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Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 137775. March 31, 2005

FGU INSURANCE CORPORATION, Petitioners,

vs.

THE COURT OF APPEALS, SAN MIGUEL CORPORATION, an ESTATE OF ANG GUI,

r!"r!#!n$! %& LUCIO, 'ULIAN, an 'AIME, a(( #)rna*! ANG, an CO TO, Respondents.

G.R. No. 1+070+. March 31, 2005

ESTATE OF ANG GUI, R!"r!#!n$! %& LUCIO, 'ULIAN an 'AIME, a(( #)rna*! ANG, an CO

TO,Petitioners,

vs.THE HONORALE COURT OF APPEALS, SAN MIGUEL CORP., an FGU INSURANCE

CORP., Respondents.

D E C I S I O N

CHICO-NAARIO, J .:

Before s !re t"o sep!r!te Petitions for revie" !ss!ilin# the Decision$ of the Court of %ppe!ls in

C%&'.R. CV No. ()*+( entitled, S!n -i#uel Corpor!tion, Pl!intiff&%ppellee versus Est!te of %n#

'ui, represented b /ucio, 0uli!n !nd 0!i1e, !ll surn!1ed %n#, !nd Co 2o, Defend!nts&%ppell!nts,

2hird3P!rt Pl!intiffs versus 4' Insur!nce Corpor!tion, 2hird&P!rt Defend!nt&%ppell!nt, "hich!ffir1ed in toto the decision+ of the Re#ion!l 2ri!l Court of Cebu Cit, Br!nch ++. 2he dispositive

portion of the Court of %ppe!ls decision re!ds:

56ERE4ORE, for !ll the fore#oin#, 7ud#1ent is hereb rendered !s follo"s:

$8 Orderin# defend!nts to p! pl!intiff the su1 of P$,9(*,$).;; !nd !n interest of *< per !nnu1 to

be rec=oned fro1 the filin# of this c!se on October +, $));>

+8 Orderin# defend!nts to p! pl!intiff the su1 of P+?,;;;.;; for !ttorne@s fees !nd !n !ddition!l

su1 of P$;,;;;.;; !s liti#!tion eApenses>

98 5ith cost !#!inst defend!nts.

4or the 2hird&P!rt Co1pl!int:

$8 Orderin# third&p!rt defend!nt 4' Insur!nce Co1p!n to p! !nd rei1burse defend!nts the

!1ount of P*9+,;;.;;.9

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2he 4!cts

Evidence sho"s th!t %nco Enterprises Co1p!n %NCO8, ! p!rtnership bet"een %n# 'ui !nd Co

2o, "!s en#!#ed in the shippin# business. It o"ned the -2 %NCO tu#bo!t !nd the DB /ucio b!r#e

"hich "ere oper!ted !s co11on c!rriers. Since the DB /ucio h!d no en#ine of its o"n, it could not

1!neuver b itself !nd h!d to be to"ed b ! tu#bo!t for it to 1ove fro1 one pl!ce to !nother.

On +9 Septe1ber $)), S!n -i#uel Corpor!tion S-C8 shipped fro1 -!nd!ue Cit, Cebu, on bo!rd

the DB /ucio, for to"!#e b -2 %NCO, the follo"in# c!r#oes:

Bill of /!din# No. Ship1ent Destin!tion

$ +?,;;; c!ses P!le Pilsen Est!nci!, Iloilo

9?; c!ses Cerve! Ne#r! Est!nci!, Iloilo

+ $?,;;; c!ses P!le Pilsen S!n 0ose, %ntiue

+;; c!ses Cerve! Ne#r! S!n 0ose, %ntiue

2he consi#nee for the c!r#oes covered b Bill of /!din# No. $ "!s S-C@s Beer -!r=etin# Division

B-D8&Est!nci! Beer S!les Office, Est!nci!, Iloilo, "hile the consi#nee for the c!r#oes covered b

Bill of /!din# No. + "!s S-C@s B-D&S!n 0ose Beer S!les Office, S!n 0ose, %ntiue.

2he DB /ucio "!s to"ed b the -2 %NCO !ll the "! fro1 -!nd!ue Cit to S!n 0ose, %ntiue.

2he vessels !rrived !t S!n 0ose, %ntiue, !t !bout one o@cloc= in the !fternoon of 9; Septe1ber

$)). 2he tu#bo!t -2 %NCO left the b!r#e i11edi!tel !fter re!chin# S!n 0ose, %ntiue.

5hen the b!r#e !nd tu#bo!t !rrived !t S!n 0ose, %ntiue, in the !fternoon of 9; Septe1ber $)),

the clouds over the !re! "ere d!r= !nd the "!ves "ere !lre!d bi#. 2he !rr!stre "or=ers unlo!din#

the c!r#oes of S-C on bo!rd the DB /ucio be#!n to co1pl!in !bout their difficult in unlo!din# the

c!r#oes. S-C@s District S!les Supervisor, 4ern!ndo -!c!bu!#, reuested %NCO@s represent!tive to

tr!nsfer the b!r#e to ! s!fer pl!ce bec!use the vessel 1i#ht not be !ble to "ithst!nd the bi# "!ves.

