American President Lines, Ltd. v. Malayan Insurance Co., Inc.

FIRST DIVISION

[G.R. No. 198258. June 6, 2019. * ]

AMERICAN PRESIDENT LINES, LTD., petitioner, vs.MALAYAN INSURANCE CO., INC., SUCCESSOR-IN-INTEREST OF TOKIO MARINE MALAYAN INSURANCE CO., INC., respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution datedJune 6, 2019which reads as follows:

"G.R. No. 198258 (American President Lines, Ltd. v. Malayan Insurance Co., Inc., successor-in-interest of Tokio Marine Malayan Insurance Co., Inc.). — This is a petition for review on certiorari1 assailing the Decision 2 dated August 23, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 110798, which held that Tokio Marine Malayan Insurance Co., Inc. (TMMIC), as the settling agent of insurer Tokio Marine and Fire Insurance Co. (TMFIC), is a real party in interest in this case for recovery of sum of money. 3

We reverse the ruling of the CA and hold that, in suits where an agent represents a party, the principal is the real party in interest and the agent cannot file a suit in his own name on behalf of the principal. 4

On September 19, 2002, 194 packages of Lipovitan Raw Materials (shipments) were off-loaded from the carrying vessel, M/V APL JAPAN V-064, at Pier 4, South Harbor, Port Area, Manila. The shipments were covered by Bill of Lading No. APLU021406764 issued by petitioner American President Lines, Ltd. (APL), consigned to Taisho Pharmaceutical Co., Ltd. (TPC), and insured under and by virtue of a Certificate of Marine Insurance Policy No. 29-00472307 issued by TMFIC. 5

On September 25, 2002, the shipments were withdrawn by Maharlika Express Cargo Systems, Inc. (MECSI) and delivered to TPC's warehouse at Sitio Malanim, Brgy. Dela Paz, Sumulong Highway, Antipolo, Rizal. 6 Thereupon, it was discovered that the shipments were damaged, to wit:

 

ITEM	QUANTITY	REMARKS/CONDITION
Citric Acid	84 Bags @ 25 kgs/bag	Almost all the bags were found with traces and its contents were noted hardened due to exposure to moisture.
Sodium Benzoate	14 Bags @ 12 kgs/bag	Almost all the bags were found with traces of wettings and/or moist and its contents were noted hardened due to exposure to moisture. 7

 

As a result of the damage, TPC suffered loss in the amount of P354,566.99. 8 Consequently, TPC filed a claim with TMMIC, which paid the same. 9 Formal claims for the payment of the damage were then made upon APL and MECSI but it was for naught. 10 Hence, TMMIC, as settling agent of TMFIC, instituted a complaint for sum of money against APL and MECSI before the MTC for the payment of the damages. 11

In response, APL argued that TMMIC was not the real party in interest and had no valid cause of action. 12 Having exercised extraordinary diligence in the delivery of the shipment, APL also claimed that the damages, if any, were sustained either prior to its receipt of the shipment or after its discharge. 13

The MTC ruled in favor of TMMIC in its Decision 14 dated June 16, 2008. It found that TMMIC was able to establish its claim by preponderance of evidence, 15 while APL was unable to prove that it exercised extraordinary diligence over the shipment. 16 The MTC also ruled that the complaint was filed within the one year prescriptive period since TPC received the shipment on September 25, 2002 and TMMIC filed the complaint on September 19, 2003. 17 Moreover, when TMMIC, as the settling agent of TMFIC, paid TPC's claim, it was subrogated to the rights of the latter pursuant to Article 2207 of the Civil Code. 18 Since TMMIC was constrained to litigate to protect and enforce its subrogatory rights, the MTC awarded P30,000.00 as attorney's fees. 19

APL appealed before the RTC.

The RTC reversed and set aside the ruling of the MTC in its Decision 20 dated February 24, 2009.

The RTC agreed with APL that TMMIC lacks the legal personality to file the complaint. The RTC observed that the subrogation receipt was issued to TMFIC, not TMMIC. 21 The RTC also found that there is no evidence that TMFIC, which is the real party in interest, vested TMMIC with the authority to institute the complaint. 22 TMMIC also failed to prove that it has any right on the money paid by TMFIC for the value of the damaged goods. 23 Finally, the RTC held that the absence of TMFIC, an indispensable party, renders all acts of the court void for want of authority. 24

Subsequently, TMMIC, as the absorbed corporation, merged with respondent Malayan Insurance Co., Inc. (MICI), the surviving corporation. 25 The ruling of the RTC thus prompted MICI to file a petition for review 26 before the CA.

