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ABOITIZ SHIPPING CORPORATION v. INSURANCE COMPANY OF NORTH AMERICA

FACTS:

The petitioner in this case is Aboitiz Shipping Corporation, while the respondent is Insurance Company of North America (ICNA). MSAS Cargo International Limited (MSAS) procured a marine insurance policy from ICNA for a transshipment of wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project (STIP). The cargo was shipped from Hamburg, Germany on board M/S Katsuragi and was off-loaded at Singapore and transshipped on board M/S Vigour Singapore. Eventually, the cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz) in Manila and was loaded on board their vessel, MV Super Concarrier I, to be transported to Cebu City. However, upon delivery to the consignee, it was discovered that the cargo had been damaged by water. The consignee filed a formal claim with Aboitiz, which they refused to settle. The consignee then made an insurance claim with ICNA and an ocular inspection and survey of the damage was conducted. It was determined that heavy rains on July 28 and 29, 1993, caused water damage to the shipment. Aboitiz still refused to settle the claim, prompting ICNA to file a case against them.

Insurance Company of North America (ICNA) issued Marine Policy No. 87GB 4475 to cover the shipment of cargo by Aboitiz Shipping Corporation from Mariveles, Bataan to Cebu City. The cargo sustained damages while it was left grounded outside Aboitiz's warehouse. ICNA paid the consignee the amount of P280,176.92 and was subrogated to the rights of the consignee. ICNA formally advised Aboitiz of the claim and subrogation receipt, but Aboitiz refused to settle the claim. ICNA then filed a civil complaint against Aboitiz, seeking collection of actual damages, plus interest and attorney's fees. Aboitiz denied liability, contending that ICNA had no cause of action and lacked capacity to sue. The RTC ruled in favor of Aboitiz, finding that ICNA failed to prove it was the real party-in-interest and that it was a foreign corporation duly licensed to do business in the Philippines. ICNA appealed to the CA, which reversed the RTC's decision and ordered Aboitiz to pay ICNA the amount claimed.

The case involves a claim for reimbursement by Insurance Company of North America (ICNA) against Aboitiz Shipping Corporation (Aboitiz). ICNA, an unlicensed foreign corporation, insured the cargo of MSAS Cargo International Limited (MSAS) and issued a marine insurance policy. The cargo was shipped from Manila to Cebu City, but it was allegedly damaged during transport.

ICNA paid the insurance claim to MSAS and its authorized agent, Shinetech Trading and Industrial Philippines (STIP), issued a subrogation receipt in favor of ICNA. ICNA then filed a complaint against Aboitiz, seeking reimbursement for the full amount of the loss sustained by the subject cargo.

Aboitiz filed a motion to dismiss the complaint, arguing that ICNA had no cause of action because it was an unlicensed foreign corporation, and that the formal claim of STIP was not made within the period prescribed by Article 366 of the Code of Commerce. The trial court granted the motion to dismiss, finding that ICNA was not the real party-in-interest and that the claim was not timely filed.

On appeal, the Court of Appeals (CA) reversed the trial court's decision. The CA held that even assuming ICNA was an unlicensed foreign corporation, it was still entitled to claim reimbursement from Aboitiz by virtue of subrogation under the contract of insurance. The CA also found that ICNA, either as the foreign company or its authorized agent in the country, was the real party-in-interest to bring the suit. The CA further ruled that the carrier's fault or negligence was not overcome by countervailing evidence, making Aboitiz liable for the loss or damage sustained by the subject cargo.

Aboitiz raised several issues before the Supreme Court, challenging the CA's ruling on the right of subrogation, the validity of the suit filed by ICNA, the indorsement of the insurance policy, and the extent and cause of the damage to the cargo.

ISSUES:

  1. Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from petitioner Aboitiz?

  2. Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce?

  3. Can petitioner be held liable on the claim for damages?

RULING:

The Supreme Court answers the triple questions in the affirmative.

PRINCIPLES:

  1. A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts. It may bring suits on isolated business transactions.

  2. Under the Code of Commerce (Article 366), the notice of claim must be made within twenty-four (24) hours from receipt of the cargo if the damage is not apparent from the outside of the package.

  3. Shipment damage and carrier liability: Article 1735 of the Civil Code presumes that common carriers are at fault or negligent if goods are lost, destroyed or deteriorated, unless they prove they observed extraordinary diligence required by law.

  4. Subrogation rights of the insurer: Article 2207 of the Civil Code provides that the insurance company shall be subrogated to the rights of the insured against the wrongdoer upon payment of indemnity.

  5. Reasonable and practical construction of notice requirement based on case circumstances to protect carriers from false claims.