NEGOTIABLE INSTRUMENTS LAW

SIGNATURE OF DECEASED SHOWN; PRIMA FACIE PRESUMED TO BE A PARTY TO A CHECK FOR VALUE
FELICITO SANSON, ET AL. VS. COURT OF APPEALS
G.R. No. 127745. April 22, 2003
Facts: Felicito Sanson filed a special proceeding for the settlement of the estate of Juan See. Sanson claimed that the
deceased was indebted to him in the amount of Php 603, 000.00 and to his sister Caledonia Sanson-Saquin in the amount
of Php 320,000.00. also petitioner Eduardo Montinola and his mother filed separate claims against the estate alleging
that the deceased owed them Php50,000 and Php 150, 000, respectively. During the trial, Caledonia and Felicito Sanson
testified that they had transaction with the deceased evidenced by six checks issued by the deceased before he died and
that after his death, Felicito and Caledonia presented the checks to the bank for payment but were dishonored due to the
closure of the account. The same transaction happened to Eduardo and Angeles Montionola but when they presented the
check to the bank, it was dishonored. Demand letters were sent to the heirs of the deceased but the checks remained
unsettled.

Issue: Whether or not presumption of consideration may be rebutted even if the heirs did not present any evidence to
controvert it.

Held: When the fact was established by a witness that it was the deceased who signed the checks and in fact who entered
into the transaction, the genuineness of the deceased signature having been shown, the latter is prima facie presumed to
have been a party to the check for value, following Section 24 of NIL which provides that every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon
to have become a party thereto for value.
Since the prima facie presumption was not rebutted or contradicted by the heirs, it has become conclusive.

PROMISSORY NOTES; PRESCRIPTION OF ACTION
QUIRINO GONZALES, ET AL. VS. COURT OF APPEALS, ET AL.
G.R. No. 126568. April 30, 2003

Facts: Petitioners applied for credit accommodations with respondent bank, which the bank approved granting a credit
line of Php900,000.00. Petitioners obligations were secured by a real estate mortgage on four parcels of land. Also,
petitioners had made certain advances in separate transactions from the bank in connection with QGLCs exportation of
logs and executed a promissory note in 1964.
Due to petitioners long default in the payment of their obligations under the credit line, the bank foreclosed the mortgage
and sold the properties covered to the highest bidder in the auction. Respondent bank, alleging non-payment of the
balance of QGLCs obligation after the proceedings of the foreclosure sale were applied and non-payment of promissory
notes despite repeated demands, filed a complaint for sum of money against petitioners.
Petitioners, on the other hand, asserted that the complaint states no cause of action and assuming that it does, the same is
barred by prescription or void for want of consideration.

Issue: Whether or not the cause of action is barred by prescription.

Held: An action upon a written contract, an obligation created by law, and a judgment must be brought within 10 years
from the time the right of action accrues.
The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Banks first to
sixth causes had arisen is not disputed. The Bank contends, however, that the notices of foreclosure sale in the foreclosure
proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due loan
obligations with the Bank; hence, said notices of foreclosure sale interrupted the running of the prescriptive period.
The Banks contention has no merit. Prescription of actions is interrupted when they are filed before the court, when there
is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the
debtor.
The law specifically requires a written extrajudicial demand by the creditor which is absent in the case at bar. The
contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the
contents of said notices not having been brought to light.
But even assuming that the notices interrupted the running of the prescriptive period, the argument would still not lie for
the following reasons:
The Bank seeks the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in
the nature of a mortgage action because its purpose is to enforce the mortgage contract. A mortgage action prescribes after
ten years from the time the right of action accrued.
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the
property at public auction and the outstanding obligation proceedings. In the present case, the Bank, as mortgagee, had
the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. as it filed the complaint only on
January 27, 1977, more than ten years had already elapsed, hence, the action had then prescribed.

