CHOA TIEK SENG v.

CA (FILIPINO MERCHANTS INSURANCE)

183 SCRA 223
Associate Justice EMILIO A. GANCAYCO; March 15, 1990

NATURE
Appeal from a decision of the Court of Appeals (and RTCs adverse to Choa Tiek Seng)

FACTS
- (1976) Petitioner imported some lactose crystals from Holland.
- The importation involved fifteen (15) metric tons packed in 600 6-ply paper bags with polythelene inner
bags, each bag at 25 kilos net.
- The goods were loaded at the port at Rotterdam (Holland) in sea vans on board the vessel "MS
Benalder' as the mother vessel, and thereafter aboard the feeder vessel "Wesser Broker V-25" of
respondent Ben Lines Container, Ltd. (Ben Lines for short).
- The goods were insured by the respondent Filipino Merchants' Insurance Co., Inc. (insurance company
for short) for the sum of P98,882.35, the equivalent of US$8,765.00 plus 50% mark-up or US $13,147.50,
against all risks under the terms of the insurance cargo policy.
- Upon arrival at the port of Manila, the cargo was discharged into the custody of the arrastre operator
respondent E. Razon, Inc. (broker for short), prior to the delivery to petitioner through his broker.
- Of the 600 bags delivered to petitioner, 403 were in bad order. The surveys showed that the bad order
bags suffered spillage and loss later valued at P33,117.63.
- Petitioner filed a claim for said loss dated February 16, 1977 against respondent insurance company in
the amount of P33,117.63 as the insured value of the loss.
- Respondent insurance company rejected the claim
Why??1. Assuming that spillage took place while the goods were in transit, petitioner and his agent failed
to avert or minimize the loss by failing to recover spillage from the sea van, thus violating the terms of the
insurance policy sued upon;
2. and that assuming that the spillage did not occur while the cargo was in transit, the said 400 bags were
loaded in bad order, and that in any case, the van did not carry any evidence of spillage.
- Petitioner filed a complaint in the RTC against the insurance company seeking payment of the sum of
P33,117.63 as damages plus attorney's fees and expenses of litigation.
- Insurance company denied all the material allegations of the complaint and raised several special
defenses as well as a compulsory counterclaim.
- Insurance company filed a third-party complaint against respondents Ben Lines and broker.

RTC:
- Dismissed the complaint, the counterclaim and the third-party complaint with costs against the petitioner.

CA
Appealed in CA but denied. MFR was denied as well.
1.
The insured goods did not sustain damage and so it cannot be held covered and even assuming
that it did, still theres no liability, because the insurance is against all risk. 2. An "all risk" marine policy
purports to cover losses from casualties at sea, it does not cover losses occasioned by the ordinary
circumstances of a voyage, but only those resulting from extra and fortuitous events. So that Filipino
Merchants is absolved from liability.

ISSUE
1.

WON the goods sustained damage

2.
WON insurance company should be held liable even if the technical meaning in marine insurance
of an insurance against all risk" is applied

HELD

1.

YES.

- In the first place it was respondent insurance company which undertook the protective survey
aforestated relating to the goods from the time of discharge up to the time of delivery thereof to the
consignee's warehouse, so that it is bound by the report of its surveyor which is the Adjustment
Corporation of the Philippines. Said report is binding upon the respondent insurance who caused the
same survey.
-Secondly, contrary to the findings of the appellate court that petitioner's witness Jose See was not
present at the time of the actual devanning of the cargo, what the record shows is that he was present
when the cargo was unloaded and received in the warehouse of the consignee. He saw 403 bags to be in
bad order. Present then was the surveyor, Adjustment Corporation of the Philippines, who surveyed the
cargo by segregating the bad order cargo from the good order and determined the amount of loss. 7
Thus, said witness was indeed competent to identify the survey report aforestated.
- Thirdly, in its letter dated May 26, 1977 to petitioner, respondent insurance company admitted in no
uncertain terms that there were 403 bags in damaged condition.

2.
In Gloren Inc. vs. Filipinas Cia. de Seguros, it was held that an all risk insurance policy insures
against all causes of conceivable loss or damage, except as otherwise excluded in the policy or due to
fraud or intentional misconduct on the part of the insured. It covers all losses during the voyage whether
arising from a marine peril or not, including pilferage losses during the war.

