Malayan v. CA
Content
SECOND DIVISION [G.R. No. 119599. March 20, 1997] MALAYAN INSURANCE CORPORATION, !"#"#o$!r, %&. T'E 'ON. COURT O( APPEALS a$) T*C MAR*ETING CORPORATION, r!&o$)!$"&. +ECISION ROMERO, .-
Assailed in this petition for review review o$ c!r"#orari is the decision of the Court of Appeals in CAG.R. No. !"#!$%& which affir'ed( with sli)ht 'odification( the decision of the Re)ional *rial Court of Ce+u( ,ranch %. rivate respondent */C 0ar1etin) Corp. was the owner2consi)nee of so'e !(%34.%5% 'etric tons of so6a +ean 'eal which was loaded on +oard the ship 0V Al /a7ie'ah on or a+out Septe'+er 3( %434 for carria)e fro' the port of Rio del Grande( ,ra7il( to the port of 0anila. Said car)o was insured a)ainst the ris1 of loss +6 petitioner 0ala6an Insurance Corporation for which it issued two 8#9 0arine Car)o olic6 Nos. 02: 453""!" a'ountin) to %3(43;(4"#. and 02: 453""!"; a'ountin) to %(%4("".( +oth dated Septe'+er %434. <hile the vessel was doc1ed in Dur+an( South Africa on Septe'+er %% %%(( %434 enroute to 0anila( the civil authorities arrested and detained it +ecause of a lawsuit on a =uestion of ownership and possession. As'ade a result( privateclai' respondent notified of petitioner on Octo+er ( %434 of the the vessel and a for'al for the a'ount >S?4%;(33;.;;( representin) the arrest dollar of e=uivalent on the policies( for non-deliver6 non- deliver6 of the car)o. rivate respondent li1ewise sou)ht the assistance of petitioner on what to do with the car)o. etitioner replied that the arrest of the vessel +6 civil authorit6 was not a peril covered +6 the policies. rivate respondent( accordin)l6( advised advised petitioner that it 'i)ht tranship the car)o and re=uested an e@tension of the insurance covera)e until actual tranship'ent( which e@tension was approved upon pa6'ent of additional pre'iu'. *he insurance covera)e was e@tended under the sa'e ter's and conditions e'+odied in the ori)inal policies while in the process of 'a1in) arran)e'ents for the tranship'ent of the car)o fro' Dur+an to 0anila( coverin) the period Octo+er -Dece'+er %4( %434. owever( on Dece'+er %%( %%( %434( the car)o was sold in Dur+an( South Africa( for >S?%." per 'etric ton orofatwent6 total ofda6s %"(!"(#!%.5 due to its perisha+le nature which could no lon)erOn stand a vo6a)e to 0anila and another twent6 da6s for the dischar)e thereof. Banuar6 ( %44"( private respondent forthwith reduced its clai' to >S?3(3";."4 8or its peso e=uivalent of 4(354(4#3.34 at the e@chan)e rate of ##."%!3 per ?%.""9 representin) private respondents loss after the proceeds of the sale were deducted fro' the ori)inal clai' of ?4%;(33;.;; or #"(%3(%4.. etitioner 'aintained its position that the arrest of the vessel +6 civil authorities on a =uestion of ownership was an e@cepted ris1 under the 'arine insurance policies. *his pro'pted private respondent to file a co'plaint for da'a)es pra6in) that aside fro' its clai'( it +e rei'+ursed the a'ount of %#3(55".33 as le)al e@penses and the interest it paid for the loan it o+tained to finance the ship'ent totallin) 4#(#;4.!". In addition( add ition( private respondent as1ed for 'oral da'a)es a'ountin) to #""(""".""( e@e'plar6 da'a)es a'ountin) to #""("""."" and attorne6s fees e=uivalent to !" of what will +e awarded +6 the court.
