G.R. No. L-2227 August 31, 1948 There is nothing there in the Insurance Law (Act No.
re is nothing there in the Insurance Law (Act No. 2427) that militates
Intestate estate of the late Esperanza J. Villanueva. MARIANO J.
VILLANUEVA, claimant-appellant,
vs.
PABLO ORO, administrator. (PARAS)
The West Coast Life Insurance Company issued two policies of insurance
on the life of Esperanza J. Villanueva, one for two thousand pesos and
maturing on April 1, 1943, and the other for three thousand pesos and
maturing on March 31, 1943. In both policies (with corresponding variation
in amount and date of maturity) the insurer agreed "to pay two thousand
pesos, at the home office of the Company, in San Francisco, California, to
the insured hereunder, if living, on the 1st day of April 1943, or to the
beneficiary Bartolome Villanueva, father of the insured, immediately upon
receipt of due proof of the prior death of the insured, Esperanza J.
Villanueva, of La Paz, Philippine Islands, during the continuance of this
policy, with right on the part of the insured to change the beneficiary.
After the death of Bartolome Villanueva in 1940, the latter was duly
substituted as beneficiary under the policies by Mariano J. Villanueva, a
brother of the insured. Esperanza J. Villanueva survived the insurance
period, for she died only on October 15, 1944, without, however, collecting
the insurance proceeds. Adverse claims for said proceeds were presented
by the estate of Esperanza J. Villanueva on the one hand and by Mariano J.
Villanueva on the other, which conflict was squarely submitted in the
intestate proceedings of Esperanza J. Villanueva pending in the Court of
First Instance of Iloilo. From an order, dated February 26, 1947, holding
the estate of the insured is entitled to the insurance proceeds, to the
exclusion of the beneficiary, Mariano J. Villanueva, the latter has
interposed the present appeal.
The lower court committed no error. Under the policies, the insurer
obligated itself to pay the insurance proceeds (1) to the insured if the
latter lived on the dates of maturity or (2) to the beneficiary if the insured
died during the continuance of the policies. The first contingency of course
excludes the second, and vice versa. In other words, as the insured
Esperanza J. Villanueva was living on April 1, and March 31, 1943, the
proceeds are payable exclusively to her estate unless she had before her
death otherwise assigned the matured policies. (It is not here pretended
and much less proven, that there was such assignment.) The beneficiary,
Mariano J. Villanueva, could be entitled to said proceeds only in default of
the first contingency. To sustain the beneficiary's claim would be
altogether eliminate from the policies the condition that the insurer
"agrees to pay . . . to the insured hereunder, if living".
against the construction placed by the lower court on the disputed
condition appearing in the two policies now under advisement. On the
contrary, said law provides that "an insurance upon life may be made
payable on the death of the death of the person, or on his surviving a
specified period, or otherwise, contingently on the continuance or
cessation of life" (section 165), and that "a policy of insurance upon life or
health mat pass by transfer, will, or succession, to any person, whether he
has an insurable interest or not, and such person may recover upon it
whatever the insured might have recovered" (section 166).
Counsel for the beneficiary invokes the decision in Del Val vs. Del Val, 29
Phil., 534, 540, in which it was held that "the proceeds of an insurance
policy belong exclusively to the beneficiary and not to the estate of the
person whose life was insured, and that such proceeds are the separate
and individual property of the beneficiary, and not of the heirs of the
person whose life was insured." This citation is clearly not controlling, first,
because it does not appear therein that the insurance contract contained
the stipulation appearing in the policies issued on the life of Esperanza J.
Villanueva and on which the appealed order in the case at bar is based;
and, secondly, because the Del Val doctrine was made upon the authority
of the provisions of the Code of Commerce relating to insurance
(particularly section 428) which had been expressly repealed by the
present Insurance Act No. 2427.
Our pronouncement is not novel, since it tallies with the following typical
American authorities: "If a policy of insurance provides that the proceeds
shall be payable to the assured, if he lives to a certain date, and, in case of
his death before that date, then they shall be payable to the beneficiary
designated, the interest of the beneficiary is a contingent one, and the
benefit of the policy will only inure to such beneficiary in case the assured
dies before the end of the period designated in the policy." (Couch,
Cyclopedia of Insurance Law, Vol. 2, sec. 343. p. 1023.) "Under
endowment of tontine policies payable to the insured at the expiration of a
certain period, if alive, but providing for the payment of a stated sum to a
designated beneficiary in case of the insured death during the period
mentioned, the insured and the beneficiary take contingent interests. The
interest of the insured in the proceeds of the insurance depends upon his
survival of the expiration of endowment period. Upon the insured's death,
within the period, the beneficiary will take, as against the personal
representative or the assignee of the insured. Upon the other hand, if the
insured survives the endowment period, the benefits are payable to him or
to his assignee, notwithstanding a beneficiary is designated in the policy."
(29 Am. Jur., section 1277, pp. 952, 953.).
The appealed order is, therefore, hereby affirmed, and it is so ordered with
costs against the appellant.
G.R. No. 76452 July 26, 1994
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO
DE LOS REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance
Commissioner, and RAMON MONTILLA PATERNO, JR., respondents.
Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.
Oscar Z. Benares for private respondent.
QUIASON, J.:
This is a petition for certiorari and prohibition under Rule 65 of the Revised
Rules of Court, with preliminary injunction or temporary restraining order,
to annul and set aside the Order dated November 6, 1986 of the Insurance
Commissioner and the entire proceedings taken in I.C. Special Case No. 1-
86.
We grant the petition.
The instant case arose from a letter-complaint of private respondent
Ramon M. Paterno, Jr. dated April 17, 1986, to respondent Commissioner,
alleging certain problems encountered by agents, supervisors, managers
and public consumers of the Philippine American Life Insurance Company
(Philamlife) as a result of certain practices by said company.
