oblicon case part 3

8/10/2019 OBLICON Case Part 3

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Obligation and Contracts; CASES/JURISPRUDENCE, November 29, 2014;

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THIRD DIVISION

LEA MER INDUSTRIES, INC., G.R. No. 161745Petitioner,

Present

Panganiban, J.,Chairman,

- versus - Sandoval-Gutierrez,Corona,

Carpio Morales, andGarcia, JJ

Promulgated:MALAYAN INSURANCE CO., INC.,*

Respondent. September 30, 2005x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, J .:

ommon carriers are bound to observe extraordinary diligence in their vigilance over the goodsentrusted to them, as required by the nature of their business and for reasons of public policy.Consequently, the law presumes that common carriers are at fault or negligent for any loss or damageto the goods that they transport. In the present case, the evidence submitted by petitioner to overcomethis presumption was sorely insufficient.

The Case

Before us is a Petition for Review[1]under Rule 45 of the Rules of Court, assailing the October 92002 Decision[2]and the December 29, 2003 Resolution[3]of the Court of Appeals (CA) in CA-GR CVNo. 66028. The challenged Decision disposed as follows:

WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision ofthe Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 ishereby REVERSEDand SETASIDE. [Petitioner] is ordered to pay the [hereinrespondent] the value of the lost cargo in the amount of P565,000.00. Costs against the[herein petitioner].[4]

The assailed Resolution denied reconsideration.

C
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The Facts

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for theshipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan Industrial andMining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991the silica sand was placed on board Judy VII, a barge leased by Lea Mer.[6] During the voyage, the

vessel sank, resulting in the loss of the cargo.[7]

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.[8] To recovethe amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement fromLea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the RegionaTrial Court (RTC) of Manila on September 4, 1992, for the collection of P565,000 representing theamount that respondent had paid Vulcan.[9]

On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of theloss was a fortuitous event.[10] The RTC noted that the vessel had sunk because of the bad weathercondition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledgeof the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travefrom Palawan to Manila.[11]

Ruling of the Court of Appeals

Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed forManila. Thus, the loss of the cargo was occasioned by petitioners fault, not by a fortuitous event.[12]

Hence, this recourse.[13]

The Issues

Petitioner states the issues in this wise:

A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had notbeen presented as a witness of the said report during the trial of this case before thelower court can be admitted in evidence to prove the alleged facts cited in the saidreport.

B. Whether or not the respondent, Court of Appeals, had validly or legally reversedthe finding of fact of the Regional Trial Court which clearly and unequivocally held thatthe loss of the cargo subject of this case was caused by fortuitous event for which hereinpetitioner could not be held liable.

C. Whether or not the respondent, Court of Appeals, had committed serious error andgrave abuse of discretion in disregarding the testimony of the witness from the MARINA,

Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy VII was seaworthy at thetime of incident and further in disregarding the testimony of the PAG-ASA weatherspecialist, Ms. Rosa Barba y Saliente, to the effect that typhoon Trining did not hitMetro Manila or Palawan.[14]

In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and(2) whether the survey report of Jesus Cortez is admissible in evidence.
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The Courts Ruling

The Petition has no merit.First Issue:

Liabi l i ty for Loss of Cargo

Question of Fact

The resolution of the present case hinges on whether the loss of the cargo was due to afortuitous event. This issue involves primarily a question of fact, notwithstanding petitioners claim thatit pertains only to a question of law. As a general rule, questions of fact may not be raised in a petitionfor review.[15] The present case serves as an exception to this rule, because the factual findings of theappellate and the trial courts vary.[16] This Court meticulously reviewed the records, but found noreason to reverse the CA.

Rule on Common Carriers

Common carriers are persons, corporations, firms or associations engaged in the business ofcarrying or transporting passengers or goods, or both -- by land, water, or air -- when this service isoffered to the public for compensation.[17] Petitioner is clearly a common carrier, because it offers to thepublic its business of transporting goods through its vessels.[18]

Thus, the Court corrects the trial courts finding that petitioner became a private carrier whenVulcan chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) andaffreightment, which are distinguished as follows:

Under the demise or bareboat charter of the vessel, the charterer will generallybe considered as owner for the voyage or service stipulated. The charterer mans thevessel with his own people and becomes, in effect, the ownerpro hac vice, subject to

liability to others for damages caused by negligence. To create a demise, the owner of avessel must completely and exclusively relinquish possession, command and navigationthereof to the charterer; anything short of such a complete transfer is a contract ofaffreightment (time or voyage charter party) or not a charter party at all. [20]

The distinction is significant, because a demise or bareboat charter indicates a businessundertaking that isprivatein character.[21] Consequently, the rights and obligations of the parties to acontract of private carriage are governed principally by their stipulations, not by the law on commoncarriers.[22]

The Contract in the present case was one of affreightment, as shown by the fact that it was

petitioners crew that manned the tugboatM/V Ayalitand controlled the barge Judy VII.[23]

Necessarilypetitioner was a common carrier, and the pertinent law governs the present factual circumstances.

Extraordinary Dil igence Required

Common carriers are bound to observe extraordinarydiligence in their vigilance over the goodsand the safety of the passengers they transport, as required by the nature of their business and forreasons of public policy.[24] Extraordinary diligence requires rendering service with the greatest skill andforesight to avoid damage and destruction to the goods entrusted for carriage and delivery.[25]
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Common carriers are presumed to have been at fault or to have acted negligently for loss ordamage to the goods that they have transported.[26] This presumption can be rebutted only by proofthat they observed extraordinary diligence, or that the loss or damage was occasioned by any of thefollowing causes:[27]

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission of the shipper or owner of the goods;(4) The character of the goods or defects in the packing or in the containers;(5) Order or act of competent public authority.[28]

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous evenwhich could not be foreseen, or which, though foreseen, was inevitable. Thus, if the loss or damagewas due to such an event, a common carrier is exempted from liability.

Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause of theunforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations,must have been independent of human will; (b) the event that constituted the caso fortuito must havebeen impossible to foreseeor, if foreseeable, impossible to avoid; (c) the occurrence must have beensuch as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) theobligor must have been free from any participation in the aggravation of the resulting injury to thecreditor.[29]

To excuse the common carrier fully of any liability, the fortuitous event must have been theproximate and only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent orminimize the loss before, during and after the occurrence of the fortuitous event.[31]

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the present case. As the commoncarrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid theloss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance.

It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed thathe loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.[32]

Evidence was presented to show that petitioner had not been informed of the incoming typhoon, andthat the Philippine Coast Guard had given it clearance to begin the voyage.[33] On October 25, 1991the date on which the voyage commenced and the barge sank, Typhoon Trining was allegedly far fromPalawan, where the storm warning was only Signal No. 1.[34]

The evidence presented by petitioner in support of its defense of fortuitous event was sorelyinsufficient. As required by the pertinent law, it was not enough for the common carrier to show thathere was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- afact it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or prevent the lossbefore, during or after the alleged fortuitous event.[35] Its witness, Joey A. Draper, testified that he couldno longer remember whether anything had been done to minimize loss when water started entering the
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barge.[36] This fact was confirmed during his cross-examination, as shown by the following briefexchange:

Atty. Baldovino, Jr.:Other than be[a]ching the barge Judy VII, were there other precautionary

measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s]

or sinking of barge Judy VII?

x x x x x x x x x

Atty. Baldovino, Jr.:Your Honor, what I am asking [relates to the] action taken by the officers andcrew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of bargeJudy VII?

x x x x x x x x x

Court:

Mr. witness, did the captain of that tugboat give any instruction on how to savethe barge Judy VII?

Joey Draper:I can no longer remember sir, because that happened [a] long time ago. [37]

Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There isa preponderance of evidence that the barge was not seaworthy when it sailed for Manila.[38]

Respondent was able to prove that, in the hull of the barge, there were holes that might have caused oraggravated the sinking.[39] Because the presumption of negligence or fault applied to petitioner, it wasincumbent upon it to show that there were no holes; or, if there were, that they did not aggravate the

sinking.

Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo ALuna, testified that the barge was in tip-top or excellent condition,[40]but that he had not personallyinspected it when it left Palawan.[41]

The submission of the Philippine Coast Guards Certificate of Inspection ofJudy VII, dated July31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the issuance othe Certificate is disputably presumed.[43] It could be contradicted by competent evidence, whichrespondent offered. Moreover, this evidence did not necessarily take into account the actual conditionof
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the vessel at the time of the commencement of the voyage.[44]

Second Issue:Adm issibi l i ty of the Survey Report

Petitioner claims that the Survey Report[45]prepared by Jesus Cortez, the cargo surveyor, shouldnot have been admitted in evidence. The Court partly agrees. Because he did not testify during thetrial,[46]then the Report that he had prepared was hearsay and therefore inadmissible for the purpose ofproving the truth of its contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortezs Survey Report was used in the testimonies of respondentswitnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding Company.[47] Soriano testified that the Survey Report had been used inpreparing the final Adjustment Report conducted by their company.[48] The final Report showed that the

barge was not seaworthy because of the existence of the holes. Manlapig testified that he hadprepared that Report after taking into account the findings of the surveyor, as well as the pictures andthe sketches of the place where the sinking occurred.[49] Evidently, the existence of the holes wasproved by the testimonies of the witnesses, not merely by Cortez Survey Report.

Rule on IndependentlyRelevant Statemen t

That witnesses must be examined and presented during the trial,[50]and that their testimoniesmust be confined to personal knowledge is required by the rules on evidence, from which we quote:

Section 36. Testimony generally confined to personal knowledge; hearsayexcluded. A witness can testify only to those facts which he knows of his personalknowledge; that is, which are derived from his own perception, except as otherwiseprovided in these rules.[51]

On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit, which respondenthad offered as evidence.[52] Well-settled is the rule that, unless the affiant is presented as a witness, anaffidavit is considered hearsay.[53]

An exception to the foregoing rule is that on independently relevant statements.A repor

made by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.[54]

Independent of the truth or the falsity of the statement given in the report, the fact that it has been madeis relevant. Here, the hearsay rule does not apply.[55]

In the instant case, the challenged Survey Report prepared by Cortez was admitted only as partof the testimonies of respondents witnesses. The referral to Cortezs Report was in relation toManlapigs final Adjustment Report. Evidently, it was the existence of the Survey Report that wastestified to. The admissibility of that Report as part of the testimonies of the witnesses was correctlyruled upon by the trial court.
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At any rate, even without the Survey Report, petitioner has already failed to overcome thepresumption of fault that applies to common carriers.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolutionare AFFIRMED. Costs against petitioner.

SO ORDERED.

ARTEMIO V. PANGANIBANAssociate Justice

Chairman, Third Division

W E C O N C U R :

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONAAssociate Justice Associate Justice

CONCHITA CARPIO MORALES CANCIO C. GARCIAAssociate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of theopinion of the Courts Division.

ARTEMIO V. PANGANIBANAssociate Justice

Chairman, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans Attestation, it is hereby certified that the conc lusionsin the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.Chief Justice

* The Petition included the Court of Appeals as a respondent. However, the CA was omitted by the Court from the title of the casebecause, under Section 4 of Rule 45 of the Rules of Court, the appellate court need not be impleaded in petitions for review.