- In the present case, the "all risks" clause of the policy sued upon reads as follows:

"5. This insurance is against all risks of loss or damage to the subject matter insured but shall in no case
be deemed to extend to cover loss, damage, or expense proximately caused by delay or inherent vice or
nature of the subject matter insured. Claims recoverable hereunder shall be payable irrespective of
percentage."

- The terms of the policy are so clear and require no interpretation. The insurance policy covers all loss or
damage to the cargo except those caused by delay or inherent vice or nature of the cargo insured. It is
the duty of the respondent insurance company to establish that said loss or damage falls within the
exceptions provided for by law, otherwise it is liable therefor.
- An "all risks" provision of a marine policy creates a special type of insurance which extends coverage to
risks not usually contemplated and avoids putting upon the insured the burden of establishing that the
loss was due to peril falling within the policy's coverage. The insurer can avoid coverage upon
demonstrating that a specific provision expressly excludes the loss from coverage.
- In this case, the damage caused to the cargo has not been attributed to any of the exceptions provided
for nor is there any pretension to this effect. Thus, the liability of respondent insurance company is clear.

Disposition the decision appealed from is hereby REVERSED AND SET ASIDE and another judgment is
hereby rendered ordering the respondent Filipinas Merchants Insurance Company, Inc. to pay the sum of
P33,117.63 as damages to petitioner with legal interest from the filing of the complaint, plus attorney's
fees and expenses of litigation in the amount of P10,000.00 as well as the costs of the suit.

Delsan vs CA
Facts:
Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., for a period of one year
whereby the said common carrier agreed to transport Caltexs 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 Maysun 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.

The Respondent (insurance) paid the Caltex the amount of P5,096,635.57 representing the amount of
the value of the lost cargo.

Issue:
1. 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.

2. 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

Held:

No, under the law, extra ordinary diligence is required by the common carrier in taking good care of the
goods. The common carrier is presumed negligent unless the contrary provides otherwise. 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. 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.

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.

FILIPINO MERCHANTS INSURANCE CO., Inc. v. CA

GR No. 85141 Nov. 28, 1989 Second Division [Regalado]

Nature: Petition for review on certiorari challenging a CA decision finding FilMerchant liable to pay
plaintiff.
Facts:
This is a story about a consignee/buyer who bought fishmeal products from Bangkok and had it delivered
to the port of Manila. He entered into an insurance contract with defendant insurance company
(FilMerchant) under policy no. M-2678 for P267,653.59 and for goods described as 600 metric tons of
fishmeal in new gunny bags of 90 kilos each. What was actually imported was 59.940mtons in 666 gunny
bags. Upon arrival at Manila, arrastre and defendants surveyor found 227 bags in bad order condition.
Because of this loss, buyer formally claimed from FilMerchant but the said insurance company refused to
pay. He brought suit. Trial court ruled for him and against FilMerchant, CA affirmed trial court hence this
petition.
FilMerchant argues:
(1) CA erred in the interpretation and application of the all risk clause of
maritime insurance policy. It says it should not be held liable for partial loss notwithstanding the clear
absence of proof of some fortuitous event, casualty, or accidental cause to which the loss is attributable.
(2) Respondent had no insurable interest in the subject cargo. The shipment reveals that it is a C
& F contract of shipment. The seller, not the consignee, paid for the shipment. As there was yet no
delivery to the consignee, ownership (and interest) does not yet pass to him.

Issues: W/N CA was correct in its interpretation of the all risk clause in the maritime insurance contract.
W/N the insured had insurable interest over the property insured.
Ruling:
a)

All risks policy has no technical meaning.

