CASE BRIEF NO. 2019-0063


“The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.


CASE: Keihin-Everett Forwarding Co., Inc. vs. Tokio Marine Malayan Insurance Co., Inc. and Sunfreight Forwarders & Customs Brokerage, Inc. [G.R. No. 212107, January 28, 2019]

PONENTE: Justice Jose C. Reyes, Jr.

SUBJECT:
A.       CIVIL LAW:
          i.        Obligations and Contracts– Solidary and Joint Obligations
          ii.       Article 1236 of the Civil Code
          iii.      Article 2207 of the Civil Code
          iv.      Law on Transportation
                   – Article 1733 of the Civil Code
                   – Common carriers
                   – Liabilities and obligations of common carriers
                   – Exercise of extra-ordinary diligence

B.       REMEDIAL LAW:
          i.        Actionable Document
          ii.       Section 7, Rule 8 of the 1997 Rules of Court

C.       COMMERCIAL LAW:
          i.        Law on Insurance – Right to subrogation

FACTS:
Honda Trading ordered 80 bundles of Aluminum Alloy Ingots from Indonesia.

Honda Trading insured the entire shipment with TKMNFI under Policy No. 83-00143689. It also engaged the services of Keihin-Everett to transport and deliver the same to its warehouse in Laguna. Meanwhile, Keihin-Everett had an Accreditation Agreement with Sunfreight Forwarders whereby the latter undertook to render common carrier services for the former within the Philippines.

When the shipment arrived in Manila, Keihin-Everett turned over it to Sunfreight Forwarders for delivery to Honda Trading. En route to the latter’s warehouse, the truck carrying the containers was hijacked. As a consequence, Honda Trading suffered losses.

Claiming to have paid Honda Trading’s insurance claim for the loss it suffered, “Tokio Marine” (not TKMNFI) filed a suit for damages against Keihin-Everett. It maintained that it had been subrogated to all the rights and causes of action pertaining to Honda Trading.

The RTC rendered a Decision finding Keihin-Everett and Sunfreight Forwarders jointly and severally liable to pay Tokio Marine. The RTC found the driver of Sunfreight Forwarders as the cause of the evil caused. Under Article 2180 of the Civil Code, it provides: “Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.” Thus, Sunfreight Forwarders is hereby held liable for the loss of the subject cargoes with Keihin-Everett, being a common carrier.

Keihin-Everett moved for reconsideration of the foregoing RTC Decision. However, its motion was denied for lack of merit. Hence, Keihin-Everett filed an appeal with the Court of Appeals.

The CA modified the ruling of the RTC insofar as the solidary liability of Keihin-Everett and Sunfreight Forwarders is concerned. The CA went to rule that solidarity is never presumed. There is solidary liability when the obligation so states, or when the law or the nature of the obligation requires the same. Thus, because of the lack of privity between Honda Trading and Sunfreight Forwarders, the latter cannot simply be held jointly and severally liable with Keihin-Everett for Tokio Marine’s claim as subrogee.

Dissatisfied with the CA Decision, Keihin-Everett went to the Supreme Court (this Court).


ISSUES:
A.       Whether the case should have been dismissed for failure of Tokio Marine to attach or state in the Complaint the actionable document or the insurance policy between the insurer and the insured?

B.       Whether Tokio Marine is not the insurer but TMNFIC.
          a.       Whether Tokio Marine is entitled to be reimbursed of what it had paid to Honda Trading.

C.       Whether or not there is legal subrogation in this case.

D.      Whether the CA is correct in ruling that Keihin-Everett is still liable despite the fact that the cargoes were lost when in the custody of Sunfreight Forwarders.
          a.       What are the responsibilities of a common carrier in carriage of goods.
          b.       Whether hijacking of the goods is considered a fortuitous event.

E.       Whether the liability of Keihin-Everett and Sunfreight Forwarders are solidary.


RULING:
A.       Keihin-Everett argued that the case should have been dismissed for failure of Tokio Marine to attach or state in the Complaint the actionable document or the insurance policy between the insurer and the insured, in clear violation of Section 7, Rule 8 of the 1997 Rules of Court, which states:

SEC. 7. Action or defense based on document. — Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

It bears to stress that failure of Tokio Marine to attach in the Complaint the contract of insurance between the insurer (TKMNFI) and the insured (Honda Trading) is not fatal to its cause of action.

True, in the case of Malayan Insurance Co., Inc. v. Regis Brokerage Corp. (690 Phil. 621) relied upon by Keihin-Everett, the Court makes it imperative for the plaintiff (whose action is predicated upon his right as a subrogee) to attach the insurance contract in the complaint in accordance with Section 7, Rule 8 of the 1997 Rules of Court, just so in order to establish the legal basis of the right to subrogation.

