SECOND DIVISION[G.R. No. 119599.March 20, 1997]MALAYAN INSURANCE CORPORATION,petitioner, vs.THE HON. COURT OF APPEALS and TKC MARKETING CORPORATION,respondents.D E C I S I O NROMERO,J.:Assailed in this petition for review oncertiorariis the decision of the Court of Appeals in CA-G.R. No. 43023[1]which affirmed, with slight modification, the decision of the Regional Trial Court of Cebu, Branch 15.Private respondent TKC Marketing Corp. was the owner/consignee of some 3,189.171 metric tons of soya bean meal which was loaded on board the ship MV Al Kaziemah on or about September 8, 1989 for carriage from the port of Rio del Grande, Brazil, to the port of Manila. Said cargo was insured against the risk of loss by petitioner Malayan Insurance Corporation for which it issued two (2) Marine Cargo Policy Nos. M/LP 97800305 amounting toP18,986,902.45 and M/LP 97800306 amounting toP1,195,005.45, both dated September 1989.While the vessel was docked in Durban, South Africa on September 11, 1989 enroute to Manila, the civil authorities arrested and detained it because of a lawsuit on a question of ownership and possession. As a result, private respondent notified petitioner on October 4, 1989 of the arrest of the vessel and made a formal claim for the amount of US$916,886.66, representing the dollar equivalent on the policies, for non-delivery of the cargo. Private respondent likewise 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 extension of the insurance coverage until actual transhipment, which extension was approved upon payment of additional premium. The insurance coverage was extended under the same terms and conditions embodied in the original policies while in the process of making arrangements for the transhipment of the cargo from Durban to Manila, covering the period October 4-December 19, 1989.However, on December 11, 1989, the cargo was sold in Durban, South Africa, for US$154.40 per metric ton or a total of P10,304,231.75 due to its perishable nature which could no longer stand a voyage of twenty days to Manila and another twenty days for the discharge thereof. On January 5, 1990, private respondent forthwith reduced its claim to US$448,806.09 (or its peso equivalent ofP9,879,928.89 at the exchange rate ofP22.0138 per $1.00) representing private respondent's loss after the proceeds of the sale were deducted from the original claim of $916,886.66 orP20,184,159.55.Petitioner maintained its position that the arrest of the vessel by civil authorities on a question of ownership was an excepted risk under the marine insurance policies. This prompted private respondent to file a complaint for damages praying that aside from its claim, it be reimbursed the amount ofP128,770.88 as legal expenses and the interest it paid for the loan it obtained to finance the shipment totallingP942,269.30. In addition, private respondent asked for moral damages amounting toP200,000.00, exemplary damages amounting toP200,000.00 and attorney's fees equivalent to 30% of what will be awarded by the court.The lower court decided in favor of private respondent and required petitioner to pay, aside from the insurance claim, consequential and liquidated damages amounting toP1,024,233.88, exemplary damages amounting toP100,000.00, reimbursement in the amount equivalent to 10% of whatever is recovered as attorney's fees as well as the costs of the suit. On private respondent's motion for reconsideration, petitioner was also required to further pay interest at the rate of 12% 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.On appeal, the Court of Appeals affirmed the decision of the lower court stating that with the deletion of Clause 12 of the policies issued to private respondent, the same became automatically covered under subsection 1.1 of Section 1 of the Institute War Clauses. The arrests, restraints or detainments contemplated in the former clause were those effected by political or executive acts. Losses occasioned by riot or ordinary judicial processes were not covered therein. In other words, arrest, restraint or detainment within the meaning of Clause 12 (or F.C. & S. Clause) rules out detention by ordinary legal processes. Hence, arrests by civil authorities, such as what happened in the instant case, is an excepted risk under Clause 12 of the Institute Cargo Clause or the F.C. & S. Clause. However, with the deletion of Clause 12 of the Institute Cargo Clause and the consequent adoption or institution of the Institute War Clauses (Cargo), the arrest and seizure by judicial processes which were excluded under the former policy became one of the covered risks.The appellate court added that the failure to deliver the consigned goods in the port of destination is a loss compensable, not only under the Institute War Clause but also under the Theft, Pilferage, and Non-delivery Clause (TNPD) of the insurance policies, as read in relation to Section 130 of the Insurance Code and as held inWilliams v. Cole.[2]Furthermore, the appellate court contended that since the vessel was prevented at an intermediate port from completing the voyage due to its seizure 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 minimize loss. Accordingly, the sale of the goods being reasonable and justified, it should not operate to discharge petitioner from its contractual liability.Hence this petition, claiming that the Court of Appeals erred:1.In ruling that the arrest of the vessel was a risk covered under the subject insurance policies.2.In ruling that there was constructive total loss over the cargo.3.In ruling that petitioner was in bad faith in declining private respondent's claim.4.In giving undue reliance to the doctrine that insurance policies are strictly construed against the insurer.In assigning the first error, petitioner submits the following: (a) an arrest by civil authority is not compensable since the term "arrest" refers to "political or executive acts" and does not include a loss caused by riot or by ordinary judicial process as in this case; (b) the deletion of the Free from Capture or Seizure Clause would leave the assured covered solely for the perils specified by the wording of the policy itself; (c) the rationale for the exclusion of an arrest pursuant to judicial authorities is to eliminate collusion between unscrupulous assured and civil authorities.As 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 seizure of the ship.As to the third issue, petitioner alleges that its act of rejecting the claim was a result of its honest belief that the arrest of the vessel was not a compensable risk under the policies issued. In fact, petitioner supported private respondent by accommodating the latter's request for an extension 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 Appeals, petitioner did not raise as an issue the award of exemplary damages. It cannot now, for the first time, raise the same before this Court. Likewise, petitioner cannot submit for the first time on appeal its argument that it was wrong for the Court of Appeals to have ruled the way it did based on facts that would need inquiry into the evidence. Even if inquiry into the facts were possible, such was not necessary because the coverage as ruled upon by the Court of Appeals is evident from the very terms of the policies.It also argued that petitioner, being the sole author of the policies, "arrests" should be strictly interpreted against it because the rule is that any ambiguity is to be takencontra proferentum. Risk policies should be construed reasonably and in a manner as to make effective the intentions and expectations of the parties. It added that the policies clearly stipulate that they cover the risks of non-delivery of an entire package and that it was petitioner itself that invited and granted the extensions and collected premiums thereon.The resolution of this controversy hinges on the interpretation of the "Perils" clause of the subject policies in relation to the excluded risks or warranty specifically stated therein.By way of a historical background, marine insurance developed as an all-risk coverage, using the phrase "perils of the sea" to encompass the wide and varied range of risks that were covered.