HOLDER IN DUE COURSE; PRESUMPTION OF ACQUISITION OF AN INSTRUMENT FOR A CONSIDERATION
CELY YANG VS. COURT OF APPEALS, ET AL.
G.R. No. 138074. August 15, 2003

Facts: Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp.
and Far east Bank and Trust Company (FEBTC) two cashiers checks in the amount of P2.087 million each, payable to
Fernando david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-
01165-2. Yang gave the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet
Chandiramani to turn over the checks and the dollar draft, and the latter would in turn deliver to the former Phil.
Commercial International Bank (PCIB) managers check in the sum of P4.2 million and the dollar draft in the same
amount to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and
Ranigo allegedly lost the two cashiers checks and the dollar draft. The loss was then reported to the police. It transpired,
however that the checks and the dollar draft were never lost, for Chandiramani was able to get hold of them without
delivering the exchange consideration consisting of PCIB Managers checks. Two hours after Chandiramani was able to
meet Ranigo, the former delivered to David the two cashiers checks of Yang and, in exchange, got US $360,000 from
David, who in turn deposited them. Chandiramani also deposited the dollar draft in PCIG FCDU No. 4194-0165-2.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both Banks
complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on
FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of
US $ 200, 000.

Issue: (1) Whether or not David may be considered a holder in due course.
(2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable
in this case.

Held: (1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this
presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law,
meaning a payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains
the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course
applies in his favor.
(2) The presumption is that every party to an instrument acquired the same for a consideration. However, said
presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the
checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for
in Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due course.
Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same
for a consideration or for value. Thus, the law itself creates a presumption in Davids favor that he gave valuable
consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of
the checks absent said consideration. However, petitioner failed to discharge her burden of proof. The petitioners
averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of
any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the
checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments.

LIABILITY OF MAKERS OF PROMISSORY NOTE
ASTRO ELECTRONIC CORP. & ROXAS VS. PHIL. EXPORT &FOREIGN LOAN GUARANTEE CORP.
G.R. No. 136729. September 23, 2003
Facts: Astro Electronic Corp. (Astro) was granted several loans by Phil. Trust Co. (Phil Trust) amounting to Php 3,000.00
with interest and secured by three promissory notes. In each note, it appears that Roxas signed twice as president of Astro
and in his personal capacity. Thereafter, Philippine Export & Foreign Guarantee Corp. (Phil Guarantee), with the consent
of Astro, guaranteed in favor of Phil Trust the payment of 70% of Astros loan. Upon the latters failure to pay its loan
obligation, despite demands, Phil Guarantee paid 70% of the guaranteed loan. The Phil Trust and Phil Guarantee
subsequently filed against astro and Roxas a complaint for sum of money. The Regional Trial Court rendered its decision
ordering Astro & Roxas to pay jointly and severally Phil Guarantee the sum of Php 3, 621, 187.52 with interest and cost.

Issue: Whether or not Roxas should be jointly and severally liable with Astro for the sum awarded by the RTC.
Held: By signing twice, as president of Astro and in his personal capacity, Roxas became a co-maker of the notes and
cannot escape any liability arising from it. Under the NIL, persons who write their names on the face of the note as
makers, promising that they will pay to the order of the payee or any holder according to its tenor will be liable as such.
Roxas is primarily liable as a joint and several debtor considering that his intention to be liable is manifested by the fact
that he affixed his signature twice in each of the three promissory notes which necessarily would imply that he is
undertaking the obligation in two different capacities, official and personal.


NOVATION; LOANS; SOLIDARY OBLIGATIONS; PROMISSORY NOTE; ACCOMODATION PARTY
ROMEO GARCIA VS. DIONISIO LLAMAS
G.R. No. 154127. December 8, 2003

Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and
Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and severally to
pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid despite repeated
demands by respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party for de
Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and acceptance
thereof novated or superseded the note.
The trial court rendered a judgment on the pleadings in favor of the respondent and directed petitioner to pay jointly and
severally respondent the amounts of Php 400, 000 representing the principal amount plus interest at 15% per month from
January 23, 1997 until the same shall have been fully paid, less the amount of Php 120,000 representing interests already
paid.
The Court of Appeals ruled that no novation, express or implied, had taken place when respondent accepted the check
from de Jesus. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory
note jointly and severally undertaken by petitioner and de Jesus. Respondents acceptance of the check did not serve to
make de Jesus the sole debtor because first, the obligation incurred by him and petitioner was joint and several; and
second, the check which had been intended to extinguish the obligation bounced upon its presentment.

Issues: (1) Whether or not there was novation of the obligation

(2) Whether or not the defense that petitioner was only an accommodation party had any basis.