%NCO@s represent!tive did not heed the reuest bec!use he "!s confident th!t the b!r#e could

"ithst!nd the "!ves. 2his, not"ithst!ndin# the f!ct th!t !t th!t ti1e, onl the -2 %NCO "!s left !t

the "h!rf of S!n 0ose, %ntiue, !s !ll other vessels !lre!d left the "h!rf to see= shelter. 5ith the

"!ves #ro"in# bi##er !nd bi##er, onl 2en 2hous!nd Seven 6undred Ninet $;,);8 c!ses of beer

"ere disch!r#ed into the custod of the !rr!stre oper!tor.

%t !bout ten to eleven o@cloc= in the evenin# of ;$ October $)), the cre" of DB /ucio !b!ndoned

the vessel bec!use the b!r#e@s rope !tt!ched to the "h!rf "!s cut off b the bi# "!ves. %t !round

1idni#ht, the b!r#e run !#round !nd "!s bro=en !nd the c!r#oes of beer in the b!r#e "ere s"ept

!"!.

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%s ! result, %NCO f!iled to deliver to S-C@s consi#nee 2"ent&Nine 2hous!nd 2"o 6undred 2en

+),+$;8 c!ses of P!le Pilsen !nd 4ive 6undred 4ift ??;8 c!ses of Cerve! Ne#r!. 2he v!lue per

c!se of P!le Pilsen "!s 4ort&4ive Pesos !nd 2"ent Cent!vos P(?.+;8. 2he v!lue of ! c!se of

Cerve! Ne#r! "!s 4ort&Seven Pesos !nd 2en Cent!vos P(.$;8, hence, S-C@s cl!i1 !#!inst

%NCO !1ounted to One -illion 2hree 6undred 4ort&SiA 2hous!nd One 6undred Ninet&Seven

Pesos P$,9(*,$).;;8.

%s ! conseuence of the incident, S-C filed ! co1pl!int for Bre!ch of Contr!ct of C!rri!#e !nd

D!1!#es !#!inst %NCO for the !1ount of One -illion 2hree 6undred 4ort&SiA 2hous!nd One

6undred Ninet&Seven Pesos P$,9(*,$).;;8 plus interest, liti#!tion eApenses !nd 2"ent&4ive

Percent +?<8 of the tot!l cl!i1 !s !ttorne@s fees.

pon %n# 'ui@s de!th, %NCO, !s ! p!rtnership, "!s dissolved hence, on +* 0!nu!r $))9, S-C

filed ! second !1ended co1pl!int "hich "!s !d1itted b the Court i1ple!din# the survivin#

p!rtner, Co 2o !nd the Est!te of %n# 'ui represented b /ucio, 0uli!n !nd 0!i1e, !ll surn!1ed %n#.

2he substituted defend!nts !dopted the ori#in!l !ns"er "ith countercl!i1 of %NCO since the

subst!nti!l !lle#!tions of the ori#in!l co1pl!int !nd the !1ended co1pl!int !re pr!ctic!ll thes!1e.

%NCO !d1itted th!t the c!ses of beer P!le Pilsen !nd Cerve! Ne#r! 1entioned in the co1pl!int

"ere indeed lo!ded on the vessel belon#in# to %NCO. It cl!i1ed ho"ever th!t it h!d !n !#ree1ent

"ith S-C th!t %NCO "ould not be li!ble for !n losses or d!1!#es resultin# to the c!r#oes b

re!son of fortuitous event. Since the c!ses of beer P!le Pilsen !nd Cerve! Ne#r! "ere lost b

re!son of ! stor1, ! fortuitous event "hich b!ttered !nd sun= the vessel in "hich the "ere lo!ded,

the should not be held li!ble. %NCO further !sserted th!t there "!s !n !#ree1ent bet"een the1

!nd S-C to insure the c!r#oes in order to recover inde1nit in c!se of loss. Pursu!nt to th!t

!#ree1ent, the c!r#oes to the eAtent of 2"ent 2hous!nd +;,;;;8 c!ses "!s insured "ith 4'

Insur!nce Corpor!tion 4'8 for the tot!l !1ount of Ei#ht 6undred 4ift&Ei#ht 2hous!nd 4ive6undred Pesos PF?F,?;;.;;8 per -!rine Insur!nce Polic No. +)?)$.

