FEDERAL EXPRESS CORPORATION, petitioner, vs. AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC., respondents.

Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff must give the carrier notice of the loss or damage, within the period prescribed by the Warsaw Convention and/or the airway bill. The Case Before us is a Petition for Review !" under Rule #$ of the Rules of Court, challenging the %une #, &''! (ecision &" and the )eptember &!, &''! Resolution *" of the Court of +ppeals ,C+- in C+./R C0 1o. $2&'2. 3he assailed (ecision disposed as follows4

);:36AB:17 and 8rench 9verseas Company in ;a<ati City, ;etro ;anila. 3he shipment was covered by Burlington +irway Bill 1o. !!&@*2&$ with the words, ER78R:/7R+37 W671 193 :1 3R+1):3> and EP7R:)6+BB7> stamp mar<ed on its face. 3hat same day, Burlington insured the cargoes in the amount of F*=,**=.'' with +merican 6ome +ssurance Company ,+6+C-. 3he following day, Burlington turned over the custody of said cargoes to 8ederal 7Dpress which transported the same to ;anila. 3he first shipment, consisting of =& cartons arrived in ;anila on %anuary &=, !==# in 8light 1o. ''G!.&21R3 and was immediately stored at Cargohaus :nc.>s" warehouse. While the second, consisting of !G cartons, came in two ,&- days later, or on %anuary *!, !==#, in 8light 1o. ''G!. *'1R3 which was li<ewise immediately stored at Cargohaus> warehouse. Prior to the arrival of the cargoes, 8ederal 7Dpress informed /73C Cargo :nternational Corporation, the customs bro<er hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its client>s cargoes.

5W67R789R7, premises considered, the present appeal is hereby (:);:))7( for lac< of merit. 3he appealed (ecision of Branch !#= of the Regional 3rial Court of ;a<ati City in Civil Case No. 95-1219, entitled American Home Assurance Co. and PHILAM Insurance Co., Inc. v. F ! "AL #P" $$ C%"P%"A&I%N and'or CA"(%HA)$, INC. *+ormerl, )--A" H%)$ , INC..,/ is hereby AFFIRMED and REITERATED. 3he assailed Resolution denied petitioner>s ;otion for Reconsideration.

The Facts 3he antecedent facts are summari?ed by the appellate court as follows4 59n %anuary &@, !==#, );:36AB:17 Beecham ,);:36AB:17 for brevity- of 1ebras<a, C)+ delivered to Burlington +ir 7Dpress ,BCRB:1/391-, an agent of Petitioner" 8ederal 7Dpress Corporation, a shipment of !'= cartons of veterinary biologicals for delivery to consignee

59n 8ebruary !', !==#, (+R:9 C. (:917(+ ,E(:917(+>-, twelve ,!&days after the cargoes arrived in ;anila, a non.licensed custom>s bro<er who was assigned by /73C to facilitate the release of the subHect cargoes, found out, while he was about to cause the release of the said cargoes, that the same were" stored only in a room with two ,&- air conditioners running, to cool the place instead of a refrigerator. When he as<ed an employee of Cargohaus why the cargoes were stored in the Ecool room> only, the latter told him that the cartons where the vaccines were contained specifically indicated therein that it should not be subHected to hot or cold temperature. 3hereafter, (:917(+, upon instructions from /73C, did not proceed with the withdrawal of the vaccines and instead, samples of the same were ta<en and brought to the Bureau of +nimal :ndustry of the (epartment of +griculture in the Philippines by );:36AB:17 for eDamination wherein it was discovered that the E7B:)+ reading of vaccinates sera are below the positive reference serum.>

5+s a consequence of the foregoing result of the veterinary biologics test, );:36AB:17 abandoned the shipment and, declaring Etotal loss> for the unusable shipment, filed a claim with +6+C through its representative in the Philippines, the Philam :nsurance Co., :nc. ,EP6:B+;>- which recompensed );:36AB:17 for the whole insured amount of 36:R3I 1:17 369C)+1( 36R77 6C1(R7( 36:R3I 1:17 (9BB+R) ,F*=,**=.''-. 3hereafter, respondents" filed an action for damages against the petitioner" imputing negligence on either or both of them in the handling of the cargo.

)ervice- was found by the C+ to be inadmissible in evidence. (espite this ruling, the appellate court held that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier in good condition. We quote from the ruling as follows4

53rial ensued and ultimately concluded on ;arch !2, !==G with the petitioner" being held solidarily liable for the loss as follows4 EW67R789R7, Hudgment is hereby rendered in favor of respondents" and petitioner and its Co.(efendant Cargohaus" are directed to pay respondents", Hointly and severally, the following4 !. +ctual damages in the amount of the peso equivalent of C)F*=,**=.'' with interest from the time of the filing of the complaint to the time the same is fully paid. &. +ttorney>s fees in the amount of P$','''.'' and *. Costs of suit.

5Where the plaintiff introduces evidence which shows 0rima +acie that the goods were delivered to the carrier in good condition i.e., the shipping receipts", and that the carrier delivered the goods in a damaged condition, a presumption is raised that the damage occurred through the fault or negligence of the carrier, and this casts upon the carrier the burden of showing that the goods were not in good condition when delivered to the carrier, or that the damage was occasioned by some cause eDcepting the carrier from absolute liability. 3his the petitioner" failed to discharge. D D D.J @" 8ound devoid of merit was petitioner>s claim that respondents had no personality to sue. 3his argument was supposedly not raised in the +nswer or during trial. 6ence, this Petition. The Issues :n its ;emorandum, petitioner raises the following issues for our consideration4

+re the decision and resolution of the 6onorable Court of +ppeals proper subHect for review by the 6onorable Court under Rule #$ of the !==G Rules of Civil ProcedureK :s the conclusion of the 6onorable Court of +ppeals L petitioner>s claim that respondents have no personality to sue because the payment was made

Rul n! "# the C"u$t "# A%%eals 3he 3est Report issued by the Cnited )tates (epartment of +griculture ,+nimal and Plant 6ealth :nspection

by the respondents to )mith<line when the insured under the policy is Burlington +ir 7Dpress is devoid of merit L correct or notK :s the conclusion of the 6onorable Court of +ppeals that the goods were received in good condition, correct or notK +re 7Dhibits E8> and E/> hearsay evidence, and therefore, not admissibleK :s the 6onorable Court of +ppeals correct in ignoring and disregarding respondents> own admission that petitioner is not liableK and :s the 6onorable Court of +ppeals correct in ignoring the Warsaw ConventionKJ )imply stated, the issues are as follows4 ,!- :s the Petition proper for review by the )upreme CourtK ,&- :s 8ederal 7Dpress liable for damage to or loss of the insured goodsK Th s C"u$t&s Rul n! 3he Petition has merit.

Ma n Issue) Liability for Damages

Petitioner contends that respondents have no personality to sue .. thus, no cause of action against it .. because the payment made to )mith<line was erroneous. Pertinent to this issue is the Certificate of :nsurance !'" ,5CertificateJ- that both opposing parties cite in support of their respective positions. 3hey differ only in their interpretation of what their rights are under its terms. 3he determination of those rights involves a question of law, not a question of fact. 5+s distinguished from a question of law which eDists Ewhen the doubt or difference arises as to what the law is on a certain state of facts> .. Ethere is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts>M or when the Equery necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, eDistence and relevancy of specific surrounding circumstance, their relation to each other and to the whole and the probabilities of the situation.>J !!" Proper Payee 3he Certificate specifies that loss of or damage to the insured cargo is 5payable to order D D D upon surrender of this Certificate.J )uch wording conveys the right of collecting on any such damage or loss, as fully as if the property were covered by a special policy in the name of the holder itself. +t the bac< of the Certificate appears the signature of the representative of Burlington. 3his document has thus been duly indorsed in blan< and is deemed a bearer instrument.

P$el ' na$( Issue)

Propriety of Review

3he correctness of legal conclusions drawn by the Court of +ppeals from undisputed facts is a question of law cogni?able by the )upreme Court. =" :n the present case, the facts are undisputed. +s will be shown shortly, petitioner is questioning the conclusions drawn from such facts. 6ence, this case is a proper subHect for review by this Court.

)ince the Certificate was in the possession of )mith<line, the latter had the right of collecting or of being indemnified for loss of or damage to the insured shipment, as fully as if the property were covered by a special policy in the name of the holder. 6ence, being the holder of the Certificate and having an insurable interest in the goods, )mith<line was the proper payee of the insurance proceeds.

Subrogation

Cpon receipt of the insurance proceeds, the consignee ,)mith<lineeDecuted a subrogation Receipt !&" in favor of respondents. 3he latter were thus authori?ed 5to file claims and begin suit against any such carrier, vessel, person, corporation or government.J Cndeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for transport to petitioner. :f that right was violated, the consignee would have a cause of action against the person responsible therefor. Cpon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurer>s entitlement to subrogation 0ro 1an1o .. being of the highest equity .. equips it with a cause of action in case of a contractual breach or negligence. !*" 58urther, the insurer>s subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is Hurisprudentially upheld.J !#" :n the eDercise of its subrogatory right, an insurer may proceed against an erring carrier. 3o all intents and purposes, it stands in the place and in substitution of the consignee. A +or1iori, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading. !$" Prescription of Claim

5@. 1o action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently describing the goods concerned, the approDimate date of the damage or loss, and the details of the claim, is presented by shipper or consignee to an office of Burlington within ,!#- days from the date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss ,including non. delivery- unless presented within ,!&'- days from the date of issue of the +irway Bill".J !@" Relevantly, petitioner>s airway bill states4 5!&./!&.! 3he person entitled to delivery must ma<e a complaint to the carrier in writing in the case4 !&.!.! of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen ,!#days from receipt of the goodsM !&.!.& of other damage to the goods, within fourteen ,!#- days from the date of receipt of the goodsM !&.!.* delay, within twenty.one ,&!- days of the date the goods are placed at his disposalM and !&.!.# of non.delivery of the goods, within one hundred and twenty ,!&'- days from the date of the issue of the air waybill. !&.& 8or the purpose of !&.! complaint in writing may be made to the carrier whose air waybill was used, or to the first carrier or to the last carrier or to the carrier who performed the transportation during which the loss, damage or delay too< place.J !G" +rticle &@ of the Warsaw Convention, on the other hand, provides4 5+R3. &@. ,!- Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation. ,&- :n case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest,

8rom the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents> claim and right of action are already barred. 3he latter, and even the consignee, never filed with the carrier any written notice or complaint regarding its claim for damage of or loss to the subHect cargo within the period required by the Warsaw Convention and/or in the airway bill. :ndeed, this fact has never been denied by respondents and is plainly evident from the records. +irway Bill 1o. !!&@*2&$, issued by Burlington as agent of petitioner, states4

within * days from the date of receipt in the case of baggage and G days from the date of receipt in the case of goods. :n case of delay the complaint must be made at the latest within !# days from the date on which the baggage or goods have been placed at his disposal. ,*- 7very complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid. ,#8ailing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part.J !2" Condition Precedent

be prevented and the liability cannot be imposed on the carrier. 3o stress, notice is a condition precedent, and the carrier is not liable if notice is not given in accordance with the stipulation. &&" 8ailure to comply with such a stipulation bars recovery for the loss or damage suffered. &*" Being a condition precedent, the notice must precede a suit for enforcement. &#" :n the present case, there is neither an allegation nor a showing of respondents> compliance with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition precedent. We note that respondents are not without recourse. Cargohaus, :nc. .. petitioner>s co.defendant in respondents> Complaint below .. has been adHudged by the trial court as liable for, in1er alia, 5actual damages in the amount of the peso equivalent of C) F*=,**=.J &$" 3his Hudgment was affirmed by the Court of +ppeals and is already final and eDecutory. &@" *HEREFORE, the Petition is ("AN& !, and the assailed (ecision " 2 "$ ! insofar as it pertains to Petitioner 8ederal 7Dpress Corporation. 1o pronouncement as to costs.