Held: For novation to take place, the following requisites must concur: (1) There must be a previous valid obligation; (2)
the parties concerned must agree to a new contract; (3) the old contract must be extinguished; and (4) there must be a
valid new contract.
The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance
of the check or that the check would take the place of the note. There is no incompatibility between the promissory note
and the check.
Neither could the payment of interests, which in petitioners view also constitutes novation, change the terms and
conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally
in accord with the terms thereof.
Also unmeritorious is petitioners argument that the obligation was novated by the substitution of debtors. In order to
change the person of the debtor, the old must be expressly released from the obligation, and the third person or new
debtor must assume the formers place in the relation. Well-settled is the rule that novation is never presumed.
Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus
incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place. Note also that for
novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor.
In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the
debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally
liable with de Jesus, petitioner is therefore liable for the entire obligation.

(2) By its terms, the note was made payable to a specific person rather than bearer to or ordera requisite for
negotiability. Hence, petitioner cannot avail himself of the NILs provisions on the liabilities and defenses of an
accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and evidence of such
intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general
provisions of the Civil Code, not by the NIL.
Even granting that the NIL was applicable, still petitioner would be liable for the note. An accommodation party is liable
for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an
accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of
principal and surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an
original promissory debtor from the beginning. The liability is immediate and direct.







BOUNCING CHECKS LAW
QUE VS. PEOPLE
154 SCRA 160
Facts: Vicotr Que deliberately issued checks to cover accounts but the checks were dishonored upon presentment. Que was
convicted by the RTC of the crime of violating B.P. Blg. 22 on two counts which decision was affirmed by the CA. que
alleged, among others, that he issued the checks in question merely to guarantee the payment of the purchases by
Powerhouse Supply, Inc. of which he is the manager.

Issue: Whether dishonored checks issued merely to guarantee payment constitute violation of B.P. Blg. 22.

Held: It is now well-settled that B.P. Blg. 22. applies even in cases where dishonored checks are issued merely in form of
deposit or a guarantee. The enactment does not make any distinction as to whether the checks within its contemplation
are issued, in payment of an obligation or merely to guarantee said obligation. Consequently, what are important are the
facts that the accused deliberately issued the checks to cover accounts and that the checks were dishonored upon
presentment regardless of whether or not the accused merely issued the checks as a guarantee. It is the intention of the
framers of B.P. Blg. 22. to make the mere act of issuing a worthless check malum prohibitum and thus punishable under
such law.














































INSURANCE
WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND SURETY CORPORATION AND THE
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD.
G.R. No. 154514. July 28, 2005

Facts: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from The Steamship
Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. White Gold was issued a
Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold
failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters unpaid
balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship
Mutual violated Sections 186 and 187, while Pioneer violated Sections 299, to 301 of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a
license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and
Indemnity Club. Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed;
hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court
distinguished between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely
acted as a collection agent of Steamship Mutual.

Issues: (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
Held: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act
required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to
a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance.
A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club
and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the
marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due
to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must
secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance
company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance
Commission.
On the second issue, Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration
issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate
of authority issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a
separate license to be an agent/broker of Steamship Mutual. Although Pioneer is already licensed as an insurance
company, it needs a separate license to act as insurance agent for Steamship Mutual.

PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION
G.R. No. 136888. June 29, 2005

Facts: Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance.
Respondent Chemoil Lighterage Corporation is also a domestic corporation engaged in the transport of goods. On 24
January 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the liquid chemical
DIOCTYL PHTHALATE (DOP) on board MT TACHIBANA which was valued at US$90,201.57 and another 436.70
metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila.
PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine
Policies No. MRN-30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached
and formed part of MRN-30721, amending the latters insured value to P24,667,422.03, and reduced the premium
accordingly. The ocean tanker MT TACHIBANA unloaded the cargo to the tanker barge, which shall transport the same
to Del Pan Bridge in Pasig River and haul it by land to PGPs storage tanks in Calamba, Laguna. Upon inspection by PGP,
the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter
where it formally made an insurance claim for the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment
which issued a report stating that DOP samples taken were discolored. Inspection of cargo tanks showed manhole covers
of ballast tanks ceilings loosely secured and that the rubber gaskets of the manhole covers of the ballast tanks re-acted to
the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the full and final
payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the
latters services.
On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC,
Br.16, City of Manila. Respondent filed an answer which admitted that it undertook to transport the shipment, but alleged
that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it
and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no
fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo.
After due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its
Decision reversing the trial court. A petition for review on certiorar[ was filed by the petitioner with this Court.

