Lagman vs. Manila (GR L-23305, 30 June 1966)
En Banc, Reyes JBL (J): 8 concur

Facts: Benedicto Lagman (Marco Transit) was granted a certificate of public convenience by the Public Service Commission (by a decision, dated 20 March 1963, in PSC Case 61-7383) to operate for public service 15 auto trucks with fixed routes and regular terminal for the transportation of passengers and freight, on the line Bocaue (Bulacan) — Parañaque (Rizal) via Meycauayan, Marilao, Obando, Polo, Malabon, Rizal), Grace Park, Rizal Avenue, Recto Avenue, Sta. Cruz Bridge, Taft Avenue, Libertad, Pasay City and Baclaran, and vice versa. Within Manila, the line passes thru Rizal Avenue, Plaza Goiti, McArthur Bridge, Plaza Lawton, P. Burgos, Taft Avenue and Taft Avenue Extension. Pursuant to said certificate, petitioner, who is doing business under the firm name and style of “Marco Transit”, began operating 12 passenger buses along his authorized line. On 17 June 1964, the Municipal Board of the City of Manila, in pursuance to Section 18, paragraph hh, of RA 409, as amended (otherwise known as the Revised Charter of the City of Manila) enacted Ordinance 4986, entitled “An Ordinance Rerouting Traffic On Roads and Streets Within The City of manila, and For Other Purposes”, which the City Mayor approved, on 13 July 1964, effective upon approval thereof. On 17 August 1964, the Mayor of City of Manila, through its police agencies, began actual enforcement of said ordinance and prevented petitioner from operating his buses, except 2 “shuttle” buses, along the line specified in his certificate of public convenience.

Lagman originally filed, on 6 August 1964, with the Supreme Court a petition for declaratory relief seeking a declaration of his rights under the so-called “provincial bus ban” ordinance of the City of Manila, with prayer for writs of preliminary and permanent injunctions to restrain and enjoin said city, its officers and/or agents, from enforcing and implementing said ordinance. At first, the Supreme Court, in its resolution dated 11 August 1964, dismissed said petition without prejudice to action, if any, in the lower court; but, upon Lagman’s motion for reconsideration and supplemental petition to convert said petition without prejudice to action, if any, in the lower court; but, upon Lagman’s motion for reconsideration and supplemental petition to convert said petition into one for prohibition, on the ground, among others, that respondents have been actually enforcing said ordinance effective 17 August 1964, the Supreme Court did not, however, issue the writ of preliminary injunction prayed for.

The Supreme Court dismissed the instant petition for prohibition; with cost against Lagman.

1. Section 18 (hh), RA 409
Section 18 (hh) of the Revised Charter of the City of Manila provides that “the Municipal board shall have the following legislative powers: (hh) To establish and regulate the size, speed, and operation of motor and other public vehicles within the city; to establish bus stops and terminals; and prohibit and regulate the entrance of provincial utility vehicles into the city, except those passing thru the city.”

2. Section 1, Ordinance 4986
Section 1 of Ordinance 4986 provides that “as a positive measure to relieve the critical traffic congestion in the City of Manila, which has grown to alarming and emergency proportions, and in the best interest of public welfare and convenience, the following traffic rules and regulations are hereby promulgated:

Maceda vs. ERB (GR 95203-05, 18 December 1990)
Lozano vs. ERB (GR 95119-21)
En Banc, Sarmiento (J): 8 concur, 3 took no part, 1 on leave

Facts: On 10 September 1990, Caltex (Philippines), Inc., Pilipinas Shell Petroleum Corporation, and Petron Corporation proferred separate applications with the Board for permission to increase the wholesale posted prices of petroleum products, at P3.2697 per liter,     2.0338 per liter, and 2.00 per liter, respectively; and meanwhile, for provisional authority to increase temporarily such wholesale posted prices pending further proceedings.  On 21 September 1990, the Board, in a joint (on three applications) Order granted provisional relief, authorizing the applicants to a weighted average provisional increase of P1.42 per liter in the wholesale posted prices of their various petroleum products enumerated below, refined and/or marketed by them locally. Senator Ernesto Maceda and Oliver O. Lozano submit that the above Order had been issued with grave abuse of discretion, tantamount to lack of jurisdiction, and correctible by certiorari.

Senator Ernesto Maceda, submits that the same was issued without proper notice and hearing in violation of Section 3, paragraph (e), of Executive Order No. 172; that the Board, in decreeing an increase, had created a new source for the Oil Price Stabilization Fund (OPSF), or otherwise that it had levied a tax, a power vested in the legislature, and/or that it had “re-collected”, by an act of taxation, ad valorem taxes on oil which RA 6965 had abolished. Atty. Oliver Lozano, likewise argues that the Board’s Order was issued without notice and hearing, and hence, without due process of law. The intervenor, the Trade Union of the Philippines and Allied Services (TUPAS/FSM)-W.F.T.U., argues on the other hand, that the increase can not be allowed since the oil companies had not exhausted their existing oil stock which they had bought at old prices and that they can not be allowed to charge new rates for stock purchased at such lower rates.

The Supreme Court dismissed the petitions; no costs.

1.    Section 8 of Executive Order 172
Section 8 (Authority to Grant Provisional Relief) of Executive Order No. 172 provides that “the Board may, upon the filing of an application, petition or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative, without prejudice to a final decision after hearing, should the Board find that the pleadings, together with such affidavits, documents and other evidence which may be submitted in support of the motion, substantially support the provisional order: Provided, That the Board shall immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.” Herein Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, have overlooked the provisions of the above provision. As the Order itself indicates, the authority for provisional increase falls within the above provision.