However, in the aforesaid case, the Court did not suggest an outright dismissal of a complaint in case of failure to attach the insurance contract in the complaint. Promoting a reasonable construction of the rules so as not to work injustice, the Court makes it clear that failure to comply with the rules does not preclude the plaintiff to offer it as evidence. Thus:

It may be that there is no specific provision in the Rules of Court which prohibits the admission in evidence of an actionable document in the event a party fails to comply with the requirement of the rule on actionable documents under Section 7, Rule 8.

Unfortunately, in the Malayan case cited by Keihin-Everett, Malayan not only failed to attach or set forth in the complaint the insurance policy, it likewise did not present the same as evidence before the trial court or even in the CA.

The instant case cannot be dismissed just like that. Unlike in the Malayan case, Tokio Marine presented as evidence, not only the Insurance Policy, but also the Subrogation Receipt evidencing that it paid Honda Trading the sum of US$38,855.83 in full settlement of the latter’s claim under the said policy. During the trial, Keihin-Everett even had the opportunity to examine the said documents and conducted a cross-examination of the said Contract of Insurance.  By presenting the insurance policy constitutive of the insurance relationship of the parties, Tokio Marine was able to confirm its legal right to recover as subrogee of Honda Trading.

B.      
Keihin-Everett pointed out that the Insurance Policy shows in its face that Honda Trading procured the insurance from TMNFIC and not from Tokio Marine. Hence, it argued that Tokio Marine has no right to institute the present action.

While this assertion is true, the Insurance Policy itself expressly made Tokio Marine as the party liable to pay the insurance claim of Honda Trading pursuant to the Agency Agreement entered into by and between Tokio Marine and TMNFIC. As properly appreciated by both the RTC and the CA, the Agency Agreement shows that TMNFIC had subsequently changed its name to that of Tokio Marine. By agreeing to this stipulation in the Insurance Policy, Honda Trading binds itself to file its claim from Tokio Marine and thereafter to accept payment from it.

At any rate, even if we consider Tokio Marine as a third person who voluntarily paid the insurance claims of Honda Trading, it is still entitled to be reimbursed of what it had paid. As held by this Court in the case of Pan Malayan Insurance Corp. v. Court of Appeals (262 Phil. 919), the insurer who may have no rights of subrogation due to “voluntary” payment may nevertheless recover from the third party responsible for the damage to the insured property under Article 1236of the Civil Code which provides”,

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

C.      
Since the insurance claim for the loss sustained by the insured shipment was paid by Tokio Marine as proven by the Subrogation Receipt – showing the amount paid and the acceptance made by Honda Trading, it is inevitable that it is entitled, as a matter of course, to exercise its legal right to subrogation as provided under Article 2207 of the Civil Code as follows:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

It must be stressed that the Subrogation Receipt only proves the fact of payment. This fact of payment grants Tokio Marine subrogatory right which enables it to exercise legal remedies that would otherwise be available to Honda Trading as owner of the hijacked cargoes as against the common carrier (Keihin-Everett). In other words, the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. [Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824, 832 (2001)]. 

The payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies which the insured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim (Equitable Insurance Corp v. Transmodal International, Inc., G.R. No. 223592, August 7, 2017)

Consequently, the payment made by Tokio Marine to Honda Trading operates as an equitable assignment to the former of all the remedies which the latter may have against Keihin-Everett.

D.     
Keihin-Everett, in an attempt to absolve itself from liability, argued that at the time when the cargoes were lost, it was already in the custody of Sunfreight Forwarders.

Notwithstanding that the cargoes were in the possession of Sunfreight Forwarders when they were hijacked, Keihin-Everett is not absolved from its liability as a common carrier. Keihin-Everett seems to have overlooked that it was the one whose services were engaged by Honda Trading to clear and withdraw the cargoes from the pier and to transport and deliver the same to its warehouse. In turn, Keihin-Everett accredited Sunfreight Forwarders to render common carrier service for it by transporting inland goods. There was no privity of contract between Honda Trading and Sunfreight Forwarders. Hence, Keihin-Everett, as the common carrier, remained responsible to Honda Trading for the lost cargoes.

In this light, Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence. To be sure, under Article 1736 of the Civil Code, a common carrier’s extraordinary responsibility over the shipper’s goods lasts from the time these goods are unconditionally placed in the possession of, and received by, the carrier for transportation, until they are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. Hence, at the time Keihin-Everett turned over the custody of the cargoes to Sunfreight Forwarders for inland transportation, it is still required to observe extraordinary diligence in the vigilance of the goods. Failure to successfully establish this carries with it the presumption of fault or negligence, thus, rendering Keihin-Everett liable to Honda Trading for breach of contract.