:n this Hurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. !=" 3he shipper or consignee must allege and prove the fulfillment of the condition. :f it fails to do so, no right of action against the carrier can accrue in favor of the former. 3he aforementioned requirement is a reasonable condition precedentM it does not constitute a limitation of action. &'" 3he requirement of giving notice of loss of or inHury to the goods is not an empty formalism. 3he fundamental reasons for such a stipulation are ,!- to inform the carrier that the cargo has been damaged, and that it is being charged with liability thereforM and ,&- to give it an opportunity to eDamine the nature and eDtent of the inHury. 53his protects the carrier by affording it an opportunity to ma<e an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.J &!" When an airway bill .. or any contract of carriage for that matter .. has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can

(uring the unloading of the shipment, one crate containing forty.two ,#&- cartons dropped from the cargo hatch to the pier apron. 3he owner of the goods eDamined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were reHected as a total loss and returned to Cebu City. 3he owner of the goods filed a claim with herein petitioner.carrier for the recovery of the value of the reHected cargo which was refused by the latter. 3hereafter, the owner of the goods sought payment from respondent 8irst Bepanto.3aisho :nsurance Corporation ,insurer- under a marine insurance policy issued to the former. Respondent.insurer paid the claim less thirty.five percent ,*$O- salvage value or P!=#, &&'.*!. SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO+TAISHO INSURANCE CORPORATION, respondent. Before Cs is a Petition for Review on Cer1iorari assailing the (ecision !" of the Court of +ppeals reversing the (ecision &" of the Regional 3rial Court ,R3C- of ;anila, Branch N:0, dismissing the complaint for damages for failure of the plaintiff to prove its case with a preponderance of evidence. +ssailed as well is the Resolution *" of the Court of +ppeals denying petitioner>s ;otion for Reconsideration. THE FACTS 9n &$ 8ebruary !==&, 3aiyo Iuden Philippines, :nc. ,owner of the goods- and (elbros, :nc. ,shipper- entered into a contract, evidenced by Bill of Bading 1o. C7B/):1.''2/=& issued by the latter in favor of the owner of the goods, for (elbros, :nc. to transport a shipment of goods consisting of three ,*- wooden crates containing one hundred thirty.siD ,!*@- cartons of inductors and BC compound on board the 0 )ingapore 0&' from Cebu City to )ingapore in favor of the consignee, 3aiyo Iuden )ingapore Pte, Btd. 3he payment of the insurance claim of the owner of the goods by the respondent.insurer subrogated the latter to whatever right or legal action the owner of the goods may have against (elbros, :nc. and petitioner.carrier, )ulpicio Bines, :nc. 3hus, respondent.insurer then filed claims for reimbursement from (elbros, :nc. and petitioner.carrier )ulpicio Bines, :nc. which were subsequently denied. 9n '# 1ovember !==&, respondent.insurer filed a suit for damages doc<eted as Civil Case 1o. =&.@***G with the trial court against (elbros, :nc. and herein petitioner.carrier. 9n '$ 8ebruary !==*, petitioner.carrier filed its +nswer with Counterclaim. (elbros, :nc. filed on !$ +pril !==* its +nswer with Counterclaim and Cross.claim, alleging that assuming the contents of the crate in question were truly in bad order, fault is with herein petitioner.carrier which was responsible for the unloading of the crates. Petitioner.carrier filed its +nswer to (elbros, :nc.>s cross.claim asserting that it observed eDtraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the ;anila +dHusters and )urveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, eDcept that 5& cello bags each of $' pieces ferri inductors 1o. BC 8B !!&&G'A.@' ,c- were unaccounted for and missing as per pac<aging list.J +fter hearing, the trial court dismissed the complaint for damages as

8or the carriage of said shipment from Cebu City to ;anila, (elbros, :nc. engaged the services of the vessel ;/0 Philippine Princess, owned and operated by petitioner )ulpicio Bines, :nc. ,carrier-. 3he vessel arrived at the 1orth 6arbor, ;anila, on &# 8ebruary !==&.

well as the counterclaim filed by therein defendant )ulpicio Bines, :nc. and the cross.claim filed by (elbros, :nc. +ccording to the R3C4 3he plaintiff has failed to prove its case. 3he first witness for the plaintiff merely testified about the payment of the claim based on the documents accompanying the claim which were the Pac<ing Bist, Commercial :nvoices, Bill of Bading, Claims )tatement, ;arine Policies, )urvey Report, ;arine Ris< 1ote, and the letter to 3hird Party carriers and shipping lines ,7Dhibit +.%-. 3he chec< was paid and delivered to the assured as evidenced by the chec< voucher and the subrogation receipt. 9n cross.eDamination by counsel for the )ulpicio Bines, he said that their company paid the claim less *$O salvage value based on the adHuster report. 3his testimony is hearsay. 3he second witness for the plaintiff, +rturo 0alde?, testified, among others, that he, together with a co.surveyor and a representative of )ulpicio Bines had conducted a survey of the shipment at the compound of )ulpicio Bines. 6e prepared a survey report ,7Dhibits / and /.!- and too< a picture of shipment ,7Dhibit /.&-. 9n cross.eDamination, he said that two cartons were torn at the sides with top portion flaps opened and the #! cartons were properly sealed and in good order conditions. 3wo cartons were already opened and slightly damaged. 6e merely loo<ed at them but did not conduct an inspection of the contents. What he was referring to as slightly damaged were the cartons only and not the contents. 8rom the foregoing evidence, it is apparent that the plaintiff had failed to prove its case with a preponderance of evidence. W67R789R7, in view of the foregoing considerations, Hudgment is hereby rendered dismissing the Complaint, defendant )ulpicio Bines> counterclaim

and defendant (elbros :nc.>s cross.claim. #" + ;otion for Reconsideration was then filed by herein respondent. insurer and subsequently denied by the trial court in an 9rder dated 'G 8ebruary !==$ on the ground that it did not raise any new issue. 3hus, respondent.insurer instituted an appeal with the Court of +ppeals, which reversed the dismissal of the complaint by the lower court, the decretal portion of which reads4 W67R789R7, the appeal is granted. 3he decision appealed from is R707R)7(. (efendants.appellees (elbros and )ulpicio Bines are hereby ordered to pay, Hointly and severally, plaintiff.appellant the sum of P!=#,&&'.*! representing actual damages, plus legal interest counted from the filing of the complaint until fully paid. $" 3he appellate court disposed of the issues in the case in this wise4 8urthermore, the evidence shows that one of the three crates fell during the unloading at the pier in ;anila. 3he wooden crate which fell was damaged such that this particular crate was not anymore sent to )ingapore and was instead shipped bac< to Cebu from ;anila. Cpon eDamination, it was found that two ,&- cartons of the forty.two ,#&- cartons contained in this crate were eDternally damaged. 3hey were torn at the sides and their top portions or flaps were open. 3hese facts were admitted by all the parties. (efendant.appellees, however, insist that it was only the eDternal pac<aging that was damaged, and that there was no actual damage to the goods such that would ma<e them liable to the shipper. 3his theory is erroneous. When the goods are placed at a common carrier>s possession for delivery to a specified consignee, they are in good order and condition and are supposed to be transported and delivered to the consignee in the same state. :n the case herein, the goods were received by defendant.appellee (elbros in Cebu properly pac<ed in cardboard cartons and then placed in wooden crates, for delivery to the consignee in )ingapore. 6owever, before the shipment reached )ingapore ,while it was in ;anila- one crate and & cartons contained therein were not anymore in their original state. 3hey were no longer fit to be sent to )ingapore.

+s We have already found, there is damage suffered by the goods of the shipper. 3his consists in the destruction of one wooden crate and the tearing of two of the cardboard boDes therein rendering then unfit to be sent to )ingapore. (efendant.appellee )ulpicio Bines admits that this crate fell while it was being unloaded at the ;anila pier. 8alling of the crate was negligence on the part of defendant.appellee )ulpicio Bines under the doctrine of res i0sa lo3ui1ur. (efendant.appellee )ulpicio Bines cannot eDculpate itself from liability because it failed to prove that it eDercised due diligence in the selection and supervision of its employees to prevent the damage. @" 9n &! %une !===, herein petitioner.carrier filed its ;otion for Reconsideration of the decision of the Court of +ppeals which was subsequently denied in a Resolution dated !* 9ctober !===. 6ence, the instant petition. (uring the pendency of the appeal before this Court, (elbros, :nc. filed a manifestation stating that its appeal G" filed before this Court had been dismissed for being filed out of time and thus the case as against it was declared closed and terminated. +s a consequence, it paid in full the amount of the damages awarded by the appellate court to the respondent. insurer. Before this Court, (elbros, :nc. prays for reimbursement, contribution, or indemnity from its co.defendant, herein petitioner.carrier )ulpicio Bines, :nc. for whatever it had paid to respondent.insurer in consonance with the decision of the appellate court declaring both (elbros, :nc. and petitioner.carrier )ulpicio Bines, :nc. Hointly and severally liable. ISSUESPetitioner.carrier raises !. &4e Cour1 o+ A00eals erred in no1 4oldin5 14a1 14e 1rial cour1 6us1l, and correc1l, dismissed 14e com0lain1 a5ains1 $ul0icio Lines, 74ic4 dismissal is alread, +inal.

raised by petitioner.carrier, )ulpicio Bines, :nc. that the Court of +ppeals should have dismissed the appeal for failure of respondent.insurer to attach a copy of the decision of the trial court to its appellant>s brief in violation of Rule ##, )ection !*,h- of the Rules of Civil Procedure. 2"

+ perusal of the records will show, however, that in a Resolution =" dated !* +ugust !==@, the Court of +ppeals required herein respondent. insurer to submit seven ,G- copies of the questioned decision within five ,$days from notice. )aid Resolution was properly complied with. +s a rule, the right to appeal is a statutory right and one who see<s to avail of that right must comply with the manner required by the pertinent rules for the perfection of an appeal. 1evertheless, this Court has allowed the filing of an appeal upon subsequent compliance with the requirements imposed by law, where a strict application of the technical rules will impair the proper administration of Hustice. +s enunciated by the Court in the case of 8aro v. Cour1 o+ A00eals4 !'" 3here is ample Hurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaDation of the rules of procedure. :n Cusi-Hernande9 vs. !ia9 **@ )CR+ !!*" and Pi5las:amao vs. Na1ional La;or "ela1ions Commission *$G)CR+ @#'", we ruled that the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance. 3he reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer scrutini?ed. !!" We see no error, therefore, on the part of the Court of +ppeals when it gave due course to the appeal after respondent.insurer had submitted copies of the R3C decision, albeit belatedly. We now come to the substantial issues alleged by petitioner.carrier. 3he pivotal question to be considered in the resolution of this issue is whether or not, based on the evidence presented during the trial, the owner of the goods, respondent.insurer>s predecessor.in.interest, did incur damages, and if so, whether or not petitioner.carrier is liable for the same.

