On June 7, 2011, the Court
En Banc, acting on the referral by the Second Division, issued a Resolution
[1] accepting these cases which stemmed from the
Motion to Re-Open Proceedings and Motion to Refer to the Court En Banc filed by Keppel Cebu Shipyard, Inc. (KCSI) on the ground that “there are serious allegations in the petition that if the decision of the Court is not vacated, there is a far-reaching effect on similar cases already decided by the Court.”
[2]Pioneer Insurance and Surety Corporation
(Pioneer) sought reconsideration of the June 7, 2011 Resolution to re-open, but its motion was denied by the Court in its Resolution,
[3] dated December 6, 2011.
Brief Statement of the AntecedentsOn January 26, 2000, KCSI and WG&A Jebsens Shipmanagement, Inc.
(WG&A) entered into, and executed, a Shiprepair Agreement
[4] wherein KCSI agreed to carry out renovation and reconstruction of M/V Superferry 3
(Superferry 3), owned by WG&A, using its (KCSI’s) dry docking facilities. Among others, the Shiprepair Agreement provided the following terms and conditions:
We, WG & A JEBSENS SHIPMGMT. Owner/Operator of M/V “SUPERFERRY 3” and KEPPEL CEBU SHIPYARD, INC. (KCSI) enter into an agreement that the Drydocking and Repair of the above-named vessel ordered by the Owner's Authorized Representative shall be carried out under the Keppel Cebu Shipyard Standard Conditions of Contract for Shiprepair, guidelines and regulations on safety and security issued by Keppel Cebu Shipyard. Among the provisions agreed upon by the parties are the following:
x x x x
3. Owner's sub-contractors or workers are not permitted to work in the yard without written approval of the Vice-President-Operations.
4. In consideration of Keppel Cebu Shipyard allowing Owner to carry out own repairs onboard the vessel, the Owner shall indemnify and hold Keppel Cebu Shipyard harmless from all claims, damages, or liabilities arising from death or bodily injuries to Owner's workers, or damages to the vessel or other property however caused.
x x x x
12. The Owner and Keppel Cebu Shipyard shall endeavor to settle amicably any dispute that may arise under this Agreement. Should all efforts for an amicable settlement fail, the disputes shall be submitted for arbitration in Metro Manila in accordance with provisions of Executive Order No. 1008 under the auspices of the Philippine Arbitration Commission.
The Shiprepair Agreement also contained KCSI’s “Standard Conditions of Contract for Shiprepair,” which provided, among others, the following:
x x x x
7. The Contractor shall perform the work in accordance with the usual practice at the Contractor's shipyard but shall comply with the Customer's reasonable requests regarding materials and execution of the order insofar as such requests fall within the scope of the Work specified in the contractual specifications, and are made prior to the commencement of the work.
x x x x
20. The Contractor shall not be under any liability to the Customer either in contract or otherwise except for negligence and such liability shall itself be subject to the following overriding limitations and exceptions, except:
(a) The total liability of the Contractor to the Customer (including the liability to replace under Clause 17) or of any Sub-Contractor shall be limited in respect of any and/or defect(s) or event(s) to the sum of Pesos Philippine Currency Fifty Million Only.
x x x x
22. (a) The Customer shall keep the vessel adequately insured for the vessel’s hull and machinery, her crew and the equipment on board and on other goods owned or held by the Customer against any and all risks and liabilities and ensure that such insurance policies shall include the Contractor as a co-assured.
x x x. [Emphases supplied]
Prior to the execution of the Shiprepair Agreement, Superferry 3 was already insured by WG&A with Pioneer for US$8,472,581.78.
On February 8, 2000, while undergoing repair, Superferry 3 was gutted by fire. WG&A declared the vessel’s damage as a “total constructive loss” and filed an insurance claim with Pioneer.
On June 16, 2000, Pioneer paid the insurance claim of WG&A in the amount of US$8,472,581.78. In exchange, WG&A executed a Loss and Subrogation Receipt in favor of Pioneer.
Believing that KCSI was solely responsible for the loss of Superferry 3, Pioneer tried to collect the amount of US$8,472,581.78 from KCSI but it was frustrated. Thus, Pioneer sought arbitration with the Construction Industry Arbitration Commission
(CIAC) pursuant to the arbitration clause in the Shiprepair Agreement.
During the arbitration proceedings, an amicable settlement was forged between KCSI and WG&A. Pioneer, thus, stayed on as the remaining claimant.
On October 28, 2002, the CIAC rendered its Decision
[5] finding that both WG&A and KCSI were
equally guilty of negligence which resulted in the fire and loss of Superferry 3. The CIAC also ruled that the liability of KSCI was limited to the amount of P50,000,000.00 pursuant to Clause 20 of the Shiprepair Agreement.
Accordingly, the CIAC ordered KCSI to pay Pioneer the amount of P25,000,000.00, with interest at 6% per annum from the time of the filing of the case up to the time the decision was promulgated, and 12% interest per annum added to the award, or any balance thereof, after it would become final and executory. The CIAC further ordered that the arbitration costs be imposed on both parties on a
pro rata basis.
[6]Both parties appealed to the Court of Appeals (CA). In its final disposition of the cases, the CA, through its Amended Decision,
[7] affirmed the decision of the CIAC but deleted its order that KCSI pay legal interest on the amount due to Pioneer.
Again, both parties appealed to this Court.
In its Decision,
[8] dated September 25, 2009, the
Third Division[9] of the Court partially granted the appeals of both parties. In granting the petition of Pioneer, the Court found that KCSI was solely liable for the loss of the vessel and that WG&A properly declared the loss of the vessel as constructive total loss. The Court also declared that Clause 20 of the Shiprepair Agreement which limited KCSI’s liability to the amount of P50,000,000.00 was invalid. As for the petition of KCSI, the Court found merit in KCSI’s assertion that the salvage recovery value of the vessel amounting to P30,252,648.09 must be considered and deducted from the amount KCSI was liable to Pioneer. Thus, the Court disposed:
WHEREFORE, the Petition of Pioneer Insurance and Surety Corporation in G.R. No. 180896-97 and the Petition of Keppel Cebu Shipyard, Inc. in G.R. No. 180880-81 are PARTIALLY GRANTED and the Amended Decision dated December 20, 2007 of the Court of Appeals is MODIFIED. Accordingly, KCSI is ordered to pay Pioneer the amount of P360,000,000.00 less P30,252,648.09, equivalent to the salvage value recovered by Pioneer from M/V “Superferry 3,” or the net total amount of P329,747,351.91, with six percent (6%) interest per annum reckoned from the time the Request for Arbitration was filed until this Decision becomes final and executory, plus twelve percent (12%) interest per annum on the said amount or any balance thereof from the finality of the Decision until the same will have been fully paid. The arbitration costs shall be borne by both parties on a pro rata basis. Costs against KCSI.
SO ORDERED. [Emphasis and underscoring supplied]
Aggrieved, KCSI moved for the reconsideration
[11] of the September 25, 2009 Decision and, subsequently, prayed that its motion be set for oral arguments.
[12] Following the opposition filed by Pioneer and the reply filed by KCSI, the Special Third Division of the Court on June 21, 2010, resolved to deny with finality KCSI’s motions for lack of merit.
[13]Undaunted, KCSI again sought reconsideration of the decision of the Third Division of the Court, reiterating its prayer that these cases be set for oral arguments. KCSI also prayed that these cases be referred to the Court
En Banc and set for its consideration.
[14] Following a reorganization of the divisions of the Court, these cases were transferred to the Second Division.
[15] On October 20, 2010, the Second Division of the Court resolved to deny KCSI’s second motion for reconsideration.
[16]On November 4, 2010, the Court issued an order for Entry of Judgment, stating that the decision in these cases had become final and executory.
[17]Through its
Motion to Re-Open Proceedings and Motion to Refer to the Court En Banc,
[18] dated November 23, 2010, and its
Supplemental Motion,
[19] dated December 13, 2010, KCSI sought the re-opening of the proceedings, and pleaded that these cases be referred to the Court En Banc. Pioneer filed its Opposition
[20] to KCSI’s motions.
On April 11, 2011, persuaded by KCSI’s arguments, the Second Division of the Court resolved to refer these cases to the Court En Banc for acceptance.
[21] As earlier stated, on June 7, 2011, the Court En Banc resolved to accept the cases.
[22] Pioneer sought reconsideration but its motion was denied.
[23]In the disposition of the subject petitions, the Court is confronted with procedural and substantive issues:
Procedural:Is the Court
En Banc in violation of the doctrine of immutability of judgment in taking cognizance of the foregoing cases, considering that these cases were already adjudged as final and executory?
Did the failure to elevate the records from the court of origin to the Court render void any decision made by the latter?
Substantive:As restated by the Court in its September 25, 2009 Decision, the substantive issues for resolution of the Court are the following:
- To whom may negligence over the fire that broke out on board M/V “Superferry 3” be imputed?
- Is subrogation proper? If proper, to what extent can subrogation be made?
- Should interest be imposed on the award of damages? If so, how much?
- Who should bear the cost of the arbitration?[24]
The Court shall first dispose of the
procedural issues.
Anent the first procedural issue, Pioneer, in essence, faults the Court
En Banc when it took cognizance of the foregoing cases and ordered their reopening in its June 7, 2011 Resolution. It argues that the decision in the present cases had already become final and, according to the principle of immutability of judgment, once a judgment attains finality, it becomes immutable and unalterable, however unjust the result of error may appear.
The rule is not absolute.
