SYLLABUS
for the damage caused to their house and its
1. CIVIL LAW; DAMAGES; DOCTRINE OF RES IPSA
LOQUITOR, APPLIED; NEGLIGENCE NOT PRESUMED.
— The facts of the case call for the application of the
doctrine, considering that in the normal course of
operations of a furniture manufacturing shop,
combustible material such as wood chips, sawdust,
paint, varnish and fuel and lubricants for machinery
may be found thereon. It must also be noted that
negligence or want of care on the part of petitioner or
its employees was not merely presumed. Even
without applying the doctrine of res ipsa loquitur,
petitioner’s failure to construct a firewall in
accordance with city ordinances would suffice to
support a finding of negligence.
2. CIVIL LAW; DAMAGES; DEFICIENCY BETWEEN
AMOUNT INDEMNIFIED BY INSURER AND THE
AMOUNT OF LOSS SUSTAINED MAY BE RECOVERED
FROM PERSON CAUSING THE LOSS. — Private
respondents have been indemnified by their insurer in
the amount of P35,000.00 for the damage caused to
their house and its contents. Hence, the Court holds
that in accordance with Article 2207 of the Civil Code
the amount of P35,000.00 should be deducted from
the amount awarded as damages. Having been
indemnified by their insurer, private respondents are
only entitled to recover the deficiency from petitioner.
3. ID.; SURROGATION; INSURER ENTITLED
THERETO UNDER ART. 2207. — The insurer, if it is so
minded, may seek reimbursement of the amount it
indemnified private respondents from petitioner. This
is the essence of its right to be subrogated to the
rights of the insured, as expressly provided in Article
2207. Upon payment of the loss incurred by the
insured, the insurer is entitled to be subrogated pro
tanto to any right of action which the insured may
have against the third person whose negligence or
wrongful act caused the loss [Fireman’s Fund
Insurance Co. v. Jamila & Co., Inc., G.R. No. L-27427,
April 7, 1976, 70 SCRA 323.]
4. ID.; ID.; EXERCISE OF RIGHT, DISCRETIONARY;
INSURER, REAL PARTY IN INTEREST WITH REGARD
TO INDEMNITY AWARDED TO THE INSURED. —
Under Article 2207, the real party in interest with
regard to the indemnity received by the insured is the
insurer [Phil. Air Lines, Inc. v. Heald Lumber Co., 101
Phil. 1031, (1957).] Whether or not the insurer should
exercise the rights of the insured to which it had been
subrogated lies solely within the former’s sound
discretion. Since the insurer is not a party to the case,
its identity is not of record and no claim is made on
its behalf, the private respondent’s insurer has to
claim his right to reimbursement of the P35,000.00
paid to the insured.
Insurance; Having been indemnified by their insurer
contents, private respondents are only entitled to
recover the deficiency from the petitioner.
Subrogation; Right of insurer to be subrogated to the
rights of the insured and to seek reimbursement from
the third party for the amount it paid to the insured,
is recognized; Real party in interest as to the
indemnity received by the insured is the insurer.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-52732 August 29, 1988
F.F. CRUZ and CO., INC., petitioner, 
vs.
THE COURT OF APPEALS, GREGORIO MABLE as
substituted by his wife LUZ ALMONTE MABLE
and children DOMING, LEONIDAS, LIGAYA,
ELENA, GREGORIO, JR., SALOME, ANTONIO,
and BERNARDO all surnamed
MABLE, respondents.
.CORTES, J.:
This petition to review the decision of the Court of
Appeals puts in issue the application of the common
law doctrine of res ipsa loquitur.
The essential facts of the case are not disputed.
The furniture manufacturing shop of petitioner in
Caloocan City was situated adjacent to the residence
of private respondents. Sometime in August 1971,
private respondent Gregorio Mable first approached
Eric Cruz, petitioner's plant manager, to request that
a firewall be constructed between the shop and
private respondents' residence. The request was
repeated several times but they fell on deaf ears. In
the early morning of September 6, 1974, fire broke
out in petitioner's shop. Petitioner's employees, who
slept in the shop premises, tried to put out the fire,
but their efforts proved futile. The fire spread to
private respondents' house. Both the shop and the
house were razed to the ground. The cause of the
conflagration was never discovered. The National
Bureau of Investigation found specimens from the
burned structures negative for the presence of
inflammable substances.
Subsequently, private respondents collected
P35,000.00 on the insurance on their house and the
contents thereof.
On January 23, 1975, private respondents filed an
action for damages against petitioner, praying for a
judgment in their favor awarding P150,000.00 as
actual damages, P50,000.00 as moral damages,
P25,000.00 as exemplary damages, P20,000.00 as
attorney's fees and costs. The Court of First Instance
held for private respondents:
WHEREFORE, the Court hereby renders judgment, in
favor of plaintiffs, and against the defendant:
1. Ordering the defendant to pay to the plaintiffs the
amount of P80,000.00 for damages suffered by said
plaintiffs for the loss of their house, with interest of
6% from the date of the filing of the Complaint on
January 23, 1975, until fully paid;
2. Ordering the defendant to pay to the plaintiffs the
sum of P50,000.00 for the loss of plaintiffs' furnitures,
religious images, silverwares, chinawares, jewelries,
books, kitchen utensils, clothing and other valuables,
with interest of 6% from date of the filing of the
Complaint on January 23, 1975, until fully paid;
3. Ordering the defendant to pay to the plaintiffs the
sum of P5,000.00 as moral damages, P2,000.00 as
exemplary damages, and P5,000.00 as and by way of
attorney's fees;
4. With costs against the defendant;
5. Counterclaim is ordered dismissed, for lack of
merit. [CA Decision, pp. 1-2; Rollo, pp. 29-30.]
On appeal, the Court of Appeals, in a decision
promulgated on November 19, 1979, affirmed the
decision of the trial court but reduced the award of
damages:
WHEREFORE, the decision declaring the defendants
liable is affirmed. The damages to be awarded to
plaintiff should be reduced to P70,000.00 for the
house and P50,000.00 for the furniture and other
fixtures with legal interest from the date of the filing
of the complaint until full payment thereof. [CA
Decision, p. 7; Rollo, p. 35.]
A motion for reconsideration was filed on December
3, 1979 but was denied in a resolution dated February
18, 1980. Hence, petitioner filed the instant petition
for review on February 22, 1980. After the comment
and reply were filed, the Court resolved to deny the
petition for lack of merit on June 11, 1980.
However, petitioner filed a motion for reconsideration,
which was granted, and the petition was given due
course on September 12, 1980. After the parties filed
their memoranda, the case was submitted for decision
on January 21, 1981.
Petitioner contends that the Court of Appeals erred:
1. In not deducting the sum of P35,000.00, which
private respondents recovered on the insurance on
their house, from the award of damages.
2. In awarding excessive and/or unproved damages.
3. In applying the doctrine of res ipsa loquitur to the
facts of the instant case.
The pivotal issue in this case is the applicability of the
common law doctrine of res ipsa loquitur, the issue of
damages being merely consequential. In view thereof,
the errors assigned by petitioner shall be discussed in
the reverse order.
1. The doctrine of res ipsa loquitur, whose application
to the instant case petitioner objects to, may be
stated as follows:
Where the thing which caused the injury complained
of is shown to be under the management of the
defendant or his servants and the accident is such as
in the ordinary course of things does not happen if
those who have its management or control use
proper care, it affords reasonable evidence, in the
absence of explanation by the defendant, that the
accident arose from want of care. [Africa v. Caltex
(Phil.), Inc., G.R. No. L-12986, March 31, 1966, 16
SCRA 448.]
Thus, in Africa, supra, where fire broke out in a Caltex
service station while gasoline from a tank truck was
being unloaded into an underground storage tank
through a hose and the fire spread to and burned
neighboring houses, this Court, applying the doctrine
of res ipsa loquitur, adjudged Caltex liable for the
loss.
The facts of the case likewise call for the application
of the doctrine, considering that in the normal course
of operations of a furniture manufacturing shop,
combustible material such as wood chips, sawdust,
paint, varnish and fuel and lubricants for machinery
may be found thereon.
It must also be noted that negligence or want of care
on the part of petitioner or its employees was not
merely presumed. The Court of Appeals found that
petitioner failed to construct a firewall between its
shop and the residence of private respondents as
required by a city ordinance; that the fire could have
been caused by a heated motor or a lit cigarette; that
gasoline and alcohol were used and stored in the
shop; and that workers sometimes smoked inside the
shop [CA Decision, p. 5; Rollo, p. 33.]
Even without applying the doctrine of res ipsa
loquitur, petitioner's failure to construct a firewall in
accordance with city ordinances would suffice to
support a finding of negligence.
Even then the fire possibly would not have spread to
the neighboring houses were it not for another
negligent omission on the part of defendants, namely,
their failure to provide a concrete wall high enough to
prevent the flames from leaping over it. As it was the
concrete wall was only 2-1/2 meters high, and
beyond that height it consisted merely of galvanized
iron sheets, which would predictably crumble and
melt when subjected to intense heat. Defendant's
negligence, therefore, was not only with respect to
the cause of the fire but also with respect to the
spread thereof to the neighboring houses.[Africa v.
Caltex (Phil.), Inc., supra; Emphasis supplied.]
In the instant case, with more reason should
petitioner be found guilty of negligence since it had
failed to construct a firewall between its property and
private respondents' residence which sufficiently
complies with the pertinent city ordinances. The
failure to comply with an ordinance providing for
safety regulations had been ruled by the Court as an
act of negligence [Teague v. Fernandez, G.R. No. L-
29745, June 4, 1973, 51 SCRA 181.]
The Court of Appeals, therefore, had more than
adequate basis to find petitioner liable for the loss
sustained by private respondents.
2. Since the amount of the loss sustained by private
respondents constitutes a finding of fact, such finding
by the Court of Appeals should not be disturbed by
this Court [M.D. Transit & Taxi Co., Inc. v. Court of
Appeals, G.R. No. L-23882, February 17, 1968, 22
SCRA 559], more so when there is no showing of
arbitrariness.
In the instant case, both the CFI and the Court of
Appeals were in agreement as to the value of private
respondents' furniture and fixtures and personal
effects lost in the fire (i.e. P50,000.00). With regard
to the house, the Court of Appeals reduced the award
to P70,000.00 from P80,000.00. Such cannot be