*he lower court decided in favor of private respondent and re=uired petitioner to pa6( aside fro' the insurance clai'( conse=uential and li=uidated da'a)es a'ountin) to %("#(#!!.33( e@e'plar6 da'a)es a'ountin) to %""(""".""( rei'+urse'ent in the a'ount e=uivalent to %" of whatever is recovered as attorne6s fees as well as the costs of the suit. On private respondents 'otion for reconsideration( petitioner was also re=uired to further pa6 interest at the rate of %# per annu' on all a'ounts due and owin) to the private respondent +6 virtue of the lower court decision counted fro' the inception of this case until the sa'e is paid. On appeal( the Court of Appeals affir'ed the decision of the lower court statin) that with the deletion of Clause %# of the policies issued to private respondent( the sa'e +eca'e auto'aticall6 covered under su+section %.% of Section % of the Institute <ar Clauses. *he arrests( restraints or detain'ents conte'plated in the for'er clause were those effected +6 political or e@ecutive acts. :osses occasioned +6 riot or ordinar6 udicial processes were not covered therein. In other words( arrest( restraint or detain'ent within the 'eanin) of Clause %# 8or F.C. F.C. S. Clause9 rules out detention +6 ordinar6 le)al processes. ence( arrests +6 civil authorities( such as what happened in the instant case( is an e@cepted ris1 under Clause %# of the Institute Car)o Clause or the F.C. F.C. S. Clause. owever( with the deletion of Clause %# of the Institute Car)o Clause and the conse=uent adoption or institution of the Institute <ar Clauses 8Car)o9( the arrest and sei7ure +6 + 6 udicial processes which were e@cluded under the for'er polic6 +eca'e one of the covered ris1s. *he appellate that the not failure deliverthe theInstitute consi)ned thealso portunder of destination is acourt loss added co'pensa+le( onl to onl6 6 under <ar)oods Clausein+ut the *heft( ilfera)e( and Non-deliver6 Clause 8*ND9 of the insurance policies( as read in relation to Section %!" of the Insurance Code and as held in <illia's v. Cole.$#& Further'ore( the appellate court contended that since the vessel was prevented at an inter'ediate port fro' co'pletin) the vo6a)e due to its sei7ure +6 civil authorities( a peril insured a)ainst( the lia+ilit6 of petitioner continued until the )oods could have +een transhipped. ,ut due to the perisha+le nature of the )oods( it had to +e pro'ptl6 sold to 'ini'i7e loss. Accordin)l6( the sale of the )oods +ein) reasona+le and us ustified( tified( it should not operate to dischar)e petitioner fro' its contractual lia+ilit6. ence this petition( clai'in) that the Court of Appeals erredH %. In rulin) that the arrest of the vessel wa s a risk covered under the subject insurance policies. 2. In ruling that there was constructive total loss over the cargo. 3. In ruling that petitioner was in bad faith in declining private respondent's claim claim.. 4. In giving undue reliance to the doctrine that insurance policies are strictly construed against the insurer. In assigning the first error, petitioner su+'its the followin)H 8a9 an arrest +6 civil authorit6 is not
co'pensa+le since the ter' arrest refers to political or e@ecutive acts and does not include a loss caused +6 riot or +6 ordinar6 udicial process as in this caseJ 8+9 the deletion of the Free fro' Capture or Sei7ure Clause would leave the assured covered solel6 for the perils specified +6 the wordin) of the polic6 itselfJ 8c9 the rationale for the e@clusion of an arrest pursuant to udicial authorities is to eli'inate collusion +etween unscrupulous assured and civ civilil authorities.