&. &4e Cour1 o+ A00eals erred in no1 dismissin5 14e a00eal +or +ailure o+ a00ellan1 1o com0l, 7i14 14e 1ec4nical re3uiremen1 o+ 14e "ules o+ Cour1. RULIN, OF THE COURT We shall first address the procedural issue

:t cannot be denied that the shipment sustained damage while in the custody of petitioner.carrier. :t is not disputed that one of the three ,*crates did fall from the cargo hatch to the pier apron while petitioner.carrier was unloading the cargo from its vessel. 1either is it impugned that upon inspection, it was found that two ,&- cartons were torn on the side and the top flaps were open and that two ,&- cello bags, each of $' pieces ferri inductors, were missing from the cargo. Petitioner.carrier contends that its liability, if any, is only to the eDtent of the cargo damage or loss and should not include the lac< of fitness of the shipment for transport to )ingapore due to the damaged pac<ing. 3his is erroneous. Petitioner.carrier seems to belabor under the misapprehension that a distinction must be made between the cargo pac<aging and the contents of the cargo. +ccording to it, damage to the pac<aging is not tantamount to damage to the cargo. :t must be stressed that in the case at bar, the damage sustained by the pac<aging of the cargo while in petitioner.carrier>s custody resulted in its unfitness to be transported to its consignee in )ingapore. )uch failure to ship the cargo to its final destination because of the ruined pac<aging, indeed, resulted in damages on the part of the owner of the goods. 3he falling of the crate during the unloading is evidence of petitioner.carrier>s negligence in handling the cargo. +s a common carrier, it is eDpected to observe eDtraordinary diligence in the handling of goods placed in its possession for transport. !&" 3he standard of eDtraordinary diligence imposed upon common carriers is considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a good 0a1er+amilias established in respect of the ordinary relations between members of society. !*" + common carrier is bound to transport its cargo and its passengers safely Pas +ar as 4uman care and +oresi541 can 0rovide , using the u1mos1 dili5ence of a ver, cau1ious 0erson, with due regard to all circumstances.J !#" 3he eDtraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to <now and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. !$" :t requires common carriers to render service with the greatest s<ill and foresight and 5to use all reasonable means to ascertain the nature and characteristic of

goods tendered for shipment, and to eDercise due care in the handling and stowage, including such methods as their nature requires.J !@" 3hus, when the shipment suffered damages as it was being unloaded, petitioner.carrier is presumed to have been negligent in the handling of the damaged cargo. Cnder +rticles !G*$ !G" and !G$& !2" of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. 3o overcome the presumption of liability for loss, destruction or deterioration of goods under +rticle !G*$, the common carrier must prove that they observed eDtraordinary diligence as required in +rticle !G** !=" of the Civil Code. &'" Petitioner.carrier miserably failed to adduce any shred of evidence of the required eDtraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Coming now to the issue of the eDtent of petitioner.carrier>s liability, it is undisputed that respondent.insurer paid the owner of the goods under the insurance policy the amount of P!=#,&&'.*! for the alleged damages the latter has incurred. 1either is there dispute as to the fact that (elbros, :nc. paid P!=#,&&'.*! to respondent.insurer in satisfaction of the whole amount of the Hudgment rendered by the Court of +ppeals. 3he question then is4 3o what eDtent is )ulpicio Bines, :nc., as common carrier, liable for the damages suffered by the owner of the goodsK Cpon respondent.insurer>s payment of the alleged amount of loss suffered by the insured ,the owner of the goods-, the insurer is entitled to be subrogated 0ro 1an1o to any right of action which the insured may have against the common carrier whose negligence or wrongful act caused the loss. &!" )ubrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. &&" 3he rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor did not have. &*" :n other words, a subrogee cannot succeed to a right not possessed by the subrogor. &#" + subrogee in effect steps into the

shoes of the insured and can recover only if the insured li<ewise could have recovered. &$" +s found by the Court of +ppeals, there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two ,&- cardboard boDes therein which rendered them unfit to be sent to )ingapore. &@" 3he falling of the crate was negligence on the part of )ulpicio Bines, :nc. for which it cannot eDculpate itself from liability because it failed to prove that it eDercised eDtraordinary diligence. 6ence, we uphold the ruling of the appellate court that herein petitioner.carrier is liable to pay the amount paid by respondent.insurer for the damages sustained by the owner of the goods. +s stated in the manifestation filed by (elbros, :nc., however, respondent.insurer had already been paid the full amount granted by the Court of +ppeals, hence, it will be tantamount to unHust enrichment for respondent.insurer to again recover damages from herein petitioner.carrier. With respect to (elbros, :nc.>s prayer contained in its manifestation that, in case the decision in the instant case be adverse to petitioner.carrier, a pronouncement as to the matter of reimbursement, indemnification or contribution in favor of (elbros, :nc. be included in the decision, this Court will not pass upon said issue since (elbros, :nc. has no personality before this Court, it not being a party to the instant case. 1otwithstanding, this shall not bar any action (elbros, :nc. may institute against petitioner.carrier )ulpicio Bines, :nc. with respect to the damages the latter is liable to pay. *HEREFORE, premises considered, the assailed (ecision of the Court of +ppeals dated &@ ;ay !=== and its Resolution dated !* 9ctober !=== are hereby +88:R;7(. 1o costs. AMERICAN HOME ASSURANCE COMPANY, TANTUCO ENTERPRISES, INC., respondent. petitioner, vs.

on %anuary !#, !===, which affirmed in 1o1o the (ecision of the Regional 3rial Court, Branch $*, Bucena City in Civil Case 1o. =&.$! dated 9ctober !@, !==$. Respondent 3antuco 7nterprises, :nc. is engaged in the coconut oil milling and refining industry. :t owns two oil mills. Both are located at its factory compound at :yam, Bucena City. :t appears that respondent commenced its business operations with only one oil mill. :n !=22, it started operating its second oil mill. 3he latter came to be commonly referred to as the new oil mill. 3he two oil mills were separately covered by fire insurance policies issued by petitioner +merican 6ome +ssurance Co., Philippine Branch. !" 3he first oil mill was insured for three million pesos ,P*,''','''.''- under Policy 1o. *'@.G#*&*&#.* for the period ;arch !, !==! to !==&. &" 3he new oil mill was insured for siD million pesos ,P@,''','''.''- under Policy 1o. *'@.G#*&*&!.= for the same term. *" 9fficial receipts indicating payment for the full amount of the premium were issued by the petitionerQs agent. #" + fire that bro<e out in the early morning of )eptember *',!==! gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident. 3he latter then sent its appraisers who inspected the burned premises and the properties destroyed. 3hereafter, in a letter dated 9ctober !$, !==!, petitioner reHected respondent>s claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. :t stated that the description of the insured establishment referred to another building thus4 59ur policy nos. *'@. G#*&*&!.= ,Ps @;- and *'@.G#*&*&#.# ,Ps *;- eDtend insurance coverage to your oil mill under Building 1o. $, whilst the affected oil mill was under Building 1o. !#.J $" + complaint for specific performance and damages was consequently instituted by the respondent with the R3C, Branch $* of Bucena City. 9n 9ctober !@, !==$, after trial, the lower court rendered a (ecision finding the petitioner liable on the insurance policy thus4 5W67R789R7, Hudgment is rendered in favor of the plaintiff ordering

Before us is a Petition for Review on Cer1iorari assailing the (ecision of the Court of +ppeals in C+./.R. C0 1o. $&&&! promulgated

defendant to pay plaintiff4 ,a- P#,#'@,$*@.#' representing damages for loss by fire of its insured property with interest at the legal rateM ,b- P2','''.'' for litigation eDpensesM ,c- P*'','''.'' for and as attorney>s feesM and ,d- Pay the costs. Petitioner assailed this Hudgment before the Court of +ppeals. 3he appellate court upheld the same in a (ecision promulgated on %anuary !#, !===, the pertinent portion of which states4 5W67R789R7, the instant appeal is hereby (:);:))7( for lac< of merit and the trial court>s (ecision dated 9ctober !@, !==$ is hereby +88:R;7( in toto. Petitioner moved for reconsideration. 3he motion, however, was denied for lac< of merit in a Resolution promulgated on %une !', !===. 6ence, the present course of action, where petitioner ascribes to the appellate court the following errors4 5,!- 3he Court of +ppeals erred in its conclusion that the issue of non.payment of the premium was beyond its Hurisdiction because it was raised for the first time on appeal.J 2" 5,&- 3he Court of +ppeals erred in its legal interpretation of Q8ire 7Dtinguishing +ppliances WarrantyQ of the policy.J =" 5,*- With due respect, the conclusion of the Court of +ppeals giving no regard to the parole evidence rule and the principle of estoppel is erroneous.J !'" 3he petition is devoid of merit. 3he primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance

policy. +ccording to it, the oil mill insured is specifically described in the policy by its boundaries in the following manner4 58ront4 by a driveway thence at !2 meters distance by Bldg. 1o. &. Right4 Beft4 Rear4 by an open space thence by Bldg. 1o. #. +dHoining thence an imperfect wall by Bldg. 1o. #. by an open space thence at 2 meters distance.J

6owever, it argues that this specific boundary description clearly pertains, not to the burned oil mill, but to the other mill. :n other words, the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy. What eDacerbates respondent>s predicament, petitioner posits, is that it did not have the supposed wrong description or mista<e corrected. (espite the fact that the policy in question was issued way bac< in !=22, or about three years before the fire, and despite the 5:mportant 1oticeJ in the policy that 5Please read and e<amine 14e 0olic, and i+ incorrec1, re1urn i1 immedia1el, +or al1era1ion,J respondent apparently did not call petitioner>s attention with respect to the misdescription. By way of conclusion, petitioner argues that respondent is 5barred by the parole evidence rule from presenting evidence ,other than the policy in question- of its self.serving intention , sic- that it intended really to insure the burned oil mill,J Hust as it is 5barred by es1o00el from claiming that the description of the insured oil mill in the policy was wrong, because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition 1o. &2.J 3hese contentions can not pass Hudicial muster. :n construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance.

!!" :n view of the custom of insurance agents to eDamine buildings before writing policies upon them, and since a mista<e as to the identity and character of the building is eDtremely unli<ely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be. !&" 1otwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. 3his is obvious from the categorical statement embodied in the policy, eDtending its protection4 59n machineries and equipment with complete accessories usual to a coconut oil mill including stoc<s of copra, copra ca<e and copra mills whilst contained in the ne- " l ' ll building, situate ,sic- at C119. +B91/ 1+3:91+B 6:/6 W+I, B9. :I+;, BCC71+ C:3I C1BB9CA7(.J !*" ,em04asis su00lied.:f the parties really intended to protect the first oil mill, then the$e s n" need t" s%ec #( t as ne-. :ndeed, it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. +s mentioned earlier, the first oil mill is already covered under Policy 1o. *'@.G#*&*&#.# issued by the petitioner. :t is unthin<able for respondent to obtain the other policy from the very same company. 3he latter ought to <now that a second agreement over that same realty results in its overinsurance. 3he imperfection in the description of the insured oil mill>s boundaries can be attributed to a misunderstanding between the petitioner>s general agent, ;r. +lfredo BorHa, and its policy issuing cler<, who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one. +s testified to by ;r.BorHa4 5+tty. /. Camaligan4 R4 What did you do when you received the reportK

+4

: told them as will be shown by the map the intention really of ;r. 7dison 3antuco is to cover the new oil mill that is why when : presented the eDisting policy of the old policy, the policy issuing cler< Hust merely ,sic- copied the wording from the old policy and what she typed is that the desc$ %t "n "# the ."unda$ es #$"' the "ld %"l c( -as c"% ed .ut she nse$ted c"/e$ n! the ne- " l ' ll and to me at that time the important thing is that it covered the new oil mill .ecause t s 0ust - th n "ne c"'%"und and the$e a$e "nl( t-" " l ' ll s" and so Hust enough, : had the policy prepared. :n fact, two policies were prepared having the same date one for the old one and the other for the new oil mill and eDactly the same policy period, sir.J !#" ,em04asis su00lied-