In a letter dated April 23, 1986, respondent Commissioner requested
petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to
comment on respondent Paterno's letter.
In a letter dated April 29, 1986 to respondent Commissioner, petitioner De
los Reyes suggested that private respondent "submit some sort of a 'bill of
particulars' listing and citing actual cases, facts, dates, figures, provisions
of law, rules and regulations, and all other pertinent data which are
necessary to enable him to prepare an intelligent reply" (Rollo, p. 37). A
copy of this letter was sent by the Insurance Commissioner to private
respondent for his comments thereon.
On May 16, 1986, respondent Commissioner received a letter from private
respondent maintaining that his letter-complaint of April 17, 1986 was
sufficient in form and substance, and requested that a hearing thereon be
conducted.
Petitioner De los Reyes, in his letter to respondent Commissioner dated
June 6, 1986, reiterated his claim that private respondent's letter of May
16, 1986 did not supply the information he needed to enable him to
answer the letter-complaint.
On July 14, a hearing on the letter-complaint was held by respondent
Commissioner on the validity of the Contract of Agency complained of by
private respondent.
In said hearing, private respondent was required by respondent
Commissioner to specify the provisions of the agency contract which he
claimed to be illegal.
On August 4, private respondent submitted a letter of specification to
respondent Commissioner dated July 31, 1986, reiterating his letter of
April 17, 1986 and praying that the provisions on charges and fees stated
in the Contract of Agency executed between Philamlife and its agents, as
well as the implementing provisions as published in the agents' handbook,
agency bulletins and circulars, be declared as null and void. He also asked
that the amounts of such charges and fees already deducted and collected
by Philamlife in connection therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the date when they were
deducted.
Respondent Commissioner furnished petitioner De los Reyes with a copy of
private respondent's letter of July 31, 1986, and requested his answer
thereto.
Petitioner De los Reyes submitted an Answer dated September 8, 1986,
stating inter alia that:
(1) Private respondent's letter of August 11, 1986 does not
contain any of the particular information which Philamlife
was seeking from him and which he promised to submit.
(2) That since the Commission's quasi-judicial power was
being invoked with regard to the complaint, private
respondent must file a verified formal complaint before any
further proceedings.
In his letter dated September 9, 1986, private respondent asked for the
resumption of the hearings on his complaint.
On October 1, private respondent executed an affidavit, verifying his
letters of April 17, 1986, and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior
Assistant Vice-President and Executive Assistant to the President, asked
that respondent Commission first rule on the questions of the jurisdiction
of the Insurance Commissioner over the subject matter of the letters-
complaint and the legal standing of private respondent.
On October 27, respondent Commissioner notified both parties of the
hearing of the case on November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice
on the following grounds;
1. The Subpoena/Notice has no legal basis and is
premature because:
(1) No complaint sufficient in form and contents has
been filed;
(2) No summons has been issued nor received by the
respondent De los Reyes, and hence, no jurisdiction
has been acquired over his person;
(3) No answer has been filed, and hence, the hearing
scheduled on November 5, 1986 in the
Subpoena/Notice, and wherein the respondent is
required to appear, is premature and lacks legal basis.
II. The Insurance Commission has no jurisdiction over;
(1) the subject matter or nature of the
action; and
(2) over the parties involved (Rollo, p.
102).
In the Order dated November 6, 1986, respondent Commissioner denied
the Motion to Quash. The dispositive portion of said Order reads:
NOW, THEREFORE, finding the position of complainant thru
counsel tenable and considering the fact that the instant
case is an informal administrative litigation falling outside
the operation of the aforecited memorandum circular but
cognizable by this Commission, the hearing officer, in open
session ruled as it is hereby ruled to deny the Motion to
Quash Subpoena/Notice for lack of merit (Rollo, p. 109).
Hence, this petition.
II
The main issue to be resolved is whether or not the resolution of the
legality of the Contract of Agency falls within the jurisdiction of the
Insurance Commissioner.
Private respondent contends that the Insurance Commissioner has
jurisdiction to take cognizance of the complaint in the exercise of its quasi-
judicial powers. The Solicitor General, upholding the jurisdiction of the
Insurance Commissioner, claims that under Sections 414 and 415 of the
Insurance Code, the Commissioner has authority to nullify the alleged
illegal provisions of the Contract of Agency.
III
The general regulatory authority of the Insurance Commissioner is
described in Section 414 of the Insurance Code, to wit:
The Insurance Commissioner shall have the duty to see
that all laws relating to insurance, insurance companies
and other insurance matters, mutual benefit associations
and trusts for charitable uses are faithfully executed and to
perform the duties imposed upon him by this Code, . . .
On the other hand, Section 415 provides:
In addition to the administrative sanctions provided
elsewhere in this Code, the Insurance Commissioner is
hereby authorized, at his discretion, to impose upon
insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or
violation of any provision of this Code, or any order,
instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as
may be determined by the the Insurance Commissioner,
the following:
(a) fines not in excess of five hundred
pesos a day; and
(b) suspension, or after due hearing,
removal of directors and/or officers
and/or agents.
A plain reading of the above-quoted provisions show that the Insurance
Commissioner has the authority to regulate the business of insurance,
which is defined as follows:
(2) The term "doing an insurance business" or "transacting
an insurance business," within the meaning of this Code,
shall include
(a) making or proposing to make, as insurer, any
insurance contract;
(b) making, or proposing to make, as surety, any contract
of suretyship as a vocation and not as merely incidental to
any other legitimate business or activity of the surety; (c)
doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing
of an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code. (Insurance Code, Sec.
2[2]; Emphasis supplied).
Since the contract of agency entered into between Philamlife and its
agents is not included within the meaning of an insurance business,
Section 2 of the Insurance Code cannot be invoked to give jurisdiction over
the same to the Insurance Commissioner. Expressio unius est exclusio
alterius.
