Filipino Merchants Insurance Co., Inc. vs. Alejandro

The one-year prescriptive period under Section 3(6) of the Carriage of Goods by Sea Act applies to an insurer subrogated to the rights of the insured, and the period is reckoned from the date of delivery of the goods or the date they should have been delivered, not from the filing of the insured's complaint against the insurer.

Filipino Merchants Insurance Company, Inc. issued marine insurance policies covering cargo shipped by Choa Tiek Seng and Joseph Benzon Chua. The cargo was transported by sea carriers Frota Oceanica Brasiliera and Australia-West Pacific Line. Upon arrival in Manila, the goods were discharged to the arrastre operator and received by the consignees, who subsequently filed actions against the insurer for the loss and damage sustained during transit.

Filipino Merchants Insurance Company, Inc. (petitioner) issued marine insurance policies covering cargo shipped by Choa Tiek Seng and Joseph Benzon Chua. The goods were transported by sea carriers Frota Oceanica Brasiliera (Frota) and Australia-West Pacific Line (Australia-West). On December 13, 1976, the vessel SS Frotario discharged Choa's goods at the port of Manila, which were delivered to the arrastre operator E. Razon, Inc. on December 17, 1976, and received by the consignee on the same date. Chua's goods were delivered to the consignee on or about January 25-28, 1977.

On August 3, 1977, Choa filed a complaint against the petitioner before the Court of First Instance of Manila for recovery of P35,987.26 under the marine insurance policy, alleging loss and damage to the insured goods. On August 10, 1977, Chua filed a similar complaint against the petitioner for the recovery of P55,996.49. The petitioner filed its answers disclaiming liability and imputing fraud.

Thereafter, the petitioner filed third-party complaints against the carriers Frota and Australia-West, seeking indemnity, subrogation, or reimbursement in the event it was held liable to the insureds. The petitioner filed the third-party complaint against Frota on January 9, 1978, and against Australia-West on September 28, 1978. In both cases, the carriers filed motions for preliminary hearing on their affirmative defense of prescription, alleging that the suits were filed beyond the one-year prescriptive period provided in Section 3(6) of the Carriage of Goods by Sea Act (COGSA). The respondent judges dismissed the third-party complaints, prompting the petitioner to elevate the cases to the Supreme Court on a pure question of law regarding the applicability of the COGSA one-year prescriptive period to an insurer.

• Applicability of COGSA: Petitioner maintained that the one-year prescriptive period under the Carriage of Goods by Sea Act applies only to the shipper and not to the insurer of the goods, arguing that an insurer which has not settled the claim cannot be considered subrogated to the rights of the insured.
• Reckoning Period: Petitioner contended that the period for filing a third-party complaint should be reckoned from the date the principal action was filed by the insured, as the third-party complaint is merely an incident of the main action.

• Applicability of COGSA: Respondents argued that the one-year prescriptive period within which to file a case against the carrier also applies to a claim filed by an insurer who stands as a subrogee to the insured.
• Reckoning Period: Respondents asserted that the third-party complaint cannot be reckoned from the filing of the main action because such complaint is independent of, and separate and distinct from, the insured's action against the petitioner.

• Applicability of COGSA: Whether the one-year prescriptive period under Section 3(6) of the Carriage of Goods by Sea Act applies to an insurer of the goods.
• Reckoning Period: Whether the one-year prescriptive period for filing a third-party complaint against the carrier is reckoned from the date of delivery of the goods or from the date the insured filed the main action against the insurer.

• Applicability of COGSA: Yes. The one-year prescriptive period applies to the insurer of the goods, as the coverage of the Act includes subrogated parties to prevent indirect circumvention of the time-bar.
• Reckoning Period: No. The prescriptive period is reckoned from the date of delivery of the goods or the date when the goods should have been delivered, not from the filing of the main action, because a third-party complaint creates no substantive rights and cannot enlarge the substantive rights of the litigant.

• Applicability of COGSA: The Court interpreted Section 3(6) of the Carriage of Goods by Sea Act in conjunction with the rest of the section, noting that while the proviso mentions "shipper," the notice of loss may be filed by the consignee or any legal holder of the bill of lading. Citing Chua Kuy vs. Everett Steamship Corporation and Aetna Insurance Co. vs. Luzon Stevedoring Corporation, the Court concluded that the Act's coverage includes the insurer. Excluding the insurer would render the one-year limitation useless, as shippers could simply file claims against the insurer after one year, who would then sue the carrier indefinitely. The law aims to protect carriers from fraudulent claims by ensuring maritime disputes are settled quickly.
• Reckoning Period: A third-party complaint is merely ancillary to the main action and cannot abridge, enlarge, or modify the substantive rights of any litigant. The petitioner can only rightfully file a third-party complaint if it can validly maintain an action against the carrier. Since the insureds gave notice and filed suit against the petitioner within one year of delivery, the petitioner had ample time (more than four months in one case, five in another) to file its third-party complaint within the prescriptive period. Its failure to do so rendered its action prescribed.

• Subrogation and the COGSA Time-Bar — The one-year prescriptive period under the Carriage of Goods by Sea Act binds not only the shipper but also the consignee, endorsee, and any subrogated insurer. An insurer cannot circumvent the time-bar by waiting to be sued by the insured before filing an action against the carrier; the prescriptive period runs from the delivery of the goods.
• Ancillary Nature of Third-Party Complaints — A third-party complaint is ancillary to the main action and creates no substantive rights. It cannot be used to acquire a right of action that has already prescribed, nor does the filing of the main action reset or suspend the prescriptive period for the third-party claim.

• "Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year." — This passage articulates the ratio decidendi for applying the COGSA time-bar to insurers, emphasizing the legislative intent to prevent indirect circumvention of the prescriptive period.
• "The petitioner can only rightfully file a third-party complaint against the respondents if, in the first place, it can still validly maintain an action against the latter." — This defines the limitation on third-party complaints, establishing that the existence of a substantive right of action is a prerequisite to filing an ancillary claim.

• Chua Kuy vs. Everett Steamship Corporation, 93 Phil 207 — Followed. The Court relied on this case to establish that the COGSA prescriptive period applies not only to shippers but also to consignees, endorsees, and subrogated parties.
• Aetna Insurance Co. vs. Luzon Stevedoring Corporation, 62 SCRA 11 — Followed. The Court cited this case to reinforce that an insurance company's suit against a carrier filed after one year from delivery is barred by prescription.
• The Yek Tong Fire and Marine Insurance Co., Ltd. vs. American President Lines, Inc., 103 Phil. 1125 — Followed. Cited to support the purpose of COGSA in protecting carriers from fraudulent claims and ensuring the prompt settlement of maritime transportation disputes.
• Eastern Assurance and Surety Corporation vs. Cui, 105 SCRA 622 — Followed. Cited for the principle that a third-party complaint is merely ancillary to the main action.

• Section 3(6), Carriage of Goods by Sea Act (COGSA) — Provides that the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. The Court applied this provision to hold that the insurer's third-party complaints, filed more than one year after delivery, were prescribed.

Feria (Chairman), Fernan, Alampay, and Paras, JJ.