Upon the termination of the agreement, the same was extended 2. Defendants to pay the reduced amount of moral damages of
for another year from March 1, 1989 to March 1, 1990, then from P10,000.00 to plaintiff;
March 1, 1990 to June 1, 1990. The amount of coverage was increased
3. Defendants to pay the reduced amount of P10,000.00 as exemplary
to a maximum sum of P75,000.00 per disability.[2]
damages to plaintiff;
During the period of his coverage, Ernani suffered a heart attack
and was confined at the Manila Medical Center (MMC) for one month 4. Defendants to pay attorneys fees of P20,000.00, plus costs of suit.
beginning March 9, 1990. While her husband was in the hospital,
[3]
respondent tried to claim the benefits under the health care SO ORDERED.
any other medical advice or examination.[10]Specifically, the Health limited to return of all Membership Fees paid. An undisclosed or
Care Agreement signed by respondents husband states:
misrepresented information is deemed material if its revelation would
have resulted in the declination of the applicant by Philamcare or the
assessment of a higher Membership Fee for the benefit or benefits
We hereby declare and agree that all statement and answers
applied for.[13]
contained herein and in any addendum annexed to this application
are full, complete and true and bind all parties in interest under the
Agreement herein applied for, that there shall be no contract of health
The answer assailed by petitioner was in response to the question
care coverage unless and until an Agreement is issued on this
relating to the medical history of the applicant. This largely depends
application and the full Membership Fee according to the mode of
on opinion rather than fact, especially coming from respondents
payment applied for is actually paid during the lifetime and good
husband who was not a medical doctor. Where matters of opinion or
health of proposed Members; that no information acquired by any
judgment are called for, answers made in good faith and without
Representative of PhilamCare shall be binding upon PhilamCare unless intent to deceive will not avoid a policy even though they are untrue.
[14]
set out in writing in the application; that any physician is, by these
Thus,
presents, expressly authorized to disclose or give testimony at
anytime relative to any information acquired by him in his professional (A)lthough false, a representation of the expectation, intention, belief,
capacity upon any question affecting the eligibility for health care
opinion, or judgment of the insured will not avoid the policy if there is
coverage of the Proposed Members and that the acceptance of any
no actual fraud in inducing the acceptance of the risk, or its
Agreement issued on this application shall be a ratification of any
acceptance at a lower rate of premium, and this is likewise the rule
correction in or addition to this application as stated in the space for
although the statement is material to the risk, if the statement is
Home Office Endorsement.[11](Underscoring ours)
obviously of the foregoing character, since in such case the insurer is
not justified in relying upon such statement, but is obligated to make
In addition to the above condition, petitioner additionally required further inquiry. There is a clear distinction between such a case and
the applicant for authorization to inquire about the applicants medical one in which the insured is fraudulently and intentionally states to be
history, thus:
true, as a matter of expectation or belief, that which he then knows,
to be actually untrue, or the impossibility of which is shown by the
facts within his knowledge, since in such case the intent to deceive
I hereby authorize any person, organization, or entity that has any
the insurer is obvious and amounts to actual fraud.[15] (Underscoring
record or knowledge of my health and/or that of __________ to give to
ours)
the PhilamCare Health Systems, Inc. any and all information relative
to any hospitalization, consultation, treatment or any other medical
advice or examination. This authorization is in connection with the
The fraudulent intent on the part of the insured must be
application for health care coverage only. A photographic copy of this
established to warrant rescission of the insurance contract.