The clause in question reproduced:

5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case
be deemed to extend to cover loss, damage, or expense proximately caused by delay or inherent vice or
nature of the subject-matter insured. Claims recoverable hereunder shall be payable irrespective of
percentage
An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an
accidental cause of any kind. The very nature of the term "all risks" must be given a broad and
comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. 7 This
is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases
where difficulties of logical explanation or some mystery surround the loss or damage to property.
Burden of proof shifts to the insurer.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but
under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage
for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of
proving that the cargo was in good condition when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to
the coverage.
b)

Vendee/Consignee has insurable interest

SC: The shipment contract being that of cost and freight (C&F) is immaterial in the determination of
insurable interest. The perfected contract of sale vests in the vendee an equitable title, an interest
sufficient enough to be insurable. Further, Art. 1523 NCC provides that where, in pursuance of a contract
of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be
a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The
Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the
nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods
and paid the insurance premium covering them.

WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent Court of
Appeals is AFFIRMED in toto.

La Razon Social "Go Tiaoco y Hermanos" vs. Union Insurance Society of Canton Ltd.
[GR 13983, 1 September 1919]
Facts: A cargo of rice belonging to the Go Tiaoco Brothers, was transported in the early days of May,
1915, on the steamship Hondagua from the port of Saigon to Cebu. On discharging the rice from one of
the compartments in the after hold, upon arrival at Cebu, it was discovered that 1,473 sacks had been
damaged by sea water. The loss so resulting to the owners of rice, after proper deduction had been made
for the portion saved, was P3,875. The policy of insurance, covering the shipment, was signed upon a

form long in use among companies engaged in maritime insurance. It purports to insure the cargo from
the following among other risks: "Perils . . . of the seas, men, of war, fire, enemies, pirates, rovers,
thieves, .jettisons, . . . barratry of the master and mariners, and of all other perils, losses, and misfortunes
that have or shall come to the hurt, detriment, or damage of the said goods and merchandise or any part
thereof." It was found out that the drain pipe which served as a discharge from the water closet passed
down through the compartment where the rice in question was stowed and thence out to sea through the
wall of the compartment, which was a part of the wall of the ship. The joint or elbow where the pipe
changed its direction was of cast iron; and in course of time it had become corroded and abraded until a
longitudinal opening had appeared in the pipe about one inch in length. This hole had been in existence
before the voyage was begun, and an attempt had been made to repair it by filling with cement and
bolting over it a strip of iron. The effect of loading the boat was to submerge the vent, or orifice, of the pipe
until it was about 18 inches or 2 feet below the level of the sea. As a consequence the sea water rose in
the pipe. Navigation under these conditions resulted in the washing out of the cement-filling from the
action of the sea water, thus permitting the continued flow of the salt water into the compartment of rice.
An action on a policy of marine insurance issued by the Union Insurance Society of Canton, Ltd., upon
the cargo of rice belonging to the Go Tiaoco Brothers was filed. The trial court found that the inflow of the
sea water during the voyage was due to a defect in one of the drain pipes of the ship and concluded that
the loss was not covered by the policy of insurance. Judgment was accordingly entered in favor of Union
Insurance and Go Tiaoco Brothers appealed.
Issue 1: Whether perils of the sea includes entrance of water into the ships hold through a defective
pipe.
Held 1: NO. It is determined that the words "all other perils, losses, and misfortunes" are to be interpreted
as covering risks which are of like kind (ejusdem generis) with the particular risks which are enumerated
in the preceding part of the same clause of the contract. According to the ordinary rules of construction
these words must be interpreted with reference to the words which immediately precede them. They were
no doubt inserted in order to prevent disputes founded on nice distinctions. Their office is to cover in
terms whatever may be within the spirit of the cases previously enumerated, and so they have a greater
or less effect as a narrower or broader view is taken of those cases. For example, if the expression "perils
of the seas" is given its widest sense the general words have little or no effect as applied to that case. If
on the other hand that expression is to receive a limited construction and loss by perils of the seas is to
be confined to loss ex marine tempestatis discrimine, the general words become most important. But still,
when they first became the subject of judicial construction, they have always been held or assumed to be
restricted to cases "akin to" or "resembling" or "of the same kind as" those specially mentioned. I see no
reason for departing from this settled rule. In marine insurance it is above all things necessary to abide by
settled rules and to avoid anything like novel refinements or a new departure. It must be considered to be
settled, furthermore, that a loss which, in the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the
ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions,
is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The
insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship.
There must, in order to make the insurer liable, be "some casualty, something which could not be
foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events which must happen." Herein, the
entrance of the sea water into the ship's hold through the defective pipe already described was not due to
any accident which happened during the voyage, but to the failure of the ship's owner properly to repair a
defect of the existence of which he was apprised. The loss was therefore more analogous to that which
directly results from simple unseaworthiness than to that which results from perils of the sea.
Issue 2: Whether there is an implied warranty on the seaworthy of the vessel in every marine insurance
contract.

