Pan Malayan Ins. Corp. v.

Court of Appeals

G.R. No. 81026, 3 April 1990, 184 SCRA 54

FACTS:

Pan Malayan filed a complaint for damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. It insured a Mitsubishi Colt Lancer car
registered in the name of Canlubang. Due to the carelessness, recklessness, and
imprudence of the unknown driver of a pick-up, the insured car was hit and suffered
damages in the amount of P42,052.00.

Pan Malayan defrayed the cost of repair of the insured car, and therefore was
subrogated to the rights of Canlubang against the driver of the pick-up and his
employer, Erlinda Fabie. Despite repeated demands, defendants failed and refused to
pay the claim of Pan Malay. Defendants/Private Respondents alleged that Pan
Malayan had no cause of action against them because payment under the “own
damage” clause of the insurance policy precluded subrogation under Article 2207 of
the Civil Code, since indemnification thereunder was made on the assumption that
there was no wrongdoer or no third party at fault. RTC dismissed the case for no
cause of action and denied its motion for reconsideration. The CA affirmed the trial
courts decision.

ISSUE:

Whether or not the insurer may institute ac action to recover the amount it had paid its
assured in settlement of an insurance claim against private respondents.

RULING:

Pan Malayan is correct. If the insured property is destroyed or damaged through the
fault or negligence of a party other than the assured, then the insurer, upon payment to
the assured, will be subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to pay. Payment by the
insurer to the assured operates as an equitable assignment to the former of all
remedies, which the latter ma have against the third party whose negligence or
wrongful act caused the loss.

The right of 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.

Manila Mahogany v. Court of Appeals

G.R. No. L-52756, 12 October 1987, 154 SCRA 650

FACTS:
Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance
company . The insured vehicle was bumped and damaged by a truck owned by San
Miguel Corporation (SMC). For the damage caused, respondent company paid
petitioner ₱ 5,000.00 in amicable settlement. Petitioner’s general manager executed a
Release of Claim, subrogating respondent company to all its right to action against
San Miguel Corp. Respondent company wrote the Insurer Adjusters, Inc. to demand
reimbursements from San Miguel Corporation of the amount it had paid petitioner.
Insurer Adjusters, Inc. refused reimbursement alleging that SMC had already paid
petitioner ₱ 4,500.00 for the damages to petitioner’s motor vehicle, as evidenced by a
cash voucher and Release of Claim executed by the General Manager of petitioner
discharging SMC from “ all actions, claims, demands the right of action that now
exist or hereafter develop arising out of or as a consequence of the accident.

Respondent demanded the ₱ 4,500.00 amount from petitioner. Petitioner refused. Suit
was filed for recovery. City Court ordered petitioner to pay respondent. CFI affirmed.
CA affirmed with modification that petitioner was to pay respondent the total amount
of ₱ 5,000.00 it had received from respondent.

Petitioner’s argument: Since the total damages were valued at P9,486.43 and only ₱
5,000.00 was received by petitioner from respondent, petitioner argues that it was
entitled to go after SMC to claim the additional which was eventually paid to it.

Respondent’s argument: No qualification to its right of subrogation.

ISSUE:

Whether or not the insured should pay the insurer despite that the subrogation in the
Release of Claim was conditioned on recovery of the total amount of damages that the
insured has sustained.

RULING:

NO. Supreme Court said there being no other evidence to support its allegation that a
gentleman’s agreement existed between the parties, not embodied in the Release of
Claim, such Release of Claim must be taken as the best evidence of the intent and
purpose of the parties. CA was correct in holding petitioner should reimburse
respondent ₱ 5,000.00.

When Manila Mahogany executed another release claim discharging SMC from all
rights of action after the insurer had paid the proceeds of the policy – the compromise
agreement of ₱ 5,000.00– the insurer is entitled to recover from the insured the
amount of insurance money paid. Petitioner by its own acts released SMC, thereby
defeating respondent’s right of subrogation, the right of action against the insurer was
also nullified.

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 losses 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.