[16]
authorization shall be as valid as the original.[12] (Underscoring ours)
Concealment as a defense for the health care provider or insurer to
avoid liability is an affirmative defense and the duty to establish such
Petitioner cannot rely on the stipulation regarding Invalidation of defense by satisfactory and convincing evidence rests upon the
provider or insurer. In any case, with or without the authority to
agreement which reads:
investigate, petitioner is liable for claims made under the
Failure to disclose or misrepresentation of any material information by contract. Having assumed a responsibility under the agreement,
petitioner is bound to answer the same to the extent agreed upon. In
the member in the application or medical examination, whether
the end, the liability of the health care provider attaches once the
intentional or unintentional, shall automatically invalidate the
Agreement from the very beginning and liability of Philamcare shall be member is hospitalized for the disease or injury covered by the
Finally, petitioner alleges that respondent was not the legal wife
of the deceased member considering that at the time of their
marriage, the deceased was previously married to another woman
who was still alive. The health care agreement is in the nature of a
contract of indemnity. Hence, payment should be made to the party
who incurred the expenses. It is not controverted that respondent paid
all the hospital and medical expenses.She is therefore entitled to
reimbursement. The records adequately prove the expenses incurred
by respondent for the deceaseds hospitalization, medication and the
professional fees of the attending physicians.[24]
The RTC found that Policy No. 9011992 had indeed lapsed and
Eulogio needed to have the same reinstated:
[The] arguments [of Insular Life] are not without
basis. When the premiums for April 24 and July 24,
1998 were not paid by [Eulogio] even after the lapse of
the 31-day grace period, his insurance policy
necessarily lapsed. This is clear from the terms and
conditions of the contract between [Insular Life] and
[Eulogio] which are written in [the] Policy provisions of
Policy No. 9011992 x x x.[17]
The RTC, taking into account the clear provisions of the Policy
Contract between Eulogio and Insular Life and the Application for
Reinstatement Eulogio subsequently signed and submitted to Insular
Life, held that Eulogio was not able to fully comply with the
requirements for the reinstatement of Policy No. 9011992:
The well-settled rule is that a contract has the force of
law between the parties. In the instant case, the terms
of the insurance contract between [Eulogio] and [Insular
Life] were spelled out in the policy provisions of
Insurance Policy No. 9011992. There is likewise no
dispute that said insurance contract is by nature a
contract of adhesion[,] which is defined as one in which
one of the contracting parties imposes a ready-made
form of contract which the other party may accept or
reject but cannot modify. (Polotan, Sr. vs. CA, 296 SCRA
247).
xxxx
The New Lexicon Websters Dictionary defines ambiguity
as the quality of having more than one meaning and an
idea, statement or expression capable of being
understood in more than one sense. In Nacu vs. Court
of Appeals, 231 SCRA 237 (1994), the Supreme
Court stated that[:]
Any ambiguity in a contract, whose terms
are susceptible of different interpretations
as a result thereby, must be read and
Appeal. Violeta filed a Notice of Appeal only on 20 May 2008, more consequence, no court (not even this Court) can exercise appellate
than five months after receipt of the RTC Order dated 8 November jurisdiction to review a case or modify a decision that has become
2007 denying her Motion for Reconsideration.
final.[32] When a final judgment is executory, it becomes immutable
and unalterable. It may no longer be modified in any respect either by
Violetas claim that her former counsels failure to file the proper the court, which rendered it or even by this Court. The doctrine is
remedy within the reglementary period was an honest mistake, founded on considerations of public policy and sound practice that, at
attributable to the latters deteriorating health, is unpersuasive.
the risk of occasional errors, judgments must become final at some
definite point in time.[33]
Violeta merely made a general averment of her former
counsels poor health, lacking relevant details and supporting The only recognized exceptions to the doctrine of immutability and
evidence. By Violetas own admission, her former counsels health unalterability are the correction of clerical errors, the so-called nunc
rapidly deteriorated only by the first week of July 2008. The events pro tunc entries, which cause no prejudice to any party, and void
pertinent to Violetas Notice of Appeal took place months before July judgments.[34] The instant case does not fall under any of these
2008, i.e., a copy of the RTC Order dated 8 November 2007, denying exceptions.
Violetas Motion for Reconsideration of the Decision dated 30 August
2007, was received on 3 December 2007; and Violetas Notice of Even if the Court ignores the procedural lapses committed herein, and
Appeal was filed on 20 May 2008. There is utter lack of proof to show proceeds to resolve the substantive issues raised, the Petition must
that Violetas former counsel was already suffering from ill health still fail.
during these times; or that the illness of Violetas former counsel would
have affected his judgment and competence as a lawyer.
Violeta makes it appear that her present Petition involves a question
of law, particularly, whether Eulogio had an existing insurable interest
Moreover, the failure of her former counsel to file a Notice of in his own life until the day of his death.
