SECOND DIVISION

[ G.R. No. 223592, August 07, 2017 ]

EQUITABLE INSURANCE CORPORATION, PETITIONER, VS.
TRANSMODAL INTERNATIONAL, INC., RESPONDENT.

DECISION

PERALTA, J.:
This is to resolve the Petition for Review on Certiorari under Rule 45
of the Rules of Court, dated May 11, 2016, of petitioner Equitable
Insurance Corporation that seeks to reverse and set aside the
Decision[1] dated September 15, 2015 and Resolution [2] dated March
17, 2016 of the Court of Appeals (CA) reversing the Decision[3] dated
June 18, 2013 of the Regional Trial Court (RTC), Branch 26, Manila in a
civil case for actual damages.

The facts follow.

Sytengco Enterprises Corporation (Sytengco) hired respondent

Transmodal International, Inc. (Transmodal) to clear from the customs
authorities and withdraw, transport, and deliver to its warehouse,
cargoes consisting of 200 cartons of gum Arabic with a total weight of
5,000 kilograms valued at US21,750.00.

The said cargoes arrived in Manila on August 14, 2004 and were
brought to Ocean Links Container Terminal Center, Inc. pending their
release by the Bureau of Customs (BOC) and on September 2, 2004,
respondent Transmodal withdrew the same cargoes and delivered
them to Sytengco's warehouse. It was noted in the delivery receipt
that all the containers were wet.

In a preliminary survey conducted by Elite Adjusters and Surveyors,

Inc. (Elite Surveyors), it was found that 187 cartons had water marks
and the contents of the 13 wet cartons were partly hardened. On
October 13, 2004, a re-inspection was conducted and it was found
that the contents of the randomly opened 20 cartons were about 40%
to 60% hardened, while 8 cartons had marks of previous wetting. In its
final report dated October 27, 2004, Elite Surveyor fixed the computed
loss payable at P728,712.00 after adjustment of 50% loss allowance.

Thus, on November 2, 2004, Sytengco demanded from respondent

Transmodal the payment of P1,457,424.00 as compensation for total
loss of shipment. On that same date, petitioner Equitable Insurance,
as insurer of the cargoes per Marine Open Policy No. MN-MRN-HO-
000549 paid Sytengco's claim for P728,712.00. On October 4, 2004,
Sytengco then signed a subrogation receipt and loss receipt in favor
of petitioner Equitable Insurance. As such, petitioner Equitable
Insurance demanded from respondent Transmodal reimbursement of
the payment given to Sytengco.

Thereafter, petitioner Equitable Insurance filed a complaint for

damages invoking its right as subrogee after paying Sytengco's
insurance claim and averred that respondent Transmodal's fault and
gross negligence were the causes of the damages sustained by
Sytengco's shipment. Petitioner Equitable Insurance prayed for the
payment of P728,712.00 actual damages with 6% interest from the
date of the filing of the complaint until full payment, plus attorney's
fees and cost of suit.

Respondent Transmodal denied knowledge of an insurance policy

and claimed that petitioner Equitable Insurance has no cause of
action against it because the damages to the cargoes were not due to
its fault or gross negligence. According to the same respondent, the
cargoes arrived at Sytengco's warehouse around 11:30 in the morning
of September 1, 2004, however, Sytengco did not immediately receive
the said cargoes and as a result, the cargoes got wet due to the rain
that occurred on the night of September 1, 2004. Respondent
Transmodal also questioned the timeliness of Sytengco's formal
claim for payment which was allegedly made more than 14 days from
the time the cargoes were placed at its disposal in contravention of
the stipulations in the delivery receipts.

The RTC, in its Decision dated June 18, 2013, found in favor of
petitioner Equitable Insurance, thus, the following dispositive portion
of said decision:
WHEREFORE, based on the foregoing, judgment is hereby rendered
in favor of the plaintiff and against the defendant, ordering the latter
to pay the following:
(1) Actual damages in the amount of Php728,712.00 plus 6% interest
from judicial demand until full payment;

(2) Attorney's fees in the amount equivalent to 10% of the amount

claimed;

(3) Costs of suit. SO ORDERED.[4]

According to the RTC, petitioner Equitable Insurance was able to
prove by substantial evidence its right to institute an action as
subrogee of Sytengco. It also ruled that petitioner Equitable
Insurance's non-presentation of the insurance policy and non-
compliance with Section 7, Rule 8 of the Rules of Court on actionable
document were raised for the first time in respondent Transmodal's
memorandum and also noted that petitioner Equitable Insurance had,
in fact, submitted a copy of the insurance contract.