The Internal Rules of the Supreme Court provides that the Court
En Banc shall act on the following matters and cases:
(a) cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive order, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question;
(b) criminal cases in which the appealed decision imposes the death penalty or reclusion perpetua;
(c) cases raising novel questions of law;
(d) cases affecting ambassadors, other public ministers, and consuls;
(e) cases involving decisions, resolutions, and orders of the Civil Service Commission, the Commission on Elections, and the Commission on Audit;
(f) cases where the penalty recommended or imposed is the dismissal of a judge, the disbarment of a lawyer, the suspension of any of them for a period of more than one year, or a fine exceeding forty thousand pesos;
(g) cases covered by the preceding paragraph and involving the reinstatement in the judiciary of a dismissed judge, the reinstatement of a lawyer in the roll of attorneys, or the lifting of a judge’s suspension or a lawyer’s suspension from the practice of law;
(h) cases involving the discipline of a Member of the Court, or a Presiding Justice, or any Associate Justice of the collegial appellate court;
(i) cases where a doctrine or principle laid down by the Court en banc or by a Division my be modified or reversed;
(j) cases involving conflicting decisions of two or more divisions;
(k) cases where three votes in a Division cannot be obtained;
(l) Division cases where the subject matter has a huge financial impact on businesses or affects the welfare of a community;
(m) Subject to Section 11(b) of this rule, other division cases that, in the opinion of at least three Members of the Division who are voting and present, are appropriate for transfer to the Court en banc;
(n) cases that the Court en banc deems of sufficient importance to merit its attention; and
(o) all matters involving policy decisions in the administrative supervision of all courts and their personnel. [Underscoring supplied][25]
On April 11, 2011, four (4) members of the Court’s Second Division found that these cases were appropriate for referral-transfer to the Court En Banc.
[26] Then, on June 7, 2011, the Court
En Banc by a vote of two-thirds (2/3) of its members,
[27] settled the issue of immutability of judgment when it accepted the referral, reasoning out 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.
Verily, “under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land.”
[28] This rule notwithstanding, the Court
En Banc had re-opened and accepted several cases for review and reevaluation for special and compelling reasons. Among these cases were
Manotok IV v. Heirs of Homer L. Barque,[29] Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,[30] League of Cities of the Philippines v. Commission on Elections,[31] and Navarro v. Ermita.
[32]In these cases, the exception to the doctrine of immutability of judgment was applied in order to serve substantial justice.
[33] The application was in line with its
power and prerogative to suspend its own rules and to exempt a case from their operation if and when justice requires it. “The power to suspend or even disregard rules of procedure can be so pervasive and compelling as to alter even that which this Court itself had already declared final.”
[34]It bears mentioning, however, that when the Court
En Banc entertains a case for its resolution and disposition, it does so without implying that the Division of origin is incapable of rendering objective and fair justice. The action of the Court simply means that the nature of the cases calls for
en banc attention and consideration. Neither can it be concluded that the Court has taken undue advantage of sheer voting strength. It is merely guided by the well-studied finding and sustainable opinion of the majority of its actual membership that, indeed, the subject case is of sufficient importance meriting the action and decision of the whole Court. It is, of course, beyond cavil that all the members of the Highest Court of the land are always imbued with the noblest of intentions in interpreting and applying the germane provisions of law, jurisprudence, rules and resolutions of the Court to the end that public interest be duly safeguarded and the rule of law be observed.
[35]On the second procedural issue, the rule is that the reviewing court can determine the merits of the petition solely on the basis of the pleadings, submissions and certified attachments by the parties.
[36] The purpose of the rule is to prevent undue delay that may result as the elevation of the records of lower tribunals to the Court usually takes time.
[37] After all, the parties are required to submit to the Court certified true copies of the pertinent records of the cases.
In this case, the Third Division of the Court deemed the attachments to the petition and the voluminous pleadings filed sufficient and, on the basis thereof, ruled on the merits of these cases. The Court finds no fault in the procedure undertaken by the members of the Division in this regard. As stated by the Court in its October 20, 2010 Resolution:
Second: The elevation of the case records is merely discretionary upon this Court. Section 8, Rule 45 of the Rules of Court provides that the Court may require the elevation of the complete records of the case or specified parts thereof within fifteen (15) days from notice. It also bears mentioning that, under Section 4(d) of the same rule, the petition for review on certiorari filed shall be “accompanied by a clearly legible duplicate original, or a certified true copy of the judgment or final order or resolution certified by the clerk of court of the court a quo and the requisite number of plain copies thereof, and such material portions of the record as would support the petition.” Indeed, with the attachments to the consolidated petitions, the Court deemed it sufficient to rule on the merits of the case.[38]
At any rate, the records of the cases at bench are now before the Court.
The Court now proceeds to delve into the
substantive issues.
With respect to the finding of negligence, the Court cannot maintain the earlier findings and rulings.
The CIAC and the CA arrived at
the same Findings of FactsIn the September 25, 2009 Decision, the Third Division premised its re-evaluation of the facts regarding the issue of negligence on its finding that the CA and the CIAC differed in their findings. Thus, it stated:
To resolve these issues, it is imperative that we digress from the general rule that in petitions for review under Rule 45 of the Rules of Court, only questions of law shall be entertained. Considering the disparate findings of fact of the CIAC and the CA which led them to different conclusions, we are constrained to revisit the factual circumstances surrounding this controversy.[39] [Emphases supplied]
It appears, however, that there was
no disparity in the findings of fact of the CIAC and the CA. Neither was there any variance in the conclusions arrived at by the two tribunals – that both KCSI and WG&A were
equally negligent in causing the fire which resulted in the burning and the loss of Superferry 3.
As to the immediate cause of the fire, there is no dispute that the same was caused by the ignition of the flammable lifejackets caused by the sparks or hot molten slags from the welding works being done at the upper deck. As stated by the CIAC:
This tribunal rules that the immediate cause of the fire was the sparks or hot molten slag falling through holes on the deck floor and coming into contact with and igniting flammable lifejackets stored in the ceiling void directly below. The sparks or hot molten slag was the result of the cutting of the bulkhead door on Deck A. The presence of the holes and the life jackets underneath the deck directly contributed to the cause of the fire.[40]
As to who was responsible for causing the fire,
both the CIAC and the CA were one in finding that both KCSI and WG&A were equally negligent. In fact, the CA, after its own review of the facts and evidence, quoted with approval a majority of the findings of the CIAC. Thus, it wrote:
THE YARD AND THE WG&A ARE EQUALLY NEGLIGENT The symbiotic relation between the litigants, insofar as the repair and reconstruction of the vessel, is aptly summarized by the CIAC, to quote:
x x x x x x x x x
The Tribunal rules that the Respondent has possession, control and custody of the vessel for all works related to the repairs and additional work under the ship repair agreement and where its rules and regulations cover the vessel and its crew. The Respondent, however, does not exercise control and custody of the Ship’s crew, its maintenance and repair crews, subcontractors and workers where the work is not covered by the ship repair agreement, or where there is no work order, or where the Vessel has signed a waiver for its own work or for unauthorized works.
x x x x x x x x x x
A review of the records reveals that the fire broke out at around 10:25 in the morning of 8 February 2000. The CIAC summarized the immediate cause of the fire, as follows, thus:
xxx. Angelino Sevillejo tried to put out the fire by pouring the contents of a five-liter drinking water container on it and as he did so, smoke came up from under Deck A. He got another container of water which he also poured whence the smoke was coming. In the meantime, other workers in the immediate vicinity tried to fight the fire by using fire extinguishers and buckets of water. But because the fire was inside the ceiling void, it was extremely difficult to contain or extinguish; and it spread rapidly because it was not possible to direct water jets or the fire extinguishers into the space at the source. Fighting the fire was extremely difficult because the life jackets and the construction materials of the Desk B ceiling were combustible and permitted the fire to spread within the ceiling void. From there, the fire dropped into the Deck B accommodation areas at various locations, where there were combustible materials. Respondent points to cans of paint and thinner, in addition to the plywood partitions and foam mattresses on Deck B x x x.
After investigation, the CIAC justified its finding of concurrent negligence, to wit:
The Negligence of WG&A:
x x x x x x x x x
The Tribunal rules that work orders and additional works when duly signed and authorized form part of the ship repair agreement and other documents referred to in the agreement. The Tribunal also rules that the Work Order of January 26, 2000 refers to five welders to work on the restaurant of the promenade deck only.
x x x x x x x x x
The Tribunal finds sufficient evidence to rule that the original request for welders [was] for hot works for the restaurant at the promenade deck only. Based on this ruling, the Tribunal finds that the Claimant used the welders beyond the scope of the Work Order and therefore unauthorized when the welders were used outside of the promenade deck. For the hotworks outside of the promenade deck to be authorized, the said work must be covered by another work order or at the very least, discussed, and included in the minutes of the production meeting and the corresponding hotworks permit issued.
x x x x x x x x x
[Emphases and underscoring supplied]
The Negligence of the Yard:
As aptly ruled by the CIAC, the negligent participation of the Yard in the fire incident is as follows:
“Precisely because of the requirement that all hot works are to be undertaken by the Yard, the Yard necessarily must obtain the hotworks permit. Looking at the Hotwork Permit document itself, the Tribunal finds that it is the Yard workers who apply and obtain the permit to perform hot works. The said permit carries a request by the Yard Foreman, Yard Supervisor, and Yard Superintendent, Inspected by the Yard Safety Assistant, and approved by Yard Safety Superintendent or Supervisor. Tribunal agrees with Claimant that hot works permit is the responsibility of the Yard worker to obtain prior to initiating any hot works.”
Thus, while it is settled that it is the Yard employee who is required to secure a permit in order that all precautions could be taken, such as providing a fire watch, fire extinguisher, fire bucket, and removing the ceiling underneath as well as the flammable lifejackets, nonetheless, Dr. Joniga was equally negligent. Rebaca asked Sevillejo to stop the hot works in Deck A for lack of hot works permit and informed Dr. Joniga about it. He advised Dr. Joniga to call the ship’s electrician to inspect the area. The ship electrician removed the ceiling panel and it was ascertained that, fortunately, no fire had started. However, when Sevillejo finished the task, Dr. Joniga again directed Sevillejo to cut an opening on the steel bulkhead below the stairway next to the beauty parlor in Deck A, without requiring or ascertaining that Sevillejo should first secure the required permit.[41] [Emphasis in the original. Underscoring supplied]
In other words, the issue of the conflicting claims between the parties - as to who should be responsible for the loss of Superferry 3 - was resolved by the CIAC against both parties. As this finding of fact by the CIAC was affirmed by the CA, the Court must have a strong and cogent reason to disturb it.