Appeal within the reglementary period binds Violeta, which failure the
latter cannot now disown on the basis of her bare allegation and self- An insurable interest is one of the most basic and essential
serving pronouncement that the former was ill. A client is bound by requirements in an insurance contract. In general, an insurable
his counsels mistakes and negligence.[31]
interest is that interest which a person is deemed to have in the
subject matter insured, where he has a relation or connection with or
The Court, therefore, finds no reversible error on the part of the concern in it, such that the person will derive pecuniary benefit or
RTC in denying Violetas Notice of Appeal for being filed beyond the advantage from the preservation of the subject matter insured and
reglementary period. Without an appeal having been timely filed, the will suffer pecuniary loss or damage from its destruction, termination,
RTC Decision dated 30 August 2007 in Civil Case No. 2177 already or injury by the happening of the event insured against. [35] The
became final and executory.
existence of an insurable interest gives a person the legal right to
insure the subject matter of the policy of insurance. [36] Section 10 of
A judgment becomes "final and executory" by operation of the Insurance Code indeed provides that every person has an
law. Finality becomes a fact when the reglementary period to appeal insurable interest in his own life.[37] Section 19 of the same code also
lapses and no appeal is perfected within such period. As a states that an interest in the life or health of a person insured must
exist when the insurance takes effect, but need not exist thereafter or
when the loss occurs.[38]
To reinstate a policy means to restore the same to premium-paying
status after it has been permitted to lapse. [39] Both the Policy Contract
Upon more extensive study of the Petition, it becomes evident that and the Application for Reinstatement provide for specific conditions
the matter of insurable interest is entirely irrelevant in the case at for the reinstatement of a lapsed policy.
bar. It is actually beyond question that while Eulogio was still alive, he
had an insurable interest in his own life, which he did insure under
The Policy Contract between Eulogio and Insular Life identified
Policy No. 9011992. The real point of contention herein is whether the following conditions for reinstatement should the policy lapse:
Eulogio was able to reinstate the lapsed insurance policy on his
10. REINSTATEMENT
life before his death on 17 September 1998.
The Court rules in the negative.
Before proceeding, the Court must correct the erroneous
declaration of the RTC in its 30 August 2007 Decision that Policy
No. 9011992 lapsed because of Eulogios non-payment of the
premiums which became due on 24 April 1998 and 24 July
1998. Policy No. 9011992 had lapsed and become void earlier, on 24
February 1998, upon the expiration of the 31-day grace period for
payment of the premium, which fell due on 24 January 1998, without
any payment having been made.
In
the
instant
case,
Eulogios
death
rendered
impossible
and
Surety
Shipyard,
Inc.[2] (KCSI)to
Corporation[1] (Pioneer)
review
and
oncertiorari the
Keppel
Decision[3] dated
December 17, 2004 and the Amended Decision [4] dated December 20,
2007 of the Court of Appeals (CA) in CA-G.R. SP Nos. 74018 and
73934.
On January 26, 2000, KCSI and WG&A Jebsens Shipmanagement, Inc.
(WG&A) executed a Shiprepair Agreement[5] wherein KCSI would
renovate and reconstruct WG&As M/V Superferry 3 using its dry
docking facilities pursuant to its restrictive safety and security rules
and regulations. Prior to the execution of the Shiprepair Agreement,
Superferry 3 was already insured by WG&A with Pioneer for
US$8,472,581.78. The Shiprepair Agreement reads
SHIPREPAIR AGREEMENT[6]
Cebu
2.
3.
4.
5.
7.
8.
9.
10.
11.
12.
(Signed)
BARRY CHIA SOO HOCK _________(Signed)__________
(Printed
Name/Signature
Above
Name/Signature Above Name)
Name) (Printed
16 June 2000
Our Claim Ref: MH-NIL-H0-99-00018
US$8,472,581.78
-----------------------------------------------RECEIVED from PIONEER INSURANCE & SURETY
CORPORATION the sum of U.S. DOLLARS EIGHT
MILLION
FOUR
HUNDRED
SEVENTY-TWO
THOUSAND FIVE HUNDRED EIGHTY-ONE & 78/100
(US$ 8,472,581.78) equivalent to PESOS THREE
HUNDRED SIXTY MILLION & 00/100 (Php
360,000,000.00), in full satisfaction, compromise and
discharge of all claims for loss and expenses sustained
to the vessel SUPERFERRY 3 insured under Policy Nos.
MH-H0-99-0000168-00-D
(H&M)
and
MH-H0-990000169 (I.V.) by reason as follows:
Fire on board at Keppel Cebu Shipyard
on 08 February 2000
gutted by fire. Claiming that the extent of the damage was pervasive,
Armed with the subrogation receipt, Pioneer tried to collect CIAC. The CIAC granted the withdrawal on October 22, 2001, thereby
from KCSI, but the latter denied any responsibility for the loss of the dismissing the claim of WG&A against KCSI. Hence, the arbitration
subject vessel. As KCSI continuously refused to pay despite repeated proceeded with Pioneer as the remaining claimant.
demands, Pioneer, on August 7, 2000, filed a Request for Arbitration
before the Construction Industry Arbitration Commission (CIAC)
docketed as CIAC Case No. 21-2000, seeking the following reliefs:
1.