categorized as arbitrary considering that the evidence
shows that the house was built in 1951 for
P40,000.00 and, according to private respondents, its
reconstruction would cost P246,000.00. Considering
the appreciation in value of real estate and the
diminution of the real value of the peso, the valuation
of the house at P70,000.00 at the time it was razed
cannot be said to be excessive.
3. While this Court finds that petitioner is liable for
damages to private respondents as found by the
Court of Appeals, the fact that private respondents
have been indemnified by their insurer in the amount
of P35,000.00 for the damage caused to their house
and its contents has not escaped the attention of the
Court. Hence, the Court holds that in accordance with
Article 2207 of the Civil Code the amount of
P35,000.00 should be deducted from the amount
awarded as damages. Said article 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 is subrogated to the rights of the
insured against the wrongdoer or the person who
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. (Emphasis supplied.]
The law is clear and needs no interpretation. Having
been indemnified by their insurer, private respondents
are only entitled to recover the deficiency from
petitioner.
On the other hand, the insurer, if it is so minded, may
seek reimbursement of the amount it indemnified
private respondents from petitioner. This is the
essence of its right to be subrogated to the rights of
the insured, as expressly provided in Article 2207.
Upon payment of the loss incurred by the insured, the
insurer is entitled to be subrogated pro tanto to any
right of action which the insured may have against
the third person whose negligence or wrongful act
caused the loss [Fireman's Fund Insurance Co. v.
Jamila & Co., Inc., G.R. No. L-27427, April 7, 1976,
70 SCRA 323.]
Under Article 2207, the real party in interest with
regard to the indemnity received by the insured is the
insurer [Phil. Air Lines, Inc. v. Heald Lumber Co., 101
Phil. 1031, (1957).] Whether or not the insurer should
exercise the rights of the insured to which it had been
subrogated lies solely within the former's sound
discretion. Since the insurer is not a party to the case,
its identity is not of record and no claim is made on
its behalf, the private respondent's insurer has to
claim his right to reimbursement of the P35,000.00
paid to the insured.
WHEREFORE, in view of the foregoing, the decision of
the Court of Appeals is hereby AFFIRMED with the
following modifications as to the damages awarded
for the loss of private respondents' house, considering
their receipt of P35,000.00 from their insurer: (1) the
damages awarded for the loss of the house is reduced
to P35,000.00; and (2) the right of the insurer to
subrogation and thus seek reimbursement from
petitioner for the P35,000.00 it had paid private
respondents is recognized.
SO ORDERED.
Insurance; Marine Insurance; Common Carriers;
While the payment by the insurer for the insured
value of the lost cargo operates as a waiver of the
insurer’s right to enforce the term of the implied
warranty against the assured under the marine
insurance policy, the same cannot be validly
interpreted as an automatic admission of the
vessel’s seaworthiness by the insurer as to
foreclose recourse against the common carrier for
any liability under the contractual obligation as
such common carrier.
Subrogation; Equity; 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.
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,
and 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.
G.R. No. 127897      November 15, 2001
DELSAN TRANSPORT LINES, INC., petitioner,  Philippine Atmospheric, Geophysical and Astronomical
vs.
THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 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 Caltex’s 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 Maysum 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 (P5,096,635.67)
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.1âwphi1.nêt
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 Maysum, 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 or force 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
Services Administration (PAGASA for brevity) which
showed that from 2:00 o’clock to 8:oo o’clock 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 petitioner’s 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:
I
THE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT
JUSTIFIED IN REBUTTING THE LEGAL PRESUMPTION
THAT THE VESSEL MT "MAYSUN" WAS SEAWORTHY.
III
THE 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 thin
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 latter’s 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
vessel’s complement. Besides, petitioner avers that
although Berina had merely a 2 nd officer’s license, he
was qualified to act as the vessel’s 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 of Home
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:
I- Whether 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.
II -Whether 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 the lost 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 vessel’s
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 plaintiff’s 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 circumstance 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 even
or force 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 o’clock 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
report15 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 o’clock to 8:00 o’clock 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 Gulf where the subject vessel
sank. Thus, as the appellate court correctly ruled,
petitioner’s 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
petitioner’s 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 certificates16 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 vessel’s actual condition.
Neither the granting of classification or the issuance of
certificates established 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
owner’s 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 Maysun’s 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 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
carrier19 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 of Home Insurance Corporation v. CA21 (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 or
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 insurer’s 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
petitioner’s 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.
INSURANCE; PHILIPPINE LAW.—The law of insurance is
now found in the Insurance Act and the Civil Code.
ID. ; OFFER AND ACCEPTANCE.—The Civil Code rule,
that an acceptance made by letter shall bind the person
making the offer only from the date, it came to his
knowledge, is controlling.
ID. ; ID.—On September 24, 1917, H made application
to an insurance company through its office in Manila for
a life annuity. Two days later he paid the sum of P6,000
to the manager of the company's Manila office and was
given a receipt therefor. On November 26, 1917, the
head office gave notice of acceptance by cable to
Manila. On the same date the Manila office prepared a
letter notifying H that his application had been accepted
and this was placed in the ordinary channels for
transmission, but as far as known, was never actually
mailed and was never received by the applicant. H died
on December 20, 1917. Held: That the contract for a life
annuity was not perfected because it had not been
proved satisfactorily that the acceptance of the,
application ever came to the knowledge of the applicant.
ID. ; ID.—An acceptance of an offer of insurance not
actually or constructively communicated to the proposer
does not make a contract. Only the mailing of
acceptance completes the contract of insurance, as the
locus pœnitentiæ is ended when the acceptance has
passed beyond the control of the party.
G.R. No. L-15895             November 29, 1920
RAFAEL ENRIQUEZ, as administrator of the estate
of the late Joaquin Ma. Herrer, plaintiff-appellant,  Herrer of this acceptance. The witness further said that
vs.
SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
MALCOLM, J.:
This is an action brought by the plaintiff ad administrator
of the estate of the late Joaquin Ma. Herrer to recover
from the defendant life insurance company the sum of
pesos 6,000 paid by the deceased for a life annuity. The
trial court gave judgment for the defendant. Plaintiff
appeals.
The undisputed facts are these: On September 24, 1917,
Joaquin Herrer made application to the Sun Life
Assurance Company of Canada through its office in
Manila for a life annuity. Two days later he paid the sum
of P6,000 to the manager of the company's Manila office
and was given a receipt reading as follows:
MANILA, I. F., 26 de septiembre, 1917.
PROVISIONAL RECEIPT Pesos 6,000
Recibi la suma de seis mil pesos de Don Joaquin Herrer
de Manila como prima dela Renta Vitalicia solicitada por
dicho Don Joaquin Herrer hoy, sujeta al examen medico
y aprobacion de la Oficina Central de la Compañia.
The application was immediately forwarded to the head
office of the company at Montreal, Canada. On
November 26, 1917, the head office gave notice of
acceptance by cable to Manila. (Whether on the same
day the cable was received notice was sent by the
Manila office of Herrer that the application had been
accepted, is a disputed point, which will be discussed
later.) On December 4, 1917, the policy was issued at
Montreal. On December 18, 1917, attorney Aurelio A.
Torres wrote to the Manila office of the company stating
that Herrer desired to withdraw his application. The
following day the local office replied to Mr. Torres,
stating that the policy had been issued, and called
attention to the notification of November 26, 1917. This
letter was received by Mr. Torres on the morning of
December 21, 1917. Mr. Herrer died on December 20,
1917.
As above suggested, the issue of fact raised by the
evidence is whether Herrer received notice of
acceptance of his application. To resolve this question,
we propose to go directly to the evidence of record.
The chief clerk of the Manila office of the Sun Life
Assurance Company of Canada at the time of the trial
testified that he prepared the letter introduced in
evidence as Exhibit 3, of date November 26, 1917, and
handed it to the local manager, Mr. E. E. White, for
signature. The witness admitted on cross-examination
that after preparing the letter and giving it to he
manager, he new nothing of what became of it. The
local manager, Mr. White, testified to having received
the cablegram accepting the application of Mr. Herrer
from the home office on November 26, 1917. He said
that on the same day he signed a letter notifying Mr.
letters, after being signed, were sent to the chief clerk
and placed on the mailing desk for transmission. The
witness could not tell if the letter had every actually
been placed in the mails. Mr. Tuason, who was the chief
clerk, on November 26, 1917, was not called as a
witness. For the defense, attorney Manuel Torres