[1] Rollo, pp. 12-27.[2]

Id., pp. 36-41. Tenth Division. Penned by Justice Elvi John S. Asuncion, with the concurrence of Justices Portia Alio-Hormachuelo(Division chairperson) and Juan Q. Enriquez Jr. (member).[3] Id., p. 48.[4] Assailed Decision, pp. 5-6; rollo, pp. 40-41.[5] Id., pp. 1 & 36.[6] The barge was allegedly owned by J. T. Lighterage Services. (TSN dated September 27, 1995, p. 3) It was non-propelled therefore

it could only operate through its towing by petitioners tugboat M/T Ayalit. (TSN dated April 26, 1995, p. 12; TSN dated April 251996, p. 19)

[7] Assailed Decision, p. 1; rollo, p. 36.[8] Id., pp. 2 & 37.[9] Ibid. The case was docketed as Civil Case No. 92-63159 and raffled to Branch 42.[10] Ibid.
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[11] RTC Decision dated December 7, 1999, p. 9; rollo, p. 58.[12] Assailed Decision, p. 4; rollo, p. 39.[13] The case was deemed submitted for decision on October 25, 2004, upon this Courts receipt of petitioners sparse, 6-page (with only

two pages of argument) Memorandum, signed by Atty. Romualdo M. Jubay. Respondents Memorandum, signed by Atty. FrederickC. Angel, was received by this Court on October 7, 2004.

[14] Petition, p. 8; rollo, p. 19. Original in uppercase.[15] 1 of Rule 45 of the Rules of Court.[16] Menchavez v. Teves Jr., 449 SCRA 380, 395, January 26, 2005; Philippine American General Insurance Company v. PKS Shipping

Company,401 SCRA 222, 230, April 9, 2003; Commissioner of Internal Revenue v. Embroidery and Garments Industries (Phil.)Inc., 364 Phil. 541, 546, March 22, 1999.[17] Art. 1732 of the Civil Code.[18] Petition, pp. 4-5; rollo, pp. 14-15.[19] RTC Decision dated December 7, 1999, p. 7; rollo, p. 56.[20] Puromines, Inc. v. Court of Appeals, 220 SCRA 281, 288, perNocon J. See also National Food Authority v. Court of Appeals, 370

Phil. 735, 743, August 4, 1999.[21] Philippine American General Insurance Company v. PKS Shipping Company, supra, p. 228; Coastwise Lighterage Corporation v

Court of Appeals,316 Phil. 13, 19, July 12, 1995.[22] National Steel Corporation v. Court of Appeals, 347 Phil. 345, 362, December 12, 1997; Valenzuela Hardwood and Industrial Supply

Inc. v. Court of Appeals, 274 SCRA 642, 654, June 30, 1997.[23] RTC Decision dated December 7, 1999, pp. 4-6; rollo, pp. 53-55.[24] Art. 1733 of the Civil Code.[25] Calvo v. UCPB General Insurance Co., Inc., 429 Phil. 244, 252, March 19, 2002; Compania Maritima v. Court of Appeals, 164 SCRA

685, 692, August 29, 1988.[26] Art. 1735 of the Civil Code.[27] Ibid. See also National Trucking and Forwarding Corp. v. Lorenzo Shipping Corporation, GR No. 153563, February 7, 2005;Asia

Lighterage and Shipping, Inc. v. Court of Appeals, 409 SCRA 340, 346, August 19, 2003; Philippine American General InsuranceCompany v. PKS Shipping Company, supra, p. 229; Coastwise Lighterage Corporation v. Court of Appeals, supra, p. 20; Basco vCourt of Appeals, 221 SCRA 318, 323, April 7, 1993.

[28] Art. 1734 of the Civil Code.[29] Mindex Resources Development v. Morillo, 428 Phil. 934, 944, March 12, 2002; Philippine American General Insurance Co. Inc. v

MGG Marine Services, Inc., 428 Phil. 705, 714, March 8, 2002; Metal Forming Corp. v. Office of the President, 317 Phil. 853, 859August 28, 1995;Vasquez v. Court of Appeals, 138 SCRA 553, 557, September 13, 1985; Republic v. Luzon Stevedoring Corp., 128Phil. 313, 318, September 29, 1967.

[30] Art. 1739 of the Civil Code.[31] Ibid.[32] RTC Decision dated December 7, 1999, p. 9; rollo p. 58 (citing the testimony of Rosa S. Barba). See also Petitioners Memorandum

p. 2; rollo, p. 157.[33] Ibid. (citing the testimony of Domingo A. Luna).[34] The testimony of Rosa S. Barba, weather specialist of Philippine Atmosphere (PAGASA), was summarized by the RTC as follows:

In May 1993, upon the request of [petitioners] counsel, she issued a weather bureau report orcertification, an official record of Pagasa, which weather report is based on their weather station at PuertoPrincesa, Palawan. x x x The report on the weather condition on October 21, 1991 at around 11:00 am to 2:00pm was weathercast sky. The bad weather condition on October 25, 26, and 27, 1991 was caused by typhoonTrining but said typhoon then was far from Palawan, which was only signal No. 1. Tropical storm Triningentered the Philippine area of responsibility on October 24. Pagasa did issue a warning that said storm wasapproaching the Philippines. Storm Trining was classified, as super typhoon with a maximum of 185kilometer[s] per hour and the coverage was big. On October 24, 1991, typhoon Trining hit Batangas, theIlocos Provinces, Isabela, but not Metro Manila or Palawan. Maybe Palawan was affected but if ever it wasaffected it was only minimal. RTC Decision dated December 7, 1999, p. 6; rollo, p. 55.