To pay to the claimant Pioneer
Insurance and Surety Corporation the sum of U.S.
$8,472,581.78 or its equivalent amount in Philippine
Currency, plus interest thereon computed from the date
of the Loss and Subrogation Receipt on 16 June 2000 or
from the date of filing of [the] Request for Arbitration,
as may be found proper;
2.
To pay to claimant WG&A, INC.
and/or Aboitiz Shipping Corporation and WG&A Jebsens
Shipmanagement, Inc. the sum of P500,000,000.00 plus
interest thereon from the date of filing [of the] Request
for Arbitration or date of the arbitral award, as may be
found proper;
3.
To pay to the claimants herein the
sum of P3,000,000.00 for and as attorneys fees; plus
other damages as may be established during the
proceedings, including arbitration fees and other
litigation expenses, and the costs of suit.
It is likewise further prayed that Clauses 1 and 2 on the
unsigned page 1 of the Shiprepair Agreement (Annex A)
as well as the hardly legible Clauses 20 and 22 (a) and
other similar clauses printed in very fine print on the
unsigned dorsal page thereof, be all declared illegal and
void ab initio and without any legal effect whatsoever.
[10]
A.
B.
C.
D.
The
evidence
presented
during the hearings indubitably
proves that respondent not only
took
custody
but
assumed
responsibility and control over M/V
Superferry 3 in carrying out the
dry-docking and repair of the
vessel.
The presence on board the
M/V Superferry 3 of its officers and
crew
does
not
relieve
the
respondent of its responsibility for
said vessel.
Respondent Keppel assumed
responsibility over M/V Superferry
3 when it brought the vessel
inside its graving dock and applied
its own safety rules to the drydocking and repairs of the vessel.
The practice of allowing a
shipowner and its sub-contractors
to perform maintenance works
while the vessel was within
respondents premises does not
detract from the fact that control
and custody over M/V Superferry 3
was transferred to the yard.
employer
of
the
B.
C.
B.
Claimant
enumerated
negligence.
A.
yard
B.
C.
D.
(ii)
(iii)
(iv)
(v)
of
According to Claimant:
further badges
Non-removal
theory.
of
the
life
jackets
Hole-in-the[-]floor theory.
Need for a plan theory.
The unauthorized hot works theory.
The Marina report theory.
i.
ii.
There
was
also
no
subrogation under Article 1236 of
the Civil Code. First, if the
Claimant asserts a right of
payment only by virtue of Article
1236, then there is no legal
subrogation under Article 2207
and it does not succeed to the
Vessels rights under the Ship
[R]epair Agreement and the
arbitration agreement. It does not
have a right to demand arbitration
and will have only a purely civil
law claim for reimbursement to
the extent that its payment
benefited the Yard which should
be filed in court. Second, since the
Yard is not liable for the fire and
the resulting damage to the
Vessel, then it derived no benefit
from the Claimants payment to
the Vessel Owner. Third, in any
event, the Claimant has not
proved payment of the proceeds
to the Vessel Owner.
2.
3.
(b)
(c)
(e)
4.
The
Yards
only
contractual
obligation to the Vessel in respect of the
26 January 2000 Work Order was to
supply welders for the Promenade Deck
restaurant who would then perform
welding
work
per
owner[s]
instruction. Consequently, once it had
provided
those
welders,
including
Angelino Sevillejo, its obligation to the
Vessel was fully discharged and no claim
for contractual breach, or for damages on
5.
(b)
(c)
2.
3.
4.
5.