:t is thus clear that the source of the discrepancy happened during the preparation of the written contract. 3hese facts lead us to hold that the present case falls within one of the recogni?ed eDceptions to the parole evidence rule. Cnder the Rules of Court, a party may present evidence to modify, eDplain or add to the terms of the written agreement if he puts in issue in his pleading, among others, its failure to eDpress the true intent and agreement of the parties thereto. !$" 6ere, the contractual intention of the parties cannot be understood from a mere reading of the instrument. 3hus, while the contract eDplicitly stipulated that it was for the insurance of the new oil mill, the boundary description written on the policy concededly pertains to the first oil mill. 3his irreconcilable difference can only be clarified by admitting evidence aliunde, which will eDplain the imperfection and clarify the intent of the parties. +nent petitioner>s argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption. 7vidence on record reveals that respondent>s operating manager, ;r. 7dison 3antuco, notified ;r. BorHa ,the petitioner>s agent with whom respondent negotiated for the contract- about the inaccurate description in the policy. 6owever, ;r. BorHa assured ;r. 3antuco that the use of the adHective ne- will distinguish the insured property. 3he assurance convinced respondent that,

despite the impreciseness in the specification of the boundaries, the insurance will cover the new oil mill. 3his can be seen from the testimony on cross of ;r. 3antuco4 P+33I. )+B91/+4 R4 Iou mentioned, sir, that at least in so far as 7Dhibit + is concern you have read what the policy contents.,sicAindly ta<e a loo< in the page of 7Dhibit + which was mar<ed as 7Dhibit +.& particularly the boundaries of the property insured by the insurance policy 7Dhibit +, will you tell us as the manager of the company whether the boundaries stated in 7Dhibit +.& are the boundaries of the old ,sic- mill that was burned or not. +4 :t was not, I called u% M$. 1"$0a $e!a$d n! th s 'atte$ and he t"ld 'e that -hat s '%"$tant s the -"$d ne- " l ' ll. ;r. BorHa said, as a matter of fact, you can never insured , sic- one property with two ,&- policies, you will only do that if you will ma<e to increase the amount and it is by indorsement not by another policy, sir.P !@"

P2=,GG'.&'. 8rom the admission of respondent>s own witness, ;r. BorHa, which the petitioner cited, the former only paid it PG$,!#G.'', leaving a difference of P!#,@&*.&'. 3he deficiency, petitioner argues, suffices to invalidate the policy, in accordance with )ection GG of the :nsurance Code. !2" 3he Court of +ppeals refused to consider this contention of the petitioner. :t held that this issue was raised for the first time on appeal, hence, beyond its Hurisdiction to resolve, pursuant to Rule #@, )ection !2 of the Rules of Court. !=" Petitioner, however, contests this finding of the appellate court. :t insists that the issue was raised in paragraph &# of its +nswer, vi9.4 5&#. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date.J Petitioner adds that the issue was the subHect of the cross.eDamination of ;r. BorHa, who ac<nowledged that the paid amount was lac<ing by P!#,@&*.&' by reason of a discount or rebate, which rebate under )ec. *@! of the :nsurance Code is illegal. 3he argument fails to impress. :t is true that the asseverations petitioner made in paragraph &# of its +nswer ostensibly spo<e of the policy>s condition for payment of the renewal premium on time and respondent>s non.compliance with it. Iet, it did not contain any specific and definite allegation that respondent did not pay the premium, or that it did not pay the full amount, or that it did not pay the amount on time. Bi<ewise, when the issues to be resolved in the trial court were formulated at the pre.trial proceedings, the question of the supposed inadequate payment was never raised. ;ost significant to point, petitioner fatally neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium. 3he thrust of the cross.eDamination of ;r. BorHa, on the other hand, was not for the purpose of proving this fact. 3hough it briefly touched on the alleged deficiency, such was made in the course of

We again stress that the obHect of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. :n determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, <eeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. :n determining the intent of the parties to the contract, the courts will consider the purpose and obHect of the contract. !G" :n a further attempt to avoid liability, petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the 8ire 7Dtinguishing +ppliances Warranty. 3he amount of the premium stated on the face of the policy was

discussing a discount or rebate, which the agent apparently gave the respondent. Certainly, the whole tenor of ;r. BorHa>s testimony, both during direct and cross eDaminations, implicitly assumed a valid and subsisting insurance policy. :t must be remembered that he was called to the stand basically to demonstrate that an eDisting policy issued by the petitioner covers the burned building. 8inally, petitioner contends that respondent violated the eDpress terms of the 8ire 7Dtinguishing +ppliances Warranty. 3he said warranty provides4 5W+RR+137( that during the currency of this Policy, 8ire 7Dtinguishing +ppliances as mentioned below shall be maintained in efficient wor<ing order on the premises to which insurance applies4 . P9R3+BB7 7N3:1/C:)67R), :137R1+B 6I(R+13), 7N37R1+B 6I(R+13), 8:R7 PC;P,&#.69CR )7CCR:3I )7R0:C7) BR7+C6 of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur.J &'" Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. 3he breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. 3his fact was admitted by the oil mill>s eDpeller operator, /erardo Sarsuela. +gain, the argument lac<s merit. We agree with the appellate court>s conclusion that the aforementioned warranty did not require respondent to provide for all the fire eDtinguishing appliances enumerated therein. +dditionally, we find that neither did it require that the appliances are restricted to those mentioned in the warranty. :n other words, what the warranty mandates is that respondent should maintain in efficient wor<ing

condition within the premises of the insured property, fire fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mill>s first line of defense in case any part of it bursts into flame. 3o be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the following devices4 numerous portable fire eDtinguishers, two fire hoses, &!" fire hydrant, &&" and an emergency fire engine. &*" +ll of these equipments were in efficient wor<ing order when the fire occurred. :t ought to be remembered that not only are warranties strictly construed against the insurer, but they should, li<ewise, by themselves be reasonably interpreted. &#" 3hat reasonableness is to be ascertained in light of the factual conditions prevailing in each case. 6ere, we find that there is no more need for an internal hydrant considering that inside the burned building were4 ,!- numerous portable fire eDtinguishers, ,&- an emergency fire engine, and ,*- a fire hose which has a connection to one of the eDternal hydrants. IN 2IE* *HEREOF, finding no reversible error in the impugned (ecision, the instant petition is hereby (:);:))7(.

DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION, respondents.

Before us is a petition for review on cer1iorari of the (ecision !" of the Court of +ppeals in C+./.R. C0 1o. *=2*@ promulgated on %une !G, !==@, reversing the decision of the Regional 3rial Court of ;a<ati City, Branch !*G, ordering petitioner to pay private respondent the sum of 8ive ;illion 1inety.)iD 3housand )iD 6undred 3hirty.8ive Pesos and 8ifty. )even Centavos ,P$,'=@,@*$.$G- and costs and the Resolution &" dated %anuary &!, !==G which denied the subsequent motion for reconsideration. 3he facts show that CalteD Philippines ,CalteD for brevity- entered into a contract of affreightment with the petitioner, (elsan 3ransport Bines, :nc., for a period of one year whereby the said common carrier agreed to transport CalteD>s industrial fuel oil from the Batangas.Bataan Refinery to different parts of the country. Cnder the contract, petitioner too< on board its vessel, ;3 ;aysun, &,&GG.*!# <iloliters of industrial fuel oil of CalteD to be delivered to the CalteD 9il 3erminal in Samboanga City. 3he shipment was insured with the private respondent, +merican 6ome +ssurance Corporation. 9n +ugust !#, !=2@, ;3 ;aysun set sail from Batangas for Samboanga City. Cnfortunately, the vessel san< in the early morning of +ugust !@, !=2@ near Panay /ulf in the 0isayas ta<ing with it the entire cargo of fuel oil. )ubsequently, private respondent paid CalteD the sum of 8ive ;illion 1inety.)iD 3housand )iD 6undred 3hirty.8ive Pesos and 8ifty. )even Centavos ,P$,'=@,@*$.$G- representing the insured value of the lost cargo. 7Dercising its right of subrogation under +rticle &&'G of the 1ew Civil Code, the private respondent demanded of the petitioner the same amount it paid to CalteD. (ue to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional 3rial Court of ;a<ati City, Branch !*G, for collection of a sum of money. +fter the trial and upon analy?ing the evidence adduced, the trial court rendered a decision on 1ovember &=, !==' dismissing the complaint against herein petitioner without pronouncement as to cost. 3he trial court found that the vessel, ;3 ;aysun, was seaworthy to underta<e the voyage as determined by the Philippine Coast /uard per )urvey Certificate Report 1o. ;$.'!@.;6

upon inspection during its annual dry.doc<ing and that the incident was caused by uneDpected inclement weather condition or +orce ma6eure, thus eDempting the common carrier ,herein petitioner- from liability for the loss of its cargo. *" 3he decision of the trial court, however, was reversed, on appeal, by the Court of +ppeals. 3he appellate court gave credence to the weather report issued by the Philippine +tmospheric, /eophysical and +stronomical )ervices +dministration ,P+/+)+ for brevity- which showed that from &4'' o>cloc< to 24'' o>cloc< in the morning on +ugust !@, !=2@, the wind speed remained at !' to &' <nots per hour while the waves measured from . G to two ,&- meters in height only in the vicinity of the Panay /ulf where the subHect vessel san<, in contrast to herein petitioner>s allegation that the waves were twenty ,&'- feet high. :n the absence of any eDplanation as to what may have caused the sin<ing of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrier #" to herein private respondent insurance company as subrogee of CalteD. 3he subsequent motion for reconsideration of herein petitioner was denied by the appellate court. Petitioner raised the following assignments of error in support of the instant petition, $" to wit4 367 C9CR3 98 +PP7+B) 7RR7( :1 R707R):1/ 367 (7C:):91 98 367 R7/:91+B 3R:+B C9CR3. 367 C9CR3 98 +PP7+B) 7RR7( +1( W+) 193 %C)3:8:7( :1 R7BC33:1/ 367 B7/+B PR7)C;P3:91 36+3 367 07))7B ;3 5;+I)C1J W+) )7+W9R36I. 367 C9CR3 98 +PP7+B) 7RR7( :1 193 +PPBI:1/ 367 (9C3R:17 98 367 )CPR7;7 C9CR3 :1 367 C+)7 98 69;7 :1)CR+1C7 C9RP9R+3:91 0. C9CR3 98 +PP7+B). Petitioner (elsan 3ransport Bines, :nc. invo<es the provision of

)ection !!* of the :nsurance Code of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subHect 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. :t theori?ed that when private respondent paid CalteD the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill.fated vessel was seaworthyM otherwise, private respondent was not legally liable to CalteD due to the latter>s breach of implied warranty under the marine insurance policy that the vessel was seaworthy. 3he petitioner also alleges that the Court of +ppeals erred in ruling that ;3 ;aysun was not seaworthy on the ground that the marine officer who served as the chief mate of the vessel, 8rancisco Berina, was allegedly not qualified. Cnder )ection !!@ of the :nsurance Code of the Philippines, the implied warranty of seaworthiness of the vessel, which the private respondent admitted as having been fulfilled by its payment of the insurance proceeds to CalteD of its lost cargo, eDtends to the vessel>s complement. Besides, petitioner avers that although Berina had merely a &nd officer>s license, he was qualified to act as the vessel>s chief officer under Chapter :0,#'*-, Category :::,a-,*-,ii-,aa- of the Philippine ;erchant ;arine Rules and Regulations. :n fact, all the crew and officers of ;3 ;aysun were eDonerated in the administrative investigation conducted by the Board of ;arine :nquiry after the subHect accident. @" :n any event, petitioner further avers that private respondent failed, for un<nown reason, to present in evidence during the trial of the instant case the subHect marine cargo insurance policy it entered into with CalteD. By virtue of the doctrine laid down in the case of Home Insurance Cor0ora1ion vs. CA, G" the 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. 6ence, the legal issues posed before the Court are4 Whether or not the payment made by the private respondent to CalteD 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. Whether or not the non.presentation of the marine insurance policy bars the complaint for recovery of sum of money for lac< of cause of action. We rule in the negative on both issues. 3he payment made by the private respondent for the insured value of the lost cargo operates as waiver of its ,private respondent- right to enforce the term of the implied warranty against CalteD under the marine insurance policy. 6owever, the same cannot be validly interpreted as an automatic admission of the vessel>s seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. 3he fact of payment grants the private respondent subrogatory right which enables it to eDercise legal remedies that would otherwise be available to CalteD as owner of the lost cargo against the petitioner common carrier. 2" +rticle &&'G of the 1ew Civil Code provides that4 +rt. &&'G. :f the plaintiff>s property has been insured, and he has received indemnity from the insurance company for the inHury 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. :f the amount paid by the insurance company does not fully cover the inHury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or inHury. 3he right of subrogation has its roots in equity. :t is designed to promote and to accomplish Hustice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in Hustice and good conscience ought to pay. =" :t is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. :t accrues simply upon payment by the insurance company of the insurance claim. !'" Consequently, the payment made by the private respondent ,insurer- to CalteD ,assured- operates as an equitable assignment to the former of all the