[35] SeeArt. 1739 of the Civil Code.[36] The testimony of Joey A. Draper, the quarter master in charge of steering the tugboat, was summarized by the RTC as follows:

On October 25, 1991, he was assigned in the tugboat M/T Ayalit. x x x [The tugboat] was towing thebarge Judy VII which was carrying silica sand. x x x He was an ordinary seaman in 1991 and it was his firstyear as a seaman, although he made several trips to Palawan and Manila. x x x He does not know thequalification[s] of a seaman but he was then a second year high school [student] and though he did not take anyexamination, he knew about navigation. When the incident happened in 1991[,] he had no seaman book as itwas not yet strict at the time and the seaman book can be dispensed with. He was only 18 years and has anactual training of the work when he boarded the tugboat. Even if he has no formal schooling, the master

allowed him to handle the wheel of the tugboat. When they left San Vicente, Palawan for Manila on said date ataround 4:00 pm, the weather was fair. When they passed by Linapakan Island, the waves were quite big andthe wind was a little bit strong. At that point in time, the barge patrol of Judy VII wave[d] his hand [at] them.Their captain decided to approach the barge. They noticed that [there was] water already inside the barge.About two (2) days later, their captain decided to beach the barge. The said barge then sank and only thebarges house at the back portion of the barge (the puppa) was above water. He could only remember thatthey save[d] the bargemen and proceeded to El Nido, Palawan where they secured themselves to save thetugboat. But he could no longer remember how long a time they stayed thereat nor if they went back to thebarge Judy VII. RTC Decision, p. 6; rollo, p. 55.

[37] TSN dated November 22, 1995, pp. 27-29.[38] In civil cases, parties who carry the burden of proof must establish their case by a preponderance of evidence. 1 of Rule 133 of the

Rules of Court.
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[39] Respondent proved this allegation through the testimony of its witnesses and submission of documentary evidence.Unseaworthiness was also the finding of the appellate court. Assailed Decision, p. 4; rollo, p. 39.

[40] TSN dated April 26, 1995, p. 44.[41] TSN dated September 27, 1995, pp. 17-21.[42] Petitioners Exhibit 4.[43] 3(m) of Rule 131 of the Rules of Court.[44] Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824, 834, November 15, 2001.[45] Exhibit H. See Respondents Offer of Evidence, p. 2; records, p. 159.[46]

Petitioners Memorandum, p. 3; rollo, p. 160.Respondents witness, Federico S. Manlapig, testified that Jesus Cortez -- who had already migrated to Australia -- could nolonger testify. TSN dated December 15, 1994, p. 9.

[47] RTC Decision dated December 7, 1999, p. 4; rollo, p. 53.[48] Ibid.[49] TSN dated December 15, 1994, pp. 9-13.[50] 1 of Rule 132 of the Rules of Court.[51] Rule 130 of the Rules of Court.[52] RTC Order dated March 17, 1995; records, p. 165.[53] Melchor v. Gironella, GR No. 151138, February 16, 2005; People v. Crispin, 383 Phil. 919, 931, March 2, 2000; People v. Villeza, 127

SCRA 349, 359, January 31, 1984; Paa v. Chan, 128 Phil. 815, 821, October 31, 1967.[54] Country Bankers Insurance v. Lianga Bay and Community Multi-purpose Cooperative, 425 Phil. 511, 521, January 25, 2002. See

alsoPresidential Commission on Good Government v. Desierto, 445 Phil. 154, 191, February 10, 2003; People v. Mallari, 369 Phil872, 884, July 20, 1999; People v. Cloud, 333 Phil. 306, 322, December 10, 1996.

[55] People v. Velasquez, 352 SCRA 455, 476, February 21, 2001; Gotesco Investment Corporation v. Chatto, 210 SCRA 18, 32, June16, 1992.

Wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww

Republic of the PhilippinesSUPREME COURT

ManilaTHIRD DIVISION

G.R. No. 102970 May 13, 1993

LUZAN SIA, petitioner,vs.COURT OF APPEALS and SECURITY BANK and TRUST COMPANY, respondents.

Asuncion Law Offices for petitioner.Cauton, Banares, Carpio & Associates for private respondent.

DAVIDE, JR., J.:

The Decision of public respondent Court of Appeals in CA-G.R. CV No. 26737, promulgated on 21August 1991, 1reversing and setting aside the Decision, dated 19 February 1990, 2of Branch 47 of theRegional Trial Court (RTC) of Manila in Civil Case No. 87-42601, entitled "LUZAN SIA vs. SECURITY

BANK and TRUST CO.," is challenged in this petition for review on certiorari under Rule 45 of theRules Court.

Civil Case No. 87-42601 is an action for damages arising out of the destruction or loss of the stampcollection of the plaintiff (petitioner herein) contained in Safety Deposit Box No. 54 which had beenrented from the defendant pursuant to a contract denominated as a Lease Agreement. 3Judgmentherein was rendered in favor of the dispositive portion of which reads:
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WHEREFORE, premises considered, judgment is hereby rendered in favor of theplaintiff and against the defendant, Security Bank & Trust Company, ordering thedefendant bank to pay the plaintiff the sum of

a) Twenty Thousand Pesos (P20,000.00), Philippine Currency, as actual damages;

b) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as moradamages; and

c) Five Thousand Pesos (P5,000.00), Philippine Currency, as attorney's fees and legaexpenses.

The counterclaim set up by the defendant are hereby dismissed for lack of merit.

No costs.

SO ORDERED.4

The antecedent facts of the present controversy are summarized by the public respondent in itschallenged decision as follows:

The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54 of the defendantbank at its Binondo Branch located at the Fookien Times Building, Soler St., BinondoManila wherein he placed his collection of stamps. The said safety deposit box leased bythe plaintiff was at the bottom or at the lowest level of the safety deposit boxes of thedefendant bank at its aforesaid Binondo Branch.

