G.R. No.

L-33131

December 13, 1930

EMILIO GONZALES LA O, plaintiff-appellee,

vs.
THE YEK TONG LIN FIRE AND MARINE INSURANCE CO., LTD., defendant-appellant.
VILLAMOR, J.:
This is an action to recover of the defendant the Yek Tong Lin Fire & Marine Insurance Co., Ltd., the
amount of two insurance policies totaling P100,000 upon leaf tobacco belonging to the plaintiff, which
was damaged by the fire that destroyed the building on Soler Street No. 188, where said tobacco was
stored, on January 11, 1928.
The defendant filed a general and specific denial of each and every allegation of the complaint, set up
three special defenses, and prayed to be absolved from the complaint with costs against the plaintiff.
After the case was tried, the court below rendered judgment as follows:

In this case and in Nos. 334568, and 33480 of this court, which, by agreement of
the interested parties, were jointly tried, the plaintiff demands P290,000 from the
defendant assurance companies, alleging that to be the amount of the insurance
on his leaf tobacco which was damaged by the fire that destroyed the warehouse
at No. 188 Soler Street, Manila, where it was stored, on January 11, 1928, the
plaintiff's claim against the herein defendant, the Yek Tong Lin Fire & Marine
Insurance Co. being for P100,000, and against the defendants in the three other
cases mentioned above, for P190,000.
After the plaintiff had presented his evidence, the defendant companies in cases
Nos. 33458, 33868, and 33480, offered to compromise with him by paying eightyfive per cent of his claim against them. In view of the fact that said defendants
had in their answer raised the question of warranties A and G of the plaintiff's
policies, providing that the building used for the effects insured would not be
occupied by any other lessee, nor would be used for the deposit of other goods,
without the consent of said defendants, and inasmuch as the latter alleged in
their answer that the owner of the burnt building had leased the warehouse to
several persons for the storage of sundry articles, the plaintiff had to accept the
proposed compromise, and in consequence thereof, the three cases aforesaid
were dismissed.
The present case followed the usual course of procedure because the plaintiffs
refused to accept the compromise which, in the same terms as those made by
the defendants in the three cases mentioned, was proposed to him by the
defendant the Yek Tong Lin Fire & Marine Insurance Company, the plaintiff
contending that said defendant did not, nor could, raise the question of
warranties A and G heretofore mentioned for the simple reason that it was the
defendant itself, as owner, who had leased the building which later was
destroyed by fire, to another person after having already ceded a portion of it to
said plaintiff.
The only question to be determined, having been raised in the defendant's

answer both parties agreeing that the plaintiff insured his leaf tobacco with the
defendant assurance company, and that said goods were damaged by the fire
which destroyed the warehouse where they were stored, on January 11, 1928
is whether said goods were worth what the plaintiff claims, that is, about equal to
the amount for which they were insured in the four above mentioned assurance
companies, including the defendant in this case.
The plaintiff has conclusively shown by the Official Register Book (Exhibit 1) and
the Official Guide (Exhibit J), furnished by the Bureau of Internal Revenue, and
kept under the supervision thereof in the usual form, in accordance with articles
10, 34 to 38 of the Regulations of the same promulgated under No. 17, by the
Secretary of Finance; the Stock Book for recording the quantity of tobacco,
Exhibit K, kept by the plaintiff and presented as part of the testimony of
witnesses Claveria, Bonete, and Leoncio Jose; the testimony of Estanislao Lopez,
Inspector of Internal Revenue, and the latter's report (Exhibit N), submitted to the
Collector of Internal Revenue in pursuance of article 33 of the aforementioned
Regulations; the tobacco invoices of stock damaged by the fire, Exhibits L and L-1
to L-20; and by the testimony of Clemente Uson who went over the plaintiff's
books as auditor and public accountant, and also prepared Exhibits T and U,
attached to the record, that the plaintiff had in the warehouse at No. 188 Soler at
the time of the fire, not less, but rather more, than 6,200 bales of leaf tobacco
worth over P300,000, which is of course more than the sum total of all the
insurances taken out with the defendant herein and the defendants in the three
aforementioned cases Nos. 33458, 33868, and 33480.lawphi1>net
The reason why the entry showing that 258 bales of tobacco had been removed
from the warehouse, appearing in the Official Register Book, Exhibit I, was not
posted in the Stock Book, Exhibit K, has been satisfactorily explained by the
plaintiff's witnesses, who stated that it was due to the fact that there was no time
to post it in the Stock Book, because the fire took place and the plaintiff told
them not to touch, and to make no further entries in the books. Witness White,
the defendant company's adjuster, who carefully examined then plaintiff's books
not only immediately after the fire, but also during the hearing of this case,
seems not to have found any irregularity therein; at least he said nothing on the
point when he took the witness stand. On the contrary, in his report Exhibit UU
sent to the defendant herein in his capacity as adjuster, appointed by the latter,
and in Exhibits WW and XX, admitted by the Yek Tong Lin Ins. Co., Ltd., he
admitted that the leaf tobacco belonging to the plaintiff in the warehouse when
the fire took place exceeded, in quantity and value, the amount of the insurance.
The defendant did not present evidence to rebut the plaintiff's evidence, but only
presented witness Rowlands, whose testimony or opinion as to the probable
number of bales of tobacco in the warehouse at the date of the fire does not
deserve serious consideration, not only because of the plaintiff's evidence, but
because his opinion or estimate is based solely upon photographs of the place
taken after the fire.
In view of the foregoing, the court hereby sentences the defendant the Yek Tong
Lin Fire and Marine Insurance Company, Ltd., to pay the plaintiff Emilio Gonzales
La O, the amount of one hundred thousand pesos (P100,000), for which it had
accepted the insurance on the leaf tobacco belonging to said plaintiff, damaged
by the fire which destroyed the warehouse at No. 188 Soler Street, where it was

stored, on January 11, 1928, and legal interest upon said amount from June 27,
1928, when the complaint was filed in this case, plus the costs.
So ordered.

violated article 3 of the conditions of the policies in question, thereby rendering these policies null and
void. Article 3 of the conditions of the policies in question prescribes:
ART. 3. Any insurance in force upon all or part of the things insured must be declared in
writing by the insured and he should cause the company to insert or mention it in the policy,
and without such requisite said policy will be regarded as null and void, and the assured
deprived of all rights of indemnity in case of loss.

Manila, P. I., this 24th day of December, 1929.

ANACLETO DIAZ
Judge.

The defendant duly appealed from this judgment, alleging that the trial court erred in making
reference to the settlement arrived at by the plaintiff and other insurance companies, and in declaring
that the only question involved in the case is whether or not the tobacco damaged by the fire is worth
at least P290,000.
There is no merit in these assignments of error. Since the settlement between the plaintiff and the
other defendant companies was reached after the plaintiff had presented his evidence, and as those
three cases were tried jointly with the instant case, there is no valid reason why the trial court should
not refer to it in deciding this case. Furthermore, the court's holding here assigned as error, granting
there were other incidental matters to be decided by the court, does not in itself constitute a
reversible error.
In the third assignment of error, the defendant contends that the plaintiff cannot recover under the
policy as he has failed to prove that the Bank of the Philippine Islands, to whom the policy was made
payable, no longer has any rights and interests in it. It should be noted that the defendant did not in
its answer allege defect of parties plaintiff, and, besides, it does not appear that the plaintiff ceded to
the bank all his rights or interests in the insurance, the note attached to the policies merely stating:
"There shall be paid to the Bank of the Philippine Islands an indemnity for any loss caused by fire,
according to the interest appearing in its favor." And the fact that the plaintiff himself presented in
evidence the policies mortgaged to the Bank of the Philippine Islands gives rise to the presumption
that the debt thus secured has been paid, in accordance with article 1191 of the Civil Code.
Corpus Juris, volume 26, pages 483 et seq., states:
Insured, being the person with whom the contract was made, is primarily the proper person
to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy
is taken wholly or in part for the benefit of another person named or unnamed, and although
it is expressly made payable to another as his interest may appear or otherwise. Although a
policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made
payable to him, yet the mortgagor may sue thereon in his own name, especially where the
mortgagee's interest is less than the full amount recoverable under the policy, . . . .
And in volume 33, page 82, of the same work, we read the following:
Insured may be regarded as the real party in interest, although he has assigned as collateral
security any judgment he may obtain.
It is also contended that the trial court erred in not declaring that in as much as the plaintiff failed to
notify the defendant corporation in writing, of other insurance policies obtained by him, he has