testified to having prepared the will of Joaquin Ma.
Herrer, that on this occasion, Mr. Herrer mentioned his
application for a life annuity, and that he said that the
only document relating to the transaction in his
possession was the provisional receipt. Rafael Enriquez,
the administrator of the estate, testified that he had
gone through the effects of the deceased and had found
no letter of notification from the insurance company to
Mr. Herrer.
Our deduction from the evidence on this issue must be
that the letter of November 26, 1917, notifying Mr.
Herrer that his application had been accepted, was
prepared and signed in the local office of the insurance
company, was placed in the ordinary channels for
transmission, but as far as we know, was never actually
mailed and thus was never received by the applicant.
Not forgetting our conclusion of fact, it next becomes
necessary to determine the law which should be applied
to the facts. In order to reach our legal goal, the obvious
signposts along the way must be noticed.
Until quite recently, all of the provisions concerning life
insurance in the Philippines were found in the Code of
Commerce and the Civil Code. In the Code of the
Commerce, there formerly existed Title VIII of Book III
and Section III of Title III of Book III, which dealt with
insurance contracts. In the Civil Code there formerly
existed and presumably still exist, Chapters II and IV,
entitled insurance contracts and life annuities,
respectively, of Title XII of Book IV. On the after July 1,
1915, there was, however, in force the Insurance Act.
No. 2427. Chapter IV of this Act concerns life and health
insurance. The Act expressly repealed Title VIII of Book
II and Section III of Title III of Book III of the code of
Commerce. The law of insurance is consequently now
found in the Insurance Act and the Civil Code.
While, as just noticed, the Insurance Act deals with life
insurance, it is silent as to the methods to be followed in
order that there may be a contract of insurance. On the
other hand, the Civil Code, in article 1802, not only
describes a contact of life annuity markedly similar to
the one we are considering, but in two other articles,
gives strong clues as to the proper disposition of the
case. For instance, article 16 of the Civil Code provides
that "In matters which are governed by special laws, any
deficiency of the latter shall be supplied by the
provisions of this Code." On the supposition, therefore,
which is incontestable, that the special law on the
subject of insurance is deficient in enunciating the
principles governing acceptance, the subject-matter of
the Civil code, if there be any, would be controlling. In
the Civil Code is found article 1262 providing that
"Consent is shown by the concurrence of offer and
acceptance with respect to the thing and the
consideration which are to constitute the contract. An
acceptance made by letter shall not bind the person
making the offer except from the time it came to his
knowledge. The contract, in such case, is presumed to
have been entered into at the place where the offer was
made." This latter article is in opposition to the
provisions of article 54 of the Code of Commerce.
If no mistake has been made in announcing the
successive steps by which we reach a conclusion, then
the only duty remaining is for the court to apply the law
as it is found. The legislature in its wisdom having
enacted a new law on insurance, and expressly repealed
the provisions in the Code of Commerce on the same
subject, and having thus left a void in the commercial
law, it would seem logical to make use of the only
pertinent provision of law found in the Civil code, closely
related to the chapter concerning life annuities.
The Civil Code rule, that an acceptance made by letter
shall bind the person making the offer only from the
date it came to his knowledge, may not be the best
expression of modern commercial usage. Still it must be
admitted that its enforcement avoids uncertainty and
tends to security. Not only this, but in order that the
principle may not be taken too lightly, let it be noticed
that it is identical with the principles announced by a
considerable number of respectable courts in the United
States. The courts who take this view have expressly
held that an acceptance of an offer of insurance not
actually or constructively communicated to the proposer
does not make a contract. Only the mailing of
acceptance, it has been said, completes the contract of
insurance, as the locus poenitentiae  is ended when the
acceptance has passed beyond the control of the party.
(I Joyce, The Law of Insurance, pp. 235, 244.)
In resume, therefore, the law applicable to the case is
found to be the second paragraph of article 1262 of the
Civil Code providing that an acceptance made by letter
shall not bind the person making the offer except from
the time it came to his knowledge. The pertinent fact is,
that according to the provisional receipt, three things
had to be accomplished by the insurance company
before there was a contract: (1) There had to be a
medical examination of the applicant; (2) there had to
be approval of the application by the head office of the
company; and (3) this approval had in some way to be
communicated by the company to the applicant. The
further admitted facts are that the head office in
Montreal did accept the application, did cable the Manila
office to that effect, did actually issue the policy and did,
through its agent in Manila, actually write the letter of
notification and place it in the usual channels for
transmission to the addressee. The fact as to the letter
of notification thus fails to concur with the essential
elements of the general rule pertaining to the mailing
and delivery of mail matter as announced by the
American courts, namely, when a letter or other mail
matter is addressed and mailed with postage prepaid
there is a rebuttable presumption of fact that it was
received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mails.
But if any one of these elemental facts fails to appear, it
is fatal to the presumption. For instance, a letter will not
be presumed to have been received by the addressee
unless it is shown that it was deposited in the post-
office, properly addressed and stamped. (See 22 C.J.,
96, and 49 L. R. A. [N. S.], pp. 458, et seq., notes.)
We hold that the contract for a life annuity in the case at
bar was not perfected because it has not been proved
satisfactorily that the acceptance of the application ever
came to the knowledge of the applicant
Judgment is reversed, and the plaintiff shall have and
recover from the defendant the sum of P6,000 with legal
interest from November 20, 1918, until paid, without
special finding as to costs in either instance. So ordered.
Insurance Law; Right of Subrogation; The right of
subrogation 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 of the insurance
claim by the insurer.—The juridical situation arising
under Article 2207 of the Civil Code is well explained in
Pan Malayan Insurance Corporation v. Court of Appeals,
184 SCRA 54 (1990), as follows: Article 2207 of the Civil
Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party
other than the assured, then the insurer, upon payment
to the assured, will be subrogated to the rights of the
assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay.
Payment by the insurer to the assured operates
as an equitable assignment to the former of all
remedies which the latter may have against the
third party whose negligence or wrongful act
caused the loss. The right of subrogation 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 of the
insurance claim by the insurer.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159213               July 3, 2013
VECTOR SHIPPING CORPORATION and
FRANCISCO SORIANO, Petitioners,  under the law prescribe, unless interrupted, on 20
vs.
AMERICAN HOME ASSURANCE COMPANY and
SULPICIO LINES, INC., Respondents.
DECISION
BERSAMIN, J.:
Subrogation under Article 2207 of the Civil Code gives
rise to a cause of action created by law. For purposes of
the law on the prescription of actions, the period of
limitation is ten years.
The Case
Vector Shipping Corporation (Vector) and Francisco
Soriano appeal the decision promulgated on July 22,
2003,1whereby the Court of Appeals (CA) held them
jointly and severally liable to pay ₱7 ,455,421.08 to
American Home Assurance Company (respondent) as
and by way of actual damages on the basis of
respondent being the subrogee of its insured Caltex
Philippines, Inc. (Caltex).
Antecedents
Vector was the operator of the motor tanker M/T Vector,
while Soriano was the registered owner of the M/T
Vector. Respondent is a domestic insurance
corporation.2
On September 30, 1987, Caltex entered into a contract
of Affreightment3 with Vector for the transport of
Caltex’s petroleum cargo through the M/T Vector. Caltex
insured the petroleum cargo with respondent for
₱7,455,421.08 under Marine Open Policy No. 34-5093-
6.4 In the evening of December 20, 1987, the M/T
Vector and the M/V Doña Paz, the latter a vessel owned
and operated by Sulpicio Lines, Inc., collided in the open
sea near Dumali Point in Tablas Strait, located between
the Provinces of Marinduque and Oriental Mindoro. The
collision led to the sinking of both vessels. The entire
petroleum cargo of Caltex on board the M/T Vector
perished.5 On July 12, 1988, respondent indemnified
Caltex for the loss of the petroleum cargo in the full
amount of ₱7,455,421.08.6
On March 5, 1992, respondent filed a complaint against
Vector, Soriano, and Sulpicio Lines, Inc. to recover the
full amount of ₱7,455,421.08 it paid to Caltex (Civil Case
No. 92-620).7 The case was raffled to Branch 145 of the
Regional Trial Court (RTC) in Makati City.
On December 10, 1997, the RTC issued a resolution
dismissing Civil Case No. 92-620 on the following
grounds:
This action is upon a quasi-delict and as such must be
commenced within four 4 years from the day they may
be brought. [Art. 1145 in relation to Art. 1150, Civil
Code] "From the day [the action] may be brought"
means from the day the quasi-delict occurred. [Capuno
v. Pepsi Cola, 13 SCRA 663]
The tort complained of in this case occurred on 20
December 1987. The action arising therefrom would
December 1991.
When the case was filed against defendants Vector
Shipping and Francisco Soriano on 5 March 1992, the
action not having been interrupted, had already
prescribed.
Under the same situation, the cross-claim of Sulpicio
Lines against Vector Shipping and Francisco Soriano filed
on 25 June 1992 had likewise prescribed.
The letter of demand upon defendant Sulpicio Lines
allegedly on 6 November 1991 did not interrupt the
tolling of the prescriptive period since there is no
evidence that it was actually received by the addressee.
Under such circumstances, the action against Sulpicio
Lines had likewise prescribed.
Even assuming that such written extra-judicial demand
was received and the prescriptive period interrupted in
accordance with Art. 1155, Civil Code, it was only for the
10-day period within which Sulpicio Lines was required
to settle its obligation. After that period lapsed, the