Respondent Transmodal appealed the RTC's decision to the CA. The

CA, on September 15, 2015, promulgated its decision reversing the
RTC's decision. It disposed of the appeal as follows:
WHEREFORE, the appeal is hereby GRANTED. The June 18,2013
Decision of the Regional Trial Court, Branch 26, Manila in Civil Case
No. 06-114861 is REVERSED and SET ASIDE. Accordingly, Equitable
Insurance Corp.'s complaint is DISMISSED for failure to prove cause
of action.

SO ORDERED.[5]
The CA ruled that there was no proof of insurance of the cargoes at
the time of the loss and that the subrogation was improper. According
to the CA, the insurance contract was neither attached in the
complaint nor offered in evidence for the perusal and appreciation of
the RTC, and what was presented was just the marine risk note.

Hence, the present petition after the CA denied petitioner Equitable

Insurance's motion for reconsideration.

Petitioner Equitable Insurance enumerates the following assignment

of errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN NOT
DECLARING THAT THE CASE OF MALAYAN INSURANCE CO., INC. V.
REGIS BROKERAGE CORP. (G.R. NO. 172156, NOVEMBER 23, 2007)
IS NOT APPLICABLE IN THE INSTANT CASE;

2. THE HONORABLE COURT OF APPEALS ERRED IN NOT

DECLARING THAT THE FACTS SURROUNDING THE CASE OF
MALAYAN INSURANCE CO., INC. V. REGIS BROKERAGE CORP. (G.R.
NO. 172156, NOVEMBER 23, 2007) IS DIFFERENT FROM THE FACTS
ATTENDING THE INSTANT CASE;

3. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING

THE CASE OF TISON V. COURT OF APPEALS, 276 SCRA 582;

4. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING

THE CASE OF COMPAÑA MARITIMA V. INSURANCE COMPANY OF
NORTH AMERICA, 12 SCRA 213;

5. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING

THE CASE OF DELSAN TRANSPORT LINES, INC. V. COURT OF
APPEALS, 273 SCRA 262;

6. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING

THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE. [6]
It is the contention of petitioner Equitable Insurance that the CA erred
in not applying certain jurisprudence on this case which it deemed
applicable. It also argues that the present case is not a suit between
the insured Sytengco and the insurer but one between the consignee
Sytengco and the respondent common carrier since petitioner
Equitable Insurance merely stepped into the shoes of the said insured
who has a direct cause of action against respondent Transmodal on
account of the damage sustained by the subject cargo, thus, the
carrier cannot set up as defense any defect in the insurance policy
because it cannot avoid its liability to the consignee under the
contract of carriage which binds it to pay any loss or damage that
may be caused to the cargo involved therein.

In its Comment[7] dated July 25, 2016, respondent Transmodal avers

that the CA did not err in not applying certain jurisprudence in the
latter's decision. Respondent Transmodal further refutes all the
assigned errors that petitioner Equitable Insurance enumerated in its
petition.

A closer look at the arguments raised in the petition would show that
petitioner is indeed asking this Court to review the factual findings of
the CA which is not within the scope of a petition for review under
Rule 45 of the Rules of Court. However, this Court has recognized
exceptions to the rule that the findings of fact of the CA are
conclusive and binding in the following instances: (1) when the
findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when
the findings of facts are conflicting; (6) when in making its findings
the CA went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they
are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent;
(10) when the findings of fact are premised on the supposed absence
of evidence and contradicted by the evidence on record; and (11)
when the CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a
different conclusion.[8] Considering that the findings of facts of the
RTC and the CA are glaringly in contrast, this Court deems it proper
to review the present case.