It is a hornbook doctrine that, save for certain exceptions,
[42] the findings of fact of administrative agencies and quasi-judicial bodies like the CIAC, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the CA.
[43] It is well-settled that “the consequent policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial.”
[44] Moreover, in petitions for review on
certiorari, only questions of law may be put into issue.
Be that as it may, the Court, after making its own assiduous assessment of the case, concurs with the conclusions arrived at by the tribunals below that the loss of Superferry 3 cannot be attributed to one party alone.
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.
In short, both WG&A and KCSI were equally negligent for the loss of Superferry 3. The parties being mutually at fault, the degree of causation may be impossible of rational assessment as there is no scale to determine how much of the damage is attributable to WG&A’s or KCSI’s own fault. Therefore, it is but fair that both WG&A and KCSI should
equally shoulder the burden for their negligence.
With respect to the defenses of KCSI that it was a co-assured under Clause 22(a) of the contract and that its liability is limited to P50,000,000.00 under Clause 20 of the Shiprepair Agreement, the Court maintains the earlier ruling on the invalidity of Clause 22(a) of the Shiprepair Agreement.
It cannot, however, maintain the earlier ruling on the invalidity of Clause 20 of the Shiprepair Agreement, which limited KCSI’s liability to P50,000,000.00. In the September 25, 2009 Decision, the Third Division found Clause 20 of the Shiprepair Agreement invalid, seeing it as an unfair imposition by KCSI, being the dominant party, on WG&A.
Basic is the rule that parties to a contract may establish such stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, and public policy.
[45] While greater vigilance is required in determining the validity of clauses arising from contracts of adhesion,
[46] the Court has nevertheless consistently ruled that contracts of adhesion are not invalid
per se and that it has, on numerous occasions, upheld the binding effect thereof.
[47]In its Decision, the Third Division placed great weight in the testimony of Engr. Elvin F. Bello, WG&A’s fleet manager, that while he assented to the Shiprepair Agreement, he did not sign the fine-print portion thereof where Clause 20 was found because he did not want WG&A to be bound by them.
[48] This testimony however, was correctly found by the CIAC as clearly self-serving, because such intention of WG&A was belied by its actions before, during and after the signing of the Shiprepair Agreement.
As pointed out by the CA, WG&A and its related group of companies, which were all extensively engaged in the shipping business, 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.
[49] Yet, in all these instances, WG&A had not been heard to complain of being strong-armed and forced to accept the fine-print provisions imposed by KCSI to limit its liability.
Also, as pointed out by the CIAC, if it were true that WG&A did not want to be bound under such an onerous clause, it could have easily transacted with other ship repairers, which may not have included such a provision.
[50]After the signing of the Shiprepair Agreement, the record is bereft of any other evidence to show that WG&A had protested such a provision limiting the liability of KCSI. Indeed, the parties bound themselves to the terms of their contract which became the law between them.
While contracts of adhesion may be struck down as void and unenforceable for being subversive of public policy, the same can only be done when, under the circumstances, the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely depriving the former of the opportunity to bargain on equal footing.
[51] This is not the situation in this case.
The Court is not unaware of the case of
Cebu Shipyard Engineering Works, Inc. v. William Lines, Inc.,
[52] where the Court struck down an almost similar provision limiting the liability of the ship repairer. In the said case, however, the Court found the provision unconscionable not only because the ship repairer therein was solely negligent in causing the loss of the vessel in their custody, but also because the limited liability clause sought to be enforced unduly restricted the recovery of the insurer’s loss of P45,000,000.00 to only
P1,000,000.00. Careful in not declaring such a provision as being contrary to public policy, the Court said:
Although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se; as binding as an ordinary contract, the Court recognizes instances when reliance on such contracts cannot be favored especially where the facts and circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the validity and applicability of the stipulation limiting the liability of CSEW for negligence to One Million (P1,000,000.00) Pesos only, the facts and circumstances vis-a-vis the nature of the provision sought to be enforced should be considered, bearing in mind the principles of equity and fair play.
x x x x
Considering the aforestated circumstances, let alone the fact that negligence on the part of petitioner has been sufficiently proven, it would indeed be unfair and inequitable to limit the liability of petitioner to One Million Pesos only. As aptly held by the trial court, “it is rather unconscionable if not overstrained.” To allow CSEW to limit its liability to One Million Pesos notwithstanding the fact that the total loss suffered by the assured and paid for by Prudential amounted to Forty Five Million (P45,000,000.00) Pesos would sanction the exercise of a degree of diligence short of what is ordinarily required because, then, it would not be difficult for petitioner to escape liability by the simple expedient of paying an amount very much lower than the actual damage or loss suffered by William Lines, Inc. [Emphases supplied][53]
Therefore, to say that Clause 20 of the Shiprepair Agreement is invalid on the basis of the
Cebu Shipyard is non sequitur. In
Cebu Shipyard, the Court struck down an almost similar provision limiting the liability of the ship repairer only after taking into account the circumstances and the unconscionable effect thereof and, as earlier underscored, after applying the principles of equity and fair play.
The differences in the factual milieu in
Cebu Shipyard and this case inevitably lead the Court to arrive at a different conclusion. In Cebu
Shipyard, the ship repairer was
solely negligent. In this case, both WG&A and KCSI were
equally negligent in causing the loss of the Superferry 3. In Cebu
Shipyard, the liability of the ship repairer was limited to P1,000,000.00 only. In this case, it was P50,000,000.00.
In
Cebu Shipyard, the limited liability was conspicuously unconscionable and disproportionate as the ship repairer would only pay a paltry P1,000,000.00 of the P45,000,000.00 liability, or a ratio of 1:45. In this case, the ratio is a little over 1:3 considering that the liability of the ship repairer, KCSI, is only P164,873,675.95, as will be later shown.
The Court, thus, finds Clause 20 just and equitable under the circumstances and should be sustained as having the force of law between the parties to be complied with in good faith.
With the liability of KCSI to WG&A for the loss of Superferry 3 being limited to P50,000,000.00, it goes without saying that Pioneer, as subrogee of WG&A, may only claim the amount of P50,000,000.00 from KCSI. Well-settled is the rule that the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. As Article 2207 of the Civil Code states:
Article 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. [Emphasis supplied)
In sum, both KCSI and WG&A should be held responsible for the loss of Superferry 3 assessed at P360,000,000.00. As stated by the Third Division of the Court in its Decision, the salvage value recovered by Pioneer from M/V Superferry 3, amounting to P30,252,648.09 should be deducted, thus, leaving P329,747,351.91 as the amount of the loss. This amount, divided between KCSI and WG&A, results in each party shouldering P164,873,675.95. Nevertheless, the limited liability clause of the Shiprepair Agreement being valid, Pioneer, as subrogee of WG&A, may only claim a maximum amount of P50,000,000.00 from KCSI.
The amount of P50,000,000.00 that KCSI is liable to pay Pioneer should be with interest at 6%
per annum from the filing of the case until the award becomes final and executory. Thereafter, the rate of interest shall be 12%
per annum from the date the award becomes final and executory until its full satisfaction. The arbitration costs shall be borne by both parties on a
pro rata basis.
[54]A final point. As both KCSI and WG&A are equally responsible for the loss of Superferry 3, questions arise: should the liability of Pioneer to WG&A be proportionately limited? Is Pioneer entitled to any refund? Whether or not Pioneer is entitled to the restitution of any excess payment is a question that cannot be adjudicated in this case. The Court cannot make a final finding or pronouncement on the matter because WG&A is not a party in this case. WG&A should be heard in this regard as it may have defenses to fend off the possible claim for refund by Pioneer. It should be stressed that their relationship is governed by their contract of insurance, where their respective rights and obligations are defined, and by their subsequent settlement or arrangement, if any. Due process dictates that these should be threshed out in a separate action. Needless to state, this decision is without prejudice to such action.
WHEREFORE, the September 25, 2009 Decision of the Third Division is hereby
MODIFIED. Accordingly, Keppel Cebu Shipyard, Inc. is ordered to pay Pioneer Insurance and Surety Corporation the amount of P50,000,000.00 plus interest at the rate of 6%
per annum from the filing of the case until the award becomes final and executory. Thereafter, the rate of interest shall be 12%
per annum from the date the award becomes final and executory until its full satisfaction.
The arbitration costs shall be borne by both parties on a pro rata basis.
SO ORDERED.Sereno, CJ., Carpio, Leonardo-De Castro, Peralta, Del Castillo, Jr., Perez, and
Perlas-Bernabe, JJ., concur.
Velasco, Jr., J., join dissent of J. Brion.
Brion, J., pls. see my dissent.
Bersamin, J., I take no part due to prior participation in hte Court of Appeals.
Abad, J., see my concurring opinion.
Villarama, J., on official leave.
Reyes, J., see my dissenting opinion.
[1] Rollo, (G.R. Nos. 180880-81, Vol. II), pp. 3329-3342;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 3457-3470, with dissents by Associate Justices Eduardo Antonio Nachura, Presbitero J. Velasco and Arturo D. Brion; Chief Justice Renato C. Corona and Associate Justice Lucas P. Bersamin took no part;
[2] Id. at 3349; id. at 3460.
[3] Id. at 3481-3483; id at 3562-3564.
[4] CA
rollo, pp. 174-175.
[5] Rollo (G.R. Nos. 180880-81, Vol. I), pp. 1022-1113;
rollo (G.R. Nos. 180896-97, Vol. I), pp. 229-320.
[6] Id. at 1113; id. at 319.
[7] Id. at 39-110; id. at 146-217.
[8] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 2551-2589;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 1945-1983.