remedies which the latter may have against the petitioner. 8rom the nature of their business and for reasons of public policy, common carriers are bound to observe eDtraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case. !!" :n the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthqua<e, lightning or other natural disaster or calamity. !&" :n all other cases, if 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 eDtraordinary diligence. !*" :n order to escape liability for the loss of its cargo of industrial fuel oil belonging to CalteD, petitioner attributes the sin<ing of ;3 ;aysun to fortuitous event or +orce ma6eure. 8rom the testimonies of %aime %arabe and 8rancisco Berina, captain and chief mate, respectively of the ill.fated vessel, it appears that a sudden and uneDpected change of weather condition occurred in the early morning of +ugust !@, !=2@M that at around *4!$ o>cloc< in the morning a squall ,5unosJ- carrying strong winds with an approDimate velocity of *' <nots per hour and big waves averaging eighteen ,!2- to twenty ,&'- feet high, repeatedly buffeted ;3 ;aysun causing it to tilt, ta<e in water and eventually sin< with its cargo. !#" 3his tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report !$" from the Philippine +tmospheric, /eophysical and +stronomical )ervices +dministration ,P+/+)+-, the independent government agency charged with monitoring weather and sea conditions, showing that from &4'' o>cloc< to 24'' o>cloc< in the morning on +ugust !@, !=2@, the wind speed remained at ten ,!'- to twenty ,&'- <nots per hour while the height of the waves ranged from .G to two ,&- meters in the vicinity of Cuyo 7ast Pass and Panay /ulf where the subHect vessel san<. 3hus, as the appellate court correctly ruled, petitioner>s vessel, ;3 ;aysun, san< with its entire cargo for the reason that it was not seaworthy. 3here was no squall or bad weather or eDtremely poor sea condition in the vicinity when the said vessel san<. 3he appellate court also correctly opined that the petitioner>s

witnesses, %aime %arabe and 8rancisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be eDpected to testify against the interest of their employer, the herein petitioner common carrier. 1either may petitioner escape liability by presenting in evidence certificates !@" that tend to show that at the time of dry.doc<ing and inspection by the Philippine Coast /uard, the vessel ;3 ;aysun, was fit for voyage. 3hese pieces of evidence do not necessarily ta<e into account the actual condition of the vessel at the time of the commencement of the voyage. +s correctly observed by the Court of appeals4 +t the time of dry.doc<ing and inspection, the ship may have appeared fit. 3he certificates issued, however, do not negate the presumption of unseaworthiness triggered by an uneDplained sin<ing. 9f certificates issued in this regard, authorities are li<ewise clear as to their probative value, ,thus-4 )eaworthiness relates to a vessel>s actual condition. 1either the granting of classification or the issuance of certificates establishes seaworthiness. ,&.+ Benedict on +dmiralty, G.*, )ec. @&+nd also4 +uthorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owner>s obligation. +lso securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. ,:bid.+dditionally, the eDoneration of ;3 ;aysun>s officers and crew by the Board of ;arine :nquiry merely concerns their respective administrative liabilities. :t does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe eDtraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination

of which properly belongs to the courts. !2" :n the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to CalteD for its failure to rebut the presumption of fault or negligence as common carrier !=" occasioned by the uneDplained sin<ing of its vessel, ;3 ;aysun, while in transit. +nent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the eDercise of its subrogatory right. 3he subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and CalteD, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. 3he right of subrogation accrues simply upon payment by the insurance company of the insurance claim. &'" 3he presentation of the insurance policy was necessary in the case of Home Insurance Cor0ora1ion v. CA &!" ,a case cited by petitioner- because the shipment therein ,hydraulic engines- passed through several stages with different parties involved in each stage. 8irst, from the shipper to the port of departureM second, from the port of departure to the ;/) 9riental )tatesmanM third, from the ;/) 9riental )tatesman to the ;/) Pacific ConveyorM fourth, from the ;/) Pacific Conveyor to the port of arrivalM fifth, from the port of arrival to the arrastre operatorM siDth, from the arrastre operator to the hauler, ;abuhay Bro<erage Co., :nc. ,private respondent therein-M and lastly, from the hauler to the consignee. We emphasi?ed in that case that 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. 9rdinarily, it cannot be held responsible for the handling of the cargo before it actually received it. 3he 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. 6ence, our ruling on the presentation of the insurance policy in the said case of 6ome :nsurance Corporation is not applicable to the case at bar. :n contrast, there is no doubt that the cargo of industrial fuel oil

belonging to CalteD, in the case at bar, was lost while on board petitioner>s vessel, ;3 ;aysun, which san< while in transit in the vicinity of Panay /ulf and Cuyo 7ast Pass in the early morning of +ugust !@, !=2@. *HEREFORE, the instant petition is (71:7(. 3he (ecision dated %une !G, !==@ of the Court of +ppeals in C+./.R. C0 1o. *=2*@ is +88:R;7(. Costs against the petitioner.

LA RA3ON SOCIAL 4,O TIAOCO Y HERMANOS,4 plaintiff. appellant, vs.UNION INSURANCE SOCIETY OF CANTON, LTD., defendant.appel 3his is an action on a policy of marine insurance issued by the Cnion :nsurance )ociety of Canton, Btd., upon a cargo of rice belonging to the plaintiffs, /o 3iaoco Brothers, which was transported in the early days of ;ay, !=!$, on the steamship Honda5ua from the port of )aigon to Cebu. 9n discharging the rice from one of the compartments in the after hold, upon arrival at Cebu, it was discovered that one thousand four hundred seventy.three sac<s and been damages by sea water. 3he loss so resulting to the owners of rice, after proper deduction had been made for the portion saved, was three thousand eight hundred seventy five pesos and twenty.five centavos ,P*,2G$.&$-. 3he trial court found that the inflow of the sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that the loss was not covered by the policy of insurance. %udgment was accordingly entered in favor of the defendant and the plaintiffs appealed.

3he facts with reference to the manner in which the sea water effected entrance into the hold may be summari?ed as follows, substantially in accordance with the findings of the trial court4 3he drain pipe which served as a discharge from the water closet passed down through the compartment where the rice in question was stowed and thence out to sea through the wall of the compartment, which was a part of the wall of the ship. 3he Hoint or elbow where the pipe changed its direction was of cast ironM and in course of time it had become corroded and abraded until a longitudinal opening had appeared in the pipe about one inch in length. 3his hole had been in eDistence before the voyage was begun, and an attempt had been made to repair it by filling with cement and bolting over it a strip of iron. 3he effect of loading the boat was to submerge the vent, or orifice, of the pipe until it was about !2 inches or & feet below the level of the sea. +s a consequence the sea water rose in the pipe. 1avigation under these conditions resulted in the washing out of the cement.filling from the action of the sea water, thus permitting the continued flow of the salt water into the compartment of rice. 3he court found in effect that the opening above described had resulted in course of time from ordinary wear and tear and not from the straining of the ship in rough weather on that voyage. 3he court also found that the repairs that had been made on the pipe were slovenly and defective and that, by reason of the condition of this pipe, the ship was not properly equipped to receive the rice at the time the voyage was begun. 8or this reason the court held that the ship was unseaworthy. 3he policy of insurance was signed upon a form long in use among companies engaged in maritime insurance. :t purports to insure the cargo from the following among other ris<s4 PPerils . . . of the seas, men of war, fire, enemies, pirates, rovers, thieves, Hettisons, . . . barratry of the master and mariners, and of all other perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the said goods and merchandise or any part thereof.P 3he question whether the insurer is liable on this policy for the loss caused

in the manner above stated presents two phases which are in a manner involved with each other. 9ne has reference to the meaning of the eDpression Pperils of the seas and all other perils, losses, and misfortunes,P as used in the policyM the other has reference to the implied warranty, on the part of the insured, as to the seaworthiness of the ship. 3he meaning of the eDpression Pperils . . . of the seas . . . and all other perils, losses, and misfortunes,P used in describing the ris<s covered by policies of marine insurance, has been the subHect of frequent discussionM and certain propositions relative thereto are now so generally accepted as to be considered definitely settled. :n the first place it is determined that the words Pall other perils, losses, and misfortunesP are to be interpreted as covering ris<s which are of li<e <ind ,e6usdem 5eneris- with the particular ris<s which are enumerated in the preceding part of the same clause of the contract. P+ccording to the ordinary rules of construction,P said Bord ;acnaghten in 3hames and ;ersey ;arine :nsurance Co. vs. 6amilton, 8raser T Co. , !22G"-, !& +. C., #2#, $'!-, Pthese words must be interpreted with reference to the words which immediately precede them. 3hey were no doubt inserted in order to prevent disputes founded on nice distinctions. 3heir office is to cover in terms whatever may be within the spirit of the cases previously enumerated, and so they have a greater or less effect as a narrower or broader view is ta<en of those cases. 8or eDample, if the eDpression Qperils of the seasQ is given its widest sense the general words have little or no effect as applied to that case. :f no the other hand that eDpression is to receive a limited construction, as apparently it did in Cullen vs. Butler ,$ ;. T )., #@!-, and loss by perils of the seas is to be confined to loss e< marinae 1em0es1a1is discrimine, the general words become most important. But still, ever since the case of Cullen vs. Butler, when they first became the subHect of Hudicial construction, they have always been held or assumed to be restricted to cases Qa<in toQ or resemblingQ or Qof the same <ind asQ those specially mentioned. : see no reason for departing from this settled rule. :n marine insurance it is above all things necessary to abide by settled rules and to avoid anything li<e novel refinements or a new departure.P

:t must be considered to be settled, furthermore, that a loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the shipQs owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. )uch a loss is rather due to what has been aptly called the Pperil of the ship.P 3he insurer underta<es to insure against perils of the sea and similar perils, not against perils of the ship. +s was well said by Bord 6erschell in Wilson, )ons T Co. vs. 9wners of Cargo per the Nantho , !22G", !& +. C., $'*,$'=-, there must, in order to ma<e the insurer liable, be Psome casualty, something which could not be foreseen as one of the necessary incidents of the adventure. 3he purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen.P :n the present case the entrance of the sea water into the shipQs hold through the defective pipe already described was not due to any accident which happened during the voyage, but to the failure of the shipQs owner properly to repair a defect of the eDistence of which he was apprised. 3he loss was therefore more analogous to that which directly results from simple unseaworthiness than to that which results from perils of the sea. 3he first of the two decisions of the 6ouse of Bords from which we have quoted ,3hames and ;ersey ;arine :nsurance Co. vs. 6amilton, 8raser T Co. !22G", !& +. C., #2#- arose upon the following state of facts4 :n ;arch, !22#, the Inc4maree was lying at anchor off (iamond :sland and was about to start upon her voyage. 3o this end it became necessary to fill up her boilers. 3here was a don<ey.engine with a don<ey.pump on board, and the don<ey.engine was set to pump up water from the sea into the boilers. 3hose in charge of the operation did not ta<e the precaution of ma<ing sure that the valve of the aperture leading into one of the boilers was open. 3his valve happened to be closed. 3he result was that the water being unable to ma<e its way into the boiler was forced bac< and split the air.chamber and so disabled the pump. :t was held that whether the inHury occurred through negligence or accidentally without negligence, it was not covered by the policy, since the loss did not fall either under the words Pperils of the seasP or under the more general words Pall other perils, losses, and misfortunes.P

