19. DELSAN TRANSPORT LINES, INC. v.
CA (Vi ℅ CABUSORA)
November 15, 2001 | De Leon, Jr., J. | Measure of Indemnity
PETITIONER: ​Delsan Transport Lines, Inc.
RESPONDENTS: The Hon. Court Of Appeals and American Home
Assurance Corporation
SUMMARY: Caltex and Delsan entered into a contract of affreightment
where Delsan would transport industrial fuel oil from the
Batangas-Bataan Refinery to Caltex Oil Terminal in Zamboanga City.
Said shipment was insured by Caltex with AHAC. While in transit,
Delsan’s ship (MT Maysun) sunk allegedly due to bad weather. AHAC
paid Caltex for the lost shipment. When AHAC went after Delsan for
reimbursement, the latter refused. Thus AHAC filed a complaint for
complaint for sum of money. The TC dismissed the case holding that
Delsan was liable due to force majeure. On appeal, the CA reversed the
decision stating that there was no force majeure. The issues were (1)
WON payment of AHAC to Caltex amounted to a and admission that MT
Maysun was seaworthy and thus precluding any action AHAC may have
against Delsan ​(NO) and (2) WON the marine insurance policy in this
case was necessary ​(NO)​.
Payment by AHAC to Caltex was only a waiver of AHAC’s ​right to
enforce the term of the implied warranty against Caltex under the
marine insurance policy but does ​not mean admission of the vessel’s
seaworthiness by AHAC as to foreclose recourse against Delsan for any
liability under its contractual obligation as a common carrier. The marine
insurance policy is not necessary in this case and that the subrogation
receipt was already sufficient having showed both (1) ​relationship of
AHAC and Caltex​, as insurer and assured, respectively and (2) ​amount
paid​ to settle the insurance claim.
DOCTRINE1: Payment by insurer to insured under a marine insurance
policy means the waiver of the insurer’s right to enforce the term of the
implied warranty against the insured but does not mean waiver of the
insurer’s right to subrogation. The presentation in evidence of the
insurance policy is not indispensable before the insurer may recover. The
subrogation receipt, by itself, is sufficient to establish not only the
relationship of the insurer and the insured, but also the amount paid to
settle the insurance.
FACTS:
1. Caltex Philippines (Caltex) entered into a ​contract of
affreightment with the ​petitioner Delsan Transport Lines, Inc.
(common carrier), for a ​one year where Delsan would transport
Caltex’s industrial fuel oil ​from the ​Batangas-Bataan Refinery
to different parts of the country.
2. Under the contract, Delsan took on board its vessel (​MT Maysun​)
2,277.314 kiloliters of said oil to be transported to Caltex Oil
Terminal in Zamboanga City. Said ​shipment was ​insured with
private respondent American Home Assurance Corporation
(AHAC)​.
3. (14 Aug 1986) MT Maysun set sail to Zamboanga City.
4. (16 Aug 1986) ​MT Maysun sank near Panay Gulf and Cuyo East
Pass in Visayas.
5. AHAC subsequently paid Caltex P5,096,635.57 (amount of
insured cargo).
6. AHAC later demanded Delsan the same amount as an exercise of
​ rt. 2207, New Civil Code​.
its​ right of subrogation​ under A
1
Contracts of marine insurance are contracts of indemnity which means its purpose is
in case of loss, to place the insured in the same situation in which he was before the
loss subject to the terms and conditions of the policy. Amount of indemnity may be
determined after the loss or is previously fixed in the contract. The amount of
insurance fixed in the policy of a marine insurance is not the exact measure of
indemnity to which the insured is entitled but the maximum indemnity which he might
obtain. The insured cannot recover in excess of his actual loss.(The case makes no
mention of the topic this case was assigned – Measure of Indemnity. This doctrine is
from De Leon, and it’s the closest I can relate the case to. Apologies.)
7. Delsan refused to pay, thus AHAC filed a complaint for collection
of sum of money with the RTC, Makati.
8. Trial Court: Dismissed the complaint reasoning that MT Maysun
was seaworthy as determined by the Philippine Coast Guard per
Survey Certificate Report No. M5-016-MH upon inspection
during its annual dry-docking and that the incident was caused by
unexpected inclement weather condition or ​force majeure​, thus
exempting the common carrier (Delsan) from liability for the loss
of its cargo.
9. CA: Reversed ​the TC Decision. CA gave credence to the ​weather
report ​issued by PAGASA which which showed that from 2-8
a.m. on 16 Aug 1986, the wind speed remained at 10-20 knots per
hour while the waves measured from ​0.7-2 meters in height only
in contrast to herein Delsan’s allegation that the waves were 20 ft.
high.
10. Delsan filed an MR which was however denied and hence this
petition.
11. Delsan invokes/alleges:
a. Sec. 113, Insurance Code states that in every marine
insurance upon a ship or freight, or freightage, or upon
any thing which is the ​subject of marine insurance ​there
is an implied warranty by the shipper that the ​ship is
seaworthy. Consequently, the ​insurer will not be liable to
the assured for any loss under the policy in case the vessel
would later on be found as not seaworthy at the inception
of the insurance​. The ​act of AHAC of paying Caltex the
value of the lost cargo amounted to a ​tacit recognition
that ​MT Maysun was seaworthy​, otherwise, AHAC was
not legally liable to Caltex due to the latter’s breach of
implied warranty under the marine insurance policy that
the vessel was seaworthy.
