RIZAL SURETY & INSURANCE COMPANY, PLAINTIFF-APPELLANT, VS. MANILA RAILROAD COMPANY AND MANILA PORT SERVICE, DEFENDANTS-APPELLEES.

In this suit for the recovery of the amount paid by the
plaintiff, Rizal Surety and Insurance Company, to the
consignee based on the applicable Civil Code provision,^[1]
which speaks to the effect that the Insurance Company “shall be subrogated
to the rights of the insured,” it is its contention that it is entitled to
the amount paid by it in full, by virtue of the insurance contract.  The lower court, however, relying on the
limited liability clause on a management contract with the defendants, could
not go along with such a theory.  Hence this appeal.

The facts were stipulated. 
The more pertinent follows:  That
on or about November 29, 1960, the vessel, SS Flying Trader, loaded on board at
Genoa, Italy for shipment to Manila, Philippines, among other cargoes, 6 cases
OMH, Special Single Colour Offset Press Machine, for
which Bill of Lading No. 1 was issued, consigned to Suter,
Inc.; that such vessel arrived at the Port of Manila, Philippines on or about
January 16, 1961 and subsequently discharged complete and in good order the
aforementioned shipment into the custody of defendant Manila Port Service as arrastre operator; that in the course of the handling, one
of the six cases identified as Case No. 2143 containing the OMR, Special Single
Colour Offset Press, while the same was being lifted
and loaded by the crane of the Manila Port Service into the consignee’s truck,
it was dropped by the crane and as a consequence, the machine was heavily
damaged for which plaintiff as insurer paid to the consignee, Suter, Inc. the amount of P16,500.00, representing damages
by way of costs of replacement parts and repairs to put the machine in working
condition, plus the sum of P180.70 which plaintiff paid to the International
Adjustment Bureau as adjuster’s fee for the survey conducted on the damaged
cargo or a total of P16,680.70 representing plaintiff’s liability under the
insurance contract; and that the arrastre charges in
this particular shipment was paid on the weight or measurement basis whichever
is higher, and not on the value thereof.^[2]

Clause 15 of the management contract which as admitted by the
plaintiff appeared “at the dorsal part of the Delivery Permit” and
was used in taking delivery of the subject ship­ment from the defendants’ (Manila
Port Service and Manila Railroad Co.) custody and control, issued in the name
of con­signee’s broker,” contained what was referred to as “an
important notice.”  Such permit
“is presented subject to all the terms and conditions of the Management
Contract between the Bureau of Customs and Manila Port Service and amendments
thereto or alterations thereof, particularly but not limited to paragraph 15
thereof limiting the Company liability to P500.00 per package, unless the value
of the goods is otherwise, specified, declared or manifested and the
corresponding arrastre charges have been paid, * *
*.”^[3]

On the above facts and relying on Bernabe
& Co. v. Delgado Brothers, Inc.,^[4]
the lower court rendered the judgment “ordering defendants, jointly and
severally, to pay plaintiff the amount of Five Hundred Pesos (P500.00), with
legal interest thereon from January 13, 1962, the date of the filing of the
complaint, with costs against said defendants.”^[5]

As noted at the outset, in this appeal, the point is pressed that
under the applicable Civil Code provision, plaintiff-appellant Insurance
Company could recover in full.  The
literal language of Article 2207, however, does not warrant such an
interpretation.  It is there made clear
that in the event that the property has been insured and the Insurance Company
has paid the indemnity for the injury or loss sustained, it “shall be
subrogated to the rights of the insured against the wrong-doer or the person
who has violated the contract.”

Plaintiff-appellant Insurance Company, therefore, cannot recover
from defendants an amount greater than that to which the consignee could
lawfully lay claim.  The management
contract is clear.  The amount is limited
to Five Hundred ,Pesos (P500.00).  Such a stipulation has invariably received
the approval of this Court from the leading case of Bernabe
& Co. v. Delgado Bros., Inc.^[6]
Such a decision was quoted with approval in the following subsequent
cases:  Atlantic Mutual Insurance Co. v.
Manila Port Service,^[7]
Insurance Service Co. of North America v. Manila Port Service,^[8]
Insurance Company of North America v. U.S. Lines, Co.,^[9]
and Insurance Company of North America v. Manila Port Service.^[10]

In one of them, Atlantic Mutual Insurance Company v. Manila Port
Service, this Court, through the then Justice, now Chief Justice, Concepcion, restated the ‘doctrine thus:  “Plaintiff maintains that, not being a
party to the manage­ment contract, the consignee – into whose shoes plaintiff
had stepped in consequence of said payment – is not subject to the provisions
of said stipulation, and that the same is furthermore invalid.  The lower court correctly rejected this
pretense because, having taken delivery of the shipment afore­mentioned by virtue
of a delivery permit, incorporating there­to, by reference, the provisions of
said management contract, particularly paragraph 15 thereof, the gist of which
was set forth in the permit, the consignee became bound by said provisions, and
because it could have avoided the application of said maximum limit of P500.00
per package by stating the true value thereof in its claim for delivery of the
goods in question, which, admittedly, the consignee failed to do * * *.”^[11]

Plaintiff-appellant Rizal Surety and
Insurance Company having been subrogated merely to the rights of the consignee
its recovery necessarily should be limited to what was recoverable by the
insured.  The lower court therefore did
not err when in the decision appealed from, it limited the amount which
defendants were jointly and severally to pay plaintiff-appellant to “Five
Hundred Pesos (P500.00) with legal interest thereon from January 31, 1962, the
date of the filing of the complaint, * * *.”

WHEREFORE, the decision appealed from is affirmed.  With costs against Rizal Surety and Insurance Company.

Reyes, J.B.L., (Acting C.J.), Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Ruiz Castro, and Angeles, JJ., concur.

^[1]
“Art. 2207.  If the plaintiff’s
property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the
insured against the wrong-doer or the person who has violated the contract.  If the amount paid by the insurance company
does not fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or injury.”

^[2]
Record on Appeal, pp. 38-39.

^[3]
Record on Appeal, p. 37.

^[4] 58 O. G. 1104 (1960).

^[5]
Record on Appeal, p. 44.

^[6] 58 O. G. 1104 (1960).

^[7]
L-16271, October 31, 1961.

^[8]
L-17331, November 29, 1961.

^[9]
L-17032, March 31, 1964.

^[10]
L-23124, October 11, 1967.

^[11]
The decision cited the following cases: 
Tomas Grocery v. Delgado Brothers, Inc., L-11154, April 29, 1959; Jose Bernabe & Co. v. Delgado Brothers, Inc.,
L-14360, February 29, 1960;
Northern Motors, Inc. v. Prince Line, L-13884, February 29, 1960; and Jose Bernabe
& Co. v. Delgado Brothers, Inc., L-12058, April 27, 1960.