prescriptive period started again. A new 4-year period to
file action was not created by the extra-judicial demand;
it merely suspended and extended the period for 10
days, which in this case meant that the action should be
commenced by 30 December 1991, rather than 20
December 1991.
Thus, when the complaint against Sulpicio Lines was
filed on 5 March 1992, the action had prescribed.
PREMISES CONSIDERED, the complaint of American
Home Assurance Company and the cross-claim of
Sulpicio Lines against Vector Shipping Corporation and
Francisco Soriano are DISMISSED.
Without costs.
SO ORDERED.8
Respondent appealed to the CA, which promulgated its
assailed decision on July 22, 2003 reversing the
RTC.9Although thereby absolving Sulpicio Lines, Inc. of
any liability to respondent, the CA held Vector and
Soriano jointly and severally liable to respondent for the
reimbursement of the amount of ₱7,455,421.08 paid to
Caltex, explaining:
xxxx
The resolution of this case is primarily anchored on the
determination of what kind of relationship existed
between Caltex and M/V Dona Paz and between Caltex
and M/T Vector for purposes of applying the laws on
prescription. The Civil Code expressly provides for the
number of years before the extinctive prescription sets
in depending on the relationship that governs the
parties.
xxxx
After a careful perusal of the factual milieu and the
evidence adduced by the parties, We are constrained to
rule that the relationship that existed between Caltex
and M/V Dona Paz is that of a quasi-delict while that
between Caltex and M/T Vector is culpa contractual
based on a Contract of Affreightment or a charter party.
xxxx
On the other hand, the claim of appellant against M/T
Vector is anchored on a breach of contract of
affreightment. The appellant averred that M/T Vector
committed such act for having misrepresented to the
appellant that said vessel is seaworthy when in fact it is
not. The contract was executed between Caltex and M/T
Vector on September 30, 1987 for the latter to transport
thousands of barrels of different petroleum products.
Under Article 1144 of the New Civil Code, actions based
on written contract must be brought within 10 years
from the time the right of action accrued. A passenger of
a ship, or his heirs, can bring an action based on culpa
contractual within a period of 10 years because the
ticket issued for the transportation is by itself a complete
written contract (Peralta de Guerrero vs. Madrigal
Shipping Co., L 12951, November 17, 1959).
Viewed with reference to the statute of limitations, an
action against a carrier, whether of goods or of
passengers, for injury resulting from a breach of
contract for safe carriage is one on contract, and not in
tort, and is therefore, in the absence of a specific statute
relating to such actions governed by the statute fixing
the period within which actions for breach of contract
must be brought (53 C.J.S. 1002 citing Southern Pac. R.
Co. of Mexico vs. Gonzales 61 P. 2d 377, 48 Ariz. 260,
106 A.L.R. 1012).
Considering that We have already concluded that the
prescriptive periods for filing action against M/V Doña
Paz based on quasi delict and M/T Vector based on
breach of contract have not yet expired, are We in a
position to decide the appeal on its merit.
We say yes.
xxxx
Article 2207 of the Civil Code on subrogation is explicit
that if the plaintiff’s 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 should
be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract.
Undoubtedly, the herein appellant has the rights of a
subrogee to recover from M/T Vector what it has paid by
way of indemnity to Caltex.
WHEREFORE, foregoing premises considered, the
decision dated December 10, 1997 of the RTC of Makati
City, Branch 145 is hereby REVERSED. Accordingly, the
defendant-appellees Vector Shipping Corporation and
Francisco Soriano are held jointly and severally liable to
the plaintiff-appellant American Home Assurance
Company for the payment of ₱7,455,421.08 as and by
way of actual damages.
SO ORDERED.10
Respondent sought the partial reconsideration of the
decision of the CA, contending that Sulpicio Lines, Inc.
should also be held jointly liable with Vector and Soriano
for the actual damages awarded. 11 On their part,
however, Vector and Soriano immediately appealed to
the Court on September 12, 2003.12 Thus, on October 1,
2003, the CA held in abeyance its action on respondent’s
partial motion for reconsideration pursuant to its internal
rules until the Court has resolved this appeal. 13
Issues
The main issue is whether this action of respondent was
already barred by prescription for bringing it only on
March 5, 1992. A related issue concerns the proper
determination of the nature of the cause of action as
arising either from a quasi-delict or a breach of contract.
The Court will not pass upon whether or not Sulpicio
Lines, Inc. should also be held jointly liable with Vector
and Soriano for the actual damages claimed.
Ruling
The petition lacks merit.
Vector and Soriano posit that the RTC correctly
dismissed respondent’s complaint on the ground of
prescription. They insist that this action was premised on
a quasi-delict or upon an injury to the rights of the
plaintiff, which, pursuant to Article 1146 of the Civil
Code, must be instituted within four years from the time
the cause of action accrued; that because respondent’s
cause of action accrued on December 20, 1987, the date
of the collision, respondent had only four years, or until
December 20, 1991, within which to bring its action, but
its complaint was filed only on March 5, 1992, thereby
rendering its action already barred for being commenced
beyond the four-year prescriptive period;14 and that
there was no showing that respondent had made
extrajudicial written demands upon them for the
reimbursement of the insurance proceeds as to interrupt
the running of the prescriptive period.15
We concur with the CA’s ruling that respondent’s action
did not yet prescribe. The legal provision governing this
case was not Article 1146 of the Civil Code, 16 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.
We need to clarify, however, that we cannot adopt the
CA’s characterization of the cause of action as 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), supra. Instead,
we find and hold that 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 respondent 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, to wit:
Article 2207. If the plaintiff’s 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.
(Emphasis supplied)
The juridical situation arising under Article 2207 of the
Civil Code is well explained in Pan Malayan Insurance
Corporation v. Court of Appeals,17 as follows:
Article 2207 of the Civil Code is founded on the well-
settled principle of subrogation. 1âwphi1 If the insured
property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the
insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured
operates as an equitable assignment to the former of all
remedies which the latter may have against the third
party whose negligence or wrongful act caused the
loss.1âwphi1 The right of subrogation 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 of the insurance claim by the insurer
[Compania Maritima v. Insurance Company of North
America, G.R. No. L-18965, October 30, 1964, 12 SCRA
213; Fireman’s Fund Insurance Company v. Jamilla &
Company, Inc., G.R. No. L-27427, April 7, 1976, 70
SCRA 323].18
Verily, the contract of affreightment that Caltex and
Vector entered into did not give rise to the legal
obligation of Vector and Soriano to pay the demand for
reimbursement by respondent because it concerned only
the agreement for the transport of Caltex’s petroleum
cargo. As the Court has aptly put it in Pan Malayan
Insurance Corporation v. Court of Appeals, supra,
respondent’s right of subrogation pursuant to Article
2207, supra, was "not dependent upon, nor did it grow
out of, any privity of contract or upon written
assignment of claim but accrued simply upon payment
of the insurance claim by the insurer."
Considering that the cause of action accrued as of the
time respondent actually indemnified Caltex in the
amount of ₱7,455,421.08 on July 12, 1988, 19 the action
was not yet barred by the time of the filing of its
complaint on March 5, 1992,20 which was well within the
10-year period prescribed by Article 1144 of the Civil
Code.
The insistence by Vector and Soriano that the running of
the prescriptive period was not interrupted because of
the failure of respondent to serve any extrajudicial
demand was rendered inconsequential by our foregoing
finding that respondent’s cause of action was not based
on a quasi-delict that prescribed in four years from the
date of the collision on December 20, 1987, as the RTC
misappreciated, but on an obligation created by law, for
which the law fixed a longer prescriptive period of ten
years from the accrual of the action.
Still, Vector and Soriano assert that respondent had no
right of subrogation to begin with, because the
complaint did not allege that respondent had actually
paid Caltex for the loss of the cargo. They further assert
that the subrogation receipt submitted by respondent
was inadmissible for not being properly identified by
Ricardo C. Ongpauco, respondent’s witness, who,
although supposed to identify the subrogation receipt
based on his affidavit, was not called to testify in court;
and that respondent presented only one witness in the
person of Teresita Espiritu, who identified Marine Open
Policy No. 34-5093-6 issued by respondent to Caltex.21
We disagree with petitioners’ assertions. It is undeniable
that respondent preponderantly established its right of
subrogation. Its Exhibit C was Marine Open Policy No.
34-5093-6 that it had issued to Caltex to insure the Caltex under its marine insurance policy on the basis of
petroleum cargo against marine peril.22 Its Exhibit D was its right of subrogation. With the clear variance between
the formal written claim of Caltex for the payment of the the two actions, the failure to set up the cross-claim
insurance coverage of ₱7,455,421.08 coursed through against them in Civil Case No. 18735 is no reason to bar
respondent’s adjuster.23 Its Exhibits E to H were marine this action.
documents relating to the perished cargo on board the
M/V Vector that were processed for the purpose of WHEREFORE, the Court DENIES the petition for review
verifying the insurance claim of Caltex. 24 Its Exhibit I on certiorari; AFFIRMS the decision promulgated on July
was the subrogation receipt dated July 12, 1988 22, 2003; and ORDERS petitioners to pay the costs of
showing that respondent paid Caltex ₱7,455,421.00 as suit.
the full settlement of Caltex’s claim under Marine Open
SO ORDERED.
Policy No. 34-5093-6.25 All these exhibits were
unquestionably duly presented, marked, and admitted
during the trial.26 Specifically, Exhibit C was admitted as
an authentic copy of Marine Open Policy No. 34-5093-6,
while Exhibits D, E, F, G, H and I, inclusive, were
admitted as parts of the testimony of respondent’s
witness Efren Villanueva, the manager for the
adjustment service of the Manila Adjusters and
Surveyors Company.27