[3]The subject policies contain the "Perils" clause which is a standard form in any marine insurance policy. Said clause reads:"Touching the adventures which the said MALAYAN INSURANCE CO., are content to bear, and to take upon them in this voyage; they are of the Seas; Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Counter Mart, Suprisals, Takings of the Sea,Arrests, Restraints and Detainments of all Kings, Princess and Peoples, of what Nation, condition, or quality soever, Barratry of the Master and Mariners, and ofall other Perils, Losses, and Misfortunes, that have come to hurt, detriment, or damage of the said goods and merchandise or any part thereof. AND in case of any loss or misfortune it shall be lawful to the ASSURED, 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, & c., or any part thereof, without prejudice to this INSURANCE; to the charges whereof the said COMPANY, will contribute according to the rate and quantity of the sum herein INSURED. AND it is expressly declared and agreed that no acts of the Insurer or Insured in recovering, saving, or preserving the Property insured shall be considered as a Waiver, or Acceptance of Abandonment. And it is agreed by the said COMPANY, that this writing or Policy of INSURANCE shall be of as much Force and Effect as the surest Writing or Policy of INSURANCE made in LONDON. And so the said MALAYAN INSURANCE COMPANY, INC., are contented, and do hereby promise and bind themselves, their Heirs, Executors, Goods and Chattel, to the ASSURED, his or their Executors, Administrators, or Assigns, for the true Performance of the Premises; confessing themselves paid the Consideration due unto them for this INSURANCE at and after the rate arranged." (Underscoring supplied)The exception or limitation to the "Perils" clause and the "All other perils" clause in the subject policies is specifically referred to as Clause 12 called the "Free from Capture & Seizure Clause" or the F.C. & S. Clause which reads, thus:"Warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereat; also from the consequences of hostilities and warlike operations, whether there be a declaration of war or not; but this warranty shall not exclude collision, contact with any fixed or floating object (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 'power' includes any authorities maintaining naval, military or air forces in association with power.Further warranted free from the consequences of civil war, revolution, insurrection, or civil strike arising therefrom or piracy.Should Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form part of this insurance." (Underscoring supplied)However, the F. C. & S. Clause was deleted from the policies. Consequently, the Institute War Clauses (Cargo) was deemed incorporated which, in subsection 1.1 of Section 1, provides:"1.This insurance covers:1.1The risks excluded from the standard form of English Marine Policy by the clause warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof of hostilities or warlike operations, whether there be a declaration of war or not; but this warranty shall not exclude collision, contact with any fixed or floating object (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 power; and for the purpose of this warranty 'power' includes any authority maintaining naval, military or air forces in association with a power. Further warranted free from the consequences of civil war, revolution, rebellion, insurrection, or civil strike arising therefrom, or piracy."According to petitioner, the automatic incorporation of subsection 1.1 of section 1 of the Institute War Clauses (Cargo), among others, means that any "capture, arrest, detention, etc." pertained exclusively to warlike operations if this Court strictly construes the heading of the said Clauses. However, it also claims that the parties intended to include arrests, etc. even if it were not the result of hostilities or warlike operations. It further claims that on the strength of jurisprudence on the matter, the term "arrests" would only cover those arising from political or executive acts, concluding that whether private respondent's claim is anchored on subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) or the F.C. & S. Clause, the arrest of the vessel by judicial authorities is an excluded risk.[4]This Court cannot agree with petitioner's assertions, particularly when it alleges that in the "Perils" Clause, it assumed the risk of arrest caused solely by executive or political acts of the government of the seizing state and thereby excludes "arrests" caused by ordinary legal processes, such as in the instant case.With the incorporation of subsection 1.1 of Section 1 of the Institute War Clauses, however, this Court agrees with the Court of Appeals and the private respondent that "arrest" caused by ordinary judicial process is deemed included among the covered risks. This interpretation becomes inevitable when subsection 1.1 of Section 1 of the Institute War Clauses provided that "this insurance covers the risks excluded from the Standard Form of English Marine Policy by the clause 'Warranted free of capture, seizure, arrest, etc. x x x'" or the F.C. & S. Clause. Jurisprudentially, "arrests" caused by ordinary judicial process is also a risk excluded from the Standard Form of English Marine Policy by the F.C. & S. Clause.Petitioner cannot adopt the argument that the "arrest" caused by ordinary judicial process is not included in the covered risk simply because the F.C. & S. Clause under the Institute War Clauses can only be operative in case of hostilities or warlike operations on account of its heading "Institute War Clauses." This Court agrees with the Court of Appeals when it held that ". . . Although the F.C. & S. Clause may have originally been inserted in marine policies to protect against risks of war, (see generally G. Gilmore & C. Black, The Law of Admiralty Section 2-9, at 71-73 [2d Ed. 1975]),its interpretation in recent years to include seizure or detention by civil authorities seems consistent with the general purposes of the clause, x x x"[5]In fact, petitioner itself averred that subsection 1.1 of Section 1 of the Institute War Clauses included "arrest" even if it were not a result of hostilities or warlike operations.[6]In this regard, since what was also excluded in the deleted F.C. & S. Clause was "arrest" occasioned by ordinary judicial process, logically, such "arrest" would now become a covered risk under subsection 1.1 of Section 1 of the Institute War Clauses, regardless of whether or not said "arrest" by civil authorities occurred in a state of war.Petitioner itself seems to be confused about the application of the F.C. & S. Clause as well as that of subsection 1.1 of Section 1 of the Institute War Clauses (Cargo). It stated that "the F.C. & S. Clause was "originally incorporated in insurance policies toeliminate the risks of warlike operations". It also averred that the F.C. & S. Clause applieseven if there be no war or warlike operationsx x x"[7]In the same vein, it contended that subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) "pertainedexclusively to warlike operations" and yet it also stated that "the deletion of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) was to include "arrest, etc.even if it were not a result of hostilities or warlike operations."[8]This 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 respondent's claim.This Court finds it pointless for petitioner to maintain its position that it only insures risks of "arrest" occasioned by executive or political acts of government which is interpreted as not referring to those caused by ordinary legal processes as contained in the "Perils" Clause; deletes the F.C. & S. Clause which excludes risks of arrest occasioned by executive or political acts of the government and naturally, also those caused by ordinary legal processes; and, thereafter incorporates subsection 1.1 of Section 1 of the Institute War Clauses which now includes in the coverage risks of arrest due to executive or political acts of a government but then still excludes "arrests" occasioned by ordinary legal processes when subsection 1.1 of Section 1 of said Clauses should also have included "arrests" previously excluded from the coverage of the F.C. & S. Clause.It 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.[9]Likewise, 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.[10]Any construction of a marine policy rendering it void should be avoided.[11]Such 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.[12]If a marine insurance company desires to limit or restrict the operation of the general provisions of its contract by special proviso, exception, or exemption, it should express such limitation in clear and unmistakable language.[13]Obviously, the deletion of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) gave rise to ambiguity. If the risk of arrest occasioned by ordinary judicial process was expressly indicated as an exception in the subject policies, there would have been no controversy with respect to the interpretation of the subject clauses.Be that as it may, exceptions to the general coverage are construed most strongly against the company.