MAYER STEEL PIPE CORP V. COURT OF APPEALS (1997) Puno, J.

Petition for review on certiorari to annul and set aside the decision of the Court of Appeals RATIO DECIDENDI The insurer's liability is based on the contract of insurance. When private respondents issued the "all risks" policies to petitioner, they bound the selves to inde nify the latter in case of loss or da a!e to the !oods insured. This obli!ation prescribes in ten years. FACTS Petitioners" #ayer $teel Pipe Corporation, %on!kon! &overn ent $upplies 'epart ent (espondents" Court of Appeals, $outh $ea $urety and )nsurance Co., )nc., Charter )nsurance Corp. )n *+,-, %on!kon! &overn ent $upplies 'epart ent contracted #ayer $teel Pipe Corporation to ake and supply steel pipes and fittin!s. #ayer shipped the pipes and fittin!s to %on!kon!. Prior to shippin!, #ayer insured the pipes and fittin!s a!ainst all risks with $outh $ea $urety and )nsurance and Charter )nsurance. The pipes and fittin!s covered by )nvoices #$PC.*/*0, */*1 and */21 worth 3$42*2,552./+ were insured with $outh $ea. Those covered by )nvoices */2/, */*5 and */22 worth 3$4*0+,05/.// were insured with Charter. #ayer and %on!kon! appointed )ndustrial )nspection 6)nternational7 )nc. as third.party inspector. )ndustrial )nspection certified all the pipes and fittin!s to be in !ood condition before they were loaded in the vessel. When the !oods reached %on!kon!, a substantial portion was da a!ed. Petitioners filed a clai a!ainst private respondents for inde nity under the insurance contract. Charter paid %on!kon! %8490,+/0.51. Petitioners de anded pay ent of the balance of %842++,-01.-/ representin! the cost of repair of the da a!ed pipes. Private respondents refused to pay because the insurance surveyor's report showed that the da a!e is a factory defect. )n *+,9, petitioners filed an action a!ainst private respondents to recover %842++,-01.-/. Private respondents said that they have no obli!ation to pay the a ount clai ed because the da a!e to the !oods is due to factory defects not covered by insurance policies.

RTC" (uled in favor of petitioners. 'a a!e to !oods is not due to anufacturin! defects. )nsurance contracts of #ayer and private respondents are "all risks" policies which insure a!ainst all causes of conceivable loss or da a!e. :nly e;ceptions are those e;cluded in the policy, or those sustained due to fraud or intentional isconduct of insured. (espondents ust pay petitioners" *. $u e<uivalent in Philippine currency of %842++,-01.-/ with le!al rate of interest 2. P*//,///.// as and for attorney's fees -. Costs of suit CA" $et aside decision of trial court and dis issed co plaint on the !round of prescription. Action is barred under $ection -697 of the Carria!e of &oods by $ea Act since it was filed ore than two years fro the ti e the !oods were unloaded fro the vessel. =The carrier and the ship shall be dischar!ed fro all liability in respect of loss or da a!e unless suit is brou!ht within one year after delivery of the !oods or the date when the !oods should have been delivered.>

ISSUE Whether or not cause of action had already prescribed HELD ?o. $ection -697 of the Carria!e of &oods by $ea Act states that the carrier and the ship shall be dischar!ed fro all liability for loss or da a!e to the !oods if no suit is filed within one year after delivery of the !oods or the date when they should have been delivered. :nly the carrier's liability is e;tin!uished if no suit is brou!ht within one year. @ut the liability of the insurer is not e;tin!uished because the insurer's liability is based not on the contract of carria!e but on the contract of insurance. The Carria!e of &oods by $ea Act !overns the relationship between the carrier on the one hand and the shipper, the consi!nee andAor the insurer on the other hand. )t defines the obli!ations of the carrier under the contract of carria!e. )t does not affect the relationship between the shipper and the insurer. The latter case is !overned by the )nsurance Code.

)n Bilipino #erchants )nsurance v. AleCandro, the shipper filed a co plaint a!ainst the insurer for recovery of of oney as inde nity for loss and da a!e of insured !oods. The insurer filed a third.party co plaint a!ainst the carrier for rei burse ent of the a ount it paid to the shipper. The insurer filed the third.party co plaint ore than one year after delivery of the !oods. The court held that the insurer was already barred fro filin! a clai a!ainst the carrier because under the Carria!e of &oods by $ea Act, the suit a!ainst the carrier ust be filed within one year after delivery of the !oods or the date when the !oods should have been delivered. The Bilipino #erchants case is different fro the case at bar. )n Bilipino #erchants, it was the insurer which filed a clai a!ainst the carrier for rei burse ent of the a ount it paid to the shipper. )n the present case, it was the shipper which filed a clai a!ainst the insurer. The basis of the shipper's clai is the "all risks" insurance policies issued by private respondents to #ayer. The rulin! in Bilipino #erchants should apply only to suits a!ainst the carrier filed by the shipper, the consi!nee or the insurer. The insurer ay no lon!er file a clai a!ainst the carrier beyond the one.year period. @ut it does not ean that the shipper ay no lon!er file a clai a!ainst the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the pre iu , a!rees to inde nify another for loss or da a!e which he ay suffer fro a specified peril. An "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. When private respondents issued the "all risks" policies to #ayer, they bound the selves to inde nify the latter in case of loss or da a!e to !oods insured. This obli!ation prescribes in ten years, accordin! to Article **00 of the Civil Code