Consistent with the pertinent law and jurisprudence,

therefore, Exhibit I was already enough by itself to
prove the payment of ₱7,455,421.00 as the full
settlement of Caltex’s claim.28 The payment made to
Caltex as the insured being thereby duly documented,
respondent became subrogated as a matter of course
pursuant to Article 2207 of the Civil Code. In legal
contemplation, subrogation is the "substitution of
another person in the place of the creditor, to whose
rights he succeeds in relation to the debt;" and is
"independent of any mere contractual relations between
the parties to be affected by it, and is broad enough to
cover every instance in which one party is required to
pay a debt for which another is primarily answerable,
and which in equity and conscience ought to be
discharged by the latter."29

Lastly, Vector and Soriano argue that Caltex waived and

abandoned its claim by not setting up a cross-claim
against them in Civil Case No. 18735, the suit that
Sulpicio Lines, Inc. had brought to claim damages for
the loss of the M/V Doña Paz from them, Oriental
Assurance Company (as insurer of the M/T Vector), and
Caltex; that such failure to set up its cross- claim on the
part of Caltex, the real party in interest who had
suffered the loss, left respondent without any better
right than Caltex, its insured, to recover anything from
them, and forever barred Caltex from asserting any
claim against them for the loss of the cargo; and that
respondent was similarly barred from asserting its
present claim due to its being merely the successor-in-
interest of Caltex.