The following clause has been inserted with a typewriter in the policies: "Subject to clauses G and A
and other insurances with a special short period attached to this policy." And attached to said policies
issued by the defendant there is a sheet of "Other insurances" with the amount and the assurance
companies in blank, which, according to the appellee, constitutes a notification that there were other
insurances existing at the time.
In the case of Benedict vs. Ocean Insurance Co. (31 N.Y., 391-393), the construction of the clause,
"privilege for $4,500 additional insurance," was discussed. One of the printed clauses of the policy
reads as follows:
If said assured, or his assigns, shall hereafter make any other insurance upon the same
property, and shall not, with all reasonable diligence, give notice to this corporation, and
have the same indorsed on this instrument, or otherwise acknowledged by them, in writing,
this policy shall cease and be of no further effect.
The Supreme Court of New York held that the words "Privilege for $4,500 additional insurance" made it
unnecessary for the assured to inform the insurer of any other policy up to that amount.
In the case cited the same goods insured by the defendant company were reinsured to the amount of
$4,500 in accordance with the clause "privilege for $4,500 additional insurance;" but in the instant
case it may be said that the tobacco insured in the other companies was different from that insured
with the defendant, since the number of bales of tobacco in the warehouse greatly exceeded that
insured with the defendant and the other companies put together. And according to the doctrine
enunciated in 26 Corpus Juris, 188, "to be insurance of the sort prohibited the prior policy must have
been insurance upon the same subject matter, and upon the same interest therein.
Furthermore, the appellant cannot invoke the violation of article 3 of the conditions of the insurance
policies for the first time on appeal, having failed to do so in its answer; besides, as the appellee
correctly contends in his brief, Guillermo Cu Unjieng, who was then president and majority shareholder
of the appellant company, the Yek Tong Lin Fire & Marine Insurance Co., knew that there were other
insurances, at least from the attempt to raise the insurance premium on the warehouse and the
appellee's tobacco deposited therein to 1 per centum, and it was later reduced upon petition of the
appellant itself and other assurance companies to 0.75 per centum presented to the association of
assurance companies in the year 1927, and notwithstanding this, said appellant did not rescind the
insurance policies in question, but demanded and collected from the appellee the increased premium.
That the defendant had knowledge of the existence of other policies obtained by the plaintiff from
other insurance companies, is specifically shown by the defendant's answer wherein it alleges, by way
of special defense, the fact that there exist other policies issued by the companies mentioned therein.
If, with the knowledge of existence of other insurances which the defendant deemed violations of the
contract, it has preferred to continue the policy, its action amounts to a waiver of the annulment of the
contract, in accordance with the following doctrine in 19 Cyc., 791, 792:.
FAILURE TO ASSERT FORFEITURE IN GENERAL. While the weight of authority is that a
policy conditioned to become void upon a breach of a warranty is void ipso facto upon such a

breach without formal proceedings on the part of the insurer, yet it is true that such
conditions are inserted for the benefit of the insurer and may be waived, and that the insurer
may elect to continue the policy despite the breach. If it does the policy is revived and
restored. Its failure to assert a forfeiture therefore is at least evidence tending to show a
waiver thereof. Many authorities go further, however, and hold that the failure to assert a
forfeiture after knowledge of a ground thereof will amount of itself to waiver. . . .
The fifth and sixth assignments of error refer to the quantity of tobacco in the Soler warehouse at the
time of the fire, which, according to the appellant, did not exceed 4,930 bales. As may be seen, these
assignments of error by the appellant involved purely questions of fact, and it is for this court to
decide whether the findings of the trial court are supported by the evidence. The judgment appealed
from sets forth clearly the evidence presented to the court in order to determine the quantity of
tobacco in the warehouse at the time of the fire. We have studied the evidence aforesaid, are fully
convinced that the court's findings are well supported by the same. Inasmuch as it has not, in our
opinion, been shown that the trial judge overlooked any fact, which, if duly considered would have
change the result of the case, we do not feel justified in altering of modifying his findings.
Finally, the appellant contends that the trial court erred in arriving at the damages that plaintiff may
recover under the policies in question by the cost price of the tobacco damaged by the fire, instead of
computing the same on the market price of the said tobacco at the time of the fire; and in declaring
that the tobacco damaged was worth more than P300,000. This error is not well taken, for it is clear
that the cost price is competent evidence tending to show the value of the article in question. And it
was so held the case of Glaser vs. Home Ins. Co. (47 Misc. Rep., 89; 93 N. Y. Supp., 524; Abbott's Proof
of Facts, 3d ed., p. 847), where it was declared that the cost of the goods destroyed by fire is some
evidence of value, in an action against the insurance company. Exhibits L to L-20, which are invoices
for tobacco purchased by the appellee, and the testimony of the public accountant Clemente Uson,
who went over them and the rest of the appellee's books after the fire, taken in connection with
reports T and Z, adduced as part of his testimony, show that the cost price of each bale of tobacco
belonging to the appellee, damaged by the fire, was P51.8544, which, multiplied by 6,264, the number
of bales, yields a total of over P320,000.
The adjusters of the appellant, White & Page, in ascertaining the market price of the plaintiff's tobacco
deposited in the burnt warehouse, taking the information furnished by the Tabacalera and by M.
Pujalte, S. en C., as a basis, thus conclude their report: "We therefore are obliged to the conclusion
that the value of the tobacco destroyed was not less than P290,000." And, indeed, said adjusters, in
behalf of the appellant, appraised the appellee's tobacco assured and damaged by the fire at
P303,052.32, collecting from the proceeds of the sale of the tobacco saved from the fire P3,000, the
appellants share in proportion to the to the insurance of P100,000 belonging to it, and P190,000
belonging to the other assurance companies, and considered the appellee himself as his own assurer
in the amount of P13,052.32 which was the difference between the total value of the tobacco
damaged and the total amount of the insurance, P290,000, for which reason the appellee received
P129.21, as his proportionate share of the tobacco saved, as shown by Exhibits UU, WW, and XX.
Hence the last assignment of error is without merit.
Wherefore, the judgment appealed from is in accordance with law, and must be, as it is hereby,
affirmed, with costs against the appellant. So ordered.
[G.R. No. 109373. March 27, 1998]
PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S. PAUG, and its
officers and members, petitioners, vs. THE HONORABLE COURT OF APPEALS and

VITALIANO
N.
NAAGAS
Corporation, respondents.

