EAGLE STAR INSURANCE, et al. vs.
CHIA YU
J. A. Reyes | March 31, 1955
TOPIC: PRESCRIPTION OF ACTION
FACTS
On Jan. 15, 1946, Atkin, Kroll & Co. loaded 14 bales of assorted underwear valued at
P8,085 consigned to Chia Yu of Manila on the SS Roeph Silverlight owned and
operated by Leigh Hoegh & Co of San Francisco, California.
The shipment was insured against all risks by Eagle Star Insurance of San Francisco
under a policy issued to Leigh Hoegh, which in turned, assigned to Chia Yu.
The vessel arrived in Manila on Feb. 10, 1946, and on Mar. 4, they started
discharging its cargo into the custody of Manila Terminal Co. which was then
operating the arrastre service for the Bureau of Customs. Out the 14 bales consigned
to Chia Yu, only 10 were delivered to him as the remaining could not be found. 3 of
those delivered were also found damaged to at least 50%.
Chia Yu claimed indemnity for the missing and damaged bales. But the claim was
denied by Leigh Hoegh and Eagle Star.
Chia Yu sued Leigh Hoegh, Eagle Star, and their respective agents in the Philippines
at the CFI Manila on Nov. 16, 1948, or more than 2 years after the delivery of the
damaged bales and the date when the missing bales should have delivered. The
action was resisted by the defendants principally on the ground of prescription.
CFI: In favor of Chia Yu and ordered the defendants to pay him for the sum sued.
CA: Affirmed the CFI’s decision.
ISSUE: WON the action against the shipper has prescribed – YES
WON the action against the insurer has prescribed – NO
RATIO
On prescription with regards the shipper’s liability
The bill of lading states: “In any event, the carried and the ship shall be discharged
from all liability in respect of loss or damage unless suit is brought within 1 year after
the delivery of the goods or the date when the goods should have been delivered.”
The stipulation is but a repetition of a provision contained in the US Carriage of
Goods by Sea Act of 1936 which was adopted and made applicable to the PH by
Commonwealth Act 65 and by express agreement incorporated in the bill of lading.
Following recent SC decisions giving force and effect to this kind of stipulation in bills
of lading covering shipments from the US to the PH, the SC would have to hold that
Chia Yu’s failure to bring his action “within one year after the delivery of the goods or
the date when the goods should have been delivered” discharged the carrier from all
liability.
On prescription with regards the insurer’s liability
The case for the insurer stands on a different footing for its claim of prescription is
founded upon the terms of the policy and not upon the bill of lading. Under our law,
the time limit for bringing a civil action upon a written contract is 10 years after the
right of action accrues.
Eagle Star: The counsel for Eagle Star raises this stipulation in the policy as an
argument: “No suit of action on this Policy, for the recovery of any claim, shall be
sustainable in any court of law or equity unless the insured shall have fully complied
with all the terms and conditions of this Policy nor unless commenced with 12 months
next after the happening of the loss”
SC: The argument is untenable. In E. Marcias & Co. vs. China Fire Insurance & Co.,
as relied upon by Eagle Star, the SC held that a clause in an insurance policy
providing that an action upon the policy by the insured must be brought within a
certain time is, if reasonable, valid and will prevail over statutory limitations of the
action.
E. Marcias, however, was rendered before the passage of Act 4101, which amended
the Insurance Act by inserting the following: “Sec. 61-A – Any condition, stipulation or
agreement in any policy of insurance, limiting the time for commencing an action
thereunder to a period of less than 1 year from the time when the cause of action
accrues, is void.”
Here, the policy sued upon reduces the period which allows the insured to bring his
action to less than 1 year. This is so because the stated clause makes the
prescriptive period begin from the happening of the loss and at the same time
provides that no suit on the policy shall be sustainable in any court unless the insured
shall have first fully complied with all the terms and conditions of the policy. It is
obvious that compliance with the conditions will necessarily consume time and thus
shorten the period for bring suit to less than 1 year if the period is to begin from ”the
happening of the loss.”
It may be suggested that the policy clause should be given the construction that
would harmonize it with Sec. 61-A taking it to mean that the time given the insured for
bringing his suit is 12 months after the cause of action accrues. As such, the cause of
action did not accrue until Chia Yu’s claim was finally rejected by Eagle Star. This is
because before such final rejection, there was no real necessity for bringing suit.
Here, the rejection was made on April 22, 1948. As Chia Yu filed the case on Nov. 16,
1948, which is less than 1 year after the rejection, the action cannot be said to have
prescribed.
DISPOSITIVE CA’s Decision is AFFIRMED against Eagle Star as insurer
REVERSED against Leigh Hoegh as shipper