Held 2: YES. It is universally accepted that in every contract of insurance upon anything which is the
subject of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the
inception of the voyage. This rule is accepted in our own Insurance Law (Act No. 2427, sec. 106). It is
also well settled that a ship which is seaworthy for the purpose of insurance upon the ship may yet be
unseaworthy for the purpose of insurance upon the cargo (Act No. 2427, sec. 106).

Roque v. Intermediate Appellate Court

G.R. No. L-66935 Nov. 11, 1985 Justice Gutierrez, Jr.
Facts:
Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay Lighterage Corp.
(Manila Bay) to load and carry its logs from Palawan to North Harbor, Manila. The logs were insured with
Pioneer Insurance and Surety Corp. (Pioneer). The logs never reached Manila due to certain
circumstances (as alleged by Roque and found by the appellate court), such as the fact that the barge
was not seaworthy that it developed a leak, that one of the hatches were left open causing water to enter,
and the absence of the necessary cover of tarpaulin causing more water to enter the barge. When Roque
demanded payment from Pioneer, but the latter refused on the ground that its liability depended upon the
Total Loss by Total Loss of Vessel Only. The trial court ruled in favor of Roque in the civil complaint filed
by the latter against Pioneer, but the decision was reversed by the appellate court.
Issue:
WON in cases of marine insurance, there is a warranty of seaworthiness by the cargo owner; WON the
loss of the cargo was due to perils of the sea, not perils of the ship.
Held:
Yes, there is. The liability of the insurance company is governed by law. Section 113 of the Insurance
Code provides that In every marine insurance upon a ship or freight, or freightage, or upon anything
which is the subject of marine insurance, a warranty is implied that the ship is seaworthy. Hence, there
can be no mistaking the fact that the term "cargo" can be the subject of marine insurance and that once it
is so made, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo
whether he be the shipowner or not. Moreover, the fact that the unseaworthiness of the ship was
unknown to the insured is immaterial in ordinary marine insurance and may not be used by him as a
defense in order to recover on the marine insurance policy. As to the second issue, by applying Sec. 113
of the Insurance Code, there is no doubt that the term 'perils of the sea' extends only to losses caused by
sea damage, or by the violence of the elements, and does not embrace all losses happening at sea; it is
said to include only such losses as are of extraordinary nature, or arise from some overwhelming power,
which cannot be guarded against by the ordinary exertion of human skill and prudence. t is also the
general rule that everything which happens thru the inherent vice of the thing, or by the act of the owners,
master or shipper, shall not be reputed a peril, if not otherwise borne in the policy. It must be considered
to be settled, furthermore, that a loss which, in the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the
ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions,
is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The
insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship.
Neither barratry can be used as a ground by Roque. Barratry as defined in American Insurance Law is
"any willful misconduct on the part of master or crew in pursuance of some unlawful or fraudulent purpose
without the consent of the owners, and to the prejudice of the owner's interest." Barratry necessarily
requires a willful and intentional act in its commission. No honest error of judgment or mere negligence,
unless criminally gross, can be barratry. In the case at bar, there is no finding that the loss was

occasioned by the willful or fraudulent acts of the vessel's crew. There was only simple negligence or lack
of skill.

Pan Malayan Insurance Corporation v CA (Insurance)

G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, ERLINDA FABIE
AND
HER UNKNOWN DRIVER, respondents.

FACTS:
On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi
Colt Lancer car with plate No. DDZ-431 and registered in the name of Canlubang Automotive Resources
Corporation [CANLUBANG]; that on May 26, 1985, due to the "carelessness, recklessness, and
imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured car was hit and
suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the
insured car and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up
and his employer, Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to
pay the claim of PANMALAY. private respondents filed a Motion to Dismiss alleging that PANMALAY had
no cause of action against them. They argued that payment under the "own damage" clause of the
insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification
thereunder was made on the assumption that there was no wrongdoer or no third party at fault.

