU prayed for the dismissal of the
Third-Party Complaint and asked for actual, moral, and
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 Third-Party complaint, the
court a quo found FGU liable to bear Fifty-Three 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, run-aground 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 co-insurers of third-party
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
assured shall bear 53% of the loss…4 [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 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. R-19341, 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 contention that the decision in Civil Case No.
R-19341,5 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. R-19341 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 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.6
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. R-19341. 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. R-19341 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
third-party defendant.
The subject matter of Civil Case No. R-19341 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 vis-à-vis that of the insurer,
while the present case involves the rights and liabilities of
the shipper vis-à-vis that of the shipowner. Specifically,
Civil Case No. R-19341 was an action for Specific
Performance and Damages based on FGU Marine Hull
Insurance Policy No. VMF-MH-13519 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. MA-58486, should the former be held
liable to pay SMC.
Moreover, the subject matter of the third-party complaint
against FGU in this case is different from that in Civil Case
No. R-19341. In the latter, ANCO was suing FGU for the
insurance contract over the vessel while in the former, the
third-party complaint arose from the insurance contract
covering the cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the re-litigation 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.7 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 point or question
was in issue and adjudicated in the first suit.8
Since the case at bar arose from the same incident as that
involved in Civil Case No. R-19341, only findings with
respect to matters passed upon by the court in the former
judgment are conclusive in the disposition of the instant
case. A careful perusal of the decision in Civil Case No. R-
19341 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 out by the records
or are based on substantial evidence.9 As held in the case
of Donato v. Court of Appeals,10 in 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
demeanor of the witnesses while testifying in the case.11
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 to constitute palpable error or
grave abuse of discretion.12
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 waves and the
area was already dark. This is corroborated by defendants’
own witness, Mr. Fernando Macabueg.13
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 Philippines.14
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 frying pan into the
fire and an advice that borders on madness."15
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, 5
kilometers from wharf where the barge remained.16
Clearly, the transferred vessels were definitely safer in
Malandong than 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 of which petitioners could not be held liable
for.17
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 that the common carrier may be
exempted from responsibility, the natural disaster
must have been the proximate and only cause 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)
Caso fortuito or force majeure (which in law are identical
insofar as they exempt an obligor from liability)18 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.19
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 have been the proximate and only cause of the
loss.20 There must have been no contributory negligence
on the part of the common carrier. As held in the case of
Limpangco Sons v. Yangco Steamship Co.:21
. . . 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 act or
omission of its own, it is not excused.22
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 engine-less 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 agents constitute no defense on the part of
the insurer.23 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 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 of Standard Marine Ins. Co. v. Nome Beach L.