With regard to private respondent's contention that the quasi-judicial
power of the Insurance Commissioner under Section 416 of the Insurance
Code applies in his case, we likewise rule in the negative. Section 416 of
the Code in pertinent part, provides:
The Commissioner shall have the power to adjudicate
claims and complaints involving any loss, damage or
liability for which an insurer may be answerable under any
kind of policy or contract of insurance, or for which such
insurer may be liable under a contract of suretyship, or for
which a reinsurer may be used under any contract or
reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the
membership certificates it has issued to its members,
where the amount of any such loss, damage or liability,
excluding interest, costs and attorney's fees, being claimed
or sued upon any kind of insurance, bond, reinsurance
contract, or membership certificate does not exceed in any
single claim one hundred thousand pesos.
A reading of the said section shows that the quasi-judicial power of the
Insurance Commissioner is limited by law "to claims and complaints
involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, . . ." Hence,
this power does not cover the relationship affecting the insurance company
and its agents but is limited to adjudicating claims and complaints filed by
the insured against the insurance company.
While the subject of Insurance Agents and Brokers is discussed under
Chapter IV, Title I of the Insurance Code, the provisions of said Chapter
speak only of the licensing requirements and limitations imposed on
insurance agents and brokers.
The Insurance Code does not have provisions governing the relations
between insurance companies and their agents. It follows that the
Insurance Commissioner cannot, in the exercise of its quasi-judicial
powers, assume jurisdiction over controversies between the insurance
companies and their agents.
We have held in the cases of Great Pacific Life Assurance Corporation v.
Judico, 180 SCRA 445 (1989), and Investment Planning Corporation of the
Philippines v. Social Security Commission, 21 SCRA 904 (1962), that an
insurance company may have two classes of agents who sell its insurance
policies: (1) salaried employees who keep definite hours and work under
the control and supervision of the company; and (2) registered
representatives, who work on commission basis.
Under the first category, the relationship between the insurance company
and its agents is governed by the Contract of Employment and the
provisions of the Labor Code, while under the second category, the same
is governed by the Contract of Agency and the provisions of the Civil Code
on the Agency. Disputes involving the latter are cognizable by the regular
courts.
WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986
of the Insurance Commission is SET ASIDE.
SO ORDERED.
 [G.R. No. 154514. July 28, 2005]
WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER
INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA) LTD., respondents.
QUISUMBING, J.:
This petition for review assails the Decision[1] dated July 30, 2002 of
the Court of Appeals in CA-G.R. SP No. 60144, affirming
the Decision[2] dated May 3, 2000 of the Insurance Commission in I.C.
Adm. Case No. RD-277. Both decisions held that there was no violation of
the Insurance Code and the respondents do not need license as insurer and
insurance agent/broker.
The facts are undisputed.
White Gold Marine Services, Inc. (White Gold) procured a protection
and indemnity coverage for its vessels from The Steamship Mutual
Underwriting Association (Bermuda) Limited (Steamship Mutual) through
Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White
Gold was issued a Certificate of Entry and Acceptance.[3] Pioneer also issued
receipts evidencing payments for the coverage. When White Gold failed to
fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the latters unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission
claiming that Steamship Mutual violated Sections 186[4] and 187[5] of the
Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and 301[8] in
relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there
was no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship Mutual was
a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not
obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance
business. Moreover, Pioneer was already licensed, hence, a separate license
solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished between P
& I Clubs vis--vis conventional insurance. The appellate court also held that
Pioneer merely acted as a collection agent of Steamship Mutual.
In this petition, petitioner assigns the following errors allegedly
committed by the appellate court,
FIRST ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT
STEAMSHIP IS NOT DOING BUSINESS IN THE PHILIPPINES ON THE
GROUND THAT IT COURSED . . . ITS TRANSACTIONS THROUGH ITS
AGENT AND/OR BROKER HENCE AS AN INSURER IT NEED NOT SECURE A
LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE PHILIPPINES.
SECOND ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS BEREFT
OF ANY EVIDENCE THAT RESPONDENT STEAMSHIP IS ENGAGED IN
INSURANCE BUSINESS.
THIRD ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT PIONEER
NEED NOT SECURE A LICENSE WHEN CONDUCTING ITS AFFAIR AS AN
AGENT/BROKER OF RESPONDENT STEAMSHIP.
FOURTH ASSIGNMENT OF ERROR
THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF
RESPONDENT PIONEER AND [IN NOT REMOVING] THE OFFICERS AND
DIRECTORS OF RESPONDENT PIONEER.[9]
Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I
Club, engaged in the insurance business in the Philippines? (2) Does Pioneer
need a license as an insurance agent/broker for Steamship Mutual?
The parties admit that Steamship Mutual is a P & I Club. Steamship
Mutual admits it does not have a license to do business in the Philippines
although Pioneer is its resident agent. This relationship is reflected in the
certifications issued by the Insurance Commission.
Petitioner insists that Steamship Mutual as a P & I Club is engaged in
the insurance business. To buttress its assertion, it cites the definition of a
P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals[10] as an
association composed of shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against
liabilities incidental to shipowning that the members incur in favor of third
parties. It stresses that as a P & I Club, Steamship Mutuals primary purpose
is to solicit and provide protection and indemnity coverage and for this
purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P & I Club,
it is not engaged in the insurance business in the Philippines. It is merely an
association of vessel owners who have come together to provide mutual
protection against liabilities incidental to shipowning.[11] Respondents
aver Hyopsung is inapplicable in this case because the issue
in Hyopsung was the jurisdiction of the court over Hyopsung.
Is Steamship Mutual engaged in the insurance business?
Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance
business or transacting an insurance business. These are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or activity of
the surety;
(c) doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning of
this Code;
(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
The same provision also provides, the fact that no profit is derived from
the making of insurance contracts, agreements or transactions, or that no
separate or direct consideration is received therefor, shall not preclude the
existence of an insurance business.[12]
The test to determine if a contract is an insurance contract or not,
depends on the nature of the promise, the act required to be performed,
and the exact nature of the agreement in the light of the occurrence,
contingency, or circumstances under which the performance becomes
requisite. It is not by what it is called.[13]
Basically, an insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event.[14]
In particular, a marine insurance undertakes to indemnify the assured
against marine losses, such as the losses incident to a marine
adventure.[15] Section 99[16] of the Insurance Code enumerates the
coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise
where the members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities are paid, and where the profits are
divided among themselves, in proportion to their interest.[17] Additionally,
mutual insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs.[18]
A P & I Club is a form of insurance against third party liability, where
the third party is anyone other than the P & I Club and the members. [19] By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country
albeit without the requisite certificate of authority mandated by Section
187[20] of the Insurance Code. It maintains a resident agent in the
Philippines to solicit insurance and to collect payments in its behalf. We note
that Steamship Mutual even renewed its P & I Club cover until it was
cancelled due to non-payment of the calls. Thus, to continue doing business
here, Steamship Mutual or through its agent Pioneer, must secure a license
from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the
State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
authority from the Insurance Commission.[21]
Does Pioneer, as agent/broker of Steamship Mutual, need a special
license?
Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration[22] issued by the Insurance Commission. It has
been licensed to do or transact insurance business by virtue of the certificate
of authority[23] issued by the same agency. However, a Certification from
the Commission states that Pioneer does not have a separate license to be
an agent/broker of Steamship Mutual.[24]
Although Pioneer is already licensed as an insurance company, it needs
a separate license to act as insurance agent for Steamship Mutual. Section
299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for
services in obtaining insurance, any commission or other compensation
from any insurance company doing business in the Philippines or any
agent thereof, without first procuring a license so to act from the
Commissioner, which must be renewed annually on the first day of
January, or within six months thereafter. . .
Finally, White Gold seeks revocation of Pioneers certificate of authority
and removal of its directors and officers. Regrettably, we are not the forum
for these issues.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated
July 30, 2002 of the Court of Appeals affirming the Decision dated May 3,
2000 of the Insurance Commission is hereby REVERSED AND SET ASIDE.
The Steamship Mutual Underwriting Association (Bermuda) Ltd., and
Pioneer Insurance and Surety Corporation are ORDERED to obtain licenses
and to secure proper authorizations to do business as insurer and insurance
agent, respectively. The petitioners prayer for the revocation of Pioneers
Certificate of Authority and removal of its directors and officers, is DENIED.
Costs against respondents.
SO ORDERED.
 Republic of the Philippines transshipment of certain wooden work tools and workbenches purchased for
Supreme Court the consignee Science Teaching Improvement Project
Manila (STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines.[3] ICNA
issued an all-risk open marine policy,[4] stating:
THIRD DIVISION
This Company, in consideration of a premium as
agreed and subject to the terms and conditions printed
ABOITIZ SHIPPING G.R. No. 168402 hereon, does insure for MSAS Cargo International Limited
CORPORATION, &/or Associated &/or Subsidiary Companies on behalf of the
Petitioner, Present: title holder: Loss, if any, payable to the Assured or order.[5]
YNARES-SANTIAGO, J.,
Cha The cargo, packed inside one container van, was shipped freight prepaid
irperson, from Hamburg, Germany on board M/S Katsuragi. A clean bill of
- versus - AUSTRIA-MARTINEZ, lading[6] was issued by Hapag-Lloyd which stated the consignee to be
CHICO-NAZARIO, STIP, Ecotech Center, Sudlon Lahug, Cebu City.
NACHURA, and
REYES, JJ. The container van was then off-loaded at Singapore and transshipped on
board M/S Vigour Singapore. On July 18, 1993, the ship arrived and docked
INSURANCE COMPANY OF Promulgated: at the Manila International Container Port where the container van was again
NORTH AMERICA, off-loaded. On July 26, 1993, the cargo was received by petitioner Aboitiz
Respondent. August 6, 2008 Shipping Corporation (Aboitiz) through its duly authorized booking
representative, Aboitiz Transport System. The bill of lading[7] issued by
x---------------------------------------------- Aboitiz contained the notation grounded outside warehouse.
----x
The container van was stripped and transferred to another crate/container
DECISION van without any notation on the condition of the cargo on the
Stuffing/Stripping Report.[8] On August 1, 1993, the container van was
loaded on board petitioners vessel, MV Super Concarrier I. The vessel
REYES, R.T., J.: left Manila en route to Cebu City on August 2, 1993.

THE RIGHT of subrogation attaches upon payment by the insurer of the
insurance claims by the assured. As subrogee, the insurer steps into the
shoes of the assured and may exercise only those rights that the assured
may have against the wrongdoer who caused the damage.
On August 3, 1993, the shipment arrived in Cebu City and discharged onto
a receiving apron of the Cebu International Port. It was then brought to the
Cebu Bonded Warehousing Corporation pending clearance from the Customs
authorities. In the Stripping Report[9] dated August 5, 1993, petitioners
checker noted that the crates were slightly broken or cracked at the bottom.

Before Us is a petition for review on certiorari of the Decision[1] of the Court
of Appeals (CA) which reversed the Decision[2] of the Regional Trial Court
(RTC). The CA ordered petitioner Aboitiz Shipping Corporation to pay the
sum of P280,176.92 plus interest and attorneys fees in favor of respondent
Insurance Company of North America (ICNA).
