SVERIGES ANGFARTYGS ASSURANS FORENING, PLAINTIFF-

APPELLANT, VS. QUA CHEE GAN, DEFENDANT-APPELLEE.

FACTS:

Qua Chee Gan, shipped on board the S.S. NAGARA, 2,032,000 kilos of
bulk copra at Quezon, consigned to DAL International Trading Co.,
in Gdynia, Poland. The vessel first called at the port of Karlshamn, Sweden,
where it unloaded 696,419 kilos of bulk copra. Then, it proceeded
to Gdynia where it unloaded the remaining copra shipment. The actual
outturn weights in the latter port showed that only 1,569,429 kilos were
discharged. Because of the alleged confirmed cargo shortage, the Polish
cargo insurers had to indemnify the consignee for the value
thereof. Thereafter, the former sued the ship-owner.

Settlement was effected between the Polish cargo insurers

and the ship owner. On August 16, 1954, claiming to have been
subrogated to the rights of the carrier, plaintiff sued defendant before the
Court of First Instance of Manila to recover U.S. $60,733.53 plus 17%
exchange tax, with legal interest, as the value of the alleged cargo short
shipment and P10,000 as attorney's fees. Defendant answered in due time
and countered with a P15,000 counterclaim for attorney's fees.

After trial the lower court September 28, 1963, rendered its decisions
dismissing the complaint and awarding P10,000 as attorney's fees to
defendant.

ISSUE:

1. W/N there was shortshipment on defendants part?

2. W/N the non-presentation of the insurance policy fatal to plaintiff's
case?
3. W/N defendant was merely acting as an agent of Louis Dreyfus &
Co., who was the real shipper?

RULING:

1. None. Plaintiff's cause of action suffers from several fatal defects

and inconsistencies. The alleged existence of the Karlshamn bills of lading is
negative by the fact that Exhibits A and B - the bills of lading presented by
plaintiff - show that the 2,032,000 kilos of copra loaded
in Siain were for Gdynia only. Further destroying its case is the testimony
of plaintiff's own witness, Mr. Claro Pasicolan, who on direct examination
affirmed[5] that these two exhibits constituted the complete set of documents
which them shipping agent in charge of the vessel S.S. NAGARA issued
covering the copra cargo loaded at Slain. In view of this admission and for
want of evidentiary support, plaintiff's belated claim that there is another
complete set of documents cannot be seriously taken.

2. No. The lower court ruled so, reasoning that unless the same —
as the best evidence — were presented, it could not be conclusively
determined if "liability for short shipment" was a covered risk. And the rule
is that an insurer who pays the insured for loss or liability not covered by the
policy is not subrogated to the latter.2 However, even assuming that there
was unwarranted — or "volunteer" — payment, plaintiff could still recover
what it paid — in effect — to the carrier from defendant shipper under Art.
1236 of the Civil Code which allows a third person who pays on behalf of
another to recover from the latter, although there is no subrogation. But
since the payment here was without the knowledge and consent of
defendant, plaintiff's right of recovery is defeasible by the former's defenses
since the Code is clear that the recovery is only up to the amount by which
the defendant was benefited.

3. Yes, suffice it to say that although on Exhibit A and B his name

appears as the shipper, yet the very loading certificate, Exhibit 3 [5-
Deposition of Horle], issued and signed by the Chief Mate, and Master of
the S.S. NAGARA shows that defendant was acting merely for account
of Louis Dreyfus & Co. The other documentary exhibits[7] confirm
this. Anyway, in whatever capacity defendant is considered, it cannot be
liable since no shortshipment was shown.