In ruling that petitioner's subrogation right is improper, the CA stated

that it found no proof of insurance of the cargoes at the time of their
loss. It also found that what was presented in court was the marine
risk note and not the insurance contract or policy, thus:
A perusal of the complaint and the other documentary evidence
submitted by Equitable Insurance such as the preliminary and final
report clearly shows that the claims for damages and subrogation
were based on Policy No. MN-MRN-HO-0005479. However, said
insurance contract was neither attached in the complaint nor offered
in evidence for the perusal and
appreciation of the court a quo. Instead, Equitable Insurance
presented the marine risk note. For clarity, We quote the pertinent
portions of the marine risk note, viz.:
Line & Subline
           MARINE CARGO
           RISK NOTE 
Policy No.:
           MN-MRN-HO-0005479
Issue date Sep. 08, 2004 
Invoice No. 59298 V

Assured: SYTENGCO ENTERPRISES CORPORATION 

Address: 10RESTHAVEN ST.
              SAN FRANCISCO DEL MONTE SUBDIVISION,
              QUEZON CITY, METRO MANILA

We have this day noted the undermentioned risk in your favor and
hereby guarantee that this document has all the force and effect of
the terms and conditions of EQUITABLE INSURANCE CORPORATION
Marine Policy No. MN-MOP-HO-0000099.

L/C AMOUNT: USD 21,750.00            MARK-UP: 20%

SUM INSURED: PHP 1,457,424.00      EXCHANGE RATE: 55.8400

CARGO: 200 CTNS. GUM ARABIC POWDER KB-120

Supplier: JUMBO TRADING CO., LTD.

Vessel: ASIAN ZEPHYR   VOYAGE No.: 062N
BL#:MNL04086310
ETD: 09-AUG-04       ETA: 13-AUG-04
[9]
From: THAILAND       To: Manila, Philippines
As such, according to the CA, the case of Eastern Shipping Lines,
Inc. v. Prudential Guarantee and Assurance, Inc. [10] is applicable,
wherein this Court held that a marine risk note is not an insurance
policy. The CA also found applicable this Court's ruling in Malayan
Insurance Co., Inc. v. Regis Brokerage Corp.,[11] stating that a marine
policy is constitutive of the insurer-insured relationship, thus, such
document should have been attached to the complaint as mandated
by Section 7,[12] Rule 8 of the Rules of Court.
Petitioner, however, insists that the CA erred in applying the case
of Malayan because the plaintiff therein did not present the marine
insurance policy whereas in the present case, petitioner has
presented not only the marine risk note but also Marine Open Policy
No. MN-MOP-HO-0000099[13] which were all admitted in evidence.

Indeed, a perusal of the records would show that petitioner is correct

in its claim that the marine insurance policy was offered as evidence.
In fact, in the questioned decision of the CA, the latter, mentioned
such policy, thus:
Contrary to the ruling of the RTC, the marine policy was not at all
presented. As borne by the records, only the marine risk note and
EQUITABLE INSURANCE CORPORATION Marine Policy No. MN-MOP-
HO-0000099 were offered in evidence. These pieces of evidence are
immaterial to Equitable Insurance's cause of action. We have earlier
pointed out that a marine risk note is insufficient to prove the
insurer's claim. Although the marine risk note provided that it "has all
the force and effect of the terms and conditions of EQUITABLE
INSURANCE CORPORATION Marine Policy No. MN-MOP-HO-
0000099," there is nothing in the records showing that the said policy
is related to Policy No. MN-MRN-HO-005479 which was the basis of
Equitable Insurance's complaint. It did not escape our attention that
the second page of the marine risk note explicitly stated that it was
"attached to and forming part of the Policy No. MN-MRN-005479."
Thus, without the presentation of Policy No. MN-MRN-005479, We
cannot simply assume that the terms and conditions, including the
period of coverage, of such policy are similar to Marine Policy No.
MN-MOP-HO-0000099.[14]
As such, respondent had the opportunity to examine the said
documents or to object to its presentation as pieces of evidence. The
records also show that respondent was able to cross-examine
petitioner's witness regarding the said documents. Thus, it was well
established that petitioner has the right to step into the shoes of the
insured who has a direct cause of action against herein respondent
on account of the damages sustained by the cargoes. "Subrogation is
the substitution of one person in the place of another with reference
to a lawful claim or right, so that he who is substituted succeeds to
the rights of the other in relation to a debt or claim, including its
remedies or securities."[15]The right of subrogation springs from
Article 2207 of the Civil Code which states:
Art. 2207. If the plaintiffs 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 wrongdoer 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.
The records further show that petitioner was able to accomplish its
obligation under the insurance policy as it has paid the assured of its
insurance claim in the amount of P728,712,00 as evidenced by, among
others, the Subrogation Receipt, [16] Loss Receipt,[17] Check Voucher,
[18]
 and Equitable PCI Bank Check No. 0000013925. [19]The payment by
the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies which the insured may have against the
third party whose negligence or wrongful act caused the loss. The
right of subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance company of
the insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim. [20]

