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[G.R. No. 145437.January 23, 2002]

ORIENTAL ASSURANCE CORP. vs. CA & TABLERIA TAN TAO SAW MILL INC.

FIRST DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated 23 JAN 2002.

G.R. No. 145437(Oriental Assurance Corporation vs. Court of Appeals and Tableria Tan Tao Saw Mill Incorporated.)

On May 9, 1989, respondent Tableria Tan Tao Saw Mill, Inc. chartered the MV Zambales, a vessel managed by Worldwide Maritime Services, Inc., to transport 282 pieces of round apitong logs with a total weight of 900 cubic meters, from Port Barton, San Vicente, Palawan to Batangas City. On the same day, Tableria insured the cargo for Two Million Four Hundred Thousand Pesos (P2.4M) with petitioner Oriental Assurance Corporation under Marine Policy Number OAC-MOP-89/016.

At around 4:26 p.m. of May 16, 1989, the MV Zambales left Port Barton en route to Batangas City with Tableria's logs on board. On May 17, 1989, the ship met rough seas caused by typhoon Bining about three miles west of Calavite Point. Unable to control the continuous listing of his ship, Captain Candelario Dela Riarte ordered his men to abandon ship at around 6:15 that evening. The ship sank five minutes later, bringing the loaded cargo down with it.

Tableria subsequently filed a formal claim for indemnity with Oriental. Oriental refused to pay Tableria, prompting the latter to institute before the Regional Trial of Manila an action for damages against said insurer.

On February 29, 1996, the trial court rendered judgment, holding Oriental liable to Tableria. The dispositive portion of the decision of the Regional Trial Court reads:

WHEREFORE, in view of the above observations and findings judgment is hereby rendered in favor of the plaintiff ordering the defendant:

1.   To pay the plaintiff the sum of P2,400,000.00 representing the Marine Insurance Coverage over the lost logs, plus 12% interest from the time of filing until fully paid;

2.   To pay the plaintiff the sum of P240,000.00 representing 10% of the amount collectible as and for attorney's fees and the further sum of P20,000.00 as and for litigation expenses and to pay the cost of suit.

The counterclaim is hereby dismissed for lack of merit.

SO ORDERED. [Rollo, p. 105.]

Upon appeal by Oriental, the Court of Appeals affirmed the decision of the Regional Trial Court subject to modifications regarding the award of attorney's fees and legal interest.

IN VIEW OF ALL THE FOREGOING, the appealed decision is AFFIRMED with the modification that the award of attorney's fees is deleted and the legal interest to be paid on the amount due, computed from the filing of the complaint, be at six (6%) percent and then at twelve (12%) percent upon the finality of this judgment until full payment thereof. Costs against the appellant.

SO ORDERED. [Rollo, pp. 43-44.]

Petitioner assigns the following errors allegedly committed by the Court of Appeals:

I

PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN ALLOWING RECOVERY ON THE MARINE INSURANCE POLICY DESPITE VIOLATION OF THE INSURANCE WARRANTY CLAUSE.

II

PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT MISINTERPRETED THE IMPLIED WARRANTY OF SEAWORTHINESS IN MARINE INSURANCE CONTRACTS.

III

PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT AWARDED THE AMOUNT STATED IN THE POLICY DESPITE THE FACT THAT INSURED PROVED A LOWER VALUE OF THE CARGO LOST. [Rollo, p. 24.]

The Court, however, finds no error on the part of the Court of Appeals in its disposition of the foregoing issues. In affirming the award of indemnity in favor of respondent Tableria, the Court of Appeals correctly held:

Oriental avers that it has no obligation to pay the entreated indemnity since Tableria violated the insurance policy's Typhoon Warranty (Exhibit "6-A") which provides that:

"Notwithstanding anything contained in this Policy or Clauses attached hereto, it is expressly warranted that the Vessel carrying subject shipment shall not sail or put out of sheltered Port when there is typhoon or storm warning at that port nor when her destination or intended route may be within the possible path of a typhoon or storm announced at port or sailing, port of destination or any intervening point. Violation of this warranty shall render this Policy 'VOID '." [Emphasis by the Court of Appeals.]

However, appellant conveniently omitted to state the second paragraph of that warranty which declares:

"However, should the vessel have sailed out of port prior to there being such warning. this Warranty, only in so far as the particular voyage is concerned, shall not apply but shall be immediately reinstated upon arrival at safe port." [Emphasis by the Court of Appeals.]