[9] Associate Justice Consuelo Ynares-Santiago, as Chairperson, and Associate Justice Minita V. Chico-Nazario, Associate Justice Presbitero J. Velasco, Jr., Associate Justice Antonio Eduardo B. Nachura, and Associate Justice Diosdado M. Peralta, as members.
[10] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 2551-2589;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 1945-1983.
[11] Id. at 2686-2784; id. at 1984-2044.
[12] Id. at 2785-2790; id. at 2176-2181.
[13] Id. at 2893-2894.; id. at 2231-2232.
[14] Id. at 2896-2906; id. at 2233-2241
[15] Rollo (G.R. Nos. 180880-81, Vol. II), p. 3004.
[16] Rollo (G.R. Nos. 180880-81, Vol. II); pp. 3262-3266;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 3339-3343.
[17] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 3271-3272.
[18] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 3279-3290;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 3351-3364.
[19] Rollo (G.R. Nos. 180896-97, Vol. II), pp. 3392-3410.
[20] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 3297-3325;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 3425-3453.
[21] Id. at 3293; id. at 3421. Second Division members were Associate Justice Antonio T. Carpio, Associate Justice Antonio B. Nachura, Associate Justice Diosdado M. Peralta, Associate Justice Roberto A. Abad, and Associate Justice Jose Catral Mendoza.
[22] Id. at 3329-3342; id. at 3457-3470, with dissents by Associate Justices Eduardo Antonio Nachura, Presbitero J. Velasco and Arturo D. Brion; Chief Justice Renato C. Corona and Associate Justice Lucas P. Bersamin took no part.
[23] Id. at 3481-3486; id. at 3562-3567.
[24] Id. at 2569; id. at 1963.
[25] A.M. No. 10-4-20-SC (May 4, 2010), Rule 2, Sec. 3.
[26] Rollo (G.R. Nos. 180896-97), p. 3421.
[27] Id. at 3457-3470.
[28] FGU Insurance Corporation v. Regional Trial Court Of Makati City, Branch 66, G.R. No. 161282, February 23, 2011, 644 SCRA 50.
[29] G..R. Nos. 162335 & 162605, December 18, 2008, 574 SCRA 468.
[30] G..R. No. 164195, April 5, 2011, 647 SCRA 207.
[31] G.R. Nos. 176951, 177499 and 178056, April 12, 2011, 648 SCRA 344.
[32] G..R. No. 180050, April 12, 2011, 648 SCRA 400.
[33] Id.
[34] Navarro v. Executive Secretary Eduardo Ermita, G.R. No. 180050, April 12, 2011, 648 SCRA 400; and
Manotok IV v. Heirs of Homer L. Barque, G.R. Nos. 162335 & 162605, December 18, 2008, 574 SCRA 468, 492.
[35] Lu v. Lu, G.R. No. 153690, February 15, 2011, 643 SCRA 23;
Firestone Ceramics v. Court of Appeals, 389 Phil. 810 (2000); and
People v. Ebio, 482 Phil. 647 (2004).
[36] See also
Eureka Personnel & Management Services, Inc. v. Valencia, G.R. No. 159358, July 15, 2009, 593 SCRA 36.
[37] B.E. San Diego v. Alzul, G.R. No. 169501, June 8, 2007, 524 SCRA 402;
San Miguel Corporation v. Aballa, 500 Phil. 170 (2005);
Atillo v. Bombay, 404 Phil. 179 (2001).
[38] Rollo (G.R. Nos. 180880-81, Vol. II), p. 3264;
rollo (G.R. Nos. 180896-97, Vol. II), p. 3341.
[39] Id. at 2569; id. at 1963.
[40] Rollo (G.R. Nos. 180880-81, Vol. I), p. 1060;
rollo (G.R. Nos. 180896-97, Vol. I), p. 267.
[41] Id. at 46-50; id. at 153-157.
[42] Instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed by the Supreme Court are: (1) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents; and (10) the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record. (Misa v. Court of Appeals, G.R. No. 97291, August 5, 1992, 212 SCRA 217, 221-222))
[43] National Housing Authority v. First United Constructors Corporation, G.R. No. 176535, September 7, 2011, 657 SCRA 175, 231;
Public Estates Authority v. Elpidio Uy, 423 Phil. 407, 416 (2001), citing
Cagayan Robina Sugar Milling Co v. Court of Appeals, 396 Phil. 830, 840 (2000).
[44] Diesel Construction Co., Inc. v. UPSI Property Holdings, Inc., G.R. No. 154885, March 24, 2008, 549 SCRA 12, 21-22;
Blue Bar Coconut Philippines v. Tantuico, 246 Phil. 714, 729 (1988).
[45] Philippine Airlines, Inc. v. Court of Appeals, 325 Phil. 303 (1996);
St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 162 Phil. 172 (1976);
Sea-Land Services, Inc. v. Intermediate Appellate Court, 237 Phil. 531 (1987);
Pan American World Airways, Inc. v. Intermediate Appellate Court, 247 Phil. 231 (1988);
[46] Citadel Lines, Inc. v. Court of Appeals, 263 Phil. 479 (1990).
[47] Everett Steamship Corporation, v. Court of Appeals, 358 Phil. 129 (1998);
Ayala Corporation v. Ray Burton Development Corporation, 355 Phil. 475 (1998).
[48] Palmares v. Court of Apppeals, 351 Phil. 664 (1998);
Ridjo Tape and Chemical Corporation v. Court of Appeals, 350 Phil. 184 (1998).
[49] Rollo (G.R. Nos. 180880-81, Vol. II), pp. 2584-2585;
rollo (G.R. Nos. 180896-97, Vol. II), pp. 1978-1979.
[50] Rollo (G.R. Nos. 180880-81, Vol. I), pp. 53-54;
rollo (G.R. Nos. 180896-97, Vol. I), pp. 160-161.
[51] Rollo (G.R. Nos. 180896-97, Vol. 1), p. 248.
[52] Philippine Airlines, Inc, v. Court of Appeals, supra note 45, citing
Saludo, Jr. v. Court of Appeals, G.R. No. 95536, March 23, 1992, 207 SCRA 498.
[53] 366 Phil. 439 (1999).
[54] Id. at 457-458.
[55] Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78, 97.
DISSENTING OPINIONBRION, J.:I maintain my dissent, based on my objections against the reopening of the final judgment in this case and its acceptance by the Court En Banc for its review on the merits. Thus,
I vote to DENY what effectively is the third motion for reconsideration in this case.
In a September 25, 2009 Decision, the Second Division of the Supreme Court, thru Justice Antonio Eduardo B. Nachura, modified the Court of Appeals’ (
CA’s) December 20, 2007 amended decision in CA-G.R. SP Nos. 74018 and 73934. It ordered Keppel Cebu Shipyard, Inc. (KCSI) to pay Pioneer Insurance and Surety Corporation (
Pioneer) P329,747,351.91, with 6% interest per annum from the time the Request for Arbitration was filed until the Decision’s finality, plus 12% interest per annum on the said amount or any balance thereof from the Decision’s finality until it is paid.
In a June 21, 2010 Resolution, the Court
denied with finality KCSI’s
first motion for reconsideration.
KCSI requested that the cases be referred to the Court En Banc, and set for oral arguments its second motion for reconsideration
and its July 30, 2010 letter. KCSI’s September 29, 2010 letter requested for the status of its July 30, 2010 letter.
In an October 20, 2010 Resolution, the Court
denied the
second motion for reconsideration and noted KCSI’s July 30, 2010 and September 29, 2010 letters.
On November 4, 2010, after denial of KCSI’s 2nd motion for reconsideration, the Decision of the Court became final and executory, and was recorded in the Book of Entries of Judgments.On November 23, 2010, KCSI filed in a belated shot in the dark and
without leave of court, a
Motion to Reopen Proceedings and Motion to Refer to the Court En Banc, claiming that the Court gravely erred when it failed to consider the CA’s principal and most crucial finding that both Pioneer and KCSI were guilty of negligence, and that their joint negligence was the cause of the fire that destroyed the vessel; thus, the shared liability of both parties on a 50-50 basis. In support of its motion to refer the case to the Court
En Banc, KCSI posited that these cases involve issues of transcendental importance and of paramount public interest, as it would purportedly establish a precedent allowing courts to deny any litigant due process of law.
Pioneer filed a Manifestation alleging that KCSI did not mention the fact that an Entry of Judgment had already been made, and the September 25, 2009 Decision had already been recorded in the Book of Entries of Judgments. It also stated that on November 22, 2010, before KCSI filed its motion to reopen, it was given a copy of the motion for issuance of a writ of execution that Pioneer filed with the Construction Industry Arbitration Commission (
CIAC) on that date.
In a December 6, 2010 letter to the Office of the Chief Justice, KCSI bewailed the Court’s reversal of the purported uniform findings of the CA and the CIAC, without elevating the entire records of the case.
On December 13, 2010, KCSI filed its supplemental motion (to its
Motion to Reopen Proceedings and Motion to Refer to the Court En Banc), alleging that it was denied its substantive rights to due process; that the limitation-of-liability clause under the Shiprepair Agreement between KCSI and WG&A is valid, such that WG&A is estopped to question the same, and that the imposition of the 6% interest is unwarranted.
The Court En Banc deliberated on the case and by a vote of 10 in favor
* and three against,
** with two abstentions,
*** it decided to lift the entry of judgment and to reopen the case.
In acting as it did, the Court violated the most basic principle underlying the legal system – the immutability of final judgments – thereby acting without authority and outside of its jurisdiction. It grossly glossed over the violation of technical rules in its haste to override its own final and executory ruling.First. The elementary concept of immutability of judgments A basic principle that supports the stability of a judicial system, as well as the social, economic and political ordering of society, is the
principle of immutability of judgments. “[A] decision that has acquired finality becomes immutable and unalterable[,] and may no longer be modified in any respect
even if the modification is meant to correct erroneous conclusions of fact or law and whether it [will be] made by the court that rendered it or by the highest court of the land.”