& T. Co.,24 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 such
liability.25 [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 that of any
agent for whose conduct he was responsible.26 [Emphasis
ours]
From the above-mentioned 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 defendants-appellants 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
defendants-appellants’ 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 defendants-appellants is proved by the
fact that on 01 October 1979, the only simple vessel left
at the wharf in San Jose was the D/B Lucio.27 [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 had failed to exercise extraordinary
diligence required of common carriers in the shipment of
SMC’s cargoes. Such blatant negligence being the
proximate cause of the loss of the cargoes amounting to
One Million Three Hundred Forty-Six Thousand One
Hundred Ninety-Seven 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.
G.R. No. 127897 November 15, 2001
DELSAN TRANSPORT LINES, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and AMERICAN HOME
ASSURANCE CORPORATION, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 of the Court of Appeals in CA-G.R. CV No. 39836
promulgated on June 17, 1996, reversing the decision of
the Regional Trial Court of Makati City, Branch 137,
ordering petitioner to pay private respondent the sum of
Five Million Ninety-Six Thousand Six Hundred Thirty-Five
Pesos and Fifty-Seven Centavos (P5,096,635.57) and
costs and the Resolution2 dated January 21, 1997 which
denied the subsequent motion for reconsideration.
The facts show that Caltex Philippines (Caltex for brevity)
entered into a contract of affreightment with the
petitioner, 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 Maysum 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.
Subsequently, private respondent paid Caltex the sum of
Five Million Ninety-Six Thousand Six Hundred Thirty-Five
Pesos and Fifty-Seven Centavos (P5,096,635.67)
representing the insured value of the lost cargo.
Exercising its right of subrogation under Article 2207 of
the New Civil Code, the private respondent demanded of
the petitioner the same amount it paid to
Caltex.1âwphi1.nêt
Due to its failure to collect from the petitioner despite
prior demand, private respondent filed a complaint with
the Regional Trial Court of Makati City, Branch 137, for
collection of a sum of money. After the trial and upon
analyzing the evidence adduced, the trial court rendered a
decision on November 29, 1990 dismissing the complaint
against herein petitioner without pronouncement as to
cost. The trial court found that the vessel, MT Maysum,
was seaworthy to undertake the voyage as determined by
the Philippine Coast Guard per Survey Certificate Report
No. M5-016-MH upon inspection during its annual dry-
docking and that the incident was caused by unexpected
inclement weather condition or force majeure, thus
exempting the common carrier (herein petitioner) from
liability for the loss of its cargo.3
The decision of the trial court, however, was reversed, on
appeal, by the Court of Appeals. The appellate court gave
credence to the weather report issued by the Philippine
Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA for brevity) which showed that
from 2:00 o’clock to 8:oo o’clock in the morning on
August 16, 1986, the wind speed remained at 10 to 20
knots per hour while the waves measured from .7 to two
(2) meters in height only in the vicinity of the Panay Gulf
where the subject vessel sank, in contrast to herein
petitioner’s allegation that the waves were twenty (20)
feet high. In the absence of any explanation as to what
may have caused the sinking of the vessel coupled with
the finding that the same was improperly manned, the
appellate court ruled that the petitioner is liable on its
obligation as common carrier4 to herein private
respondent insurance company as subrogee of Caltex. The
subsequent motion for reconsideration of herein petitioner
was denied by the appellate court.
Petitioner raised the following assignments of error in
support of the instant petition,5 to wit:
I
THE COURT OF APPEALS ERRED IN REVERSING
THE DECISION OF THE REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT
JUSTIFIED IN REBUTTING THE LEGAL
PRESUMPTION THAT THE VESSEL MT "MAYSUN"
WAS SEAWORTHY.
III
THE COURT OF APPEALS ERRED IN NOT
