View full case

MAYER STEEL PIPE CORPORATION v. CA

FACTS:

Petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. Mayer shipped the goods to Hongkong, but a substantial portion of the goods was found to be damaged upon arrival. Mayer had insured the goods against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). Mayer and Hongkong filed a claim against the insurers for indemnity. Charter paid a partial amount, while South Sea refused to pay, alleging that the damage was due to factory defects not covered by the insurance policies. Petitioners filed an action to recover the remaining amount from the insurers.

ISSUES:

  1. Whether petitioners' cause of action had already prescribed under Section 3(6) of the Carriage of Goods by Sea Act.

  2. Whether the complaint should be dismissed based on the alleged prescription of the cause of action.

RULING:

  1. The cause of action had not prescribed under Section 3(6) of the Carriage of Goods by Sea Act because this provision applies only to the carrier's liability and not to the insurer's liability, which is based on the contract of insurance and is governed by the Insurance Code. The prescriptive period for the insurance contract is ten years under Article 1144 of the New Civil Code.

  2. The complaint should not be dismissed because the claim against the insurer for indemnity is still within the ten-year prescriptive period provided by law for written contracts.

PRINCIPLES:

  1. The Carriage of Goods by Sea Act governs the relationship between the carrier and the shipper, consignee, and/or insurer, but it does not govern the relationship between the shipper and the insurer.

  2. An "all risks" insurance policy covers all types of loss or damage unless caused by the willful or fraudulent act of the insured.

  3. The prescriptive period for an insurance contract claim is ten years in accordance with Article 1144 of the New Civil Code.

  4. The ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro should be applied to bar claims by the insurer against the carrier if filed beyond the one-year period, but it does not bar claims by the shipper against the insurer based on the insurance contract.