Simply stated, this paragraph renders the typhoon warranty nugatory when the vessel sails out of port prior to the issuance of the storm warning referred to in the said warranty and becomes effective again as soon as the ship reaches port safely.

We made a thorough examination of the records and found no evidence showing that appellee breached the typhoon warranty. In fact, no storm warning was yet in effect over Palawan and Mindoro (the general area where MV Zambales was supposed to pass) at the time of the subject vessel's departure. Weather Forecaster Nanette Lomarda of the PAGASA confirmed that when Domestic Bulletin No. 4 (Appellant's Exhibit "3") was issued at 4:30 in the afternoon of May 16, 1989, Mindoro and Southern Tagalog was not yet covered by that warning (T.S.N., February 22, 1994, p. 13). It was not until 10:55 that evening that Domestic Bulletin No. 5 was issued (Appellant's Exhibit "4"), raising Public Storm Signal Number 1 over Mindoro and Southern Tagalog (T.S.N., ibid., p. 9). By then, MV Zambales was already over six hours into its voyage. Verily, the ship embarked on its journey while there was still no storm warning issued either at the port of sailing or at the port of destination which effectively suspended the application of the typhoon warranty. As a matter of fact, even after Domestic Bulletin No. 4 was issued four minutes since MV Zambales left the port, the warranty suspension still remains because the storm warning did not cover Palawan and Mindoro nor the area of the ship's intended route.

x x x.

Appellant's further assertion that the MV Zambales was unseaworthy at the time of its voyage deserves scant consideration. Ordinarily, it is the obligation of a cargo owner to look for a reliable common carrier which keeps its vessels in seaworthy condition since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine insurance. Indeed, while the shipper of cargo may have no control over the vessel, he has full control in the choice of the common carrier that will transport his goods. (Roque vs. Intermediate Appellate Court, 139 SCRA 596 [1985]). However, this is not a hard and fast rule.

A close scrutiny of Section 30 of the subject insurance policy shows that both parties admitted the seaworthiness of the vessel in controversy and further agreed that the wrongful act or misconduct of the shipowner or his servants causing a loss shall not defeat the recovery by the assured provided such a loss is recoverable under the policy (Exhibit "6"). Settled is the rule that where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be raised by the assurer without showing concealment or misrepresentation by the assured (Philippine American General Insurance Co., Inc. vs. Court of Appeals, 273 SCRA 262 [1997]). A fortiori, appellant's predications must resultantly fail in the absence of competent proof that appellee concealed or misrepresented the vessel's seaworthiness.

Incidentally, the result of the admission of seaworthiness by Oriental may mean one of two things: (a) that the warranty of seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company. The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the vessel (Philippine American General Insurance Co., Inc. vs. Court of Appeals, ibid.). With such categorical waiver, appellant has accepted the risk of unseaworthiness and should the ship sink due to unseaworthiness, as what it zealously insists, Oriental is liable.

In a manifest attempt to mitigate its liability, Oriental brands the awarded indemnity of P2,400,000.00 as exorbitant since the value of the logs is only P1,980,000.00. It must be remembered, though, that the contested contract is a valued marine policy with the logs initially estimated at P2,400,000.00 ("Certificate of Insurance", Exhibit "1"). The law provides that a valuation in a policy of marine insurance is conclusive between the parties thereto in the adjustment of either a partial or total loss if: (1) the insured has some interest at risk; and, (2) there is no fraud on his part (Section 156, Insurance Code). In a valued marine policy therefore, neither party can give evidence of the real value of the thing insured, except when there was fraud on the part of the assured.

Lamentably, appellant's heavy reliance on the sales invoice that pegged the price of the logs at P1,980,000.00 is wanting. A close inspection of the said Sales Invoice (Exhibit "C-4") discloses that the same was prepared on May 29, 1989 or approximately three weeks after the subject insurance contract was executed. This is not sufficient proof that appellee fraudulently valued the logs at a price higher than its true cost. Fraud must be established by clear and convincing evidence, mere preponderance of evidence is not even adequate (Palmares vs. Court of Appeals, 288 SCRA 422 [1998]). [Rollo, pp. 39-42.]

ACCORDINGLY, for lack of merit, the Court Resolved to DENY the petition.

Very truly yours,

(Sgd.) VIRGINIA ANCHETA-SORIANO

Clerk of Court


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