II,

as

Liquidator

of

Pacific

Banking

[G.R. No. 112991. March 27, 1998]

THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as Liquidator of
the Pacific Banking Corporation, petitioner, vs. COURT OF APPEALS, HON. JUDGE REGINO T.
VERIDIANO II, DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG JOO, ANG KEONG LAN and
E.J ANG INTL. LTD., represented by their Attorney-in-fact, GONZALO C. SY, respondents.
RESOLUTION
MENDOZA, J.:
For consideration are (1) petitioner's Omnibus Motion in G.R. No. 112991 seeking reconsideration
of the Court's resolution dated October 9, 1995, which denied the reconsideration of the decision in
this case promulgated on March 20, 1995, and the resolution of October 13, 1995 which absolved the
branch clerk of court of the RTC of Manila, Branch 31, of charges of wrongdoing; and (2) the
manifestation and motions for clarification filed by the Land Bank of the Philippines (LBP) concerning
the request of petitioner in G.R. No. 112991 for the transfer of the funds of the Pacific Banking
Corporation (PaBC) to its other account in another branch of LBP and the alleged garnishment of the
funds of PaBC deposited in LBP in favor of the Bureau of Internal Revenue.
The antecedent facts are as follows:
On March 20, 1995, the Court rendered a decision holding that a petition for liquidation under Sec. 29
of the Central Bank Act, R.A.No. 265[1] is a special proceeding and , therefore, the rules prescribing a
period of 30 days for appealing and requiring a record on appeal apply.Accordingly, the appeal in G.R.
No. 109373 was held to have been duly perfected but the appeal in G.R. No. 112991 had not been
perfected because of petitioner's failure to file a record on appeal.
Petitioner in G.R. No. 112991 moved for a reconsideration of the aforesaid decision but the Court
denied his motion in its resolution of October 9, 1995 on the following grounds (1) the clerks of the
RTC and the Court of Appeals certified that no record on appeal had been filed; (2) the branch clerk
denied that the signature on the alleged copy of the record on appeal was his; (3) counsel for private
respondents and his clerk denied in their respective affidavits that they had been served a copy of the
record on appeal; (4) the identity of the person who allegedly received the record on appeal filed in
the trial court and whose initials appear on the first page of the alleged copy of the said record had
never been established; and (5) the copy of the record on appeal allegedly filed did not bear the
stamp of the RTC showing due receipt thereof.
In the resolution of October 13, 1995, the Court held Judge Regino Veridiano II, Deputy Sheriff Carmelo
Cachero and private respondent's counsel, Atty. Marino Eslao, guilty of indirect contempt for executing
the decision of the trial court despite the temporary restraining order issued by this Court. The Court,
however, found no basis of holding branch clerk Antonio Valencia Jr. guilty of any wrongdoing in
certifying that petitioner failed to file a record on appeal.

On November 6, 1995, petitioner then filed the Omnibus Motion in question seeking to (1) reopen the
case and/or consider the resolution of October 9, 1995 which denied his motion for reconsideration,
and (2) reconsider the October 13, 1995 resolution absolving the branch clerk of the trial court from
contempt charges.
In his omnibus motion, petitioner insists that he filed a record on appeal. As proof, he presents a
photocopy of the record on appeal allegedly received by the branch clerk of the trial court bearing the
handwritten notation "Received, 10-15-92, 3:45 PM" and the alleged initials of the said clerk. Petitioner
explains that the record on appeal does not have the RTC stamp "Received" because the trial court
does not use a stamp but receipt of pleadings is acknowledged simply by nothing this fact by
hand. Petitioner submitted certain pleadings filed in the trial court which were acknowledged by the
branch clerk in the same way he allegedly acknowledged by the branch clerk in the same way he
allegedly acknowledged receipt of petitioner's record on appeal. These are the notice of appeal filed
by petitioner on October 14, 1992 (Annex E, Omnibus Motion), Motion to Strike Out the Notice of
Appeal with Motion for Issuance of Writ of Execution filed by the private respondents (Annex G) and
Comment filed by another claimant (Solid Bank) dated May 26, 1995 (Annex H).
In addition, petitioner claims that the certifications by the clerks of the RTC and the Court of Appeals
that no record on appeal was filed are unreliable, that his record on appeal was suppressed from the
records of the case, and that the certification of the Court of Appeals that no record on appeal was
filed therein was to be expected because the record on appeal was filed with the RTC and not with the
Court of Appeals.
Commenting, private respondents contend that the Omnibus Motion is actually a second motion for
reconsideration which is not allowed by the rules since the issues raised therein had been fully
considered and passed upon by the Court and that there is no compelling reason to grant the
motion. They maintain that petitioner's appeal was not perfected because of the non-filing of a record
on appeal. Branch Clerk of court Antonio Valencia, on the other hand, maintains that "no record on
appeal was filed and therefore none could be found in the expediente (records of the case)." He claims
that the record on appeal allegedly filed in the trial court could not have been unlawfully removed
from the records because all pleadings received by the court are immediately attached to the
records. He denies that the signature appearing on the alleged record on appeal was his.
Because of the serious ness of the petitioner's allegation that its record on appeal had been
suppressed, the Court on December 11, 1996, referred the question to the Office of the Court
Administrator (OCA) for investigation, report and recommendation.
On June 18, 1997, the OCA submitted its report and recommendation, the pertinent portions of
which state:[2]
In the formal investigation conducted (please see attached transcript) it was disclosed that
Atty. Antonio Valencia Jr. was appointed as the Clerk of Court V on June 18, 1992 and
officially assumed office on July 1, 1992.
As the Clerk of Court of RTC, Branch 31, it is his duty to exercise control and supervision
over the personnel of the said court; examines records of all cases filed and calendared;

issues court processes, prepares drafts of orders and other matters which are assigned by
the Judge Regino Verediano.
In their sala each personnel have their respective duties , from receipt of pleadings that are
being filed to their safekeeping. In no case is anyone allowed to interfere with the duties of
each personnel except under extreme urgency. Thus, receiving of pleadings is normally
entrusted to the receiving clerk and no one else. It is, as claimed by Atty. Valencia, only in
the absence of the said receiving clerk that other employees are authorized to receive
pleadings.
For his part, Atty. Valencia claims that he rarely receives pleadings since before it reaches
his table, the same are already duly received. Besides, it is not one of his duties to receive
pleadings.
With respect to the alleged receipt of the record on appeal by their office, specifically to
him, Atty. Valencia vehemently denied having received the same. First, because the stroke
of the alphabet indicating his initials is very different and so with the dates, secondly, if it
was actually received it could have been brought to attention of the late Judge Verediano
who thereafter would have made a notation of the same, like all other pleadings received in
their office or simply instruct the preparation of an order if necessary and lastly, it would
have been included in their court calendar as there was a notice of hearing attached
thereto.
In the court's calendar dated October 23, 1992, Sp. Proc. No. 35313 was never scheduled
for hearing. Under normal circumstances, if there was notice of hearing it would be
outrightly included in the court's calendar for October 23, 1992 as requested.
To substantiate the aforesaid allegations Atty. Valencia submitted copies of pleadings filed
relative to the subject case bearing the notation of then Judge Verediano and the Court's
calendar for October 22 and 23, 1992.
In addition, he pointed out that if the Notice of Appeal (Record on Appeal) was actually filed
in their sala, why was it raised for the first time only in PDIC's Motion for
Reconsideration. This according to him is suspicious. He even insinuated that nobody could
have done this (meaning inserted the notice of appeal [record on appeal] in their pleadings)
except the interested lawyer/s.
Moreover, Atty. Valencia vouches for the honesty and integrity of his staff, and if there be a
need for the examination of their signatures they would be very willing to go for a specimen
signature examination only to clear his/their names.
The office of the undersigned believes the claim of Atty. Valencia that no Notice of Appeal
[Record on Appeal] was filed at RTC Branch 31, Manila. As a CPA/lawyer, he was very well
aware of his duties and responsibilities as a Branch Clerk of Court. This is evidenced by the
fact that in his more than five (5) years stay as a Branch Clerk of Court, no single

administrative complaint has ever been lodged against him, be it a harassment suit or
otherwise.
Moreover, if it has been actually filed it would not have passed unnoticed by then Judge
Verediano who had to approve the same.

He even stressed that when he was made earlier to comment on whether or not a record on
appeal was actually filed, he checked and double checked the original records, inquired
from the employees of RTC, Manila including the Judge whether they have knowledge of any
record on appeal which was filed in their sala but all answered in the negative. (pp. 21 & 22,
TSN, Nov. 6, 1997).