Bord Bramwell, in the course of his opinion quoted with approbation as definition given by Bopes B.%. in Pandorf vs. 6amilton ,!@ R. B. (., @&=-, which is as follows4 :n a sea.worthy ship damage to goods caused by the action of the sea during transit not attributable to the fault of anybody, is a damage from a peril of the sea. 3he second of the decision from the 6ouse of Bords from which we have quoted ,Wilson, )on T Co. vs. owners of Cargo per the #an14o !22G", !& +. C., $'*- arose upon the following facts4 3he owners of certain cargo embar<ed the same upon the steamship #an14o. + collision too< place in a fog between this vessel and another ship, 2alu1a. +n action was thereupon instituted by the owners of the cargo against the owners of the #an14o. :t was held that if the collision occurred without fault on the part of the carrying ship, the owners were not liable for the value of the cargo lost by such collision. )till another case was decided in the 6ouse of Bords upon the same date as the preceding two, which is equally instructive as the others upon the question now under consideration. We refer to 6amilton, 8raser T Co. vs. Pandorf T Co. , !22G", !& +. C., $!2-, where it appeared that rice was shipped under a charter party and bills of lading which eDpected Pdangers and accident of the sea.P (uring the voyage rats gnawed a hole in a pipe on board the ship, whereby sea water effected an entrance into the shipQs hold and damaged the rice. :t appeared that there was no neglect or default on the part of the shipowners or their servants in the matter of attending to the cargo. :t was held that this loss resulted from an accident or peril of the sea and that the shipowners were not responsible. )aid Bramwell4 P1o question of negligence eDists in this case. 3he damage was caused by the sea in the course of navigation with no default in any one. : am, therefore, of opinion that the damage was caused by peril of the sea within the meaning of the bill of lading.P 3he point which discriminates this decision from that now before us is that in the present case the negligence of the shipowners must be accepted as established. Cndoubtedly, if in 6amilton, 8raser T Co. vs. Pandorf T Co. !22G", !& +. C., $!2-, it had appeared that this hold had been gnawed by the rats prior to this voyage and the owners, after having their attention directed to it, had failed to ma<e adequate repairs, the ship

would have been liable. 3he three decisions in the 6ouse of Bords above referred to contain elaborate discussions concerning the liability of shipowners and insurers, respectively, for damage happening to cargo in the course of a sea voyageM and it would be presumptuous for us to underta<e to add to what has been there said by the learned Hudges of that high court. )uffice it to say that upon the authority of those cases there is no room to doubt the liability of the shipowner for such a loss as occurred in this case. By parity of reasoning the insurer is not liableM for, generally spea<ing, the shipowner eDcepts the perils of the sea from his engagement under the bill of lading, while this is the very peril against which the insurer intends to give protection. +s applied to the present case it results that the owners of the damages rice must loo< to the shipowner for redress and not to the insurer. 3he same conclusion must be reached if the question be discussed with reference to the seaworthiness of the ship. :t is universally accepted that in every contract of insurance upon anything which is the subHect of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the inception of the voyage. 3his rule is accepted in our own :nsurance Baw ,+ct 1o. &#&G, sec. !'@-. :t is also well settled that a ship which is seaworthy for the purpose of insurance upon the ship may yet be unseaworthy for the purpose of insurance upon the cargo ,+ct 1o. &#&G, sec. !'@-. :n )teel vs. )tate Bine )teamship Co. , !2GG", B. R. * +. C., G&-, a cargo of wheat was laden upon a ship which had a port.hole insecurely fastened at the time of the lading. 3his port.hole was about one foot above the water lineM and in the course of the voyage sea water entered the compartment where the wheat was stores and damaged the cargo. :t was held that the ship was unseaworthy with reference to the cargo in question. :n /ilroy, )ons T Co. vs. Price T Co. , !2=*", !2 +. C., $@-, a cargo of Hute was shipped. (uring the voyage the vessel encountered stormy weather, as a consequence of which the cargo shifted its position and bro<e a pipe leading down through the hold from the water closet, with result that water entered the vessel and the Hute was damaged. :t was found that the cargo was improperly stowed and that the owners of the ship were chargeable with negligence for failure to protect the pipe by putting a case over it. :t

was accordingly held that the ship was unseaworthy. 8rom what has been said it follows that the trial court committed no error in absolving the defendant from the complaint. 3he Hudgment must therefore be affirmed, and it is so ordered, with costs.

policies while in the process of ma<ing arrangements for the transhipment of the cargo from (urban to ;anila, covering the period 9ctober #. (ecember !=, !=2=. 6owever, on (ecember !!, !=2=, the cargo was sold in (urban, )outh +frica, for C)F!$#.#' per metric ton or a total of P!',*'#,&*!.G$ due to its perishable nature which could no longer stand a voyage of twenty days to ;anila and another twenty days for the discharge thereof. 9n %anuary $, !==', private respondent forthwith reduced its claim to C)F##2,2'@.'= ,or its peso equivalent of P=,2G=,=&2.2= at the eDchange rate of P&&.'!*2 per F!.''- representing private respondentQs loss after the proceeds of the sale were deducted from the original claim of F=!@,22@.@@ or P&',!2#,!$=.$$. Petitioner maintained its position that the arrest of the vessel by civil authorities on a question of ownership was an eDcepted ris< under the marine insurance policies. 3his prompted private respondent to file a complaint for damages praying that aside from its claim, it be reimbursed the amount of P!&2,GG'.22 as legal eDpenses and the interest it paid for the loan it obtained to finance the shipment totalling P=#&,&@=.*'. :n addition, private respondent as<ed for moral damages amounting to P&'','''.'', eDemplary damages amounting to P&'','''.'' and attorneyQs fees equivalent to *'O of what will be awarded by the court. 3he lower court decided in favor of private respondent and required petitioner to pay, aside from the insurance claim, consequential and liquidated damages amounting to P!,'&#,&**.22, eDemplary damages amounting to P!'','''.'', reimbursement in the amount equivalent to !'O of whatever is recovered as attorneyQs fees as well as the costs of the suit. 9n private respondentQs motion for reconsideration, petitioner was also required to further pay interest at the rate of !&O per annum on all amounts due and owing to the private respondent by virtue of the lower court decision counted from the inception of this case until the same is paid. 9n appeal, the Court of +ppeals affirmed the decision of the lower court stating that with the deletion of Clause !& of the policies issued to private respondent, the same became automatically covered under subsection !.! of )ection ! of the :nstitute War Clauses. 3he arrests,

MALAYAN INSURANCE CORPORATION, petitioner, vs. THE HON. COURT OF APPEALS and T5C MAR5ETIN, CORPORATION, respondents. +ssailed in this petition for review on cer1iorari is the decision of the Court of +ppeals in C+./.R. 1o. #*'&* !" which affirmed, with slight modification, the decision of the Regional 3rial Court of Cebu, Branch !$. Private respondent 3AC ;ar<eting Corp. was the owner/consignee of some *,!2=.!G! metric tons of soya bean meal which was loaded on board the ship ;0 +l Aa?iemah on or about )eptember 2, !=2= for carriage from the port of Rio del /rande, Bra?il, to the port of ;anila. )aid cargo was insured against the ris< of loss by petitioner ;alayan :nsurance Corporation for which it issued two ,&- ;arine Cargo Policy 1os. ;/BP =G2''*'$ amounting to P!2,=2@,='&.#$ and ;/BP =G2''*'@ amounting to P!,!=$,''$.#$, both dated )eptember !=2=. While the vessel was doc<ed in (urban, )outh +frica on )eptember !!, !=2= enroute to ;anila, the civil authorities arrested and detained it because of a lawsuit on a question of ownership and possession. +s a result, private respondent notified petitioner on 9ctober #, !=2= of the arrest of the vessel and made a formal claim for the amount of C)F=!@,22@.@@, representing the dollar equivalent on the policies, for non.delivery of the cargo. Private respondent li<ewise sought the assistance of petitioner on what to do with the cargo. Petitioner replied that the arrest of the vessel by civil authority was not a peril covered by the policies. Private respondent, accordingly, advised petitioner that it might tranship the cargo and requested an eDtension of the insurance coverage until actual transhipment, which eDtension was approved upon payment of additional premium. 3he insurance coverage was eDtended under the same terms and conditions embodied in the original

restraints or detainments contemplated in the former clause were those effected by political or eDecutive acts. Bosses occasioned by riot or ordinary Hudicial processes were not covered therein. :n other words, arrest, restraint or detainment within the meaning of Clause !& ,or 8.C. T ). Clause- rules out detention by ordinary legal processes. 6ence, arrests by civil authorities, such as what happened in the instant case, is an eDcepted ris< under Clause !& of the :nstitute Cargo Clause or the 8.C. T ). Clause. 6owever, with the deletion of Clause !& of the :nstitute Cargo Clause and the consequent adoption or institution of the :nstitute War Clauses ,Cargo-, the arrest and sei?ure by Hudicial processes which were eDcluded under the former policy became one of the covered ris<s. 3he appellate court added that the failure to deliver the consigned goods in the port of destination is a loss compensable, not only under the :nstitute War Clause but also under the 3heft, Pilferage, and 1on.delivery Clause ,31P(- of the insurance policies, as read in relation to )ection !*' of the :nsurance Code and as held in Williams v. Cole. &" 8urthermore, the appellate court contended that since the vessel was prevented at an intermediate port from completing the voyage due to its sei?ure by civil authorities, a peril insured against, the liability of petitioner continued until the goods could have been transhipped. But due to the perishable nature of the goods, it had to be promptly sold to minimi?e loss. +ccordingly, the sale of the goods being reasonable and Hustified, it should not operate to discharge petitioner from its contractual liability. 6ence this petition, claiming that the Court of +ppeals erred4 !. :n ruling that the arrest of the vessel was a ris< covered under the subHect insurance policies. &. :n ruling that there was constructive total loss over the cargo. *. :n ruling that petitioner was in bad faith in declining private respondentQs claim. #. :n giving undue reliance to the doctrine that insurance policies are

strictly construed against the insurer. :n assigning the first error, petitioner submits the following4 ,a- an arrest by civil authority is not compensable since the term ParrestP refers to Ppolitical or eDecutive actsP and does not include a loss caused by riot or by ordinary Hudicial process as in this caseM ,b- the deletion of the 8ree from Capture or )ei?ure Clause would leave the assured covered solely for the perils specified by the wording of the policy itselfM ,c- the rationale for the eDclusion of an arrest pursuant to Hudicial authorities is to eliminate collusion between unscrupulous assured and civil authorities. +s to the second assigned error, petitioner submits that any loss which private respondent may have incurred was in the nature and form of unrecovered acquisition value brought about by a voluntary sacrifice sale and not by arrest, detention or sei?ure of the ship. +s to the third issue, petitioner alleges that its act of reHecting the claim was a result of its honest belief that the arrest of the vessel was not a compensable ris< under the policies issued. :n fact, petitioner supported private respondent by accommodating the latterQs request for an eDtension of the insurance coverage, notwithstanding that it was then under no legal obligation to do so. Private respondent, on the other hand, argued that when it appealed its case to the Court of +ppeals, petitioner did not raise as an issue the award of eDemplary damages. :t cannot now, for the first time, raise the same before this Court. Bi<ewise, petitioner cannot submit for the first time on appeal its argument that it was wrong for the Court of +ppeals to have ruled the way it did based on facts that would need inquiry into the evidence. 7ven if inquiry into the facts were possible, such was not necessary because the coverage as ruled upon by the Court of +ppeals is evident from the very terms of the policies. :t also argued that petitioner, being the sole author of the policies, ParrestsP should be strictly interpreted against it because the rule is that any ambiguity is to be ta<en con1ra 0ro+eren1um. Ris< policies should be construed reasonably and in a manner as to ma<e effective the intentions