APPLYING THE DOCTRINE OF THE SUPREME
COURT IN THE CASE OF HOME INSURANCE
CORPORATION V. COURT OF APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes the
provision of Section 113 of the Insurance Code of the
Philippines, which states that in every marine insurance
upon a ship or freight, or freightage, or upon any thin
which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is
seaworthy. Consequently, the insurer will not be liable to
the assured for any loss under the policy in case the
vessel would later on be found as not seaworthy at the
inception of the insurance. It theorized that when private
respondent paid Caltex the value of its lost cargo, the act
of the private respondent is equivalent to a tacit
recognition that the ill-fated vessel was seaworthy;
otherwise, private respondent was not legally liable to
Caltex due to the latter’s breach of implied warranty
under the marine insurance policy that the vessel was
seaworthy.
The petitioner also alleges that the Court of Appeals erred
in ruling that MT Maysun was not seaworthy on the
ground that the marine officer who served as the chief
mate of the vessel, Francisco Berina, was allegedly not
qualified. Under Section 116 of the Insurance Code of the
Philippines, the implied warranty of seaworthiness of the
vessel, which the private respondent admitted as having
been fulfilled by its payment of the insurance proceeds to
Caltex of its lost cargo, extends to the vessel’s
complement. Besides, petitioner avers that although
Berina had merely a 2nd officer’s license, he was qualified
to act as the vessel’s chief officer under Chapter IV(403),
Category III(a)(3)(ii)(aa) of the Philippine Merchant
Marine Rules and Regulations. In fact, all the crew and
officers of MT Maysun were exonerated in the
administrative investigation conducted by the Board of
Marine Inquiry after the subject accident.6
In any event, petitioner further avers that private
respondent failed, for unknown reason, to present in
evidence during the trial of the instant case the subject
marine cargo insurance policy it entered into with Caltex.
By virtue of the doctrine laid down in the case of Home
Insurance Corporation vs. CA,7 the failure of the private
respondent to present the insurance policy in evidence is
allegedly fatal to its claim inasmuch as there is no way to
determine the rights of the parties thereto.
Hence, the legal issues posed before the Court are:
I calamity.12 In all other cases, if the goods are lost,
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.
II
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.
We rule in the negative on both issues.
The payment made by the private respondent for the
insured value of the lost cargo operates as waiver of its
(private respondent) right to enforce the term of the
implied warranty against Caltex under the marine
insurance policy. However, the same cannot be validly
interpreted as an automatic admission of the vessel’s
seaworthiness by the private respondent as to foreclose
recourse against the petitioner for any liability under its
contractual obligation as a common carrier. The fact of
payment grants the private respondent subrogatory right
which enables it to exercise legal remedies that would
otherwise be available to Caltex as owner of the lost cargo
against the petitioner common carrier.8 Article 2207 of the
New civil Code provides 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.
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.9 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.10
Consequently, the payment made by the private
respondent (insurer) to Caltex (assured) operates as an
equitable assignment to the former of all the remedies
which the latter may have against the petitioner.
From the nature of their business and for reasons of
public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of passengers transported by them,
according to all the circumstance of each case.11 In the
event of loss, destruction or deterioration of the insured
goods, common carriers shall be responsible unless the
same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or
destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence.13
In order to escape liability for the loss of its cargo of
industrial fuel oil belonging to Caltex, petitioner attributes
the sinking of MT Maysun to fortuitous even or force
majeure. From the testimonies of Jaime Jarabe and
Francisco Berina, captain and chief mate, respectively of