Plaintiff's action against defendant cannot, however, be considered as

clearly unfounded as to warrant an award of attorney's fees as damages to
defendant under par. 4, Art. 2208 of the Civil Code. The facts do not show
that plaintiff's cause of action was so frivolous or untenably as to amount to
gross and evident bad faith.[8]
WHEREFORE, but for the award of attorney's fees to defendant which is
eliminated, the decision appealed from is, in all other respects, hereby
affirmed. Costs against plaintiff-appellant.
RIZAL SURETY AND INSURANCE CO. vs. MANILA RAILROAD CO. AND
MANILA PORT SERVICE

Facts:

On Nov 29, 1960, a vessel named SS Flying Trader, loaded on board a

cargo which is an offset press machine, from Italy to Manila. Upon reaching
the port of destination and upon unloading it, it was dropped b the crane
which resulted to damages of the machine. The plaintiff as the insurer had
paid the consignee, Suter, Inc. the amount of P16.5k for the machine and
P180.70 for the International Adjustment Bureau as adjuster’s fee. However,
the arrastre charges in this particular shipment was paid on the weight or
measurement basis whichever is higher, and not on the value thereof.

Issue:

Can the insurance get an amount greater than what was declared?

Held:

Plaintiff Insurance Company cannot recover from defendants an

amount greater than that to which the consignee could lawfully lay claim.
The management contract is clear, the amount is limited to P500.

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 right of the insured against the wrong-doer or the person
who has violated the contract. If the amount paid by the insurance company
doer 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 insurance have no greater right than the party in interest thereof.
PAUL FIRE & MARINE INSURANCE v MACONDRAY & CO

Facts:

-Winthrop Products, Inc., of New York shipped aboard the SS “Tai

Ping”, owned and operated by Wilhelm Wilhelmsen218 cartons and drums of
drugs and medicine with Winthrop-Stearns Inc., Manila, Philippines as
consingee. BarberSteamship Lines, Inc., agent of Wilhelm Wilhelmsen issued
Bill of Lading No. 34, in the name of Winthrop Products.

-The shipment was insured by the shipper against loss and/or damage with
the St. Paul Fire & Marine InsuranceCompany.

-“Tai Ping” arrived at the Port of Manila.

-The said shipment was discharged complete and in good order with the
exception of one (1) drum and several cartonswhich were in bad condition.

-Because consignee failed to receive the whole shipment and as several

cartons of medicine were received in badorder condition, Winthrop-Sterns
Philippines filed the corresponding claim in the amount of Pl,109.67
representingthe C.I.F. value of the damaged drum and cartons of medicine
with the carrier and the arrestre.

-However, both refused to pay.

-Winthrop-Sterns Philippines filed its claim with the insurer, St. Paul Fire &
Marine insurance.

-The insurance company, on the basis of such claim, paid to the consignee
the insured value of the lost and damagedgoods, including other expenses in
connection therewith, in the total amount of $1,134.46.

-As subrogee of the rights of the shipper and/or consignee, the insurer, St.
Paul Fire & Marine Insurance Co., instituted with the Court of First Instance
the present action against the defendants for the recovery of said amount
of $1,134.46, plus costs.

-The Lower court rendered judgment ordering defendants Macondray & Co.,
Inc., Barber Steamship Lines, Inc. andWilhelm Wilhelmsen to pay to
the plaintiff P300.00. It also held defendants Manila Railroad Company
and Manila PortService to pay to plaintiff, jointly and severally, the sum
of P809.67.
-The Insurer, , contending that it should recover the amount of $1,134.46 or
its equivalent in pesos (the rate of P3.90,instead of P2.00, for every
US$1.00), filed a motion for reconsideration, but this was denied.

-The Insurer argues that, as subrogee of the consignee, it should be entitled

to recover from the defendants-appelleesthe amount of $1,134.46 which it
actually paid to the consignee and which represents the value of the lost
anddamaged shipment as well as other legitimate expenses such as the
duties and cost of survey of said shipment, andthat the exchange rate on the
date of the judgment, which was P3.90 for every US$1.00.