Federal Express Corporation v. American Home Assurance Company

G.R. No. 150094, 18 August 18 2004, 437 SCRA 50

FACTS:

Shipper SMITHKLINE USA delivered to carrier Burlington Air Express, an agent of

herein petitioner, a cargo shipment, insured with respondent which consist of 109
cartons of veterinary biological for delivery to consignee SMITHKLINE and French
Overseas Company in Makati City with the words, “REFRIGERATE WHEN NOT
IN TRANSIT” and “PERISHABLE” stamp marked on its face. However, 12 days
after the cargoes arrived in Manila, it was found out that the same were stored only in
a room with 2 air conditioners running in the warehouse of Cargohaus Inc., to cool the
place instead of a refrigerator.

As a consequence of the result of the veterinary biological test, SMITHKLINE

abandoned the shipment and, declaring “total loss” for the unusable shipment, filed a
claim with AHAC through its representative in the Philippines, The Philam Insurance
Co., Inc., (PHILAM) which recompensed SMITHKLINE for the whole insured
amount. Thereafter, PHILAM filed an action for damages against FEDEX imputing
negligence on either or both of them in the handling of the cargo where it was decided
that FEDEX is solidarily liable with Cargohaus Inc.

ISSUE:

Whether or not FEDEX is liable for damage to or loss of the insured goods?

RULING:

No. Upon receipt of the insurance proceeds, the consignee (SMITHKLINE) executed
a subrogation receipt in favor of respondents authorizing them “to file claims and
begin suit against any such carrier, person, vessel, corporation or government.”
Undeniably, the consignee had a legal right to receive the goods in the same condition
it was delivered for transport to petitioner and if that right was violated, the consignee
would have a cause of action against the person responsible therefor.

In the exercise of its subrogatory right, an insurer may proceed against an erring
carrier and to all intents and purposes, it stands in the place and in substitution of the
consignee.

[ G.R. No. L-22146, September 05, 1967 ]

SVERIGES ANGFARTYGS ASSURANS FORENING,

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

DECISION
BENGZON, J.P., J.:

On August 23 and 24, 1947, defendant Qua Chee Gan, a sole proprietorship, shipped
on board the S.S. NAGARA as per bills of lading Exhs. A and B 2,032,000 kilos of
bulk copra at Siain, 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, the Swedish East Asia Company, in Gothenburg, Sweden. The latter, in
turn, sued defendant and had it summoned to Gothenburg. Defendant However
refused to submit to that court's jurisdiction and its objection was sustained.

In March, 1951, a settlement was effected between the Polish cargo insurers
and the shipowner. Plaintiff, as the indemnity insurer for the latter, paid
approximately $60,733.53 to the Polish insurers. On August 16, 1954, claiming to
have bee 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 shortshipment and P10,000 as
attorney's fees. Defendant answered in due time and countered with a
P15,000 counterclaim for attorney's fees.

On August 1, 1955, defendant filed a motion to dismiss on the ground of prescription

under the Carriage of Goods by Sea Act. The lowercourt sustained the motion and
plaintiff appealed here. We reversed the order of dismissals and remanded the case
for further proceedings.
[1]

After trial the lower court September 28, 1963, rendered its decisions dismissing the
complaint and awarding P10,000 as attorney's fees to defendant. It ruled (a) that there
was no shortshipment on defendant's part (b) that plaintiff's insurance policy did not
cover the shortshipment and (c) defendant was merely acting as an agent of
Louis Dreyfus & Co., who was the real shipper.

Taking issue with all the foregoing, plaintiff has interposed the present appeal to Us
on questions of fact and law, the amount involved exceeding P200,000.00.

Was the non-presentation of the insurance policy fatal to plaintiff's case? 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 shortshipment" 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. However, even assuming that
[2]

there was unwarranted - or "volunteer" - payment, plaintiff could still recover what it
paid - in effect - to the carrier from defendants 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 only up to the amount
by which the defendant was benefited.

This brings Us to the crux of them case: Was there a shortshipment? To support its
case, plaintiff theorizes that defendant had two
shipments at Siain, Quezon province: (1) 812,800 kilos for Karlshamn and (2)
2,032,000 kilos for Gdynia. The Karlshamn shipment was asserted to have been
covered by a separate bill of lading which however was allegedly lost
subsequently. Thus, the 696,419 kilos of copra unloaded in Karlshamn was not part
of the Gdynia shipment and cannot explain the confirmed shortage at the latter port.