the ill-fated vessel, it appears that a sudden and
unexpected change of weather condition occurred in the
early morning of August 16, 1986; that at around 3:15
o’clock in the morning a squall ("unos") carrying strong
winds with an approximate velocity of 30 knots per hour
and big waves averaging eighteen (18) to twenty (20)
feet high, repeatedly buffeted MT Maysun causing it to tilt,
take in water and eventually sink with its cargo.14 This
tale of strong winds and big waves by the said officers of
the petitioner however, was effectively rebutted and
belied by the weather report15 from the Philippine
Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA), the independent government
agency charged with monitoring weather and sea
conditions, showing that from 2:00 o’clock to 8:00 o’clock
in the morning on August 16, 1986, the wind speed
remained at ten (10) to twenty (20) knots per hour while
the height of the waves ranged from .7 to two (2) meters
in the vicinity of Cuyo East Pass and Panay Gulf where the
subject vessel sank. Thus, as the appellate court correctly
ruled, petitioner’s vessel, MT Maysun, sank with its entire
cargo for the reason that it was not seaworthy. There was
no squall or bad weather or extremely poor sea condition
in the vicinity when the said vessel sank.
The appellate court also correctly opined that the
petitioner’s witnesses, Jaime Jarabe and Francisco Berina,
ship captain and chief mate, respectively, of the said
vessel, could not be expected to testify against the
interest of their employer, the herein petitioner common
carrier.
Neither may petitioner escape liability by presenting in
evidence certificates16 that tend to show that at the time
of dry-docking and inspection by the Philippine Coast
Guard, the vessel MT Maysun, was fit for voyage. These
pieces of evidence do not necessarily take into account
the actual condition of the vessel at the time of the
commencement of the voyage. As correctly observed by
the Court of appeals:
At the time of dry-docking and inspection, the
ship may have appeared fit. The certificates
issued, however, do not negate the presumption
of unseaworthiness triggered by an unexplained
sinking. Of certificates issued in this regard,
authorities are likewise clear as to their probative
value, (thus):
Seaworthiness relates to a vessel’s actual
condition. Neither the granting of
classification or the issuance of
certificates established seaworthiness.
(2-A Benedict on Admiralty, 7-3, Sec.
62).
And also:
Authorities are clear that diligence in
securing certificates of seaworthiness
does not satisfy the vessel owner’s
obligation. Also securing the approval of
the shipper of the cargo, or his surveyor,
of the condition of the vessel or her
stowage does not establish due diligence
if the vessel was in fact unseaworthy, for
the cargo owner has no obligation in
relation to seaworthiness. (Ibid.)17
Additionally, the exoneration of MT Maysun’s officers and
crew by the Board of Marine Inquiry merely concerns their
respective administrative liabilities. It does not in any way
operate to absolve the petitioner common carrier from its
civil liabilities. It does not in any way operate to absolve
the petitioner common carrier from its civil liability arising
from its failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the
negligent acts or omissions of its employees, the
determination of which properly belongs to the courts.18
In the case at bar, petitioner is liable for the insured value
of the lost cargo of industrial fuel oil belonging to Caltex
for its failure to rebut the presumption of fault or
negligence as common carrier19 occasioned by the
unexplained sinking of its vessel, MT Maysun, while in
transit.
Anent the second issue, it is our view and so hold that 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.20
The presentation of the insurance policy was necessary in
the case of Home Insurance Corporation v. CA21 (a case
cited by petitioner) because the shipment therein
(hydraulic engines) passed through several stages with
different parties involved in each stage. First, from the
shipper to the port of departure; second, from the port of
departure to the M/S Oriental Statesman; third, from the
M/S Oriental Statesman to the M/S Pacific Conveyor;
fourth, from the M/S Pacific Conveyor to the port or
arrival; fifth, from the port of arrival to the arrastre
operator; sixth, from the arrastre operator to the hauler,
Mabuhay Brokerage Co., Inc. (private respondent