[1] “Once a judgment or order becomes final, all the issues between the parties are deemed resolved and laid to rest.”
[2] No additions can be made to the decision, and no other action can be taken on it,
[3] except to order its execution.
[4]As recited above, the decision in this case was originally resolved by the unanimous vote of a Division of the Court. The Division also voted unanimously in denying the motion for reconsideration that subsequently came, and even in the denial of the second motion for reconsideration that followed. The Court changed its vote, however, on the subsequent (effectively, the third) motion for reconsideration, it set aside the final judgment and opened the case anew for review on the merits.
Faced with a renewed assault on the merits of a final judgment, the Court had only one recourse open to it – to simply note the motion (effectively, the third motion for reconsideration); it did not even have to deny this motion as it was way past the prohibited phase of filing pleadings under the express terms of the Rules of Court.
[5] That the Court instead opened the case for further review despite the express prohibition of the Rules bodes ill for the respondent as this reopening could not but be a prelude to the reversal of the Division’s final and executory judgment.
The capacity, capability and potential for imaginative ideas of those engaged in the law, in arguing about the law and citing justifications for their conclusions, have been amply demonstrated over the years and cannot be doubted. In this endeavor, however, lawyers should not forget that certain underlying realities exist that should be beyond debate, and that cannot and should not at all be touched even by lawyers’ convincing prowess. They should not forget that their arguments and conclusions do not stand by themselves and do not solely address the dispute at hand;
what they say and conclude create ripple effects on the law and jurisprudence that ultimately become tsunamis enveloping the greater society where the law stands as an instrument aimed at fostering social, political and economic order.
In the context of the actions of the Supreme Court – the highest court that decides on the interpretation of the law with binding effect for the whole country – it cannot simply disregard fundamental principles (such as the principle of immutability of judgments) in its actions without causing damage to itself and to the society that it serves.
A supreme court exists in a society and is supported by that society as a necessary and desirable institution because it can settle disputes and can do this with finality. Its rulings lay to rest the disputes that can otherwise disrupt the harmony in society.This is the role that courts generally serve; specific to the Supreme Court – as the highest court – is the finality, at the highest level, that it can bestow on the resolution of disputes. Without this element of finality, the core essence of courts, and of the Supreme Court in particular, completely vanishes.
This is the reality that must necessarily confront the Court in its present action in reopening its ruling on a case that it has thrice passed upon. After the Court’s unsettling action in this case,
society will inevitably conclude that the Court, by its own action, has established that judgments can no longer achieve finality in this country; an enterprising advocate, who can get a Justice of the Court interested in the reopening of the final judgment in his case, now has an even greater chance of securing a reopening and a possible reversal, even of final rulings, because the Court’s judgment never really becomes final. Others in society may think further and simply conclude that this Supreme Court no longer has a reason for its being, as it no longer fulfills the basic aim justifying its existence.
At the very least, the Court loses ground in the areas of respect and credibility.Second. The Court’s loss of jurisdiction once judgment attains finality. The Rules of Court amply provides the rules on the finality of judgments,
[6] supported by established rulings on this point.
[7] In fact, the Rules itself expressly provides that no second motion for reconsideration shall be entertained.
[8] The operational reason behind this rule is not hard to grasp – a party has 15 days to move for reconsideration of a decision or final resolution, and, thereafter, the decision lapses to finality if no motion for reconsideration is filed. If one is filed, the denial of the motion for reconsideration signals the finality of the judgment. Thereafter, no second motion for reconsideration shall be entertained. At that point, the final judgment begins to carry the effect of
res adjudicata – the rule, expressly provided in the Rules of Court, that a judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been adjudged, binding on the parties and can no longer be reopened;
[9] execution or implementation of the judgment thereafter follows.
[10] Most importantly, at that point, the court – even the Supreme Court – loses jurisdiction over the case except for purposes of its execution.In the present case, the Supreme Court has bent backwards to accommodate a second motion for reconsideration pursuant to its Internal Rules. After the denial of this 2nd motion for reconsideration, an entry of judgment was even made. At this point, the
Supreme Court clearly no longer has jurisdiction to touch or reopen the case because the judgment has lapsed to finality and an entry of final judgment has, in fact, been made evidencing its finality. Even the Constitution itself recognizes that the reopening of a case that has lapsed to finality is outside the powers of the Supreme Court;
the express constitutional power given to the Supreme Court is to review judgments of lower courts, on appeal or on certiorari, and not to reopen and review its own judgment that has lapsed to finality.[11] Thus, the Court itself effectively becomes a transgressor for acting with grave abuse of discretion that the Constitution itself, under Section 1, Article VIII, has mandated the Court to check in all areas and branches of government. It becomes a question now of the old dilemma bedeviling all governments –
who will guard and check on the guardians? Unnerving, to say the least, for the ordinary citizen who goes about his or her daily life relying on the order that the community has established by social compact.
Third. The interest of the original victor is unduly prejudiced by an unwarranted departure from the doctrine of finality of judgment. The finality of a judgment is a consequence that directly affects the immediate parties to a case. In a sense, it affects the public as well because the public must respect the finality of the judgment that prevails between the immediate parties. Where a ruling affects the public at large, as in the declaration of the constitutionality or unconstitutionality of a statute, the Court’s declaration is binding on the general public.
Under this scheme, it is only right and proper that the Supreme Court itself be bound by the finality of the judgment because: (1) the finality is by reason of the Rules that the Court itself promulgated; and (2) of societal reasons deeper than what the Rules of Court expressly provides. If the rules for the immediate parties and the public were to be one of finality, while the rule for the Court is one of flexibility and non-binding effect because the Court may reopen at will and revisit even final rulings, what results is a
monumental imbalance in the legal structure that the Constitution and our laws could not have intended. If an imbalance were intended or tolerated, then a serious restudy must perhaps be made – for a society with a heavy tilt towards unregulated power cannot but at some point fall, or, at the very least, suffer from it. If no imbalance is intended and the system is correct, then the Court may be seriously out of sync in respecting the system and must rectify its ways.
The most graphic example perhaps of the resulting imbalance is the effect of a reopened decision on the respondent, as in this case. Let it be remembered that a judgment that becomes final does not do so in a vacuum. It affects the parties and one effect is on the prevailing party
whose rights under the final judgment vest on the proceeds of the judgment. This vested right is the reason why a writ of execution follows. When and if a final judgment is reopened, the Court effectively dispossesses the winning party of its right and entitlement to what the final decision decrees,
all because the Court at that point wants to change its mind on a matter that is already outside of its jurisdiction to rule upon. This is no less than an act of injustice that is hard to live down for an institution whose guiding light and objective is justice.
Fourth. The recognized exceptions to the rule on immutability rise above the individual interest of the parties. The Rules of Court themselves recognize that the doctrine of finality of judgment is not absolute. Thus, these Rules allow, on specific grounds and for specific periods, petitions for annulment of judgment, petitions for relief from judgment, (and even petition for certiorari) as extraordinary and equitable remedies. The Supreme Court itself allows a second motion for reconsideration under its Internal Rules, but only a second motion and under very specific terms; the Internal Rules do not allow a third motion for reconsideration and no rules exist to guide (a party) and govern a third motion for reconsideration filed by a defeated litigant. If the Court allowed exceptions at all under our jurisprudence, these exceptions only came because of strong justification.
Under the Rules of Court, the only recognized exceptions to the rule on the non-reviewability of final judgments are the correction of clerical errors, the so-called
nunc pro tunc entries which cause no prejudice to any party, void judgments, and when relief from judgment is provided when circumstances transpire rendering the execution of a final decision unjust and inequitable.
[12]To be sure, none of these exceptions exists in the present case. The majority has not claimed that the Second Division’s September 25, 2009 Decision and its subsequent resolutions denying KCSI’s first and second motions for reconsideration are void on due process ground or for lack of jurisdiction. On the contrary, the majority rejected KCSI’s claims to this effect.
[13] Rather, in entertaining KCSI’s present motion and to justify the Court’s assumption of jurisdiction, the majority could only rely on the overly abused legal precept of serving “substantial justice.” The decision, though, is silent on the manner by which
substantial justice may truly be served.
The review of a final and executory decision, when it does occur, must necessarily take into account the nature of the decision. When the final decision is valid, it cannot be the subject of review, even by the Court En Banc.
[14] Neither can a review be entertained because of error in the judgment;
the Supreme Court is supreme because its judgment is final, not because it cannot err. A judgment even if erroneous is still valid if rendered within the scope of the courts’ authority or jurisdiction. It is only when the decision is void, as when there is denial of due process or when it is rendered by a court without jurisdiction, that there can be a reopening of the case. The reason, of course, is that a void judgment is no judgment at all, and a new one must be entered in the fulfillment of the courts’ dispute resolution function.
Beyond these recognized exceptions, the Court has on several occasions modified or even reversed its rulings which have already become final and executory. These were done even if the questioned ruling already pertained to the execution aspect of the case on the forceful reasoning that the “
fallo without any basis at all in fact and in law or in the opinion portion of the decision from which it draws its breath and life can only be considered as
null and void.”
[15] In most (if not all) of these instances, however, the Court’s ultimate decision, at the very least, rests on sufficiently compellingly grounds. A brief survey of some of these cases is in order.
[16]In
San Miguel Corporation v. National Labor Relations Commission,
[17] the Court reinstated the petition it had dismissed and reviewed the case on the merits after admitting that it had “prematurely” denied the petitioner’s 1st motion for reconsideration.
In
Galman v. Sandiganbayan,
[18] the Court initially dismissed the petition and the motion for reconsideration subsequently filed. On second motion for reconsideration
filed with prior leave, the Court set aside its previous actions and granted the petition upon finding that there were serious violations of the People’s right to
due process. The Court took a similar action on a second motion for reconsideration filed
with prior leave in
Philippine Consumers Foundation v. National Telecommunications Commission.