This Court's ruling in Asian Terminals, Inc. v. First Lepanto-Taisho

Insurance Corporation[21] is highly instructive, thus:
As a general rule, the marine insurance policy needs to be presented
in evidence before the insurer may recover the insured value of the
lost/damaged cargo in the exercise of its subrogatory right.
In Malayan Insurance Co., Inc. v. Regis Brokerage Corp., the Court
stated that the presentation of the contract constitutive of the
insurance relationship between the consignee and insurer is critical
because it is the legal basis of the latter's right to subrogation.

In Home Insurance Corporation v. CA, the Court also held that the
insurance contract was necessary to prove that it covered the hauling
portion of the shipment and was not limited to the transport of the
cargo while at sea. The shipment in that case passed through six
stages with different parties involved in each stage until it reached the
consignee. The insurance contract, which was not presented in
evidence, was necessary to determine the scope of the insurer's
liability, if any, since no evidence was adduced indicating at what
stage in the handling process the damage to the cargo was sustained.
An analogous disposition was arrived at in the Wallem case cited by
ATI wherein the Court held that the insurance contract must be
presented in evidence in order to determine the extent of its coverage.
It was further ruled therein that the liability of the carrier from whom
reimbursement was demanded was not established with certainty
because the alleged shortage incurred by the cargoes was not
definitively determined.

Nevertheless, the rule is not inflexible. In certain instances, the Court

has admitted exceptions by declaring that a marine insurance policy
is dispensable evidence in reimbursement claims instituted by the
insurer.

In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of
subrogation accrues simply upon payment by the insurance company
of the insurance claim. Hence, presentation in evidence of the marine
insurance policy is not indispensable before the insurer may recover
from the common carrier the insured value of the lost cargo in the
exercise of its subrogatory right. The subrogation receipt, by itself,
was held sufficient to establish not only the relationship between the
insurer and consignee, but also the amount paid to settle the
insurance claim. The presentation of the insurance contract was
deemed not fatal to the insurer's cause of action because the loss of
the cargo undoubtedly occurred while on board the petitioner's
vessel.

The same rationale was the basis of the judgment in International

Container Terminal Services, Inc. v. FGU Insurance Corporation,
wherein the arrastre operator was found liable for the lost shipment
despite the failure of the insurance company to offer in evidence the
insurance contract or policy. As in Delsan, it was certain that the loss
of the cargo occurred while in the petitioner's custody. [22]
In view thereof, the RTC did not err in its ruling, thus:
Defendant in its memorandum, raised the issue that plaintiff failed to
attach in its complaint a copy of the Marine Open Insurance Policy,
thus, it failed to establish its cause of action as subrogee of the
consignee quoting the case of Malayan Insurance Co., Inc. v. Regis
Brokerage Corp.
The above-mentioned case is not applicable in the instant case.
In Malayan Insurance Co. v. Regis Brokerage, Malayan did not submit
the copy of the insurance contract or policy. In the instant case,
plaintiff submitted the copy of the insurance contract. In fact, the non-
presentation of the insurance contract is not fatal to its cause of
action.

In the more recent case of Asian Terminals, Inc. v. Malayan Insurance

Co., Inc., it was held:
Similarly, in this case, the presentation of the insurance contract or
policy was not necessary. Although petitioner objected to the
admission of the Subrogation Receipt in its Comment to respondent's
formal offer of evidence on the ground that respondent failed to
present the insurance contract or policy, a perusal of petitioner's
Answer and Pre-trial Brief shows that petitioner never questioned
respondent's right to subrogation, nor did it dispute the coverage of
the insurance contract or policy. Since there was no issue regarding
the validity of the insurance contract or policy, or any provision
thereof, respondent had no reason to present the insurance contract
or policy as evidence during the trial.
Perusal of the records likewise show that the defendant failed to raise
the issue of non-compliance with Section 7, Rule 8 of the 1997 Rules
of Procedure and the non-presentation of insurance policy during the
pre-trial. In the same case, it was held:
Petitioner claims that respondent's non-presentation of the insurance
contract or policy between the respondent and the consignee is fatal
to its cause of action.