DECISION OF LOWER COURTS:

(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for damages against private
respondents Erlinda Fabie and her driver
(2) CA: affirmed trial court.

ISSUE:
Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its
assured in settlement of an insurance claim against private respondents as the parties allegedly
responsible for the damage caused to the insured vehicle.

RULING:
PANMALAY is correct.
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 that the insurer has been obligated to pay. Payment by the insurer to
the assured operates as an equitable or negligence of a third party. CANLUBANG is apparently of the
same understanding. Based on a police report assignment to the former of all remedies that 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.
The exceptions are:
(1) 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
(2) where the insurer pays the assured the value of the lost goods without notifying the carrier who has in
good faith settled the assured's claim for loss, the settlement is binding on both the assured and the
insurer, and the latter cannot bring an action against the carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby
effecting "voluntary payment", the former has no right of subrogation against the third party liable for the
loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of
its assured under Article 2207 of the Civil Code, PANMALAY would still have a cause of action against
private respondents. In the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan,
supra., the Court ruled that the insurer who may have no rights of subrogation due to "voluntary" payment
may nevertheless recover from the third party responsible for the damage to the insured property under
Article 1236 of the Civil Code.
WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for
damages against private respondents is hereby REINSTATED. Let the case be remanded to the lower
court for trial on the merits.

PHIL. AMERICAN GEN. INSURANCE CO, INC. vs. CA

G.R. No. 116940 June 11, 1997

FACTS:
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and
operated by respondent Felman Shipping Lines, 7,500 cases of 1-liter Coca-Cola softdrink bottles to be
transported from Zamboanga City to Cebu City. The shipment was insured with petitioner Philippine
American General Insurance Co., Inc., under Marine Open. On 7 July 1983, the vessel sank in the waters
of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1liter Coca-Cola softdrink bottles.
on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages. On 15
February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that FELMAN had
abandoned all its rights, interests and ownership over "MV Asilda" together with her freight and
appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of
Commerce.

ISSUE:
WON the limited liability under Art. 587 of the Code of Commerce should apply

DECISION:
Art. 587 of the Code of Commerce is NOT applicable to the case at bar. The ship agent is liable for the
negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be
limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587.
Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable
despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the
captain. The international rule is to the effect that the right of abandonment of vessels, as a legal
limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by
the shipowner's own fault. It must be stressed at this point that Art. 587 speaks only of situations where
the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed,
Art. 587 will not apply.
It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness
even at the time of its departure from the port of Zamboanga. Closer supervision on the part of the
shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It
cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by
virtue of Art. 587 of the Code of Commerce.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay
petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC

ORIENTAL ASSURANCE CORPORATION vs. CA

G.R. No. 94052 August 9, 1991

FACTS:
In January 1986, private respondent Panama Sawmill Co., Inc. hired Transpacific Towage, Inc., to
transport the logs by sea to Manila and insured it against loss with petitioner Oriental Assurance
Corporation (Oriental Assurance). The logs were loaded on two (2) barges: (1) on barge PCT-7000,610;
and (2) on Barge TPAC-1000. On 28 January 1986, the two barges were towed by one tug-boat, during
the voyage, rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of
497 pieces of logs out of the 598 pieces loaded thereon. Panama demanded payment for the loss but
was denied by Oriental Assurance

ISSUE:
WON, Oriental Assurance can be held liable under its marine insurance policy based on a constructive
total loss.

DECISION:

NO. The requirements for the application of Section 139 of the Insurance Code, have not been met. The
logs involved, although placed in two barges, were not separately valued by the policy, nor separately
insured. The logs having been insured as one inseparable unit, the correct basis for determining the
existence of constructive total loss is the totality of the shipment of logs. Since the cost of those 497
pieces does not exceed 75% of the value of all 1,208 pieces of logs, the shipment cannot be said to have
sustained a constructive total loss under Section 139(a) of the Insurance Code. WHEREFORE, the
judgment under review is hereby SET ASIDE and petitioner, Oriental Assurance Corporation, is hereby
ABSOLVED from liability under its marine insurance policy.