Subseuentl, %NCO, "ith le!ve of court, filed ! 2hird&P!rt Co1pl!int !#!inst 4', !lle#in# th!t

before the vessel of %NCO left for S!n 0ose, %ntiue "ith the c!r#oes o"ned b S-C, the c!r#oes,

to the eAtent of 2"ent 2hous!nd +;,;;;8 c!ses, "ere insured "ith 4' for ! tot!l !1ount of Ei#ht

6undred 4ift&Ei#ht 2hous!nd 4ive 6undred Pesos PF?F,?;;.;;8 under -!rine Insur!nce Polic

No. +)?)$. %NCO further !lle#ed th!t on or !bout ;+ October $)), b re!son of ver stron# "inds

!nd he!v "!ves brou#ht !bout b ! p!ssin# tphoon, the vessel run !#round ne!r the vicinit of

S!n 0ose, %ntiue, !s ! result of "hich, the vessel "!s tot!ll "rec=ed !nd its c!r#oes o"ned b

S-C "ere lost !ndor destroed. %ccordin# to %NCO, the loss of s!id c!r#oes occurred !s ! result

of ris=s insured !#!inst in the insur!nce polic !nd durin# the eAistence !nd lifeti1e of s!idinsur!nce polic. %NCO "ent on to !ssert th!t in the re1ote possibilit th!t the court "ill order %NCO

to p! S-C@s cl!i1, the third&p!rt defend!nt corpor!tion should be held li!ble to inde1nif or

rei1burse %NCO "h!tever !1ounts, or d!1!#es, it 1! be reuired to p! to S-C.

In its !ns"er to the 2hird&P!rt co1pl!int, third&p!rt defend!nt 4' !d1itted the eAistence of the

Insur!nce Polic under -!rine Cover Note No. +)?)$ but 1!int!ined th!t the !lle#ed loss of the

c!r#oes covered b the s!id insur!nce polic c!nnot be !ttributed directl or indirectl to !n of the

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ris=s insured !#!inst in the s!id insur!nce polic. %ccordin# to 4', it is onl li!ble under the polic

to 2hird&p!rt Pl!intiff %NCO !ndor Pl!intiff S-C in c!se of !n of the follo"in#:

!8 tot!l loss of the entire ship1ent>

b8 loss of !n c!se !s ! result of the sin=in# of the vessel> or

c8 loss !s ! result of the vessel bein# on fire.

4urther1ore, 4' !lle#ed th!t the 2hird&P!rt Pl!intiff %NCO !nd Pl!intiff S-C f!iled to eAercise

ordin!r dili#ence or the dili#ence of ! #ood f!ther of the f!1il in the c!re !nd supervision of the

c!r#oes insured to prevent its loss !ndor destruction.

2hird&P!rt defend!nt 4' pr!ed for the dis1iss!l of the 2hird&P!rt Co1pl!int !nd !s=ed for

!ctu!l, 1or!l, !nd eAe1pl!r d!1!#es !nd !ttorne@s fees.

2he tri!l court found th!t "hile the c!r#oes "ere indeed lost due to fortuitous event, there "!s f!ilureon %NCO@s p!rt, throu#h their represent!tives, to observe the de#ree of dili#ence reuired th!t

"ould eAoner!te the1 fro1 li!bilit. 2he tri!l court thus held the Est!te of %n# 'ui !nd Co 2o li!ble

to S-C for the !1ount of the lost ship1ent. 5ith respect to the 2hird&P!rt co1pl!int, the court !

uo found 4' li!ble to be!r 4ift&2hree Percent ?9<8 of the !1ount of the lost c!r#oes. %ccordin#

to the tri!l court:

. . . Evidence is to the effect th!t the DB /ucio, on "hich the c!r#o insured, run&!#round !nd "!s

bro=en !nd the beer c!r#oes on the s!id b!r#e "ere s"ept !"!. It is the sense of this Court that

the risk insured against was the cause of the loss.

. . .

Since the tot!l c!r#o "!s (;,??; c!ses "hich h!d ! tot!l !1ount of P$,F99,);?.;; !nd the !1ount

of the polic "!s onl for PF?F,?;;.;;, defendants as assured, therefore, were considered co-

insurers of third-party defendant FGU Insurance Corporation to the extent of 97,!"#"" $alue of the

cargo# Conseuentl, in!s1uch !s there "!s p!rti!l loss of onl P$,9(*,$).;;, the !ssured sh!ll

be!r ?9< of the lossG( HE1ph!sis ours

2he !ppell!te court !ffir1ed in toto the decision of the lo"er court !nd denied the 1otion for

reconsider!tion !nd the supple1ent!l 1otion for reconsider!tion.

6ence, the petitions.

2he Issues

In '.R. No. $9?, the #rounds for revie" r!ised b petitioner 4' c!n be su11!ried into t"o: $8

5hether or not respondent Court of %ppe!ls co11itted #r!ve !buse of discretion in holdin# 4'

li!ble under the insur!nce contr!ct considerin# the circu1st!nces surroundin# the loss of the

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c!r#oes> !nd +8 5hether or not the Court of %ppe!ls co11itted !n error of l!" in holdin# th!t the

doctrine of res %udicata !pplies in the inst!nt c!se.

