2F INSURANCE DIGESTS|2021

VECTOR SHIPPING CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY

• Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered owner
of the M/T Vector. Respondent is a domestic insurance corporation. I
• On September 30, 1987, Caltex entered into a contract of affreightment with Vector for the transport
of Caltex's petroleum cargo through the M/T Vector. Caltex insured the petroleum cargo with
respondent for P7,455,421.08 under Marine Open Policy No. 34- 5093-6.
• In the evening of December 20, 1987, the M/T Vector and the M/V Doña Paz, the latter a vessel
owned and operated by Sulpicio Lines, Inc., collided in the open sea near Dumali Point in Tablas
Strait, located between the Provinces of Marinduque and Oriental Mindoro. The collision led to the
sinking of both vessels. The entire petroleum cargo of Caltex on board the M/T Vector perished.
On July 12, 1988, respondent Indemnified Caltex for the loss of the petroleum cargo in the full
amount of P7,455,421.08.
• On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc.
to recover the full amount of P7,455,421.08 it paid to Caltex. On December 10, 1997, the RTC
issued a resolution dismissing the case on the following grounds:

 This action is upon a quasi-delict and as such must be commenced within four years from the day they
may be brought. "From the day [the action] may be brought" means from the day the quasi-delict occurred.
[Capuno v. Pepsi Cola]
 The tort complained of in this case occurred on 20 December 1987. The action arising therefrom would
under the law prescribe, unless interrupted, on 20 December 1991.
 When the case was filed against defendants Vector Shipping and Francisco Soriano on 5 March 1992,
the action not having been interrupted, had already prescribed
 Under the same situation, the cross-claim of Sulpicio Lines against Vector Shipping and Francisco
Soriano filed on 25 June 1992 had likewise prescribed.
 The letter of demand upon defendant Sulpicio Lines allegedly on 6 November 1991 did not interrupt the
FACTS: tolling of the prescriptive period since there is no evidence that it was actually received by the addressee.
Under such circumstances, the action against Sulpicio Lines had likewise prescribed.
 Even assuming that such written extra-judicial demand was received and the prescriptive period
interrupted in accordance with Art. 1155, Civil Code, it was only for the 10-day period within which Sulpicio
Lines was required to settle its obligation. After that period lapsed, the prescriptive period started again. A
new 4- year period to file action was not created by the extra- judicial demand; it merely suspended and
extended the period for 10 days, which in this case meant that the action should be commenced by 30
December 1991, rather than 20 December 1991.
• Thus, when the complaint against Sulpicio Lines was filed on 5 March 1992, the action had
prescribed.

• Respondent appealed to the CA, which promulgated its assailed decision on July 22, 2003
reversing the RTC. Although thereby absolving Sulpicio Lines, Inc. of any liability to respondent,
the CA held Vector and Soriano jointly and severally liable to respondent for the reimbursement of
the amount of P7,455,421.08 paid to Caltex, explaining that the resolution of the case is primarily
anchored on the determination of what kind of relationship existed between Caltex and M/V Doña
Paz and between Caltex and M/T Vector for purposes of applying the laws on prescription. The
relationship that existed between Caltex and M/V Dona Paz is that of a quasi-delict while that
between Caltex and M/T Vector is culpa contractual based on a Contract of Affreightment or a
charter party.

• On the other hand, the claim of appellant against M/T Vector is anchored on a breach of contract
of affreightment. The appellant averred that M/T Vector committed such act for having
misrepresented to the appellant that said vessel is seaworthy when in fact it is not. The contract
was executed between Caltex and M/T Vector on September 30, 1987 for the latter to transport
thousands of barrels of different petroleum products.
2F INSURANCE DIGESTS|2021
• Under Article 1144 of the New Civil Code, actions based on written contract must be brought within
10 years from the time the right of action accrued. A passenger of a ship or his heirs, can bring an
action based on culpa contractual within a period of 10 years because the ticket issued for the
transportation is by itself a complete written contract, Viewed with reference to the statute of
limitations, an action against a carrier, whether of goods or of passengers, for injury resulting from
a breach of contract for safe carriage is one on contract, and not in tort, and is therefore, in the
absence of a specific statute relating to such actions governed by the statute fixing the period within
which actions or breach of contract must be brought.

• Considering the conclusion that the prescriptive periods for filing action against M/VDoña Paz
based on quasi delict and M/T Vector based on breach of contract have not yet expired, the
Court decided affirmatively on the appeal on its merit.

• Article 2207 of the Civil Code on subrogation is explicit that 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 should be subrogated
to the rights of the insured against the wrongdoer or the person who has violated the contract.
Undoubtedly, the herein appellant has the rights of a subrogee to recover from M/T Vector what it
has paid by way of indemnity to Caltex.

1. Whether this action of respondent was already barred by prescription for bringing it only
on March 5, 1992. - NO
• A related issue concerns the proper determination of the nature of the cause of action as
ISSUE/S:
arising either from a quasi-delict or a breach of contract.
2. Whether or not Sulpicio Lines, Inc. should also be held jointly liable with Vector and Soriano
for the actual damages claimed.

The petition lacks merit. The Court concurs with the CA's ruling that respondent's action did not yet
prescribe.
The legal provision governing this case was not Article 1146 of the Civil Code, but Article 1144 of the Civil
Code, which states: “The following actions must be brought within ten years from the time the cause of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.”
The Court finds and holds that that the present action was not upon a written contract, but upon an
obligation created by law. Hence, it came under Article 1144 (2). This is because the subrogation of
respondent to the rights of Caltex as the insured was by virtue of the express provision of law embodied in
Article 2207, to wit: “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
HELD: the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.”
Verily, the contract of affreightment that Caltex and Vector entered into did not give rise to the legal
obligation of Vector and Soriano to pay the demand for reimbursement by respondent because it concerned
only the agreement for the transport of Caltex's petroleum cargo. As the Court has aptly put it in Pan
Malayan Insurance Corporation v. Court of Appeals, supra, respondent's right of subrogation pursuant to
Article 2207, was "not dependent upon, nor d[id] it grow out of, any privity of contract or upon written
assignment of claim [but] accrue[d] simply upon payment of the insurance claim by the insurer."
Considering that the cause of action accrued as of the time respondent actually indemnified Caltex in the
amount of P7,455,421.08 on July 12, 1988, the action was n \ot yet barred by the time of the filing of its
complaint on March 5, 1992, which was well within the 10-year period prescribed by Article 1144 of the
Civil Code.
It is undeniable that respondent preponderantly established its right of subrogation. Its Exhibit C was
Marine Open Policy No. 34-5093-6 that it had issued to Caltex to insure the petroleum cargo against
marine peril. The formal written claim of Caltex for the payment of the insurance coverage of
P7,455,421.08 coursed through respondent's adjuster. The marine documents relating to the perished
cargo on board the M/V Vector were processed for the purpose of verifying the insurance claim of Caltex.
2F INSURANCE DIGESTS|2021
The subrogation receipt dated July 12, 1988 shows that respondent paid Caltex P7,455,421.00 as the full
settlement of Caltex's claim under Marine Open Policy No. 34- 5093-6. All these were unquestionably
duly presented, marked, and admitted during the trial.
Consistent with the pertinent law and jurisprudence, therefore, the formal written claim was already
enough by itself to prove the payment of P7,455,421.00 as the full settlement of Caltex's claim. The
payment made to Caltex as the insured being thereby duly documented, respondent became subrogated
as a matter of course pursuant to Article 2207.
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the
decision promulgated on July 22, 2003; and ORDERS petitioners to pay the costs of suit.
SO ORDERED.

ANNEX