The Facts
Culled from the records, the facts are as follows:
On June 20, 1993, MSAS Cargo International Limited and/or Associated
and/or Subsidiary Companies (MSAS) procured a marine insurance policy
from respondent ICNA UK Limited of London. The insurance was for a
On August 11, 1993, the cargo was withdrawn by the representative of the
consignee, Science Teaching Improvement Project (STIP) and delivered
to Don Bosco Technical High School, Punta Princesa, Cebu City. It was
received by Mr. Bernhard Willig. On August 13, 1993, Mayo B. Perez, then
Claims Head of petitioner, received a telephone call from Willig informing
him that the cargo sustained water damage. Perez, upon receiving the call,
immediately went to the bonded warehouse and checked the condition of
the container and other cargoes stuffed in the same container. He found
that the container van and other cargoes stuffed there were completely dry
and showed no sign of wetness.[10]
Perez found that except for the bottom of the crate which was slightly
broken, the crate itself appeared to be completely dry and had no water
marks. But he confirmed that the tools which were stored inside the crate
were already corroded. He further explained that the grounded outside
warehouse notation in the bill of lading referred only to the container van
bearing the cargo.[11]
In a letter dated August 15, 1993, Willig informed Aboitiz of the damage
noticed upon opening of the cargo.[12] The letter stated that the crate was
broken at its bottom part such that the contents were exposed. The work
tools and workbenches were found to have been completely soaked in water
with most of the packing cartons already disintegrating. The crate was
properly sealed off from the inside with tarpaper sheets. On the outside,
galvanized metal bands were nailed onto all the edges. The letter concluded
that apparently, the damage was caused by water entering through the
broken parts of the crate.
The consignee contacted the Philippine office of ICNA for insurance
claims. On August 21, 1993, the Claimsmen Adjustment Corporation (CAC)
conducted an ocular inspection and survey of the damage. CAC reported to
ICNA that the goods sustained water damage, molds, and corrosion which
were discovered upon delivery to consignee.[13]
On September 21, 1993, the consignee filed a formal claim [14] with Aboitiz
in the amount of P276,540.00 for the damaged condition of the following
goods:
ten (10) wooden workbenches
three (3) carbide-tipped saw blades
one (1) set of ball-bearing guides
one (1) set of overarm router bits
twenty (20) rolls of sandpaper for stroke sander
In a Supplemental Report dated October 20, 1993,[15] CAC reported to ICNA
that based on official weather report from the Philippine Atmospheric,
Geophysical and Astronomical Services Administration, it would appear that
heavy rains on July 28 and 29, 1993 caused water damage to the
shipment. CAC noted that the shipment was placed outside the warehouse
of Pier No. 4, North Harbor, Manila when it was delivered on July 26,
1993. The shipment was placed outside the warehouse as can be gleaned
from the bill of lading issued by Aboitiz which contained the notation
grounded outside warehouse. It was only on July 31, 1993 when the
shipment was stuffed inside another container van for shipment to Cebu.
Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the
amount of P280,176.92 to consignee. A subrogation receipt was duly signed
by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt
executed in its favor. Despite follow-ups, however, no reply was received
from Aboitiz.
RTC Disposition
ICNA filed a civil complaint against Aboitiz for collection of actual damages
in the sum of P280,176.92, plus interest and attorneys fees.[16] ICNA alleged
that the damage sustained by the shipment was exclusively and solely
brought about by the fault and negligence of Aboitiz when the shipment was
left grounded outside its warehouse prior to delivery.
Aboitiz disavowed any liability and asserted that the claim had no factual
and legal bases. It countered that the complaint stated no cause of action,
plaintiff ICNA had no personality to institute the suit, the cause of action
was barred, and the suit was premature there being no claim made upon
Aboitiz.
On November 14, 2003, the RTC rendered judgment against ICNA. The
dispositive portion of the decision[17] states:
WHEREFORE, premises considered, the court holds that
plaintiff is not entitled to the relief claimed in the complaint
for being baseless and without merit. The complaint is
hereby DISMISSED.The defendants counterclaims are,
likewise, DISMISSED for lack of basis.[18]
The RTC ruled that ICNA failed to prove that it is the real party-in-
interest to pursue the claim against Aboitiz. The trial court noted that Marine
Policy No. 87GB 4475 was issued by ICNA UK Limited with address at Cigna
House, 8 Lime Street, London EC3M 7NA. However, complainant ICNA Phils.
did not present any evidence to show that ICNA UK is its predecessor-in-
interest, or that ICNA UK assigned the insurance policy to ICNA
Phils. Moreover, ICNA Phils. claim that it had been subrogated to the rights
of the consignee must fail because the subrogation receipt had no probative
value for being hearsay evidence. The RTC reasoned:
While it is clear that Marine Policy No. 87GB 4475
was issued by Insurance Company of North America (U.K.)
Limited (ICNA UK) with address at Cigna House, 8 Lime
Street, London EC3M 7NA, no evidence has been adduced
which would show that ICNA UK is the same as or the
predecessor-in-interest of plaintiff Insurance Company of
North America ICNA with office address at Cigna-Monarch
Bldg., dela Rosa cor. Herrera Sts., Legaspi Village, Makati,
Metro Manila or that ICNA UK assigned the Marine Policy to
ICNA. Second, the assured in the Marine Policy appears to
be MSAS Cargo International Limited &/or Associated &/or
Subsidiary Companies. Plaintiffs witness, Francisco B.
Francisco, claims that the signature below the name MSAS
Cargo International is an endorsement of the marine policy
in favor of Science Teaching Improvement Project. Plaintiffs
witness, however, failed to identify whose signature it was
 and plaintiff did not present on the witness stand or took
(sic) the deposition of the person who made that
signature. Hence, the claim that there was an endorsement
of the marine policy has no probative value as it is hearsay.
