Before Us are two separate Petitions for review assailing the Decision^[1] of the Court of Appeals in CA-G.R. CV No. 49624 entitled, "San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang, and Co To, Defendants-Appellants, Third Party Plaintiffs versus FGU Insurance Corporation, Third-Party Defendant-Appellant," which affirmed in toto the decision^[2] of the Regional Trial Court of Cebu City, Branch 22.  The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:

1) Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of this case on October 2, 1990;

2) Ordering defendants to pay plaintiff the sum of P25,000.00 for attorney's fees and an additional sum of P10,000.00 as litigation expenses;

3) With cost against defendants.

For the Third-Party Complaint:

1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of P632,700.00.^[3]

Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business.     It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers.  Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes:

Bill of Lading No.	Shipment	Destination
1	25,000 cases Pale Pilsen  350 cases Cerveza Negra	Estancia, Iloilo  Estancia, Iloilo
2	15,000 cases Pale Pilsen  200 cases Cerveza Negra	San Jose, Antique  San Jose, Antique

The consignee for the cargoes covered by Bill of Lading No. 1 was SMC's Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2 was SMC's BMD-San Jose Beer Sales Office, San Jose, Antique.

The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique.  The vessels arrived at San Jose, Antique, at about one o'clock in the afternoon of 30 September 1979.  The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big.  The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading the cargoes.  SMC's District Sales Supervisor, Fernando Macabuag, requested ANCO's representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves.

ANCO's representative did not heed the request because he was confident that the barge could withstand the waves.  This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator.

At about ten to eleven o'clock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barge's rope attached to the wharf was cut off by the big waves.  At around midnight, the barge run    aground and was broken and the cargoes of beer in the barge were swept away.

As a result, ANCO failed to deliver to SMC's consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.  The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20).  The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMC's claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).

As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorney's fees.

Upon Ang Gui's death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a second amended complaint which was admitted by the Court impleading the surviving partner, Co To and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang.  The substituted defendants adopted the original answer with counterclaim of ANCO "since the substantial allegations of the original complaint and the amended complaint are practically the same."

ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded on the vessel belonging to ANCO.  It claimed however that it had an agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event.  Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were loaded, they should not be held liable.  ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of loss.  Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU    Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.

Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591.  ANCO further alleged that on or about 02 October 1979, by reason of very strong winds and heavy waves brought about by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or destroyed.  According to ANCO, the loss of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence and lifetime of said insurance policy.  ANCO went on to assert that in the remote possibility that the court will order ANCO to pay SMC's claim, the third-party defendant corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC.

In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy.  According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following:

a) total loss of the entire shipment;

b) loss of any case as a result of the sinking of the vessel; or

c) loss as a result of the vessel being on fire.

Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or destruction.

Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral, and exemplary damages and attorney's fees.^[1]

The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on ANCO's part, through their representatives, to observe the degree of diligence required that would exonerate them from liability.  The trial court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment.  With respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes.  According to the trial court:

. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and the beer cargoes on the said barge were swept away.  It is the sense of this Court that the risk insured against was the cause of the loss.

.   .   .

Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the policy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of third-party defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo.  Consequently, inasmuch as there was partial loss of only P1,346,197.00, the assured shall bear 53% of the loss…^[4] [Emphasis ours]

The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration and the supplemental motion for reconsideration.

Hence, the petitions.


In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant case.

In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on the following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming the findings of the lower court that the negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the cargoes; and 2) The respondent court acted with grave abuse of discretion when it ruled that the appeal was without merit despite the fact that said court had accepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme Court, as res judicata.


First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions for review, that is, whether or not the doctrine of res judicata applies in the instant case.

It is ANCO's contention that the decision in Civil Case No. R-19341,^[5] which was decided in its favor, constitutes res judicata with respect to the issues raised in the case at bar.

The contention is without merit.  There can be no res judicata as between Civil Case No. R-19341 and the case at bar.  In order for res judicata to be made applicable in a case, the following essential requisites must be present: 1) the former judgment must be final; 2) the former judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment must be a judgment or order on the merits; and 4) there must be between the first and second action identity of parties, identity of subject matter, and identity of causes of action.^[6]

There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by the decision in Civil Case No. R-19341.  However, the doctrine is still inapplicable due to the absence of the last essential requisite of identity of parties, subject matter and causes of action.

The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant.

The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMC's consignees the lost cargo.  Otherwise stated, the controversy in the first case involved the rights and liabilities of the shipowner vis-à-vis that of the insurer, while the present case involves the rights and liabilities of the shipper vis-à-vis that of the shipowner.  Specifically, Civil Case No. R-19341 was an action for Specific Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy No. MA-58486, should the former be held liable to pay SMC.

Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No. R-19341.  In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio.

The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a court of competent jurisdiction in a former judgment, in another action between the same parties based on a different claim or cause of action.  The judgment in the prior action operates as estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered.^[7] If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit.^[8]

Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings with respect to matters passed upon by the court in the former judgment are conclusive in the disposition of the instant case.  A careful perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss.

Said decision, however, did not pass upon the issues raised in the instant case.  Absent therein was any discussion regarding the liability of ANCO for the loss of the cargoes.  Neither did the lower court pass upon the issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC.

Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there is res judicata.

Anent ANCO's first assignment of error, i.e., the appellate court committed error in concluding that the negligence of ANCO's representatives was the proximate cause of the loss, said issue is a question of fact assailing the lower court's appreciation of evidence on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellate court, are deemed final and conclusive.  The Supreme Court cannot review such findings on appeal, especially when they are borne out by the records or are based on substantial evidence.^[9] As held in the case of Donato v. Court of Appeals,^[10] in this jurisdiction, it is a fundamental and settled rule that findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.^[11]

It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.^[12]

A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by the appellate court, that ANCO's representatives failed to exercise the extraordinary degree of diligence required by the law to exculpate them from liability for the loss of the cargoes.

First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.

Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of its own and could not maneuver by itself.  Yet, the patron of ANCO's tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest.  As stated by the lower court, witness Mr. Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the area was already dark.  This is corroborated by defendants' own witness, Mr. Fernando Macabueg.^[13]

The trial court continued:

At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a very safe location before they left knowing or sensing at that time the coming of a typhoon.  The presence of big waves and dark clouds could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo.  D/B Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by itself.  Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not have occurred.  In short, therefore, defendants through their representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of the Civil Code of the Philippines.^[14]

Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents SMC and FGU that "the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like advising the fish to jump from the frying pan into the fire and an advice that borders on madness."^[15]

The argument does not persuade.  The records show that the D/B Lucio was the only vessel left at San Jose, Antique, during the time in question.  The other vessels were transferred and temporarily moved to Malandong, 5 kilometers from wharf where the barge remained.^[16] Clearly, the transferred vessels were definitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact which petitioners failed to dispute

ANCO's arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a fortuitous event (caso fortuito), and there was no fault or negligence on their part.  In fact, ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but their efforts proved no match to the forces unleashed by the typhoon which, in petitioners' own words was, by any yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which petitioners could not be held liable for.^[17]

The Civil Code provides:

Art. 1733.  Common carriers, from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1)     Flood, storm, earthquake, lightning, or other natural disaster or calamity;

.  .  .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss.  However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability  for the loss, destruction, or deterioration of the goods . . . (Emphasis supplied)

Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)^[18] by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable.  It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.^[19]

In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable.  In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMC's District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail.  The D/B Lucio had no engine and could not maneuver by itself.  Even if ANCO's representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices.  The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm.

While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC.  The records clearly show the failure of petitioners' representatives to exercise the extraordinary degree of diligence mandated by law.  To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss.^[20] There must have been no contributory negligence on the part of the common carrier.  As held in the case of Limpangco Sons v. Yangco Steamship Co.:^[21]

. . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned.  For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused.^[22]

Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCO's crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMC's representatives to have the barge transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes.

We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of the latter's employees.

One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence and that of his agents.  Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute no defense on the part of the insurer.^[23] This rule however presupposes that the loss has occurred due to causes which could not have been prevented by the insured, despite the exercise of due diligence.

The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will deprive him the right to recover under the insurance contract.  We say there is.  However, to what extent such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case.  When evidence show that the insured's negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.

In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,^[24] the United States Supreme Court held that:

The ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability.  But willful exposure, gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from such liability.^[25] [Emphasis ours]

. . .

In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an insured vessel attempted to put her across the bar at Hatteras Inlet.  She struck on the bar and was wrecked.  The master knew that the depth of water on the bar was such as to make the attempted passage dangerous.  Judge Clifford held that, under the circumstances, the loss was not within the protection of the policy, saying:

Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are hardly necessary, as the proposition involves an elementary principle of universal application.  Losses may be recovered by the insured, though remotely occasioned by the negligence or misconduct of the master or crew, if proximately caused by the perils insured against, because such mistakes and negligence are incident to navigation and constitute a part of the perils which those who engage in such adventures are obliged to incur; but it was never supposed that the insured could recover indemnity for a loss occasioned by his own wrongful act or by that of any agent for whose conduct he was responsible.^[26] [Emphasis ours]