[19]In
Vir-Jen Shipping and Marine Services v. National Labor Relations Commission,
[20] the Court
En Banc entertained a third motion for reconsideration (previously denied twice by a Division of the Court) under its
constitutional authority to resolve conflicting rulings laid down by different Divisions of the Court. In
Cosio v. de Rama,
[21] the Court partially granted the petitioner’s plea on a second for reconsideration on the ground that what is involved is a “difficult question of law.”
In
Munoz v. Court of Appeals,
[22] the Court reversed the judgment of acquittal on a second motion for reconsideration and opted to “resolve the same on its merits, rather than on mere procedural considerations” considering that what is at stake is the individual
liberty of an accused; in this case, the Court initially dismissed the petition
for being filed late (and the motion for reconsideration subsequently filed)
[23]In
Manotok IV v. Barque,
[24] after denying the petition and the two motions subsequently filed,
[25] the Court
En Banc recalled the entry of judgment and proceeded to reevaluate the cases “on a
pro hac vice basis,” considering that conflicting rulings of the Court on administrative reconstitution of titles is in issue. More importantly, the “militating concern” of the Court
En Banc in accepting and reviewing the cases is on the “stability of the Torrens system of registration” and “
not so much the particular fate of the parties.”In
Barnes v. Padilla,
[26] in recalling the entry of judgment, the Court relieved a party from the procedural negligence of his counsel (which made the appellate ruling lapsed into finality) because otherwise, the petitioner would suffer serious injustice.
[27]More importantly, in the case of
Apo Fruits Plantation v. Land Bank of the Philippines,
[28] - penned by this writer - the Court granted what is effectively the petitioner’s third motion for reconsideration (with regard to the deletion of the award of interest originally awarded to it)
due to the “
transcendental importance” of the case in light of the constitutional underpinning involved - the agrarian reform program of the government -
and the assailed decision’s inconsistency with settled jurisprudence. Pointedly, the Court said:
To claim, as the assailed Resolution does, that only private interest is involved in this case is to forget that an expropriation involves the government as a necessary actor. It forgets, too, that under eminent domain, the constitutional limits or standards apply to government who carries the burden of showing that these standards have been met. Thus, to simply dismiss this case as a private interest matter is an extremely shortsighted view that this Court should not leave uncorrected.
x x x x
The assailed decision patently and legally wrong, but is also morally unconscionable for being grossly unfair and unjust. if we continue to deny the petitioners’ present motion for reconsideration, we would – illogically and without much thought to the fairness that the situation demands – uphold the interests of the LBP, not only at the expense of the landowners but also that of substantial justice as well.
What runs throughout these cases, where the Court took an extraordinary step, is the presence of an exceptionally justifying circumstance of a fundamental value which goes beyond the interests of the litigants. It is the presence of this exceptional character that imposes upon the Court a measure of self-regulation to prevent itself from committing the very grave abuse of discretion which under the Constitution it is designed to perform as a checking measure.
[29] Without this exceptional character, the underlying public policy in the crafting and applying the doctrine of immutability should dictate the Court’s action; for, parties come to court to litigate on a dispute and not to prolong and perpetuate the dispute itself at the expense of supposed victor. The Court should not allow itself to be a party to this perpetuation for –
Every litigation must come to an end once a judgment becomes final, executory and unappealable. For just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment, which is the “life of the law.”[30]
What the majority cited in justifying the En Banc’s action in making an on-the-merits review of the case is the Court’s own
Internal Rules on matters or cases which calls for En Banc attention. This provision, however, does not altogether rule out the
Rules of Court’s prohibition against the filing of a second or subsequent motion for reconsideration, much less of a motion filed without prior leave – as was done here.
[31] Worse, the majority’s reasoning “that there were serious allegations in the petition that if the decision of the Court would not be vacated, there would be far-reaching effect on similar cases” finds absolutely no substantiation at all anywhere in the decision!
Fifth: Grant of motions for reconsideration subsequent to the finality of judgment. A still debatable instance when a final decision can be reopened is through action on a second motion for reconsideration under Section 3, Rule 15 of the Internal Rules of the Supreme Court.
[32] The rule states:
Sec. 3.
Second motion for reconsideration. – The Court shall not entertain a second motion for reconsideration, and any exception to this rule can only be granted in the higher interest of justice by the Court
en banc upon a vote of at least two-thirds of its actual membership. There is reconsideration “in the higher interest of justice” when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties. A second motion for reconsideration can only be entertained before the ruling sought to be reconsidered becomes final by operation of law or by the Court’s declaration. [italics supplied]
Under this provision (
that lays hidden in the Court’s Internal Rules and is not reflected in the Rules of Court), a second motion for reconsideration shall not be entertained, except in the “higher interest of justice” by a two-thirds vote of the Court
En Banc’s members. Aside from the voting requirements, a movant must substantially show that a reconsideration of the Court's ruling is necessary in the higher interest of justice, which standard is satisfied upon proving that the assailed ruling is both (1) legally erroneous, and (2) patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties.
Clearly, even under this debatable Internal Rules provision, the judicially subjective standard employed - i.e., whether the case is of sufficient importance - to merit the En Banc’s consideration is in itself insufficient to disregard the settled black-letter rule on immutability of a final judgment. In fact, if KCSI itself as petitioner is convinced that its cause is of sufficient importance to merit the attention of the En banc, it could not have moved for the referral of the case to En banc
only after it failed to obtain a judgment favorable to it.
Then again, even this avenue under the Internal Rules may be closed, as the Court is proscribed from accepting motions for reconsideration filed after the finality of the assailed decision. In this case, KCSI filed its motion to reopen (a third motion for reconsideration), without leave of court, after the denial of its second motion for reconsideration, when a motion for the issuance of execution was already staring it in the face. This move can only be described as a brazen shot in the dark, unsupported by legal reason that the majority in the Court saw fit to entertain.
It was through the opening provided by the questionable provision of the Internal Rules that KCSI’s
Motion to Reopen Proceedings and Motion to Refer to the Court En Banc sought its entry. Significantly, aside from a fig leaf reference to violation of due process (for allegedly deciding the case without the original records), the presented justification essentially referred to cited legal errors committed in the Court’s three considerations of the case,
i.e., in the original
ponencia and in the two motion for reconsideration that were denied.
An eyebrow-raising aspect is that all the Court’s three considerations and ruling on the case were unanimous; not one dissent or sliver of a dissent was ever made. Yet, those who voted for the reopening were the same Members of the Division who supported the
ponencia, except only for the
ponente. Most unsettling of all is the realization that the Court’s revisit of resolved issues, under the guise of “higher interest of justice,” will mean the abandonment of settled principles of law to accommodate KCSI's arguments that had been considered and unanimously turned down in the Court’s Decision and Resolutions.
These disturbing thoughts invariably lead to the question: if no finality can be secured even under the glaringly clear circumstances of this case, can the country’s adjudication system be in grave peril? I do not believe that the problem so far is systemic; the system has had (and it still does have) its share of problems, but these have not been on the finality of judgments as this principle has been with the Court in its more that a hundred years of existence. The problem, as I see it, is individual and remediable. If only the Court and its Members will go back to first principles, and will truly reflect on the place, role, and relevance of the Court in contemporary society, then our judicial system can be and can remain the stable and reliable system that society expects it to be.
For all these reasons, I vote to
DENY KCSI’s third motion for reconsideration for lack of jurisdiction, and to reiterate the finality of the Decision of the Second Division dated September 25, 2009.
* JJ. Carpio, Morales, De Castro, Peralta, Del Castillo, Abad, Perez, Mendoza, Villarama, and Sereno.
** JJ. Nachura, Velasco, and Brion.
*** C.J. Corona, and J. Bersamin.
[1] Genato v. Viola, G.R. No. 169706, February 5, 2010, 611 SCRA 677, 690;
Marcelo v. Philippine Commercial International Bank (PCIB), G.R. No. 182735, December 4, 2009, 607 SCRA 778, 790; and
Heirs of Maura So v. Obliosca, G.R. No. 147082, January 28, 2008, 542 SCRA 406, 418.
[2] Marcelo v. Philippine Commercial International Bank (PCIB), supra;
Ang v. Grageda, G.R. No. 166239, June 8, 2006, 490 SCRA 424, 440; and
Salva v. Court of Appeals, G.R. No. 132250, March 11, 1999, 304 SCRA 632, 645.
[3] Natalia Realty, Inc. v. Rivera, G.R. No. 164914, October 5, 2005, 472 SCRA 189, 197;
Toledo-Banaga v. Court of Appeals, G.R. No. 127941, January 28, 1999, 302 SCRA 331, 341.
[4] Times Transit Credit Cooperative, Inc. v. NLRC, G.R. No. 117105, March 2, 1999, 304 SCRA 11, 17; and
Yu v. National Labor Relations Commission, G.R. Nos. 111810-11, June 16, 1995, 245 SCRA 134, 142.
[5] RULES OF COURT, Rule 52, Section 1, in relation to Rule 56, Section 4.
[6] RULES OF COURT, Rule 36, Section 2.
[7] See
Government Service Insurance System v. Regional Trial Court of Pasig, Branch 71, G.R. Nos. 175393 and 177731, December 18, 2009, 608 SCRA 552;
Gomez v. Correa, G.R. No. 153923, October 2, 2009, 602 SCRA 40;
Obieta v. Cheok, G.R. No. 170072, September 3, 2009, 598 SCRA 86;
Dacanay v. Yrastorza, Sr., G.R. No. 150664, September 3, 2009, 598 SCRA 20;
Julie’s Franchise Corporation v Ruiz, G.R. No. 180988, August 28, 2009, 597 SCRA 463; and
Heirs of Emiliano San Pedro v. Garcia, G.R. No. 166988, July 3, 2009, 591 SCRA 593.
[8] RULES OF COURT, Rule 52, Section 2, in relation to Rule 56, Section 4.
[9] RULES OF COURT, Rule 39, Section 47(b).
[10] RULES OF COURT, Rule 39, Section 1.