The undersigned is in accord with the claim of Atty. Valencia as presented by him to Atty.
Cunanan of this Office that indeed no record on appeal was filed by the counsels of PDIC in
the subject case, thus no administrative action should be taken against him.(Memorandum
dated June 5, 1997, pp. 1-2; Rollo, p. 538-539)

Moreover, he also firmly denied having received the alleged copy of the record on appeal
which was presented to him for identification during his direct testimony since the
signatures appearing therein are totally different from his actual signature (pp. 23, TSN,
November 6, 1997).

On July 23, 1997, after considering the report and it appearing that the investigation conducted
by the OCA was limited to hearing the evidence of the branch clerk of court and his witnesses, the
required the OCA to hear the evidence of petitioner that he had filed a record on appeal but it was
suppressed and, after considering that totality of the evidence presented, to determine liability for any
wrongful act committed, and to submit its findings and recommendations.
On January 27, 1998, the OCA submitted its report and recommendation on the additional
investigation it conducted from which it appears that hearings were held on three dates; the parties,
through their counsel, were duly notified of the same; and that at the first scheduled hearing on
October 7, 1997, only Atty. Marino E. Eslao, counsel for private respondent, appeared. In order to
expidite the proceedings, he was allowed to present documentary evidence without prejudice to the
right of the petitioner to comment thereon. During the hearing on November 5, 1997, the parties
agreed to file position papers after the testimony of branch clerk Atty. Valencia. On November 6, 1997,
the respective testimonies of Atty. Valencia and Atty. Pablo Romero, the sole witness for petitioner,
were taken. In his report dated December 1, 1997,[3] Senior Deputy Court Administrator Reynaldo L.
Suarez summarized the evidence presented by the parties and his findings on the same, to wit:
Atty. Pablo Romero, Manager of R&L Litigation Center, PDIC testifies that he was the one
who prepared the subject Record on Appeal. He likewise confirmed the fact that the
President of the PDIC, Mr. Ernest Leung, Atty. Rosalinda Casiguran and he then went to see
Judge Veridiano and was informed by Atty. Valencia that he cannot find a copy of the Record
on Appeal which was allegedly filed. He cannot recall if Atty. Valencia ever demanded from
him a copy of said record (pp. 28-29, TSN dated November 6, 1997). No other relevant
information were given by Atty. Romero.
Atty. Antonio Valencia, Branch Clerk of Court, RTC, Branch 31, Manila, was invited to testify
as to whether a Record on Appeal was actually filed before their court and the same was
duly received by him. He was examined by the parties, principally the counsel for PDIC.
In his testimony, Atty. Valencia, reiterated his previous stand that he never saw a copy of
the Record on Appeal and he was positive that indeed there was no Record on Appeal
having been filed in his court. Counsel of PDIC however insinuated that record on appeal
might have been filed but the same was misplaced. Atty. Valencia assured that "this is very
remote". (TSN, p. 8, November 6, 1997).

It is to be noted that the alleged duplicate original copy of the Notice of Appeal [Record on
Appeal] which is supposed to be with the counsels of PDIC was not presented as
evidence. In fact when the counsel of PDIC Atty. Romero was asked if the PDIC employee
who allegedly filed the Record on Appeal could testify he answered in the negative and
claimed that the said employee is already in Riyadh, Saudi Arabia. No evidence was likewise
presented to prove the same. No effort was exerted by PDIC to prove the authenticity of the
signature of Clerk of Court Valencia appearing in PDIC's copy of the Record on Appeal.
It is also worthy to note that other than the bare testimony of Atty. Romero, no other
evidence were presented by petitioner PDIC to substantiate their claim that a Record on
Appeal was filed at the RTC of Manila and the same was duly received by Atty. Valencia.The
testimony was not even corroborated.
Be that as it may this Office still has to determine as to whether a Record on Appeal was
actually filed at the court a quo.
A review of the record impels a rejection of the petitioner's claim that a Record on Appeal
was filed.
The private respondent was able to present proof which are affirmative, unequivocal
convincing, and consistent. In fact the testimony alone of Atty. Valencia which was a
reiteration of his previous testimonies were very clear, concise, and moreover
consistent. For the record Atty. Valencia is viewed by the undersigned who personally
conducted the investigation as a plain, sincere and honest man who, not having been
shown of any reason to be bias or to favor any party, had no reason to deliberately tell a
falsehood relative to his official functions. The fact therefore that he submitted himself to an
investigatin twice and in different occassions shows his determination to vindicate his honor
by proving the integrity of the records of his office.
From all indications and as the records of the case will show NO RECORD ON APPEAL was
actually filed in the court a quo.
Apparently, RTC, Branch 31, Manila has an effective records management (system) and it is
improbable to have missed one important document (RECORD ON APPEAL). In the absence
of any convincing proof to the contrary, the regularity of official function must be upheld.

Far from the assertions of the petitioner we conclude that there was no Record on Appeal
actually filed. (Memorandum dated December 11, 1997, pp. 3-5; Rollo, pp. 557-559)
The findings of the OCA are well taken.
In civil cases, the burden of proof is on the party who would be defeated if no evidence is given
on the either side. Plaintiff must therefore establish his case by a preponderance of evidence, i.e.
evidence as a whole which is superior to that of the defendant. [4] In other words, the party who alleges
a fact has the burden of proving it. [5] In this case, petitioner, as the party claiming affirmative relief
from this Court by contending that he had filed a record on appeal in the trial court, must discharge
the burden of convincingly proving his claim. [6] As found by the OCA, however, the evidence of the
respondents even outweighs that of petitioner. Private respondents presented proof which are
affirmative, unequivocal, convincing, and consistent that no record on appel had been filed. As the
OCA noted, petitioner not only failed to present the PDIC employee who allegedly filed on the record
appeal in the trial court but more importantly, he failed to prove the authenticity of the alleged
signature of Branch Clerk Antonio Valencia appearing in his copy of the record on appeal.
The firm and consistent denial of the branch clerk that he was the one who received the record
on appeal and acknowledged its filing was disputed by petitioner. But petitioner's witness, Atty.
Romero, who allegedly prepared the said record did not file it in the trial court. Nor did he have any
personal knowledge of the actual filing of the record on appeal in the trial court. According to Atty.
Romero, the PDIC employee who allegedly filed the record on appeal in the trial court could not testify
because the said employee was already in Riyadh, Saudi Arabia. This allegation is not persuasive since
no evidence was presented to prove the same. [7]
Even the documentary evidence submitted by petitioner to prove the authenticity of the
signature of the branch clerk on the alleged duplicate original copy of the record on appeal [8] is not
convincing. The signature and notation on the alleged duplicate original copy of the record on appeal
do not match the actual signature and handwriting of the branch clerk as shown in the pleadings
submitted by petitioner himself, namely, the notice of appeal filed by petitioner (Annex E, Omnibus
Motion), motion to strike out notice of appeal filed by private respondents (Annex G) and comment
filed by another claimant (Annex H). The branch clerk's alleged signature and notation are markedly
different from his signature and handwriting appearing in the submitted documentary evidence. [9] For
one, the branch clerk's initial "AV" appear "HV" in the alleged duplicate original copy of the record. In
addition, numeral "5" was written with a rounded stroke instead of a sharp one. Clearly, petitioner
failed to discharge the required burden of proof. Hence, petitioner's assertion that he had filed a
record on appeal is not worthy of belief.
As regards petitioner's prayer that the Court reconsider its resolution of October 13, 1995
absolving the branch clerk of court of charges of wrongdoing, suffice it to state here that no ground
exists to impute bad faith on the part of the branch clerk. Good faith is presumed and the complainant
has the burden of proving any wrongdoing. [10] Petitioner simply failed to prove that the branch clerk
either suppressed the record on appeal allegedly filed by petitioner did not file the said record. The
Court cannot find the branch clerk guilty of any wrongdoing in certifying that petitioner failed to file a
record on appeal in the trial court in the face of petitioner's failure to adduce convincing proof that
such a record was in fact filed therein.