As to the second assi)ned error( error( petitioner su+'its that an6 loss which private respondent 'a6 have incurred was in the nature and for' of unrecovered ac=uisition value +rou)ht a+out +6 a voluntar6 sacrifice sale and not +6 arrest( detention or sei7ure of the ship. As to the third issue( petitioner petitioner alle)es that its act o off reectin) the clai' w was as a result of its honest +elief that the arrest of the vessel was not a co'pensa+le ris1 under the policies issued. In fact( petitioner supported private respondent +6 acco''odatin) the latters re=uest for an e@tension of the insurance covera)e( notwithstandin) that it was then under no le)al o+li)ation to do so. rivate respondent( on the other hand( ar)ued that when it appealed its case to the Court of Appeals( petitioner did not raise as an issue the award of e@e'plar6 da'a)es da'a)es.. It cannot now( now( for the first ti'e( raise the sa'e +efore this Court. :i1ewise( petitioner cannot su+'it for the first ti'e on appeal its ar)u'ent that it was wron) for the Court of Appeals to have ruled the wa6 it did +ased on facts that would need in=uir6 into the evidence. Even if in=uir6 into the facts were possi+le( such was not necessar6 +ecause the covera)e as ruled upon +6 the Court of Appeals is evident fro' the ver6 ter's of the policies. It also ar)ued that petitioner( +ein) the sole author of the policies( arrests should +e strictl6 interpreted a)ainst it +ecause the rule is that an6 a'+i)uit6 is to +e ta1en contra proferentu'. Ris1 policies sho/) ! co$&"r!) reasona+l6 and in a 'anner as to 'a1e effective the intentions and e@pectations of the parties. It added that the policies clearl6 stipulate that the6 cover the ris1s non-deliver6 an entirepre'iu's pac1a)e and that it was petitioner itself that invited and )ranted theofe@tensions andofcollected thereon. *he resolution of this controvers6 hin)es on the interpretation of the erils clause of the su+ect policies in relation to the e@cluded ris1s or warrant6 specificall6 stated therein. ,6 wa6 of a historical +ac1)round( 'arine insurance developed as an all-ris1 covera)e( usin) the phrase perils of the sea to enco'pass the wide and varied ran)e of ris1s that were covered.$!& *he su+ect policies contain the erils clause which is a standard for' in an6 'arine insurance polic6. Said clause readsH *ouchin) the adventures which the said 0A:AKAN INS>RANCE CO.( are content to bear, and to take upon them in this voyage; they are of the Seas; Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Counter Mart, Suprisals, Takings of the Sea, Arrests, Restraints and Detainments of all Kings, Princess and Peoples, of what Nation, condition, or quality soever, Barratry of the Master and Mariners, and of all other Perils, Losses, and Misfortunes, that have come to hurt, detriment, or damage of the said goods and merchandise or any part thereof . AND in case of any loss or misfortune it shall be lawful to the ASSURED, their factors, servants and assigns, to sue, labour, and travel for, in and about the defence, safeguards, and recovery of the said goods and merchandises, and ship, & c., or any part thereof, without prejudice to this INSURANCE; to the charges whereof the said COMPANY, will will contribute according to the rate and quantity of the sum herein INSURED. AND it is expressly declared and agreed that no acts of the Insurer or Insured in recovering, saving, or preserving the Property insured shall be considered as a Waiver, or Acceptance of Abandonment. And it is agreed by the said COMPANY, that this writing or Policy of INSURANCE shall be of as much Force and Effect as the surest Writing or Policy of INSURANCE made in LONDON. And so the said MALAYAN INSURANCE COMPANY, COMPANY, INC., are contented, and do hereby promise and bind themselves, their Heirs, Executors, Goods and Chattel, to the ASSURED, his or their Executors, Administrators, or Assigns, for the Performance Premises; paidsupplied the Consideration due unto them for thistrue INSURANCE at of andthe after the rateconfessing arranged." themselves ((Underscoring Underscoring supplied) )
The exception or limitation to the "Perils" clause and the "Al l other perils clause in the su+ect
