7/30/2019 G.R. No.

139273 Case digest

CALIFORNIA AND HAWAIIAN SUGAR COMPANY vs. PIONEER

INSURANCE AND SURETY CORPORATION

[G.R. No. 139273. November 28, 2000]

CALIFORNIA AND HAWAIIAN SUGAR COMPANY; PACIFIC GULF

MARINE, INC.; and C.F. SHARP & COMPANY, petitioners,

vs.

PIONEER INSURANCE AND SURETY CORPORATION, respondent.

Facts of the Case:

Before us is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court, assailing the January 21, 1999 Decision of the Court of 
Appeals[1] (CA) in CA-GR SP No. 33723, as well as the July 6, 1999 CA
Resolution[2] denying reconsideration. The challenged Decision, which
sustained the Orders[3]of the Regional Trial Court of Makati City, dismissing
the instant petition.

 The Facts, as summarized as follows:

November 27, 1990

>>the vessel MV “SUGAR ISLANDER” arrived at the port of Manila

carrying a cargo of soybean meal in bulk consigned to several consignees,
one of which was the Metro Manila Feed Millers Association (Metro for
[b]revity). Discharging of cargo from vessel to barges commenced on
November 30, 1990. From the barges, the cargo was allegedly offloaded,
rebagged and reloaded on consignee’s delivery trucks. Respondent,
however, claims that when the cargo [was] weighed on a licensed truck scale
a shortage of 255.051 metric tons valued at P1,621,171.16 was discovered.
 The above-mentioned shipment was insured with private respondent against
all risk in the amount of P19,976,404.00. Due to the alleged refusal of 
petitioners to settle their respective liabilities, respondent, as insurer, paid
the consignee Metro Manila Feed Miller’s Association.

March 26, 1992

>>as alleged subrogee of Metro, private respondent filed a complaint

for damages against herein petitioners. Within the reglementary period to
file an Answer, petitioners filed a Motion to Dismiss the complaint on the
ground that respondent’s claim is premature, the same being arbitrable.

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Private respondent filed its Opposition thereto and petitioners filed their Reply
to Opposition.

November 11, 1992

>>[the RTC] issued an Order deferring the hearing on the Motion to

Dismiss until the trial and directing petitioners to file their Answer.
Petitioners then moved to reconsider said Order which was, however, denied
by [the RTC] on the ground that the reason relied upon by herein petitioners
in its Motion to Dismiss and Motion for Reconsideration [was] a matter of 
defense which they must prove with their evidence.

August 20, 1993

>> petitioners filed their Answer with Counterclaim and Crossclaim

alleging therein that plaintiff, herein respondent, did not comply with the
arbitration clause of the charter party; hence, the complaint was allegedly
prematurely filed. The trial court set the case for pre-trial on November 26,
1993.

November 15 and 16, 1993

>>petitioners filed a Motion to Defer Pre-Trial and Motion to Set for

Preliminary Hearing the Affirmative Defense of Lack of Cause of Action for
Failure to comply with Arbitration Clause, respectively. Private respondent did
not file an Opposition to the said Motion to Set for Preliminary Hearing.

December 28, 1993

>>[the RTC] issued an Order denying the Motion to Set for Preliminary
Hearing.

February 2, 1994

>>petitioners filed a Motion for Reconsideration of the Order dated

December 28, 1993.

February 11, 1994

>> [the RTC] issued an Order denying petitioners’ Motion for

Reconsideration. Hence, the instant petition.
 January 21, 1999

>>CA affirmed the decision of RTC

 July 6, 1999

>>CA denied the motion for reconsideration

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Issue:

In their Memorandum, petitioners submit the following issues for our

consideration:

“1. Whether or not insurer, as subrogee of the consignee, is bound

by the charter party which is incorporated and referred to in the bill of lading.

2. Whether or not the motion to dismiss should be granted on the ground

that a condition precedent has not been complied with, based on the
arbitration clause incorporated in the bill of lading.