2.    Section 3 (e) of Executive Order 172 is not the applicable provision
Section 3, paragraph (e) of Executive Order 172 provides that “whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund created under Presidential Decree No. 1956 by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board, which will enable the importer to recover its cost of importation.”

3.    Ex parte order for provisional increase allowed
While under Executive Order 172, a hearing is indispensable, it does not preclude the Board from ordering, ex parte, a provisional increase, as it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny the application. Section 37 paragraph (e) is akin to a temporary restraining order or a writ of preliminary attachment issued by the courts, which are given ex parte, and which are subject to the resolution of the main case.

4.    Provisions do not negate each other nor operate exclusively of the other
Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate exclusively of the other, in that the Board may resort to one but not to both at the same time. Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may decree a price adjustment, subject to the requirements of notice and hearing. Pending that, however, it may order, under Section 8, an authority to increase provisionally, without need of a hearing, subject to the final outcome of the proceeding. The Board, of course, is not prevented from conducting a hearing on the grant of provisional authority — which is of course, the better procedure — however, it can not be stigmatized later if it failed to conduct one.

5.    Citizens’ Alliance for Consumer Protection v. Energy Regulatory Board
In the light of Section 8, the Board need not even have conducted formal hearings in these cases prior to the granting of a provisional increase of prices. The Board, upon its own discretion and on the basis of documents and evidence submitted, could have issued an order granting provisional relief immediately upon filing of the applications. In this respect, the Court considers the evidence in support of the applications — i.e., evidence showing that importation costs of petroleum products had gone up; that the peso had depreciated in value; and that the Oil Price Stabilization Fund (OPSF) had by then been depleted — as substantial and hence constitutive of at least prima facie basis for issuance by the Board of a provisional relief order granting an increase in the prices of petroleum products.

6.    Applications may be contested in the hearings proper
The challenged action of the Board has not been done in violation of the due process clause. However, Senator Maceda and Atty. Lozano may contest the applications at the hearings proper.

7.    RA 6965 not an insurance against “oil hike”
Republic Act 6965 operated to lower taxes on petroleum and petroleum products by imposing specific taxes rather than ad valorem taxes thereon; it is, not, however, an insurance against an “oil hike”, whenever warranted, or is it a price control mechanism on petroleum and petroleum products. The statute had possibly forestalled a larger hike, but it operated no more.

8.    Proceeds deposited to OPSF not an act of taxation
The Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act of taxation. It is authorized by Presidential Decree 1956, as amended by Executive Order 137.

9.    Section 8 of PD 1956, as amended by EO 137
Section 8 provides that “there is hereby created a Trust Account in the books of accounts of the Ministry of Energy to be designated as Oil Price Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum products. The Oil Price Stabilization Fund (OPSF) may be sourced from any of the following: (a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; (b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy; (c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment by persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; (d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rates as fixed by the Board of Energy.

10.    Events taken judicial notice of
The increase was not prompted alone by the increase in world oil prices arising from tension in the Persian Gulf. What the Court gathers from the pleadings as well as events of which it takes judicial notice, is that: (1) as of 30 June 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3) the country’s balance of payments is expected to reach $1 Billion; (4) our trade deficit is at $2.855 Billion as of the first nine months of the year. Evidently, authorities have been unable to collect enough taxes necessary to replenish the OPSF as provided by PD 1956, and hence, there was no available alternative but to hike existing prices.

11.    Purpose of the OPSF
The OPSF must not be understood to be a funding designed to guarantee oil firms’ profits although as a subsidy, or a trust account, the Court has no doubt that oil firms make money from it. The OPSF was established precisely to protect the consuming public from the erratic movement of oil prices and to preclude oil companies from taking advantage of fluctuations occurring every so often. As a buffer mechanism, it stabilizes domestic prices by bringing about a uniform rate rather than leaving pricing to the caprices of the market.

12.    Oil hike permanent; Findings for provisional increase however are not final
In all likelihood, an oil hike would have probably been imminent, with or without trouble in the Gulf, although trouble would have probably aggravated it.  The Court is not to be understood as having prejudged the justness of an oil price increase amid the above premises. What the Court is saying is that it thinks that based thereon, the Government has made out a prima facie case to justify the provisional increase in question. Let the Court therefore make clear that these findings are not final; the burden, however, is on the petitioners’ shoulders to demonstrate the fact that the present economic picture does not warrant a permanent increase.

13.    Wisdom on the increase in oil prices a political question
The increase in oil prices in question (not to mention another one impending, which the Court understands has been under consideration by policy-makers) spells hard(er) times for the Filipino people. The Court can not, however, debate the wisdom of policy or the logic behind it (unless it is otherwise arbitrary), not because the Court agrees with policy, but because the Court is not the suitable forum for debate. It is a question best judged by the political leadership which after all, determines policy, and ultimately, by the electorate, that stands to be better for it or worse off, either in the short or long run. The Court shares the indignation of the people over the conspiracy of events and regrets its own powerlessness, if by this Decision it has been powerless. The constitutional scheme of things has simply left it with no choice.

