GR 141462; (December, 2005) (Digest)
G.R. No. 141462, December 15, 2005
Danzas Corporation and All Transport Network, Inc. vs. Hon. Zeus C. Abrogar, et al.
FACTS
Petitioner Danzas Corporation, through its agent All Transport Network, transported a shipment of watches for consignee International Freeport Traders, Inc. (IFTI). The shipment, insured by respondent Seaboard Eastern Insurance Co., Inc., sustained losses upon arrival. Seaboard, as insurer, paid IFTI for the losses and, by right of subrogation, filed a complaint for damages against petitioners and respondent Philippine Skylanders, Inc. Petitioners impleaded Korean Airlines (KAL) as a third-party defendant.
While the case was pending, IFTI’s treasurer accepted a settlement offer from KAL and received payment, signing a release form. Petitioners consequently filed a motion to dismiss the complaint, arguing that Seaboard’s subrogated right was extinguished by IFTI’s settlement with KAL. The trial court denied the motion to dismiss and later allowed Skylanders to present evidence in a preliminary hearing. Petitioners challenged these orders via a petition for certiorari with the Court of Appeals, which was dismissed, leading to this petition.
ISSUE
Whether the insurer’s (Seaboard’s) right of subrogation was extinguished by the insured’s (IFTI’s) subsequent settlement with and release of the alleged tortfeasor (KAL).
RULING
No. The Supreme Court ruled that Seaboard’s right of subrogation was not extinguished. The Court distinguished the case from the general rule in Manila Mahogany Manufacturing Corporation v. Court of Appeals, where a settlement between the insured and the tortfeasor without the insurer’s consent typically defeats subrogation. Here, a critical factual difference existed: KAL settled with IFTI with full knowledge that Seaboard had already indemnified the insured and had filed a subrogation suit.
The Court adopted the prevailing doctrine from American jurisprudence, which holds that a wrongdoer who, with knowledge of the insurer’s payment and subrogation rights, settles separately with the insured, does not defeat the insurer’s subrogation claim. Such a settlement, made in bad faith, cannot absolve the tortfeasor from liability to the insurer. Since KAL was aware of Seaboard’s prior payment and ongoing lawsuit, its settlement with IFTI did not release petitioners from their liability to Seaboard. The trial court correctly denied the motion to dismiss, and no grave abuse of discretion attended its orders.