Plaintiff's cause of action suffers from several fatal defects and inconsistencies. The
alleged shipment of 812,800 kilos for Karlshamn is contradicted by plaintiff's
admission in paragraphs 2 and 3 of its complaint that defendant shipped only
2,032,000 kilos copra at Siain, purportedly for both Gdynia and Karlshamn. Needless
[3]

to state, plaintiff is bound by such judicial admission. Moreover, the alleged

[4]

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 that these two exhibits constituted the complete set of documents which
[5]

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 can not be
seriously taken.

Lastly, if there really was a separate bill of lading for the Karlshamn shipment,
plaintiff could not have failed to present a copy thereof. Mr. Pasicolan testified that
[6]

the shipping agent makes 20 copies of the documents of which three signed ones are
given to the shipper and the rest, marked as non-negotiable bills of lading - like
Exhibits A and B - are kept on its file. For the three signed copies to be lost,We may
believe, but not for all the remaining 17 other copies. Under the circumstances, it his
more reasonable to hold that there was no separate shipment intended for Karlshamn,
Sweden.

As a corollary to the foregoing conclusion, it stands to reason that the copra unloaded
in Karlshamn formed part of the same - and only - shipment of defendant intended
for Gdynia. Now the fact that the sum total of the cargo unloaded
at Karlshamn and Gdynia would exceed what appears to have been loaded at Sian by
as much as 233,848 kilos can only show that defendant really overshipped,
not shortshipped. And while this would not tally with defendant's claim of having
weighed the copra cargo 100% at Siain, thus exposing a flaw in defendant's case, yet
it is elementary that plaintiff must rely on the strength of it own case to recover, and
not bank on the weakness of the defense. Plaintiff here failed to establish its case by
preponderance on evidence.

On the question whether defendant is the real shipped or merely an agent of Louis
Dreyfus & Co., 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 confirm this. Anyway, in whatever capacity defendant is considered, it
[7]

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.

SO ORDERED.

Concepcion, C.J., Reyes, Dizon, Makalintal, Zaldivar, Sanchez, Castro,

Angeles, and Fernando, JJ., concur.

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.
014 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 "Stolt Sceptre," a tanker
owned by Stolt-Nielsen Philippines Inc., from Bauan, Batangas, Philippines,
consigned to "Nieuwe Matex" 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 Insurance Company 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.

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.

Cebu Shipyard and Engineering Works, Inc. v. William Lines

G.R. No. 132607,5 May 1999, 306 SCRA 762

FACTS:

William Lines, Inc. brought its vessel M/V Manila City to the Cebu Shipyard and
Engineering Works, Inc (CSEW) in Lapulapu City for annual dry-docking and repair.
Subject vessel was insured with Prudential Guarantee for P45,000,000.00 for hull and
machinery. The Hull Policy included an “Additional Perils” clause covering loss of or
damage to the vessel through the negligence of, among others, ship repairmen. CSEW
was also insured by Prudential Guarantee for third party liability under s Shiprepairs
Legal Liability Insurance Policy for P10,000,000.00 only.

After subject vessel was transferred to the docking quay, it caught fire and sank,
resulting to its eventual total loss. 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 CSEW’s negligence and lack of care. An amended complaint, impleading
Prudential Guarantee as co-plaintiff, was filed after the latter had paid William Lines,
Inc. the value of the hull and machinery insurance of M/V Manila City. RTC ruled
that the cause of the fire was through the negligence of CSEW. CA affirmed the
appealed decision.

ISSUE:
Whether or not Prudential has the right of subrogation against its own insured.
Whether or not the parties intended for them to be a co-assured in the insurance
policy.

RULING:

The petition is unmeritorious. Upon proof of payment by Prudential Guarantee to

William Lines, the former was subrogated to the right of the latter to indemnification
from CSEW. Thus, when Prudential, after due verification of the merit and validity of
the insurance claim of William Lines, paid the latter the total amount covered by its
insurance policy, it was subrogated to the right of the latter to recover the insured loss
from CSEW, the liable party.