Issues: 1. Whether or not the Notice of Claim was filed within the required period.

2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent.

Held: Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; Within
twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage
or average found upon opening the packages, provided that the indications of the damage or average giving rise to the
claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time
of the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been
paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms.
Abastillas, at the time of the delivery of the cargo, and therefore, within the required period. The respondent, however,
claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. The Court of Appeals
declared:that a telephone call made to defendant-company could constitute substantial compliance with the requirement
of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the
requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods,
the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately
apparent. We have examined the evidence, and We are unable to find any proof of compliance with the required period,
which is fatal to the accrual of the right of action against the carrier.[27]
Nothing in the trial courts decision stated that the notice of claim was relayed or filed with the respondent-carrier
immediately or within a period of twenty-four hours from the time the goods were received. The Court of Appeals made
the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely
and ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is
not an empty or worthless proviso.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel
the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the
goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within
twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the
alleged damages to the goods while the matter is still fresh in the minds of the parties.
The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the
accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the
former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of
action.[31]
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within
the period provided for under Article 366 of the Code of Commerce. Petitioners contention proceeds from a false
presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the
second issue.








EXEMPTION SHOULD BE PROVEN IN ORDER TO QUALIFY UNDEREXCEPTION CLAUSE OF INSURANCE POLICY
COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY MULTI-PURPOSE COOPERATIVE, INC.
G.R. No.136914, January 25, 2002

Facts: Country Bankers Insurance Corp. (CBIC) insured the building of respondent Lianga Bay and Community Multi-
Purpose Corp., Inc. against fire, loss, damage, or liability during the period starting June 20, 1990 for the sum of
Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred. The respondent filed the insurance claim
but the petition denied the same on the ground that the building was set on fire by two NPA rebels and that such loss was
an excepted risk under par.6 of the conditions of the insurance policy that the insurance does not cover any loss or damage
occasioned by among others, mutiny, riot, military or any uprising. Respondent filed an action for recovery of loss,
damage or liability against petitioner and the Trial Court ordered the petition to pay the full value of the insurance.

Issue: Whether or not the insurance corporation is exempted to pay based on the exception clause in the insurance policy.

Held: The Supreme Court held that the insurance corporation has the burden of proof to show that the loss comes within
the purview of the exception or limitation set-up. But the insurance corporation cannot use a witness to prove that the fire
was caused by the NPA rebels on the basis that the witness learned this from others. Such testimony is considered hearsay
and may not be received as proof of the truth of what he has learned. The petitioner, failing to prove the exception, cannot
rely upon on exemption or exception clause in the fire insurance policy. The petition was granted.


BREACH OF CONTRACT OF INSURANCE
MALAYAN INSURANCE CO., VS. PHIL.NAILS & WIRES CORP.
G.R. No.138084, April 10, 2002
Facts: Respondent Phil. Nails & Wires Corp. insured against all risk its shipment of 10,053.40 metric tons of steel billet
with petitioner Malayan Insurance Co., Inc., the shipment delivered was short by 377.168 metric tons. For this shortage,
respondent claimed insurance for Php.5,250,000.00. Petitioner refused to pay. On July 28, 1993, respondent filed a
complaint against petitioner for the Sum of money with RTC of Pasig. Petitioner moved to dismiss for failure to state cause
of action but it was denied. On November 4, 1994, respondent moved to declare petitioner in default and the trial court
granted and allowed the presentation of evidence ex parte. Respondent presented its lone witness, Jeanne King. On
November 11, 1993, petitioner filed its answer but was expunged from the record for late filing. The Trial Court rendered a
judgment by default.


Issue: Whether or not there is a cause of action and whether or not King is credible witness.