Also for consideration are two (2) manifestations and motions for clarification filed by the Land
Bank of the Philippines (LBP). In its Manifestation/Motion dated May 20, 1996, LBP alleges that on or
about March 24, 1995, petitioner's deposit accounts in LBP were garnished by Sheriff Carmelo Cachero
in favor of private respondents pursuant to the writ of execution issued by RTC Branch 31, Manila
acting as the liquidation court; that on April 10, 1995, it received from petitioner a copy of the April 7,
1995 order of this Court directing the parties to maintain the status quo in the case; that on November
20, 1995, the Court issued another resolution directing the parties to maintain the status quo until
further orders; and that on April 1, 1996, it received as request from the petitioner to transfer the
garnished funds to a different account maintained by petitioner in another branch of LBP. LBP seeks
clarification whether or not the garnishment of petitioner's deposit accounts on March 24, 1995 is null
and void considering the status quo orders issued by the Court. It further inquires whether or not it
may acquiesce to petitioner's request to transfer the garnished funds to petitioner's other account in
another branch of LBP.[11] In its Manifestation dated October 7, 1996, on the other hand, LBP alleges
that on September 9, 1996, it received from Sheriff Adolfo Garcia a notice of garnishment over the
same deposit accounts of petitioner implementing the writ of execution issued also by the RTC, Branch
31, Manila, but for another claimant, the Bureau of Internal Revenue (BIR); that on September 25,
1996, it wrote Sheriff Garcia informing him that the accounts sought to be garnished were already
garnished pursuant to the processes of the same court for another claimant (herein private
respondents); that on September 27, 1996, it received a letter from petitioner urging it to effect the
immediate release of the garnished funds to the BIR and that on October 2, 1996, it received from
Sheriff Garcia the order to deliver to him the garnished amount of P179,971,860.13. LBP manifests
that it is holding in abeyance action on the order to Sheriff Garcia and the letter of petitioner until the
incidents in this case are finally resolved by this Court.[12]
These are matters largely relating to the execution of the decision of the trial court. As far as this
Court is concerned, its decision is now final and it no longer has any jurisdiction to pass upon these
incidents, not to mention the fact that the manifestation filed by LBP are in the nature of consultation
by one not a party to this case.
WHEREFORE, the Court RESOLVED to DENY petitioner's Omnibus Motion for lack of merit. The
manifestations and motions dated May 20, 1996 and October 7, 1996 by the Land Bank of the
Philippines are NOTED.
SO ORDERED.
G.R. No. L-27932 October 30, 1972
UNION MANUFACTURING CO., INC. and the REPUBLIC BANK, plaintiffs, REPUBLIC
BANK, plaintiff-appellant,
vs.
PHILIPPINE GUARANTY CO., INC., defendant-appellee.
Armando L. Abad, Sr. for plaintiff-appellant.
Gamelo, Francisco and Aquino for defendant-appellee.

FERNANDO, J.:p
In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the
lower court and now appellee, was able to avoid liability upon proof that there was a violation of a
warranty. There was no denial thereof from the insured, Union Manufacturing Co., Inc. With such a
legally crippling blow, the effort of the Republic Bank, the main plaintiff and now the sole appellant, to
recover on such policy as mortgagee, by virtue of the cover note in the insurance policy providing that
it is entitled to the payment of loss or damages as its interest may appear, was in vain. The defect
being legally incurable, its appeal is likewise futile. We affirm.
As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union
Manufacturing Co., Inc. obtained certain loans, overdrafts and other credit accommodations from the
Republic Bank in the total sum of P415,000.00 with interest at 9% per annum from said date and to
secure the payment thereof, said Union Manufacturing Co., Inc. executed a real and chattel mortgages
on certain properties, which are more particularly described and listed at the back of the mortgage
contract ...; (2) That as additional condition of the mortgage contract, the Union Manufacturing Co.,
Inc. undertook to secure insurance coverage over the mortgaged properties for the same amount of
P415,000.00 distributed as follows: (a) Buildings, P30,000.00; (b) Machineries, P300,000.00; and (c)
Merchandise Inventory, P85,000.00, giving a total of P415,000.00; (3) That as Union Manufacturing
Co., Inc. failed to secure insurance coverage on the mortgaged properties since January 12, 1962,
despite the fact that Cua Tok, its general manager, was reminded of said requirement, the Republic
Bank procured from the defendant, Philippine Guaranty Co., Inc. an insurance coverage on loss against
fire for P500,000.00 over the properties of the Union Manufacturing Co., Inc., as described in
defendant's 'Cover Note' dated September 25, 1962, with the annotation that loss or damage, if any,
under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the
printed conditions of said defendant's Fire Insurance Policy Form; (4) That on September 27, 1962, Fire
Insurance Policy No. 43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union
Manufacturing Co., Inc., for which the corresponding premium in the sum of P8,328.12, which was
reduced to P6,688.12, was paid by the Republic Bank to the defendant, Philippine Guaranty Co.,
Inc. ...; (5) That upon the expiration of said fire policy on September 25, 1963, the same was renewed
by the Republic Bank upon payment of the corresponding premium in the same amount of P6,663.52
on September 26, 1963; (6) That in the corresponding voucher ..., it appears that although said
renewal premium was paid by the Republic Bank, such payment was for the account of Union
Manufacturing Co., Inc. and that the cash voucher for the payment of the first premium was paid also
by the Republic Bank but for the account Union Manufacturing Co., Inc.; (7) That sometime on
September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co., Inc.; (8) That on
October 6, 1964, the Union Manufacturing Co., Inc. filed its fire claim with the defendant Philippine
Guaranty Co., Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant
in its letter dated November 27, 1964 ..., on the following grounds: 'a. Policy Condition No. 3 and/or
the 'Other Insurance Clause' of the policy violated because you did not give notice to us the other
insurance which you had taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and
Manila Insurance for P200,000.00 with the result that these insurances, of which we became aware of
only after the fire, were not endorsed on our policy; and (b) Policy Condition No. 11 was not complied
with because you have failed to give to our representatives the required documents and other proofs
with respect to your claim and matters touching on our liability, if any, and the amount of such
liability'; (9) That as of September, 1962, when the defendant Philippine Guaranty Co., issued Fire
Insurance Policy No. 43170 ... in the sum of P500,000.00 to cover the properties of the Union