In '.R. No. $(;;(, petitioner Est!te of %n# 'ui !nd Co 2o !ss!il the decision of the !ppell!te court

b!sed on the follo"in# !ssi#n1ents of error: $8 2he Court of %ppe!ls co11itted #r!ve !buse of

discretion in !ffir1in# the findin#s of the lo"er court th!t the ne#li#ence of the cre"1e1bers of theDB /ucio "!s the proAi1!te c!use of the loss of the c!r#oes> !nd +8 2he respondent court !cted

"ith #r!ve !buse of discretion "hen it ruled th!t the !ppe!l "!s "ithout 1erit despite the f!ct th!t

s!id court h!d !ccepted the decision in Civil C!se No. R&$)9($, !s !ffir1ed b the Court of %ppe!ls

!nd the Supre1e Court, !s res %udicata.

Rulin# of the Court

4irst, "e sh!ll ende!vor to dispose of the co11on issue r!ised b both petitioners in their respective

petitions for revie", th!t is, "hether or not the doctrine of res %udicata !pplies in the inst!nt c!se.

It is %NCO@s contention th!t the decision in Civil C!se No. R&$)9($,?

"hich "!s decided in its f!vor,constitutes res %udicata "ith respect to the issues r!ised in the c!se !t b!r.

2he contention is "ithout 1erit. 2here c!n be no res %udicata !s bet"een Civil C!se No. R&$)9($

!nd the c!se !t b!r. In order for res %udicata to be 1!de !pplic!ble in ! c!se, the follo"in# essenti!l

reuisites 1ust be present: $8 the for1er 7ud#1ent 1ust be fin!l> +8 the for1er 7ud#1ent 1ust h!ve

been rendered b ! court h!vin# 7urisdiction over the sub7ect 1!tter !nd the p!rties> 98 the for1er

7ud#1ent 1ust be ! 7ud#1ent or order on the 1erits> !nd (8there &ust 'e 'etween the first and

second action identity of parties, identity of su'%ect &atter, and identity of causes of action# *

2here is no uestion th!t the first three ele1ents of res 7udic!t! !s enu1er!ted !bove !re indeed

s!tisfied b the decision in Civil C!se No. R&$)9($. 6o"ever, the doctrine is still in!pplic!ble due tothe !bsence of the l!st essenti!l reuisite of identit of p!rties, sub7ect 1!tter !nd c!uses of !ction.

2he p!rties in Civil C!se No. R&$)9($ "ere %NCO !s pl!intiff !nd 4' !s defend!nt "hile in the

inst!nt c!se, S-C is the pl!intiff !nd the Est!te of %n# 'ui represented b /ucio, 0uli!n !nd 0!i1e,

!ll surn!1ed %n# !nd Co 2o !s defend!nts, "ith the l!tter 1erel i1ple!din# 4' !s third&p!rt

defend!nt.

2he sub7ect 1!tter of Civil C!se No. R&$)9($ "!s the insur!nce contr!ct entered into b %NCO, the

o"ner of the vessel, "ith 4' coverin# the vessel DB /ucio, "hile in the inst!nt c!se, the sub7ect

1!tter of liti#!tion is the loss of the c!r#oes of S-C, !s shipper, lo!ded in the DB /ucio !nd the

resultin# f!ilure of %NCO to deliver to S-C@s consi#nees the lost c!r#o. Other"ise st!ted, thecontrovers in the first c!se involved the ri#hts !nd li!bilities of the shipo"ner $is-(-$is th!t of the

insurer, "hile the present c!se involves the ri#hts !nd li!bilities of the shipper $is-(-$is th!t of the

shipo"ner. Specific!ll, Civil C!se No. R&$)9($ "!s !n !ction for Specific Perfor1!nce !nd

D!1!#es b!sed on 4' -!rine 6ull Insur!nce Polic No. V-4&-6&$9?$) coverin# the vessel DB

/ucio, "hile the inst!nt c!se is !n !ction for Bre!ch of Contr!ct of C!rri!#e !nd D!1!#es filed b

S-C !#!inst %NCO b!sed on Bill of /!din# No. $ !nd No. +, "ith defend!nt %NCO see=in#

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rei1burse1ent fro1 4' under Insur!nce Polic No. -%&?F(F*, should the for1er be held li!ble to

p! S-C.

-oreover, the sub7ect 1!tter of the third&p!rt co1pl!int !#!inst 4' in this c!se is different fro1

th!t in Civil C!se No. R&$)9($. In the l!tter, %NCO "!s suin# 4' for the insur!nce contr!ct over

the vessel "hile in the for1er, the third&p!rt co1pl!int !rose fro1 the insur!nce contr!ct coverin#the c!r#oes on bo!rd the DB /ucio.

