Mayleen Paper, Inc. contracted the services of the National Marine Corporation (NMC) to transport 5,000 bales of paper from Taiwan to the Philippines. Upon arrival in Manila, it was discovered that 122 bales were lost. Mayleen demanded payment of losses from NMC but NMC did not respond. As the papers were insured by the American Home Assurance Company (AHAC), Mayleen recovered insurance from AHAC which AHAC promptly paid. AHAC then filed suit for recovery against NMC. NMC filed a motion to dismiss claiming lack of cause of action on the part of AHAC. NMC argued that under the Code of Commerce, claims for general averages cannot be granted if the claim does not exceed 5% of the total value of the cargo. Accordingly, 122 bales is just amounting to 0.18% worth of damage. AHAC argued that the Code of Commerce is not applicable but rather it is the Civil Code.
ISSUE: Whether or not the applicable rule is the Code of Commerce.
HELD: No. In the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Liability here is present due to NMC’s negligence which it hypothetically admitted when it filed a Motion to Dismiss due to lack of cause action before the lower court. Thus, American Home Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.