Plaintiff, further, claims that it has been subrogated
to the rights and interest of Science Teaching Improvement
Project as shown by the Subrogation Form (Exhibit K)
allegedly signed by a representative of Science Teaching
Improvement Project. Such representative, however, was
not presented on the witness stand. Hence, the Subrogation
Form is self-serving and has no probative
value.[19] (Emphasis supplied)
The trial court also found that ICNA failed to produce evidence that it was a
foreign corporation duly licensed to do business in the Philippines. Thus, it
lacked the capacity to sue before Philippine Courts, to wit:
Prescinding from the foregoing, plaintiff alleged in
its complaint that it is a foreign insurance company
duly authorized to do business in the Philippines. This
allegation was, however, denied by the defendant. In fact,
in the Pre-Trial Order of 12 March 1996, one of the issues
defined by the court is whether or not the plaintiff has legal
capacity to sue and be sued. Under Philippine law, the
condition is that a foreign insurance company must
obtain licenses/authority to do business in
the Philippines. These licenses/authority are
obtained from the Securities and Exchange
Commission, the Board of Investments and the
Insurance Commission. If it fails to obtain these
licenses/authority, such foreign corporation doing
business in the Philippines cannot sue before
Philippine courts. Mentholatum Co., Inc. v.
Mangaliman, 72 Phil. 524. (Emphasis supplied)
CA Disposition
ICNA appealed to the CA. It contended that the trial court failed to consider
that its cause of action is anchored on the right of subrogation under Article
2207 of the Civil Code. ICNA said it is one and the same as the ICNA UK
Limited as made known in the dorsal portion of the Open Policy.[20]
On the other hand, Aboitiz reiterated that ICNA lacked a cause of action. It
argued that the formal claim was not filed within the period required under
Article 366 of the Code of Commerce; that ICNA had no right of subrogation
because the subrogation receipt should have been signed by MSAS, the
assured in the open policy, and not Willig, who is merely the representative
of the consignee.
On March 29, 2005, the CA reversed and set aside the RTC ruling, disposing
as follows:
WHEREFORE, premises considered, the present appeal is
hereby GRANTED. The appealed decision of the Regional
Trial Court of Makati City in Civil Case No. 94-1590 is hereby
REVERSED and SET ASIDE. A new judgment is hereby
rendered ordering defendant-appellee Aboitiz Shipping
Corporation to pay the plaintiff-appellant Insurance
Company of North America the sum of P280,176.92 with
interest thereon at the legal rate from the date of the
institution of this case until fully paid, and attorneys fees in
the sum of P50,000, plus the costs of suit.[21]
The CA opined that the right of subrogation accrues simply upon payment
by the insurance company of the insurance claim. As subrogee, ICNA is
entitled to reimbursement from Aboitiz, even assuming that it is an
unlicensed foreign corporation. The CA ruled:
At any rate, We find the ground invoked for the dismissal of
the complaint as legally untenable. Even
assuming arguendo that the plaintiff-insurer in this case is
an unlicensed foreign corporation, such circumstance will
not bar it from claiming reimbursement from the defendant
carrier by virtue of subrogation under the contract of
insurance and as recognized by Philippine courts. x x x
xxxx
Plaintiff insurer, whether the foreign company or its duly
authorized Agent/Representative in the country, as
subrogee of the claim of the insured under the subject
marine policy, is therefore the real party in interest to bring
this suit and recover the full amount of loss of the subject
cargo shipped by it from Manila to the consignee in Cebu
City. x x x[22]
The CA ruled that the presumption that the carrier was at fault or that it
acted negligently was not overcome by any countervailing evidence. Hence,
the trial court erred in dismissing the complaint and in not finding that based
on the evidence on record and relevant provisions of law, Aboitiz is liable for
the loss or damage sustained by the subject cargo.
Issues
 The following issues are up for Our consideration:
(1) THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RULING THAT ICNA HAS A
CAUSE OF ACTION AGAINST ABOITIZ BY VIRTUE OF
THE RIGHT OF SUBROGATION BUT WITHOUT
CONSIDERING THE ISSUE CONSISTENTLY RAISED BY
ABOITIZ THAT THE FORMAL CLAIM OF STIP WAS NOT
MADE WITHIN THE PERIOD PRESCRIBED BY ARTICLE
366 OF THE CODE OF COMMERCE; AND, MORE SO,
THAT THE CLAIM WAS MADE BY A WRONG CLAIMANT.
(2) THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RULING THAT THE SUIT FOR
REIMBURSEMENT AGAINST ABOITIZ WAS PROPERLY
FILED BY ICNA AS THE LATTER WAS AN AUTHORIZED
AGENT OF THE INSURANCE COMPANY OF NORTH
AMERICA (U.K.) (ICNA UK).
(3) THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RULING THAT THERE
WAS PROPER INDORSEMENT OF THE INSURANCE
POLICYFROM THE ORIGINAL ASSURED MSAS CARGO
INTERNATIONAL LIMITED (MSAS) IN FAVOR OF THE
CONSIGNEE STIP, AND THAT THE SUBROGATION
RECEIPT ISSUED BY STIP IN FAVOR OF ICNA IS VALID
NOTWITHSTANDING THE FACT THAT IT HAS NO
PROBATIVE VALUE AND IS MERELY HEARSAY AND A
SELF-SERVING DOCUMENT FOR FAILURE OF ICNA TO
PRESENT A REPRESENTATIVE OF STIP TO
IDENTIFY AND AUTHENTICATE THE SAME.
(4) THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RULING THAT THE
EXTENT AND KIND OF DAMAGE SUSTAINED BY THE
SUBJECT CARGO WAS CAUSED BY THE FAULT OR
NEGLIGENCE OF ABOITIZ.[23] (Underscoring supplied)
Elsewise stated, the controversy rotates on three (3) central questions: (a)
Is respondent ICNA the real party-in-interest that possesses the right of
subrogation to claim reimbursement from petitioner Aboitiz? (b) Was there
a timely filing of the notice of claim as required under Article 366 of the Code
of Commerce? (c) If so, can petitioner be held liable on the claim for
damages?
