Sunday, March 11, 2012

Pacific Timber Export Corporation vs. CA

Facts: Plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. The defendant issued on said date Cover Note No. 1010, insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY, INC. 

Two regular marine cargo policies were issued by the defendant in favor of the plaintiff. The total cargo insured under the two marine policies accordingly consisted of 1,395 logs. 

After the issuance of Cover Note No. 1010, but before the issuance of the two marine policies, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay due to bad weather. 

The plaintiff informed the defendant about the loss. Defendant denied the claim. on the ground that the cover note is null and void for lack of valuable consideration. 

CFI ruled in favor of petitioner. CA reversed, hence the petition. 

Issue: Is the cover note null and void? 

Held: No. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner's contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. This is a fact admitted by an official of respondent company, Juan Jose Camacho, in charge of issuing cover notes of the respondent company. 

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer.

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