policies is specificall6 referred to as Clause %# called the Free fro' Capture Sei7ure Clause or the F.C. F.C. S. Clause which reads( thusH <arranted free of capture( sei7ure( arrest( restraint or det ainment, and the consequences thereof or of any attempt thereat; also from the consequences of hostilities and warlike operations, whether there be a declaration of war or not; but this warranty shall not exclude collision, contact with any fixed or floating object (other than a mine or torpedo), stranding stranding,, heavy weather or fire unless caused directly (and independently of the nature of the voyage or service which the vessel concerned or, in the case of a collision, any other vessel involved therein is performing) by a hostile act by or against a belligerent power and for the purpose of this warranty 'power' includes any authorities maintaining naval, military or air forces in association with power. Further warranted free from the consequences of civil war, revolution, insurrection, insurrection, or civil strike arising therefrom or piracy. Should Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form part of this insurance." (Underscoring supplied) However, the F. C. & S. Clause was deleted from the policies. Conse=uentl6( the Institute <ar
Clauses 8Car)o9 was dee'ed incorporated which( in su+section %.% of Section %( providesH %. *his insurance coversH %.% *he ris1s e@cluded fro' t he standard form of English Marine Policy by the clause warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof of hostilities or warlike operations, whether there be a declaration of war or not; but this warranty shall not exclude collision, contact with any fixed or floating object (other than a mine or torpedo), stranding, heavy weather or fire unless caused directly (and independently of the nature on voyage or service which the vessel concerned or, in the case of a collision any other vessel involved therein is performing) by a hostile act by or against a belligerent power; and for the purpose of this warranty 'power' includes any authority maintaining maintaining naval, military or air forces in association with a power. Further warranted free from the consequences of civil war, revolution, rebellion, insurrection, or civil strike arising therefrom, or piracy." According to petitioner, the automatic incorporation of su+section su+section %.% of section % of the Institute
<ar Clauses 8Car)o9( a'on) others( 'eans that an6 capture( arrest( detention( etc. pertained e@clusivel6 to warli1e operations if this Court strictl6 construes the headin) of the said Clauses. owever( it also clai's that the parties intended to include arrests( etc. even if it were not the result of hostilities or warli1e operations. It further clai's that on the stren)th of urisprudence on the 'atter( the ter' arrests would onl6 cover those arisin) fro' political or e@ecutive acts( concludin) that whether private respondents clai' is anchored on su+section %.% of Section % of the Institute <ar Clauses 8Car)o9 or the F.C. F.C. S. Clause( the arrest of the vessel +6 udicial authorities is an e@cluded ris1.$& *his Court cannot a)ree with petitioners assertions( particularl6 when it alle)es that in the erils Clause( it assu'ed the ris1 of arrest caused solel6 +6 e@ecutive or political acts of the )overn'ent of the sei7in) state and there+6 e@cludes arrests caused +6 ordinar6 le)al processes( such as in the instant case.
<ith the incorporation of su+section %.% of Section % of the Institute <ar Clauses( however( this Court a)rees with the Court of Appeals and the private respondent that arrest caused +6 ordinar6 udicial process is dee'ed included a'on) the covered ris1s. *his interpretation +eco'es inevita+le when su+section %.% of Section % of the Institute <ar Clauses provided that this insurance covers the ris1s e@cluded fro' the Standard For' of En)lish 0arine olic6 +6 the clause <arranted free of capture( sei7ure( arrest( etc. @ @ @ or the F.C .C.. S. Clause. Burisprudentiall6( arrests caused +6 ordinar6 udicial process is also a ris1 e@cluded fro' the Standard For' of En)lish 0arine olic6 ol ic6 +6 the F.C. F.C. S. Clause. etitioner cannot adopt the ar)u'ent that the arrest caused +6 ordinar6 udicial process is not included in the covered ris1 si'pl6 +ecause the F. F.C. C. S. Clause under the Institute <ar Clauses can onl6 +e operative in case of hostilities or warli1e operations on account of its headin) Institute <ar Clauses. *his Court a)rees with the Court of Appeals when it held that . . . Althou)h the F.C. F.C. S. Clause 'a6 have ori)inall6 +een inserted in 'arine policies to protect a)ainst ris1s of war( 8see )enerall6 G. Gil'ore C. ,lac1( *he :aw :a w of Ad'iralt6 Section #-4( at 5%-5! $#d Ed. %45&9( its interpretation in recent 6ears to include sei7ure or detention +6 civil authorities see's consistent with the )eneral purposes of the clause( @ @ @$& In fact( petitioner itself averred that su+section %.% of Section % of the Institute <ar Clauses included arrest even if it were not a result of hostilities or warli1e operations.$;& In this re)ard( since what was also e@cluded in the deleted F.C. S. Clause was arrest occasioned +6 ordinar6 udicial process( lo)icall6( such such arrest would now +eco'e a covered ris1 under su+section of Section % of the Institute <ar Clauses( re)ardless of whether or not said arrest + 6 civil %.