A stipulation in the work order that requires William Lines to maintain insurance on
the vessel during the period of dry-docking or repair, works to the benefit of CSEW.
However, the fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The hull and machinery
insurance procured by William Lines, Inc. from Prudential named only “William
Lines, Inc.” as the assured. Thus, when the insurance policy involved named only
William Lines, Inc. as the assured thereunder, the claim of CSEW that it is a
co-assured is unfounded.

Fireman v Jamila

April 7, 1976

FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE TIRE AND

RUBBER COMPANY OF THE PHILIPPINES
vs.
JAMILA & COMPANY, INC. and FIRST QUEZON CITY INSURANCE CO., INC

AQUINO, J.:

SUMMARY: Jamila supplies security guards to Firestone and assumes their

responsibility. When some properties of Firestone were lost due to connivance of
some security guards, Fireman’s Fund as insurer paid Firestone the value of such and
is now subrogated to Firestone’s right to reimbursement. They filed complaint to
recover money when Jamila failed to pay. CFI dismissed complaint as to Jamila citing
that there is no cause of action as the latter did not consent to subrogation and there
are no allegations in the complaint that Firestone investigated the loss. Subsequent
MRs, F&F argue that their cause of action is on the basis of legal subrogation. SC:
There was cause of action on the part of Fireman’s Fund pursuant to Art. 2207.
Payment by the assurer to the assured operates as an equitable assignment to the
assurer of all the remedies which the assured may have against the third party whose
negligence or wrongful act caused the loss.

DOCTRINE: Loss or injury for risk must be covered by the policy – Under Article
2207, the cause of the loss or injury must be a risk covered by the policy to entitle the
insurer to the subrogation. Thus, where the insurer pays the insured for a loss which is
not a risk covered by the policy, thereby effecting “voluntary payment,” the insurer
has no right of subrogation against the third party liable for the loss. Nevertheless, the
insurer may recover from the third party responsible for the damage to the insured
property under Article 1236 of the Civil Code.

FACTS:

Jamila or the Veterans Philippine Scouts Security Agency contracted to supply

security guards to Firestone. Jamila assumed responsibility for the acts of its
security guards




First Quezon City Insurance Co., Inc. executed a bond in the sum of P20k to
guarantee Jamila's obligations under that contract




May 18, 1963: Properties of Firestone valued at P11,925 were lost allegedly
due to the acts of its employees who connived with Jamila's security guard




Fireman's Fund, as insurer, paid to Firestone the amount of the loss and is now
subrogated to Firestone's right to get reimbursement from Jamila




Jamila and its surety, First Quezon City Insurance Co., Inc., failed to pay the
amount of the loss in spite of repeated demands.




Fireman's Fund and Firestone Tire and Rubber Co instituted this complaint
against Jamila for the recovery of the sum of P11,925.00 plus interest,
damages and attorney's fees



Jamila moved to dismiss the complaint on the ground of lack of cause of
action

(1) complaint did not allege that Firestone, pursuant to the contractual
stipulation quoted in the complaint, had investigated the loss and that
Jamila was represented in the investigation and




(2) Jamila did not consent to the subrogation of Fireman's Fund to

Firestone's right to get reimbursement from Jamila and its surety.




CFI: Dismissed the complaint as to Jamila on the second ground that there was
no allegation that it had consented to the subrogation and, therefore, Fireman's
Fund had no cause of action against it.




Also dismissed the complaint as to First Quezon City Insurance Co.,

Inc. on the ground of res judicata as the same action was previously
filed in a civil case which was dismissed because of the failure of the
same plaintiffs and their counsel to appear at the pre trial.




Firestone and Fireman's Fund filed MR




CFI on F&F’s MR: Set aside its order of dismissal. No res judicata as to First
Quezon City Insurance Co., Inc. because civil case was dismissed without
prejudice


 However, due to inadvertence, the lower court did not state in its order
of September 3, 1966 why it set aside its prior order dismissing the
complaint with respect to Jamila.




First Quezon City Insurance Co., Inc. filed its answer to the complaint.