therein); and lastly, from the hauler to the consignee. We
emphasized in that case that in the absence of proof of
stipulations to the contrary, the hauler can be liable only
for any damage that occurred from the time it received
the cargo until it finally delivered it to the consignee.
Ordinarily, it cannot be held responsible for the handling
of the cargo before it actually received it. The insurance
contract, which was not presented in evidence in that case
would have indicated the scope of the insurer’s liability, if
any, since no evidence was adduced indicating at what
stage in the handling process the damage to the cargo
was sustained.
Hence, our ruling on the presentation of the insurance
policy in the said case of Home Insurance Corporation is
not applicable to the case at bar. In contrast, there is no
doubt that the cargo of industrial fuel oil belonging to
Caltex, in the case at bar, was lost while on board
petitioner’s vessel, MT Maysun, which sank while in transit
in the vicinity of Panay Gulf and Cuyo East Pass in the
early morning of August 16, 1986.
WHEREFORE, the instant petition is DENIED. The
Decision dated June 17, 1996 of the Court of Appeals in
CA-G.R. CV No. 39836 is AFFIRMED. Costs against the
petitioner.
SO ORDERED.
G.R. No. 95070 September 5, 1991
PAN MALAYAN INSURANCE CORPORATION,
petitioner,
vs.
COURT OF APPEALS and THE FOOD AND
AGRICULTURAL ORGANIZATION OF THE UNITED
NATIONS, respondents.
REGALADO, J.:p
This case had its origin in a shipment of 1,500 metric
petitions of IR-36 certified rice seeds which private
respondent, The Food and Agricultural Organization of the
United Nations (hereinafter referred to as FAO), an
autonomous intergovernmental organization created by
treaty, intended and made arrangements to send to
Kampuchea to be distributed to the people for seedling
purposes. Respondent court affirms the factual findings
therein of the court a quo as chronologized hereunder.
On May 22, 1980, FAO received a formal offer from the
Luzon Stevedoring Corporation (LUZTEVECO, for brevity)
whereby the latter offered to ship the former's aforesaid
cargo, consisting of 3,000 metric petitions in two lots of
rice seeds, to Vietnam Ocean Shipping Industry in Vaung
Tau, Vietnam for freight fees of $55.50/MT, subject to the
terms and conditions indicated in the corresponding
communication. 1
On May 28, 1980, FAO wrote LUZTEVECO formally
confirming its acceptance of the foregoing offer amounting
to US$83,325.92 in respect of one lot of 1,500 metric
petitions winch is the subject of the present action. 2 The
cargo was loaded on board LUZTEVECO Barge No. LC-
3000 and consisted of 34,122 bags of IR-36 certified rice
seeds purchased by FAO from the Bureau of Plant
Industry for P4,602,270.00. 3
On June 12, 1980, the loading was completed and
LUZTEVECO issued its Bill of Lading No. 01 in favor of
FAO. 4 The latter then secured insurance coverage in the
amount of P5,250,000.00 from petitioner, Pan Malayan
Insurance Corporation, as evidenced by the latter's Marine
Cargo Policy No. B-11474A and Premium Invoice No.
78615, dated June 16, 1980. 5
On June 16, 1980, FAO gave instructions to LUZTEVECO
to leave for Vaung Tau, Vietnam to deliver the cargo
which, by its nature, could not withstand delay because of
the inherent risks of termination and/or spoilage. On the
same date, the insurance premiums on the shipment was
paid by FAO petitioner.
On June 23, 1980, FAO was informed by LUZTEVECO that
the tugboat and barge carrying FAO's shipment returned
to Manila after leaving on June 16, 1980 and that the
shipment again left Manila for Vaung Tau Vietnam on June
21, 1980 with the barge being towed by a different
tugboat. Since this was an unauthorized deviation, FAO
demanded an explanation on June 25, 1980. 6
On June 26, 1980, FAO was advised of the sinking of the
barge in the China Sea, hence it informed petitioner
thereof and, later, formally filed its claim under the
marine insurance policy. 7 On July 29, 1980, FAO was
informed by LUSTEVECO of the recovery of the lost
shipment, for which reason FAO formally filed its claim
with LUZTEVECO for compensation of damage to its cargo.
Thereafter, despite repeated demands to replace the
same or to pay for the total insured value in the sum of
P5,250,000.00, LUSTEVECO failed and refused to do so.
Petitioner likewise failed to pay for the losses and
damages sustained by FAO by reason of its inability to
recover the value of the shipment from LUZTEVECO. 9