Philippine Global Communications vs. Relova (GR L-52819, 2 October 1980)
Second Division, Fernando (CJ): 5 concur, 1 on leave

Facts: Petitioner Philippine Global Communications filed on 10 May 1976 with the Board of Telecommunications an application for authority to establish a branch or station in Cebu City “for the purpose of rendering international telecommunications services from Cebu City to any point outside the Philippines where it is authorized to operated.” The Solicitor General, and the private respondents Philippine Telegraph and Telephone Corp., Capitol Wireless, and Radio Communications of the Philippines, Inc. opposed such application. Thereafter, on 9 March 1979, the Board of Communications rendered a decision, recognizing the right of petitioners under its legislative franchise to establish branches or stations anywhere in the Philippines, subject to its prior approval. A joint motion for reconsideration, dated 14 June 1979, came from private respondents, followed as could be expected by an opposition from petitioner. In a reply to such opposition, private respondents put in issue the jurisdiction of the Board of Communications, now the National Telecommunications Commission, to act on such application. Such motion is still pending.

On 27 August 1979, private respondents filed before Judge Benjamin Relova an action for declaratory judgment to ascertain the scope and coverage of the legislative franchise of petitioner; it was ratified to Branch XI, presided by respondent Judge. Hence, the certiorari and prohibition proceedings.

The Supreme Court dismissed the petition for certiorari, and set aside the restraining order issued on 6 March 1980; no pronouncement as to costs.

1.    Right to establish branch or station debatable
From the very legislative franchise of Philippine Global Communications, Inc. the right to establish a branch or station in Cebu City “for the purpose of rendering international telecommunications services” from such city to any point outside the Philippines is say the least, debatable. The matter is far from clear, as its franchise does not, in express terms, grant it.

2.    Position of the private respondents
Since Section 1 of Republic Act No. 4617; [the franchise in question] limits ingress and egress of Philippine Global messages or signals only thru a ‘Sole Gateway’ (Manila) or only thru ‘[any point]’ or single location in the Philippines, therefore: a.) Philippine Global cannot establish branches or distribution systems (direct connections to end-users) at any other point or locality within the country for the purpose of transmitting and receiving messages between the gateway (Manila) and these branches or stations located say, at Cebu or Davao. For that is to constitute domestic service within the context of its franchise; b.) Philippine Global cannot even establish distribution systems in Manila other than its main office or gateway to transmit and receive messages to or from the end users destined for external transmission; this phase of operation (between the main office at gateway to the distribution system or individual equipment installed in the end-users’ offices in Manila) being ‘domestic service’; c.) Assuming arguendo, that Philippine Global shall not charge any additional fee for the extra service mentioned does not detract from the fact that the same still constitutes ‘domestic service’ since they are rendered from one point in the Philippines to another point within the same country.”

3.    Legal question appropriate to judiciary
Fidelity to the basic concept of exhausting administrative remedies calls for the equally fundamental principle of primary jurisdiction to be respected. The doctrine of primary jurisdiction calls for application when there is such competence to act on the part of an administrative body. Petitioner, however, could not dissipate the well founded doubt as to whether its legislative franchise justifies its plea to establish the branch or station in question. Absent such clarity as to the scope and coverage of its franchise, a legal question arises which is more appropriate for the judiciary than for an administrative agency to resolve. There is merit, therefore, to the approach to seek judicial remedy as to whether or not the legislative franchise could be so interpreted as to enable the National Telecommunications Commission to act on the matter. A jurisdictional question thus arises and calls for an answer.

4.    Requisite for the filing of a petition for certiorari; Panalgan vs. Adolfo
For certiorari to be available, as set forth in Panaligan v. Adolfo, requires a showing of “a capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil law and common law traditions.”

5.    Reliance on doctrine of ripeness for judicial review not always attended with success; Arrow Transport vs. BOT
Reliance on the doctrine of ripeness for judicial review is not always attended with success. Precisely, in Arrow Transportation Corp. v. Board of Transportation, the mere fact that at the time the case was elevated to the Supreme Court, a motion for reconsideration was still pending with respondent Board did not suffice to preclude a ruling on the decisive question raised.

6.    Kenneth Culp Davis on Administrative Law
A noted authority on Administrative Law, Professor Kenneth Culp Davis, was referred to as being “of the view that the resolution of what could be a debilitating uncertainty with the conceded ability of the judiciary to work out a solution of the problem posed is a potent argument for minimizing the emphasis laid on its technical aspect.”

7.    Jurisdiction issue; Radio Communications vs. Santiago
An excerpt from Radio Communications of the Philippines, Inc. v. Santiago, is even more persuasive as to why the stage has been reached for the judiciary to act considering that the question raised is one of jurisdiction. Thus: “Except for constitutional officials who can trace their competence to act to the fundamental law itself, a public official must locate in the statute relied upon a grant of power before he can exercise it. It need not be express. It may be implied from the wording of the law. Absent such a requisite, however, no warrant exists for the assumption of authority. The act performed, if properly challenged, cannot meet the test of validity. It must be set aside. So it must be in these two petitions. That is to defer to a principle reiterated by this Court time and time again.”

Mayer Steel Pipe vs. CA (GR 124050, 19 June 1997)
Second Division, Puno (J): 4 concur

Facts: In 1983, Hongkong Government Supplies Department (Hongkong) contracted Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October 1983, Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022. Prior to the shipping, Mayer insured the pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with South Sea, while those covered by Invoice 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with Charter. Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. Hongkong and Mayer filed a claim against Sourth Sea and Charter for indemnity under the insurance contract. Charter paid Hongkong the amount of HK$64,904.75. Hongkong and Mayer demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. South Sea and Charter refused to pay because the insurance surveyor’s report allegedly showed that the damage is a factory defect.

