G.R. No. 220211 - Edron Construction Corp. vs. Provincial Government of Surigao del Sur

FAO, an autonomous intergovernmental organization, intended to distribute a shipment of 1,500 metric tons of IR-36 certified rice seeds in Kampuchea for seedling purposes.
On May 22, 1980, FAO received a formal offer from Luzon Stevedoring Corporation (LUZTEVECO) to ship the cargo in two lots at a freight fee of US$55.50 per metric ton via Vietnam Ocean Shipping Industry in Vung Tau, Vietnam.
FAO confirmed acceptance of the offer on May 28, 1980, for one lot amounting to US$83,325.92.

The cargo was loaded aboard LUZTEVECO Barge No. LC-3000 and consisted of 34,122 bags of IR-36 certified rice seeds, purchased from the Bureau of Plant Industry for P4,602,270.00.
Loading was completed on June 12, 1980, as evidenced by the issuance of Bill of Lading No. 01.
FAO secured insurance coverage for the shipment in the amount of P5,250,000.00 from Pan Malayan Insurance Corporation through Marine Cargo Policy No. B-11474A, with premiums paid on June 16, 1980.

FAO instructed LUZTEVECO on June 16, 1980, to deliver the cargo to Vung Tau without delay due to the seeds’ susceptibility to germination and spoilage.
On the same day the insurance premiums were paid, the shipment departed for Vietnam.
On June 23, 1980, FAO was informed that the tugboat and barge had returned to Manila and that an unauthorized deviation occurred when the cargo departed again on June 21, 1980 with a different tugboat.
Shortly thereafter, on June 26, 1980, FAO was notified of the sinking of Barge LC-3000 in the China Sea, prompting FAO to file a formal claim under the marine insurance policy.

On July 31, 1980, petitioner allegedly engaged the services of Pan Asiatic Adjustment and Marine Surveying Corporation.
On August 4, 1980, J. A. Barroso, Jr. conducted a survey, finding that out of 34,122 bags there were 9,629 bags in good order, 23,510 bags with 10% to 15% wettage, and 983 bags were shortlanded or missing.
Based on this survey report, petitioner recommended denying FAO's claim on the ground of partial damage being non-compensable under the policy.

On September 26–29, 1980, a survey by Catalan, Jr. reported only 6,200 bags in good order from the remaining cargo, with 23,510 bags allegedly already sold by LUZTEVECO.
FAO, by a subsequent letter dated September 29, 1980, proposed abandoning the proceeds from the sale of damaged bags and the remaining good order bags, but this abandonment was rejected by petitioner on October 6, 1980.

FAO instituted Civil Case No. 41716 against LUZTEVECO and Pan Malayan Insurance Corporation at the Regional Trial Court of Pasig, Metro Manila.

On December 14, 1987, the trial court rendered a judgment awarding FAO the full insured value of P5,250,000.00, plus P250,000.00 for attorney’s fees and litigation expenses, and court costs.

Petitioner (Pan Malayan Insurance Corporation) appealed solely, and the Court of Appeals, in CA-G.R. CV No. 22114, affirmed the trial court’s decision on July 20, 1990—modifying only the attorney’s fees (reduced to P25,000.00).
A motion for reconsideration by petitioner was denied on September 3, 1990.

Petitioner contested that only a 78% loss of the shipment occurred, arguing that 27,922 out of 34,122 bags were rendered valueless.
FAO maintained that, due to the nature of the cargo (prone to germination once wetted) and unauthorized actions by LUZTEVECO, it suffered an effective total loss.

Whether the respondent court erred in holding that there was a total loss of the shipment despite evidence showing that only 27,922 of 34,122 bags were rendered valueless and approximately 78% of the cargo was damaged.
Whether the respondent court wrongly affirmed the trial court’s decision ordering petitioner to pay the full insured value of P5,250,000.00 to FAO, notwithstanding the partial recovery of some cargo.