[Digest] Cebu Salvage Corporation vs Philippine Home Assurance (2007)

CEBU SALVAGE CORPORATION,   vs. PHILIPPINE HOME ASSURANCE CORPORATION (2007)

CORONA, J.:

·         NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter wherein CSC was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc

·         DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left for Misamis the next day à M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.

·         MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance Corporation à paid the claim of P211,500 and was subrogated to the rights of MCCII

·         PHAC filed a case against CSC for reimbursement of the amount it paid MCCII à WON IN THE RTC! CSC ordered to reimburse

·         CA affirmed à CSC appealed

ISSUE: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?

·         CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of freight. Under a voyage charter, the shipowner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation.

·         CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew thus, it could not be held liable for the loss of the shipment

·         SC DISAGREES! à Based on the agreement signed by the parties and the testimony of CSC’s operations manager, it is clear that it was a contract of carriage.

·         There is no dispute that CSC was a common carrier. At the time of the loss of the cargo, it was engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to the public.

·         From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to the circumstances of each case. In the event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about by the causes specified in Article 1734. In all other cases, common carriers are presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.

·         IN THIS CASE à CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as a common carrier.

·         Court did said it is not reasonable to expect MCCII to ask about ownership of vesselà  As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated petitioner as the "owner/operator" of the vessel

·         CSC says if there was a contract of carriage à it was between MCCII and ALS as evidenced by the bill of lading ALS issuedà SC DISAGREES AGAIN

o    A bill of lading may serve as the contract of carriage between the parties BUT it cannot prevail over the express provision of the voyage charter à[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for the goods, and as document of title passing the property of the goods, but not as varying the contract between the charterer and the shipowner."

·         Coastwise asserts that MCCII should be held liable for its own loss since the voyage charter stipulated that cargo insurance was for the charterer’s account. à This deserves scant consideration. à This simply meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public policy.

[Digest] Fieldmen's Insurance vs. Asian Surety (1970)

FIELDMEN'S INSURANCE CO., INC.,vs. ASIAN SURETY & INSURANCE, CO., INC. and CA (1970) 

MAKALINTAL, J.:

·         On various dates the Asian Surety & Insurance and the Fieldmen's insurance entered into 7 reinsurance agreements or treaties  under the general terms of which ASIAN, as the ceding company undertook to cede to FIELDMEN’S, as the reinsuring company, a specified portion of the amount of insurance underwritten by ASIAN upon payment to FIELDMEN'S of a proportionate share of the gross rate of the premium applicable with respect to each cession after deducting a commission.

o    agreements were take effect from certain specific dates and were to be in force until cancelled by either party upon previous notice of at least 3 months by registered mail to the other party, the cancellation to take effect as of the 31st of December of the year in which notice was given.

·         Sept and Dec 1961 à FIELDMEN’S sent letters to ASIAN expressing its desire to cancel all agreements between them as of DEC 31, 1961 alleging that ASIAN had already incurred numerous violations àASIAN received but did not reply

·         Feb 1962 à FIELDMEN’S sent another letter to ASIAn repeating the fact of cancellation and now requesting ASIAN to submit its final accounting of all cessions made to the former for the preceding months when the reinsurance agreements were in force.

·         Meanwhile one of the risks reinsured by FIELDMENS issued in favor of the GSIS became a liability when the insured property was burned on Feb 1962 à The next day ASIAN sent letter to FIELDMEN’S notifiying them of the loss and stating…

o    ... we beg to reiterate that your letter of December 7, 1961, terminating said treaties by December 31, 1961, is not in accordance with the terms thereof, since there was no prior three months' notice. However, considering the attitude express (sic) in your aforesaid letter of December 7, 1961, we are willing to waive provision that said treaties may be cancelled on December 31st of any year, and will consider them cancelled at the end of three (3) months from December 7, 1961, by which time we shall be able to render the final accounting you desire.

·         FIELDMEN’S filed a petition for declaratory relief with CFI Manila alleging its first letter of notification on SEPT 19, 1961 was sufficient to meet the 3 month period before cancellation and to obtain an order directing ASIAN to render final accounting of the transactions between them with respect to said reinsurance treaties as of the cut-off date.