We do not agree.

First of all, this was never raised as an issue before the RTC. In fact, it
is not among the issues agreed upon by the parties to be resolved
during the pre-trial. As we have said, the determination of issues
during the pre-trial conference bars the consideration of other
questions, whether during trial or on appeal. Thus, [t]he parties must
disclose during pre-trial all issues they intend to raise during the trial,
except those involving privileged or impeaching matters. x x x The
basis of the rule is simple. Petitioners are bound by the delimitation of
the issues during the pre-trial because they themselves agreed to the
same.
Plaintiff was able to prove by substantial evidence their right to
institute this action as subrogee of the insured. The defendant did not
present any evidence or witness to bolster their defense and to
contradict plaintiffs allegation.[23]
To reiterate, in this case, petitioner was able to present as evidence
the marine open policy that vested upon it, its rights as a subrogee.
Subrogation is designed to promote and to accomplish justice and is
the mode which equity adopts to compel the ultimate payment of a
debt by one who injustice, equity and good conscience ought to pay.
[24]

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of

the Rules of Court, dated May 11, 2016, of petitioner Equitable
Insurance Corporation is GRANTED. Consequently, the Decision
dated September 15, 2015 and Resolution dated March 17, 2016 of the
Court of Appeals in CA-G.R. CV No. 101296 are REVERSED and SET
ASIDE, and the Decision dated June 18, 2013 of the Regional Trial
Court, Branch 26, Manila is AFFIRMED and REINSTATED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 13983           September 1, 1919

LA RAZON SOCIAL "GO TIAOCO Y HERMANOS," plaintiff-appellant, 

vs.
UNION INSURANCE SOCIETY OF CANTON, LTD., defendant-appellee.

P. E. del Rosario and W. F. Mueller for appellant.

Crossfield and O'Brien for appellee.

STREET, J.:

This is an action on a policy of marine insurance issued by the Union

Insurance Society of Canton, Ltd., upon a cargo of rice belonging to the
plaintiffs, Go Tiaoco Brothers, which was transported in the early days of
May, 1915, on the steamship Hondagua from the port of Saigon to Cebu.
On discharging the rice from one of the compartments in the after hold,
upon arrival at Cebu, it was discovered that one thousand four hundred
seventy-three sacks and been damages by sea water. The loss so resulting
to the owners of rice, after proper deduction had been made for the portion
saved, was three thousand eight hundred seventy five pesos and twenty-
five centavos (P3,875.25). The trial court found that the inflow of the sea
water during the voyage was due to a defect in one of the drain pipes of the
ship and concluded that the loss was not covered by the policy of
insurance. Judgment was accordingly entered in favor of the defendant and
the plaintiffs appealed.

The facts with reference to the manner in which the sea water effected
entrance into the hold may be summarized as follows, substantially in
accordance with the findings of the trial court:

The drain pipe which served as a discharge from the water closet passed
down through the compartment where the rice in question was stowed and
thence out to sea through the wall of the compartment, which was a part of
the wall of the ship. The joint or elbow where the pipe changed its direction
was of cast iron; and in course of time it had become corroded and
abraded until a longitudinal opening had appeared in the pipe about one
inch in length. This hole had been in existence before the voyage was
begun, and an attempt had been made to repair it by filling with cement and
bolting over it a strip of iron. The effect of loading the boat was to submerge
the vent, or orifice, of the pipe until it was about 18 inches or 2 feet below
the level of the sea. As a consequence the sea water rose in the pipe.
Navigation under these conditions resulted in the washing out of the
cement-filling from the action of the sea water, thus permitting the
continued flow of the salt water into the compartment of rice.

The court found in effect that the opening above described had resulted in
course of time from ordinary wear and tear and not from the straining of the
ship in rough weather on that voyage. The court also found that the repairs
that had been made on the pipe were slovenly and defective and that, by
reason of the condition of this pipe, the ship was not properly equipped to
receive the rice at the time the voyage was begun. For this reason the court
held that the ship was unseaworthy.
The policy of insurance was signed upon a form long in use among
companies engaged in maritime insurance. It purports to insure the cargo
from the following among other risks: "Perils . . . of the seas, men of war,
fire, enemies, pirates, rovers, thieves, jettisons, . . . barratry of the master
and mariners, and of all other perils, losses, and misfortunes that have or
shall come to the hurt, detriment, or damage of the said goods and
merchandise or any part thereof."