[11] CONSTITUTION, Article VIII, Section 5(2).
[12] Peña v. Government Service Insurance System (GSIS), G.R. No. 159520, September 19, 2006, 502 SCRA 383, 404;
Siy v. National Labor Relations Commission, G.R. No. 158971, August 25, 2005, 468 SCRA 154, 161-162; and
Sacdalan v. Court of Appeals, G.R. No. 128967, May 20, 2004, 428 SCRA 586.
[13] Ponencia, pp. 11-12.
[14] In
Apo Fruits Plantation v. Court of Appeals, G.R. No. 164195, April 30, 2008, the Court stated:
The Court En Banc is not an appellate tribunal to which appeals from a Division of the Court may be taken. A Division of the Court is the Supreme Court as fully and veritably as the Court En Banc itself, and a decision of its Division is as authoritative and final as a decision of the Court En Banc. Referrals of cases from a Division to the Court En Banc do not take place as just a matter of routine but only on such specified grounds as the Court in its discretion may allow.
But the allowable discretion the Court has does not include the resuscitation of a final and executory judgment without the most compelling of reasons laid down in the decision itself.
[15] Republic v. De Los Angeles, G.R. No. L-26112, October 4, 1971, 41 SCRA 422.
[16] There are usually two instances or stages when the doctrine of finality of judgment is engaged;
first, when a decision is rendered by a lower court or tribunal and the same is affirmed or modified on appeal by the Supreme Court or the ruling at the trial or appellate level becomes final without reaching the Supreme Court and its reconsideration on the merits is sought; second, when the decision becomes final whether at the trial or appellate level and the case have reached the execution stage which spawned litigation anew. The first instance is what is before the Court.
[17] G.R. No. 82467, June 29, 1989, 174 SCRA 510.
[18] G.R. No. L-72670, September 12, 1986, 144 SCRA 43.
[19] G.R. No. L-63318, August 18, 1984, 131 SCRA 200. The Court stated: “
It should be emphasized that the resolution of this Court xxx denying the first motion for reconsideration did not state that the denial is final.” The decision was rendered in 1984 at the time when the 1964 Rules of Court expressly allows a second motion for reconsideration (Section 1, Rule 52).
[20] G.R. No. L-58011, November 18, 1983, 125 SCRA 577.
[21] G.R. No. L-18452, May 20, 1966, 17 SCRA 207.
[22] G.R. No. 125451, January 20, 2000, 322 SCRA 741; August 22, 2001.
[23] Tan Tiac Chiong v. Hon. Cosico, 434 Phil. 753 (2002).
[24] G.R. No. 162335, December 18, 2008, 574 SCRA 468.
[25] A Motion for Reconsideration and Motion for Leave to File a Second Motion for Reconsideration with the Motion for Reconsideration attached.
[26] 482 Phil. 903 (2004).
[27] See Sanchez v. Court of Appeals, 404 SCRA 544.
[28] G.R. No. 164195, October 12, 2010.
[29] CONSTITUTION, Article VIII, Section 1, par. 2.
[30] Bongcac v. Sandiganbayan, G.R. Nos. 156687-88, May 21, 2009.
[31] The cases cited by the ponencia are likewise inapt.
Firestone Ceramics v. Court of Appeals involves an En Banc action to take cognizance of a first motion for reconsideration pending with a Division. On the other hand,
Lu v. Lu involves conflicting rulings of the Court of which only the Court
En Banc has constitutional authority to ultimately resolve.
People v. Ebio involves the issue of doubt on the constitutionality of the
En Banc’s action for lack of quorum, which warranted a re-deliberation. Ebio involves the Court’s action on a first Motion for Reconsideration.
[32] A.M. No. 10-4-20-SC, The Internal Rules of the Supreme Court, effective May 22, 2010.
CONCURRING OPINIONABAD, J.:I concur with the main opinion in reconsidering the Division’s decision in these cases. I especially address the dissenting opinion of Justice Arturo D. Brion.
On January 26, 2000 Keppel Cebu Shipyard, Inc. (KCSI) and WG&A Jebsens Shipmanagement, Inc. (WG&A) executed a Shiprepair Agreement where KCSI agreed to renovate and reconstruct WG&A’s M/V Superferry 3 using its dry docking facilities pursuant to its safety and security rules and regulations. Under the agreement, KCSI’s total liability was limited to P50 Million. Meanwhile, the ship was insured with Pioneer Insurance and Surety Corporation (Pioneer) for US$8,472,581.78.
In the course of the repairs, M/V Superferry 3 was destroyed by fire. WG&A declared a “total constructive loss” and filed an insurance claim with Pioneer which, in turn, paid WG&A the total sum insured equivalent to P360 Million. WG&A then executed a Loss and Subrogation Receipt in favor of Pioneer.
Pioneer tried to collect from KCSI the full amount of P360 Million that it had paid to WG&A, but KCSI denied any responsibility for the loss of the vessel. Consequently, Pioneer filed a Request for Arbitration before the Construction Industry Arbitration Commission (CIAC).
On October 28, 2002 the CIAC rendered a decision declaring both WG&A and KCSI guilty of negligence. Holding that the liability for damages was limited to P50 Million, the CIAC ordered KCSI to pay Pioneer P25 Million, with interest at 6% per annum from the time of filing of the case up to the time the decision is promulgated, and 12% interest after the decision becomes final and executory.
Pioneer and KCSI appealed to the Court of Appeals (CA) in CA-G.R. SP 74018 and CA-G.R. SP 73934, respectively. The CA dismissed Pioneer’s petition, but granted KCSI’s appeal. On Pioneer’s motion for reconsideration, however, the CA issued an amended decision ordering KCSI to pay Pioneer P25 Million, without legal interest, within 15 days from the finality of its amended decision.
Both Pioneer and KCSI elevated the matter to the Court for review under Rule 45 of the Rules of Court. On September 25, 2009 the Court’s Second Division partially granted the petitions and modified the CA’s amended decision. The Court found KCSI solely liable for the loss of the vessel and ordered it to pay Pioneer P360 Million less the salvage value of P30,252,648.09, or the net amount of P329,747,351.91 with 6% per annum from the time the Request for Arbitration was filed until the decision becomes final and executory, plus 12% per annum on the amount or any balance from finality of the decision until full payment.
KCSI filed a motion for reconsideration, which the Court denied on June 21, 2010. KCSI then filed a second motion for reconsideration to refer to the Court
En Banc and for oral arguments, which the Court also denied on October 20, 2010. The decision became final and executory on November 4, 2010.
On November 23, 2010 KCSI filed a motion to reopen proceedings and motion to refer to the Court
En Banc. The Court’s Second Division voted 4-1 to submit the case to the
En Banc, while two-thirds of the Court
En Banc, or ten members, voted to grant KCSI’s motion. Three members dissented and two members took no part.
The Court
En Banc has, in exceptional cases, reopened and accepted for review decisions that have otherwise attained finality. Indeed, it has suspended the rules of procedure when there are special and compelling reasons to alter a judgment that has been declared final even by the Court itself.
For instance, the Court set aside entry of judgment in
Manotok IV v. Heirs of Homer L. Barque[1] to protect the Torrens system of registration. The Court did the same thing in
Tan Tiac Chiong v. Cosico[2] owing to due process concerns. In
Barnes v. Judge Padilla,[3] the Court allowed the recall of entries of judgment in the interest of justice. Meanwhile, in the more recent cases of
League of Cities of the Philippines v. Commission on Elections[4] and
Navarro v. Ermita[5] the Court vacated previous decisions in order to uphold congressional intent.
In
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,[6] the Court
En Banc also reversed a division ruling despite a final and executory judgment because the Court found the issue of just compensation a matter of public interest. Notably, the ponente then was Justice Brion who now vigorously opposes the reopening of these cases in his dissenting opinion.
It is argued that the Court violated the principle on immutability of judgments and that it is proscribed from accepting motions for reconsideration after finality of the assailed decision. But, as shown by jurisprudence cited above, a final judgment may be reopened and reviewed by the Court in order to render just and equitable relief.
We are of course aware that the departure from the rules of procedure may provoke criticism from various quarters. But, to be sure, the Court does not recall entries of judgment indiscriminately or without sufficient justification. In granting KCSI’s motion, there is no resulting “monumental imbalance in the legal structure” but merely an affirmation that, in rendering justice, courts should be mindful first of substantive rights rather than technicalities.
[7]Here, the CIAC and the CA had the same factual findings with respect to the negligence of the parties. Both found WG&A and KCSI equally at fault for the loss of the vessel. The Court’s Second Division, however, held only KCSI liable. What is more, it disregarded the limitation-of-liability clause in the Shiprepair Agreement that would have an impact on future commercial contracts.
KCSI argues that the Court’s Second Division had no basis to reverse the factual findings of the CIAC and the CA without having asked for the case records. KCSI also points out that the limitation-of-liability clause is valid and that, on at least 22 different occasions, WG&A or its affiliate companies had willingly entered into similar agreements with the same conditions. Needless to say, these are serious allegations that the Court
En Banc, by a vote of two-thirds or ten of its members, rightfully saw fit to evaluate.
Besides, the Court acted in accordance with its internal rules which recognize the
En Banc’s power to review and take cognizance of cases under exceptional circumstances. Section 3(m), Rule 2 of the rules expressly provides that the Court
En Banc shall act on cases that it deems of sufficient importance to merit its attention. In this regard, the rules also state that a second motion for reconsideration may be entertained, in the higher interest of justice, by a two-thirds vote of the Court
En Banc’s members.
[1] G.R. Nos. 162335 & 162605, December 18, 2008, 574 SCRA 468.
[2] 434 Phil. 753 (2002).
[3] 482 Phil. 903 (2004).
[4] G.R. Nos. 176951, 177499, and 178056, April 12, 2011, 648 SCRA 344.
[5] G.R. No. 180050, April 12, 2011, 648 SCRA 400.
[6] G.R. No. 164195, April 5, 2011, 647 SCRA 207.