The argument of Vector and Soriano would have

substance and merit had Civil Case No. 18735 and this
case involved the same parties and litigated the same
rights and obligations. But the two actions were
separate from and independent of each other. Civil Case
No. 18735 was instituted by Sulpicio Lines, Inc. to
recover damages for the loss of its M/V Doña Paz. In
contrast, this action was brought by respondent to
recover from Vector and Soriano whatever it had paid to
Insurance Law; Right of Subrogation; There exists a On July 2, 1996, petitioners filed a motion to dismiss the
wealth of U.S. jurisprudence holding that whenever the case on the ground that private respondent Seaboard’s
wrongdoer settles with the insured without the consent demand had been paid or otherwise extinguished by
of the insurer and with knowledge of the insurer’s KAL.
payment and right of subrogation, such right is not
defeated by the settlement. On December 9, 1996, the trial court issued an order
denying the motion to dismiss. Petitioners, private
G.R. No. 141462 December 15, 2005 respondent Skylanders and KAL filed separate motions
for reconsideration. Prior to the resolution of these
DANZAS CORPORATION and ALL TRANSPORT motions, the trial court allowed private respondent
NETWORK, INC., Petitioners,  Skylanders to present evidence in a preliminary hearing
vs. on November 14, 1997, after which the court set a date
HON. ZEUS C. ABROGAR, Presiding Judge of Br. to hear the presentation of rebuttal evidence.
150 of Makati City, SEABOARD EASTERN
INSURANCE CO., INC. and PHILIPPINE On December 5, 1997, petitioners filed a manifestation
SKYLANDERS, INC., Respondents. and motion for reconsideration of the order of the trial
court dated November 14, 1997, questioning the
DECISION propriety of the preliminary hearing.

CORONA, J.: On February 18, 1998, the trial court issued an order

denying: (1) the motion for reconsideration of the
Petitioner Danzas Corporation, through its agent,
December 9, 1996 order filed by petitioners, private
petitioner All Transport Network brings to us this petition
respondent Skylanders and KAL; (2) the motion to
for review on certiorari1 questioning the decision2 and
dismiss filed by Skylanders and (3) petitioners’ motion
resolution3 of the Court of Appeals which affirmed two
for reconsideration of the November 14, 1997 order.
orders issued by the Regional Trial Court, Makati City,
Branch 150.4 On April 6, 1998, petitioners filed in the Court of Appeals
a special civil action for certiorari under Rule 65 of the
The facts of the case follow.5
Rules of Court. On March 5, 1999, the CA dismissed the
On February 22, 1994, petitioner Danzas took a petition.6 Petitioners filed7 a motion for reconsideration
shipment of nine packages of ICS watches for transport but this was denied.8
to Manila. The consignee, International Freeport
Hence, this petition.
Traders, Inc. (IFTI) secured Marine Risk Note No.
0000342 from private respondent Seaboard. Petitioners’ principal contention is that private
respondent’s right of subrogation was extinguished
On March 2, 1994, the Korean Airlines plane carrying the
when IFTI received payment from KAL in settlement of
goods arrived in Manila and discharged the goods to the
its obligation. They also claim that public respondent
custody of private respondent Philippine Skylanders, Inc.
committed grave abuse of discretion by refusing to
for safekeeping. On withdrawal of the shipment from
dismiss the case on that ground. Finally, they claim that,
private respondent Skylanders’ warehouse, IFTI noted
by granting private respondent Skylanders a preliminary
that one package containing 475 watches was
hearing on an affirmative defense other than one of the
shortlanded while the remaining eight were found to
grounds stated in Section 1, Rule 16 of the 1997 Rules
have sustained tears on sides and the retape of flaps.
of Civil Procedure, public respondent committed another
On further examination and inventory of the cartons, it
grave abuse of discretion.
was discovered that 176 Guess watches were missing.
Private respondent Seaboard, as insurer, paid the losses For its part, private respondent Seaboard argues that
to IFTI. the payment made by the tortfeasor did not relieve it of
liability because at the time of payment, its (Seaboard’s)
On February 23, 1995, Seaboard, invoking its right of
suit against petitioners was already ongoing. It also
subrogation, filed a complaint against Skylanders,
insists that because the assailed order was interlocutory,
petitioner and its authorized representative, petitioner All
it was not a proper subject for certiorari.9
Transport Network, Inc. (ATN), praying for actual
damages in the amount of ₱612,904.97 plus legal Private respondent Skylanders likewise contends that the
interest, attorney’s fees and cost of suit. Petitioners order denying dismissal cannot be the subject of
impleaded Korean Airlines (KAL) as third-party certiorari in the absence of grave abuse of discretion. It
defendant. also defends the trial court’s order granting a preliminary
hearing, saying that, assuming the trial court had
While the case was pending, IFTI’s treasurer, Mary
erroneously granted such a hearing, such error was
Eileen Gozon accepted the proposal of KAL to settle
merely one of judgment and not of jurisdiction as to
consignee’s claim by paying the amount of US $522.20.
merit certiorari.10
On May 8, 1996, Felipe Acebedo, IFTI’s representative
received a check from KAL and correspondingly signed a The petition has no merit.
release form.
It is true that the doctrine in Manila Mahogany
Manufacturing Corporation v. Court of Appeals11 remains
the controlling doctrine on the issue of whether the
tortfeasor, by settling with the insured, defeats the right
to subrogation of the insurer. According to Manila
Mahogany:
the refusal to allow the most efficient and expeditious
process which we condemned.
In the instant case, we are not convinced that public
respondents’ act of allowing a preliminary hearing
constituted grave abuse of discretion.