-Defendants-appellees countered that:

o Their liability is limited to the C.I.F. value of the goods, pursuant

to contract of sea carriage embodied in the bill of lading that the consignee’s
(Winthrop-Stearns Inc.) claim against the carrier (Macondray & Co.,
Inc.,Barber Steamship Lines, Inc., Wilhelm Wilhelmsen and the arrastre
operators (Manila Port Service and Manila Railroad Company) was only
for the sum of Pl,109.67

ISSUE(S):

1.Whether or not, in case of loss or damage, the liability of the carrier

to the consignee is limited to the C.I.F value of the goods which were lost or
damaged

2.Whether the insurer who has paid the claim in dollars to the
consignee should be reimbursed in its peso equivalent on the date of
discharge of the cargo or on the date of the decision.

HELD:

The appeal is without merit and the judgement of the lower court
is affirmed.

-The purpose of the bill of lading is to provide for the rights and liabilities of
the parties in reference to the contract tocarry.

-The stipulation in the bill of lading limiting the common carrier’s liability to
the value of the goods appearing in thebill, unless the shipper or owner
declares a greater value, is valid and binding.
-This limitation of the carrier’s liability is sanctioned by the freedom of the
contracting parties to establish suchstipulations, clauses, terms, or
conditions as they may deem convenient, provided they are not contrary to
law,morals, good customs and public policy.

-A stipulation fixing or limiting the sum that may be recovered from the
carrier on the loss or deterioration of the goods is valid, provided it is:

(a) reasonable and just under the circumstances, and

(b) has been fairly and freely agreed upon.

-In the case at bar, the liabilities of the defendants- appellees with respect
to the lost or damaged shipments areexpressly limited to the C.I.F. value of
the goods as per contract of sea carriage embodied in the bill of lading,
whichreads:

o Whenever the value of the goods is less than $500 per package or other
freight unit, their value in the calculation and adjustment of claims for which
the Carrier may be liable shall for the purpose of avoiding uncertainties and
difficulties in fixing value be deemed to be the invoice value, plus freight and
insurance if paid, irrespective of whether any other value is greater or less.
National Union Fire Insurance Company v. Stolt-Nielsen

GR No. 87958; April 26, 1990

EMERGENCY RECIT: United Coconut Chemicals (SHIPPER) shipped distilled

fatty acid on board MT “StoltSceptre” (CARRIER). The shipment was insured
under a marine cargo policy with National Union Fire Insurance Co
(INSURER). Upon receipt of the cargo by the consignee in Netherlands, it
was totally contaminated. Hence, claim was made on the INSURER of the
cargo. The INSURER as subrogee filed a claim for damages against the
CARRIER with RTC Manila. The CARRIER invoked that arbitration must be
done pursuant to the Charter. The INSURER opposed, arguing that the
provision on arbitration was not included in the Bill of Lading. SC: The
INSURER cannot avoid the binding effect of the arbitration clause. By
subrogation, it became privy to the Charter Party as fully as the SHIPPER
before the latter was indemnified, because as subrogee it stepped into the
shoes of the SHIPPER and is subrogated merely to the latter's rights.

FACTS:

On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774

metric tons of distilled C6-C18 fatty acid on board MT "StoltSceptre," a
tanker owned by Stolt-Nielsen Philippines Inc., from Bauan, Batangas,
Philippines, consigned to "NieuweMatex" at Rotterdam, Netherlands, covered
by Tanker Bill of Lading BL No. BAT-1.

The shipment was insured under a marine cargo policy with Petitioner
National Union Fire InsuranceCompany of Pittsburg (hereinafter referred to
as INSURER), a non-life American insurance corporation, through its settling
agent in the Philippines, the American International Underwriters
(Philippines), Inc., the other petitioner herein.

Upon receipt of the cargo by the consignee in the Netherlands, it was found
to be discoloured and totally contaminated. Hence, a claim was made on the
Insurer of the cargo. The insurer as subrogee filed a claim for damages
against the carrier with the RTC of Manila.

The carrier filed a motion to dismiss on the ground that the case was
arbritrable and pursuant to the charter party as embodied in the bill of
lading, arbitration must be done. The insurer opposed the motion by
arguing that the provision on arbitration was not included in the bill of lading
and even if it was included, it was nevertheless unjust and unreasonable.

The RTC denied the motion but upon reconsideration, the resolution on the
motion to dismiss was suspended or deferred.