b. CA erred in finding that MT Maysun was not seaworthy
on the ground that Francisco Berina, chief mate of the
vessel, was not qualified. Under ​Sec. 116, Insurance
Code​, the implied warranty of seaworthiness of the
vessel, which AHAC admitted as having been fulfilled by
its payment of the insurance proceeds to Caltex of its lost
cargo, extends to the vessel’s complement. Despite Berina
having merely a 2nd officer’s license, he was qualified to
act as the vessel’s chief officer under Chapter IV(403),
Category III(a)(3)(ii)(aa) of the Philippine Merchant
Marine Rules and Regulations. In fact, all the crew and
officers of MT Maysun were exonerated in the
administrative investigation conducted by the Board of
Marine Inquiry after the subject accident.
c. The doctrine in ​Home Insurance Corporation v. CA (​ i.e.
failure of the private respondent to present the insurance
policy in evidence is allegedly fatal to its claim inasmuch
as there is no way to determine the rights of the parties
thereto), should have been applied herein, since AHAC
failed to present the subject marine cargo insurance policy
as evidence.
ISSUE/s:
1. WON the payment made by the AHAC to Caltex for the
insured value of the lost cargo amounted to an admission that
the vessel was seaworthy, thus precluding any action for
recovery against the petitioner. – NO. Payment by AHAC to
Caltex was only a ​waiver of AHAC’s right to enforce the term
of the implied warranty against Caltex ​under the marine
insurance policy but does not mean ​admission of the vessel’s
seaworthiness ​by AHAC as to foreclose recourse against Delsan
for any liability under its contractual obligation as a common
carrier.
2. WON the non-presentation of the marine insurance policy bars
the complaint for recovery of sum of money for lack of cause of
action. – NO. In this case, said insurance policy is not necessary.
The subrogation receipt was already sufficient and it showed both
 (1) relationship of AHAC and Caltex​, as insurer and assured,
respectively and (2)​ amount paid​ to settle the insurance claim.
RULING: WHEREFORE, the instant petition is DENIED. The Decision
dated June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is
AFFIRMED. Costs against the petitioner. SO ORDERED.
RATIO:
1. (First Issue) The ​payment made by the AHAC for the insured value
of the lost cargo operates as waiver of its (AHAC) right to enforce
the term of the implied warranty against Caltex ​under the marine
insurance policy. However, the ​same cannot be validly
interpreted as an automatic admission ​of the ​vessel's
seaworthiness ​by the AHAC as to foreclose recourse against the
Delsan for any liability under its contractual obligation as a
common carrier. Said payment grants AHAC subrogatory right to
exercise legal remedies available to Caltex against Delsan, the
common carrier by virtue of ​Art. 2207, Civil Code2
2. The ​right of subrogation has its ​roots in equity​. It is ​not
dependent upon​, nor does it grow out of, ​any privity of contract
or upon written assignment of claim​. It ​accrues simply upon
payment by the insurance company of the insurance claim.
Consequently, the payment made by the AHAC (insurer) to Caltex
(assured) operates as an ​equitable assignment ​to the former of all
the remedies which the latter may have against Delsan.
3. From the nature of their business and for reasons of public policy,
common carriers are bound to observe ​extraordinary diligence in
2
​Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.
the vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstances of each
case.
a. GR: ​In the event of loss, destruction or deterioration of
the insured goods, common carriers shall be responsible.
Exception: ​If the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural
disaster or calamity.
b. GR: If the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to
have acted negligently.
Exception: ​If the common carrier proves that they
observed extraordinary diligence.
4. Jaime Jarabe, captain of MT Maysun, and Berina testified that at
around 3:15 a.m. a squall ("​unos​") carrying strong winds with an
approximate velocity of 30 knots per hour and big waves averaging
18-20 ft. high caused the vessel to sink. ​However, this tale was
effectively rebutted PAGASA’s weather report​. (See Fact #9)
Thus, Delsan’s defense of force majeure cannot be sustained. Also,
said witnesses as employees of Delsan, cannot be expected to
testify against the latter. (See Fact #11.2) Exoneration of MT
Maysun’s officers and crew to liability is only with respect to
administrative liabilities and does not operate to absolve Delsan’s
civil liabilities arising from its negligence as a common carrier.
(See Fact #11.2)
5. Evidence certificates that MT Maysun was fit for voyage ​at the
time of dry-docking and inspection by the Philippine Coast
Guard​, was also ​not ​credited by the court to prove the ​vessel’s
fitness for voyage at the time of the ​commencement of the
voyage​. “Seaworthiness relates to a vessel's ​actual condition.
Neither the granting of classification or the issuance of certificates
establishes seaworthiness.”
6. (Second Issue) The marine insurance policy is not necessary in this
case. The ​subrogation receipt, ​by itself, is ​sufficient to establish
 (1) th​e relationship of AHAC​, as insurer, ​and Caltex​, as the
assured shipper of the lost cargo and (2) the ​amount paid to settle
the insurance claim. The ​right of subrogation accrues simply
upon payment by the insurance company of the insurance claim.​
7. The presentation of the insurance policy was necessary in the case
of ​Home Insurance Corporation v. CA ​because the shipment
therein passed through several stages with different parties
involved in each stage. In that case, in the absence of proof of
stipulations to the contrary, the hauler can be liable only for any
damage that occurred from the time it received the cargo until it
finally delivered it to the consignee. It cannot be held responsible
for the handling of the cargo before it actually received it. The
insurance contract, which was not presented in evidence in that
case would have indicated the scope of the insurer's liability​, if
any, since ​no evidence was adduced indicating at what stage in
the handling process the damage to the cargo was sustained​.
8. In this case, there is no doubt that the cargo of oil belonging to
Caltex was lost while on board MT Maysun, which was owned by
Delsan. Thus, Delsan cannot deny its liability.