3. Whether or not the Court of Appeals erred in holding that the trial court
did not commit grave abuse of discretion in denying petitioners’ motion for
preliminary hearing.

4. Whether or not the trial court can defer the resolution of a motion to
dismiss on the ground that the ground relied upon is indubitable.
5. Whether or not the petitioners have resorted to an improper remedy which
makes them responsible for delaying the case.”

In the main, the two principal matters before us are: (1) the denial of 
petitioners’ Motion for Preliminary Hearing and (2) the propriety of 
the CA ruling regarding the arbitration clause.

Held:

The Petition is meritorious.

Affirmative Defense May Be Raised

True, Section 6, Rule 16 of the 1997 Rules,[11] specifically provides that a

 preliminary hearing on the affirmative defenses may be allowed only when
no motion to dismiss has been filed. Section 6, however, must be viewed in
the light of Section 3 of the same Rule,[12] which requires courts to resolve a
motion to dismiss and prohibits them from deferring its resolution on the
ground of indubitability. Clearly then, Section 6 disallows a preliminary 
hearing of affirmative defenses once a motion to dismiss has been filed
because such defense should have already been resolved. In the present 
case, however, the trial court did not categorically resolve petitioners’ Motion
to Dismiss, but merely deferred resolution thereof.

Indeed, the present Rules are consistent with Section 5, Rule 16 of the pre-
1997 Rules of Court, because both presuppose that no motion to dismiss had
been filed; or in the case of the pre-1997 Rules, if one has been filed, it has
not been unconditionally denied.[14] Hence, the ground invoked may still be
 pleaded as an affirmative defense even if the defendant’s Motion to Dismiss

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has been filed but not definitely resolved, or if it has been deferred as it could
be under the pre-1997 Rules.

Denial of the Motion for a Preliminary Hearing Was a Grave Abuse of 
Discretion

Undeniably, a preliminary hearing is not mandatory, but subject to the

discretion of the trial court. In the light of the circumstances in this case,
though, we find that the lower court committed grave abuse of discretion in
refusing to grant the Motion.

We note that the trial court deferred the resolution of petitioners’ Motion to
Dismiss because of a single issue. It was apparently unsure whether the
charter party that the bill of lading referred to was indeed the Baltimore
Berth Grain Charter Party submitted by petitioners.

Considering that there was only one question, which may even be deemed to
be the very touchstone of the whole case, the trial court had no cogent 
reason to deny the Motion for Preliminary Hearing. Indeed, it committed
grave abuse of discretion when it denied a preliminary hearing on a simple
issue of fact that could have possibly settled the entire case. Verily, where a
 preliminary hearing appears to suffice, there is no reason to go on to trial.
One reason why dockets of trial courts are clogged is the unreasonable
refusal to use a process or procedure, like a motion to dismiss, which is
designed to abbreviate the resolution of a case.

Second Issue: The Arbitration Clause

The CA also erred when it held that the arbitration clause was not binding on
respondent. We reiterate that the crux of this case is whether the trial court 
committed grave abuse of discretion in denying the aforecited Motion. There
was neither need nor reason to rule on the applicability of the arbitration
clause.

Be that as it may, we find the CA’s reasoning on this point faulty. Citing Pan
Malayan Insurance Corporation v. CA,[17] it ruled that the right of respondent 
insurance company as subrogee was not based on the charter party or any 
other contract; rather, it accrued upon the payment of the insurance claim by 
 private respondent to the insured consignee. There was nothing in Pan
Malayan, however, that prohibited the applicability of the arbitration clause to
the subrogee. That case merely discussed, inter alia, the accrual of the right 
of subrogation and the legal basis therefor.[18] This issue is completely 
different from that of the consequences of such subrogation; that is, the
rights that the insurer acquires from the insured upon payment of the
indemnity.

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WHEREFORE, the Petition is GRANTED and the appealed Decision is

hereby REVERSED. The case is REMANDED to the trial court for 
 preliminary hearing on petitioners’ affirmative defense. No costs.

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