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[G.R. No. 78860 May 28, 1990] PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HONORABLE COUR O!

APPEALS a"# MILAGROS CA$AS, respondents. ! A C S % P r i v a t e r e s p o n d e n t M i l a g r o s C a y a s w a s t h e registered owner of a Mazda bus, insured with Perla Compania de Seguros, Inc. (PCSI under a policy issued on !ebruary ", #$%&. 'n ( e c e m b e r # % , # $ % & , t h e b u s f i g u r e d i n a n accident in )aic, Cavite in*uring several of its passengers . 'ne of them, #$+year old ,dgardo Perea, sued Mila gros Cayas for damages in the C!I of Cavite, w h i l e t h r e e o t h e r s a g r e e d t o a settlement of P-,...... each. /fter trial, the court rendered a decision in favor of Perea, ordering Cayas to compensate him, with an award of e0emplary and moral damages, as well as attorney1s fees. (P"2,... total . 'n )ovember ##, #$&#, Milagros Cayas filed a complaint for a sum of money and damages against PCSI in the Court of !irst Instance of Cavite. 3he court rendered *udgment by default ordering PCSI to pay Milagros Cayas P4.,... as compensation for the in*ured passengers, P4,... as moral damages and P4,... as attorney5s fees. Said decision was set aside after the PCSI filed a motion therefor. 3rial of the case ensued. In due course, the court promulgated a decision ordering defendant Perla Compania de Seguros, Inc. to pay plaintiff Milagros Cayas the sum of P4.,...... under its ma0imum liability as provided for in the insurance policy6 and the sum of P4,...... as reasonable attorney5s fee. P C S I a p p e a l e d t o t h e C o u r t o f / p p e a l s , w h i c h affirmed in toto the lower court1s decision. Its motion for reconsideration having been denied by said appellate court, PCSI filed this petition. ISSUE 7hether or not PCSI is limited only to the payment made by private respondent to Perea and only up to the amount of P#2,....... HELD 8,S. 3he insurance policy involved e0plicitly limits petitioner5s liability to P#2,...... per person and to P4.,...... per accident. Pertinent provisions of the policy state9 S,C3I') I+:iability to the Public 000 000 000

". 3he :imit of :iability stated in Schedule / as applicable (a to 3;I<( P/<38 is the limit of the Company5s liability for all damages arising out of death, bodily in*ury and damage to property combined so sustained as the result of any one accident6 (b =per person= for P/SS,)>,< liability is the limit of the Company5s liability for all damages arising out of death or bodily in*ury sustained by one person as the result of any one accident9 (c =per accident= for P/SS,)>,< liability is, sub*ect to the above provisions respecting per person, the total limit of the Company5s liability for all such damages arising out of death or bodily in*ury sustained by two or more persons as the result of any one accident. Conditions /pplicable to /ll Sections 000 000 000 4. )o admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company which shall be entitled, if it so desires, to ta?e over and conduct in his (sic name the defense or settlement of any claim, or to prosecute in his (sic name for its own benefit any claim for indemnity or damages or otherwise, and shall have full discretion in the conduct of any proceedings in the settlement of any claim, and the insured shall give all such information and assistance as the Company may re@uire. If the Company shall ma?e any payment in settlement of any claim, and such payment includes any amount not covered by this Policy, the Insured shall repay the Company the amount not so covered In Sto?es vs. Malayan Insurance Co., Inc., the Court held that the terms of the contract constitute the measure of the insurer5s liability and compliance therewith is a condition precedent to the insured5s right of recovery from the insurer. In the case at bar, the insurance policy clearly and c a t e g o r i c a l l y p l a c e d p e t i t i o n e r 5 s l i a b i l i t y f o r a l l damages arising out of death or bodily in*ury sustained by one person a s a r e s u l t o f a n y o n e accident at P#2,....... Said amount complied with the minimum fi0ed by the law then prevailing, Section "%% of Presidential (ecree )o. A#2, which provided that the liability of l a n d t r a n s p o r t a t i o n v e h i c l e o p e r a t o r s f o r b o d i l y in*uries sustained by a passenger arising out of the use of their vehicles shall not be less than P#2,.... I n o t h e r w o r d s , u n d e r t h e l a w , t h e m inimum liability is P#2,... per passenger. Petitioner5s liability under the insurance contract not being less than P # 2 , . . . . . . , a n d t h e r e f o r e n o t c o n t r a r y t o l a w , morals, good customs, public order or public policy, said stipulation must be upheld as effective, valid and binding as between the parties. In li?e manner, we rule as valid and binding upon private respondent the condition re@uiring her to secure the written permission of petitioner before effecting any payment in settlement of any claim against her.

3 h e r e i s n o t h i n g u n r e a s o n a b l e , a r b i t r a r y o r ob*ectionable in this stipulation as would warrant its nullification. 3he same was obviously designed to safeguard the insurer5s interest against collusion between the insured and the claimants. I t b e i n g s p e c i f i c a l l y r e @ u i r e d t h a t p e t i t i o n e r 5 s written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from see?ing reimbursement of the payments made to the three other passangers in view of her failure to comply with the condition contained in the insurance policy. Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. It was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy. In Phil. /merican >eneral Insurance Co., Inc vs. Mutuc, we ruled that contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as t o t h e i n t e n t i o n o f t h e c o n t r a c t i n g p a r t i e s , f o r contracts are obligatory, no matter what form they may be, whenever the essential re@uisites for their validity are present. In Pacific '0ygen B /cetylene Co. vs. Central Can? , it was stated that the first and fundamental d u t y o f t h e c o u r t s i s t h e a p p l i c a t i o n o f t h e l a w according to its e0press terms, interpretation being c a l l e d f o r o n l y w h e n s u c h l i t e r a l a p p l i c a t i o n i s impossible. 7e observe that although Milagros Cayas was able to prove a total loss of only P--,......, petitioner was made liable for the amount of P4.,......, the ma0imum liability per accident stipulated in the policy. 3his is patent error. /n insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any a c c i d e n t v i c t i m o r c l a i m a n t a s a n i n s t r u m e n t o f enrichment by reason of an accident. Petition granted. 3he decision of the Court of /ppeals is modified in that petitioner shall pay Milagros Cayas the amount of 3welve 3housand Pesos (P#2,.... .. plus legal interest from the promulgation of the decision of the lower court until it is fully paid and attorney5s fees in the amount of P4,......