Held: The Supreme Court ruled that the respondents cause of action is founded on breach of insurance. To hold petitioner
liable, respondent has to prove, first, its, its importation of 10,053.40 metric tons of steel billets and second, the actual
steel billets delivered to and received by the respondent. Witness Jeanne King has personal knowledge of the goods
imported steel billets received. Her testimony on steel billets received was hearsay because she based the summary only on
the receipts prepared by the other person.


CONCEALMENT MADE IN GOOD FAITH; VALID INSURACE CONTRACT
PHILAMCARE HEALTH SYSTEMS, INC. VS. CA & JULITA RAMOS
G.R. No.125678, March 18, 2002

Facts: Ernani Trinos, deceased husband of Julita Ramos, applied for a health care coverage with the petitioner
Philamcare. In the standard application form, he delivered no to a question asking him if he had been treated of any of the
family member consulted for high blood, heart trouble, diabetes, cancer, liver disease, asthma or ulcer. The application
was approved for a period of 1 year from and thus extended to June 1, 1990. During the period of coverage, Ernani
suffered a heart attack and was confined for one month. Respondent Julita Ramos tried to claim saying that the health
care Agreement was void as there was concealment regarding Ernanis medical history. On July 24, 1990, after Ernani
died, Julita Ramos instituted an action for damages against Philam care with the RTC Manila, which ruled against the
latter.

Issue: Whether or not there is a valid insurance contract because of alleged concealment of material fact.

Held: The Supreme Court ruled that there is a valid insurance contract, after all, all the elements for an insurance contract
are contract are present and alleged concealment answers made in good faith and without intent to deceive will not avoid
the policy. The insurer, in case of material fact, is not justified in relying upon such statement, but obligated to make
further inquiry.

PAYMENT BY INSURANCE COMPANY OF INSURABLE VALUE OF THE GOODS; INSURANCE COMPANY
SUBROGATED TO THE RIGHTS OF THE ASSURED AGAINST THE COMMON CARRIER
DELSAN TRANSPORT LINES, INC. VS. CA ET.AL.
G.R. No.127897, November 15, 2001

Facts: Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc. for a period of
one year whereby the petitioner agreed to transport Caltex industrial fuel oil from Batangas refinery to different parts of
the country. On August 14, 1986, MT Maysun set sail for Zamboanga City but unfortunately the vessel in the early morning
of August 16, 1986 near Panay Gulf. The shipment was insured with the private respondent, American Home Assurance
Corporation. Subsequently, private respondent paid Caltex the sum of Php.5,096,635.57. Exercising its right of
subrogation under Art. 2207, NCC, the private respondent demanded from the petitioner the same amount paid to Caltex.
Due to its failure to collect from the petitioner, private respondent filed a complaint with the RTC of Makati City but the
trial court dismissed the complaint, finding the vessel to be seaworthy and that the incident was due to a force majeure,
thus exempting the petitioner from liability. However, the decision of the trial court was reversed by the CA, giving
credence to the report of PAGASA that the weather was normal and that it was impossible for the vessel to sink.

Issue: Whether or not the payment made by private respondent 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.

Held: The payment by the private respondent for the insured value of the lost cargo operates as waiver of its right to
enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be
validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose
recourse against the petitioner for any liability under its contractual obligation as common carrier. The fact of payment
grants the private respondent subrogatory right which enables it to exercise legal remedies that otherwise be available to
Caltex as owner of the lost cargo against the petitioner common carrier.





































TRANSPORTATION LAW

JAPAN AIRLINES VS. ASUNCION
G.R. No. 161730. January 28, 2005
Facts: On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines (JAL) bound
for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at
Narita, en employee of JAL endorsed their applications for shore pass and directed them to the Japanese immigration
official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the
port of call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated
in his passport. Because of this inconsistency, respondents were denied shore pass entries and were detained at the Narita
Airport Rest House where they were billeted overnight. A JAL employee was instructed that the respondents were to be
watched so as not to escape. Respondents were charged US $400.00 each for their accommodation, security, service and
meals.
Subsequently, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel
requirements and that they were rudely and forcibly detained at the Narita Airport. The trial court rendered a decision
favor of the respondents. On appeal, the CA affirmed in toto the decision of the trial court.
Issue: Whether JAL is guilty of breach of contract.
Held: The SC found that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty
to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking
the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness
of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered
with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As
such, JAL should not be faulted for the denial of respondents shore pass applications.