The carrier then filed a petition for review on certiorari with preliminary
injunction/TRO which was granted by the CA.

ISSUE:

Are the terms of the Charter Party, particularly the provision on

arbitration, binding on the INSURER?

HELD:

Yes. The pertinent portion of the Bill of Lading in issue provides in

part:

xxx [A]ll the terms whatsoever of the said Charter except the rate and
payment of freight specified therein apply to and govern the rights of the
parties concerned in this shipment.xxx

The provision on arbitration in the Charter Party reads:

4. Arbitration. Any dispute arising from the making, performance or

termination of this Charter Party shall be settled in New York, Owner and
Charterer each appointing an arbitrator, who shall be a merchant, broker or
individual experienced in the shipping business; the two thus chosen, if they
cannot agree, shall nominate a third arbitrator who shall be an admiralty
lawyer. Such arbitration shall be conducted in conformity with the provisions
and procedure of the United States arbitration act, and a judgment of the
court shall be entered upon any award made by said arbitrator. Nothing in
this clause shall be deemed to waive Owner's right to lien on the cargo for
freight, deed of freight, or demurrage.

Clearly, the Bill of Lading incorporates by reference the terms of the Charter
Party. It is settled law that the charter may be made part of the contract
under which the goods are carried by an appropriate reference in the Bill of
Lading. As the respondent Appellate Court found, the INSURER "cannot feign
ignorance of the arbitration clause since it was already charged with notice
of the existence of the charter party due to an appropriate reference thereof
in the bill of lading and, by the exercise of ordinary diligence, it could have
easily obtained a copy thereof either from the shipper or the charterer.

We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as
fully as the SHIPPER before the latter was indemnified, because as subrogee
it stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely
to the latter's rights. It can recover only the amount that is recoverable by
the assured. And since the right of action of the SHIPPER-ASSURED is
governed by the provisions of the Bill of Lading, which includes by reference
the terms of the Charter Party, necessarily, a suit by the INSURER is subject
to the same agreements. It has not been shown that the arbitral clause in
question is null and void, inoperative, or incapable of being performed. Nor
has any conflict been pointed out between the Charter Party and the Bill of
Lading.
CEBU SHIPYARD AND ENGINEERING WORKS, INC. v. WILLIAM
LINES, INC. and PRUDENTIAL GUARANTEE and ASSURANCE
COMPANY, INC.

Construction/Interpretation of Insurance Contracts | May 5, 1999 | Purisima,

J.

Nature of Case: Petition for Review on Certiorari

Digest maker:Erika Potian

SUMMARY:William Lines insured its M/V Manila City

under Prudential Guarantee for hull and machinery.Policy
contained clause providing that loss/damage caused by
negligence of charterers or repairers are excluded from
coverage. William Lines brought the vessel to Cebu
Shipyard for annual dry-docking and repair.The two
executed contracts stipulating the liabilities of both
parties, including that the insurance on the vessel should
be maintained by the owner during period of the
contract. After the vessel was transferred to the docking
quay, it caught fire and sank, resulting to its eventual
total loss. Cebu Shipyard claims that it is a co-assured
under the Marine Hull Insurance Policy by virtue of
Clause 20, and therefore no subrogation can be made by
Prudential. SC held that it is not and the petition was
denied.
DOCTRINE:Intention of parties to make each other co-
assured is to be gleaned from the insurance policy itself
and not from any other contract because the policy
denominates the assured and the beneficiaries.

FACTS:

Cebu Shipyard and Engineering Works, Inc. (CSEW) is engaged in the

business of dry-docking and repairing of marine vessels while the Prudential
Guarantee and Assurance, Inc. (Prudential) is in the non-life insurance
business.

