G. R. No. 16473. November 22, 1921
PHILIPPINE MANUFACTURING CO., PLAINTIFF AND APPELLANT, VS. UNION INSURANCE SOCIETY OF CANTON, LTD., DEFENDANT AND APPELLEE.
JOHNS, J.:
The plaintiff is a corporation duly organized under
the laws of the Philippine Islands with its principal office and place
of business at Manila, and at the times alleged was the owner of the
steel tank lighter named Philmaco. The defendant is an insurance
company organized under the laws of Hongkong and duly authorized to
transact business here.
July, 1917, the defendant insured plaintiff’s
lighter for the sum of P16,000, and issued its policy for such
insurance, which recites that the steel tank lighter Philmaco is
insured “for and during the space of twelve calendar months from July
6, 1917 to July 5, 1918, both dates inclusive, upon the hull,
machinery, tackle, apparel, boats or other furniture of the good ship
or vessel,” and that “the assured is and shall be rated and valued on
hull, engine and pumping machinery, whereof this policy insures pesos
sixteen thousand, P. I. C. Warranted against the absolute total loss of
the lighter only. Warranted trading between Bitas, Tondo, or Pasig
River and steamers in the Bay of Manila or harbor.” In consideration
thereof, the plaintiff paid the defendant P960 as a premium for such
insurance. About July 1, 1918, and during the life of the policy and as
a result of a typhoon, the lighter was sunk in the Manila Bay, of which
the plaintiff notified the defendant and demanded payment of the full
amount of its policy, which the defendant refused, and denied its
liability. On February 25, 1919, the plaintiff commenced this action
and, among other things, alleged in the complaint :
“That during the period of said
insurance the said steel tank lighter Philmaco became a total loss by
sinking in the waters of the Bay of Manila while operating within the
places noted in the said insurance policy. “That the loss of the said
steel tank lighter was total and the full amount for which it was
insured upon such loss immediately became due and payable,” and prayed
for judgment for the sum of P16,000, with legal interest and costs. For
answer the defendant admits the issuance and delivery of the policy,
and, as a further and separate defense, alleges that, under its terms,
the defendant was only liable for an absolute total loss, and that
there was not a total destruction of the lighter.
After the testimony was taken, the lower court sustained this
contention and rendered judgment for the defendant, from which the
plaintiff appeals, claiming that the trial court erred in holding that
there was not an absolute total loss, and/in refusing to hold that the
policy covered a “constructive total loss, as well as an actual total
loss,” and that under the facts, it was entitled to recover the full
amount of the policy.
As a result of a typhoon the vessel was sunk in the
Manila Bay in front of the Manila Hotel. The plaintiff at once notified
the defendant that the lighter was of no value, and offered to abandon
the wreck as an absolute total loss to the plaintiff. The defendant
refused the offer, and instructed plaintiff to salve the wreck, if it
was possible to do so. Under such instructions, the plaintiff employed
a third party to proceed with the salvage, which was commenced some
time in July, 1918. After seveval attempts and on September 20, 1918,
the storm-beaten hull was finally raised and between two barges was
taken to the Pandacan Slipway.
Upon the evidence for the plaintiff, the trial
court found, and upon that point the testimony is conclusive, that the
cost of salvage and the necessary repairs were substantially equal to
the original cost of the lighter and its value as stipulated in the
policy. The findings did not take into consideration any damages to the
plaintiff for being deprived of the use of the lighter or the interest
on the investment. Although the evidence is clear that the lighter was
raised and floated to the slipway on September 20, 1918, it does not
appear how long it remained there or when it was finally reconstructed
and again placed in commission. The plaintiff having finally raised the
lighter, reconstructed andplaced it in commission, and having used a
large portion of its hull in such reconstruction, the defendant claims
that the loss was not an absolute total loss under the terms and
provisions of the policy. That plaintiff having reconstructed a new
lighter out ofjthe remains of the old one, it cannot claim or assert
that the old one was a total loss. The defendant did not offer any
evidence. The question is thus squarely presented whether, under the
facts shown, the loss is an absolute total loss within the terms and
provisions of the policy. The testimony is conclusive that the hull
itself was very seriously damaged, and that in the reconstruction of
the lighter the damaged hull was repaired, and that the lighter with
such repaired hull was eventually placed in commission. Through the
violence of the storm and the action of the waves, a large portion of
its machinery and other equipment were lost or destroyed.
The policy was executed at Manila and the lighter
was sunk in the Manila Bay, and, under the rule of construction, the
physical conditions then and there existing should be read into and
become a part of the policy.
