UNION INSURANCE SOCIETY OF CANTON vs.

CA, FAR EAST CHEMCO LEASING AND FINANCING CORP August 8, 1996 J. Torres, Jr. FACTS: The Union Insurance Society of Canton, through its general agent, Ker & Co, was the insurer subrogee of Litton Mills, Inc. Philippine Tugs, Inc (PTI) was contracted by Litton Mills to deliver 2045 bales of compressed cotton from a ship to Magallanes Drive. However, there was a shortage of 9 bales and 521 bales were found to be damaged by seawater so Litton Mills sent formal claims to its insurer (Ker & Co) and demands from PTI. Ker & Co paid Litton Mills so as subrogee, they seek reimbursement from PTI for the reason that shortage and damage was PTIs responsibility. CFI ruled for Ker & Co. CA affirmed. However, during the pendency of the action in the CFI, PTI through its corporate officers (Angel T. Rodriguez, VP and Treasurer, Julian Cordero, and Francisco Wong, directors) transferred several of its vessels amounting to P2.6M to Valenzuela Watercraft Corporation (which said officers also owned) which in turn sold the vessels to Far East Chemco Leasing Corporation. After judgment by the CFI, plaintiffs had said judgment annotated on titles of vessels. RTC later ruled that said sale was made fraudulently and thus invalid. They ruled that the value of water vessels be returned to plaintiff Union Insurance since Far East was not a party to the case and said vessels could no longer be returned. CA reversed the RTC ruling. ISSUES: WON Far East Chemco should return the vessels HELD: NO. Petition devoid of merit, CA decision affirmed. While Far East Chemco, as buyer of the vessels from Valenzuela Watercraft purchased the said vessels at their own risk, such risk only pertains to the possibility of the sale being rescinded. It is error to make Far East pay petitioner the value of three vessels or to order the return of the vessels to petitioner WITHOUT the sale first being rescinded. Moreover, the vessels are no longer owned by Far East. When petitioner filed complaint, it was already aware that the vessels had already been sold to Peninsula Tourist Shipping Corp, yet they did not implead Peninsula as a co-defendant of Far East. Petitioner cannot be given justice at the expense of Peninsula, who cannot be bound by an adverse decision in a case where it was not given a chance to defend itself, and Far East, who should not be made to pay another s indebtedness in the absence of showing that PTIhasn ot paid petitioner or that PTI has no other properties to answer its liabilities to petitioner. To rule that Far East should pay petitioner the value of the vessels is without legal basis and could result to the unjust enrichment of the petitioner. Lastly, as quoted from the CAs decision, petitioner had yet to show if it is entitled to a rescission of the supposed fraudulent transaction. Those asking for rescission must prove that he has no other legal means to obtain reparation because the action for rescission is subsidiary; it cannot be instituted except when the damaged party has no other legal means to obtain reparation for the same. In the case at bar, petitioner has failed to adduce sufficient evidence that they had pursued all available legal remedies against PTI s properties to satisfy their claims. Although the sale of the vessels is rescissible, there is insufficient basis to allow petitioner to rescind the said sale.