and eDpectations of the parties. :t added that the policies clearly stipulate that they cover the ris<s of non.delivery of an entire pac<age and that it was petitioner itself that invited and granted the eDtensions and collected premiums thereon. 3he resolution of this controversy hinges on the interpretation of the PPerilsP clause of the subHect policies in relation to the eDcluded ris<s or warranty specifically stated therein. By way of a historical bac<ground, marine insurance developed as an all.ris< coverage, using the phrase Pperils of the seaP to encompass the wide and varied range of ris<s that were covered. *" 3he subHect policies contain the PPerilsP clause which is a standard form in any marine insurance policy. )aid clause reads4 P3ouching the adventures which the said ;+B+I+1 :1)CR+1C7 C9., are content to bear, and to ta<e upon them in this voyageM they are of the )easM ;en.of.War, 8ire, 7nemies, Pirates, Rovers, 3hieves, %ettisons, Betters of ;art and Counter ;art, )uprisals, 3a<ings of the )ea, +rrests, Restraints and (etainments of all Aings, Princess and Peoples, of what 1ation, condition, or quality soever, Barratry of the ;aster and ;ariners, and of all other Perils, Bosses, and ;isfortunes, that have come to hurt, detriment, or damage of the said goods and merchandise or any part thereof . +1( in case of any loss or misfortune it shall be lawful to the +))CR7(, their factors, servants and assigns, to sue, labour, and travel for, in and about the defence, safeguards, and recovery of the said goods and merchandises, and ship, T c., or any part thereof, without preHudice to this :1)CR+1C7M to the charges whereof the said C9;P+1I, will contribute according to the rate and quantity of the sum herein :1)CR7(. +1( it is eDpressly declared and agreed that no acts of the :nsurer or :nsured in recovering, saving, or preserving the Property insured shall be considered as a Waiver, or +cceptance of +bandonment. +nd it is agreed by the said C9;P+1I, that this writing or Policy of :1)CR+1C7 shall be of as much 8orce and 7ffect as the surest Writing or Policy of :1)CR+1C7 made in B91(91. +nd so the said ;+B+I+1 :1)CR+1C7 C9;P+1I, :1C., are contented, and do hereby promise and bind themselves, their 6eirs, 7Decutors, /oods and Chattel, to the +))CR7(, his or their 7Decutors, +dministrators, or +ssigns, for the true Performance

of the PremisesM confessing themselves paid the Consideration due unto them for this :1)CR+1C7 at and after the rate arranged.P ,Cnderscoring supplied3he eDception or limitation to the PPerilsP clause and the P+ll other perilsP clause in the subHect policies is specifically referred to as Clause !& called the P8ree from Capture T )ei?ure ClauseP or the 8.C. T ). Clause which reads, thus4 PWarranted free of capture, sei?ure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereatM also from the consequences of hostilities and warli<e operations, whether there be a declaration of war or notM but this warranty shall not eDclude collision, contact with any fiDed or floating obHect ,other than a mine or torpedo-, stranding, heavy weather or fire unless caused directly ,and independently of the nature of the voyage or service which the vessel concerned or, in the case of a collision, any other vessel involved therein is performing- by a hostile act by or against a belligerent power and for the purpose of this warranty QpowerQ includes any authorities maintaining naval, military or air forces in association with power. 8urther warranted free from the consequences of civil war, revolution, insurrection, or civil stri<e arising therefrom or piracy. )hould Clause !& be deleted, the relevant current institute war clauses shall be deemed to form part of this insurance.P ,Cnderscoring supplied6owever, the 8. C. T ). Clause was deleted from the policies. Consequently, the :nstitute War Clauses ,Cargo- was deemed incorporated which, in subsection !.! of )ection !, provides4 P!. 3his insurance covers4 !.! 3he ris<s eDcluded from the standard form of 7nglish ;arine Policy by the clause warranted free of capture, sei?ure, arrest, restraint or detainment,

and the consequences thereof of hostilities or warli<e operations, whether there be a declaration of war or notM but this warranty shall not eDclude collision, contact with any fiDed or floating obHect ,other than a mine or torpedo-, stranding, heavy weather or fire unless caused directly ,and independently of the nature on voyage or service which the vessel concerned or, in the case of a collision any other vessel involved therein is performing- by a hostile act by or against a belligerent powerM and for the purpose of this warranty QpowerQ includes any authority maintaining naval, military or air forces in association with a power. 8urther warranted free from the consequences of civil war, revolution, rebellion, insurrection, or civil stri<e arising therefrom, or piracy.P +ccording to petitioner, the automatic incorporation of subsection !.! of section ! of the :nstitute War Clauses ,Cargo-, among others, means that any Pcapture, arrest, detention, etc.P pertained eDclusively to warli<e operations if this Court strictly construes the heading of the said Clauses. 6owever, it also claims that the parties intended to include arrests, etc. even if it were not the result of hostilities or warli<e operations. :t further claims that on the strength of Hurisprudence on the matter, the term ParrestsP would only cover those arising from political or eDecutive acts, concluding that whether private respondentQs claim is anchored on subsection !.! of )ection ! of the :nstitute War Clauses ,Cargo- or the 8.C. T ). Clause, the arrest of the vessel by Hudicial authorities is an eDcluded ris<. #" 3his Court cannot agree with petitionerQs assertions, particularly when it alleges that in the PPerilsP Clause, it assumed the ris< of arrest caused solely by eDecutive or political acts of the government of the sei?ing state and thereby eDcludes ParrestsP caused by ordinary legal processes, such as in the instant case. With the incorporation of subsection !.! of )ection ! of the :nstitute War Clauses, however, this Court agrees with the Court of +ppeals and the private respondent that ParrestP caused by ordinary Hudicial process is deemed included among the covered ris<s. 3his interpretation becomes inevitable when subsection !.! of )ection ! of the :nstitute War Clauses provided that Pthis insurance covers the ris<s eDcluded from the )tandard 8orm of 7nglish ;arine Policy by the clause QWarranted free of capture,

sei?ure, arrest, etc. D D DQP or the 8.C. T ). Clause. %urisprudentially, ParrestsP caused by ordinary Hudicial process is also a ris< eDcluded from the )tandard 8orm of 7nglish ;arine Policy by the 8.C. T ). Clause. Petitioner cannot adopt the argument that the ParrestP caused by ordinary Hudicial process is not included in the covered ris< simply because the 8.C. T ). Clause under the :nstitute War Clauses can only be operative in case of hostilities or warli<e operations on account of its heading P:nstitute War Clauses.P 3his Court agrees with the Court of +ppeals when it held that P. . . +lthough the 8.C. T ). Clause may have originally been inserted in marine policies to protect against ris<s of war, ,see generally /. /ilmore T C. Blac<, 3he Baw of +dmiralty )ection &.=, at G!.G* &d 7d. !=G$"-, its interpretation in recent years to include sei?ure or detention by civil authorities seems consistent with the general purposes of the clause, D D DP $" :n fact, petitioner itself averred that subsection !.! of )ection ! of the :nstitute War Clauses included ParrestP even if it were not a result of hostilities or warli<e operations. @" :n this regard, since what was also eDcluded in the deleted 8.C. T ). Clause was ParrestP occasioned by ordinary Hudicial process, logically, such ParrestP would now become a covered ris< under subsection !.! of )ection ! of the :nstitute War Clauses, regardless of whether or not said ParrestP by civil authorities occurred in a state of war. Petitioner itself seems to be confused about the application of the 8.C. T ). Clause as well as that of subsection !.! of )ection ! of the :nstitute War Clauses ,Cargo-. :t stated that Pthe 8.C. T ). Clause was Poriginally incorporated in insurance policies to eliminate the ris<s of warli<e operationsP. :t also averred that the 8.C. T ). Clause applies even if there be no war or warli<e operations D D DP G" :n the same vein, it contended that subsection !.! of )ection ! of the :nstitute War Clauses ,Cargo- Ppertained eDclusively to warli<e operationsP and yet it also stated that Pthe deletion of the 8.C. T ). Clause and the consequent incorporation of subsection !.! of )ection ! of the :nstitute War Clauses ,Cargo- was to include Parrest, etc. even if it were not a result of hostilities or warli<e operations.P 2" 3his Court cannot help the impression that petitioner is overly straining its interpretation of the provisions of the policy in order to avoid

being liable for private respondentQs claim. 3his Court finds it pointless for petitioner to maintain its position that it only insures ris<s of ParrestP occasioned by eDecutive or political acts of government which is interpreted as not referring to those caused by ordinary legal processes as contained in the PPerilsP ClauseM deletes the 8.C. T ). Clause which eDcludes ris<s of arrest occasioned by eDecutive or political acts of the government and naturally, also those caused by ordinary legal processesM and, thereafter incorporates subsection !.! of )ection ! of the :nstitute War Clauses which now includes in the coverage ris<s of arrest due to eDecutive or political acts of a government but then still eDcludes ParrestsP occasioned by ordinary legal processes when subsection !.! of )ection ! of said Clauses should also have included ParrestsP previously eDcluded from the coverage of the 8.C. T ). Clause. :t has been held that a strained interpretation which is unnatural and forced, as to lead to an absurd conclusion or to render the policy nonsensical, should, by all means, be avoided. =" Bi<ewise, it must be borne in mind that such contracts are invariably prepared by the companies and must be accepted by the insured in the form in which they are written. !'" +ny construction of a marine policy rendering it void should be avoided. !!" )uch policies will, therefore, be construed strictly against the company in order to avoid a forfeiture, unless no other result is possible from the language used. !&" :f a marine insurance company desires to limit or restrict the operation of the general provisions of its contract by special proviso, eDception, or eDemption, it should eDpress such limitation in clear and unmista<able language. !*" 9bviously, the deletion of the 8.C. T ). Clause and the consequent incorporation of subsection !.! of )ection ! of the :nstitute War Clauses ,Cargo- gave rise to ambiguity. :f the ris< of arrest occasioned by ordinary Hudicial process was eDpressly indicated as an eDception in the subHect policies, there would have been no controversy with respect to the interpretation of the subHect clauses. Be that as it may, eDceptions to the general coverage are construed most strongly against the company. !#" 7ven an eDpress eDception in a policy is to be construed against the underwriters by whom the policy is

framed, and for whose benefit the eDception is introduced. !$" +n insurance contract should be so interpreted as to carry out the purpose for which the parties entered into the contract which is, to insure against ris<s of loss or damage to the goods. )uch interpretation should result from the natural and reasonable meaning of language in the policy. !@" Where restrictive provisions are open to two interpretations, that which is most favorable to the insured is adopted. !G" :ndemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. !2" + contract of insurance, being a contract of adhesion, par eDcellence, any ambiguity therein should be resolved against the insurerM in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Bimitations of liability should be regarded with eDtreme Healousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. !=" :n view of the foregoing, this Court sees no need to discuss the other issues presented. *HEREFORE, the petition for review is (71:7( and the decision of the Court of +ppeals is +88:R;7(.

FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs. COURT OF APPEALS and CHOA TIE5 SEN,, respondents. 3his is a review of the decision of the Court of +ppeals, promulgated on %uly !=,!=22, the dispositive part of which reads4 W67R789R7, the Hudgment appealed from is affirmed insofar as it orders defendant 8ilipino ;erchants :nsurance Company to pay the plaintiff the sum of P$!,$@2.@& with interest at legal rate from the date of filing of the complaint, and is modified with respect to the third party complaint in that

,!- third party defendant 7. Ra?on, :nc. is ordered to reimburse third party plaintiff the sum of P&$,#G!.2' with legal interest from the date of payment until the date of reimbursement, and ,&- the third.party complaint against third party defendant Compagnie ;aritime (es Chargeurs Reunis is dismissed. 6 3he facts as found by the trial court and adopted by the Court of +ppeals are as follows4 3his is an action brought by the consignee of the shipment of fishmeal loaded on board the vessel )) Bougainville and unloaded at the Port of ;anila on or about (ecember !!, !=G@ and see<s to recover from the defendant insurance company the amount of P$!,$@2.@& representing damages to said shipment which has been insured by the defendant insurance company under Policy 1o. ;.&@G2. 3he defendant brought a third party complaint against third party defendants Compagnie ;aritime (es Chargeurs Reunis and/or 7. Ra?on, :nc. see<ing Hudgment against the third ,sic- defendants in case %udgment is rendered against the third party plaintiff. :t appears from the evidence presented that in (ecember !=G@, plaintiff insured said shipment with defendant insurance company under said cargo Policy 1o. ;.&@G2 for the sum of P&@G,@$*.$= for the goods described as @'' metric tons of fishmeal in new gunny bags of =' <ilos each from Bang<o<, 3hailand to ;anila against all ris<s under warehouse to warehouse terms. +ctually, what was imported was $=.=#' metric tons not @'' tons at F*=$.#& a ton C18 ;anila. 3he fishmeal in @@@ new gunny bags were unloaded from the ship on (ecember !!, !=G@ at ;anila unto the arrastre contractor 7. Ra?on, :nc. and defendantQs surveyor ascertained and certified that in such discharge !'$ bags were in bad order condition as Hointly surveyed by the shipQs agent and the arrastre contractor. 3he condition of the bad order was reflected in the turn over survey report of Bad 9rder cargoes 1os. !&'*&' to !&'*&&, as 7Dhibit C.# consisting of three ,*- pages which are also 7Dhibits #, $ and @. Ra?on. 3he cargo was also surveyed by the arrastre contractor before delivery of the cargo to the consignee and the condition of the cargo on such delivery was reflected in 7. Ra?onQs Bad 9rder Certificate 1o. !#2$=, !#2@* and !#2@= covering a total of &&G bags in bad order condition. (efendantQs surveyor has

conducted a final and detailed survey of the cargo in the warehouse for which he prepared a survey report 7Dhibit 8 with the findings on the eDtent of shortage or loss on the bad order bags totalling &&G bags amounting to !&,!#2 <ilos, 7Dhibit 8.!. Based on said computation the plaintiff made a formal claim against the defendant 8ilipino ;erchants :nsurance Company for P$!,$@2.@& ,7Dhibit C- the computation of which claim is contained therein. + formal claim statement was also presented by the plaintiff against the vessel dated (ecember &!, !=G@, 7Dhibit B, but the defendant 8ilipino ;erchants :nsurance Company refused to pay the claim. Consequently, the plaintiff brought an action against said defendant as adverted to above and defendant presented a third party complaint against the vessel and the arrastre contractor. 7 3he court below, after trial on the merits, rendered Hudgment in favor of private respondent, the decretal portion whereof reads4 W67R789R7, on the main complaint, Hudgment is hereby rendered in favor of the plaintiff and against the defendant 8ilipino ;erchantQs ,sic:nsurance Co., ordering the defendants to pay the plaintiff the following amount4 3he sum of P$!,$@2.@& with interest at legal rate from the date of the filing of the complaintM 9n the third party complaint, the third party defendant Compagnie ;aritime (es Chargeurs Reunis and third party defendant 7. Ra?on, :nc. are ordered to pay to the third party plaintiff Hointly and severally reimbursement of the amounts paid by the third party plaintiff with legal interest from the date of such payment until the date of such reimbursement. 9n appeal, the respondent court affirmed the decision of the lower court insofar as the award on the complaint is concerned and modified the same with regard to the adHudication of the third.party complaint. + motion for reconsideration of the aforesaid decision was denied, hence this petition with the following assignment of errors4

!. 3he Court of +ppeals erred in its interpretation and application of the Pall ris<sP clause of the marine insurance policy when it held the petitioner liable to the private respondent for the partial loss of the cargo, notwithstanding the clear absence of proof of some fortuitous event, casualty, or accidental cause to which the loss is attributable, thereby contradicting the very precedents cited by it in its decision as well as a prior decision of the same (ivision of the said court ,then composed of %ustices Cacdac, Castro.Bartolome, and Pronove-M &. 3he Court of +ppeals erred in not holding that the private respondent had no insurable interest in the subHect cargo, hence, the marine insurance policy ta<en out by private respondent is null and voidM *. 3he Court of +ppeals erred in not holding that the private respondent was guilty of fraud in not disclosing the fact, it being bound out of utmost good faith to do so, that it had no insurable interest in the subHect cargo, which bars its recovery on the policy. 8 9n the first assignment of error, petitioner contends that an Pall ris<sP marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be Psome fortuity, P PcasualtyP or Paccidental causeP to which the alleged loss is attributable and the failure of herein private respondent, upon whom lay the burden, to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy. We find said contention untenable. 3he Pall ris<s clauseP of the :nstitute Cargo Clauses read as follows4 $. 3his insurance is against all ris<s of loss or damage to the subHect.matter insured but shall in no case be deemed to eDtend to cover loss, damage, or eDpense proDimately caused by delay or inherent vice or nature of the subHect.matter insured. Claims recoverable hereunder shall be payable irrespective of percentage. 9 +n Pall ris<s policyP should be read literally as meaning all ris<s whatsoever

and covering all losses by an accidental cause of any <ind. 3he terms PaccidentP and PaccidentalP, as used in insurance contracts, have not acquired any technical meaning. 3hey are construed by the courts in their ordinary and common acceptance. 3hus, the terms have been ta<en to mean that which happens by chance or fortuitously, without intention and design, and which is uneDpected, unusual and unforeseen. +n accident is an event that ta<es place without oneQs foresight or eDpectationM an event that proceeds from an un<nown cause, or is an unusual effect of a <nown cause and, therefore, not eDpected. : 3he very nature of the term Pall ris<sP must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. ; 3his is pursuant to the very purpose of an Pall ris<sP insurance to give protection to the insured in those cases where difficulties of logical eDplanation or some mystery surround the loss or damage to property. < +n Pall as<sP policy has been evolved to grant greater protection than that afforded by the Pperils clause,P in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the shipM it is written against all losses, that is, attributable to eDternal causes. = 3he term Pall ris<sP cannot be given a strained technical meaning, the language of the clause under the :nstitute Cargo Clauses being unequivocal and clear, to the effect that it eDtends to all damages/losses suffered by the insured cargo eDcept ,a- loss or damage or eDpense proDimately caused by delay, and ,b- loss or damage or eDpense proDimately caused by the inherent vice or nature of the subHect matter insured. /enerally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an Pall ris<sP policy the burden is not on the insured to prove the precise cause of loss or damage for which it see<s compensation. 3he insured under an Pall ris<s insurance policyP has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vesselM thereafter, the burden then shifts to the insurer to show the eDception to the coverage. 6> +s we held in Paris-Manila Per+umer, Co. vs. P4oeni<

Assurance Co., L1d. 66 the basic rule is that the insurance company has the burden of proving that the loss is caused by the ris< eDcepted and for want of such proof, the company is liable. Coverage under an Pall ris<sP provision of a marine insurance policy creates a special type of insurance which eDtends coverage to ris<s not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policyQs coverageM the insurer can avoid coverage upon demonstrating that a specific provision eDpressly eDcludes the loss from coverage. 67 + marine insurance policy providing that the insurance was to be Pagainst all ris<sP must be construed as creating a special insurance and eDtending to other ris<s than are usually contemplated, and covers all losses eDcept such as arise from the fraud of the insured. 6? 3he burden of the insured, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. 3hereafter, the burden is shifted to the insurer to prove that the loss was due to eDcepted perils. 3o impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of Pall ris<sP insurance. :n the present case, there being no showing that the loss was caused by any of the eDcepted perils, the insurer is liable under the policy. +s aptly stated by the respondent Court of +ppeals, upon due consideration of the authorities and Hurisprudence it discussed U ... it is believed that in the absence of any showing that the losses/damages were caused by an eDcepted peril, i.e. delay or the inherent vice or nature of the subHect matter insured, and there is no such showing, the lower court did not err in holding that the loss was covered by the policy. 3here is no evidence presented to show that the condition of the gunny bags in which the fishmeal was pac<ed was such that they could not hold their contents in the course of the necessary transit, much less any evidence that the bags of cargo had burst as the result of the wea<ness of the bags themselves. 6ad there been such a showing that spillage would have been a certainty, there may have been good reason to plead that there was no ris<

covered by the policy ,)ee Ber< vs. )tyle !=$@" cited in ;arine :nsurance Claims, I;id, p. !&$-. Cnder an Qall ris<sQ policy, it was sufficient to show that there was damage occasioned by some accidental cause of any <ind, and there is no necessity to point to any particular cause. 68 Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. 3he agreement has the force of law between the parties. 3he terms of the policy constitute the measure of the insurerQs liability. :f such terms are clear and unambiguous, they must be ta<en and understood in their plain, ordinary and popular sense. 69 +nent the issue of insurable interest, we uphold the ruling of the respondent court that private respondent, as consignee of the goods in transit under an invoice containing the terms under PC T 8 ;anila,P has insurable interest in said goods. )ection !* of the :nsurance Code defines insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. :n principle, anyone has an insurable interest in property who derives a benefit from its eDistence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property y. 6: :nsurable interest in property may consist in ,a- an eDisting interestM ,b- an inchoate interest founded on an eDisting interestM or ,c- an eDpectancy, coupled with an eDisting interest in that out of which the eDpectancy arises. 6; 6erein private respondent, as vendee/consignee of the goods in transit has such eDisting interest therein as may be the subHect of a valid contract of insurance. 6is interest over the goods is based on the perfected contract of sale. 6< 3he perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. 6= 3he contract of shipment, whether under 8.9.B., C.:.8., or C. T 8. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. 3he perfected contract of sale even without delivery vests

in the vendee an equitable title, an eDisting interest over the goods sufficient to be the subHect of insurance. 8urther, +rticle !$&* of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authori?ed or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the eDceptions to said rule not obtaining in the present case. 3he Court has heretofore ruled that the delivery of the goods on board the carrying vessels parta<e of the nature of actual delivery since, from that time, the foreign buyers assumed the ris<s of loss of the goods and paid the insurance premium covering them. 7> C T 8 contracts are shipment contracts. 3he term means that the price fiDed includes in a lump sum the cost of the goods and freight to the named destination. 76 :t simply means that the seller must pay the costs and freight necessary to bring the goods to the named destination but the ris< of loss or damage to the goods is transferred from the seller to the buyer when the goods pass the shipQs rail in the port of shipment. 77 ;oreover, the issue of lac< of insurable interest was not among the defenses averred in petitioners answer. :t was neither an issue agreed upon by the parties at the pre.trial conference nor was it raised during the trial in the court below. :t is a settled rule that an issue which has not been raised in the court a 3uo cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, Hustice and due process. 7? 3his is but a permuted restatement of the long settled rule that when a party deliberately adopts a certain theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal because, to permit him to do so, would be unfair to the adverse party. 78 :f despite the fundamental doctrines Hust stated, we nevertheless decided to indite a disquisition on the issue of insurable interest raised by petitioner, it was to put at rest all doubts on the matter under the facts in this case and also to dispose of petitionerQs third assignment of error which consequently

needs no further discussion. W67R789R7, the instant petition is (71:7( and the assailed decision of the respondent Court of +ppeals is +88:R;7( in 1o1o.