2he doctrine of res %udicata precludes the re&liti#!tion of ! p!rticul!r f!ct or issue !lre!d p!ssed

upon b ! court of co1petent 7urisdiction in ! for1er 7ud#1ent, in !nother !ction bet"een the s!1e

p!rties b!sed on ! different cl!i1 or c!use of !ction. 2he 7ud#1ent in the prior !ction oper!tes !s

estoppel onl !s to those 1!tters in issue or points controverted, upon the deter1in!tion of "hich

the findin# or 7ud#1ent "!s rendered. If ! p!rticul!r point or uestion is in issue in the second

!ction, !nd the 7ud#1ent "ill depend on the deter1in!tion of th!t p!rticul!r point or uestion, !

for1er 7ud#1ent bet"een the s!1e p!rties or their privies "ill be fin!l !nd conclusive in the second

if th!t s!1e point or uestion "!s in issue !nd !d7udic!ted in the first suit.F

Since the c!se !t b!r !rose fro1 the s!1e incident !s th!t involved in Civil C!se No. R&$)9($, onl

findin#s "ith respect to 1!tters p!ssed upon b the court in the for1er 7ud#1ent !re conclusive in

the disposition of the inst!nt c!se. % c!reful perus!l of the decision in Civil C!se No. R&$)9($ "ill

reve!l th!t the pivot!l issues resolved b the lo"er court, !s !ffir1ed b both the Court of %ppe!ls

!nd the Supre1e Court, c!n be su11!ried into three le#!l conclusions: $8 th!t the DB /ucio

before !nd durin# the vo!#e "!s se!"orth> +8 th!t there "!s proper notice of loss 1!de b %NCO

"ithin the re#le1ent!r period> !nd 98 th!t the vessel DB /ucio "!s ! constructive tot!l loss.

S!id decision, ho"ever, did not p!ss upon the issues r!ised in the inst!nt c!se. %bsent therein "!s

!n discussion re#!rdin# the li!bilit of %NCO for the loss of the c!r#oes. Neither did the lo"er court

p!ss upon the issue of the !lle#ed ne#li#ence of the cre"1e1bers of the DB /ucio bein# the c!useof the loss of the c!r#oes o"ned b S-C.

2herefore, b!sed on the fore#oin# discussion, "e !re reversin# the findin#s of the Court of %ppe!ls

th!t there isres %udicata.

%nent %NCO@s first !ssi#n1ent of error, i#e., the !ppell!te court co11itted error in concludin# th!t

the ne#li#ence of %NCO@s represent!tives "!s the proAi1!te c!use of the loss, s!id issue is !

uestion of f!ct !ss!ilin# the lo"er court@s !ppreci!tion of evidence on the ne#li#ence or l!c= thereof

of the cre"1e1bers of the DB /ucio. %s ! rule, findin#s of f!ct of lo"er courts, p!rticul!rl "hen

!ffir1ed b the !ppell!te court, !re dee1ed fin!l !nd conclusive. 2he Supre1e Court c!nnot revie"

such findin#s on !ppe!l, especi!ll "hen the !re borne out b the records or !re b!sed onsubst!nti!l evidence.) %s held in the c!se of )onato $# Court of *ppeals,$; in this 7urisdiction, it is !

fund!1ent!l !nd settled rule th!t findin#s of f!ct b the tri!l court !re entitled to #re!t "ei#ht on

!ppe!l !nd should not be disturbed unless for stron# !nd co#ent re!sons bec!use the tri!l court is in

! better position to eA!1ine re!l evidence, !s "ell !s to observe the de1e!nor of the "itnesses

"hile testifin# in the c!se.$$

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It is not the function of this Court to !n!le or "ei#h evidence !ll over !#!in, unless there is !

sho"in# th!t the findin#s of the lo"er court !re tot!ll devoid of support or !re #l!rin#l erroneous !s

to constitute p!lp!ble error or #r!ve !buse of discretion.$+

% c!reful stud of the records sho"s no co#ent re!son to f!ult the findin#s of the lo"er court, !s

sust!ined b the !ppell!te court, th!t %NCO@s represent!tives f!iled to eAercise the eAtr!ordin!rde#ree of dili#ence reuired b the l!" to eAculp!te the1 fro1 li!bilit for the loss of the c!r#oes.

First , %NCO !d1itted th!t the f!iled to deliver to the desi#n!ted consi#nee the 2"ent Nine

2hous!nd 2"o 6undred 2en +),+$;8 c!ses of P!le Pilsen !nd 4ive 6undred 4ift ??;8 c!ses of

Cerve! Ne#r!.

+econd , it is borne out in the testi1on of the "itnesses on record th!t the b!r#e DB /ucio h!d no

en#ine of its o"n !nd could not 1!neuver b itself. Jet, the p!tron of %NCO@s tu#bo!t -2 %NCO left

it to fend for itself not"ithst!ndin# the f!ct th!t !s the t"o vessels !rrived !t the port of S!n 0ose,

%ntiue, si#ns of the i1pendin# stor1 "ere !lre!d 1!nifest. %s st!ted b the lo"er court, "itness

-r. %n!st!cio -!nil!# testified th!t the c!pt!in or p!tron of the tu#bo!t -2 %NCO left the b!r#e DB/ucio i11edi!tel !fter it re!ched S!n 0ose, %ntiue, despite the f!ct th!t there "ere !lre!d bi#

"!ves !nd the !re! "!s !lre!d d!r=. 2his is corrobor!ted b defend!nts@ o"n "itness, -r.