Manufacturing Co., Inc., the same properties were already covered by Fire Policy No. 1533 of the
Sincere Insurance Company for P25,000.00 for the period from October 7, 1961 to October 7, 1962 ...;
and by insurance policies Nos. F-2314 ... and F-2590 ... of the Oceanic Insurance Agency for the total
sum of P300,000.00 and for periods respectively, from January 27, 1962 to January 27, 1963, and from
June 1, 1962 to June 1, 1963; and (10) That when said defendant's Fire Insurance Policy No. 43170 was
already in full force and effect, the Union Manufacturing Co., Inc. without the consent of the defendant,
Philippine Guaranty Co., Inc., obtained other insurance policies totalling P305,000.00 over the same
properties prior to the fire, to wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for
P80,000.00 for the period from May 27, 1964 to May 27, 1965 ...; (2) Fire Policy No. 3702 of the
Sincere Insurance Company for P25,000.00 for the period from October 7, 1963 to October 7, 1964 ...;
and (3) Fire Policy No. 6161 of Manila Insurance Co. for P200,000.00 for the period from May 15, 1964
to May 15, 1965 ... ." 1 There is in the cover note 2 and in the fire insurance policy 3 the following
warranty: "[Co- Insurance Declared]: Nil." 4
Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may
appear subject to the terms and conditions, clauses and warranties" of the policy was expressed in the
appealed decision thus: "However, inasmuch as the Union Manufacturing Co., Inc. has violated the
condition of the policy to the effect that it did not reveal the existence of other insurance policies over
the same properties, as required by the warranty appearing on the face of the policy issued by the
defendant and that on the other hand said Union Manufacturing Co., Inc. represented that there were
no other insurance policies at the time of the issuance of said defendant's policy, and it appearing
furthermore that while the policy of the defendant was in full force and effect the Union Manufacturing
Co., Inc. secured other fire insurance policies without the written consent of the defendant endorsed
on the policy, the conclusion is inevitable that both the Republic Bank and Union Manufacturing Co.,
Inc. cannot recover from the same policy of the defendant because the same is null and void." 5 The
tone of confidence apparent in the above excerpts from the lower court decision is understandable.
The conclusion reached by the lower court finds support in authoritative precedents. It is far from
easy, therefore, for appellant Republic Bank to impute to such a decision a failure to abide by the law.
Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated.
It is to Santa Ana v. Commercial Union Assurance Co., 6 a 1930 decision, that one turns to for the first
explicit formulation as to the controlling principle. As was made clear in the opinion of this Court,
penned by Justice Villa-Real: "Without deciding whether notice of other insurance upon the same
property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid
which requires such notice, whether oral or written, we hold that in the absolute absence of such
notice when it is one of the conditions specified in the fire insurance policy, the policy is null and
void." 7 The next year, in Ang Giok Chip v. Springfield Fire & Marine Ins. Co., 8 the conformity of the
insured to the terms of the policy, implied from the failure to express any disagreement with what is
provided for, was stressed in these words of the ponente, Justice Malcolm: "It is admitted that the
policy before us was accepted by the plaintiff. The receipt of this policy by the insured without
objection binds both the acceptor and the insured to the terms thereof. The insured may not thereafter
be heard to say that he did not read the policy or know its terms, since it is his duty to read his policy
and it will be assumed that he did so." 9 As far back as 1915, in Young v. Midland Textile Insurance
Company, 10 it was categorically set forth that as a condition precedent to the right of recovery, there
must be compliance on the part of the insured with the terms of the policy. As stated in the opinion of
the Court through Justice Johnson: "If the insured has violated or failed to perform the conditions of the
contract, and such a violation or want of performance has not been waived by the insurer, then the

insured cannot recover. Courts are not permitted to make contracts for the parties. The function and
duty of the courts consist simply in enforcing and carrying out the contracts actually made. While it is
true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet
contracts of insurance, like other contracts, are to be construed according to the sense and meaning
of the terms which the parties themselves have used. If such terms are clear and unambiguous they
must be taken and understood in their plain, ordinary and popular sense." 11 More specifically, there
was a reiteration of this Santa Ana ruling in a decision by the then Justice, later Chief Justice, Bengzon,
in General Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to
rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana
v. Commercial Union Assurance Company, Ltd. ... . The materiality of non-disclosure of other insurance
policies is not open to doubt." 13 As a matter of fact, in a 1966 decision, Misamis Lumber Corp. v.
Capital Ins. & Surety Co., Inc., 14 Justice J.B.L. Reyes, for this Court, made manifest anew its adherence
to such a principle in the face of an assertion that thereby a highly unfavorable provision for the
insured would be accorded recognition. This is the language used: "The insurance contract may be
rather onerous ('one sided', as the lower court put it), but that in itself does not justify the abrogation
of its express terms, terms which the insured accepted or adhered to and which is the law between
the contracting parties." 15
There is no escaping the conclusion then that the lower court could not have disposed of this case in a
way other than it did. Had it acted otherwise, it clearly would have disregarded pronouncements of
this Court, the compelling force of which cannot be denied. There is, to repeat, no justification for a
reversal.
WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs.
G.R. No. L-41432 July 30, 1979
IVOR ROBERT DAYTON GIBSON, petitioner,
vs.
HON. PEDRO A. REVILLA, in his official capacity as Presiding Judge of Branch XIII, Court of
First Instance of Rizal, and LEPANTO CONSOLIDATED MINING COMPANY, respondents.
Quasha, Asperilla, Ancheta, Valmonte, Pe;a & Marcos for petitioner.
Sycip, Salazar, Feliciano, Hernandez & Castillo for respondents.
GUERRERO, J.:1wph1.t
This is a petition for review 1 seeking to set aside the Order of the Court of First Instance of Rizal
Branch XIII, presided by respondent Judge Pedro A. Revilla, in Civil Case No. 20046 entitled "Lepanto
Consolidated Mining Company versus Malayan Insurance Company, Inc." denying the motion of the
petitioner Ivor Robert Dayton Gibson for leave to intervene in said case, and to order the respondent
Judge to admit him as intervenor therein.
The antecedent facts of this case are as follows:

Lepanto Consolidated Mining Company (hereinafter referred to as Lepanto) filed on September 27,
1974 in the Court of First Instance of Rizal, Branch XIII a complaint with a plea for preliminary
mandatory injunction against Malayan Insurance Company, Inc., (hereinafter referred to as Malayan),
docketed as Civil Case No. 20046 seeking the following relief:t.hqw
(a) upon the firing of this complaint, a writ of preliminary mandatory injunction be
issued directing defendant to advance to plaintiff an interest-free loan of
P1,831,695.75; and
(b) upon trial on the merits t.hqw
(i) an accounting or average adjustments be made for the
liquidation of the general average losses, damages and expenses
arising from the marine accidents subject of this action and the
determination of the contributions due from subject cargoes under
the Policy;
(ii) defendant be ordered to pay plaintiff the amounts under item
(i) above, with interest thereon at the rate of 12% per annum,
from February 20, 1972 as to the cargo's contribution relative to
the 'Hermonsa' and from March 27, 1972 as to the cargo's
contribution relative to the 'General Aguinaldo;'
(iii) the amount of P1,831,695.75 as interest-free loan due plaintiff
from defendant be declared repayable upon and only to the extent
of any corresponding recovery from the owners of the 'Hermosa'
and 'General Aguinaldo; ...
Lepanto also sought payment of interest on delayed loan amounts, exemplary damages of at least
P500,000.00, attorney's fees and other litigation expenses, and other cumulative and/or alternative
reliefs as may be lawful, just or equitable in the premises.
The civil suit thus instituted by Lepanto against Malayan was founded on the fact that on Sept. 9,
1971, Malayan issued Marine Open Policy No. LIDC-MOP-001/71 covering an shipments of copper, gold
and silver concentrates in bulk from Poro, San Fernando, La Union to Tacoma, Washington or to other
places in the United States which Lepanto may make on and after August 1, 1971 and until the
cancellation of the policy upon thirty (30) days' written notice. Thereafter, Malayan obtained
reinsurance abroad through Sedgwick, Collins & Co., Limited, a London insurance brokerage. The
Memorandum of Insurance issued by Sedgwick to Malayan on September 24, 1971 listed three groups
of underwriters or re-insurers and their reinsurance interest are as follows: t.hqw
Lloyds 62.808%
Companies (I.L.U.) 34.705%
Other Companies 2.487%
100.000%