[13]
October
28,
2002,
the
CIAC
rendered
its
December
20,
2007,
an
Amended
Decision
was
Holding that the liability for damages was limited to P50,000,000.00, promulgated by the Special Division of Five Former Fifteenth Division
the CIAC ordered KCSI to pay Pioneer the amount of P25,000,000.00, of the CA in light of the dissent of Associate Justice Lucas P. Bersamin,
with interest at 6% per annum from the time of the filing of the case
[17]
up to the time the decision is promulgated, and 12% interest per Amended Decision reads
annum added to the award, or any balance thereof, after it becomes
final and executory. The CIAC further ordered that the arbitration costs
be imposed on both parties on a pro rata basis.[15]
II
THE COURT OF APPEALS ERRED IN LIMITING THE LEGAL
LIABILITY
OF
THE
YARD
TO
THE
SUM
OF P50,000,000.00, IN THAT:
A. STARE
DECISIS RENDERS
INAPPLICABLE ANY INVOCATION OF LIMITED
LIABILITY BY THE YARD.
VI
THE COURT OF APPEALS ERRED IN NOT HOLDING THE
YARD SOLELY LIABLE FOR ARBITRATION COSTS.[19]
On the other hand, KCSI cites the following grounds for the allowance
of its petition, to wit:
1. ABSENCE OF YARD RESPONSIBILITY
IT WAS GRIEVOUS ERROR FOR THE COURT OF APPEALS
TO ADOPT, WITHOUT EXPLANATION, THE CIACS RULING
THAT THE YARD WAS EQUALLY NEGLIGENT BECAUSE OF
ITS FAILURE TO REQUIRE A HOT WORKS PERMIT FOR
THE CUTTING WORK DONE BY ANGELINO SEVILLEJO,
AFTER THE COURT OF APPEALS ITSELF HAD SHOWN
THAT RULING TO BE COMPLETELY WRONG AND
BASELESS.
2. NO CONSTRUCTIVE TOTAL LOSS
IT WAS EQUALLY GRIEVOUS ERROR FOR THE COURT OF
APPEALS TO RULE, WITHOUT EXPLANATION, THAT THE
VESSEL WAS A CONSTRUCTIVE TOTAL LOSS AFTER
HAVING ITSELF EXPLAINED WHY THE VESSEL COULD
NOT BE A CONSTRUCTIVE TOTAL LOSS.
3. FAILURE OR REFUSAL TO ADDRESS
KEPPELS MOTION FOR RECONSIDERATION
FINALLY, IT WAS ALSO GRIEVOUS ERROR FOR THE
COURT OF APPEALS TO HAVE EFFECTIVELY DENIED,
WITHOUT ADDRESSING IT AND ALSO WITHOUT
EXPLANATION,
KEPPELS
PARTIAL
MOTION
FOR
RECONSIDERATION OF THE ORIGINAL DECISION WHICH
SHOWED: 1) WHY PIONEER WAS NOT SUBROGATED TO
THE RIGHTS OF THE VESSEL OWNER AND SO HAD NO
STANDING TO SUE THE YARD; 2) WHY KEPPEL MAY NOT
BE REQUIRED TO REIMBURSE PIONEERS PAYMENTS TO
THE VESSEL OWNER IN VIEW OF THE CO-INSURANCE
CLAUSE IN THE SHIPREPAIR AGREEMENT; AND 3) WHY
PIONEER ALONE
ARBITRATION.
SHOULD
BEAR
THE
COSTS
OF
on
the
award
of
Undeniably, the immediate cause of the fire was the hot work done by from the ceiling void, causing the immediate spread of the fire to the
Angelino Sevillejo (Sevillejo) on the accommodation area of the other areas of the ship.
vessel, specifically on Deck A. As established before the CIAC
The fire broke out shortly after 10:25 and an alarm was
raised (Exh. 1-Ms. Aini Ling,[22] p. 20). Angelino Sevillejo
tried to put out the fire by pouring the contents of a
five-liter drinking water container on it and as he did so,
smoke came up from under Deck A. He got another
container of water which he also poured whence the
smoke was coming. In the meantime, other workers in
the immediate vicinity tried to fight the fire by using fire
extinguishers and buckets of water. But because the fire
was inside the ceiling void, it was extremely difficult to
contain or extinguish; and it spread rapidly because it
was not possible to direct water jets or the fire
extinguishers into the space at the source. Fighting the
fire was extremely difficult because the life jackets and
the construction materials of the Deck B ceiling were
combustible and permitted the fire to spread within the
ceiling void. From there, the fire dropped into the Deck
B accommodation areas at various locations, where
there were combustible materials.Respondent points to
cans of paint and thinner, in addition to the plywood
partitions and foam mattresses on deck B (Exh. 1Mullen,[23] pp. 7-8, 18; Exh. 2-Mullen, pp. 11-12).[24]
Pioneer contends that KCSI should be held liable because Sevillejo was
its employee who, at the time the fire broke out, was doing his
assigned task, and that KCSI was solely responsible for all the hot
works done on board the vessel. KCSI claims otherwise, stating that
the hot work done was beyond the scope of Sevillejos assigned tasks,
the same not having been authorized under the Work Order [25] dated
by the vessels contractors on the passenger accommodation decks. between February 4 and 6, 2000, the welders of KCSI: (a) did the
[27]
This was corroborated by the statements of the vessels hotel welding works on the ceiling hangers in the lobby of Deck A; (b) did
manager Marcelo Rabe[28] and the vessels quality control officer the welding and cutting works on the deck beam to access aircon
Joselito Esteban.[29] KCSI knew of the unfinished hot works in the ducts; and (c) did the cutting and welding works on the protection
passenger
accommodation
areas. Its
safety
supervisor
Esteban bars
at
the
tourist
Cabalhug confirmed that KCSI was aware that the owners of this of P150.00/welder/hour.