Our Ruling
We answer the triple questions in the affirmative.
A foreign corporation not licensed to do business in
the Philippines is not absolutely incapacitated from filing a suit in
local courts. Only when that foreign corporation is transacting or doing
business in the country will a license be necessary before it can institute
suits.[24] It may, however, bring suits on isolated business transactions,
which is not prohibited under Philippine law.[25] Thus, this Court has held
that a foreign insurance company may sue in Philippine courts upon the
marine insurance policies issued by it abroad to cover international-bound
cargoes shipped by a Philippine carrier, even if it has no license to do
business in this country. It is the act of engaging in business without the
prescribed license, and not the lack of license per se, which bars a foreign
corporation from access to our courts.[26]
In any case, We uphold the CA observation that while it was the ICNA UK
Limited which issued the subject marine policy, the present suit was filed by
the said companys authorized agent in Manila. It was the domestic
corporation that brought the suit and not the foreign company. Its authority
is expressly provided for in the open policy which includes the ICNA office in
the Philippines as one of the foreign companys agents.
As found by the CA, the RTC erred when it ruled that there was no
proper indorsement of the insurance policy by MSAS, the shipper, in favor
of STIP of Don Bosco Technical High School, the consignee.
The terms of the Open Policy authorize the filing of any claim on the insured
goods, to be brought against ICNA UK, the company who issued the
insurance, or against any of its listed agents worldwide.[27] MSAS accepted
said provision when it signed and accepted the policy. The acceptance
operated as an acceptance of the authority of the agents. Hence, a formal
indorsement of the policy to the agent in the Philippines was unnecessary
for the latter to exercise the rights of the insurer.
Likewise, the Open Policy expressly provides that:
The Company, in consideration of a premium as
agreed and subject to the terms and conditions printed
hereon, does insure MSAS Cargo International Limited &/or
Associates &/or Subsidiary Companies in behalf of the title
holder: Loss, if any, payable to the Assured or Order.
The policy benefits any subsequent assignee, or holder, including
the consignee, who may file claims on behalf of the assured. This is in
keeping with Section 57 of the Insurance Code which states:
A policy may be so framed that it will inure to the
benefit of whosoever, during the continuance of the
risk, may become the owner of the interest
insured. (Emphasis added)
Respondents cause of action is founded on it being subrogated to
the rights of the consignee of the damaged shipment. The right of
subrogation springs from Article 2207 of the Civil Code, which states:
Article 2207. If the plaintiffs 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. (Emphasis added)
As this Court held in the case of Pan Malayan Insurance Corporation v. Court
of Appeals,[28] payment by the insurer to the assured operates as an
equitable assignment of all remedies the assured may have against the third
party who caused the damage. Subrogation 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 of the insurance claim by the insurer.[29]
Upon payment to the consignee of indemnity for damage to the insured
goods, ICNAs entitlement to subrogation equipped it with a cause of action
against petitioner in case of a contractual breach or negligence.[30] This right
of subrogation, however, has its limitations. First, both the insurer and the
consignee are bound by the contractual stipulations under the bill of
lading.[31] Second, the insurer can be subrogated only to the rights as the
insured may have against the wrongdoer. If by its own acts after receiving
payment from the insurer, the insured releases the wrongdoer who caused
the loss from liability, the insurer loses its claim against the latter.[32]
The giving of notice of loss or injury is a condition precedent to the
action for loss or injury or the right to enforce the carriers
liability. Circumstances peculiar to this case lead Us to conclude that
the notice requirement was complied with. As held in the case
of Philippine American General Insurance Co., Inc. v. Sweet Lines,
Inc.,[33] this notice requirement protects the carrier by affording it an
opportunity to make an investigation of the claim while the matter is still
fresh and easily investigated. It is meant to safeguard the carrier from false
and fraudulent claims.
Under the Code of Commerce, the notice of claim must be made
within twenty four (24) hours from receipt of the cargo if the damage is not
apparent from the outside of the package. For damages that are visible from
the outside of the package, the claim must be made immediately. The law
provides:
Article 366. Within twenty four hours following the
receipt of the merchandise, the claim against the carrier for
damages or average which may be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which give rise to the
claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered. (Emphasis
supplied)
The periods above, as well as the manner of giving notice may be
modified in the terms of the bill of lading, which is the contract between the
parties. Notably, neither of the parties in this case presented the terms for
giving notices of claim under the bill of lading issued by petitioner for the
goods.
The shipment was delivered on August 11, 1993. Although the letter
informing the carrier of the damage was dated August 15, 1993, that letter,
together with the notice of claim, was received by petitioner only
on September 21, 1993. But petitioner admits that even before it received
the written notice of claim, Mr. Mayo B. Perez, Claims Head of the company,
was informed by telephone sometime in August 13, 1993. Mr. Perez then
immediately went to the warehouse and to the delivery site to inspect the
goods in behalf of petitioner.[34]
In the case of Philippine Charter Insurance Corporation (PCIC) v.
Chemoil Lighterage Corporation,[35] the notice was allegedly made by the
consignee through telephone. The claim for damages was denied. This Court
ruled that such a notice did not comply with the notice requirement under
the law. There was no evidence presented that the notice was timely
given. Neither was there evidence presented that the notice was relayed to
the responsible authority of the carrier.
As adverted to earlier, there are peculiar circumstances in the
instant case that constrain Us to rule differently from the PCIC case, albeit
this ruling is being made pro hac vice,not to be made a precedent for other
cases.
Stipulations requiring notice of loss or claim for damage as a
condition precedent to the right of recovery from a carrier must be given a
reasonable and practical construction, adapted to the circumstances of the
case under adjudication, and their application is limited to cases falling fairly
within their object and purpose.[36]
Bernhard Willig, the representative of consignee who received the
shipment, relayed the information that the delivered goods were discovered
to have sustained water damage to no less than the Claims Head of
petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the
claims himself and he confirmed that the goods were, indeed, already
corroded.