[14]Even an express exception in a policy is to be construed against the underwriters by whom the policy is framed, and for whose benefit the exception is introduced.[15]An 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 risks of loss or damage to the goods. Such interpretation should result from the natural and reasonable meaning of language in the policy.[16]Where restrictive provisions are open to two interpretations, that which is most favorable to the insured is adopted.[17]Indemnity 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.[18]A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.[19]In view of the foregoing, this Court sees no need to discuss the other issues presented.WHEREFORE, the petition for review is DENIED and the decision of the Court of Appeals is AFFIRMED.SO ORDERED.Regalado, (Chairman), Puno, Mendoza,andTorres, Jr., JJ.,concur.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. 13983 September 1, 1919LA RAZON SOCIAL "GO TIAOCO Y HERMANOS,"plaintiff-appellant,vs.UNION INSURANCE SOCIETY OF CANTON, LTD.,defendant-appellee.P. E. del Rosario and W. F. Mueller for appellant.Crossfield and O'Brien for appellee.STREET,J.:This is an action on a policy of marine insurance issued by the Union Insurance Society of Canton, Ltd., upon a cargo of rice belonging to the plaintiffs, Go Tiaoco Brothers, which was transported in the early days of May, 1915, on the steamshipHondaguafrom the port of Saigon to Cebu. On 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 sacks and been damages by sea water. The 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 (P3,875.25). The 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. Judgment was accordingly entered in favor of the defendant and the plaintiffs appealed.The facts with reference to the manner in which the sea water effected entrance into the hold may be summarized as follows, substantially in accordance with the findings of the trial court:The 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. The joint or elbow where the pipe changed its direction was of cast iron; 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. This hole had been in existence 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. The effect of loading the boat was to submerge the vent, or orifice, of the pipe until it was about 18 inches or 2 feet below the level of the sea. As a consequence the sea water rose in the pipe. Navigation 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.The 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. The 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. For this reason the court held that the ship was unseaworthy.The policy of insurance was signed upon a form long in use among companies engaged in maritime insurance. It purports to insure the cargo from the following among other risks: "Perils . . . of the seas, men of war, fire, enemies, pirates, rovers, thieves, jettisons, . . . 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."The 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. One has reference to the meaning of the expression "perils of the seas and all other perils, losses, and misfortunes," as used in the policy; the other has reference to the implied warranty, on the part of the insured, as to the seaworthiness of the ship.The meaning of the expression "perils . . . of the seas . . . and all other perils, losses, and misfortunes," used in describing the risks covered by policies of marine insurance, has been the subject of frequent discussion; and certain propositions relative thereto are now so generally accepted as to be considered definitely settled.In the first place it is determined that the words "all other perils, losses, and misfortunes" are to be interpreted as covering risks which are of like kind (ejusdem generis) with the particular risks which are enumerated in the preceding part of the same clause of the contract. "According to the ordinary rules of construction," said Lord Macnaghten in Thames and Mersey Marine Insurance Co.vs.Hamilton, Fraser & Co. ([1887]), 12 A. C., 484, 501), "these words must be interpreted with reference to the words which immediately precede them. They were no doubt inserted in order to prevent disputes founded on nice distinctions. Their 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 taken of those cases. For example, if the expression 'perils of the seas' is given its widest sense the general words have little or no effect as applied to that case. If no the other hand that expression is to receive a limited construction, as apparently it did in Cullenvs.Butler (5 M. & S., 461), and loss by perils of the seas is to be confined to lossex marinae tempestatis discrimine, the general words become most important. But still, ever since the case of Cullenvs.Butler, when they first became the subject of judicial construction, they have always been held or assumed to be restricted to cases 'akin to' or resembling' or 'of the same kind as' those specially mentioned. I see no reason for departing from this settled rule. In marine insurance it is above all things necessary to abide by settled rules and to avoid anything like novel refinements or a new departure."It 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 ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship. As was well said by Lord Herschell in Wilson, Sons & Co.vs.Owners of Cargo per the Xantho ([1887], 12 A. C., 503,509), there must, in order to make the insurer liable, be "some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen."In the present case the entrance of the sea water into the ship's hold through the defective pipe already described was not due to any accident which happened during the voyage, but to the failure of the ship's owner properly to repair a defect of the existence of which he was apprised. The loss was therefore more analogous to that which directly results from simple unseaworthiness than to that which results from perils of the sea.The first of the two decisions of the House of Lords from which we have quoted (Thames and Mersey Marine Insurance Co.vs.Hamilton, Fraser & Co. [1887], 12 A. C., 484) arose upon the following state of facts: In March, 1884, theInchmareewas lying at anchor off Diamond Island and was about to start upon her voyage. To this end it became necessary to fill up her boilers. There was a donkey-engine with a donkey-pump on board, and the donkey-engine was set to pump up water from the sea into the boilers. Those in charge of the operation did not take the precaution of making sure that the valve of the aperture leading into one of the boilers was open. This valve happened to be closed. The result was that the water being unable to make its way into the boiler was forced back and split the air-chamber and so disabled the pump. It was held that whether the injury occurred through negligence or accidentally without negligence, it was not covered by the policy, since the loss did not fall either under the words "perils of the seas" or under the more general words "all other perils, losses, and misfortunes." Lord Bramwell, in the course of his opinion quoted with approbation as definition given by Lopes L.J. in Pandorfvs.Hamilton (16 Q. B. D., 629), which is as follows: In 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.The second of the decision from the House of Lords from which we have quoted (Wilson, Son & Co.vs.owners of Cargo per theXantho[1887], 12 A. C., 503) arose upon the following facts: The owners of certain cargo embarked the same upon the steamshipXantho.A collision took place in a fog between this vessel and another ship,Valuta. An action was thereupon instituted by the owners of the cargo against the owners of theXantho. It 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.Still another case was decided in the House of Lords upon the same date as the preceding two, which is equally instructive as the others upon the question now under consideration. We refer to Hamilton, Fraser & Co.vs.Pandorf & Co. ([1887], 12 A. C., 518), where it appeared that rice was shipped under a charter party and bills of lading which expected "dangers and accident of the sea." During the voyage rats gnawed a hole in a pipe on board the ship, whereby sea water effected an entrance into the ship's hold and damaged the rice. It 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. It was held that this loss resulted from an accident or peril of the sea and that the shipowners were not responsible. Said Bramwell: "No question of negligence exists in this case. The damage