dining
[32]
salon
of
Deck
B, [31] at
rate
vessel (M/V Superferry 3) had undertaken their own (hot) works prior KCSI, admitted that as early as February 3, 2000 (five days before the
to arrival alongside (sic) on 26th January, and that no hot work permits fire) [the Yard] had acknowledged Dr. Jonigas authority to order such
could thereafter be issued to WG&As own workers because this was works or additional jobs.[33]
not allowed for the Superferry 3. [30] This shows that Dr. Joniga had
authority only to request the performance of hot works by KCSIs
welders as needed in the repair of the vessel while on dry dock.
Third. KCSI welders covered by the Work Order performed hot works only. The Work Order was only a special arrangement between KCSI
on various areas of the M/V Superferry 3, aside from its promenade and WG&A that meant additional cost to the latter.
deck. This was a recognition of Dr. Jonigas authority to request the
conduct of hot works even on the passenger accommodation decks,
subject to the provision of the January 26, 2000 Work Order that KCSI
would supply welders for the promenade deck of the ship.
Fourth. At the time of the fire, Sevillejo was an employee of KCSI and
was subject to the latters direct control and supervision.
Indeed, KCSI was the employer of Sevillejopaying his salaries;
retaining the power and the right to discharge or substitute him with
another welder; providing him and the other welders with its
equipment; giving him and the other welders marching orders to work
on the vessel; and monitoring and keeping track of his and the other
welders activities on board, in view of the delicate nature of their
work.[34] Thus, as such employee, aware of KCSIs Safety Regulations
on Vessels Afloat/Dry, which specifically provides that (n)o hotwork
(welding/cutting works) shall be done on board [the] vessel without
[a] Safety Permit from KCSI Safety Section, [35] it was incumbent upon
Sevillejo to obtain the required hot work safety permit before starting
the work he did, including that done on Deck A where the fire started.
Fifth. There was a lapse in KCSIs supervision of Sevillejos work at the
time the fire broke out.
It was established that no hot works could be hidden from or remain
undetected by KCSI because the welding cables and the gas hoses
emanating from the dock would give the hot works away. Moreover,
KCSI had roving fire watchmen and safety assistants who were moving
around
the
by Restituto
Rebaca
that it did its duty when it prohibited Sevillejo from continuing the hot
work. However, it is noteworthy that, after purportedly scolding In this light, therefore, Sevillejo, being one of the specially trained
Sevillejo for working without a permit and telling him to stop until the welders specifically authorized by KCSI to do the hot works on M/V
permit was acquired and the other safety measures were observed, Superferry 3 to the exclusion of other workers, failed to comply with
Rebaca left without pulling Sevillejo out of the work area or making the strict safety standards of KCSI, not only because he worked
sure that the latter did as he was told. Unfortunately for KCSI, Sevillejo without the required permit, fire watch, fire buckets, and
reluctantly proceeded with his cutting of the bulkhead door at Deck A extinguishers, but also because he failed to undertake other
after Rebaca left, even disregarding the 4-inch marking set, thus precautionary measures for preventing the fire. For instance, he could
have, at the very least, ensured that whatever combustible material
cutting the door level with the deck, until the fire broke out.
may have been in the vicinity would be protected from the sparks
caused by the welding torch. He could have easily removed the life
This conclusion on the failure of supervision by KCSI was absolutely
supported by Dr. Eric Mullen of the Dr. J.H. Burgoyne & Partners
(International) Ltd., Singapore, KCSIs own fire expert, who observed
that
jackets from the ceiling void, as well as the foam mattresses, and
covered any holes where the sparks may enter.