Petitioner claims that on July 31, 1980 it supposedly
engaged the services of Pan Asiatic Adjustment and
Marine Surveying Corporation to investigate and examine
the shipment. On August 4, 1980, J.A. Barroso, Jr. of said
corporation reportedly conducted a survey on the
shipment and found that 9,629 bags of rice seeds were in
good order, 23,510 bags sustained wattage of 10% to
15%, and 983 bags were shorthanded or missing. After
the alleged survey, Barroso, Jr. made a report
recommending to petitioner the denial of FAO's claim
because the partial damage suffered by the shipment is
not compensable under the policy. On the basis of said
recommendation, petitioner denied FAO's claim. 10
Petitioner further avers that upon the request of counsel
of FAO, a survey of the shipment was conducted on
September 26, 27 and 29, 1980 by Conrado Catalan, Jr.
of Manila Adjusters & Surveyors Company and he found
6,200 bags in good order condition. At the time of his
survey, 23,510 bags of the shipment had allegedly
already been sold by LUZTEVECO. Petitioner further
asserts that on September 29, 1980, FAO wrote a letter to
petitioner signifying its willingness to abandon the
proceeds of the sale of the 23,510 bags and the remaining
good order bags, but that on October 6, 1980 petitioner
rejected FAO's proposed abandonment.
FAO then instituted Civil Case No. 41716 against
LUZTEVECO and/or herein petitioner, as defendants, with
the Regional Trial Court of Pasig, Metro Manila which, on
December 14, 1987, rendered judgment in favor of FAO
with the following decretal portion:
WHEREFORE, by virtue of preponderance
of evidence and in consideration of
justice and equity, this Court hereby
renders judgment in favor of the plaintiff
against the defendant Luzon Stevedoring
Corporation and defendant Pan Malayan
Insurance Corporation, ordering both the
defendants, to pay jointly and severally,
the plaintiff, to wit:
1. The sum of P5,250,000.00 with
interest thereon, at legal rate from
September 29, 1980 until fully paid;
2. The sum of P250,000.00 by way of
attorney's fees and expenses of litigation;
and
3. The cost of this suit. 11
Petitioner alone appealed the said decision to respondent
Court of Appeals, docketed therein as CA-G.R. CV No.
22114, and on July 20, 1990 respondent court affirmed
the decision of the trial court except for the award of
attorney's fees which was reduced to P25,000.00. 12
Petitioner's motion for reconsideration was denied in
respondent court's resolution of September 3, 1990. 13
The petition now before us raises the following issues: (1)
Whether or not respondent court committed a reversible
error in holding that the trial court is correct in holding
that there is a total loss of the shipment; and (2) Whether
or not respondent court committed a reversible error in
affirming the decision of the trial court ordering petitioner
to pay private respondent the amount of P5,250,000.00
representing the full insured value of the rice seeds. 14
The law classifies loss into either total or partial. Total loss
may be actual or absolute, 15 or it may otherwise be
constructive or technical. 16 Petitioner submits that
respondent court erred in ruling that there was total loss
of the shipment despite the fact that only 27,922 bags of
rice seeds out of 34,122 bags were rendered valueless to
FAO and the shipment sustained only a loss of 78%. FAO,
however, claims that, for all intents and purposes, it has
practically lost its total or entire shipment in this case,
inclusive of expenses, premium fees, and so forth, despite
the alleged recovery by defendant LUZTEVECO.
As found by the court below and reproduced with approval
by respondent court, FAO "has never been compensated
for this total loss or damage, a fact which is not denied
nor controverted. If there were some cargoes saved, by
LUZTEVECO, private respondent abandoned it and the
same was sold or used for the benefit of LUZTEVECO or
Pan Malayan Corporation. Under Sections 129 and 130 of
the New Insurance Code, a total loss may either be actual
or constructive. In case of total loss in Marine Insurance,
the assured is entitled to recover from the underwriter the
whole amount of his subscription (Vol. 2, Arnould Mar.
Ins. 9th Ed. P. 1304; Alsop vs. Commercial Insurance Co.
cc Mass IF Case No. 262, summ 451."(Emphasis in the
original text.) 17
It is a fact that on July 9, 1980, FAO formally filed its
claim under the marine insurance policy issued by
