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CALIFORNIA AND HAWAIIAN SUGAR vs. PIONEER INSURANCE GR No.

139273 | Nov 28, 2000 | Petition for Review on Certiorari | Panganiban Petitioners: California and Hawaiian Sugar Company, Pacific Gulf Marine and CF Sharp & Company Respondent: Pioneer Insurance and Surety Corp. Facts: Nov 27, 1990 - the vessel MV SUGAR ISLANDER arrived at the port of Manila carrying a cargo of soybean meal in bulk consigned to several consignees, one of which was the Metro Manila Feed Millers Association. Nov 30, 1990 discharging of cargo from vessel to barges commenced. From the barges, the cargo was allegedly offloaded, rebagged and reloaded on consignees delivery trucks. Pioneer Insurance, however, claims that when the cargo was weighed on a licensed truck scale a shortage of 255.051 metric tons valued at P1,621,171.16 was discovered. The abovementioned shipment was insured with Pioneer Insurance against all risk in the amount of P19,976,404.00. Due to the alleged refusal of California and Hawaiian et al. to settle their respective liabilities, Pioneer, as insurer, paid the consignee Metro Manila Feed Millers Association. March 26, 1992 - as alleged subrogee of Metro, Pioneer filed a complaint for damages against California and Hawaiian et al. Within the reglementary period to file an Answer, California and Hawaiian et al. filed a Motion to Dismiss the complaint on the ground that Pioneers claim is premature, the same being arbitrable. Pioneer filed its Opposition thereto and California and Hawaiian et al. filed their Reply to Opposition. RTC: issued an Order deferring the hearing on the Motion to Dismiss until the trial and directing petitioners to file their Answer. California and Hawaiian et al. then moved to reconsider said Order which was, however, denied by the RTC on the ground that the reason relied upon by California and Hawaiian et al. in its Motion to Dismiss and Motion for Reconsideration was a matter of defense which they must prove with their evidence. California and Hawaiian et al. filed their Answer with Counterclaim and Cross-claim alleging therein that Pioneer did not comply with the arbitration clause of the charter party; hence, the complaint was allegedly prematurely filed. The trial court set the case for pre-trial on November 26, 1993. Nov 15 & 16, 1993 California and Hawaiian et al. filed a Motion to Defer Pre-Trial and Motion to Set for Preliminary Hearing the Affirmative Defense of

Lack of Cause of Action for Failure to comply with Arbitration Clause, respectively. Pioneer did not file an Opposition to the said Motion to Set for Preliminary Hearing. RTC: denied the motion to set for preliminary hearing California and Hawaiian et al.s MR was denied by the RTC. California and Hawaiian et al. filed a petition for certiorari with the CA. CA: ruled that the arbitration clause did not bind Pioneer Insurance, which is a mere subrogee of Metro Manila Feed Millers Association citing Pan Malayan Insurance vs. CA Hence, this petition.

Issue: 1. WON the RTC erred in denying California and Hawaiian et al.s Motion to set for preliminary hearing [YES] 2. WON the arbitration clause is binding to Pioneer Insurance [YES] Ratio:

1. True,

Section 6, Rule 16 of the 1997 Rules,[11] specifically provides that a preliminary hearing on the affirmative defenses may be allowed only when no motion to dismiss has been filed. Section 6, however, must be viewed in the light of Section 3 of the same Rule,[12] which requires courts to resolve a motion to dismiss and prohibits them from deferring its resolution on the ground of indubitability. Clearly then, Section 6 disallows a preliminary hearing of affirmative defenses once a motion to dismiss has been filed because such defense should have already been resolved. In the present case, however, the trial court did not categorically resolve petitioners Motion to Dismiss, but merely deferred resolution thereof. Indeed, the present Rules are consistent with Section 5, Rule 16 of the pre-1997 Rules of Court, because both presuppose that no motion to dismiss had been filed; or in the case of the pre1997 Rules, if one has been filed, it has not been unconditionally denied. Hence, the ground invoked may still be pleaded as an affirmative defense even if the defendants Motion to Dismiss has been filed but not definitely resolved, or if it has been deferred as it could be under the pre-1997 Rules. A preliminary hearing is not mandatory, but subject to the discretion of the trial court. We note that the trial court deferred the resolution of petitioners Motion to Dismiss because of a single issue. It was apparently unsure whether the charter party that the bill of lading referred to was indeed the Baltimore Berth Grain Charter Party submitted by petitioners. Considering that there was only one question, which may even be deemed to be the very touchstone of the whole case, the trial court had

no cogent reason to deny the Motion for Preliminary Hearing. Indeed, it committed grave abuse of discretion when it denied a preliminary hearing on a simple issue of fact that could have possibly settled the entire case. Verily, where a preliminary hearing appears to suffice, there is no reason to go on to trial.

2. There was nothing in Pan Malayan, however, that

prohibited the applicability of the arbitration clause to the subrogee. That case merely discussed, inter alia, the accrual of the right of subrogation and the legal basis therefor. This issue is completely different from that of the consequences of such subrogation; that is, the rights that the insurer acquires from the insured upon payment of the indemnity.

Dispositive: Petition granted, CA decision reversed. Case remanded to the RTC for preliminary hearing of California and Hawaiian et al.s affirmative defense.

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