4ern!ndo -!c!bue#.$9

2he tri!l court continued:

%t th!t precise 1o1ent, since it is the dut of the defend!nt to eAercise !nd observe eAtr!ordin!r

dili#ence in the vi#il!nce over the c!r#o of the pl!intiff, the p!tron or c!pt!in of -2 %NCO,

representin# the defend!nt could h!ve pl!ced DB /ucio in ! ver s!fe loc!tion before the left

=no"in# or sensin# !t th!t ti1e the co1in# of ! tphoon. 2he presence of bi# "!ves !nd d!r=

clouds could h!ve "!rned the p!tron or c!pt!in of -2 %NCO to insure the s!fet of DB /ucioincludin# its c!r#o. DB /ucio bein# ! b!r#e, "ithout its en#ine, !s the p!tron or c!pt!in of -2

%NCO =ne", could not possibl 1!neuver b itself. 6!d the p!tron or c!pt!in of -2 %NCO, the

represent!tive of the defend!nts observed eAtr!ordin!r dili#ence in pl!cin# the DB /ucio in ! s!fe

pl!ce, the loss to the c!r#o of the pl!intiff could not h!ve occurred. In short, therefore, defend!nts

throu#h their represent!tives, f!iled to observe the de#ree of dili#ence reuired of the1 under the

provision of %rt. $99 of the Civil Code of the Philippines.$(

Petitioners Est!te of %n# 'ui !nd Co 2o, in their e&orandu&, !sserted th!t the contention of

respondents S-C !nd 4' th!t the cre"1e1bers of DB /ucio should h!ve left port !t the onset of

the tphoon is li=e !dvisin# the fish to 7u1p fro1 the frin# p!n into the fire !nd !n !dvice th!t

borders on 1!dness.$?

2he !r#u1ent does not persu!de. 2he records sho" th!t the DB /ucio "!s the onl vessel left !t

S!n 0ose, %ntiue, durin# the ti1e in uestion. 2he other vessels "ere tr!nsferred !nd te1por!ril

1oved to -!l!ndon#, ? =ilo1eters fro1 "h!rf "here the b!r#e re1!ined.$* Cle!rl, the tr!nsferred

vessels "ere definitel s!fer in -!l!ndon# th!n !t the port of S!n 0ose, %ntiue, !t th!t p!rticul!r

ti1e, ! f!ct "hich petitioners f!iled to dispute

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%NCO@s !r#u1ents boil do"n to the cl!i1 th!t the loss of the c!r#oes "!s c!used b the

tphoon +isang , ! fortuitous event caso fortuito8, !nd there "!s no f!ult or ne#li#ence on their p!rt.

In f!ct, %NCO cl!i1s th!t their cre"1e1bers eAercised due dili#ence to prevent or 1ini1ie the loss

of the c!r#oes but their efforts proved no 1!tch to the forces unle!shed b the tphoon "hich, in

petitioners@ o"n "ords "!s, b !n !rdstic=, ! n!tur!l c!l!1it, ! fortuitous event, !n !ct of 'od,

the conseuences of "hich petitioners could not be held li!ble for.

$

2he Civil Code provides:

Ar$. 1733. Co11on c!rriers, fro1 the n!ture of their business !nd for re!sons of public polic !re

bound to observe eAtr!ordin!r dili#ence in the vi#il!nce over the #oods !nd for the s!fet of the

p!ssen#ers tr!nsported b the1, !ccordin# to !ll the circu1st!nces of e!ch c!se.

Such eAtr!ordin!r dili#ence in vi#il!nce over the #oods is further eApressed in %rticles $9(, $9?,

!nd $(? Nos. ?, *, !nd . . .

Ar$. 173+. Co11on c!rriers !re responsible for the loss, destruction, or deterior!tion of the #oods,unless the s!1e is due to !n of the follo"in# c!uses onl:

$8 4lood, stor1, e!rthu!=e, li#htnin#, or other n!tur!l dis!ster or c!l!1it>

. . .

Ar$. 173/. In order that the common carrier may be exempted from responsibility, the natural

disaster must have been the proximate and only cause of the loss . 6o"ever, the co11on

c!rrier 1ust eAercise due dili#ence to prevent or 1ini1ie loss before, durin# !nd !fter the

occurrence of flood, stor1, or other n!tur!l dis!ster in order th!t the co11on c!rrier 1! be

eAe1pted fro1 li!bilit for the loss, destruction, or deterior!tion of the #oods . . . E1ph!sissupplied8

Caso fortuito or force &a%eure "hich in l!" !re identic!l insof!r !s the eAe1pt !n obli#or fro1

li!bilit8$F b definition, !re eAtr!ordin!r events not foresee!ble or !void!ble, events th!t could not

be foreseen, or "hich thou#h foreseen, "ere inevit!ble. It is therefore not enou#h th!t the event

should not h!ve been foreseen or !nticip!ted, !s is co11onl believed but it 1ust be one

i1possible to foresee or to !void.$)