SHIP AGENT; LIABILITIES
MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February, 2005
Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade carrier certain goods in
favor of ATLAS FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all
risks.
When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses.
Formal claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same.
MACONDRAY denies liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator
of the vessel who transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the
charterer of M/V Trade Carrier and not party to this case; that it has no control over the acts of the captain and crew of the
carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew; that
upon arrival at the port, M/V Trade Carrier discharged the full amount of shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the
vessel owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade
Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be
found. Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered
as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the
entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel.
The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and
Customs Clearance. Petitioners employees were present at the port of destination one day before the arrival of the vessel,
where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la
Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that
it was the entity that represented the vessel at the port of destination and was the ship agent within the meaning and
context of Article 586 of the Code of Commerce.

EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT OR NEGLIGENCE REBUTTABLE
REPUBLIC OF THE PHIL., represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND
FORWARDING CORPORATION (NTFC) and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE)
VS. LORENZO SHIPPING CORPORATION (LSC)
G.R. No. 153563. February 7, 2005

Facts: The Philippine government entered into a contract of carriage of goods with petitioner NTFC whereby the latter
shipped bags of non-fat dried milk through respondent LSC. The consignee named in the bills of lading issued by the
respondent was Abdurahma Jama, petitioners branch supervisor in Zamboanga City.
On reaching the port of Zamboanga City, the respondents agent unloaded the goods and delivered the same to petitioners
warehouse. Before each delivery, the delivery checkers of respondents agent requested Jama to surrender the original
bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, the delivery
checkers asked Jama to sign the delivery receipts. However, at times when Jama had to attend to other business before a
delivery was completed, he instructed his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive the good and filed a formal claim for
non-delivery of the goods shipped through respondent. Respondent explained that the cargo had already been delivered to
Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an action for breach of contract of carriage
against respondent as defendant.
Issue: Whether or not respondent is presumed at fault or negligent as common carrier for the loss or deterioration of the
goods.
Held: Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods
transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence
and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on
common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy
of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the
common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or
negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary
diligence over the goods.
The respondent has observed such extraordinary diligence in the delivery of the goods. Prior to releasing the goods to
Jama, the delivery checkers required the surrender of the original bills of lading, and in their absence, the certified true
copies showing that Jama was indeed the consignee of the goods. In addition, they required Jama or his designated
subordinates to sign the delivery receipts upon completion of each delivery.

PROMPT NOTICE OF CLAIM MUST BE MADE WITHIN THE PRESCRIBED PERIOD AS STATED IN THE BILL OF
LADING
PROVIDENT INSURANCE CORP. (PIC) VS. COURT OF APPEALS and AZUCAR SHIPPING CORP. (ASC)
G.R. No. 118030. January 15, 2004

Facts: The vessel MV Eduardo II received on board a shipment of plastic woven bags of fertilizer in good order and
condition which was consigned to Atlas Fertilizer Corporation (AFC) and covered by a bill of lading. In the process of
unloading at the port of destination, certain goods were found to have fallen overboard and some considered being
unrecovered spillages. Petitioner PIC indemnified the consignee AFC for its damages and seeks reimbursement from
respondent ASC for the value of the losses/damages to the cargo. Respondent ASC argued that the claim or demand by
petitioner had been waived, abandoned, or otherwise extinguished for failure of the consignee to comply with the required
claim for damages set forth in Stipulation No. 7 of the Bill of Lading.
Issue: Whether or not failure to make the prompt notice of claim as required is fatal to the right of petitioner to claim
indemnification for damages.
Held: There can be no question about the validity and enforceability of Stipulation No. 7 in the Bill of Lading. The 24-hour
requirement under said stipulation is, by agreement of the contracting parties, a sine qua non for accrual of the right of
action to recover damages against the carrier.
Considering that the prompt demand was necessary to foreclose the possibility of fraud or mistake in ascertaining the
validity of claims, there was a need for the consignee or its agent to observe the conditions provided for in Stipulation No.
7. Hence, petitioners insistence that respondent carrier had knowledge of the damage because one of respondents officers
supervised the unloading operations and signed a discharging receipt, cannot be construed as sufficient compliance with
the said proviso. Moreover, a reading of the stipulation will readily show that upon the consignee or its agent rests the
obligation to make the necessary claim within the prescribed period and not merely rely on the supposed knowledge of the
damage by the carrier.