In its Decision 27 dated August 23, 2011, the CA granted the petition and reversed the RTC. The CA held that TMMIC was a real party in interest. The Certificate of Marine Insurance Policy issued to TPC clearly provides that immediate claim/notice must be given to TMMIC. 28 It also provides that "ALL RISKS AND CLAIMS WILL BE PAID BY SAID AGENT." Based on the foregoing clauses, the CA inferred the following:

a) TTMFIC recognizes TMMIC (MICO) as its agent; b) TTMFIC authorizes TMMIC (MICO) to settle in full the claim of the insured company; and c) TMMIC (MICO) is likewise empowered to take the necessary steps in recovering the full amount of what it had paid to the insured company from the liable party, which includes the institution of a collection suit, as in the case at bar. This makes TMMIC/MICO a real party-in-interest. 29

APL now assails the Decision of the CA before this Court.

APL's petition is meritorious.

The Certificate of Insurance Policy was issued by TMFIC to TPC. Accordingly, once its claims were paid, TPC issued the subrogation receipt in favor of TMFIC. At that point, TMFIC undoubtedly has a cause of action against APL. However, as found by the trial court, TMFIC did not claim against TPC. Instead, TMMIC, as the settling agent, filed the case for the recovery of sum of money against TPC. We also note that TMFIC is not impleaded in the case.

It is a cardinal rule that every action must be prosecuted or defended in the name of the real party in interest. 30 A real party in interest is defined as the party who stands to be benefited or injured by the judgment in the suit, or the other party entitled to the avails of the suit. 31 Interest pertains to material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By real interest is meant a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or consequential interest. 32 In sum, a real party in interest is the person who will suffer (or has suffered) the wrong. 33

The cause of action in insurance claims is founded on the contract entered into by the insured and the insurer. The principle of relativity in contract law teaches that contracts are generally binding only upon the parties, their assigns and heirs, save for exceptions provided for by law. 34 As a consequence, such contract cannot favor or prejudice a third person.

Here, the contract of insurance is between TMFIC as the insurer, and TPC as the insured. TMMIC is not a party to the contract. Hence, there can be no conceivable issue that will favorably or adversely affect TMMIC. In the same vein, TMMIC possesses no interest to demand the fulfillment of the insurance contract or to deny any claim against it.

Moreover, TMMIC cannot derive its interest in this case from the principle of subrogation. The Civil Code provides, thus:

Art. 2207. If the plaintiff's 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 law clearly states that the party subrogated to the rights of the insured is the insurance company who can recover from the wrongdoer up to the extent that it has been obligated to pay. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. 35 True to this principle, the subrogation receipts in this case were issued in the name of TMFIC, and not of TMMIC.

Neither can TMMIC assert interest in this case by claiming that it is the settling agent of TMFIC.

Again, the rule is that whenever an agent represents a party in a given suit, the real party in interest is the principal. An agent cannot, file a suit in his own name but always on behalf of the principal. Section 3, Rule 3 of the Rules of Court, however, provides for an exception where an agent may sue or be sued without joining the principal. The exception obtains when the following requisites are present: (1) the agent acted in his own name during the transaction; (2) the agent acted for the benefit of an undisclosed principal; and (3) the transaction did not involve the property of the principal. 36

TMMIC clearly does not qualify under the exception. For one, TMFIC is not an undisclosed principal. Also, in settling the claim of TPC, TMMIC was performing its functions as the agent of TMFIC, and not in its own name or own capacity.

Moreover, TMFIC did not assign to TMMIC its right to proceed against APL. In fact, the Settling Agreement (between TMFIC and TMMIC) provides that TMFIC retains control over actions for the recovery of claims attended to by TMMIC, thus:

Recoveries from Carriers and/or other Bailees

The Settling Agent shall attend to recovery of claims it has handled.

