Finals Transpo Digested Cases.docx - MAYER STEEL PIPE CORP v CA 274 SCRA 432 FACTS Petitioner Hongkong Government Supplies Department(Hongkong

Finals Transpo Digested Cases.docx - MAYER STEEL PIPE CORP...

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MAYER STEEL PIPE CORP. v. CA 274 SCRA 432, June 19, 1997 FACTS: Petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). A third-party inspector jointly hired by petitioners certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. Petitioners Mayer and Hong Kong filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor’s report allegedly showed that the damage is a factory defect. Petitioners filed an action against private respondents South Sea and Charter to recover the sum of HK$299,345.30. The trial court ruled in favor of petitioners. Private respondents elevated the case to respondent Court of Appeals. Respondent court 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 issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial court and dismissed the complaint on the groimd of prescription. It held that, the action is barred under Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel. HELD: 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. A close reading of the law reveals that COGSA governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code.
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