was caused by the sea in the course of navigation with no default in any one. I am, therefore, of opinion that the damage was caused by peril of the sea within the meaning of the bill of lading." The 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. Undoubtedly, if in Hamilton, Fraser & Co.vs.Pandorf & Co. [1887], 12 A. C., 518), 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 make adequate repairs, the ship would have been liable.The three decisions in the House of Lords 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 voyage; and it would be presumptuous for us to undertake to add to what has been there said by the learned judges of that high court. Suffice 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 liable; for, generally speaking, the shipowner excepts 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. As applied to the present case it results that the owners of the damages rice must look to the shipowner for redress and not to the insurer.The same conclusion must be reached if the question be discussed with reference to the seaworthiness of the ship. It is universally accepted that in every contract of insurance upon anything which is the subject of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the inception of the voyage. This rule is accepted in our own Insurance Law (Act No. 2427, sec. 106). It 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 (Act No. 2427, sec. 106). In Steelvs.State Line Steamship Co. ([1877], L. R. 3 A. C., 72), a cargo of wheat was laden upon a ship which had a port-hole insecurely fastened at the time of the lading. This port-hole was about one foot above the water line; and in the course of the voyage sea water entered the compartment where the wheat was stores and damaged the cargo. It was held that the ship was unseaworthy with reference to the cargo in question. In Gilroy, Sons & Co.vs.Price & Co. ([1893], 18 A. C., 56), a cargo of jute was shipped. During the voyage the vessel encountered stormy weather, as a consequence of which the cargo shifted its position and broke a pipe leading down through the hold from the water closet, with result that water entered the vessel and the jute was damaged. It 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. It was accordingly held that the ship was unseaworthy.From what has been said it follows that the trial court committed no error in absolving the defendant from the complaint. The judgment must therefore be affirmed, and it is so ordered, with costs.Arellano, C.J., Johnson, Araullo, Malcolm, Avacena and Moir, JJ.,concur.Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 76145 June 30, 1987CATHAY INSURANCE CO.,petitioner,vs.HON. COURT OF APPEALS, and REMINGTON INDUSTRIAL SALES CORPORATION,respondents.PARAS,J.:This petition seeks the review of the decision of the Court of Appeals1in CA-G.R. CV No. 06559 affirming the decision of the Regional Trial Court (RTC),2National Capital Region (NCR) Manila, Branch 38 and the Resolution of the said appellate court denying petitioner's motion for reconsideration.Originally, this was a complaint filed by private respondent corporation against petitioner (then defendant) company seeking collection of the sum of P868,339.15 representing private respondent's losses and damages incurred in a shipment of seamless steel pipes under an insurance contract in favor of the said private respondent as the insured, consignee or importer of aforesaid merchandise while in transit from Japan to the Philippines on board vessel SS "Eastern Mariner." The total value of the shipment was P2,894,463.83 at the prevailing rate of P7.95 to a dollar in June and July 1984, when the shipment was made.The trial court decided in favor of private respondent corporation by ordering petitioner to pay it the sum of P866,339.15 as its recoverable insured loss equivalent to 30% of the value of the seamless steel pipes; ordering petitioner to pay private respondent interest on the aforecited amount at the rate of 34% or double the ceiling prescribed by the Monetary Board per annum from February 3, 1982 or 90 days from private respondent's submission of proof of loss to petitioner until paid as provided in the settlement of claim provision of the policy; and ordering petitioner to pay private respondent certain amounts for marine surveyor's fee, attorney's fees and costs of the suit.Respondent in its comment on the petition, contends that:1. Coverage of private respondent's loss under the insurance policy issued by petitioner is unmistakable.2. Alleged contractual limitations contained in insurance policies are regarded with extreme caution by courts and are to be strictly construed against the insurer; obscure phrases and exceptions should not be allowed to defeat the very purpose for which the policy was procured.3. Rust is not an inherent vice of the seamless steel pipes without interference of external factors.4. No matter how petitioner might want it otherwise, the 15-day clause of the policy had been foreclosed in the pre-trial order and it was not even raised in petitioner's answer to private respondent's complaint.5. The decision was correct in not holding that the heavy rusting of the seamless steel pipes did not occur during the voyage of 7 days from July 1 to July 7, 1981.6. The alleged lack of supposed bad order survey from the arrastre capitalized on by petitioner was more than clarified by no less than 2 witnesses.7. The placing of notation "rusty" in the way bills is not only private respondent's right but a natural and spontaneous reaction of whoever received the seamless steel pipes in a rusty condition at private respondent's bodega.8. The Court of Appeals did not engage in any guesswork or speculation in concluding a loss allowance of 30% in the amount of P868,339.15.9. The rate of 34% per annum double the ceiling prescribed by the Monetary Board is the rate of interest fixed by the Insurance Policy itself and the Insurance Code.The petitioner however maintains that:(1) Private respondent does not dispute the fact that, contrary to the finding of the respondent Court (the petitioner has failed "to present any evidence of any viable exeption to the application of the policy") there is in fact an express exeption to the application of the policy.(2) As adverted to in the Petition for Review, private respondent has admitted that the question shipment in not covered bya " square provision of the contract," but private respondent claims implied coverage from the phrase " perils of the sea" mentioned in the opening sentenced of the policy.(3) The insistence of private respondent that rusting is a peril of the sea is erroneous.(4) Private respondent inaccurately invokes the rule of strict construction against insurer under the guise of construction in order to impart a non-existing ambiguity or doubt into the policy so as to resolve it against the insurer.(5) Private respondent while impliedly admitting that a loss occasioned by an inherent defect or vice in the insured article is not within the terms of the policy, erroneously insists that rusting is not an inherent vice or in the nature of steel pipes.(6) Rusting is not a risk insured against, since a risk to be insured against should be a casualty or some casualty, something which could not be foreseen as one of the necessary incidents of adventure.(7) A fact capable of unquestionable demonstration or of public knowledge needs no evidence. This fact of unquestionable demonstration or of public knowledge is that heavy rusting of steel or iron pipes cannot occur within a period of a seven (7) day voyage. Besides, petitioner had introduced the clear cargo receipts or tally sheets indicating that there was no damage on the steel pipes during the voyage.(8) The evidence of private respondent betrays the fact that the account of P868,339.15 awarded by the respondent Court is founded on speculation, surmises or conjectures and the amount of less has not been proven by competent, satisfactory and clear evidence.We find no merit in this petition.There is no question that the rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if the insurer cannot be held accountable therefor, We would fail to observe a cardinal rule in the interpretation of contracts, namely, that any ambiguity therein should be construed against the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring cargo during a voyage would be rendered fruitless. Be it noted that any attack of the 15-day clause in the policy was foreclosed right in the pre-trial conference.Finally, it is a cardinal rule that save for certain exceptions, findings of facts of the appellate tribunal are binding on Us. Not one of said exceptions can apply to this case.WHEREFORE, this petition is hereby DENIED, and the assailed decision of the Court of Appeals is hereby AFFIRMED.SO ORDERED.Fernan (Chairman), Gutierrez, Jr., and Cortes, JJ., concur.Padilla and Bidin, JJ., took no partSECOND DIVISION[G.R. No. 127897.November 15, 2001]DELSAN TRANSPORT LINES, INC.,petitioner,vs.THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION,respondents.D E C I S I O NDE LEON, JR.,J.:Before us is a petition for review oncertiorariof the Decision[1]of the Court of Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the Resolution[2]dated January 21, 1997 which denied the subsequent motion for reconsideration.The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City.The shipment was insured with the private respondent, American Home Assurance Corporation.On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City.Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos(P5,096,635.57) representing the insured value of the lost cargo.Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex.Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money.After the trial and upon analyzing the evidence adduced, the trial court rendered a decision on November 29, 1990 dismissing the complaint against herein petitioner without pronouncement as to cost.The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition orforce majeure,thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo.[3]The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals.The appellate court gave credence to the weather report issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA for brevity) which showed that from 2:00 oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioners allegation that the waves were twenty (20) feet high.In the absence of any explanation as to what may have caused the sinking 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[4]to herein private respondent insurance company as subrogee of Caltex.The 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,[5]to wit:ITHE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT.IITHE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL PRESUMPTION THAT THE VESSEL MT MAYSUN WAS SEAWORTHY.IIITHE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS.Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance 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 subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy.Consequently, the insurer will not be liable to the assured for any loss under the policy in case the vessel would later on be found as not seaworthy at the inception of the insurance.It theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the latters breach of implied warranty under the marine insurance policy that the vessel was seaworthy.The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not seaworthy on the ground that the marine officer who served as the chief mate of the vessel, Francisco Berina, was allegedly not qualified.Under Section 116 of the Insurance 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 Caltex of its lost cargo, extends to the vessels complement.Besides, petitioner avers that although Berina had merely a 2ndofficers license, he was qualified to act as the vessels chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations.In fact, all the crew and officers of MT Maysun were exonerated in the administrative investigation conducted by the Board of Marine Inquiry after the subject accident.[6]In any event, petitioner further avers that private respondent failed, for unknown reason, to present in evidence during the trial of the instant case the subject marine cargo insurance policy it entered into with Caltex.By virtue of the doctrine laid down in the case ofHome Insurance Corporation vs. CA,[7]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.Hence, the legal issues posed before the Court are:IWhether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.IIWhether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action.We rule in the negative on both issues.The payment made by the private respondent for the insured value of thelost cargo operates as waiver of its (private respondent) 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 a common carrier.The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.[8]Article 2207 of the New Civil Code provides that:Art. 2207.If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.The right of subrogation has its roots in equity.It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay.[9]It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim.It accrues simply upon payment by the insurance company of the insurance claim.[10]Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner.From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case.[11]In 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, earthquake, lightning or other natural disaster or calamity.[12]In 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 extraordinary diligence.[13]In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner attributes the sinking of MT Maysun to fortuitous event orforce majeure.From the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the early morning of August 16, 1986; that at around 3:15 oclock in the morning a squall (unos) carrying strong winds with an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo.[14]This tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report[15]from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent government agency charged with monitoring weather and sea conditions, showing that from 2:00 oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged from .7 to two (2)meters in the vicinity of Cuyo East Pass and Panay Gulfwhere the subject vessel sank.Thus, as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy.There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.The appellate court also correctly opined that the petitioners witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, the herein petitioner common carrier.Neither may petitioner escape liability by presenting in evidence certificates[16]that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage.These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage.As correctly observed by the Court of appeals:At the time of dry-docking and inspection, the ship may have appeared fit.The certificates issued, however, do not negate the presumption of unseaworthiness triggered by an unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as to their probative value, (thus):Seaworthiness relates to a vessels actual condition.Neither the granting of classification or the issuance of certificates establishes seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62)And also:Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owners obligation.Also 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. (Ibid.)[17]Additionally, the exoneration of MT Maysuns officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities.It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary 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.[18]In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier[19]occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.Anent 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 exercise of its subrogatory right.The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim.The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.[20]The presentation of the insurance policy was necessary in the case ofHome Insurance Corporation v. CA[21](a case cited by petitioner)because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage.First, from the shipper to the port of departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the consignee.We emphasized 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.Ordinarily, it cannot be held responsible for the handling of the cargo before it actually received it.The insurance contract, which was not presented in evidence in that case would have indicated the scope of the insurers liability, if any, since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained.Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance Corporation is not applicable to the case at bar.In contrast, there is no doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at bar, was lost while on board petitioners vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986.WHEREFORE, the instant petition is DENIED.The Decision dated June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED.Costs against the petitioner.SO ORDERED.Bellosillo, (Chairman), Mendoza, Quisumbing,andBuena, JJ.,concur.