When a legal action is contemplated, the Settling Agent shall notify the Insurer, who may instruct the Settling Agent to discontinue, suspend or transfer such action. 37

The power of TMFIC to discontinue, suspend, or transfer any action undertaken by TMMIC belies any possibility that it assigned its right to go after APL. On the contrary, it shows that TMMIC still acts as TMFIC's agent in pursuing actions involving claims settled by TMMIC. There is nothing in the provision which authorizes TMMIC to institute actions in its own name without joining TMFIC.

Nonetheless, in the event that TMFIC authorizes TMMIC to institute actions in its own name, TMMIC is still bound by the law on agency and the Rules of Court. In such cases, TMFIC cannot, on the one hand, authorize TMMIC to institute actions in its own capacity, and at the same time, retain rights over the claims settled by the latter.

Considering that TMMIC, as the settling agent of TMFIC, neither qualified under Section 3, Rule 3 of the Rules of Court, nor was an assignee of the rights against APL, it had no personality to file the suit. It can never lawfully assume any interest in this case by merely invoking its role as the settling agent.

Since TMFIC is the real party in interest, it should have been the party who filed the suit, or at the very least it should have been included in it. Unfortunately for TMMIC, and consequently for MICI, the non-inclusion of TMFIC is fatal to the present action. By itself, MICI has no cause of action against APL. This case is clearly one which was not prosecuted in the name of the real party in interest. Therefore, the complaint should have been dismissed. Consequently, it is unnecessary to discuss the issue on APL's alleged liability to MICI.

WHEREFORE, the petition is GRANTED. The August 23, 2011 Decision of the Court of Appeals in CA-G.R. SP No. 110798 is REVERSED and SET ASIDE. The February 24, 2009 Decision of the Regional Trial Court, Branch 149, National Capital Judicial Region in Civil Case No. 09-002 is REINSTATED.

SO ORDERED."Carandang, J., on official leave.

Very truly yours,

(SGD.) LIBRADA C. BUENADivision Clerk of Court

 

Footnotes

1.Rollo, pp. 8-24.

2.Id. at 32-42; penned by Associate Justice Jane Aurora C. Lantion, concurred in by Associate Justices Andres B. Reyes, Jr. (now a Member of this Court) and Mario V. Lopez of the Special First Division.

3. The Court of Appeals Decision reversed and set aside the Decision dated February 24, 2009 of the Regional Trial Court (RTC), Branch 149, in Civil Case No. 09-002. The RTC reversed and set aside the Decision dated June 16, 2008 of the Metropolitan Trial Court (MTC), Branch 65, in Civil Case No. 82697.

4.V-Gent, Inc. v. Morning Star Travel and Tours, Inc., G.R. No. 186305, July 22, 2015, 763 SCRA 496, 501.

5.Rollo, pp. 33-34.

*Revision: Date corrected from June 5, 2019 to June 6, 2019.

6.Id. at 34.

7.Id.

8.Rollo, p. 34.

9.Id. at 35.

10.Id.

11.Rollo, p. 35.

12.Id.

13.Rollo, p. 35.

14.Id. at 77-82.

15.Id. at 80.

16.Id. at 81.

17.Id.

18.Rollo, p. 82.

19.Id.

20.Rollo, pp. 43-47.

21.Id. at 46.

22.Id.

23.Rollo, p. 47.

24.Id.

25.Rollo, p. 84.

26.Id. at 48.

27.Id. at 32-42.

28.Id. at 41.

29.Id.

30. RULES OF COURT, Rule 3, Sec. 2.

31.Id.

32.Siguion Reyna Montecillo and Ongsiako Law Offices v. Chionlo-Sia, G.R. No. 181186, February 3, 2016, 783 SCRA 57, 67-68, citing Ortigas & Co., Ltd. v. Court of Appeals, G.R. No. 126102, December 4, 2000, 346 SCRA 748.

33.Id.

34. Article 1311 of the Civil Code provides that:

   Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

   If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

35.Coastwise Lighterage Corporation v. Court of Appeals, G.R. No. 114167, July 12, 1995, 245 SCRA 796, 803, citing Compania Maritima v. Insurance Company of North America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213; Fireman's Fund Insurance Company v. Jamilla & Company, Inc., and Pan Malayan Insurance Corporation v. Court of Appeals, G.R. No. L-27427, April 7, 1976, 70 SCRA 323.

36. V-Gent, Inc. v. Morning Star Travel and Tours, Inc., G.R. No. 186305, July 22, 2015, 763 SCRA 496, 502.

37. Rollo, p. 176.