At the top of the list of underwriting members of Lloyds is Syndicate No. 448, assuming 2.48% of the
risk assumed by the reinsurer, which syndicate number petitioner Ivor Robert Dayton Gibson claims to
be himself.
In November, 1971, a cargo of concentrates was shipped by Lepanto on the M/V Hermosa at Poro, San
Fernando, La Union destined for Tacoma, Washington. During the sea voyage, while the vessel was in
the Northern Pacific Ocean south of Japan on or about Nov. 11, 1971, it encountered heavy weather
and rough seas which caused it to roll, pitch and vibrate heavily so that certain shifting boards in the
vessel broke and part of the cargo shifted transversely, thereby causing a list. The vessel deviated to
Moji, Japan and after the shifting boards were repaired and/or replaced, it proceeded on its trip to
Tacoma, but about the end of the month, the ship once again met with strong winds, monsoon rains,
severe winter and very rough seas and it roiled, pitched and vibrated heavily so other shifting boards
broke and part of the cargo also shifted causing a heavier list. The captain of the boat, fearing that the
vessel might sink, sailed to Osaka and unloaded the cargo. Expenses were incurred by Lepanto
relative to the cargo while in Japan but eventually the cargo was transhipped to Tacoma via another
vessel.
Also in November, 1971, another cargo of concentrates was shipped by Lepanto on board the MIV
General Aguinaldo at Poro, San Fernando, La Union and destined for Tacoma, Washington. Similarly,
during the sea voyage on or about November 30, 1971 in the Northern Pacific Ocean southeast of
Japan, it met with heavy weather and rough seas, causing it to pitch, roll and vibrate heavily so that
certain shifting boards in the vessel broke and part of the cargo shifted transversely which caused the
listing of the vessel The captain, fearing also that the vessel The captain, fearing also that the vessel
might sink, sailed for Miyako, Japan, unloaded the cargo and expenses were incurred relative to the
cargo while in Japan. Thereafter, the cargo was transhipped to Tacoma on board another vessel.
Lepanto notified Malayan and another insurer, Commercial Union in London in November and
December, 1971 of the accidents. Formal claims under the open policy were also filed by Lepanto with
Malayan in March and July, 1972 upon the conclusion of the voyages and the determination of the
shortweight.
The claims were denied by Malayan tentatively at first claiming that it needed time to determine
whether or not the marine accidents resulted from the inherent vice or nature of the cargo and finally
Malayan rejected Lepanto's insurance claim for the reason that the cargoes were inherently vicious on
loading and such condition caused the listing of the vessel.
Hence, the complaint filed by Lepanto against Malayan in Civil Case No. 20046 for the interest-free
loan to Lepanto as stipulated in the policy computed at P1,831,695.75.
Malayan filed a motion to dismiss the case on three grounds: 1. that the instant case has been brought
in the name of other than the real party in interest; 2. that the complaint states no cause of action;
and 3. that the claim set forth in the complaint has been extinguished.
On December 4, 1974, Malayan's motion to dismiss was denied. On January 17, 1975, Malayan filed its
Answers incorporating as part of its special and affirmative defenses the following allegations: t.
hqw

(5) Defendant acted in good faith in rejecting plaintiff's insurance claims, not only
because of the circumstances and reasons set forth in the preceding sub-paragraphs
(1) to (4) which defendant had been reasonably led to believe by reports of reputed
experts and/or by legal advice as justifying rejection, but also because, as plaintiff
had been repeatedly told, it is under constraint, on one hand, by customs of the
insurance trade to adhere to the decisions of the lead insurers, and on another hand,
by its contract with its reinsurer which among others, prohibit settlement of the
reinsured claims without the reinsurer's assent.
On January 27, 1975, Lepanto filed its reply. On January 30, 1975, the Court denied Lepanto's motion
for mandatory preliminary injunction "without prejudice to reconsider the said motion after the pretrial of this case shall have been concluded." On March 19, 1975, the first pre-trial conference was
held and on March 25, 1975, the parties filed their Stipulation of Facts and Issues, which Stipulations
was approved en toto in the trial court's order of April 1, 1975.
Subsequently, pre-trial conferences were held on April 3, 1975, May 21, 1975, and June 19, 1975 when
Lepanto concluded its evidence. Defendant through counsel reserved its right to make a formal offer
of its evidence at the continuation of the hearing scheduled on July 16, 1975.
Then on June 25, 1975, petitioner Ivor Robert Dayton Gibson filed a motion to intervene as defendant,
which motion is as follows: t.hqw
MOTION TO INTERVENE
COMES NOW Ivor Robert Dayton Gibson, Reinsurer in the above-entitled case,
through undersigned counsel, and to this Honorable Court respectfully & Heges that:
1. Movant is of legal age, a British citizen, with address at Lloyd's Lime Street,
London, EC 3;
2. Movant is the leading re-insurer of the risks and liabilities assumed by defendant
Malayan Insurance Co., Inc. in a contract of marine insurance involving two (2)
separate shipments of copper' concentrates aboard the MV "Hermosa" and the MV
"General Aguinaldo" shipped by Lepanto Consolidated Mining Co., Inc. to American
Smelting & Refining Co. from Poro Point, San Fernando, La Union, to Tacoma,
Washington for which defendant issued Policy No. LIDC-MOP-001/71 dated
September 9, 1971, in the amount of 20% of the declared value of each shipment
but not to exceed US $2,000,000 per shipment.
3. Prior to these two shipments and after defendant Malayan contracted with
Lepanto to insure these two (2) copper concentrates shipments against risks of loss
and damage, defendant Malayan in turn, re-insured its liabilities for losses and
damages in accordance with the terms of their reinsurance contract.

4. After the defendant Malayan filed Answer to this suit, movant was informed that
defendant made express reservations "to file in due time a third-party complaint
against the lead insurers and/or its reinsurers" (par. XVIII, Answer).
5. Movant has a legal interest in the subject matter of litigation in that he stands to
be held liable to pay on its re-insurance contract should judgment be rendered
requiring the defendant to pay the claim of the plaintiff.
6. To avoid multiplicity of suits and allow all parties who have any relation to the
cause of action, whether legally or in equity, to ventilate expeditiously every issue
relevant to the suit, it is respectfully submitted that movant be allowed to intervene
as a defendant in the interest of justice.
7. By the very nature of a contract of reinsurance and considering that the reinsurer
is obliged "to pay as may be paid thereon" (referring to the original policies),
although this is subject to other stipulations and conditions of the re-insurance
contract, it will serve better the ends of justice if a full disclosure of all pertinent
facts and issues is made with the participation of the movant at this trial where his
interests have been and are already inevitably at stake.
Counsel for the movant submitted the foregoing motion for the consideration and resolution of the
Court on June 30, 1975. The motion to intervene was opposed by Lepanto on the following grounds: 1.
Movant Ivor Robert Dayton Gibson has no legal interest in the matter in litigation or in the success of
either plaintiff or defendant; 2. Movant is estopped by his laches from intervening in this action; 3. The
intervention is intended for delay and if allowed, win unduly delay the proceedings between plaintiff
and defendant; and 4. The rights, if any, of movant are not prejudiced by the present suit and win be
fully protected in a separate action against him and his co-insurers by defendant herein.
Replying to Lepanto's opposition, movant Ivor Robert Dayton Gibson contended that 1. Contrary to
oppositors contention, movant Gibson has a legal interest in the matter in litigation because a
contract of reinsurance between the defendant Malayan Insurance Company, Inc. and the movant
herein is a contract of indemnity against liability, and not merely against damage, and therefore,
movant has a direct and immediate interest in the success of defendant Malayan Insurance Company,
Inc.; 2. Neither estoppel nor laches applies to the movant since the motion to intervene was filed
seasonably on June 25, 1975 during the period of introduction of evidence by defendant Malayan; 3.
The intervention is not intended for delay; movant is merely asserting a legal right or interest in the
pending case with the request for opportunity to appear and be joined so that he could protect or
assert such right or interest; and 4. The filing of an independent and separate suit proposed by the
plaintiff is condemned by the basic and fundamental principles against multiplicity of suits.
On July 26, 1975, Lepanto filed a Rejoinder to the movant's "Reply to Opposition." On July 28, 1975,
Malayan made a manifestation that it had no objection to the "Motion to Intervene" of Ivor Robert
Dayton Gibson and on July 31, 1975, movant made a Sur-Rejoinder to Lepanto's Rejoinder.
On August 18, 1975, the Court a quo resolved to deny the Motion for Intervention in the following: t.
hqw

