VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO vs.

AMERICAN HOME ASSURANCE

COMPANY and SULPICIO LINES, INC.
G.R. No. 159213

By: Lat, Danneth Gian P.

TOPIC: Right of subrogation; prescriptive period

Q: Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered
owner of the M/T Vector. Caltex entered into a contract of affreightment with Vector for the
transport of Caltex’s petroleum cargo through the M/T Vector. Caltex insured the petroleum
cargo with American Home Assurance Corp. for P 7,455,421.08. Thereafter, M/T vector and
M/V Dona Paz owned by Sulpicio lines collided which led to the sinking of both vessels. The
entire petroleum cargo of Caltex perished. American Home Assurance filed a complaint against
Vector Soriano and Sulpicio Lines Inc. to recover the full amount it paid to Caltex for the loss of
the shipment alleging that as owners of the vessel they are jointly liable for the loss. On July 12,
1988, American Home Assurance paid Caltex for the amount of loss, thereafter on March 5,
1992, American Home Assurance filed a complaint against Vector, Soriano and Sulpicio Lines to
recover the full amount it paid to Caltex. The RTC dismissed the case on the ground that the
action is upon a quasi-delict and as such it must commence within 4 years from the day they
may be brought under Article 1146 of the civil code. Is the action already barred by prescription
taking into consideration the contract of affreightment that Caltex and Vector entered into
which gives rise to the legal obligation of Vector and Soriano to pay the demand for
reimbursement for the agreement to transport Caltex’s petroleum cargo.

A: No, the right of action has not yet prescribed and the contract of affreigtment did not give
rise to the legal obligation of Vector and Soriano to pay.
The Supreme Court has held that The legal provision governing this case was not Article
1146 of the Civil Code, but Article 1144 of the Civil Code, which states: Article 1144. The
following actions must be brought within ten years from the time the cause of action accrues:
(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. The
Supreme Court has clarified that the cause of action is not based on the contract of
affreightment between Caltex and Vector with the breach of contract being the failure of
Vector to make the M/T Vector seaworthy, as to make this action come under Article 1144 (1),
Instead, it was held that the present action was not upon a written contract, but upon an
obligation created by law. Hence, it came under Article 1144 (2) of the Civil Code. This is
because the subrogation of American Home Assurance to the rights of Caltex as the insured
was by virtue of the express provision of law embodied in Article 2207 of the Civil Code.
Since the cause of action accrued as of the time respondent actually indemnified Caltex
in the amount of P7,455,421.08 on July 12, 1988 which was an obligation created by law, the
action was not yet barred by the time of the filing of its complaint on March 5, 1992, which was
well within the 10-year period prescribed by Article 1144 of the Civil Code.
 ORIENTAL ASSURANCE CORPORATION vs. MANUEL ONG, doing business under the business
name of WESTERN PACIFIC TRANSPORT SERVICES and/or ASIAN TERMINALS, INC
G.R. No. 189524

By: Lat, Danneth Gian P.

TOPIC: Libility of the carrier

Q: JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-alloy-
coated steel sheets in coils. These steel sheets were transported to Manila onboard the vessel
M/V Dooyang Glory. Upon arrival of the vessel at the Manila South Harbor on June 10, 2002,
the 72 coils were discharged and stored in Pier 9 under the custody of the arrastre contractor,
Asian Terminals, Inc. (Asian Terminals). From the storage compound of Asian Terminals, the
coils were loaded on the trucks of Manuel Ong (Ong) and delivered to JEA Steel’s plant in
Barangay Lapidario, Trece Martirez, Cavite on June 14, 2002 and June 17, 2002. Eleven of these
coils “were found to be in damaged condition, dented or their normal round shape deformed.”
JEA Steel filed a claim with Oriental for the value of the 11 damaged coils, pursuant to Marine
Insurance Policy. Oriental paid JEA Steel the sum of P521,530.16 and subsequently demanded
indemnity from Ong and Asian Terminals (respondents), but they refused to pay. Oriental filed
a complaint before the RTC for sum of money contending that Ong should be held solidarily
liable with Asian Terminals for acting in bad faith when it did not apprise the consignee or Asian
Terminals about the damaged coils. Ong countered that the 1 coils were already damaged
when they were loaded onboard his trucks and transported to the consignee. For its part, Asian
Terminals claimed that it exercised due diligence in handling the cargo, that the cargo was
released to the consignee’s representative in the same condition as when received from the
vessel, and that the damages were sustained while in the custody of the vessel or the customs
broker. Asian Terminals further argued that Oriental’s claim was barred for the latter’s failure
to file a notice of claim within the 15-day period provided in the Gate Pass and in Article VII,
Section 7.01 of the Contract for Cargo Handling Services (Management Contract) between the
Philippine Ports Authority and Asian Terminals. The Gate Pass was signed by the consignee’s
representative to acknowledge the delivery and receipt of the shipment and that provisions of
the Management Contract and the Gate Pass are binding on Oriental as insurer-subrogee and
successor-in-interest of the consignee.

1. Is Ong liable for the damage of the cargo?

2. Is Oriental Assurance who was not a party to the Gate Pass or Management Contract bound
by the 15-day prescriptive period fixed in them to file a claim against the arrastre operator?

A: 1. No, Ong is not liable for the damage of the cargo.

The Supreme Court has held that there was no proof of Ong’s bad faith. Mere allegation
cannot take the place of evidence. Ong’s assertion that the loading of the cargo on the trucks
was undertaken by Asian Terminals and the unloading of the same cargo was undertaken by
the consignee at its warehouse remains unrebutted. Asian terminals caused the inspection of
the shipment before they were loaded on Ong’s truck and at the consignee’s warehouse, the
inspection was done in the presence of the consignee’s authorized representative. Thus, Ong is
not obliged to inform the consignee or Asian Terminals about the damaged coils as they would
have presumably known about them.

2. Yes, Oriental is bound by the Gate Pass or Management contract even if it is not a party
thereto.
The Supreme Court has held that the fact that Oriental is not a party to the Gate Pass
and the Management Contract does not mean that it cannot be bound by their provisions.
Oriental is subrogated to the rights of the consignee simply upon its payment of the insurance
claim. As subrogee, petitioner merely stepped into the shoes of the consignee and may only
exercise those rights that the consignee may have against the wrongdoer who caused the
damage. It can recover only the amount that is recoverable by the assured. And since the right
of action of the consignee is subject to a precedent condition stipulated in the Gate Pass, which
includes by reference the terms of the Management Contract, necessarily a suit by the insurer
is subject to the same precedent condition.
Since the dorsal side of the Gate Pass signed by the consignee’s representative upon
receipt of the cargo expressly refers to the Management Contract between the Philippine Ports
Authority and Asian Terminals. Hence, the consignee and its subrogee, petitioner insurance
company, are deemed to have notice of this Management Contract.