petitioner. 18 FAO thus claims actual loss under
paragraphs (c) and (d) of Section 130 of the Insurance
Code which provides:
SEC. 130. An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking,
or by being broken up;
(c) Any damage to the thing which renders it
valueless to the owner for the purpose for which
he held it; or
(d) Any other event which effectively deprives the
owner of the possession, at the port of
destination of the thing insured.
Respondent court affirmed the ruling of the trial court to
the effect that there was indeed actual total loss,
painstakingly explaining therein the following grounds for
holding petitioner liable for the entire amount of the
insurance coverage:
... The lower court was not incorrect in holding
that there is a total or entire loss of shipment in
the case at bar.
First, the fact of the sinking of Barge LC-3000 as
the occurrence of the risk insured against under
the marine insurance was proved and borne out
by the following findings of the court a quo, thus;
Here, we should not lose sight of the fact of
sinking of the barge according to the defendant
LUZTEVECO, in a phone call by Mr. Emata,
defendant's representative, on June 26, 1980 and
(of) which fact, the defendant Pan Malayan
Insurance Corporation was notified.
Subsequently, there was marine protest, based
on said information released by the defendant
LUZTEVECO. In fine, the barge LC-3000 carrying
the load in question sank. If the barge was made
to refloat, it cannot be denied that it sank,
otherwise, what is the use of refloating the
barge? What is mentioned in the law as the risk
or peril insured against is sinking. This is the risk
or peril covered by the Marine Insurance.
(Decision, p. 4)
xxx xxx xxx
...it is worth mentioning the following unrebutted
documents, testimonies and pleadings cited by
the plaintiff-appellant, viz:
(1) Testimony of Mr. Keiner that he was informed
by Mr. Emata, a representative of LUZTEVECO,
that the barge and its cargo sank in the South
China Sea on June 25, 1980 (Deposition, Q43 p.
11)
(2) Letter of Capt. Ilano of Luzon Stevedoring
Corporation dated June 26, 1980 confirming the
sinking of Barge LC-3000 and its cargo on June
25, 1980 (Exhibit "D-9").
(3) Marine protest executed on July 2, 1980 by
Capt. Rudy Vencer, master of tugboat towing
Barge LC-3000, attesting to said barge's sinking
on June 25, 1980, 385 miles off South Vietnam,
due to very strong winds and rough seas. (Exhibit
"E- 4").
(4) The answer of defendant LUZTEVECO itself
which admits in no uncertain terms the sinking of
Barge LC-3000 on June 25, 1980. ...
xxx xxx xxx
Basing on the evidence on record, the factual
finding of the lower court re sinking of Barge LC-
3000 is not without basis but rather sufficiently
supported by evidence adduced by plaintiff-
appellee.
Second, there is the direct testimony of Mr. Fritz
Keiner (the UNFAO officer-in-charge in the
Philippines at the time of the loss) which states as
follows:
52. CONGEN: What eventually happened to your
Organization's entire shipment of rice seedlings
intended for the refugees of Vietnam?
FK: First, I would like to point out that the rice
seeds were intended for the people of
Kampuchea, but for logistical reasons, the
shipment had to go through Vungtan, (sic)
Vietnam.
In spite of the alleged salvaging of our shipment,
there was absolutely no replacement or payment
made by either defendant LUZTEVECO or
defendant Pan Malayan Insurance Co. on our
losses and eventually FAO did not recover
anything from either of the said defendants.
Thus considered, We agree with the plaintiff-
appellee that the 27,922 damaged/lost bags were
rendered valueless to plaintiff-appellee for
planting or seeding purposes in Kampuchea since
the wetting or contact with water had definitely
activated their tendency to terminate. Moreover,
all of said damaged/lost bags were no longer
available for reshipment to Vietnam because the
same were disposed of by defendant LUZTEVECO
without authorization from plaintiff-appellee, to
answer for alleged salvage charges, while the
others were lost/shortlanded.
Third the testimony of Mr. Conrado Catalan, Jr.
that the shipment sustained a loss of 78% is not
speculative. Uncontroverted is his testimony
which is based on data corroborated by the report
of defendant-appellant's adjuster/surveyor and on
actual inspection of the remaining bags stored in
LUZTEVECO's warehouse. Exhibit '3' of
defendant-appellant states in part, thus:

53. CONGEN: Up to the present, has any Condition No. of Bags

replacement or payment of the value of your lost
cargo been made to your organization by either of Good order(dry) — 9,629
the defendants?
Partly wet but
damage limited
FPKEINER: Up to the present, no replacement or
payment of the value of our lost cargo was ever
only to
made to our Organization by either of the
approximately 10%
defendants in this case. (Deposition of Fritz
to
Keiner, pp. 13-14)
15% of the contents.
As emphasized by said witness, the insured cargo Wet
was intended for distribution by Vietnam Ocean
Shipping Agency to the people of Kampuchea for portion
the purpose of alleviating the acute rice shortage terminated/sprouted.
then prevailing in that country and to improve the
rice production therein. (Deposition, Q17 p. 5). Remaining 85% to
The bags containing said cargo were marked 90% of the
"TREATED, UNFIT FOR FOOD" (Exh. "E-3-b"; TSN,
January 15, 1985, pp. 3-5) and the seeds contents apparently — 23,510
themselves were of such a fragile nature that dry
they have the tendency to germinate upon mere
contact with water. Shortlanded/missing — 983

As shown, of the 34,122 bags of rice seeds Total 34,122 Bags

shipped on board Barge LC-3000 (Exh. "E-l"),
23,510 were determined by defendant-appellant's
surveyor, the Pan Asiatic Adjustment and Marine
Surveying Corporation to be bad order bags (Exh.
"3"). Add to these bad order bags the
shortlanded/missing bags numbering 983 per
report of the same surveying corporation, the
damaged/lost bags would total 24,493 thereby
leaving a balance of 9,269 (sic) presumed to be
good order/dry bags. Of these 9,629 good
order/dry bags, an additional 2,682 bags were
found damaged/wetted after sorting (Exh. "E").
All in all, therefore, 27,175 bags were determined
to be lost/damaged. Although 6,947 bags in
apparent external good order and condition were
presumed to be inside the LUZTEVECO
warehouse, only 6,200 were actually determined
to be there by Conrado Catalan on September 26,
27 and 29, 1980 (Exh. "E", p. 2). This increases
the number of lost/damaged bags to 27,922.
It is understandable that plaintiff-appellee's
surveyor (Mr. Conrado Catalan, Jr.) no longer saw
the 23,510 bad order/damaged bags as these
were already sold at public auction by defendant
LUZTEVECO, while 983 more were
shortlanded/missing. When Mr. Catalan sought to
verify on September 26, 27 and 29, 1980 the
existence and condition of the 9,629 presumed to
be good order bags, he discovered that "an
additional 2,629 bags were found
damaged/wetted, with the estimated 6,947 bags
in apparently external good order condition" (Exh.
"E"). However, out of these presumed 6,947 bags
only approximately 6,200 bags were computed
and counted by Mr. Catalan to the best of his
ability. (Exh. "E", p. 2). It is even more than 78%
per testimony of Mr. Catalan but at least 82% if
we divide 6,200 (the actual number of bags in the
 warehouse) by 34,122 (the actual number of
bags loaded on Barge LC-3000). 19
Petitioner, on the other hand, claims that respondent
court gravely erred in sustaining the ruling of the trial
court that there was total loss of the shipment since from
the evidence on record and the findings of respondent
court itself, only 27,922 bags of rice seeds out of 34,122
bags were rendered valueless to FAO and the shipment
sustained only a loss of 78%. 20 Thus, petitioner
concludes that the findings of the court a quo, as affirmed
by the Court of Appeals, are contrary to the evidence.
Upon an examination, however, of the records presented
before this Court, it is quite clear that there was indeed
actual total loss.
While this Court is not a trier of facts, yet, when the
findings of the Court of Appeals are alleged to be without
citation of specific evidence on which they are based,
there is sufficient reason for us to review the appellate
court's decision. 21 Under the factual milieu of this case,
we find that there is abundant evidence to support the
conclusion of respondent court.
In his testimony on cross-examination at the trial,
Conrado Catalan, Jr., declared:
Q You said that you did not make an actual count
but you estimated, how many bags all in all did
you estimate?
A It is 6,200 bags if I may recall.
exist (Great Western Ins. Co. vs. Fogarty, N.Y.,
19 Wall 640, 22 L. Ed. 216), as where the cargo
by the process of decomposition or other chemical
agency no longer remains the same kind of thing
as before (Williams vs. Cole, 16 Me. 207). 23
Moreover, it is undisputed that no replacement
whatsoever or any payment, for that matter, of the value
of said lost cargo was made to FAO by petitioner or
LUZTEVECO. It is thus clear that FAO suffered actual total
loss under Section 130 of the Insurance Code, specifically
under paragraphs (c) and (d) thereof, recompense for
which it has been denied up to the present.
In view of our aforestated holding that there was actual
total loss of the goods insured in this case, it is no longer
necessary to pass upon the issue of the validity of the
abandonment made by FAO. Section 135 of the Insurance
Code explicitly provides that "(u)pon an actual total loss,
a person insured is entitled to payment without notice of
abandonment." This is a statutory adoption of a long
standing doctrine in maritime insurance law that in case of
actual total loss, the right of the insured to claim the
whole insurance is absolute, without need of a notice of
abandonment. 24
WHEREFORE, the assailed judgment and resolution of
respondent Court of Appeals are hereby AFFIRMED in
toto.
SO ORDERED.

Q Out of these 6,200 bags you only opened two

(2) bags?

A Yes, sir.

Q And the others, the balance you did not

examine anymore?

A It is shown in the picture that it is stained.

Q You must answer the question.

A Yes, sir.

Q What was the damage of the two (2) bags that

you examined?

A They are stained. (Emphasis supplied.) 22

It will be recalled that said rice seeds were treated and

would germinate upon mere contact with water. The rule
is that where the cargo by the process of decomposition
or other chemical agency no longer remains the same
kind of thing as before, an actual total loss has been
suffered.

... However, the complete physical destruction of

the subject matter is not essential to constitute
an actual total loss. Such a loss may exist where
the form and specie of the thing is destroyed,
although the materials of which it consisted still