On 17 April 1986, Hongkong and Mayer filed an action against South Sea and Charter to recover the sum of HK$299,345.30. The trial court ruled in favor of the former. It found that the damage to the goods is not due to manufacturing defects. It also noted that the insurance contracts executed by Mayer with South Sea and Charter are “all risks” policies which insure against all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured. Thus, the court ordered South Sea and Charter to pay in solidum the sum equivalent in Philippine currency of HK$299,345.30 with legal rate of interest as of the filing of the complaint; P100,000.00 as and for attorney’s fees; and costs of suit.

South Sea and Charter elevated the case to the Court of Appeals. The appellate court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the “all risks” insurance policies issued by South Sea and Charter to Mayer. However, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. Hence, the petition for review on certiorari filed by Mayer and Hongkong.

The Supreme Court granted the petition, set aside the 14 December 1995 decision and the 22 February 1996 resolution of the Court of Appeals, and reinstated the decision of the RTC; without costs.

1. Section 3 (6) of COGSA
Section 3(6) of the Carriage of Goods by Sea Act provides that “the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.”

2. Section 3 (6) of COGSA applies to carriers and not to insurers; Insurers covered by Insurance Code
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code.

3. Filipino Merchants Insurance Co. vs. Alejandro different from case at bar
The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper’s claim is the “all risks” insurance policies issued by South Sea and Charter to Mayer.

4. Proper application of ruling in Filipino Merchants
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer’s liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril.

5. Nature of an “all risks” insurance policy; Prescription as per Article 1144 NCC
An “all risks” insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Herein, South Sea and Charter issued the “all risks” policies to Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

The American Insurance Co. vs. Compania Maritima (GR L-24515, 18 November 1967)
En Banc, Makalintal (J): 9 concur

Facts: On 11 August 1962, a certain cargo insured with the American Insurance Company (AIC) was shipped in New York, USA aboard “M/S TOREADOR”, of which the general agent in the Philippines is Macondray & Co. Inc.. The cargo, with an invoice value of $3,539.61 CIF Cebu, was consigned to the order of the importer Atlas Consolidated Mining and Development Corporation. Inasmuch as the final port of call of the “M/S TOREADOR” was Manila, the carrier, in accepting the cargo at the point of shipment, agreed to transship the same, after its discharge in Manila, aboard an inter-island vessel to its destination in Cebu. On 18 September 1962 the “M/S TOREADOR” arrived at the port of Manila and on the same date discharged the cargo in question. Pursuant to the arrangement the cargo was subsequently loaded aboard the “SS SIQUIJOR, an inter-island vessel. The shipment was finally discharged in Cebu on 24 September 1962. When the consignee took delivery of the shipment it was found to be short of 2 pieces of tractor parts worth $2,834.88, or P11,063.12 at the exchange rate of P3.9025. AIC paid the insured value of the lost merchandise to the consignee. To recover the said sum of P11,063.12, AIC, as subrogee of the consignee’s rights, filed on 24 September 1963 a complaint against the Compañia Maritima and the Visayan Cebu Terminal Co., Inc. as alternative defendants. The former was sued as operator and owner of “SS SIQUIJOR” and the latter as operator of the arrastre service at the port of Cebu, charged with the care and custody of all cargo discharged there. In view of Maritima’s allegation in its answer that the lost merchandise had not actually been delivered to it, AIC filed on 6 November 1964 a motion to admit its amended complaint impleading Macondray and Luzon Brokerage Corporation as additional defendants and eliminating the Visayan Cebu Terminal Co., Inc.  The amended complaint was admitted on 14 November 1964. On 23 December 1964 Macondray moved to dismiss the amended complaint against it on the ground that AIC’s action had already prescribed under the provisions of the Carriage of Goods by Sea Act. The motion to dismiss was granted and AIC interposed the present appeal from the order of dismissal.

The Supreme Court affirmed the order affirmed from, with costs.

1.    Section 3 (6), COGSA
The provision provides “In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods shall have been delivered.”

2.    Action based on the contract of carriage up to final port of destination
The action is based on the contract of carriage up to the final port of destination, which was Cebu City, for which the corresponding freight had been prepaid (Bill of Lading No. 13).  The use of the term “forwarding agent of the shipper” (Clause 11 of the bill of lading) is not decisive of the issue.

3.    Provisions of bill of lading evidencing nature of contract of carriage
The following provisions of the bill of lading are the ones directly in point: (1) “This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States of America. approved April 16, 1936, which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. The provisions stated in said Act (except as may be otherwise specifically provided herein) shall govern before the goods are loaded on and after they are discharged from the ship and throughout the entire time the goods are in the custody of the carrier. . . “ and “(19) In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.”

4.    Transshipment of cargo not a separate transaction entered into by Macondray; Transaction remains to covered by COGSA
The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the “M/S TOREADOR”. It was part of Macondray’s obligation under the contract of carriage and the fact that the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act. (See Go Chang & Co., Inc. vs. Aboitiz & Co., Inc., 98 Phil. 197).

Tan vs. Northwestern Airlines (GR 135802, 3 March 2000)
First Division, Pardo (J): 4 concur

Facts: On 31 May 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines Flight 29 in Chicago, USA bound for the Philippines, with a stop-over at Detroit, USA. They arrived at the Ninoy Aquino International Airport (NAIA) on 1 June 1994 at about 10:40 p.m. Upon their arrival, Tan and her companion Connie Tan found that their baggages were missing. They returned to the airport in the evening of the following day and they were informed that their baggages might still be in another plane in Tokyo, Japan. On 3 June 1994, they recovered their baggages and discovered that some of its contents were destroyed and soiled.   Claiming that they “suffered mental anguish, sleepless nights and great damage” because of Northwest’s failure to inform them in advance that their baggages would not be loaded on the same flight they boarded and because of their delayed arrival, they demanded from Northwest Airlines compensation for the damages they suffered. On 15 June 1994 and 22 June 1994, Tan sent demand letters to Northwest Airlines, but the latter did not respond. Hence, the filing of the case with the RTC.