[G.R. No. 116940.June 11, 1997]THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.,petitioner, vs. COURT OF APPEALS and FELMAN SHIPPINGLINES,respondents.D E C I S I O NBELLOSILLO,J.:This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the rights of the insured upon payment of the insurance claim.On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on boardMV Asilda,a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transportedfromZamboangaCityto CebuCityforconsigneeCoca-ColaBottlersPhilippines,Inc.,Cebu.[1]The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG.MV Asildaleft the port of Zamboanga in fine weather at eight oclock in the evening of the same day.At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank withMV Asilda.Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim ofP755,250.00.Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss.Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages.In its complaint PHILAMGEN alleged that the sinking and total loss ofMV Asildaand its cargo were due to the vessels unseaworthiness as she was put to sea in an unstable condition.It further alleged thatthevesselwasimproperlymannedandthatits officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership overMV Asildatogether with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce.[2]On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN.On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits.FELMAN filed a petition forcertiorariwith this Court but it was subsequently denied on 13 February 1989.On 28 February 1992 the trial court rendered judgment in favor of FELMAN.[3]It ruled thatMV Asildawas seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowners surveyor attesting to its seaworthiness.Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply.The lower court further ruled that assumingMV Asildawas unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessels seaworthiness.Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment.Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee.On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals.On 29 August 1994 respondent appellate court rendered judgment findingMV Asildaunseaworthy for being top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck.In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo.Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground that the assureds implied warranty of seaworthiness was not complied with.Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper.Furthermore, respondent court held that the filing of notice of abandonmenthad absolved the shipowner/agent from liability under the limited liability rule.The issues for resolution in this petition are:(a) whetherMV Asildawas seaworthy when it left the port of Zamboanga; (b) whether the limited liability under Art. 587oftheCodeofCommerceshould apply; and, (c) whether PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner.MV Asildawas unseaworthy when it left the port of Zamboanga.In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga.According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs.They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck.[4]The ship captain stated that around four oclock in the morning of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel had hit a floating log.At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves.After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching.He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced.At about seven oclock in the morning, the master of the vessel stopped the engine because the vessel was listing dangerously to portside.He ordered his crew to shift the cargo back to starboard.The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed.At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargoondeckwerethrownoverboardandseawaterenteredthe engine room and cargo holds of the vessel.At that instance, the master of the vessel ordered his crew to abandon ship.Shortly thereafter,MV Asildacapsized and sank.He ascribed the sinkingtotheentry of seawater through a hole in the hull caused by the vessels collision with a partially submerged log.[5]The Elite Adjusters, Inc., submitted a report regarding the sinking ofMV Asilda.The report, which was adopted by the Court of Appeals, reads -We found in the course of our investigation that a reasonable explanation for the series of lists experienced by the vessel that eventually led to her capsizing and sinking, was that the vessel wastop-heavywhich is to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that particular voyage.In this connection, we wish to call attention to the fact that this vessel was designed as a fishing vessel x x x x and it was not designed to carry a substantial amount or quantity of cargo on deck.Therefore, we believe strongly that had her cargo been confined to those that could have been accommodated under deck, her stability would not have been affected and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking.But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the vessels metacentric height as to cause it to become unstable.Finally, with regard to the allegation that the vessel encountered big waves, it must be pointed out that ships are precisely designed to be able to navigate safely even during heavy weather and frequently we hear of ships safely and successfully weathering encounters with typhoons and although they may sustain some amount of damage, the sinking of ship during heavy weather is not a frequent occurrence and is not likely to occur unless they are inherently unstable and unseaworthyxxxxWe believe, therefore, and so hold that theproximate causeof the sinking of theM/VAsildawas her condition of unseaworthiness arising from her having beentop-heavywhenshedepartedfromthe Port of Zamboanga.Her having capsized and eventually sunk was bound to happen and was therefore in the category of an inevitable occurrence (underscoring supplied).[6]We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause of the sinking ofMV Asildawas its being top-heavy.Contrary to the ship captains allegations, evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck.Several days afterMV Asildasank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking.Considering that the ships hatches were properly secured, the empty Coca-Cola cases recovered could have come only from the vessels deck cargo.It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship.However, in this case it was established thatMV Asildawas not designed to carry substantial amount of cargo on deck.The inordinate loading of cargo deck resulted in the decrease of the vessels metacentric height[7]thus making it unstable.The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition.On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar.[8]Simply put, the ship agent is liable for the negligent acts of the captain in the care of goodsloadedonthevessel.This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587.Nonetheless, there are exceptional circumstances whereintheship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain.[9]The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowners liability, does not apply to cases where the injury or average was occasioned by the shipowners own fault.[10]It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain.Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier.[11]It was already established at the outset that the sinking ofMV Asildawas due to its unseaworthiness even at the time of its departure from the port of Zamboanga.It was top-heavy as an excessive amount of cargo was loaded on deck.Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.As such,FELMAN was equally negligent.It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.Under Art 1733 of the Civil Code, (c)ommon carriers, from the nature of their business and for reasons of publicpolicy,areboundtoobserve extraordinary diligence in the vigilance over the goods andfor the safety of the passengerstransportedbythem,accordingtoallthe circumstances of each case x x x x" In the event of loss of goods, common carriers are presumed to have acted negligently.FELMAN, the shipowner, was not able to rebut this presumption.In relation to the question of subrogation, respondent appellate court foundMV Asildaunseaworthy with reference to the cargo and therefore ruled that there was breach of warranty of seaworthiness that rendered the assured not entitled to the payment of is claim under the policy.Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a voluntary payment and no right of subrogation accrued in its favor.In other words, when PHILAMGEN paid it did so at its own risk.It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy.[12]Thus Sec. 113 of the Insurance Code provides that (i)n every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.Under Sec. 114, a ship is seaworthy when reasonably fit to perform the service, and to encountertheordinaryperilsofthevoyage,contemplatedbythe parties to the policy.Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps itsvesselsin seaworthy condition.He may have no control overthevesselbuthe has full control in the selection of the common carrier that will transport his goods.He also has full discretion in the choice of assurer that will underwrite a particular venture.We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly pointed out by FELMAN to stress that subrogation will not work in this case.In policies where the law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in the policy in the clearest language.[13]And where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be raised by the assurer without showing concealment or misrepresentation by the assured.[14]The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness.Paragraph 15 of the Marine Open Policy No. 100367-PAG reads (t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and theCompanyshallnotprejudicethe insurance.The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted.[15]The same clause is present in par. 8 of the Institute Cargo Clauses(F.P.A.) of the policywhich states (t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted x x x x"[16]The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things:(a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company.[17]The insertion of such waiver clausesin cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the vessel.Thus it can be said that with such categorical waiver,PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case, PHILAMGEN is liable.Having disposed of this matter, we move on to the legal basis for subrogation.PHILAMGENs action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides:Art. 2207.If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.InPan Malayan Insurance Corporation v. Court of Appeals,[18]we said that payment by the assurer to the assured operates as an equitable assignment to the assurerof all the remedies whichtheassuredmay have against the third party whose negligenceorwrongfulactcaused the loss.The right of subrogation is not dependent upon, nor does itgrow out of any privity of contract or uponpaymentbytheinsurance company of the insurance claim.It accrues simply upon payment by the insurance company of the insurance claim.The doctrine of subrogation has its roots in equity.It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay.[19]Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN.Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable.WHEREFORE, the petition is GRANTED.Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICANGENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand TwoHundredandFiftyPesos(P755,250.00)plus legal interest thereon counted from 29 November 1983, the date ofjudicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code.[20]SO ORDERED.Vitug, Kapunan,andHermosisima, Jr., JJ.,concur.Padilla, (Chairman), J.,on leave.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 95070 September 5, 1991PAN MALAYAN INSURANCE CORPORATION,petitioner,vs.COURT OF APPEALS and THE FOOD AND AGRICULTURAL ORGANIZATION OF THE UNITED NATIONS,respondents.Alejandro P. Ruiz, Jr. for petitioner.Conrado R. Ayuyao for private respondent.REGALADO,J.:pThis case had its origin in a shipment of 1,500 metric petitions of IR-36 certified rice seeds which private respondent, The Food and Agricultural Organization of the United Nations (hereinafter referred to as FAO), an autonomous intergovernmental organization created by treaty, intended and made arrangements to send to Kampuchea to be distributed to the people for seedling purposes. Respondent court affirms the factual findings therein of the courta quoas chronologized hereunder.On May 22, 1980, FAO received a formal offer from the Luzon Stevedoring Corporation (LUZTEVECO, for brevity) whereby the latter offered to ship the former's aforesaid cargo, consisting of 3,000 metric petitions in two lots of rice seeds, to Vietnam Ocean Shipping Industry in Vaung Tau, Vietnam for freight fees of $55.50/MT, subject to the terms and conditions indicated in the corresponding communication.1On May 28, 1980, FAO wrote LUZTEVECO formally confirming its acceptance of the foregoing offer amounting to US$83,325.92 in respect of one lot of 1,500 metric petitions winch is the subject of the present action.2The cargo was loaded on board LUZTEVECO Barge No. LC-3000 and consisted of 34,122 bags of IR-36 certified rice seeds purchased by FAO from the Bureau of Plant Industry for P4,602,270.00.3On June 12, 1980, the loading was completed and LUZTEVECO issued its Bill of Lading No. 01 in favor of FAO.4The latter then secured insurance coverage in the amount of P5,250,000.00 from petitioner, Pan Malayan Insurance Corporation, as evidenced by the latter's Marine Cargo Policy No. B-11474A and Premium Invoice No. 78615, dated June 16, 1980.5On June 16, 1980, FAO gave instructions to LUZTEVECO to leave for Vaung Tau, Vietnam to deliver the cargo which, by its nature, could not withstand delay because of the inherent risks of termination and/or spoilage. On the same date, the insurance premiums on the shipment was paid by FAO petitioner.On June 23, 1980, FAO was informed by LUZTEVECO that the tugboat and barge carrying FAO's shipment returned to Manila after leaving on June 16, 1980 and that the shipment again left Manila for Vaung Tau Vietnam on June 21, 1980 with the barge being towed by a different tugboat. Since this was an unauthorized deviation, FAO demanded an explanation on June 25, 1980.6On June 26, 1980, FAO was advised of the sinking of the barge in the China Sea, hence it informed petitioner thereof and, later, formally filed its claim under the marine insurance policy.7On July 29, 1980, FAO was informed by LUSTEVECO of the recovery of the lost shipment, for which reason FAO formally filed its claim with LUZTEVECO for compensation of damage to its cargo.8Thereafter, despite repeated demands to replace the same or to pay for the total insured value in the sum of P5,250,000.00, LUSTEVECO failed and refused to do so. Petitioner likewise failed to pay for the losses and damages sustained by FAO by reason of its inability to recover the value of the shipment from LUZTEVECO.9Petitioner claims that on July 31, 1980 it supposedly engaged the services of Pan Asiatic Adjustment and Marine Surveying Corporation to investigate and examine the shipment. On August 4, 1980, J.A. Barroso, Jr. of said corporation reportedly conducted a survey on the shipment and found that 9,629 bags of rice seeds were in good order, 23,510 bags sustained wattage of 10% to 15%, and 983 bags were shorthanded or missing. After the alleged survey, Barroso, Jr. made a report recommending to petitioner the denial of FAO's claim because the partial damage suffered by the shipment is not compensable under the policy. On the basis of said recommendation, petitioner denied FAO's claim.10Petitioner further avers that upon the request of counsel of FAO, a survey of the shipment was conducted on September 26, 27 and 29, 1980 by Conrado Catalan, Jr. of Manila Adjusters & Surveyors Company and he found 6,200 bags in good order condition. At the time of his survey, 23,510 bags of the shipment had allegedly already been sold by LUZTEVECO. Petitioner further asserts that on September 29, 1980, FAO wrote a letter to petitioner signifying its willingness to abandon the proceeds of the sale of the 23,510 bags and the remaining good order bags, but that on October 6, 1980 petitioner rejected FAO's proposed abandonment.FAO then instituted Civil Case No. 41716 against LUZTEVECO and/or herein petitioner, as defendants, with the Regional Trial Court of Pasig, Metro Manila which, on December 14, 1987, rendered judgment in favor of FAO with the following decretal portion:WHEREFORE, by virtue of preponderance of evidence and in consideration of justice and equity, this Court hereby renders judgment in favor of the plaintiff against the defendant Luzon Stevedoring Corporation and defendant Pan Malayan Insurance Corporation,ordering both the defendants, to payjointlyand severally, the plaintiff, to wit:1. The sum of P5,250,000.00 with interest thereon, at legal rate from September 29, 1980 until fully paid;2. The sum of P250,000.00 by way of attorney's fees and expenses of litigation; and3. The cost of this