During the floods that took place in 1985 and 1986, floodwater entered into thedefendant bank's premises, seeped into the safety deposit box leased by the plaintiff and

caused, according to the plaintiff, damage to his stamps collection. The defendant bankrejected the plaintiff's claim for compensation for his damaged stamps collection, so, theplaintiff instituted an action for damages against the defendant bank.

The defendant bank denied liability for the damaged stamps collection of the plaintiff onthe basis of the "Rules and Regulations Governing the Lease of Safe Deposit Boxes"(Exhs. "A-1", "1-A"), particularly paragraphs 9 and 13, which reads (sic):

"9. The liability of the Bank by reason of the lease, is limited to the exercise of thediligence to prevent the opening of the safe by any person other than the Renter, hisauthorized agent or legal representative;

xxx xxx xxx

"13. The Bank is not a depository of the contents of the safe and it has neither thepossession nor the control of the same. The Bank has no interest whatsoever in saidcontents, except as herein provided, and it assumes absolutely no liability in connectiontherewith."


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The defendant bank also contended that its contract with the plaintiff over safety depositbox No. 54 was one of lease and not of deposit and, therefore, governed by the leaseagreement (Exhs. "A", "L") which should be the applicable law; that the destruction of theplaintiff's stamps collection was due to a calamity beyond obligation on its part to notifythe plaintiff about the floodwaters that inundated its premises at Binondo branch whichallegedly seeped into the safety deposit box leased to the plaintiff.

The trial court then directed that an ocular inspection on (sic) the contents of the safetydeposit box be conducted, which was done on December 8, 1988 by its clerk of court inthe presence of the parties and their counsels. A report thereon was then submitted onDecember 12, 1988 (Records, p. 98-A) and confirmed in open court by both parties thrucounsel during the hearing on the same date (Ibid., p. 102) stating:

"That the Safety Box Deposit No. 54 was opened by both plaintiff LuzanSia and the Acting Branch Manager Jimmy B. Ynion in the presence ofthe undersigned, plaintiff's and defendant's counsel. Said Safety Boxwhen opened contains two albums of different sizes and thickness, lengthand width and a tin box with printed word 'Tai Ping Shiang Roast Pork in

pieces with Chinese designs and character."

Condition of the above-stated Items

"Both albums are wet, moldy and badly damaged.

1. The first album measures 10 1/8 inches in length, 8 inches in width and 3/4 in thick.The leaves of the album are attached to every page and cannot be lifted withoudestroying it, hence the stamps contained therein are no longer visible.

2. The second album measure 12 1/2 inches in length, 9 3/4 in width 1 inch thick. Some

of its pages can still be lifted. The stamps therein can still be distinguished but beyondrestoration. Others have lost its original form.

3. The tin box is rusty inside. It contains an album with several pieces of papers stuck upto the cover of the box. The condition of the album is the second abovementionedalbum."5

The SECURITY BANK AND TRUST COMPANY, hereinafter referred to as SBTC, appealed the triacourt's decision to the public respondent Court of Appeals. The appeal was docketed as CA-G.R. CVNo. 26737.

In urging the public respondent to reverse the decision of the trial court, SBTC contended that the latter

erred in (a) holding that the lease agreement is a contract of adhesion; (b) finding that the defendanthad failed to exercise the required diligence expected of a bank in maintaining the safety deposit box;(c) awarding to the plaintiff actual damages in the amount of P20,000.00, moral damages in the amountof P100,000.00 and attorney's fees and legal expenses in the amount of P5,000.00; and (d) dismissingthe counterclaim.

On 21 August 1991, the respondent promulgated its decision the dispositive portion of which reads:


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WHEREFORE, the decision appealed from is hereby REVERSED and instead theappellee's complaint is hereby DISMISSED. The appellant bank's counterclaim islikewise DISMISSED. No costs.6

In reversing the trial court's decision and absolving SBTC from liability, the public respondent found andruled that:

a) the fine print in the "Lease Agreement " (Exhibits "A" and "1" ) constitutes the terms and conditions ofthe contract of lease which the appellee (now petitioner) had voluntarily and knowingly executed withSBTC;

b) the contract entered into by the parties regarding Safe Deposit Box No. 54 was not a contract ofdeposit wherein the bank became a depositary of the subject stamp collection; hence, as contended bySBTC, the provisions of Book IV, Title XII of the Civil Code on deposits do not apply;

c) The following provisions of the questioned lease agreement of the safety deposit box limiting SBTC'sliability:

9. The liability of the bank by reason of the lease, is limited to the exercise of thediligence to prevent the opening of the Safe by any person other than the Renter, hisauthorized agent or legal representative.

xxx xxx xxx

13. The bank is not a depository of the contents of the Safe and it has neither thepossession nor the control of the same. The Bank has no interest whatsoever in saidcontents, except as herein provided, and it assumes absolutely no liability in connectiontherewith.

are valid since said stipulations are not contrary to law, morals, good customs, public order or publicpolicy; and

d) there is no concrete evidence to show that SBTC failed to exercise the required diligence inmaintaining the safety deposit box; what was proven was that the floods of 1985 and 1986, which werebeyond the control of SBTC, caused the damage to the stamp collection; said floods were fortuitousevents which SBTC should not be held liable for since it was not shown to have participated in theaggravation of the damage to the stamp collection; on the contrary, it offered its services to secure theassistance of an expert in order to save most of the stamps, but the appellee refused; appellee mustthen bear the lose under the principle of "res perit domino."