% +6 authorities occurred in a state of war. etitioner itself see's to +e confused a+out the application of the F. F.C. C. S. Clause as well as that of su+section %.% of Section % of the Institute <ar Clauses 8Car)o9. It stated that the F.C. F.C. S. Clause was ori)inall6 incorporated in insurance policies to eli'inate the ris1s of warli1e operations. It also averred that the F.C. F.C. S. Clause applies even if there +e no war or warli1e operations @ @ @$5& In the sa'e vein( it contended that su+section %.% of Section % of the Institute <ar Clauses 8Car)o9 pertained e@clusivel6 to warli1e operations and 6et it also stated that the deletion of the F.C .C.. S. Clause and the conse=uent incorporation of su+section %.% of Section % of the Institute <ar Clauses 8Car)o9 was to include arrest( etc. even if it were not a result of hostilities or warli1e operations.$3& *his Court of cannot help the i'pression petitioner is overl6 its interpretation of the provisions the polic6 in order to avoidthat +ein) lia+le for privatestrainin) respondents clai'. *his Court finds it pointless for petitioner to 'aintain its position that it onl6 insures ris1s of arrest occasioned +6 e@ecutive or political acts of )overn'ent which is interpreted as not referrin) to those caused +6 ordinar6 ordinar 6 le)al processes as contained in the erils ClauseJ deletes the F.C. F.C. S. Clause which e@cludes ris1s of arrest occasioned +6 e@ecutive or political acts of the )overn'ent and naturall6( also those caused +6 ordinar6 le)al processesJ and( thereafter incorporates su+section %.% of Section % of the Institute <ar Clauses which now includes in the covera)e ris1s of arrest ar rest due to e@ecutive or political acts of a )overn'ent +ut then still e@cludes arrests occasioned +6 ordinar6 le)al processes when su+section %.% of Section % of said Clauses should also have included arrests previousl6 e@cluded fro' the covera)e of the F.C. F.C. S. Clause. It has +een held that a strained interpretation which is unnatural and forced( as to lead to an a+surd conclusion or to render the polic6 nonsensical( should( +6 all 'eans( +e avoided.$4&
:i1ewise( it 'ust +e +orne in 'ind that such contracts are invaria+l6 prepared +6 the co'panies and 'ust +e accepted +6 the insured in the for' in which the6 are written.$%"& An6 construction of a 'arine polic6 renderin) it void should +e avoided.$%%& Such policies will( therefore( +e construed strictl6 a)ainst the co'pan6 in order to avoid a forfeiture( unless no other result is possi+le fro' the lan)ua)e used.$%#& If a 'arine insurance co'pan6 desires to li'it or restrict the operation of the )eneral provisions of its contract +6 special proviso( e@ception( or e@e'ption( it should e@press such li'itation in clear and un'ista1a+le lan)ua)e.$%!& O+viousl6( the deletion of the F.C. S. Clause and the conse=uent incorporation of su+section %.% of Section % of the Institute <ar Clauses 8Car)o9 )ave rise to a'+i)uit6. If the ris1 of arrest occasioned +6 ordinar6 udicial process pr ocess was e@pressl6 indicated as an e@ception in the su+ect policies( there would have +een no controvers6 with respect to the interpretation of the su+ect clauses. ,e that as it 'a6( e@ceptions to the )eneral covera)e are construed 'ost stron)l6 a)ainst the co'pan6.$%& co'pan6. $%& Even an e@press e@ception in a polic6 is to +e construed a)ainst the underwriters +6 who' the polic6 is fra'ed( and for whose +enefit the e@ception is introduced.$%& An insurance contract should +e so interpreted interpreted as to carr6 out the purpose for which the parties entered into the contract which is( to insure a)ainst ris1s of loss or da'a)e to the )oods. Such interpretation should result fro' the natural and reasona+le 'eanin) of lan)ua)e in the polic6. $%;& <here restrictive provisions are open to two interpretations( that which is 'ost favora+le to the insured is adopted.$%5& Inde'nit6 and lia+ilit6 insurance policies are construed in accordance with the )eneral rule of resolvin) an6 a'+i)uit6 therein in favor of the insured( where the contract or polic6 is prepared +6 the insurer.$%3& A contract of insurance( +ein) a contract of adhesion( par e@cellence( e @cellence( an6 a'+i)uit6 therein should +e resolved a)ainst the insurerJ in other words( it should +e construed li+erall6 in favor of the insured insu red and strictl6 a)ainst the insurer. :i'itations of lia+ilit6 should +e re)arded with e@tre'e ealous6 and 'ust +e construed in such a wa6 as to preclude the insurer fro' nonco'pliance with its o+li)ations.$%4& In view of the fore)oin)( this Court sees no need to discuss the other issues presented. <EREFORE( the petition for review is DENIED and the decision of the Court of Appeals is AFFIR0ED. SO ORDERED.