William Lines, Inc. is in the shipping business. It was the owner of M/V
Manila City, a luxury passenger-cargo vessel, which caught fire and sank.
At the time of the unfortunate occurrence sued upon, subject vessel was
insured with Prudential for P45M for hull and machinery. The Hull Policy
included an “Additional Perils (INCHMAREE)” Clause covering loss of or
damage to the vessel through the negligence of, among others, ship
repairmen

Petitioner CSEW was also insured by Prudential for third party liability under
a Shiprepairer’s Legal Liability Insurance Policy. The policy was for P10
million only, under the limited liability clause

On Feb. 5, 1991, William Lines, Inc. brought its vessel, M/V Manila City, to
the Cebu Shipyard in Lapulapu City for annual dry-docking and repair.

On Feb. 6, 1991, an arrival conference was held between representatives of

William Lines, Inc. and CSEW to discuss the work to be undertaken on the
M/V Manila City. The contracts, denominated as Work Orders, were signed
thereafter., with the following stipulations:

10. The Contractor shall replace at its own work and at its own cost
any work or material which can be shown to be defective and which is
communicated in writing

20. The insurance on the vessel should be maintained by the customer

and/or owner of the vessel during the period the contract is in effect.

The total liability of the Contractor to the Customer or of any sub-contractor

shall be limited in respect of any defect or event to the sum of 1M.

While the M/V Manila City was undergoing dry-docking and repairs within the
premises of CSEW, the master, officers and crew of M/V Manila City stayed
in the vessel, using their cabins as living quarters. Other employees hired by
William Lines to do repairs and maintenance work on the vessel were also
present during the dry-docking.

On February 16, 1991, after subject vessel was transferred to the docking
quay, it caught fire and sank, resulting to its eventual total loss

On February 21, 1991, William Lines, Inc. filed a complaint for damages
against CSEW, alleging that the fire which broke out in M/V Manila City was
caused by CSEWs negligence and lack of care.
Prudential was impleaded as co-plaintiff, after it paid William Lines, Inc. the
value of the hull and machinery insurance on the M/V Manila City. As a result
of such payment Prudential was subrogated to the claim of P45 million,
representing the value of the said insurance it paid.

Trial Court: CSEW to pay William Lines and Prudential (45M)

CA: Affirmed TC. Ordered the partial dismissal of the case insofar as CSEW
and William Lines were concerned.

CSEW claims that the insurance policy does not cover loss resulting from the
fault of negligent charterers that are assured in the same policy and by
virtue of clause 20, it is deemed a co-assured.

ISSUE/S & RATIO:

WON CSEW is co-assured, thus losses caused by it are not covered by

the policy-NO

The fact that clause 20 benefited petitioner, does not automatically make it a
co-assured of William Lines.

Intention of parties to make each other co-assured is to be gleaned from the

insurance policy itself and not from any other contract because the policy
denominates the assured and the beneficiaries.

Prudential named only William Lines, Inc. as the assured. There was no
manifestation of any intention of William Lines Inc to make CSEW a co-
assured. When the terms of a contract are clear, its stipulations control.

If CSEW were deemed co-assured, it would nullify any claim of William Lines
Inc. No shipowner would agree to make shiprepairer a co-assured because
any claim it has under the policy would be invalidated. Such result could not
have been intended by William Lines Inc.

WON CSEW had “management and supervisory control“ of the ship at

the time the fire broke out- YES

The factual findings by the CA are conclusive on the parties and are not
reviewable by this Court.

WON the doctrine of res ipsa loquitur applies against the crew- YES
For the doctrine of res ipsa loquitur to apply to a given situation, the
following conditions must concur: (1) the accident was of a kind which does
not ordinarily occur unless someone is negligent; and (2) that the
instrumentality or agency which caused the injury was under the exclusive
control of the person charged with negligence.

The facts and evidence reveal the presence of these conditions. First, the fire
would not have happened in the ordinary course of things if reasonable care
and diligence had been exercised.

WON the provisions limiting CSEW’s liability for negligence to a maximum of

Php 1 million are valid- NO

Althoughcontracts of adhesion have been consistently upheld as valid,

reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. Tthe facts
and circumstances vis-a-vis the nature of the provision sought to be
enforced should be considered, bearing in mind the principles of equity and
fair play.

RULING: Petition denied.