Jamila, upon noticing that the order had obliterated its victory without any
reason therefor, filed MR reconsideration

Invoked the first ground in its original motion to dismiss which had
never been passed upon by the lower court that complaint did not
allege that Firestone, pursuant to the contractual stipulation quoted in
the complaint, had investigated the loss and that Jamila was
represented in the investigation




CFI on Jamila’s MR: Granted Jamila's MR. However, it completely ignored

the 1st ground but reverted to the second ground (no consent to subrogation
thus no cause of action).

It did not mention Firestone, the co-plaintiff of Fireman's Fund.




Firestone and Fireman's Fund filed MR on the ground that Fireman's Fund
Insurance Company was suing on the basis of legal subrogation whereas CFI
erroneously predicated its dismissal order on the theory that there was no
conventional subrogation because the debtor's consent was lacking.


 Cited NCC 2207 which provides that "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".




CFI on F&F MR: Denied motion.




F&F filed 2 MR and called CFI's attention to the fact that the issue of
nd

subrogation was of no moment because Firestone, the subrogor (??), is a

party-plaintiff and could sue directly Jamila in its own right.




CFI on F&F’S 2 MR: Denied 2 MR without resolving contention

nd nd




Appeal to SC




F&F: CFI’s dismissal of their complaint is contrary to Article 2207 which

provides for legal subrogation.




JAMILA: Legal subrogation under Art. 2207 requires the debtor's consent

Legal subrogation takes place in the cases mentioned in NCC 1302 and
the instant case is not among the 3 cases enumerated in that article



 There could be no subrogation in this case because according to F&F,
the contract between Jamila and Firestone was entered into on June 1,
1965 but the loss complained of occurred on May 18, 1963.

ISSUES:

1) Whether the complaint of Firestone as subrogor (???) states a cause of action

against Jamila? (Not really)

2) Whether the complaint of Fireman's Fund as subrogee states a cause of action

against Jamila? (YES)

3) Whether Jamila should reimburse Fireman’s Fund? (Not decided here)

HELD: CFI Decision's order of dismissal is legally untenable so SET ASIDE with
costs against Jamila & Co., Inc.

RATIO:

[F&F’s counsel gratuitously alleged in their brief that Firestone and Jamila entered
into a "contract of guard services" on June 1, ‘65. That allegationwas uncalled for
because it is not found in the complaint and so created confusion which did not exist.
No copy of the contract was annexed to the complaint. That confusing statement was
an obvious error since it was expressly alleged in the complaint that the loss occurred
on May 18, ‘63. The fact that such an error was committed is another instance
substantiating the observation that F&F's counsel had not exercised due care in the
presentation of his case.]

1) Firestone is really a nominal party in this case as it had already been indemnified
for the loss which it had sustained. It joined as a party-plaintiff in order to help
Fireman's Fund to recover the amount of the loss from Jamila and First Quezon City
Insurance Co., Inc. Firestone had tacitly assigned to Fireman's Fund its cause of
action against Jamila for breach of contract. Sufficient ultimate facts are alleged in the
complaint to sustain that cause of action.

2) Fireman's Fund's action against Jamila is squarely sanctioned by article 2207. As

the insurer, Fireman's Fund is entitled to go after the person or entity that violated its
contractual commitment to answer for the loss insured against (PAL vs. Heald
Lumber Co).


CFI erred in applying to this case the rules on novation. F&F in alleging in
their complaint that Fireman's Fund "became a party in interest in this case by
virtue of a subrogation right given in its favor by" Firestone, were not relying
on the novation by change of creditors as contemplated in NCC 1291 and
1300 to 1303 but rather on NCC 2207.




Article 2207 is a restatement of a settled principle of American jurisprudence.

Subrogation has been referred to as the doctrine of substitution. It "is an arm
of EQUITY that may guide or even force one to pay a debt for which an
obligation was incurred but which was in whole or in part paid by another" (83
C.J.S. 576).




"Subrogation is founded on principles of JUSTICE AND EQUITY, and its

operation is governed by principles of equity. It rests on the principle that
substantial justice should be attained regardless of form, that is, its basis is the
doing of complete, essential, and perfect justice between all the parties without
regard to form"(83 C.J.S. 579- 80)




Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs

Moses). Upon payment of the loss, the insurer is entitled to be subrogated pro
tanto to any right of action which the insured may have against the third
person whose negligence or wrongful act caused the loss (44 Am. Jur. 2nd
745).