Unsuccessful in his bid to have the above decision reconsidered by the public respondent, 7petitione

filed the instant petition wherein he contends that:

I

IT WAS A GRAVE ERROR OR AN ABUSE OF DISCRETION ON THE PART OF THERESPONDENT COURT WHEN IT RULED THAT RESPONDENT SBTC DID NOT FAILTO EXERCISE THE REQUIRED DILIGENCE IN MAINTAINING THE SAFETY


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DEPOSIT BOX OF THE PETITIONER CONSIDERING THAT SUBSTANTIALEVIDENCE EXIST (sic) PROVING THE CONTRARY.

II

THE RESPONDENT COURT SERIOUSLY ERRED IN EXCULPATING PRIVATERESPONDENT FROM ANY LIABILITY WHATSOEVER BY REASON OF THEPROVISIONS OF PARAGRAPHS 9 AND 13 OF THE AGREEMENT (EXHS. "A" AND"A-1").

III

THE RESPONDENT COURT SERIOUSLY ERRED IN NOT UPHOLDING THEAWARDS OF THE TRIAL COURT FOR ACTUAL AND MORAL DAMAGESINCLUDING ATTORNEY'S FEES AND LEGAL EXPENSES, IN FAVOR OF THEPETITIONER.8

We subsequently gave due course the petition and required both parties to submit their respectivememoranda, which they complied with.9

Petitioner insists that the trial court correctly ruled that SBTC had failed "to exercise the requireddiligence expected of a bank maintaining such safety deposit box . . . in the light of the environmentacircumstance of said safety deposit box after the floods of 1985 and 1986." He argues that such aconclusion is supported by the evidence on record, to wit: SBTC was fully cognizant of the exactlocation of the safety deposit box in question; it knew that the premises were inundated by floodwatersin 1985 and 1986 and considering that the bank is guarded twenty-four (24) hours a day , it is safe toconclude that it was also aware of the inundation of the premises where the safety deposit box waslocated; despite such knowledge, however, it never bothered to inform the petitioner of the flooding ortake any appropriate measures to insure the safety and good maintenance of the safety deposit box in

question.

SBTC does not squarely dispute these facts; rather, it relies on the rule that findings of facts of theCourt of Appeals, when supported by substantial exidence, are not reviewable on appeaby certiorari. 10

The foregoing rule is, of course, subject to certain exceptions such as when there exists a disparitybetween the factual findings and conclusions of the Court of Appeals and the trial court. 11Such adisparity obtains in the present case.

As We see it, SBTC's theory, which was upheld by the public respondent, is that the "Lease Agreemen" covering Safe Deposit Box No. 54 (Exhibit "A and "1") is just that a contract of lease and not a

contract of deposit, and that paragraphs 9 and 13 thereof, which expressly limit the bank's liability asfollows:

9. The liability of the bank by reason of the lease, is limited to the exercise of thediligence to prevent the opening of the Safe by any person other than the Renter, hisautliorized agent or legal representative;

xxx xxx xxx


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agreement [Art. 1170, id.]. In the absence of any stipulation prescribing the degree ofdiligence required, that of a good father of a family is to be observed [Art. 1173, id.]Hence, any stipulation exempting the depositary from any liability arising from the loss ofthe thing deposited on account of fraud, negligence or delay would be void for beingcontrary to law and public policy. In the instant case, petitioner maintains that conditions13 and l4 of the questioned contract of lease of the safety deposit box, which read:

"13. The bank is a depositary of the contents of the safe and it has neither thepossession nor control of the same.

"14. The bank has no interest whatsoever in said contents, except as herein expresslyprovided, and it assumes absolutely no liability in connection therewith."

are void as they are contrary to law and public policy. We find Ourselves in agreementwith this proposition for indeed, said provisions are inconsistent with the respondentBank's responsibility as a depositary under Section 72 (a) of the General Banking ActBoth exempt the latter from any liability except as contemplated in condition 8 thereofwhich limits its duty to exercise reasonable diligence only with respect to who shall beadmitted to any rented safe, to wit:

"8. The Bank shall use due diligence that no unauthorized person shall beadmitted to any rented safe and beyond this, the Bank will not beresponsible for the contents of any safe rented from it."

Furthermore condition 13 stands on a wrong premise and is contrary to the actuapractice of the Bank. It is not correct to assert that the Bank has neither the possessionnor control of the contents of the box since in fact, the safety deposit box itself is locatedin its premises and is under its absolute control; moreover, the respondent Bank keepsthe guard key to the said box. As stated earlier, renters cannot open their respectiveboxes unless the Bank cooperates by presenting and using this guard key. Clearly then,to the extent above stated, the foregoing conditions in the contract in question are voidand ineffective. It has been said:

"With respect to property deposited in a safe-deposit box by a customerof a safe-deposit company, the parties, since the relation is a contractuaone, may by special contract define their respective duties or provide forincreasing or limiting the liability of the deposit company, provided suchcontract is not in violation of law or public policy. It must clearly appearthat there actually was such a special contract, however, in order to varythe ordinary obligations implied by law from the relationship of the partiesliability of the deposit company will not be enlarged or restricted by words

of doubtful meaning. The company, in renting safe-deposit boxes, cannotexempt itself from liability for loss of the contents by its own fraud onegligence or that, of its agents or servants, and if a provision of thecontract may be construed as an attempt to do so, it will be heldineffective for the purpose. Although it has been held that the lessor of asafe-deposit box cannot limit its liability for loss of the contents thereofthrough its own negligence, the view has been taken that such a lessormay limit its liability to some extent by agreement or stipulation ."[10 AMJUR 2d., 466]. (citations omitted) 16


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It must be noted that conditions No. 13 and No. 14 in the Contract of Lease of Safety Deposit Box inCAAgro-Industrial Development Corp.are strikingly similar to condition No. 13 in the instant case. On theother hand, both condition No. 8 in CA Agro-Industrial Development Corp.and condition No. 9 in thepresent case limit the scope of the exercise of due diligence by the banks involved to merely seeing toit that only the renter, his authorized agent or his legal representative should open or have access tothe safety deposit box. In short, in all other situations, it would seem that SBTC is not bound to exercise

diligence of any kind at all. Assayed in the light of Our aforementioned pronouncements inCA Agrolndustrial Development Corp.,it is not at all difficult to conclude that both conditions No. 9 and No. 13 ofthe "Lease Agreement" covering the safety deposit box in question (Exhibits "A" and "1") must bestricken down for being contrary to law and public policy as they are meant to exempt SBTC from anyliability for damage, loss or destruction of the contents of the safety deposit box which may arise fromits own or its agents' fraud, negligence or delay. Accordingly, SBTC cannot take refuge under the saidconditions.