The question whether the insurer is liable on this policy for the loss caused
in the manner above stated presents two phases which are in a manner
involved with each other. One has reference to the meaning of the
expression "perils of the seas and all other perils, losses, and misfortunes,"
as used in the policy; the other has reference to the implied warranty, on
the part of the insured, as to the seaworthiness of the ship.

The meaning of the expression "perils . . . of the seas . . . and all other
perils, losses, and misfortunes," used in describing the risks covered by
policies of marine insurance, has been the subject of frequent discussion;
and certain propositions relative thereto are now so generally accepted as
to be considered definitely settled.

In the first place it is determined that the words "all other perils, losses, and
misfortunes" are to be interpreted as covering risks which are of like kind
(ejusdem generis) with the particular risks which are enumerated in the
preceding part of the same clause of the contract. "According to the
ordinary rules of construction," said Lord Macnaghten in Thames and
Mersey Marine Insurance Co. vs. Hamilton, Fraser & Co. ([1887]), 12 A. C.,
484, 501), "these words must be interpreted with reference to the words
which immediately precede them. They were no doubt inserted in order to
prevent disputes founded on nice distinctions. Their office is to cover in
terms whatever may be within the spirit of the cases previously
enumerated, and so they have a greater or less effect as a narrower or
broader view is taken of those cases. For example, if the expression 'perils
of the seas' is given its widest sense the general words have little or no
effect as applied to that case. If no the other hand that expression is to
receive a limited construction, as apparently it did in Cullen vs. Butler (5 M.
& S., 461), and loss by perils of the seas is to be confined to loss ex
marinae tempestatis discrimine, the general words become most important.
But still, ever since the case of Cullen vs. Butler, when they first became
the subject of judicial construction, they have always been held or assumed
to be restricted to cases 'akin to' or resembling' or 'of the same kind as'
those specially mentioned. I see no reason for departing from this settled
rule. In marine insurance it is above all things necessary to abide by settled
rules and to avoid anything like novel refinements or a new departure."

It must be considered to be settled, furthermore, that a loss which, in the

ordinary course of events, results from the natural and inevitable action of
the sea, from the ordinary wear and tear of the ship, or from the negligent
failure of the ship's owner to provide the vessel with proper equipment to
convey the cargo under ordinary conditions, is not a peril of the sea. Such a
loss is rather due to what has been aptly called the "peril of the ship." The
insurer undertakes to insure against perils of the sea and similar perils, not
against perils of the ship. As was well said by Lord Herschell in Wilson,
Sons & Co. vs. Owners of Cargo per the Xantho ([1887], 12 A. C.,
503,509), there must, in order to make the insurer liable, be "some
casualty, something which could not be foreseen as one of the necessary
incidents of the adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events which
must happen."

In the present case the entrance of the sea water into the ship's hold
through the defective pipe already described was not due to any accident
which happened during the voyage, but to the failure of the ship's owner
properly to repair a defect of the existence of which he was apprised. The
loss was therefore more analogous to that which directly results from
simple unseaworthiness than to that which results from perils of the sea.

The first of the two decisions of the House of Lords from which we have
quoted (Thames and Mersey Marine Insurance Co. vs. Hamilton, Fraser &
Co. [1887], 12 A. C., 484) arose upon the following state of facts: In March,
1884, the Inchmaree was lying at anchor off Diamond Island and was
about to start upon her voyage. To this end it became necessary to fill up
her boilers. There was a donkey-engine with a donkey-pump on board, and
the donkey-engine was set to pump up water from the sea into the boilers.
Those in charge of the operation did not take the precaution of making sure
that the valve of the aperture leading into one of the boilers was open. This
valve happened to be closed. The result was that the water being unable to
make its way into the boiler was forced back and split the air-chamber and
so disabled the pump. It was held that whether the injury occurred through
negligence or accidentally without negligence, it was not covered by the
policy, since the loss did not fall either under the words "perils of the seas"
or under the more general words "all other perils, losses, and misfortunes."
Lord Bramwell, in the course of his opinion quoted with approbation as
definition given by Lopes L.J. in Pandorf vs. Hamilton (16 Q. B. D., 629),
which is as follows: In a sea-worthy ship damage to goods caused by the
action of the sea during transit not attributable to the fault of anybody, is a
damage from a peril of the sea.