After due trial, on 10 June 1996, the trial court rendered decision finding Northwest Airlines, Inc. liable for damages (P15,000 as actual damages, P100,000 as moral damages, P50,000 as exemplary damages, P30,000 as and for attorney’s fees and Costs).

Northwest Airlines, Inc. appealed from the trial court’s decision to the Court of Appeals contending that the court a quo erred in finding it guilty of breach of contract of carriage and of willful misconduct and awarded damages which had no basis in fact or were otherwise excessive. On 30 September 1998, the Court of Appeals promulgated its decision partially granting the appeal by deleting the award of moral and exemplary damages and reducing the attorney’s fees to P10,000; without pronouncement as to costs. Hence, the appeal.

The Supreme Court denied the petition for lack of merit, and affirmed the decision of the Court of Appeals deleting, however, the award of attorney’s fees.

1.    No willful misconduct to allow award of moral and exemplary damages
For willful misconduct to exist there must be a showing that the acts complained of were impelled by an intention to violate the law, or were in persistent disregard of one’s rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct. There was nothing in the conduct of Northwest Airlines which showed that they were motivated by malice or bad faith in loading her baggages on another plane. Due to weight and balance restrictions, as a safety measure, the airline had to transport the baggages on a different flight, but with the same expected date and time of arrival in the Philippines. Northwest Airlines was not guilty of willful misconduct.

2.    No malice; Airline did not act in bad faith
It is admitted that Northwest Airlines failed to deliver Tan’s luggages on time. However, there was no showing of malice in such failure. By its concern for safety, the airline had to ship the baggages in another flight with the same date of arrival.   The Airline did not act in bad faith. Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill-will that partakes of the nature of fraud.”

3.    Liability arising from breach of contract of carriage, without fraud or bad faith, does not include moral and exemplary damages
Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages.

Telefast Communications vs. Castro (GR 73867, 29 February 1988)
Second Division, Padilla (J):  3 concur

Facts: On 2 November 1956, Consolacion Bravo-Castro, wife of Ignacio Castro, Sr. and mother of Sofia Castro-Crouch, Ignacio Castro Jr., Aurora Castro, Salvador Castro, Mario Castro, Conrado Castro, Esmeralda Castro-Floro, Agerico Castro, Rolando Castro, Virgilio Castro and Gloria Castro, passed away in Lingayen, Pangasinan. On the same day, her daughter Sofia C. Crouch, who was then vacationing in the Philippines, addressed a telegram to Ignacio Castro, Sr. at 685 Wanda, Scottsburg, Indiana, USA, 47170 announcing Consolacion’s death. The telegram was accepted by Telefast in its Dagupan office, for transmission, after payment of the required fees or charges. The telegram never reached its addressee. Consolacion was interred with only her daughter Sofia in attendance. Neither the husband nor any of the other children of the deceased, then all residing in the United States, returned for the burial. When Sofia returned to the United States, she discovered that the wire she had caused Telefast to send, had not been received.

The Castros brought action for damages arising from Telefast’s breach of contract. The case was filed in the CFI Pangasinan (Civil Case 15356). The trial court, after trial, ordered Telefast to pay the Castros damages with interest at 6% per annum ([1] Sofia C. Crouch, P31.92 and P16,000.00 as compensatory damages and P20,000.00 as moral damages; [2] Ignacio Castro Sr., P20,000.00 as moral damages; [3] Ignacio Castro Jr., P20,000.00 as moral damages; [4] Aurora Castro, P10,000.00 moral damages; [5] Salvador Castro, P10,000.00 moral damages; [6] Mario Castro, P10,000.00 moral damages; [7] Conrado Castro, P10,000 moral damages; [8] Esmeralda C. Floro, P20,000.00 moral damages; [9] Agerico Castro, P10,000.00 moral damages; [10] Rolando Castro, P10,000.00 moral damages; [11] Virgilio Castro, P10,000.00 moral damages; and [12] Gloria Castro, P10,000.00 moral damages). The Court also ordered Telefast to pay P5,000.00 attorney’s fees, exemplary damages in the amount of P1,000.00 to each of the Castros and costs.

On appeal by Telefast, the Intermediate Appellate Court affirmed the trial court’s decision but eliminated the award of P16,000.00 as compensatory damages to Sofia C. Crouch and the award of Pl,000.00 to each of the Castros as exemplary damages. The award of P20,000.00 as moral damages to each of Sofia C. Crouch, Ignacio Castro, Jr. and Esmeralda C. Floro was also reduced to P10,000.00 for each. Teledast appealed from the judgment of the appellate court, contending that the award of moral damages should be eliminated as Telefast’s negligent act was not motivated by “fraud, malice or recklessness.”

The Supreme Court denied the petition, and modified the decision appealed from so that Telefast was held liable to the Castros in the amounts of (1) P10,000.00 as moral damages, to each of the Castros; (2) P1,000.00 as exemplary damages, to each of the Castros; (3) P16,000.00 as compensatory damages, to Sofia C. Crouch; (4) P5,000.00 as attorney’s fees; and (5) Costs of suit.