·         CFI DECISION à 6 of 7 agreements are cancelled as of DEC 1961 but agreed with ASIAN that FIELDMEN’S is still liable for as long the previously contracted policies are still valid. It also ordered FIELDMEN'S to make an accounting with ASIAN within 30 days.

·         CA à Affirmed with modification à  the order for accounting was eliminated

ISSUE: WON cancellation had the effect of terminating also the liability of FIELDMEN'S as reinsurer with respect to policies or cessions issued prior to the termination of the principal reinsurance contracts or treaties?

·         Only the cancelled agreements are being considered here à 2 of which contain provisions, which clearly and expressly recognize the continuing effectivity of policies ceded under them for reinsurance notwithstanding the cancellation of the contracts themselves.

o    Article 10 of the Facultative Obligatory Reinsurance Treaty Fire provides "that in the event of termination of this Agreement ..., the liability of the Fieldmen's under current cessions shall continue in full force and effect until their natural expiry ...;" and the 4th paragraph of Article VI of the Personal Accident Reinsurance Treaty  states:

o    4. On the termination of this Agreement from any cause whatever, the liability of the REINSURER (Fieldmen's) under any current cession including any amounts due to be ceded under the terms of this Agreement and which are not cancelled in the ordinary course of business shall continue in full force until their expiry unless the COMPANY (Asian) shall, prior to the thirty-first December next following such notice, elect to withdraw the existing cessions ....

·         It is therefore clear that FIELDMEN’S is still liable despite the cancellation àSuch cessions continued to be in force until their respective dates of expiration à GSIS policy still valid and subsisting at time of loss à FIELDMEN’S IS LIABLE

·         No need to go into other arguments (did not mention what they are) because the cancellation of the agreements made them moot

·         SC NOTES à ASIAN only claims continued liability of FIELDMEN’s as to the 2 agreements that had the provision cited above (as compared to the other 4 cancelled agreements wherein FIELDMEN’S liability had terminated with the contracts)

·         FIELDMEN'S insists on its alternative prayer that all cessions under the six reinsurance agreements be declared rescinded by reason of certain violations thereof, as stated by FIELDMEN'S in its letter of December 7, 1961 à Court reminds them that this action is for declaratory relief and not one for rescission and no grounds found by lower courts that can justify rescission anyway.

WHITE GOLD MARINE SERVICES, INC. vs. PIONEER INSURANCE AND SURETY CORPORATION

QUISUMBING, J.:

Facts:

ê  White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association Limited through Pioneer.

ê  White Gold was issued a Certificate of Entry and Acceptance.

ê  Pioneer also issued receipts evidencing payments for the coverage.

ê  When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.

ê  Steamship Mutual filed a case against White Gold to recover the unpaid balance while White Gold filed a complaint with the Insurance Commission alleging that Steamship violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections' 299, 300and 301 in relation to Sections 302 and 303.

ê  The Insurance Commission dismissed the complaint on the grounds that Steamship was not engaged in the insurance business and hence did not need a license.  It found Steamship Mutual to be a Protection and Indemnity Club and found Pioneer to be an agent/broker for Steamship Mutual à Pioneer has a license.

ê  CA affirmed holding that Pioneer merely acted as a collection agent of Steamship mutual.

Issues:

(1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?  YES

(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? YES

Held/Ratio:

The records reveal Steamship Mutual is doing business without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.

ê  Court cited SEC 2(2) of the insurance code and enumerated what constitutes doing an insurance business.

(a)      making or proposing to make, as insurer, any insurance contract;

(b)     making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;

(c)      doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code;

(d)     doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

ê  Court noted how lack of profit does not preclude existence of insurance business

ê  TEST WON INSURANCE OR NOT à depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called.

ê  Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.

o    Mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest. Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs

o    A P & I Club is 'a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members.

o    Since a contract of insurance involves public interest, regulation by the State is necessary. à needs a license!

Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:

ê  SEC. 299 . . . No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter.

ê  Pioneer is the resident agent of Steamship Mutual it is licensed to do or transact insurance business by virtue of the certificate of authority issued by the Insurance Commission. However Pioneer does not have a separate license to be an agent/broker of Steamship Mutual.




CLICK HERE FOR THE FULL TEXT