In this c!se, the c!l!1it "hich c!used the loss of the c!r#oes "!s not unforeseen nor "!s it

un!void!ble. In f!ct, the other vessels in the port of S!n 0ose, %ntiue, 1!n!#ed to tr!nsfer to

!nother pl!ce, ! circu1st!nce "hich pro1pted S-C@s District S!les Supervisor to reuest th!t theDB /ucio be li=e"ise tr!nsferred, but to no !v!il. 2he DB /ucio h!d no en#ine !nd could not

1!neuver b itself. Even if %NCO@s represent!tives "!nted to tr!nsfer it, the no lon#er h!d !n

1e!ns to do so !s the tu#bo!t -2 %NCO h!d !lre!d dep!rted, le!vin# the b!r#e to its o"n

devices. 2he c!pt!in of the tu#bo!t should h!ve h!d the foresi#ht not to le!ve the b!r#e !lone

considerin# the pendin# stor1.

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5hile the loss of the c!r#oes "!s !d1ittedl c!used b the tphoon +isang , ! n!tur!l dis!ster,

%NCO could not esc!pe li!bilit to respondent S-C. 2he records cle!rl sho" the f!ilure of

petitioners@ represent!tives to eAercise the eAtr!ordin!r de#ree of dili#ence 1!nd!ted b l!". 2o be

eAe1pted fro1 responsibilit, the n!tur!l dis!ster should h!ve been the proAi1!te !nd onl c!use of

the loss.+; 2here 1ust h!ve been no contributor ne#li#ence on the p!rt of the co11on c!rrier. %s

held in the c!se of i&pangco +ons $# .angco +tea&ship Co.:

+$

. . . 2o be eAe1pt fro1 li!bilit bec!use of !n !ct of 'od, the tu# 1ust be free fro1 !n previous

ne#li#ence or 1isconduct b "hich th!t loss or d!1!#e 1! h!ve been occ!sioned. 4or, !lthou#h

the i11edi!te or proAi1!te c!use of the loss in !n #iven inst!nce 1! h!ve been "h!t is ter1ed

!n !ct of 'od, et, if the tu# unnecess!ril eAposed the t"o to such !ccident b !n culp!ble !ct or

o1ission of its o"n, it is not eAcused.++

2herefore, !s correctl pointed out b the !ppell!te court, there "!s bl!t!nt ne#li#ence on the p!rt of

-2 %NCO@s cre"1e1bers, first in le!vin# the en#ine&less b!r#e DB /ucio !t the 1erc of the

stor1 "ithout the !ssist!nce of the tu#bo!t, !nd !#!in in f!ilin# to heed the reuest of S-C@s

represent!tives to h!ve the b!r#e tr!nsferred to ! s!fer pl!ce, !s "!s done b the other vessels inthe port> thus, 1!=in# s!id bl!t!nt ne#li#ence the proAi1!te c!use of the loss of the c!r#oes.

5e no" co1e to the issue of "hether or not 4' c!n be held li!ble under the insur!nce polic to

rei1burse %NCO for the loss of the c!r#oes despite the findin#s of the respondent court th!t such

loss "!s occ!sioned b the bl!t!nt ne#li#ence of the l!tter@s e1ploees.

One of the purposes for t!=in# out insur!nce is to protect the insured !#!inst the conseuences of

his o"n ne#li#ence !nd th!t of his !#ents. 2hus, it is ! b!sic rule in insur!nce th!t the c!relessness

!nd ne#li#ence of the insured or his !#ents constitute no defense on the p!rt of the insurer.+9 2his

rule ho"ever presupposes th!t the loss h!s occurred due to c!uses "hich could not h!ve been

prevented b the insured, despite the eAercise of due dili#ence.

2he uestion no" is "hether there is ! cert!in de#ree of ne#li#ence on the p!rt of the insured or his

!#ents th!t "ill deprive hi1 the ri#ht to recover under the insur!nce contr!ct. 5e s! there is.

6o"ever, to "h!t eAtent such ne#li#ence 1ust #o in order to eAoner!te the insurer fro1 li!bilit 1ust

be ev!lu!ted in li#ht of the circu1st!nces surroundin# e!ch c!se. 5hen evidence sho" th!t the

insured@s ne#li#ence or rec=lessness is so #ross !s to be sufficient to constitute ! "illful !ct, the

insurer 1ust be eAoner!ted.

In the c!se of +tandard arine Ins# Co# $# /o&e 0each # 1 2# Co.,+( the nited St!tes Supre1e

Court held th!t:

2he ordin!r ne#li#ence of the insured !nd his !#ents h!s lon# been held !s ! p!rt of the ris= "hich

the insurer t!=es upon hi1self, !nd the eAistence of "hich, "here it is the proAi1!te c!use of the

loss, does not !bsolve the insurer fro1 li!bilit. 0ut willful exposure, gross negligence, negligence

a&ounting to &isconduct, etc#, ha$e often 'een held to release the insurer fro& such

lia'ility .+? HE1ph!sis ours

. . .