[7] Supra note 3, at 916, citing
De Guzman v. Sandiganbayan, 326 Phil. 182 (1996).
DISSENTING OPINIONREYES, J.:I find myself unable to concur in the majority opinion. I would like to emphasize the applicability of
Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc.[1] in this case.
Below is a summary of
Cebu Shipyard insofar as it is relevant to
Keppel Cebu Shipyard, Inc. v. Pioneer Insurance and Surety Corporation.[2]M/V Manila City, a luxury passenger-cargo vessel owned by William Lines, Inc. (William Lines), was insured with Prudential Guarantee and Assurance Company, Inc. (Prudential) for P45,000,000.00 for hull and machinery. Among others, the policy provided as follows:
Subject to the conditions of [the] Policy, [the] insurance also covers loss of or damage to Vessel directly caused by the following:
x x x
Negligence of Charterers and/or Repairers, provided such Charterers and/or Repairers are not an Assured hereunder.
x x x
provided such loss or damage has not resulted from want of due diligence by the Assured, the Owners or Managers of the Vessel, of any of them. Masters, Officers, Crew or Pilots are not to be considered Owners within the meaning of this Clause should they hold shares in the Vessel.[3]
During the effectivity of the insurance, M/V Manila City caught fire and sank on February 16, 1991 while it was undergoing dry-docking and repair within the premises of Cebu Shipyard and Engineering Works, Inc. (Cebu Shipyard). On February 5, 1991, William Lines brought M/V Manila City to Cebu Shipyard for dry-docking and repair. The Work Orders executed by William Lines and Cebu Shipyard contain the following stipulations:
11. Save as provided in Clause 10, the Contractor shall not be under any liability to the Customer either in contract or for delict or quasi-delict or otherwise except for negligence and such liability shall itself be subject to the following overriding limitations and exceptions, namely:
(a) The total liability of the Contractor to the Customer (over and above the liability to replace under Clause 10) or of any sub-contractor shall be limited in respect of any defect or event (and a series of accidents arising out of the same defect or event shall constitute one defect or event) to the sum of Pesos Philippine Currency One Million only.
x x x x
20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the contract is in effect.[4]
After M/V Manila City caught fire and sank, William Lines filed a complaint with the Regional Trial Court (RTC) of Cebu City against Cebu Shipyard, alleging that the loss of the vessel was due to the latter’s fault and negligence.
Subsequently, Prudential paid William Lines the value of the vessel’s hull and machinery, resulting to Prudential’s subrogation to the claims of William Lines against Cebu Shipyard. An amended complaint was filed to include Prudential as a co-plaintiff.
In its Decision dated June 10, 1994, the RTC ruled that it was Cebu Shipyard’s negligence that caused the total loss of the vessel. Cebu Shipyard was ordered to pay Prudential the amount of P45,000,000.00, representing the amount the latter paid to William Lines.
On appeal, the Court of Appeals (CA) affirmed the RTC decision.
Cebu Shipyard filed a Petition for Review with this Court, claiming, among others, that: (a) it is a co-assured under the insurance contract between William Lines and Prudential by virtue of Clause 20 of the Work Orders; thus, its supposed negligence is an excluded risk; and (b) on the assumption that its negligence was the cause of the vessel’s total loss, its liability is limited to P1,000,000.00.
In a Decision dated May 5, 1999 penned by Justice Fidel P. Purisima, this Court denied the petition finding no merit in any of Cebu Shipyard’s claims.
First, this Court, not being a trier of facts, is bound by the factual findings of the RTC and the CA that Cebu Shipyard’s negligence was the cause of the loss.
Second, the loss took place while the Cebu Shipyard had custody and control of the vessel, thus, the principle of
res ipsa loquitor applies.
Third, Clause 20 of the Work Orders does not make Cebu Shipyard a co-assured under the insurance contract between Prudential and William Lines. While William Lines is required to maintain an insurance contract while the vessel is being dry-docked and repaired by Cebu Shipyard and such coverage benefits Cebu Shipyard, this does not automatically make Cebu Shipyard a co-assured. It is only William Lines who was designated as “assured” in the insurance contract and:
The intention of the parties to make each other a co-assured under an insurance policy is to be gleaned principally from the insurance contract or policy itself and not from any other contract or agreement because the insurance policy denominates the assured and the beneficiaries of the insurance. x x x.[5]
Fourth, the Work Orders are in the nature of adhesion contract, which is recognized as valid in this jurisdiction but reliance thereon is unfavored given a certain factual milieu. In this case, it is unfair and inequitable to limit the liability of Cebu Shipyard to P1,000,000.00 in view of the proven fact that its failure to exercise the required diligence was the proximate cause of the loss.
It is evident that the Decision dated September 25, 2009 of this Court in
Keppel Cebu Shipyard shares a parallelism with its Decision dated May 5, 1999 in Cebu Shipyard. As to the validity of Clause 20, the limited liability clause of the Ship Repair Agreement between WG & A Jebsens Ship Management, Inc. (Aboitiz), this Court held that:
Indeed, the assailed clauses amount to a contract of adhesion imposed on WG&A on a “take-it-or-leave-it” basis. A contract of adhesion is so-called because its terms are prepared by only one party, while the other party merely affixes his signature signifying his adhesion thereto. Although not invalid, per se, a contract of adhesion is void when the weaker party is imposed upon in dealing with the dominant bargaining party, and its option is reduced to the alternative of “taking it or leaving it,” completely depriving such party of the opportunity to bargain on equal footing.
x x x x
Likewise, Clause 20 is a stipulation that may be considered contrary to public policy. To allow KCSI to limit its liability to only [P]50,000,000.00, notwithstanding the fact that there was a constructive total loss in the amount of [P]360,000,000.00, would sanction the exercise of a degree of diligence short of what is ordinarily required. It would not be difficult for a negligent party to escape liability by the simple expedient of paying an amount very much lower than the actual damage or loss sustained by the other.[6]
As to the validity of Clause 22(a), the provision in the Ship Repair Agreement that required Aboitiz to maintain an insurance cover on the vehicle while it is being dry-docked and repaired by Keppel Cebu Shipyard, Inc. (KCSI), invoked by KCSI to claim that it is a co-assured in the insurance contract between Aboitiz and Pioneer Insurance and Surety Corporation (Pioneer), this Court held that:
Along the same vein, Clause 22(a) cannot be upheld. The intention of the parties to make each other a co-assured under an insurance policy is to be gleaned principally from the insurance contract or policy itself and not from any other contract or agreement, because the insurance policy denominates the assured and the beneficiaries of the insurance contract. Undeniably, the hull and machinery insurance procured by WG&A from Pioneer named only the former as the assured. There was no manifest intention on the part of WG&A to constitute KCSI as a co-assured under the policies. To have deemed KCSI as a co-assured under the policies would have had the effect of nullifying any claim of WG&A from Pioneer for any loss or damage caused by the negligence of KCSI. No ship owner would agree to make a ship repairer a co-assured under such insurance policy. Otherwise, any claim for loss or damage under the policy would be rendered nugatory. WG&A could not have intended such a result.[7]
The re-opening of our Decision dated September 25, 2009 despite the fact that this had already become final and executory, raises the presumption that there will be a reversal in KCSI’s favor.
At the onset, it bears stressing that the conclusions made by this Court in
Keppel Cebu Shipyard was consistent with the principles enunciated in Cebu Shipyard and in observance of the principle of
stare decisis. In fact, even without having to go through the rigorous exercise of determining whether Aboitiz consented to the limited liability clause (a supposed fine-print in the Ship Repair Agreement), the conclusion would be the same and KCSI’s liability to Pioneer would still be within the range of P350,000,000.00 considering the pronouncement in
Cebu Shipyard that a limitation of liability in that form is void for being against public policy.
The same is true with respect to the issue on whether KCSI can be considered a co-assured in the insurance contract between Pioneer and Aboitiz. Even if KCSI’s being a co-assured is expressly stipulated in the Ship Repair Agreement (compared to the Work Orders in
Cebu Shipyard, which was not that explicit), that would not suffice to make it so. Keppel
Cebu Shipyard echoed the pronouncements in
Cebu Shipyard that one can only claim to be a co-assured if he is designated as one in the insurance contract itself, and no other contract where the insurer is not a party can be invoked.
Therefore, to hold that KCSI’s liability to Pioneer is limited only to P50,000,000.00 is tantamount to a reversal of the doctrine espoused in
Cebu Shipyard; and if such is the intention then a categorical statement to that effect should be made. For several years, ship owners had relied on this formulation that any attempt on the part of the ship repairer and owner of docking facilities to limit their liability to a certain amount, which is way below that actual value of the ship, is an exercise in futility. This holds true even if the ship owner had consented to a contract where such limitation on liability has been stipulated.
It is not without reason that limited liability provisions had been struck down as void for being against public policy. It is indeed distasteful and an affront to one’s sense of justice and fairness that: (a) ship owners would render themselves unqualified to the services of ship repairers and owners of docking facilities should they refuse to accede to a limited liability clause; and (b) ship repairers and owners of docking facilities would be relieved of liability to a significant degree even if it was by their fault or negligence that the vessel was placed in utter ruin. The consent of a ship owner to a limited liability clause is not freely given in a certain sense, most especially if the ship owner is confronted with no choice but to engage the services of that ship repairer for being the only one available. Such cutthroat practice is what this Court would intend to avoid by declaring such a limited liability clause invalid.
In light of the foregoing, and on the ground of immutability of judgment, I register my
DISSENT. I vote to
AFFIRM the Decision dated September 25, 2009 of the Court in this case.
[1] 366 Phil. 439 (1999).
[2] G.R. Nos. 180880-81 & G.R. Nos. 180896-97, September 25, 2009, 601 SCRA 96.
[3] Supra note 1, at 444-445.
[4] Id. at 446.
[5] Id. at 456.
[6] Supra note 2, at 143-144.
[7] Id. at 144.