1.    Articles 1170 and 2176 of the Civil Code; Telefast liable for damages
Art. 1170 of the Civil Code provides that “those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.” Art. 2176 also provides that “whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done.” Herein, Sofia C. Crouch entered into a contract whereby, for a fee, Telefast undertook to send her message overseas by telegram. This, Telefast did not do, despite performance by Crouch of her obligation by paying the required charges. Telefast was therefore guilty of contravening its obligation to Castro and is thus liable for damages.

2.    Liability not limited to actual or quantified damages
The liability is not limited to actual or quantified damages. To sustain Telefast’s contrary position in this regard would result in an inequitous situation where Telefast will only be held liable for the actual cost of a telegram fixed 30 years ago.

3.    Article 2217 of the Civil Code applicable
Art. 2217 of the Civil Code is applicable to the case. It states: “Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate results of the defendant’s wrongful act or omission.”  Herein, Telefast’s act or omission, which amounted to gross negligence, was precisely the cause of the suffering the Castros had to undergo. No one can seriously dispute the shock, the mental anguish and the sorrow that the overseas children must have suffered upon learning of the death of their mother after she had already been interred, without being given the opportunity to even make a choice on whether they wanted to pay her their last respects. There is no doubt that these emotional sufferings were proximately caused by appellant’s omission and substantive law provides for the justification for the award of moral damages.

4.    Award of compensatory damages justified
The Court sustained the trial court’s award of P16,000.00 as compensatory damages to Crouch representing the expenses she incurred when she came to the Philippines from the United States to testify before the trial court. Had Telefast not been remiss in performing its obligation, there would have been no need for this suit or for Mrs. Crouch’s testimony.

5.    Award of exemplary damages justified
The award of exemplary damages by the trial court is likewise justified and, therefore, sustained in the amount of P1,000.00 for each of the Castros, as a warning to all telegram companies to observe due diligence in transmitting the messages of their customers.

Keng Hua Paper Products vs. CA (GR 116863, 12 February 1998)
First Division, Panganiban (J): 4 concur

Facts: Sea-Land Service, a shipping company, is a foreign corporation licensed to do business in the Philippines. On 29 June 1982, SeaLand received at its Hong Kong terminal a sealed container, Container SEAU 67523, containing 76 bales of “unsorted waste paper” for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued by Sea-Land. On 9 July 1982, the  shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to Keng Hua but the latter failed to discharge the shipment from the container during the “free time” period or grace period. The said shipment remained inside the Sea-Land’s container from the moment the free time period expired on 29 July 1982 until the time when the shipment was unloaded from the container on 22 November 1983, or a total of 481 days. During the 481-day period, demurrage charges accrued. Within the same period, letters demanding payment were sent by Sea-Land to Keng Hua who, however, refused to settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on Keng Hua but the obligation remained unpaid.

Sea Land  thereafter commenced the civil action for collection and damages. The RTC found Keng Hua liable for demurrage, attorney’s fees and expenses of litigation.

Keng Hua appealed to the Court of Appeals, which denied the appeal and affirmed the lower court’s decision in toto. In a subsequent resolution, it also denied Keng Hua’s motion for reconsideration.  Hence, the petition for review.

The Supreme Court affirmed the assailed Decision with the modification that the legal interest of 6% per annum shall be computed from 28 September 1990 until its full payment before finality of judgment. The rate of interest shall be adjusted to 12% per annum, computed from the time said judgment became final and executory until full satisfaction. The award of attorney’s fees is deleted.

1.    Nature of bill of lading
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. A “bill of lading delivered and accepted constitutes the contract of carriage even though not signed,” because the “(a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice.” In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract.

2.    Shipper and consignee were liable for payment of demurrer charges; Section 17 of the bill of lading
Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment beyond the grace period allowed by tariff rules.  Section 17 of the bill of lading provided “Cooperage Fines. The shipper and consignee shall be liable for, indemnify the carrier and ship and hold them harmless against, and the carrier shall have a lien on the goods for, all expenses and charges for mending cooperage, baling, repairing or reconditioning the goods, or the van, trailers or containers, and all expenses incurred in protecting, caring for or otherwise made for the benefit of the goods, whether the goods be damaged or not, and for any payment, expense, penalty fine, dues, duty, tax or impost, loss, damage, detention, demurrage, or liability of whatsoever nature, sustained or incurred by or levied upon the carrier or the ship in connection with the goods or by reason of the goods being or having been on board, or because of shipper’s failure to procure consular or other proper permits, certificates or any papers that may be required at any port or place or shipper’s failure to supply information or otherwise to comply with all laws, regulations and requirements of law in connection with the goods of from any other act or omission of the shipper or consignee.” Keng Hua’s prolonged failure to receive and discharge the cargo from the Sea-Land’s vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former.

3.    Keng Hua’s letter proved refusal to pick up cargo and not rejection of bill of lading; Implied acceptance
Keng Hua “received the bill of lading immediately after the arrival of the shipment” on 8 July 1982. Having been afforded an opportunity to examine the said document, it did not immediately object to or dissent from any term or stipulation therein. It was only six months later, on 24 January 1983, that it sent a letter to private respondent saying that it could not accept the shipment. Its inaction for such a long period conveys the clear inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioner’s inability to use the delivery permit, i.e. to pick up the cargo, due to the shipper’s failure to comply with the terms and conditions of the letter of credit, for which reason the bill of lading and other shipping documents were returned by the “banks” to the shipper. The letter merely proved its refusal to pick up the cargo, not its rejection of the bill of lading.

