FACTS:

The case involves an appeal filed by Keihin-Everett Forwarding Co., Inc. (Keihin-Everett) from the decision of the Court of Appeals (CA) holding it liable to pay Tokio Marine Malayan Insurance Co., Inc.'s (Tokio Marine) claim for damages. In 2005, Honda Trading Phils. Ecozone Corporation ordered Aluminum Alloy Ingots from PT Molten Aluminum Producer Indonesia. PT Molten loaded the goods in two container vans which were received in Jakarta, Indonesia by Nippon Express Co., Ltd. for shipment to Manila. Honda Trading insured the shipment with Tokio Marine & Nichido Fire Insurance Co., Inc. and engaged the services of Keihin-Everett to clear and withdraw the cargo from the pier and deliver it to its warehouse. Upon arrival in Manila, the shipment was temporarily stored at the CY Area of the Manila International Port. Keihin-Everett released the shipment from the pier and turned it over to Sunfreight Forwarders for delivery to Honda Trading. However, during transport, the truck carrying the containers was hijacked and one of the container vans was reportedly taken away. Only one container van reached the warehouse. As a result, Honda Trading suffered losses. Tokio Marine paid Honda Trading's insurance claim and filed a complaint for damages against Keihin-Everett. Keihin-Everett denied liability and filed a third-party complaint against Sunfreight Forwarders. The Regional Trial Court (RTC) held Keihin-Everett and Sunfreight Forwarders jointly and severally liable to pay Tokio Marine's claim. The RTC ruled that Sunfreight Forwarders, as a common carrier, is liable for the loss of the subject cargo. Keihin-Everett appealed the decision to the CA. The CA modified the ruling of the RTC, stating that the lack of privity between Honda Trading and Sunfreight Forwarders means that the latter cannot be held jointly and severally liable with Keihin-Everett. The CA found that Sunfreight Forwarders' liability is limited to the amount stated in their Accreditation Agreement with Keihin-Everett.

ISSUES:

1. Whether Malayan has a legal basis for its right to subrogation as an incident to an insurance relationship.

2. Whether Tokio Marine has the right to institute the present action as the insurer or subrogee.

3. Whether Tokio Marine is entitled to exercise its legal right to subrogation.

4. Whether the right of subrogation allows Tokio Marine to exercise legal remedies against the common carrier, Keihin-Everett, even though there is no privity of contract between them.

5. Whether Keihin-Everett is absolved of liability as a common carrier because the hijacking occurred while the goods were in the custody of Sunfreight Forwarders.

6. Whether Keihin-Everett can be held liable for breach of contract due to its failure to observe extraordinary diligence in the vigilance over the goods.

7. Whether the hijacking of the goods qualifies as a fortuitous event or a force majeure.

8. Whether the liability of Keihin-Everett and Sunfreight Forwarders is solidary.

9. Whether TMBI is entitled to be reimbursed by BMT for the lost cargoes.

10. Whether Keihin-Everett is entitled to be reimbursed by Sunfreight Forwarders for the lost cargoes.

RULING:

1. Malayan failed to establish the legal basis for its right to subrogation as an incident to the insurance relationship with ABB Koppel. It did not attach or present the Marine Insurance Policy, which is constitutive of the insurer-insured relationship, as evidence. Therefore, the case was dismissed for lack of legal basis.

2. Tokio Marine has the right to institute the present action as the insurer or subrogee, despite not being the insurer named in the Insurance Policy. The Insurance Policy expressly made Tokio Marine the party liable to pay the insurance claim of Honda Trading, and Honda Trading agreed to file its claim from Tokio Marine and accept payment from it. Even if Tokio Marine is considered a third person who voluntarily paid the insurance claim, it is entitled to reimbursement and can go after the third party responsible for the loss.

3. Since Tokio Marine paid the insurance claim and has proof of payment through the Subrogation Receipt, it has the right to exercise its legal right to subrogation as provided under Article 2207 of the Civil Code. Tokio Marine is subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.

4. The right of subrogation allows Tokio Marine, as the insurer, to exercise legal remedies against Keihin-Everett, the common carrier, even in the absence of privity of contract between them. The right of subrogation accrues upon payment by the insurer of the insurance claim, and it operates as an equitable assignment of all remedies the insured may have against the third party.

5. Keihin-Everett is not absolved of liability as a common carrier even though the goods were in the custody of Sunfreight Forwarders at the time of the hijacking. Keihin-Everett was engaged by Honda Trading to clear and withdraw the cargoes from the pier and transport them to its warehouse. The absence of privity of contract between Honda Trading and Sunfreight Forwarders does not absolve Keihin-Everett from responsibility for the lost cargoes.

6. Keihin-Everett, as a common carrier, is mandated to observe extraordinary diligence in the vigilance over the goods it transports. At the time Keihin-Everett turned over the custody of the cargoes to Sunfreight Forwarders for inland transportation, it was still required to observe extraordinary diligence. Failure to establish this presumption carries with it the presumption of fault or negligence, rendering Keihin-Everett liable for breach of contract.

7. The hijacking of the goods is not considered a fortuitous event or a force majeure. A common carrier may absolve itself of liability for a resulting loss caused by robbery or hijacking if it can prove that it was attended by grave or irresistible threat, violence, or force. However, Keihin-Everett failed to prove the existence of such circumstances.

8. The liability of Keihin-Everett and Sunfreight Forwarders is not solidary. Keihin-Everett's liability to Honda Trading stems from its breach of the contract of carriage, while Sunfreight Forwarders was only impleaded in the case through Keihin-Everett's third-party complaint. Since there was no direct contractual relationship between Sunfreight Forwarders and Honda Trading, Sunfreight Forwarders cannot be directly held liable for breach of contract.

9. Yes, TMBI is entitled to be reimbursed by BMT for the lost cargoes due to BMT's breach of its contract of carriage. TMBI paid the value of the lost cargoes to its client, and as the insurer, it is entitled to seek reimbursement from BMT for its own loss.

10. Yes, Keihin-Everett is entitled to be reimbursed by Sunfreight Forwarders for the lost cargoes. Keihin-Everett entered into an Accreditation Agreement with Sunfreight Forwarders, effectively forming a contract of carriage between them. Since the cargoes were lost while under the custody of Sunfreight Forwarders, the presumption of fault under Article 1735 of the Civil Code applies. Sunfreight Forwarders failed to prove that it observed extraordinary diligence in the performance of its obligation, thus making it liable for breach of contract. Keihin-Everett is therefore entitled to be reimbursed by Sunfreight Forwarders for the loss and damage to the cargoes.

PRINCIPLES:

• An insurer who pays the value of lost cargoes to its insured is entitled to seek reimbursement from the carrier responsible for the loss.

• The presumption of fault under Article 1735 of the Civil Code applies to common carriers, and they have the burden of proving that they observed extraordinary diligence in the performance of their obligations.

• Attorney's fees may be awarded based on the court's discretion, taking into consideration various factors such as the need for litigation to protect one's interest.