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Transportation Case Digest: Mayer Steel Pipe Corp. v. CA (1997)

G.R. No. 124050  June 19, 1997
Lessons Applicable: Ancillary Contracts (transportation)


  • 1983: Hongkong Government Supplies Department (Hongkong) contracted Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings
  • August to October, 1983: Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022
  • Prior to the shipping, Mayer insured the pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter)
    • South Sea:Invoice Nos. MSPC-1014, 1015 and 1025 for US$212,772.09
    • Charter: Invoice Nos. 1020, 1017 and 1022 for US$149,470.00
  • Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract
    • Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel
    • When the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged
  • Mayer and Hongkong a claim against private respondents for indemnity under the insurance contract
    • Charter paid petitioner Hongkong the amount of HK$64,904.75
    • demanded payment of the balance of HK$299,345.30 which was refused
  • April 17, 1986: filed an action to recover HK$299,345.30
    • Defense: insurance surveyor's report allegedly showed that the damage is a factory defect
  • Trial Court: in favor of Mayer and Hongkong
  • CA: reversed 
    • affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the "all risks" insurance policies 
    • BUT held that Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered
    • applies not only to the carrier but also to the insurer
ISSUE: W/N Section 3(6) of the Carriage of Goods by Sea also applies to insurer

HELD: NO.  Petition is granted. CA reversed. RTC reinstated
  • Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered.  Under this provision, only the carrier's liability is extinguished if no suit is brought within one year.  But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance - governed by the Insurance Code
  • An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril
    • "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured
    • prescribes in ten years, in accordance with Article 1144 of the New Civil Code