Since the insurer can be subrogated to only such rights
as the insured may have, should the insured, after
receiving payment from the insurer, release the
wrongdoer who caused the loss, the insurer loses his
rights against the latter. But in such a case, the insurer
will be entitled to recover from the insured whatever it
has paid to the latter, unless the release was made with
the consent of the insurer.
This is buttressed by a later decision, Pan Malayan
Insurance Corporation v. Court of Appeals,12 in which we
cited a number of exceptions to the rule laid down in
Article 2207 of the Civil Code.13 Under the first of these
exceptions, "if the assured by his own act releases the
wrongdoer or third party liable for the loss or damage
from liability, the insurer’s right of subrogation is
defeated."
However, certain factual differences pointed out by
private respondent Seaboard render this doctrine
inapplicable. In Manila Mahogany, the tortfeasor San
Miguel Corporation paid the insured without knowing
that the insurer had already made such payment. KAL
was not similarly situated, being fully aware of the prior
payment made by the insurer to the consignee. Private
respondent Seaboard asserts that, being in bad faith,
KAL should bear the consequences of its actions. 14
While Manila Mahogany is silent on whether the
existence of good faith or bad faith on the tortfeasor’s
part affects the insurer’s right of subrogation, there
exists a wealth of U.S. jurisprudence holding that
whenever the wrongdoer settles with the insured
without the consent of the insurer and with knowledge
of the insurer’s payment and right of subrogation, such
right is not defeated by the settlement. 15 Because this
doctrine is actually consistent with the facts
of Mahogany and helps fill a slight gap left by our ruling
in that case, we adopt it now. The trial court correctly
refused to dismiss the case. In that respect, therefore,
the trial court did not commit grave abuse of discretion
which would justify certiorari.
In Land Bank of the Philippines v. the Court of
Appeals17 we discussed the meaning of "grave abuse of
discretion:"
Grave abuse of discretion implies such capricious and
whimsical exercise of judgment as is equivalent to lack
of jurisdiction or, in other words, where the power is
exercised in an arbitrary manner by reason of passion,
prejudice, or personal hostility, and it must be so patent
or gross as to amount to an evasion of a positive duty or
to a virtual refusal to perform the duty enjoined or to act
at all in contemplation of law.
The special civil action for certiorari is a remedy
designed for the correction of errors of
jurisdiction and not errors of judgment. The raison
d’etre for the rule is when a court exercises its
jurisdiction, an error committed while so engaged does
not deprive it of the jurisdiction being exercised when
the error is committed. If it did, every error committed
by a court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. In such
a scenario, the administration of justice would not
survive. Hence, where the issue or question
involved affects the wisdom or legal soundness of
the decision—not the jurisdiction of the court to
render said decision—the same is beyond the
province of a special civil action for certiorari.
(emphasis supplied)
Public respondent’s order granting the preliminary
hearing does not at all fit the description above. At
worst, it was an error in judgment which is beyond the
domain of certiorari.
WHEREFORE, in view of the foregoing, the petition is
hereby DENIED. The decision and resolution of the
Court of Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.

We likewise find that no grave abuse of discretion was

committed by public respondent when it granted private
respondent Skylanders’ motion for a preliminary hearing.