Conjunctively, since Rebaca was already aware of the hazard,
he should have taken all possible precautionary measures, including
those above mentioned, before allowing Sevillejo to continue with his
hot work on Deck A. In addition to scolding Sevillejo, Rebaca merely was doing, but failed to supervise him with the degree of care
checked that no fire had started yet. Nothing more. Also, inasmuch as warranted by the attendant circumstances.
KCSI had the power to substitute Sevillejo with another electric arc
welder, Rebaca should have replaced him.
Neither can Dr. Joniga be faulted for not removing the life
There is negligence when an act is done without exercising the
competence that a reasonable person in the position of the actor
would recognize as necessary to prevent an unreasonable risk of harm
to another. Those who undertake any work calling for special skills are
required to exercise reasonable care in what they do. [38] Verily, there is
an obligation all persons have to take due care which, under ordinary
circumstances of the case, a reasonable and prudent man would
take. The omission of that care constitutesnegligence. Generally, the
degree of care required is graduated according to the danger a person
or property may be subjected to, arising from the activity that the
jackets from the ceiling void for two reasons (1) the life jackets were
not even contributory to the occurrence of the fire; and (2) it was not
incumbent upon him to remove the same. It was shown during the
hearings before the CIAC that the removal of the life jackets would not
have made much of a difference. The fire would still have occurred
due to the presence of other combustible materials in the area. This
was the uniform conclusion of both WG&As [40] and KCSIs[41] fire
experts. It was also proven during the CIAC proceedings that KCSI did
not see the life jackets as being in the way of the hot works, thus,
making their removal from storage unnecessary.[42]
extraordinary
care. Similarly,
the
imminent thedanger, the higher degree of care warranted. [39] In this assigned task. His negligence was the proximate cause of the fire on
aspect, KCSI failed to exercise the necessary degree of caution and board M/V Superferry 3. As he was then definitely engaged in the
foresight called for by the circumstances.
xxxx
Sevillejo.[44] Consequently,
it
is
responsible
for
the
damages caused by the negligent act of its employee, and its liability
is primary and solidary. All that is needed is proof that the employee
has, by his negligence, caused damage to another in order to make
the employer responsible for the tortuous act of the former. [45] From
the foregoing disquisition, there is ample proof of the employees
negligence.
B. The right of subrogation
Pioneer asseverates that there existed a total constructive loss so that
it had to pay WG&A the full amount of the insurance coverage and, by
operation of law, it was entitled to be subrogated to the rights of
WG&A to claim the amount of the loss. It further argues that the
limitation of liability clause found in the Shiprepair Agreement is null
and void for being iniquitous and against public policy.
KCSI counters that a total constructive loss was not adequately proven
by Pioneer, and that there is no proof of payment of the insurance
proceeds. KCSI insists on the validity of the limited-liability clause up
to P50,000,000.00, because WG&A acceded to the provision when it
executed the Shiprepair Agreement. KCSI also claims that the salvage
value of the vessel should be deducted from whatever amount it will
be made to pay to Pioneer.
policies
on Hull and
Machinery. In
making
this
determination, only expenses incurred or to be incurred
by reason of a single accident or a sequence of
damages arising from the same accident shall be taken
into account, but expenses incurred prior to tender of
abandonment shall not be considered if such are to be
claimed separately under the Sue and Labor clause. x x
x.
In the course of the arbitration proceedings, Pioneer adduced
in evidence the estimates made by three (3) disinterested and
qualified shipyards for the cost of the repair of the vessel, specifically:
(a) P296,256,717.00, based on the Philippine currency equivalent of
insurance
policies
in
question
expressly
provided
the
following:
IMPORTANT
This insurance is subject to English jurisdiction, except
in the event that loss or losses are payable in the
Philippines, in which case if the said laws and customs
of England shall be in conflict with the laws of the
Republic of the Philippines, then the laws of the
Republic of the Philippines shall govern. (Underscoring
supplied.)
KCSI denies the liability because, aside from its claim that it
cannot be held culpable for negligence resulting in the destructive
fire, there was no constructive total loss, as the amount of damage
was only US$3,800,000.00 or P170,611,260.00, the amount of repair
expense quoted by Simpson, Spence & Young.