The second of the decision from the House of Lords from which we have
quoted (Wilson, Son & Co. vs. owners of Cargo per the Xantho [1887], 12
A. C., 503) arose upon the following facts: The owners of certain cargo
embarked the same upon the steamship Xantho. A collision took place in a
fog between this vessel and another ship, Valuta. An action was thereupon
instituted by the owners of the cargo against the owners of the Xantho. It
was held that if the collision occurred without fault on the part of the
carrying ship, the owners were not liable for the value of the cargo lost by
such collision.

Still another case was decided in the House of Lords upon the same date
as the preceding two, which is equally instructive as the others upon the
question now under consideration. We refer to Hamilton, Fraser &
Co. vs. Pandorf & Co. ([1887], 12 A. C., 518), where it appeared that rice
was shipped under a charter party and bills of lading which expected
"dangers and accident of the sea." During the voyage rats gnawed a hole in
a pipe on board the ship, whereby sea water effected an entrance into the
ship's hold and damaged the rice. It appeared that there was no neglect or
default on the part of the shipowners or their servants in the matter of
attending to the cargo. It was held that this loss resulted from an accident
or peril of the sea and that the shipowners were not responsible. Said
Bramwell: "No question of negligence exists in this case. The damage was
caused by the sea in the course of navigation with no default in any one. I
am, therefore, of opinion that the damage was caused by peril of the sea
within the meaning of the bill of lading." The point which discriminates this
decision from that now before us is that in the present case the negligence
of the shipowners must be accepted as established. Undoubtedly, if in
Hamilton, Fraser & Co. vs. Pandorf & Co. [1887], 12 A. C., 518), it had
appeared that this hold had been gnawed by the rats prior to this voyage
and the owners, after having their attention directed to it, had failed to make
adequate repairs, the ship would have been liable.
The three decisions in the House of Lords above referred to contain
elaborate discussions concerning the liability of shipowners and insurers,
respectively, for damage happening to cargo in the course of a sea voyage;
and it would be presumptuous for us to undertake to add to what has been
there said by the learned judges of that high court. Suffice it to say that
upon the authority of those cases there is no room to doubt the liability of
the shipowner for such a loss as occurred in this case. By parity of
reasoning the insurer is not liable; for, generally speaking, the shipowner
excepts the perils of the sea from his engagement under the bill of lading,
while this is the very peril against which the insurer intends to give
protection. As applied to the present case it results that the owners of the
damages rice must look to the shipowner for redress and not to the insurer.

The same conclusion must be reached if the question be discussed with

reference to the seaworthiness of the ship. It is universally accepted that in
every contract of insurance upon anything which is the subject of marine
insurance, a warranty is implied that the ship shall be seaworthy at the time
of the inception of the voyage. This rule is accepted in our own Insurance
Law (Act No. 2427, sec. 106). It is also well settled that a ship which is
seaworthy for the purpose of insurance upon the ship may yet be
unseaworthy for the purpose of insurance upon the cargo (Act No. 2427,
sec. 106). In Steel vs. State Line Steamship Co. ([1877], L. R. 3 A. C., 72),
a cargo of wheat was laden upon a ship which had a port-hole insecurely
fastened at the time of the lading. This port-hole was about one foot above
the water line; and in the course of the voyage sea water entered the
compartment where the wheat was stores and damaged the cargo. It was
held that the ship was unseaworthy with reference to the cargo in question.
In Gilroy, Sons & Co. vs. Price & Co. ([1893], 18 A. C., 56), a cargo of jute
was shipped. During the voyage the vessel encountered stormy weather,
as a consequence of which the cargo shifted its position and broke a pipe
leading down through the hold from the water closet, with result that water
entered the vessel and the jute was damaged. It was found that the cargo
was improperly stowed and that the owners of the ship were chargeable
with negligence for failure to protect the pipe by putting a case over it. It
was accordingly held that the ship was unseaworthy.

From what has been said it follows that the trial court committed no error in
absolving the defendant from the complaint. The judgment must therefore
be affirmed, and it is so ordered, with costs.