Provisions specifying a time to give notice of damage to common
carriers are ordinarily to be given a reasonable and practical, rather than a
strict construction.[37] We give due consideration to the fact that the final
destination of the damaged cargo was a school institution where authorities
are bound by rules and regulations governing their actions. Understandably,
when the goods were delivered, the necessary clearance had to be made
before the package was opened. Upon opening and discovery of the
damaged condition of the goods, a report to this effect had to pass through
the proper channels before it could be finalized and endorsed by the
institution to the claims department of the shipping company.
The call to petitioner was made two days from delivery, a reasonable
period considering that the goods could not have corroded instantly
overnight such that it could only have sustained the damage during
transit. Moreover, petitioner was able to immediately inspect the damage
while the matter was still fresh. In so doing, the main objective of the
prescribed time period was fulfilled. Thus, there was substantial compliance
with the notice requirement in this case.
To recapitulate, We have found that respondent, as subrogee of the
consignee, is the real party in interest to institute the claim for damages
against petitioner; and pro hac vice, that a valid notice of claim was made
by respondent.
We now discuss petitioners liability for the damages sustained by
the shipment. The rule as stated in Article 1735 of the Civil Code is
that in cases where the goods are lost, 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 required by law.[38] Extraordinary diligence is that extreme
measure of care and caution which persons of unusual prudence and
circumspection use for securing and preserving their own property
rights.[39] This standard is intended to grant favor to the shipper who is at
the mercy of the common carrier once the goods have been entrusted to
the latter for shipment.[40]
Here, the shipment delivered to the consignee sustained water
damage. We agree with the findings of the CA that petitioner failed to
overturn this presumption:
x x x upon delivery of the cargo to the consignee
Don Bosco Technical High School by a representative from
Trabajo Arrastre, and the crates opened, it was discovered
that the workbenches and work tools suffered damage due
to wettage although by then they were already physically
dry. Appellee carrier having failed to discharge the burden
of proving that it exercised extraordinary diligence in the
vigilance over such goods it contracted for carriage, the
presumption of fault or negligence on its part from the time
the goods were unconditionally placed in its possession (July
26, 1993) up to the time the same were delivered to the
consignee (August 11, 1993), therefore stands. The
presumption that the carrier was at fault or that it acted
negligently was not overcome by any countervailing
evidence. x x x[41] (Emphasis added)
The shipment arrived in the port of Manila and was received by
petitioner for carriage on July 26, 1993. On the same day, it was stripped
from the container van. Five days later, on July 31, 1993, it was re-stuffed
inside another container van. On August 1, 1993, it was loaded onto another
vessel bound for Cebu. During the period between July 26 to 31, 1993, the
shipment was outside a container van and kept in storage by petitioner.
The bill of lading issued by petitioner on July 31, 1993 contains the
notation grounded outside warehouse, suggesting that from July 26 to 31,
the goods were kept outside the warehouse. And since evidence showed
that rain fell over Manila during the same period, We can conclude that this
was when the shipment sustained water damage.
To prove the exercise of extraordinary diligence, petitioner must do
more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used all reasonable means
to ascertain the nature and characteristic of the goods tendered for transport
and that it exercised due care in handling them.[42] Extraordinary diligence
must include safeguarding the shipment from damage coming from natural
elements such as rainfall.
Aside from denying that the grounded outside warehouse notation
referred not to the crate for shipment but only to the carrier van, petitioner
failed to mention where exactly the goods were stored during the period in
question. It failed to show that the crate was properly stored indoors during
the time when it exercised custody before shipment to Cebu.As amply
explained by the CA:
On the other hand, the supplemental report submitted by
the surveyor has confirmed that it was rainwater that
seeped into the cargo based on official data from the
PAGASA that there was, indeed, rainfall in the Port Area of
 Manila from July 26 to 31, 1993. The Surveyor specifically
noted that the subject cargo was under the custody of
appellee carrier from the time it was delivered by the
shipper on July 26, 1993 until it was stuffed inside Container
No. ACCU-213798-4 on July 31, 1993. No other inevitable
conclusion can be deduced from the foregoing established
facts that damage from wettage suffered by the subject
cargo was caused by the negligence of appellee carrier in
grounding the shipment outside causing rainwater to seep
into the cargoes.

Appellees witness, Mr. Mayo tried to disavow any

responsibility for causing wettage to the subject goods by
claiming that the notation GROUNDED OUTSIDE WHSE.
actually refers to the container and not the contents thereof
or the cargoes. And yet it presented no evidence to explain
where did they place or store the subject goods from the
time it accepted the same for shipment on July 26, 1993 up
to the time the goods were stripped or transferred from the
container van to another container and loaded into the
vessel M/V Supercon Carrier I on August 1, 1993 and left
Manila for Cebu City on August 2, 1993. x x x If the subject
cargo was not grounded outside prior to shipment
to Cebu City, appellee provided no explanation as to where
said cargo was stored from July 26, 1993 to July 31,
1993. What the records showed is that the subject cargo
was stripped from the container van of the shipper and
transferred to the container on August 1, 1993 and finally
loaded into the appellees vessel bound
for Cebu City on August 2, 1993. The Stuffing/Stripping
Report (Exhibit D) at the Manila port did not indicate any
such defect or damage, but when the container was stripped
upon arrival in Cebu City port after being discharged from
appellees vessel, it was noted that only one (1) slab was
slightly broken at the bottom allegedly hit by a forklift blade
(Exhibit F).[43] (Emphasis added)

Petitioner is thus liable for the water damage sustained by the goods
due to its failure to satisfactorily prove that it exercised the extraordinary
diligence required of common carriers.

WHEREFORE, the petition is DENIED and the appealed

Decision AFFIRMED.

SO ORDERED.