FF CRUZ AND CO vs. CA

Facts:

A fire broke up from the furniture shop of the petitioner in Caloocan

city early September 6, 1974. Prior to that, neighbor of the said shop
requested that the petitioner should build a firewall but failed to do so. The
cause of the fire was never discovered. Private respondent got P35k from
the insurance on their house and contents thereof.

Issue:

Whether or not the 35k be deducted from the damages thereof

Ruling:

Since P35k had already been claimed by the respondents, the court
held that such amount should be deducted from the award of damages in
accordance with Art 2207 NCC

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.

Having been indemnified by their insurer, private respondents are entitled

only to recover the deficiency from the petitioner.

Whether or not the insurer should exercise the rights of the insured to which
it had been subrogated lies solely within the former’s sound discretion. Since
the insurer is not a party to the case, its identity is not of record and no
claim is made on its behalf, the private respondent’s insurer has to claim his
right to reimbursement of the P35,000.00 paid to the insured.
MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF
APPEALS ANDZENITH INSURANCE CORPORATION (G.R. No. L-52756
(October 12, 1987)

FACTS:

Petitioner Manila Mahogany Manufacturing Corporation insured its

Mercedes Benz 4-door sedan withrespondent Zenith Insurance Corporation.
The insured vehicle was bumped and damaged by a truck owned bySan
Miguel Corporation. For the damage caused, respondent company
paid petitioner five thousand pesos (P5,000.00) in amicable settlement.
Petitioner's general manager executed a Release of Claim,
subrogatingrespondent company to all its right to action against San Miguel
Corporation.Thereafter, respondent company wrote Insurance Adjusters,
Inc. to demand reimbursement from SanMiguel Corporation of the amount it
had paid petitioner. Insurance Adjusters, Inc. refused
reimbursement,alleging that San Miguel Corporation had already paid
petitioner P4,500.00 for the damages to petitioner'smotor vehicle, as
evidenced by a cash voucher and a Release of Claim executed by the
General Manager of petitioner discharging San Miguel Corporation from "all
actions, claims, demands the rights of action that nowexist or hereafter
develop arising out of or as a consequence of the
accident."R e s p o n d e n t i n s u r a n c e c o m p a n y t h u s d e m a n d e d f r o m p
e t i t i o n e r r e i m b u r s e m e n t o f t h e s u m o f P4,500.00 paid by San
Miguel Corporation. Petitioner refused; hence, the instant case.

ISSUE:

Whether or not the respondent insurance company is subrogated to

the rights of the petitioner againstSan Miguel Corporation.

HELD:

YES

RULING:

The Supreme Court held that if a property is insured and the owner receives
the indemnity from theinsurer, it is provided in [Article 2207 of the
New Civil Code] that the insurer is

deemed subrogated
to therights of the insured against the wrongdoer and if the amount paid by
the insurer does not fully cover the loss,then the aggrieved party is the one
entitled to recover the deficiency. Under this legal provision,

the real partyin interest with regard to the portion of the indemnity paid is
the insurer and not the insured.

Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San

Miguel Corporation under itsclear right to file a deficiency claim for
damages incurred, against the wrongdoer, should the
insurancecompany not fully pay for the injury caused (Article 2207,
New Civil Code).

However, when petitioner released San Miguel Corporation from any

liability, petitioner's right to retain the sum of P5,000.00 no longer existed,
thereby entitling private respondent to recover the same

.The right of subrogation can only exist after the insurer has paid the insured
otherwise the insured will be deprived of his right to full indemnity. If the
insurance proceeds are not sufficient to cover the damagessuffered by the
insured, then he may sue the party responsible for the damage for the
remainder. To the extentof the amount he has already received from, the
insurer enjoys the right of subrogation.Since the insurer can be subrogated
to only such rights as the insured may have,

should the insured,after receiving payment from the insurer, release

the wrongdoer who caused the loss, the insurer loses his rights
against the latter. But in such a case, the insurer will be entitled to recover
from the insured whatever it has paid to the latter, unless the release was
made with the consent of the insurer