Public respondent further postulates that SBTC cannot be held responsible for the destruction or loss ofthe stamp collection because the flooding was a fortuitous event and there was no showing of SBTC'sparticipation in the aggravation of the loss or injury. It states:

Article 1174 of the Civil Code provides:

"Except in cases expressly specified by the law, or when it is otherwisedeclared by stipulation, or when the nature of the obligation requires theassumption of risk, no person shall be responsible for those events whichcould not be foreseen, or which, though foreseen, were inevitable.'

In its dissertation of the phrase "caso fortuito" the Enciclopedia JurisdicadaEspaola 17says: "In a legal sense and, consequently, also in relation to contracts,a "caso fortuito"prevents (sic) 18the following essential characteristics: (1) the cause ofthe unforeseen ands unexpected occurrence, or of the failure of the debtor to complywith his obligation, must be independent of the human will; (2) it must be impossible toforesee the event which constitutes the "caso fortuito,"or if it can be foreseen, it must beimpossible to avoid; (3) the occurrence must be such as to render it impossible for onedebtor to fulfill his obligation in a normal manner; and (4) the obligor must be free fromany participation in the aggravation of the injury resulting to the creditor." (cited inServando vs.Phil., Steam Navigation Co.,supra). 19

Here, the unforeseen or unexpected inundating floods were independent of the will ofthe appellant bank and the latter was not shown to have participated in aggravatingdamage (sic) to the stamps collection of the appellee. In fact, the appellant bank offeredits services to secure the assistance of an expert to save most of the then good stampsbut the appelle refused and let (sic) these recoverable stamps inside the safety depositbox until they were ruined. 20

Both the law and authority cited are clear enough and require no further elucidation. Unfortunately,however, the public respondent failed to consider that in the instant case, as correctly held by the triacourt, SBTC was guilty of negligence. The facts constituting negligence are enumerated in the petitionand have been summarized in thisponencia. SBTC's negligenceaggravated the injury or damage to thestamp collection. SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwatersinundated the room where Safe Deposit Box No. 54 was located. In view thereof, it should have lost notime in notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus


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saving the same from further deterioration and loss. In this respect, it failed to exercise the reasonablecare and prudence expected of a good father of a family, thereby becoming a party to the aggravationof the injury or loss. Accordingly, the aforementioned fourth characteristic of a fortuitous event is absent

Article 1170 of the Civil Code, which reads:

Those who in the performance of their obligation are guilty of fraud, negligence, or delay,

and those who in any manner contravene the tenor thereof, are liable for damages,

thus comes to the succor of the petitioner. The destruction or loss of the stamp collection which was, inthe language of the trial court, the "product of 27 years of patience and diligence" 21caused thepetitioner pecuniary loss; hence, he must be compensated therefor.

We cannot, however, place Our imprimatur on the trial court's award of moral damages. Since therelationship between the petitioner and SBTC is based on a contract, either of them may be held liablefor moral damages for breach thereof only if said party had acted fraudulently or in bad faith. 22There ishere no proof of fraud or bad faith on the part of SBTC.

WHEREFORE, the instant petition is hereby GRANTED. The challenged Decision and Resolution ofthe public respondent Court of Appeals of 21 August 1991 and 21 November 1991, respectively, in CA-G.R. CV No. 26737, are hereby SET ASIDE and the Decision of 19 February 1990 of Branch 47 of theRegional Trial Court of Manila in Civil Case No. 87-42601 is hereby REINSTATED in full, except as tothe award of moral damages which is hereby set aside.

Costs against the private respondent.

SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

# Footnotes

1 Rollo, 34-41. Per Associate Justice Lucio L. Victor, concurred in by Associate Justices Santiago M. Kapunan andSegundino G. Chua.2 Id., 52-55.3 Exhibit "A" and "1", Original Records of Civil Case No. 87-42601, 87.4 Rollo, 55.5 Rollo, 34-36.6 Rollo, 41.7 Rollo, 43-49.8 Id., 17.9 Id., 63.10 Rollo, 61, citing Gonzales vs.Court of Appeals, 90 SCRA 183 [1979].11 Sacay vs. Sandiganbayan, 142 SCRA 593 [1986]; Remalante vs. Tibe, 158 SCRA 138 [1988]; Medina vs. Asisitio, 191SCRA 218 [1990].12 Exhibit "A-1", Original Records, dorsal side of page 87.13 G.R. No. 90027, 3 March 1993.14 Title XII, Book IV, Civil Code.

15 10 Am Jur 2d, 440-441.16 Entries in brackets appear as footnotes in the decision.17 5 Enciclopedia Juridicada Espaola.18 Should bepresents.19 117 SCRA 832 [1982].20 Rollo, 40.21 Rollo, 54.22 Article 2220, Civil Code.