DEFINITION: COMMON CARRIER IN GENERAL
CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.
G.R. No. 148496. March 19, 2002

Facts: A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes
from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When
the shipment arrived and unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the
same to SMCs warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the
insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo.
Petitioner, on the other hand, contends that it is a private carrier not required to observe such extraordinary diligence in
the vigilance over the goods.
As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties.

Issue: Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in
the vigilance over the goods.

Held: The law makes no distinction between a carrier offering its services to the general community or solicits business
only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of
Calvos business, it cannot indeed be doubted that it is a common carrier.

FILING OF NOTICE OF CLAIM; ONE-YEAR PRESCRIPTIVE PERIOD

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. VS. PHIL. FIRST INSURANCE CO., INC.
G.R. No. 143133. June 5, 2002

Facts: On June 13, 1990, CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of
various Prime Cold Rolled Steel Sheets for transportation to Manila consigned to the Philippine Steel Trading
Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and within the subsequent days, discharged
the subject cargo. Four coils were found to be in bad order, and the consignee declared the same as total loss.
The respondent filed its Notice of Claim only on September 18, 1990. the complaint was filed by respondent on July 25,
1991. Petitioners, on the other hand, claim that pursuant to the Carriage of Goods by Sea Act (COGSA), respondent should
have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990
but respondent filed its Notice of Claim only on September 18, 1990.

Issue: Whether or not failure to file a Notice of Claim shall bar respondent from recovery.

Held: First, COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt,
has been the subject of a joint inspection or survey. In this case, prior to unloading the cargo, an Inspection Report as to
the condition of the goods was prepared and signed by representative of both parties.
Second, a failure to file a Notice of Claim within three days will not bar recovery if it is nonetheless filed within one year.
The one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of
the bill of lading. The cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25,
1991, within the one-year prescriptive period.


FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS)
G.R. No. 141910. August 6, 2002
Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of
Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in
damage to the cargoes.
FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS.
GPS filed a motion to dismiss for failure to prove that it was a common carrier.

Issue: Whether or not GPS falls under the category of a common carrier.

Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other
individual or entity.
A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but
never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its
liability based on culpa contractual.

STIPULATION IN THE CHARTER PARTY EXEMPTING LIABILITY
HOME INSURANCE CO. VS. AMERICAN STEAMSHIP AGENCIES
23 SCRA 24

Facts: A Peruvian firm shipped on board its vessel certain goods with San Miguel Brewery as its consignee and Home
Insurance Co. (HIC) as its insurer. The cargo was found to have shortages when it arrived. HIC paid for said shortages and
thereafter, demanded recovery of the amount from American Steamship Agencies (ASA). The trial court ordered ASA to
reimburse HIC since according to the Code of Commerce, the ship agent is civilly liable for damages in favor of third
persons due to the conduct of the carriers captain and that the stipulation in the charter party exempting the owner of the
ship from liability is against public policy.

Issue: Whether or not the stipulation in the charter party exempting the ship owner from liability for negligence of its
agents is valid.

Held: The stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid and
not against public policy considering that the ship was totally chartered for the use of a single party, hence, the public at
large is not involved and strict public policy governing common carriers cannot be applied.


FORTUITOUS EVENT: EXEMPTION FROM LIABILITY
FORTUNE EXPRESS, INC. VS. COURT OF APPEALS
305 SCRA 14
Facts: A bus of Fortune Express, Inc. (FEI) figured in an accident with a jeepney which resulted in the death of several
passengers including two Maranaos. It was found out that a Maranao owns said jeepney and certain Maranaos were
planning to take revenge by burning some of FEIs buses. The operations manager of FEI was advised to take
precautionary measures but just the same, three armed Maranaos were able to seize a bus of FEI and set it on fire.

Issue: Whether the seizure of the bus was a fortuitous event which Fortune Express, Inc could not be held liable.

Held: A fortuitous event is an occurrence which could not be foreseen or which though foreseen, is inevitable. This factor
of unforeseen-ability is lacking in this case for despite the report that the Maranaos were planning to burn FEIs buses,
nothing was really done by FEI to protect the safety of the passengers.