In California and Hawaiian Sugar Company v. Pioneer

Insurance and Surety Corporation, 16 we held that a
preliminary hearing was not mandatory but was rather
subject to the discretion of the trial court. We found in
that instance that the trial court had committed grave
abuse of discretion in refusing the party’s motion for a
preliminary hearing on the ground that the case was
premature, not having been submitted for arbitration. A
preliminary hearing could have settled the entire case,
thereby helping decongest the dockets. It was therefore
Subrogation is the substitution of one person in
the place of another with reference to a lawful
claim or right, so that he who is substituted
succeeds to the rights of the other in relation to a
debt or claim, including its remedies or securities.
G.R. No. 179446               January 10, 2011
LOADMASTERS CUSTOMS SERVICES,
INC., Petitioner,  for the loss of the subject cargo. It claimed that it had
vs.
GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45
of the Revised Rules of Court assailing the August 24,
2007 Decision1 of the Court of Appeals (CA) in CA-G.R.
CV No. 82822, entitled " R&B Insurance Corporation v.
Glodel Brokerage Corporation and Loadmasters Customs
Services, Inc.," which held petitioner Loadmasters
Customs Services, Inc. (Loadmasters) liable to
respondent Glodel Brokerage Corporation (Glodel) in the
amount of ₱1,896,789.62 representing the insurance
indemnity which R&B Insurance Corporation (R&B
Insurance)  paid to the insured-consignee, Columbia
Wire and Cable Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy
No. MN-00105/2001 in favor of Columbia to insure the
shipment of 132 bundles of electric copper cathodes
against All Risks. On August 28, 2001, the cargoes were
shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on
the same date.
Columbia engaged the services of Glodel for the release
and withdrawal of the cargoes from the pier and the
subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of
its delivery trucks to transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks
owned by Loadmasters, driven by its employed drivers
and accompanied by its employed truck helpers. Six (6)
truckloads of copper cathodes were to be delivered to
Balagtas, Bulacan, while the other six (6) truckloads
were destined for Lawang Bato, Valenzuela City. The
cargoes in six truckloads for Lawang Bato were duly
delivered in Columbia’s warehouses there. Of the six (6)
trucks en route to Balagtas, Bulacan, however, only five
(5) reached the destination. One (1) truck, loaded with
11 bundles or 232 pieces of copper cathodes, failed to
deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-
117, was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B
Insurance a claim for insurance indemnity in the amount
of ₱1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount
of ₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for
damages against both Loadmasters and Glodel before
the Regional Trial Court, Branch 14, Manila ( RTC),
docketed as Civil Case No. 02-103040. It sought
reimbursement of the amount it had paid to Columbia
been subrogated "to the right of the consignee to
recover from the party/parties who may be held legally
liable for the loss."2
On November 19, 2003, the RTC rendered a
decision3 holding Glodel liable for damages for the loss
of the subject cargo and dismissing Loadmasters’
counterclaim for damages and attorney’s fees against
R&B Insurance. The dispositive portion of the decision
reads:
WHEREFORE, all premises considered, the plaintiff
having established by preponderance of evidence its
claims against defendant Glodel Brokerage Corporation,
judgment is hereby rendered ordering the latter:
1. To pay plaintiff R&B Insurance Corporation the sum of
₱1,896,789.62 as actual and compensatory damages,
with interest from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the
amount equivalent to 10% of the principal amount
recovered as and for attorney’s fees plus ₱1,500.00 per
appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the sum of
₱22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs
Services, Inc.’s counterclaim for damages and attorney’s
fees against plaintiff are hereby dismissed.
With costs against defendant Glodel Brokerage
Corporation.
SO ORDERED.4
Both R&B Insurance and Glodel appealed the RTC
decision to the CA.
On August 24, 2007, the CA rendered the assailed
decision which reads in part:
Considering that appellee is an agent of appellant
Glodel, whatever liability the latter owes to appellant
R&B Insurance Corporation as insurance indemnity must
likewise be the amount it shall be paid by appellee
Loadmasters.
WHEREFORE, the foregoing considered, the appeal is
PARTLY GRANTED in that the appellee Loadmasters is
likewise held liable to appellant Glodel in the amount of
₱1,896,789.62 representing the insurance indemnity
appellant Glodel has been held liable to appellant R&B
Insurance Corporation.
Appellant Glodel’s appeal to absolve it from any liability
is herein DISMISSED.
SO ORDERED.5
Hence, Loadmasters filed the present petition for review
on certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to
Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a cross-claim
against it (Loadmasters)?
2. Under the set of facts established and
undisputed in the case, can petitioner
Loadmasters be legally considered as an Agent of
respondent Glodel?6
To totally exculpate itself from responsibility for the lost
goods, Loadmasters argues that it cannot be considered
an agent of Glodel because it never represented the
latter in its dealings with the consignee. At any rate, it
further contends that Glodel has no recourse against it
for its (Glodel’s) failure to file a cross-claim pursuant to
Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,7 counters that Loadmasters is
liable to it under its cross-claim because the latter was
grossly negligent in the transportation of the subject
cargo. With respect to Loadmasters’ claim that it is
already estopped from filing a cross-claim, Glodel insists
that it can still do so even for the first time on appeal
because there is no rule that provides otherwise. Finally,
Glodel argues that its relationship with Loadmasters is
that of Charter wherein the transporter (Loadmasters) is
only hired for the specific job of delivering the
merchandise. Thus, the diligence required in this case is
merely ordinary diligence or that of a good father of the
family, not the extraordinary diligence required of
common carriers.
R&B Insurance, for its part, claims that Glodel is deemed
to have interposed a cross-claim against Loadmasters
because it was not prevented from presenting evidence
to prove its position even without amending its Answer.
As to the relationship between Loadmasters and Glodel,
it contends that a contract of agency existed between
the two corporations.8
Subrogation is the substitution of one person in the
place of another with reference to a lawful claim or
right, so that he who is substituted succeeds to the
rights of the other in relation to a debt or claim,
including its remedies or securities. 9 Doubtless, R&B
Insurance is subrogated to the rights of the insured to
the extent of the amount it paid the consignee under the
marine insurance, as provided under Article 2207 of the
Civil Code, which reads:
ART. 2207. If the plaintiff’s 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 wrong-doer 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.
As subrogee of the rights and interest of the consignee,
R&B Insurance has the right to seek reimbursement
from either Loadmasters or Glodel or both for breach of
contract and/or tort.
The issue now is who, between Glodel and Loadmasters,
is liable to pay R&B Insurance for the amount of the
indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether
Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo.
Under Article 1732 of the Civil Code, common carriers
are persons, corporations, firms, or associations
engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for
compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a
common carrier because it is engaged in the business of
transporting goods by land, through its trucking service.
It is a common carrier as distinguished from a private
carrier wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to carry
goods for the general public.10 The distinction is
significant in the sense that "the rights and obligations
of the parties to a contract of private carriage are
governed principally by their stipulations, not by the law
on common carriers."11
In the present case, there is no indication that the
undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing
that Loadmasters solely and exclusively rendered
services to Glodel.
In fact, Loadmasters admitted that it is a common
carrier.12
In the same vein, Glodel is also considered a common
carrier within the context of Article 1732. In its
Memorandum,13 it states that it "is a corporation duly
organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of
customs brokering." It cannot be considered otherwise
because as held by this Court in Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc., 14 a
customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers,
are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that
extreme measure of care and caution which persons of
unusual prudence and circumspection observe for
securing and preserving their own property or
rights.15 This exacting standard imposed on common
carriers in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at the mercy
of the common carrier once the goods have been lodged
for shipment.16 Thus, in case of loss of the goods, the
common carrier is presumed to have been at fault or to
have acted negligently.17 This presumption of fault or
negligence, however, may be rebutted by proof that the
common carrier has observed extraordinary diligence
over the goods.
With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise
of extraordinary diligence lasts from the time the goods
are unconditionally placed in the possession of, and
received by, the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to
receive them.18
Premises considered, the Court is of the view that both
Loadmasters and Glodel are jointly and severally liable
to R & B Insurance for the loss of the subject cargo.
Under Article 2194 of the New Civil Code, "the
responsibility of two or more persons who are liable for
a quasi-delict is solidary."
Loadmasters’ claim that it was never privy to the
contract entered into by Glodel with the consignee
Columbia or R&B Insurance as subrogee, is not a valid
defense. It may not have a direct contractual relation
with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-
delicts which expressly provide:
ART. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
Pertinent is the ruling enunciated in the case
of Mindanao Terminal and Brokerage Service, Inc. v.
Phoenix Assurance Company of New York,/McGee & Co.,
Inc.19  where this Court held that a tort may arise despite
the absence of a contractual relationship,  to wit:
We agree with the Court of Appeals that the complaint
filed by Phoenix and McGee against Mindanao Terminal,
from which the present case has arisen, states a cause
of action. The present action is based on quasi-delict,
arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce.
Even assuming that both Phoenix and McGee have only
been subrogated in the rights of Del Monte Produce,
who is not a party to the contract of service between
Mindanao Terminal and Del Monte, still the insurance
carriers may have a cause of action in light of the
Court’s consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort
may arise even under a contract, where tort is that
which breaches the contract. In the present case,
Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of
service but from the alleged negligent manner by
which Mindanao Terminal handled the cargoes belonging
to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the
part of the defendant should be sufficient to establish a
cause of action arising from quasi-delict. [Emphases
supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is
demandable not only for one’s own acts or omissions,
but also for those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages caused by
their employees and household helpers acting within the
scope of their assigned tasks, even though the former
are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in
the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or
robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by
its employees who acted within the scope of their
assigned task of delivering the goods safely to the
warehouse.
Whenever an employee’s negligence causes damage or
injury to another, there instantly arises a presumption
juris tantum that the employer failed to exercise
diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its
employees.20 To avoid liability for a quasi-delict
committed by its employee, an employer must overcome
the presumption by presenting convincing proof that he
exercised the care and diligence of a good father of a
family in the selection and supervision of his
employee.21 In this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to
safely transport the subject cargo to the designated
destination. It should have been more prudent in
entrusting the goods to Loadmasters by taking
precautionary measures, such as providing escorts to
accompany the trucks in delivering the cargoes. Glodel
should, therefore, be held liable with Loadmasters. Its
defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no
principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article
1868 of the Civil Code provides: "By the contract of
agency a person binds himself to render some service or
to do something in representation or on behalf of
another, with the consent or authority of the latter." The
elements of a contract of agency are: (1) consent,
express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts
within the scope of his authority.22
Accordingly, there can be no contract of agency
between the parties. Loadmasters never represented
Glodel. Neither was it ever authorized to make such
representation. It is a settled rule that the basis for
agency is representation, that is, the agent acts for and
on behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect as
if they were personally executed by the principal. On the
part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his
words or actions, while on the part of the agent, there
must be an intention to accept the appointment and act
on it.23 Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of
Loadmasters and Glodel? Each wrongdoer is liable for
the total damage suffered by R&B Insurance. Where
there are several causes for the resulting damages, a
party is not relieved from liability, even partially. It is
sufficient that the negligence of a party is an efficient
cause without which the damage would not have
resulted. It is no defense to one of the concurrent
tortfeasors that the damage would not have resulted
from his negligence alone, without the negligence or
wrongful acts of the other concurrent tortfeasor. As
stated in the case of Far Eastern Shipping v. Court of
Appeals,24
X x x. Where several causes producing an injury are
concurrent and each is an efficient cause without which
the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons
although under the circumstances of the case, it may
appear that one of them was more culpable, and that
the duty owed by them to the injured person was not
the same. No actor's negligence ceases to be a
proximate cause merely because it does not exceed the
negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though
his acts were the sole cause of the injury.
The Court now resolves the issue of whether Glodel can
collect from Loadmasters, it having failed to file a cross-
claim against the latter.1avvphi1
Undoubtedly, Glodel has a definite cause of action
against Loadmasters for breach of contract of service as
the latter is primarily liable for the loss of the subject
cargo. In this case, however, it cannot succeed in
seeking judicial sanction against Loadmasters because
the records disclose that it did not properly interpose a
cross-claim against the latter. Glodel did not even pray
that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B Insurance.
Under the Rules, a compulsory counterclaim, or a cross-
claim, not set up shall be barred .25Thus, a cross-claim
cannot be set up for the first time on appeal.
For the consequence, Glodel has no one to blame but
itself. The Court cannot come to its aid on equitable
grounds. "Equity, which has been aptly described as ‘a
justice outside legality,’ is applied only in the absence of,
and never against, statutory law or judicial rules of
procedure."26 The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED.
The August 24, 2007 Decision of the Court of Appeals
is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring
petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and
severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to
consignee Columbia Wire & Cable Corporation and
ordering both parties to pay, jointly and severally, R&B
Insurance Corporation a] the amount of ₱1,896,789.62
representing the insurance indemnity; b] the amount
equivalent to ten (10%) percent thereof for attorney’s
fees; and c] the amount of ₱22,427.18 for litigation
expenses.
The cross-claim belatedly prayed for by respondent
Glodel Brokerage Corporation against petitioner
Loadmasters Customs Services, Inc. is DENIED.
SO ORDERED.

There is no contribution between joint tortfeasors whose

liability is solidary since both of them are liable for the
total damage. Where the concurrent or successive
negligent acts or omissions of two or more persons,
although acting independently, are in combination the
direct and proximate cause of a single injury to a third
person, it is impossible to determine in what proportion
each contributed to the injury and either of them is
responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a
third party, they become joint tortfeasors and are
solidarily liable for the resulting damage under Article
2194 of the Civil Code. [Emphasis supplied]