MAYER STEEL v.

CA
Topic: Common Carriers; Contract of Transportation; Ancillary
Contracts

FACTS:
 Petitioner Hong Kong government contracted the services of
Mayer Steel to manufacture and supply various steel pipes
and fittings
 Shipping had already started; before shipping, Mayer would
insure the said pipes and fittings with South Sea Surety
 The Government of Hong Kong appointed Industrial
Inspection Inc. as third-party inspector to inspect whether or
not Mayer Steel manufactured the pipes and fittings in
accordance with the specifications in the contract
 When the goods reached Hong Kong, it was found out that
the a substantial portion of the goods were damaged
 Petitioners filed a claim against private respondents for
indemnity under the insurance contract
 Private respondents refused to pay because the insurance
surveyor’s report allegedly showed that the damage is a
factory defect – not covered by the insurance policies
 RTC: Petitioners insurance contract included “all risks”; CA:
affirmed the previous ruling but set aside the decision
because of prescription
 According to the CA, the action is barred under Section 3(6)
of the Carriage of Goods by the Sea Act
o Action was filed only on April 17, 1986 – two years
from the unloading of the goods from the vessel
ISSUE: WON the action has prescribed/ WON South Sea Surety
should be held liable
HELD:
 NO (not prescribed), YES (South Sea Surety is liable)
 Indeed the liability of the carrier is extinguished if no suit is
brought within one year. However, the said provision from the
Carriage of Goods by the Sea Act (with respect to
prescription) only covers contract of carriage and not
insurance contracts.