“An act revising the insurance laws and
regulating insurance business in the Philippine Islands,” No. 2427, was
enacted by the Philippine Legislature December 12, 1914, and, under the
heading of “Loss,” contains the following provisions:“Sec. 120. A loss may be either total or partial.
“Sec. 121. Every loss which is not total is partial.
“Sec. 122. A total loss may be either actual or constructive.
“Sec. 123. An actual total loss is caused by:
“(a) A total destruction of the thing insured;
“(b) The loss of the thing by sinking, or by being broken up;
“(c) Any damage to the thing which renders it valueless to the owner for the purposes for which he held
Whatever may be the rule in other jurisdictions,
the policy having been issued at Manila, it must be construed under the
terms and provisions of those sections, and section 122 specifically
says that “a total loss may be either actual or constructive,” and that
“the loss of the thing by sinking, or by being broken up,” is an actual
loss, or that “any damage to the thing which renders it valueless to
the owner for the purposes for which he held it” is an actual loss.
As we construe the record, at the time the lighter
was sunk and in the bottom of the bay under the conditions then and
there existing, it was of no value to the owner, and, if it was of no
value to the owner, it would be an actual total loss. To render it
valueless to the owner, it is not necessary that there should be an
actual or total loss or destruction of all the different parts of the
entire vessel. The question here is whether, under the conditions then
and there existing, and as the lighter laid in the bottom of the bay,
was it of any value to the owner. If it was not of any value to the
owner, then there was and actual loss or a “total destruction of the
thing insured” within the meaning of the above sections of Act No. 2427
of the insurance code.
The lighter was sunk about July 1, 1918. After
several futile attempts, it was finally raised September 20, 1918. It
is fair to assume that in its then condition much further time would be
required to make the necessary repairs and install the new machinery
before it could again be placed in commission. During all that time the
owner would be deprived of the use of its vessel or the interest on its
investment. When those questions are considered the testimony is
conclusive that the cost of salvage, repair, and reconstruction was
more than the original cost of the vessel or its value at the time the
policy was issued. As found by the trial court “it is difficult to see
how there could have been a more complete loss of the vessel than that
which actually occurred.” Upon the facts shown here, any other
construction would nullify the statute, and, as applied to the
conditions existing in the Manila Bay, this kind of a policy would be
worthless, and there would not be any consideration for the premium.
In their able brief, the distinguished counsel for
the defendant point out that the policy itself provides that it “shall
be of as much force and effect as the surest writing or policy of
insurance made in London,” and contend that the policy should be
construed under the Marine Law of Great Britain, but as to what may be
the law there is not alleged or proven.
In Liverpool and Great Western Steam Co. vs. Phenix Iris. Co. (129 U. S., 397; 32 L. ed., 788, 793), the court says:
“The law of Great Britain since
the Declaration of Independence is the law of a foreign country, and,
like any other foreign law, is matter of fact, which the courts of this
country cannot be presumed to be acquainted with, or to have judicial
knowledge of, unless it is pleaded and proved.
“The rule that the courts of one
country cannot take cognizance of the law of another without plea and
proof has been constantly maintained at law and in equity, in England
and America.”
That rule was followed by this court in Sy Joe Lieng vs. Encarnacion (16 Phil., 137, 139), where it is said:
“When in a litigation the
application of a foreign law, for example the law of China, is sought,
it is necessary to prove before the courts of the Islands, in a
satisfactory manner, the existence of such a law as a question of fact;
and when proof of such a law is lacking, it is improper to apply
unknown laws to suits pending before the courts of the Islands.”
The notes to The Great Western Insurance Company vs. Fogarty (86 U. S., 216), say:
“In the English practice, a ship
is a total loss when she has sustained such extensive damage that it
would not be reasonably practical to repair her. The ordinary measure
of prudence which the courts have adopted is this: If the ship, when
repaired, will not be worth the sum which it would be necessary to
expend upon her, the repairs are, practically speaking, impossible, and
it is a case of total loss.” (Citing a number of English authorities.)
After a careful consideration of this important case, we hold that
the decision of the trial court should be reversed, and that a judgment
should be entered here in favpr of the plaintiff and against the
defendant for P16,000, with interest ihereon, from February 25, 1919,
at the rate of 6 per cem per annum, and the costs and disbursements of
this action in this and the lower court. So ordered.
Araullo, C. J., Johnson, Street, Malcolm, Avanceña, Villamor, and Romualdez, JJ., concur.