suit.11Petitioner alone appealed the said decision to respondent Court of Appeals, docketed therein as CA-G.R. CV No. 22114, and on July 20, 1990 respondent court affirmed the decision of the trial court except for the award of attorney's fees which was reduced to P25,000.00.12Petitioner's motion for reconsideration was denied in respondent court's resolution of September 3, 1990.13The petition now before us raises the following issues: (1) Whether or not respondent court committed a reversible error in holding that the trial court is correct in holding that there is a total loss of the shipment; and (2) Whether or not respondent court committed a reversible error in affirming the decision of the trial court ordering petitioner to pay private respondent the amount of P5,250,000.00 representing the full insured value of the rice seeds.14The law classifies loss into either total or partial. Total loss may be actual or absolute,15or it may otherwise be constructive or technical.16Petitioner submits that respondent court erred in ruling that there was total loss of the shipment despite the fact that only 27,922 bags of rice seeds out of 34,122 bags were rendered valueless to FAO and the shipment sustained only a loss of 78%. FAO, however, claims that, for all intents and purposes, it has practically lost itstotalorentire shipmentin this case, inclusive of expenses, premium fees, and so forth, despite the alleged recovery by defendant LUZTEVECO.As found by the court below and reproduced with approval by respondent court, FAO "has never been compensated for thistotalloss or damage, a fact which is not denied nor controverted. If there were some cargoes saved, by LUZTEVECO, private respondent abandoned it and the same was sold or used for the benefit of LUZTEVECO or Pan Malayan Corporation. Under Sections 129 and 130 of the New Insurance Code, a total loss may either be actual or constructive.In case of total loss in Marine Insurance, the assured is entitled to recover from the underwriter the whole amount of his subscription (Vol. 2, Arnould Mar. Ins. 9th Ed. P. 1304; Alsop vs. Commercial Insurance Co. cc Mass IF Case No. 262, summ 451."(Emphasis in the original text.)17It is a fact that on July 9, 1980, FAO formally filed its claim under the marine insurance policy issued by petitioner.18FAO thus claims actual loss under paragraphs (c) and (d) of Section 130 of the Insurance Code which provides:SEC. 130. An actual total loss is caused by:(a) A total destruction of the thing insured;(b) The irretrievable loss of the thing by sinking, or by being broken up;(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or(d) Any other event which effectively deprives the owner of the possession, at the port of destination of the thing insured.Respondent court affirmed the ruling of the trial court to the effect that there was indeed actual total loss, painstakingly explaining therein the following grounds for holding petitioner liable for the entire amount of the insurance coverage:... The lower court was not incorrect in holding that there is a total or entire loss of shipment in the case at bar.First, the fact of the sinking of Barge LC-3000 as the occurrence of the risk insured against under the marine insurance was proved and borne out by the following findings of the courta quo, thus;Here, we should not lose sight of the fact ofsinkingof the barge according to the defendant LUZTEVECO, in a phone call by Mr. Emata, defendant's representative, on June 26, 1980 and (of) which fact, the defendant Pan Malayan Insurance Corporation was notified. Subsequently, there was marine protest, based on said information released by the defendant LUZTEVECO. In fine, the barge LC-3000 carrying the load in question sank.If the barge was made to refloat, it cannot be denied that it sank, otherwise, what is the use of refloating the barge?What is mentioned in the law as the risk orperilinsured against issinking. This is the risk or peril covered by the Marine Insurance. (Decision, p. 4)xxx xxx xxx..., it is worth mentioning the following unrebutted documents, testimonies and pleadings cited by the plaintiff-appellant, viz:(1) Testimony of Mr. Keiner that he was informed by Mr. Emata, a representative of LUZTEVECO, that the barge and its cargo sank in the South China Sea on June 25, 1980 (Deposition, Q43 p. 11)(2) Letter of Capt. Ilano of Luzon Stevedoring Corporation dated June 26, 1980 confirming the sinking of Barge LC-3000 and its cargo on June 25, 1980 (Exhibit "D-9").(3) Marine protest executed on July 2, 1980 by Capt. Rudy Vencer, master of tugboat towing Barge LC-3000, attesting to said barge's sinking on June 25, 1980, 385 miles off South Vietnam, due to very strong winds and rough seas. (Exhibit "E- 4").(4) The answer of defendant LUZTEVECO itself which admits in no uncertain terms the sinking of Barge LC-3000 on June 25, 1980. ...xxx xxx xxxBasing on the evidence on record, the factual finding of the lower court re sinking of Barge LC-3000 is not without basis but rather sufficiently supported by evidence adduced by plaintiff-appellee.Second, there is the direct testimony of Mr. Fritz Keiner (the UNFAO officer-in-charge in the Philippines at the time of the loss) which states as follows:52. CONGEN:What eventually happened to your Organization's entire shipment of rice seedlings intended for the refugees of Vietnam?FK:First, I would like to point out that the rice seeds were intended for the people of Kampuchea, but for logistical reasons, the shipment had to go through Vungtan, (sic) Vietnam.In spite of the alleged salvaging of our shipment, there was absolutely no replacement or payment made by either defendant LUZTEVECO or defendant Pan Malayan Insurance Co. on our losses and eventually FAO did not recover anything from either of the said defendants.53. CONGEN:Up to the present, has any replacement or payment of the value of your lost cargo been made to your organization by either of the defendants?FPKEINER:Up to the present, no replacement or payment of the value of our lost cargo was ever made to our Organization by either of the defendants in this case. (Deposition of Fritz Keiner, pp. 13-14)As emphasized by said witness, the insured cargo was intended for distribution by Vietnam Ocean Shipping Agency to the people of Kampuchea for the purpose of alleviating the acute rice shortage then prevailing in that country and to improve the rice production therein. (Deposition, Q17 p. 5). The bags containing said cargo were marked "TREATED, UNFIT FOR FOOD" (Exh. "E-3-b"; TSN, January 15, 1985, pp. 3-5) and the seeds themselves were of such a fragile nature that they have the tendency to germinate upon mere contact with water.As shown, of the 34,122 bags of rice seeds shipped on board Barge LC-3000 (Exh. "E-l"), 23,510 were determined by defendant-appellant's surveyor, the Pan Asiatic Adjustment and Marine Surveying Corporation to be bad order bags (Exh. "3"). Add to these bad order bags the shortlanded/missing bags numbering 983 per report of the same surveying corporation, the damaged/lost bags would total 24,493 thereby leaving a balance of 9,269 (sic) presumed to be good order/dry bags. Of these 9,629 good order/dry bags, an additional 2,682 bags were found damaged/wetted after sorting (Exh. "E"). All in all, therefore, 27,175 bags were determined to be lost/damaged. Although 6,947 bags in apparent external good order and condition were presumed to be inside the LUZTEVECO warehouse, only 6,200 were actually determined to be there by Conrado Catalan on September 26, 27 and 29, 1980 (Exh. "E", p. 2). This increases the number of lost/damaged bags to 27,922.Thus considered, We agree with the plaintiff-appellee that the 27,922 damaged/lost bags were rendered valueless to plaintiff-appellee for planting or seeding purposes in Kampuchea since the wetting or contact with water had definitely activated their tendency to terminate. Moreover, all of said damaged/lost bags were no longer available for reshipment to Vietnam because the same were disposed of by defendant LUZTEVECO without authorization from plaintiff-appellee, to answer for alleged salvage charges, while the others were lost/shortlanded.Third the testimony of Mr. Conrado Catalan, Jr. that the shipment sustained a loss of 78% is not speculative. Uncontroverted is his testimony which is based on data corroborated by the report of defendant-appellant's adjuster/surveyor and on actual inspection of the remaining bags stored in LUZTEVECO's warehouse. Exhibit '3' of defendant-appellant states in part, thus:ConditionNo. of Bags

Good order(dry) 9,629

Partly wet but damage limited

only to approximately 10% to

15% of the contents. Wet

po