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Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

G.R. No. 147839 June 8, 2006GAISANO CAGAYAN, INC. Petitioner,

vs.INSURANCE COMPANY OF NORTH AMERICA, Respondent.D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari of the Decision1dated October 11, 2000 of theCourt of Appeals (CA) in CA-G.R. CV No. 61848 which set aside the Decision dated August 31, 1998 ofthe Regional Trial Court, Branch 138, Makati (RTC) in Civil Case No. 92-322 and upheld the causes ofaction for damages of Insurance Company of North America (respondent) against Gaisano Cagayan,Inc. (petitioner); and the CA Resolution dated April 11, 2001 which denied petitioner's motion forreconsideration.

The factual background of the case is as follows:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc(LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC andLSPI separately obtained from respondent fire insurance policies with book debt endorsements. Theinsurance policies provide for coverage on "book debts in connection with ready-made clothingmaterials which have been sold or delivered to various customers and dealers of the Insured anywherein the Philippines."2The policies defined book debts as the "unpaid account still appearing in the Bookof Account of the Insured 45 days after the time of the loss covered under this Policy."3The policiesalso provide for the following conditions:

1. Warranted that the Company shall not be liable for any unpaid account in respect of themerchandise sold and delivered by the Insured which are outstanding at the date of loss for aperiod in excess of six (6) months from the date of the covering invoice or actual delivery of themerchandise whichever shall first occur.

2. Warranted that the Insured shall submit to the Company within twelve (12) days after theclose of every calendar month all amount shown in their books of accounts as unpaid and thusbecome receivable item from their customers and dealers. x x x4

x x x x

Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, theGaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fireIncluded in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold anddelivered by IMC and LSPI.

On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMCand LSPI filed with respondent their claims under their respective fire insurance policies with book debtendorsements; that as of February 25, 1991, the unpaid accounts of petitioner on the sale and deliveryof ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that
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respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to theirrights against petitioner; that respondent made several demands for payment upon petitioner but thesewent unheeded.5

In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liablebecause the property covered by the insurance policies were destroyed due to fortuities event or force

majeure; that respondent's right of subrogation has no basis inasmuch as there was no breach ofcontract committed by it since the loss was due to fire which it could not prevent or foresee; that IMCand LSPI never communicated to it that they insured their properties; that it never consented to payingthe claim of the insured.6

At the pre-trial conference the parties failed to arrive at an amicable settlement.7Thus, trial on themerits ensued.

On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint.8It held that thefire was purely accidental; that the cause of the fire was not attributable to the negligence of thepetitioner; that it has not been established that petitioner is the debtor of IMC and LSPI; that since thesales invoices state that "it is further agreed that merely for purpose of securing the payment ofpurchase price, the above-described merchandise remains the property of the vendor until thepurchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bearthe loss.

Dissatisfied, petitioner appealed to the CA.9On October 11, 2000, the CA rendered its decision settingaside the decision of the RTC. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET ASIDE and anew one is entered ordering defendant-appellee Gaisano Cagayan, Inc. to pay:

1. the amount of P2,119,205.60 representing the amount paid by the plaintiff-appellant to the

insured Inter Capitol Marketing Corporation, plus legal interest from the time of demand untifully paid;

2. the amount of P535,613.00 representing the amount paid by the plaintiff-appellant to theinsured Levi Strauss Phil., Inc., plus legal interest from the time of demand until fully paid.

With costs against the defendant-appellee.

SO ORDERED.10

The CA held that the sales invoices are proofs of sale, being detailed statements of the nature, quantityand cost of the thing sold; that loss of the goods in the fire must be borne by petitioner since

theprovisocontained in the sales invoices is an exception under Article 1504 (1) of the Civil Code, tothe general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the thingat the time the loss under the principle of res perit domino; that petitioner's obligation to IMC and LSPis not the delivery of the lost goods but the payment of its unpaid account and as such the obligation topay is not extinguished, even if the fire is considered a fortuitous event; that by subrogation, the insurerhas the right to go against petitioner; that, being a fire insurance with book debt endorsements, whatwas insured was the vendor's interest as a creditor.11
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Petitioner filed a motion for reconsideration12but it was denied by the CA in its Resolution dated Apri11, 2001.13

Hence, the present petition for review on certiorari anchored on the following Assignment of Errors:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASEWAS ONE OVER CREDIT.

THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS INTHE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF.

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATIONUNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT.14

Anent the first error, petitioner contends that the insurance in the present case cannot be deemed to beover credit since an insurance "on credit" belies not only the nature of fire insurance but the expressterms of the policies; that it was not credit that was insured since respondent paid on the occasion of

the loss of the insured goods to fire and not because of the non-payment by petitioner of any obligation;that, even if the insurance is deemed as one over credit, there was no loss as the accounts were notyet due since no prior demands were made by IMC and LSPI against petitioner for payment of the debtand such demands came from respondent only after it had already paid IMC and LSPI under the fireinsurance policies.15

As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer IMC andLSPI assumed the risk of loss when they secured fire insurance policies over the goods.

Concerning the third ground, petitioner submits that there is no subrogation in favor of respondent asno valid insurance could be maintained thereon by IMC and LSPI since all risk had transferred topetitioner upon delivery of the goods; that petitioner was not privy to the insurance contract or the

payment between respondent and its insured nor was its consent or approval ever secured; that thislack of privity forecloses any real interest on the part of respondent in the obligation to pay, limiting itsinterest to keeping the insured goods safe from fire.

For its part, respondent counters that while ownership over the ready- made clothing materials wastransferred upon delivery to petitioner, IMC and LSPI have insurable interest over said goods ascreditors who stand to suffer direct pecuniary loss from its destruction by fire; that petitioner is liable forloss of the ready-made clothing materials since it failed to overcome the presumption of liability under

Article 126516o

oblicon case part 3

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