4.    Apprehension of violating laws cannot defeat contractual obligation and liability
Keng Hua’s attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate customs, tariff and central bank laws must fail. Mere apprehension of violating said laws, without a clear demonstration that taking delivery of the shipment has become legally impossible, cannot defeat the petitioner’s contractual obligation and liability under the bill of lading.

5.    Issue raised for first time on appeal cannot be entertained
An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal. Herein, the issue of whether or not Keng Hua accepted the bill of lading was raised for the first time only in its memorandum before the Supreme Court.

6.    Nature of demurrage
Demurrage is merely an allowance or compensation for the delay or detention of a vessel. It is often a matter of contract, but not necessarily so. The very circumstance that in ordinary commercial voyages, a particular sum is deemed by the parties a fair compensation for delays, is the very reason why it is, and ought to be, adopted as a measure of compensation, in cases ex delicto. What fairer rule can be adopted than that which founds itself upon mercantile usage as to indemnity, and fixes a recompense upon the deliberate consideration of all the circumstances attending the usual earnings and expenditures in common voyages? It appears to us that an allowance, by way of demurrage, is the true measure of damages in all cases of mere detention, for that allowance has reference to the ship’s expenses, wear and tear, and common employment.

7.    Amount of Demurrage Charges supported by extant evidence
The amount of demurrage charges in the sum of P67,340 is a factual conclusion of the trial court that was affirmed by the Court of Appeals and, thus, binding on the Supreme Court. Besides, such factual finding is supported by the extant evidence. The apparent discrepancy was a result of the variance of the dates when the two demands were made. Necessarily, the longer the cargo remained unclaimed, the higher the demurrage. Thus, while in his letter dated 24 April 1983, Sea-Land’s counsel demanded payment of only P37,800, the additional demurrage incurred by Keng Hua due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by 22 November 1983.

8.    Three contracts in a letter of credit
In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. “Few things are more clearly settled in law than that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation.” A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter.

9.    Contract of carriage in bill of lading to be treated independently of contract of sale and the contract for the issuance of credit
The contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-a-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate Keng Hua’s obligation to private respondent arising from the contract of transportation.

10.    Remedy of alleged overshipment lies against the shipper and not against the carrier
The contract of carriage was under the arrangement known as “Shipper’s Load And Count,” and the shipper was solely responsible for the loading of the container while the carrier was oblivious to the contents of the shipment. Keng Hua’s remedy in case of overshipment lies against the seller/shipper, not against the carrier.

11.    Computation of legal interest
a.    When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
b.    When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

12.    Obligation one not arising from loan or forbearance of money; Legal interest in the present case
The case involves an obligation not arising from a loan or forbearance of money; thus, pursuant to Article 2209 of the Civil Code, the applicable interest rate is 6% per annum. Since the bill of lading did not specify the amount of demurrage, and the sum claimed by Sea-Land increased as the days went by, the total amount demanded cannot be deemed to have been established with reasonable certainty until the trial court rendered its judgment. Indeed, “unliquidated damages or claims, it is said, are those which are not or cannot be known until definitely ascertained, assessed and determined by the courts after presentation of proof.” Consequently, the legal interest rate is 6%, to be computed from 28 September 1990, the date of the trial court’s decision. And in accordance with the cases of PNB and Eastern Shipping, the rate of 12% per annum shall be charged on the total then outstanding, from the time the judgment becomes final and executory until its satisfaction.

13.    Attorney’s fees denied due to lack of justification
The matter of attorney’s fees was taken up only in the dispositive portion of the trial court’s decision. This falls short of the settled requirement that the text of the decision should state the reason for the award of attorney’s fees, for without such justification, its award would be a “conclusion without a premise, its basis being improperly left to speculation and conjecture.”

Panay Autobus vs. Pastor (GR 47933, 29 July 1942)
En Banc, Moran (J): 4 concur

Facts: Early in the morning of 11 February 1938, Concepcion Gallopin (+), with her daughter-in-law, Carmen Areda, left Estancia, Iloilo, for the City of Iloilo on truck 408 of Panay Autobus Company, Inc., driven by one Felicisimo Tilos. Gallopin and Areda were seated at the extreme right of the second bench behind the driver’s seat. In the course of transit, Gallopin stretched her right arm beyond the railing of the bus, apparently pointing to her companion the rice fields yonder. This arm was caught and broken by another truck driven by one Francisco Yap coming closely from the opposite direction. Whether Gallopin stretched her right arm at the precise moment that the two buses were about to cross each other or sometime prior thereto, and how close the two busses were to each other, the record does not disclose. Her wrist bled profusely and notwithstanding medical treatment at the Maternity Hospital at Sara and Mission Hospital at Jaro, Iloilo, where she was brought after the accident, she died the following day, undoubtedly as a result of hemorrhage and severe shock.

Crisanta, Salome, and Jose, all surnamed Pastor, as heirs of the deceased, instituted in the court below an action against Panay Autobus as owner of truck 408, seeking to recover damages in the sum of P8,200 for the death of their mother. Panay Autobus having been absolved of the complaint, the heirs of Pastor appealed to the Court of Appeals where the judgment of the trial court was reversed and another entered in their favor awarding them damages in the sum of P2,000. Hence, the appeal by certiorari by Panay Autobus.

The Supreme Court reversed the judgment, and absolved Panay Autobus, without costs.