It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force majeure [Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., 789 Phil. 413 (2016)]. Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat, violence or force. In this case, Keihin-Everett failed to prove the existence of the aforementioned instances.

E.
The liability of Keihin-Everett and Sunfreight Forwarders are not solidary. There is solidary liability only when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires.Thus, under Article 2194 of the Civil Code, liability of two or more persons is solidary in quasi-delicts. But in this case, Keihin-Everett’s liability to Honda Trading (to which Tokio Marine had been subrogated as an insurer) stemmed not from quasi-delict, but from its breach of contract of carriage. Sunfreight Forwarders was only impleaded in the case when Keihin-Everett filed a third-party complaint against it. As mentioned earlier, there was no direct contractual relationship between Sunfreight Forwarders and Honda Trading. Accordingly, there was no basis to directly hold Sunfreight Forwarders liable to Honda Trading for breach of contract. If at all, Honda Trading can hold Sunfreight Forwarders for quasi-delict, which is not the action filed in the instant case.

It is not expected however that Keihin-Everett must shoulder the entire loss. Following the ruling in Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc. Keihin-Everett has a right to be reimbursed based on its Accreditation Agreement with Sunfreight Forwarders. By accrediting Sunfreight Forwarders to render common carrier services to it, Keihin-Everett in effect entered into a contract of carriage with a fellow common carrier, Sunfreight Forwarders.

It is undisputed that the cargoes were lost when they were in the custody of Sunfreight Forwarders. Hence, under Article 1735of the Civil Code, the presumption of fault on the part of Sunfreight Forwarders (as common carrier) arose. Since Sunfreight Forwarders failed to prove that it observed extraordinary diligence in the performance of its obligation to Keihin-Everett, it is liable to the latter for breach of contract.

Consequently, Keihin-Everett is entitled to be reimbursed by Sunfreight Forwarders due to the latter’s own breach occasioned by the loss and damage to the cargoes under its care and custody. As with the cited Torres-Madrid Brokerage case, Sunfreight Forwarders, too, has the option to absorb the loss or to proceed after its missing driver, the suspect in the hijacking incident.

Related Case Briefs:
a)       Malayan Insurance Co., Inc. v. Regis Brokerage Corp. (690 Phil. 621)
b)       Pan Malayan Insurance Corp. v. Court of Appeals (262 Phil. 919)
c)       Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824, 832 (2001)
d)       Equitable Insurance Corp v. Transmodal International, Inc., G.R. No. 223592, August 7, 2017
e)       Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., 789 Phil. 413 (2016)
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THINGS DECIDED:

A.       True, in the case of Malayan Insurance Co., Inc. v. Regis Brokerage Corp. (690 Phil. 621) relied upon by Keihin-Everett, the Court makes it imperative for the plaintiff (whose action is predicated upon his right as a subrogee) to attach the insurance contract in the complaint in accordance with Section 7, Rule 8 of the 1997 Rules of Court, just so in order to establish the legal basis of the right to subrogation.


However, in the aforesaid case, the Court did not suggest an outright dismissal of a complaint in case of failure to attach the insurance contract in the complaint. Promoting a reasonable construction of the rules so as not to work injustice, the Court makes it clear that failure to comply with the rules does not preclude the plaintiff to offer it as evidence. Thus:

It may be that there is no specific provision in the Rules of Court which prohibits the admission in evidence of an actionable document in the event a party fails to comply with the requirement of the rule on actionable documents under Section 7, Rule 8.

B.       The insurer who may have no rights of subrogation due to “voluntary” payment may nevertheless recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code.

C.       The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. [Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824, 832 (2001)].

D.      Notwithstanding that the cargoes were in the possession of Sunfreight Forwarders when they were hijacked, Keihin-Everett is not absolved from its liability as a common carrier.

E.       Under Article 1736 of the Civil Code, a common carrier’s extraordinary responsibility over the shipper’s goods lasts from the time these goods are unconditionally placed in the possession of, and received by, the carrier for transportation, until they are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.

F.       It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force majeure [Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc., 789 Phil. 413 (2016)]. Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat, violence or force. 

G.      There is solidary liability only when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires.Thus, under Article 2194 of the Civil Code, liability of two or more persons is solidary in quasi-delicts. But in this case, Keihin-Everett’s liability to Honda Trading (to which Tokio Marine had been subrogated as an insurer) stemmed not from quasi-delict, but from its breach of contract of carriage.

‘Stand by things decided’ ~ Stare Decisis


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