G.R. Nos. 180880-81 – KEPPEL CEBU SHIPYARD, INC., petitioner, vs. PIONEER INSURANCE AND SURETY CORPORATION, respondent.
G.R. Nos. 180896-97 – PIONEER INSURANCE AND SURETY CORPORATION, petitioner, vs. KEPPEL CEBU SHIPYARD, INC., respondent.
MENDOZA, J.
Rule Synopsis
On Obligations and Contracts. Contracts of adhesion may be struck down only if the the weaker party is completely deprived by the dominant party of the opportunity to bargain on equal footing.
On Insurance Law: The insurer can be subrogated only to the rights as the insured may have against the wrongdoer.
Facts
This resolution is issued by the Court upon KCSI’s Motion to Re-Open Proceedings and Motion to Refer to the Court En Banc, assailing the decision of the Third Division of SC in [see:] GR Nos. 180880-81 and 180896-97, dated September 25, 2009.
The Court En Banc modified the decision of the Third Division of SC, holding that both KCSI and WG&A were equally negligent and limiting KCSI’s liability to Pioneer to P50M, with legal interest.
Issues
- To whom may negligence over the fire that broke out on board M/V “Superferry 3” be imputed?
- To what extent can subrogation be made?
- May Pioneer claim reimbursement from WG&A?
Ruling and Discussion
Procedural notes:
The Court En Banc did not violate the doctrine of immutability of judgment in taking cognizance of this case given that “there were serious allegations in the petition that if the decision of the Court would not be vacated, there would be a far-reaching effect on similar cases.” The exception to the doctrine of immutability of judgment was applied in order to serve substantial justice.
The failure to elevate the records from the court of origin to the Court did not render void any decision made by the latter. The reviewing court can determine the merits of the petition solely on the basis of the pleadings, submissions and certified attachments by the parties to prevent undue delay. At any rate, the records of the cases at bench are now before the Court.
- Both KCSI and WG&A were equally negligent.
Both the CIAC and the CA were one in finding that both KCSI and WG&A were equally negligent.
WG&A was negligent because, although it utilized the welders of KCSI, it used them outside the agreed area, the restaurant of the promenade deck. If they did not venture out of the restaurant, the sparks or the hot molten slags produced by the welding of the steel plates would not have reached the combustible lifejackets stored at the deck below.
On the part of KCSI, it failed to secure a hot work permit pursuant to another work order. Had this been applied for by the KCSI worker, the hot work area could have been inspected and safety measures, including the removal of the combustible lifejackets, could have been undertaken. In this regard, KCSI is responsible.
Thus, both were liable pro-rata. - KCSI’s liability shall be limited to P50M.
The Court En Banc sustained the invalidity of Clause 22(a) of the Shiprepair Agreement. However, it reversed the Third Division’s ruling on Clause 20, upholding its validity and limiting KCSI’s liability to such.
The Court En Banc found that the testimony of WG&A’s fleet maanger “that he did not sign the fine-print portion of the Agreement where Clauses 20 and 22(a) were found, because he did not want WG&A to be bound by them” to be clearly self-serving. Such actions was belied by WG&A’s actions before, during and after the signing of the Agreement.
WG&A is extensively engaged in the shipping business and had previously dry-docked and repaired its various ships with KCSI under ship repair agreements incorporating the same standard conditions on at least 22 different occasions. Yet it did not complain then into being strong-armed into signing said agreements.
Contracts of adhesion may be struck down only if the the weaker party is completely deprived by the dominant party of the opportunity to bargain on equal footing.
The case of Cebu Shipyard Engineering Works, Inc. v. William Lines, Inc., where the Court struck down an almost similar provision is not applicable in this case. In such case, the ship repairer was solely negligent in causing the loss of the vessel in their custody, and the provision limiting the liability was unduly restricted the recovery of the insurer’s loss of P45M to only P1M. In this case, the ship repairer and the ship owner were equally negligent, and KCSI limited liability was not as conspicuously unconscionable and disproportionate.
[Note: in this case, the Court En Banc computed the amount of actual loss attributable to KCSI’s to be P164.87M, i.e. P360M, less P30.25M net salvage value, divided by two (KCSI and WG&A equally liable). Thus, the ration of the limited liability to the actual liability is about 1:3, or P50M:P164.87M, vis-a-vis 1:45 in the case of Cebu Shipyard.]
As KCSI is liable to WG&A to only P50M, Pioneer is subrogated only to the same amount. - The issue was not resolved since WG&A is not a party to the case.
Dispositive
Judgment dated September 25, 2009 of the Third Division modified.