1.    No negligence on part of Panay Autobus; Act of deceased the proximate cause of injury
Driving at an appropriate speed, almost at the middle of a six-meter highway which, at the time of the accident, was without traffic, is not negligence. Independently of the act of the deceased in stretching her right arm beyond the railing of the bus, the manner the bus was driven could not have produced the injury. Petitioner’s driver at the time that the other bus was passing closely from the opposite direction, did not know that the deceased’s arm was extended beyond the railing of the bus. He has the right to assume that all his passengers are taking the usual precaution for their own safety. If, without such knowledge of the position of the deceased and on the assurance of such assumption, the chauffeur drives his bus at a reasonably safe distance from that coming from the opposite direction, and one of his passengers suffers an injury, the negligence cannot be attributed to him. In other words, the act performed by the deceased at the time the accident occurred must be regarded as the proximate cause of the injury.

Jarque vs. Smith Bell (GR 32986, 11 November 1930)
En Banc Ostrand (J):  5 concur

Facts: Francisco Jarque was the owner of the motorboat Pandan and held a marine insurance policy for the sum of P45,000 on the boat, the policy being issued by the National Union Fire Insurance Company and according to the provisions of a “rider” attached to the policy, the insurance was against the “absolute total loss of the vessel only.” On 31 October 1928, the ship ran into very heavy sea off the Island of Ticlin, and it became necessary to jettison a portion of the cargo. As a result of the jettison, the National Union Fire Insurance Company was assessed in the sum of P2,610.86 as its contribution to the general average. The insurance company, insisting that its obligation did not extend beyond the insurance of the “absolute total loss of the vessel only, and to pay proportionate salvage of the declared value,” refused to contribute to the settlement of the general average.

Jarque instituted the present action, and after trial the court below rendered judgment in favor of Jarque and ordered the National Union Fire Insurance Company to pay the former the sum of P2,610.86 as its part of the indemnity for the general average brought about by the jettison of cargo.  The insurance company appealed to the Supreme Court.

The Supreme Court affirmed the appealed judgment with the costs against Union Fire Insurance Co.

1.    Contents of the insurance contract: clause
The insurance contract is printed in the English common form of marine policies. One of the clauses of the document originally read as follows: “Touching the Adventures and Perils which the said National Union Fire Insurance Company is content to bear, and to take upon them in this Voyage; they are of the Seas, Men-of-War, Fire, Pirates, Thieves, Jettison, Letters of Mart and Countermart, Surprisals, and Takings at Sea. Arrests, Restraints and Detainments, of all Kings, Princes and People of what Nation, Condition or Quality soever; Barratry of the Master and Marines, and of all other Perils, Losses and Misfortunes, that have or shall come to the Hurt, Detriment, or Damage of the said Vessel or any part thereof; and in case of any Loss or Misfortunes, it shall be lawful for the Assured, his or their Factors, Servants, or assigns, to sue, labour and travel for, in and about the Defence. Safeguard, and recovery of the said Vessel or any part thereof, without Prejudice to this Insurance; to the Charges whereof the said Company, will contribute, according to the rate and quantity of the sum herein assured. And it is agreed that this Writing or Policy of Insurance shall be of as much force and Virtue as the surest Writing or Policy of Insurance made in LONDON.”

2.    Contents of the insurance ocntract: rider
Attached to the policy over and above the said clause is a “rider” containing typewritten provisions, among which appears in capitalized type the following clause: “AGAINST THE ABSOLUTE TOTAL LOSS OF THE VESSEL ONLY, AND TO PAY PROPORTIONATE SALVAGE CHARGES OF THE DECLARED VALUE.” At the bottom of the same rider following the typewritten provisions therein set forth are the following words: “Attaching to and forming part of the National Union Fire Insurance Co., Hull Policy No. 1055.”

3.    Written portion prevails over printed portion, when repugnance exists between them
In case repugnance exists between written and printed portions of a policy, the written portion prevails, and there can be no question that as far as any inconsistency exists, the above-mentioned typed “rider” prevails over the printed clause it covers. Section 291 of the Code of Civil Procedure provides that “when an instrument consists partly of written words and partly of a printed form and the two are inconsistent, the former controls the latter.”

4.    Liability for contribution to general average based on quasi-contract implied by law, not to contractual stipulations
In the absence of positive legislation to the contrary, the liability of the defendant insurance company on its policy would, perhaps, be limited to “absolute loss of the vessel only, and to pay proportionate salvage of the declared value.” But the policy was executed in this jurisdiction and “warranted to trade within the waters of the Philippine Archipelago only.” Here the liability for contribution in general average is not based on the express terms of the policy, but rests upon the theory that from the relation of the parties and for their benefit, a quasi contract is implied by law.

5.    Article 859 of the Code of Commerce; in force, mandatory
Article 859 of the Code of Commerce, still in force, provides “the underwriters of the vessel, of the freight, and of the cargo shall be obliged to pay for the indemnity of the gross average in so far as is required of each one of these objects respectively.” The article is mandatory in its terms, and the insurers, whether for the vessel or for the freight or for the cargo, are bound to contribute to the indemnity of the general average. And there is nothing unfair in that provisions; it simply places the insurer on the same footing as other persons who have an interest in the vessel, or the cargo therein, at the time of the occurrence of the general average and who are compelled to contribute.

6.    Jettison of cargo necessary to save ship; Benefit inured to the underwriter
The ship was in grave peril and that the jettison of part of the cargo was necessary. If the cargo was in peril to the extent of call for general average, the ship must also have been in great danger, possibly sufficient to cause its absolute loss. The jettison was therefore as much to the benefit of the underwriter as to the owner of the cargo. If no jettison had taken place and if the ship by reason thereof had foundered, the underwriter’s loss would have been many times as large as the contribution now demanded.