In the face of this apparent conflict, we hold that Section 139 peril under the marine insurance policies obtained by WG&A from
of the Insurance Code should govern, because (1) Philippine law is Pioneer. The estimates given by the three disinterested and qualified
shipyards
show
that
exceed P270,000,000.00,
the
or
damage
of
the
to
the
total
ship
value
would
of
the
verify and confirm the extent of the damage. The Adjustment Report
verified and confirmed that the damage to the vessel amounted to a
constructive total loss and that the claim for P360,000,000.00 under reference to a lawful claim or right, so that he who is substituted
the policies was compensable.[46] It is also noteworthy that KCSI did succeeds to the rights of the other in relation to a debt or claim,
not cross-examine Henson Lim, Director of Richards Hogg, whose including its remedies or securities. The principle covers a situation
affidavit-direct testimony submitted to the CIAC confirmed that the wherein an insurer has paid a loss under an insurance policy is
entitled to all the rights and remedies belonging to the insured against
proceeds
from
Pioneer. On
this
note,
we
find
as
Clauses 20 and 22(a) of the Shiprepair Agreement are without circumstances and likely consequences. There must be persuasive
[52]
This
factual and legal foundation. They are unfair and inequitable under evidence to show an actual intention to relinquish the right.
the premises. It was established during arbitration that WG&A did not has not been demonstrated in this case.
voluntarily and expressly agree to these provisions. Engr. Elvin F.
Bello, WG&As fleet manager, testified that he did not sign the fineprint portion of the Shiprepair Agreement where Clauses 20 and 22(a)
were found, because he did not want WG&A to be bound by
them. However, considering that it was only KCSI that had shipyard
facilities large enough to accommodate the dry docking and repair of
big vessels owned by WG&A, such as M/V Superferry 3, in Cebu, he
had to sign the front portion of the Shiprepair Agreement; otherwise,
the vessel would not be accepted for dry docking. [50]
Indeed, the assailed clauses amount to a contract of adhesion
imposed on WG&A on a take-it-or-leave-it basis. A contract of
adhesion is so-called because its terms are prepared by only one
party, while the other party merely affixes his signature signifying his
adhesion thereto. Although not invalid, per se, a contract of adhesion
is void when the weaker party is imposed upon in dealing with the
dominant bargaining party, and its option is reduced to the alternative
of taking it or leaving it, completely depriving such party of the
opportunity to bargain on equal footing.[51]
deemed KCSI as a co-assured under the policies would have had the annum from the date the award becomes final and executory until its
effect of nullifying any claim of WG&A from Pioneer for any loss or full satisfaction.
damage caused by the negligence of KCSI. No ship owner would agree
to make
policy.Otherwise, any claim for loss or damage under the policy would It is only fitting that both parties should share in the burden of the
be rendered nugatory. WG&A could not have intended such a result. cost of arbitration, on a pro rata basis. We find that Pioneer had a
[54]
(or
US$468,333.33)
and
US$363,289.50,
respectively. WG&As claim for the upkeep of the wreck until the same
entitled
to
claim
reimbursement
of
the
amount
it
paid
to
were sold amounts to P8,521,737.75 (or US$157,809.96), to be Corporation in G.R. No. 180896-97 and the Petition of Keppel Cebu
deducted from the proceeds of the sale of the machinery and the hull, Shipyard, Inc. in G.R. No. 180880-81 are PARTIALLY GRANTED and
for a net recovery of US$673,812.87, or equivalent to P30,252,648.09, the Amended Decision dated December 20, 2007 of the Court of
at P44.8977/$1, the prevailing exchange rate when the Request for Appeals is MODIFIED. Accordingly, KCSI is ordered to pay Pioneer the
Arbitration was filed. Not considering this salvage value in the award amount of P360,000,000.00 less P30,252,648.09, equivalent to the
would amount to unjust enrichment on the part of Pioneer.
annum reckoned from the time the Request for Arbitration was filed
[55]
the
award
in
favor
of
Pioneer
in
the
until this Decision becomes final and executory, plus twelve percent
amount (12%) interest per annum on the said amount or any balance thereof
of P350,146,786.89 should earn interest at 6% per annum from the from the finality of the Decision until the same will have been fully
filing
of
the
case
executory. Thereafter,
until
the
the
rate
of
award
interest
becomes
shall
final
be
and paid. The arbitration costs shall be borne by both parties on a pro