G.R. No. L-38613 - Pacific Timber Export Corp. vs. Court of Appeals

On March 19, 1963, Pacific Timber Export Corporation (plaintiff/petitioner) secured temporary insurance coverage from Workmen’s Insurance Company, Inc. (defendant/respondent) through Cover Note No. 1010 covering exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs shipped from Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan.
The Cover Note stipulated that the insurance was "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY, INC. printed Marine Policy form as filed and approved by the Insurance Commissioner."
On April 2, 1963, the defendant issued two regular marine cargo policies Nos. 53 HO 1032 and 53 HO 1033 covering respectively 542 pieces of logs (499,950 bd. ft.) and 853 pieces (695,548 bd. ft.), totaling 1,395 logs or 1,195,498 board feet.

Between issuance of the Cover Note and the issuance of marine policies, loss occurred during the loading operations on March 29, 1963.
The logs were to be loaded onto the vessel SS Woodlock, docking approximately 500 meters from shore. Logs were rafted from the plaintiff’s log pond to the vessel.
At about 10:00 a.m., during bad weather, 75 pieces of logs rafted together broke loose; 45 pieces were salvaged, 30 pieces confirmed lost/washed away.

On April 4, 1963, the plaintiff notified defendant of the loss of approximately 32 pieces of logs during loading via a letter (received by defendant on April 15, 1963).
Subsequent formal claim filed by plaintiff demanded P19,286.79 under the marine policies Nos. 53 HO 1032 and 1033.

Defendant requested First Philippine Adjustment Corporation to inspect and assess loss (July-August 1963).
Adjuster report dated August 23, 1963, stated loss of 30 pieces was not covered by the marine policies as those covered actual number loaded aboard SS Woodlock but was within coverage of the Cover Note No. 1010.
Defendant’s probable liability computed at P11,042.04 (September 14, 1963).
On January 13, 1964, defendant denied the claim, asserting the marine policies excluded the lost logs, and the Cover Note had become null and void upon issuance of the marine policies.
Plaintiff protested to the Insurance Commissioner, who recommended indemnification under the Cover Note. Defendant refused to pay, citing lack of consideration and nullity of Cover Note.

The Court of First Instance ruled in favor of plaintiff ordering payment of P11,042.04 with 12% interest from April 15, 1963, plus attorney’s fees and costs.
The Court of Appeals reversed the decision, holding the Cover Note null and void for lack of valuable consideration and that defendant was released from liability due to delay in notice of loss, dismissing petitioner's complaint.
Petitioner filed a petition to the Supreme Court seeking reversal of the Court of Appeals’ ruling.

Whether the Cover Note issued by defendant was null and void for lack of valuable consideration.
Whether the defendant was relieved of liability under the Cover Note by reason of alleged unreasonable delay in giving notice of loss.