60. Filipino Merchants v. C.A.

179 SCRA 638 (1989)

1. Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse terms. What was imported in the SS Bougainville
was 59.940 metric tons at $395.42 a ton. The cargo was unloaded from the ship and 227 bags were
found to be in bad condition by the arrastre.

2. Choa made a formal claim against the defendant Filipino Merchants Insurance Company for
P51,568.62 He also presented a claim against the ship, but the defendant Filipino Merchants
Insurance Company refused to pay the claim. The plaintiff brought an action against the company
and presented a third party complaint against the vessel and the arrastre contractor.

3. The court below, after trial on the merits, rendered judgment in favor of private respondent, for the
sum of P51,568.62 with interest at legal rate.

4. The common carrier, Compagnie, was ordered to pay as a joint debtor.

ISSUE/S:
1. Whether or not the "all risks" clause of the marine insurance policy held the petitioner liable to the
private respondent for the partial loss of the cargo, notwithstanding the clear absence of proof of
some fortuitous event, casualty, or accidental cause to which the loss is attributable [NO]

2. Whether or not the Court of Appeals erred in not holding that the private respondent had no
insurable interest in the subject cargo, hence, the marine insurance policy taken out by private
respondent is null and void [NO]

RATIONALE: 

1. The "all risks clause" of the Institute Cargo Clauses read as follows:
“5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no
case be deemed to extend to cover loss, damage, or expense proximately caused by delay or
inherent vice or nature of the subject-matter insured. Claims recoverable hereunder shall be payable
irrespective of percentage.“

An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses
by an accidental cause of any kind. “Accident” is construed by the courts in their ordinary and
common acceptance.

The very nature of the term "all risks" must be given a broad and comprehensive meaning as
covering any loss other than a willful and fraudulent act of the insured. This is pursuant to the very
purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties
of logical explanation or some mystery surround the loss or damage to property.
Institute Cargo Clauses extends to all damages/losses suffered by the insured cargo except (a) loss
or damage or expense proximately caused by delay, and (b) loss or damage or expense proximately
caused by the inherent vice or nature of the subject matter insured.
 Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril,
but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or
damage for which it seeks compensation. The insured under an "all risks insurance policy" has the
initial burden of proving that the cargo was in good condition when the policy attached, and that the
cargo was damaged when unloaded from the vessel. The burden then shifts to the insurer to show
the exception to the coverage. This creates a special type of insurance which extends coverage to
risks not usually contemplated and avoids putting upon the insured the burden of establishing that
the loss was due to the peril falling within the policy's coverage; the insurer can avoid coverage
upon demonstrating that a specific provision expressly excludes the loss from coverage.

Under an 'all risks' policy, it was sufficient to show that there was damage occasioned by some
accidental cause of any kind, and there is no necessity to point to any particular cause.

2. Section 13 of the Insurance Code- anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction
Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded
on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which
the expectancy arises.

Choa, as vendee/consignee of the goods in transit, has such existing interest as may be the subject
of a valid contract of insurance. His interest over the goods is based on the perfected contract of
sale. The perfected contract of sale between him and the shipper of the goods operates to vest in
him an equitable title even before delivery or before conditions have been performed.

Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, for
the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer. The
Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of
the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of
the goods and paid the insurance premium covering them.

DISPOSITIVE PORTION: 
WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent Court of
Appeals is AFFIRMED in toto.

SO ORDERED.

Additional Notes:

Section 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof,
of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

1. COMMERCIAL LAW; MARINE INSURANCE; "ALL RISKS POLICY;" COVERS ALL LOSSES BY ANY KIND
OF ACCIDENTS. — An "all risks policy" should be read literally as meaning all risks whatsoever and
covering all losses by an accidental cause of any kind. The terms "accident" and "accidental", as used
in insurance contracts, have not acquired any technical meaning. They are construed by the courts in
their ordinary and common acceptance. Thus, the terms have been taken to mean that which happens
by chance or fortuitously, without intention and design, and which is unexpected, unusual and
unforeseen. An accident is an event that takes place without one’s foresight or expectation; an event
that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not
expected.

2. ID.; INSURANCE; CONSIDERED CONTRACTS OF INDEMNITY; IF TERMS ARE CLEAR, POLICY MUST
BE UNDERSTOOD IN THEIR PLAIN, ORDINARY AND POPULAR SENSE. — Contracts of insurance are
contracts of indemnity upon the terms and conditions specified in the policy. The agreement has the
force of law between the parties. The terms of the policy constitute the measure of the insurer’s
liability. If such terms are clear and unambiguous, they must be taken and understood in their plain,
ordinary and popular sense.

3. ID.; ID.; INSURABLE INTEREST, DEFINITION OF; KINDS. — Section 13 of the Insurance Code
defines insurable interest in property as every interest in property, whether real or personal, or any
relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly
damnify the insured. In principle, anyone has an insurable interest in property who derives a benefit
from its existence or would suffer loss from its destruction whether he has or has not any title in, or
lien upon or possession of the property. Insurable interest in property may consist in (a) an existing
interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with
an existing interest in that out of which the expectancy arises.

4. ID.; ID.; VENDEE OF GOODS INSURED HAS AN EQUITABLE TITLE EVEN BEFORE DELIVERY ON
PERFORMANCE OF CONDITIONS OF SALE. — Herein private respondent, as vendee/consignee of the
goods in transit has such existing interest therein as may be the subject of a valid contract of
insurance. His interest over the goods is based on the perfected contract of sale. The perfected
contract of sale between him and the shipper of the goods operates to vest in him an equitable title
even before delivery or before he performed the conditions of the sale. The contract of shipment,
whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether
the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even
without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to
be the subject of insurance.

5. CIVIL LAW; SALES; DELIVERY OF GOODS ON BOARD THE CARRYING VESSEL CONSIDERED AN
ACTUAL DELIVERY. — Article 1523 of the Civil Code provides that where, in pursuance of a contract of
sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed
to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present
case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels
partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of
loss of the goods and paid the insurance premium covering them.

6. COMMERCIAL LAW; CODE OF COMMERCE; C & F CONTRACTS MEAN SELLER MUST PAY THE COSTS
AND FREIGHT BUT BUYER ASSUMES RISKS OF LOSS. — C & F contracts are shipment contracts. The
term means that the price fixed includes in a lump sum the cost of the goods and freight to the named
destination. It simply means that the seller must pay the costs and freight necessary to bring the
goods to the named destination but the risk of loss or damage to the goods is transferred from the
seller to the buyer when the goods pass the ship’s rail in the port of shipment.

7. REMEDIAL LAW; APPEAL; ISSUE NOT RAISED IN THE COURT A QUO CANNOT BE RAISED FOR THE
FIRST TIME ON APPEAL. — It is a settled rule that an issue which has not been raised in the court a
quo cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process. This is but a permuted restatement of the long settled rule that when a party
deliberately adopts a certain theory, and the case is tried and decided upon that theory in the court
below, he will not be permitted to change his theory on appeal because, to permit him to do so, would
be unfair to the adverse party.