Title
Malayan Insurance Co., Inc. vs. Philippine 1st Insurance Co., Inc.
Case
G.R. No. 184300
Decision Date
Jul 11, 2012
Reputable, a private carrier, liable for hijacked goods under contract; Malayan liable under SR Policy, no double insurance or solidary liability.
private carrier
loss of goods
theft

Case Summary (G.R. No. 184300)

Factual Background

Wyeth Philippines, Inc. and Reputable Forwarder Services, Inc. had executed annual contracts of carriage since 1989 under which Reputable undertook transportation and delivery of Wyeth’s products. On November 18, 1993, Philippines First Insurance Co., Inc. issued a marine policy (Marine Policy) insuring Wyeth’s goods against all risks while in transit, with a limit of P6,000,000.00 per land vehicle. On December 1, 1993, Wyeth and Reputable had a contract of carriage that, although signed by Reputable, was not signed by any Wyeth representative yet had been annually observed by both parties.

Contract of Carriage and Insurance Policies

Under the contract of carriage, Reputable undertook to answer for all risks and to be liable to the company for loss, destruction, or damage of goods due to any and all causes whatsoever, specifically including theft, robbery, and force majeure while goods were in transit until actual delivery. The contract required Reputable to secure insurance on Wyeth’s goods. Pursuant to that requirement, Reputable procured a Special Risk Insurance Policy (SR Policy) from Malayan Insurance Co., Inc. for P1,000,000.00 effective February 1, 1994 to February 1, 1995. The SR Policy contained a Section 5 titled “Insurance with Other Companies” and a Section 12 titled “Other Insurance Clause.”

Hijacking, Indemnity Payment and Subrogation

On October 6, 1994, a truck carrying 1,000 boxes of Promil infant formula worth P2,357,582.70 was hijacked while under Reputable’s custody. The truck was recovered two weeks later without its cargo. Philippines First, after adjustment under the Marine Policy, paid Wyeth P2,133,257.00 on March 8, 1995 and asserted subrogation to Wyeth’s rights against Reputable, demanding reimbursement. Reputable ignored the demand, and Philippines First filed suit against Reputable on August 12, 1996. Reputable impleaded Malayan as third-party defendant seeking indemnity under the SR Policy.

Trial Court Proceedings and Judgment

The Regional Trial Court found Reputable liable to Philippines First for the indemnity paid to Wyeth and found Malayan liable to indemnify Reputable up to the SR Policy coverage of P1,000,000.00. The trial court awarded Philippines First P2,133,257.00, adjustment fees of P15,650.00, attorney’s fees of P50,000.00, and costs, and awarded Reputable recovery from Malayan of P1,000,000.00, attorney’s fees of P50,000.00, and costs.

Court of Appeals Decision

The Court of Appeals affirmed the RTC decision with modification by deleting the award of attorney’s fees in favor of Reputable. The CA ruled that Reputable was estopped from contesting the validity of the contract of carriage despite Wyeth’s lack of signature; that Reputable was liable under the contract even if the loss resulted from fortuitous events; and that Section 12 of the SR Policy prevailed over Section 5 but, because Section 12 applied only when double insurance existed and no double insurance existed here, Malayan remained liable for the full P1,000,000.00 policy amount.

Petition and Parties’ Contentions Before the Supreme Court

Malayan petitioned for certiorari, arguing that the CA erred in (a) failing to apply statutory limits on common carrier liability and Article 1745(6) of the Civil Code, (b) misconstruing the SR Policy’s Section 5 and Section 12 so as to impair the insurer’s contractual defenses, and (c) accepting the characterization of Reputable as a private carrier. Reputable maintained that it was not liable where thieves or robbers acted with grave or irresistible threat and endorsed the CA’s ruling that Malayan should pay the full policy amount. Philippines First urged that the trial courts’ factual finding that Reputable was a private carrier deserved deference, denied that its own pleading created a binding judicial admission as to Reputable’s status, and sought a modification rendering Reputable and Malayan solidarily liable in the amount of P998,000.00, net of the P2,000.00 deductible under the SR Policy.

Issues Presented

The Court identified and addressed four central issues: (1) whether Reputable was a private carrier or a common carrier; (2) whether Reputable was strictly bound by the contractual stipulations of the contract of carriage making it liable for loss from any cause including theft and force majeure; (3) whether Sections 5 and 12 of the SR Policy were applicable and whether the courts below erred in rendering them nugatory; and (4) whether Reputable and Malayan should be held solidarily liable to Philippines First for the claimed amount.

Supreme Court’s Finding on Carrier Status

The Court held that Reputable was a private or special carrier. It rejected Malayan’s reliance on an alleged judicial admission by Philippines First in its complaint that Reputable was a common carrier because judicial admissions are conclusive only as against the pleader and cannot bind the party whose status is in controversy. The Court noted that Reputable consistently asserted in its pleadings and testimony that it served only Wyeth, and that unrebutted testimonial evidence showed Reputable served one customer. Applying Article 1732 of the Civil Code, the Court concluded that Reputable’s carriage was undertaken by special agreement rather than to the public, and that Reputable therefore operated as a private carrier with respect to Wyeth’s shipments.

Supreme Court on Contractual Liability of a Private Carrier

The Court ruled that, as a private carrier, Reputable’s obligations were governed by the contract it executed and that the Civil Code provisions applicable to common carriers did not apply. The Court explained that stipulations of a private carrier’s contract bind the parties so long as they are not contrary to law, morals, good customs, public order, or public policy. Because the contract expressly made Reputable liable for loss from any and all causes including theft and robbery while goods were in transit, the contractual stipulation was enforceable against Reputable.

Supreme Court on Sections 5 and 12 of the SR Policy

The Court construed Section 5 of the SR Policy as an other insurance clause and Section 12 as an over insurance or contribution clause. It rejected Malayan’s contention that Section 5 was an over insurance clause that should absolve Malayan where another policy covered the loss. Relying on prior jurisprudence, the Court explained that Section 5 operated to limit Malayan’s liability only in circumstances of double insurance as defined by Section 93 of the Insurance Code, which requires that the same person be insured by several insurers for the same subject and interest. The Court found no double insurance because the Marine Policy insured Wyeth while the SR Policy insured Reputable, and each policy reflected distinct insurable inter

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