The right of subrogation is of the highest EQUITY. The LOSS IN THE FIRST
INSTANCE is that of the INSURED but AFTER reimbursement or
compensation, it becomes the LOSS OF THE INSURER (44 Am. Jur. 2d
746).




"Although many policies including policies in the standard form, now provide
for subrogation, and thus determine the rights of the insurer in this respect, the
equitable right of subrogation as the legal effect of payment inures to the
insurer without any formal assignment or any express stipulation to that effect
in the policy" (44 Am. Jur. 2nd 746).
 


Stated otherwise, when the insurance company pays for the loss, such payment
operates as an equitable assignment to the insurer of the property and all
remedies which the insured may have for the recovery thereof. That right is
not dependent upon, nor does it grow out of, any privity of contract, or upon
written assignment of claim, and payment to the insured makes the insurer an
assignee in equity (Shambley v. Jobe-Blackley Plumbing and Heating Co).

3) Whether the plaintiffs would be able to prove their cause of action against Jamila is
another question.

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.

Compania Maritima v. Insurance Company of North America 054 GR No. L-18965,

30 Oct 1964, Bautista Angelo J. Digested by Fonzy • Law 138 – Transportation Law
Topic: Duration of Extraordinary Responsibility The goods was not yet actually
loaded on the vessel which would carry the hemp to its destination and that no bill of
lading was issued when the vessel sank. SC held that this fact is irrelevant, and that
the contract of carriage already commenced when the shipping company went to
shipper’s private pier to get the goods. FACTS Macleod contracted by telephone the
services of the Compañia Maritima (CM), a shipping corporation, for: shipment of
hemp from the Macleod's Sasa private pier at Davao City to Manila to be
subsequently transhipped to Boston. This oral contract was later on confirmed and the
loading of the hemp was completed when CM sent 2 private wharfs to Macelod’s pier.
The 2 vessels were manned each by a patron and an assistant patron. One of the
vessels sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein.
All abaca shipments of Macleod were insured with the Insurance Company of North
America o Macleod filed a claim for the loss it suffered with the insurance company
and was paid P64,018.55 The insurance company failing to recover from the carrier,
the insurance company instituted the present action CA and RTC both ordered CM to
pay the insurance co. ISSUES & HOLDING W/N there was a contract of carriage bet.
CM (carrier) and Macleod (shipper) existed– YES. The liability of the common
carrier ccommences on their actual delivery to, or receipt by, the carrier or an
authorized agent. RATIO The main contention is the fact that the loss occurred when
the hemp was loaded on a barge owned by the carrier which was loaded free of charge
and was not actually loaded on the vessel which would carry the hemp to Manila and
that no bill of lading was issued. SC: This preparatory fact does not in any way impair
the contract of carriage already entered into between the carrier and the shipper, for
that preparatory step is but part and parcel of said contract of carriage. o There was a
complete contract of carriage the consummation of which has already begun: the
shipper delivering the cargo to the carrier, and the latter taking possession thereof by
placing it on a lighter manned by its authorized employees The liability and
responsibility of the carrier under a contract for the carriage of goods commence on
their actual delivery to, or receipt by, the carrier or an authorized agent. ... and
delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the
custom to deliver in that way, binds the vessel receiving the freight The test as to
whether the relation of shipper and carrier had been established is, Had the control
and possession of the cotton been completely surrendered by the shipper to the
common carrier? o Whenever the control and possession of goods passes to the carrier
and nothing remains to be done by the shipper, then it can be said with certainty that
the relation of shipper and carrier has been established. The fact that the hemp was not
actually loaded on the ship that was to take it from Davao City to Manila is of no
moment. In fact, the receipt signed by the patron of the lighter that carried the hemp
stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order
and condition.” A bill of lading is not indispensable for the creation of a contract of
carriage. The bill of lading is not essential to the contract, although it may become
obligatory by reason of the regulations. The Code does not demand, as necessary
requisite in the contract of transportation, the delivery of the bill of lading to the
shipper, but gives right to both the carrier and the shipper to mutually demand of each
other the delivery of said bill. Side issue: No force majeure, it was lack of precautions
that caused the damage (the ill-fated barge had cracks on its bottom)