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In the c!se of 5illi!1s v. Ne" En#l!nd Insur!nce Co., 9 Cliff. +((, 4ed. C!s. No. $,9$, the o"ners

of !n insured vessel !tte1pted to put her !cross the b!r !t 6!tter!s Inlet. She struc= on the b!r !nd

"!s "rec=ed. 2he 1!ster =ne" th!t the depth of "!ter on the b!r "!s such !s to 1!=e the

!tte1pted p!ss!#e d!n#erous. 0ud#e Clifford held th!t, under the circu1st!nces, the loss "!s not

"ithin the protection of the polic, s!in#:

%uthorities to prove th!t persons insured c!nnot recover for ! loss occ!sioned b their o"n "ron#ful

!cts !re h!rdl necess!r, !s the proposition involves !n ele1ent!r principle of univers!l

!pplic!tion. /osses 1! be recovered b the insured, thou#h re1otel occ!sioned b the ne#li#ence

or 1isconduct of the 1!ster or cre", if proAi1!tel c!used b the perils insured !#!inst, bec!use

such 1ist!=es !nd ne#li#ence !re incident to n!vi#!tion !nd constitute ! p!rt of the perils "hich

those "ho en#!#e in such !dventures !re obli#ed to incur> 'ut it was ne$er supposed that the

insured could reco$er inde&nity for a loss occasioned 'y his own wrongful act or 'y that of any

agent for whose conduct he was responsi'le.+* HE1ph!sis ours

4ro1 the !bove&1entioned decision, the nited St!tes Supre1e Court h!s 1!de ! distinction

bet"een ordin!r ne#li#ence !nd #ross ne#li#ence or ne#li#ence !1ountin# to 1isconduct !nd itseffect on the insured@s ri#ht to recover under the insur!nce contr!ct. %ccordin# to the Court, "hile

1ist!=e !nd ne#li#ence of the 1!ster or cre" !re incident to n!vi#!tion !nd constitute ! p!rt of the

perils th!t the insurer is obli#ed to incur, such ne#li#ence or rec=lessness 1ust not be of such #ross

ch!r!cter !s to !1ount to 1isconduct or "ron#ful !cts> other"ise, such ne#li#ence sh!ll rele!se the

insurer fro1 li!bilit under the insur!nce contr!ct.

In the c!se !t b!r, both the tri!l court !nd the !ppell!te court h!d concluded fro1 the evidence th!t

the cre"1e1bers of both the DB /ucio !nd the -2 %NCO "ere bl!t!ntl ne#li#ent. 2o "it:

2here "!s 'latant negligence on the p!rt of the e1ploees of defend!nts&!ppell!nts "hen the

p!tron oper!tor8 of the tu# bo!t i11edi!tel left the b!r#e !t the S!n 0ose, %ntiue "h!rf despitethe loo1in# b!d "e!ther. Ne#li#ence "!s li=e"ise eAhibited b the defend!nts&!ppell!nts@

represent!tive "ho did not heed -!c!bu!#@s reuest th!t the b!r#e be 1oved to ! 1ore secure

pl!ce. 2he prudent thin# to do, !s "!s done b the other se! vessels !t S!n 0ose, %ntiue durin#

the ti1e in uestion, "!s to tr!nsfer the vessel to ! s!fer "h!rf. 2he negligence of the defendants-

appellants is pro$ed 'y the fact that on "3 4cto'er 3979, the only si&ple $essel left at the wharf in

+an Jose was the )50 ucio.+ HE1ph!sis ours

%s st!ted e!rlier, this Court does not find !n re!son to devi!te fro1 the conclusion dr!"n b the

lo"er court, !s sust!ined b the Court of %ppe!ls, th!t %NCO@s represent!tives h!d f!iled to

eAercise eAtr!ordin!r dili#ence reuired of co11on c!rriers in the ship1ent of S-C@s c!r#oes.

Such bl!t!nt ne#li#ence bein# the proAi1!te c!use of the loss of the c!r#oes !1ountin# to One-illion 2hree 6undred 4ort&SiA 2hous!nd One 6undred Ninet&Seven Pesos P$,9(*,$).;;8

2his Court, t!=in# into !ccount the circu1st!nces present in the inst!nt c!se, concludes th!t the

bl!t!nt ne#li#ence of %NCO@s e1ploees is of such #ross ch!r!cter th!t it !1ounts to ! "ron#ful !ct

"hich 1ust eAoner!te 4' fro1 li!bilit under the insur!nce contr!ct.

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HEREFORE, pre1ises considered, the Decision of the Court of %ppe!ls d!ted +( 4ebru!r $)))

is hereb %44IR-ED "ith -ODI4IC%2ION dis1issin# the third&p!rt co1pl!int.

SO ORDERED.

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