ORDER
Ivor Robert Dayton Gibson, thru counsel, has presented before this Court a motion to
intervene on June 25, 1975. In his motion, he alleges that he is a British citizen with
address at Lloyd's Lime Street, London, EC3; that he is the leading re-insurer of the
risks and liabilities assumed by defendant Malayan Insurance Company, Inc. in the
contract of marine insurance involving the shipments subject of the instant suit. He
further contends that he has a legal interest in the subject matter of litigation for he
stands liable on his reinsurances contract should judgment be rendered against the
defendant and that this intervention would avoid a multiplicity of suits. Plaintiff
vigorously opposed the motion contending that movant Ivor Robert Dayton Gibson
has no legal interest in the matter in litigation or in the success of either parties in
this suit; that he is estopped by laches; that the intervention is intended for delay
and will unduly delay the proceedings between plaintiff and defendant; and that
movant will not be prejudiced by the present suit and can be fully protected in any
separate action which defendant may file against him and his co-insurers.
Considering the grounds of the opposition, the Court believes that the third and
fourth grounds raised in the opposition appear highly meritorious. Since movant Ivor
Robert Dayton Gibson appears to be only one of several re-insurers of the risks and
liabilities assumed by Malayan Insurance Company, Inc., it is highly probable that
other re-insurers may likewise intervene. This would definitely disrupt the trial
between plaintiff and defendant, the principal protagonists in this suit. To allow the
intervention would certainly unduly delay the proceedings between plaintiff and
defendant especially at this stage where plaintiff had already rested its case. It
would also compound the issues as more parties and more matters will have to be
litigated. At any rate, Ivor Robert Dayton Gibson may protect whatever interest he
has in a separate action.
IN VIEW OF ALL THE FOREGOING, the Court resolves to deny the motion for
intervention.
SO ORDERED.
(SGD) PEDRO A. REVILLA J u d
ge
Not satisfied with the denial of his Motion to Intervene, petitioner now comes before Us seeking to set
aside the order of denial and to order the respondent Judge to admit him as intervenor. By resolution
of this Court dated November 17, 1975, the petition was denied due course for lack of merit, but upon
petitioner's motion for reconsideration, the petition was allowed in the Resolution of February 18,
1976, treating it as a special civil action.
The principal issue is whether the lower court committed reversible error in refusing the intervention
of petitioner Ivor Robert Dayton Gibson in the suit between Lepanto and Malayan.

We lay down the law on Intervention as found in Sec. 2, Rule 12 of the Rules of Court: t.hqw
Section 2. Intervention. A person may, before or during a trial, be permitted by
the court, in its discretion, to intervene in an action, if he has legal interest in the
matter in litigation, or in the success of either of the parties or an interest against
both, or when he is so situated as to be adversely affected by a distribution or other
disposition of property in the custody of the court or of an officer thereof.
(a) Motion for intervention. A person desiring to intervene shall file a motion for
leave of court with notice upon all the parties to the action.
(b) Discretion of court. In allowing or disallowing a motion for intervention, the
court, in the exercise of discretion, shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the original parties and
whether or not the intervenor's rights may be fully protected in a separate
proceeding.
(c) Complaint or answer in intervention. The intervention shall be made by
complaint filed and served in a regular form, and may be answered as if it were an
original complaint; but where intervenor unites with the defendant in resisting the
claims of the plaintiff, the intervention may be made in the form of an answer to the
complaint,
(d) Time. Unless a different period is fixed by the court, the complaint or answer
in intervention shall be filed within ten (10) days from notice of the order permitting
such intervention.
According to pertinent jurisprudence, the term "intervention" refers to the proceeding by which one
not originally a party to an action is permitted, on his own application, to appear therein and join one
of the original parties in maintaining the action or defense, or to assert a claim or defense against
some or all of the parties to the proceeding as originally instituted. Such a third party may, upon the
discretion of the court, become a party to a pending proceedings between others for the protection of
some rights or interest alleged by him to be affected by such proceedings. 2
Intervention is not a matter of absolute right but may be permitted by the court when the applicant
shows facts which satisfy the requirements of the statute authorizing intervention. 3 Under our rules of
Court, what qualifies a person to intervene is his possession of a legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both; or when he is so
situated as to be adversely affected by a distribution or other disposition of property in the custody of
the court or an officer thereof. 4 As regards the legal interest as qualifying factor, tills Court has ruled
that such interest must be of a direct and immediate character so that the intervenor wig either gain
or lose by the direct legal operation of the judgment. The interest must be actual and material, a
concern which is more than mere curiosity, or academic or sentimental desire; it must not be indirect
and contingent, indirect and remote, conjectural, consequential or collateral. 5 However,
notwithstanding the presence of a legal interest, permission to intervene is subject to the sound
discretion of the court, the exercise of which is limited by considering I 'whether or not the

intervention will unduly delay or prejudice the adjudication of the rights of the original parties and
whether or not the intervenor's rights may be fully protected in a separate proceeding. 6 Once judicial
discretion is exercised, the action of the court cannot be reviewed or controlled by mandamus
however erroneous it may be, except only when there is an arbitrary or capricious exercise of
discretion, in which case, the fault is correctible by mandamus if there be no other adequate and
speedy remedy. 7
As may be noted in the questioned Order, respondent Judge denied the Motion to Intervene on the last
two grounds of Lepanto's Opposition, namely: "3. The intervention is intended for delay and if allowed,
will unduly delay the proceedings between plaintiff and defendant; and 4. The rights, if any, of movant
are not prejudiced by the present suit and will be fully protected in a separate action against him and
his co-insurers by defendant herein.
Respondent Judge, reasoning out his Order, ruled that "(s)ince movant Ivor Robert Dayton Gibson
appears to be only one of several co-insurers of the risks and liabilities assumed by Malayan Insurance
Company, Inc., it is highly probable that other re-insurers may likewise intervene. This would definitely
disrupt the trial between plaintiff and defendant, the principal protagonists in this suit. To allow the
intervention would certainly unduly delay the proceedings between plaintiff and defendant especially
at this stage where plaintiff had already rested its case. It would also compound the issues as more
parties and more matters will have to be litigated. At any rate, Ivor Robert Dayton Gibson may protect
whatever interest he has in a separate action."
In his petition, petitioner submits that the respondent Judge, in refusing to permit/allow him to
intervene in Civil Case No. 20046, incorrectly interpreted and/or appreciated the purpose/intent of the
pertinent rules of procedure that govern intervention of parties in a given action and that the
respondent Judge erred: (1) In concluding that to allow the intervention of herein petitioner "would
definitely disrupt the trial" and "would certainly unduly delay the proceedings," when such
apprehension appears to be clearly immaterial in determining when intervention is proper or not; (2)
In viewing the alleged availability of another recourse on the part of herein petitioner to protect his
interest, i.e. separate action, as an added justification to deny his intervention, despite the fact that
the applicable rule of procedure in this regard (Section 2, Rule 12) does not preclude intervention even
if another separate action is appropriate and for available; and (3) In its obvious disregard of the very
rule (Section 2, Rule 12) precisely designed to apply on cases where intervention is sought, thereby
departing from the accepted and usual procedure under the premises.
After carefully considering the arguments of both the petitioner and Lepanto, the facts and
circumstances obtaining in the case at bar and applying Rule 12, Sec. 2 of the Rules of Court and the
doctrines enunciated by the Supreme Court on the matter, We rule that the respondent Judge
committed no error of law in denying petitioner's Motion to Intervene. And neither has he abused his
discretion in his denial of petitioner's Motion for Intervention.
It is quite crystal clear that the questioned Order of the respondent Court was based strictly and
squarely on Section 2(b) of Rule 12 which specifically directs the Court in allowing or disallowing a
motion for intervention in the exercise of discretion to consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the
intervenor's rights may be fully protected in a separate proceeding. The Court a quo has specifically
and correctly complied with the Rule's mandate and We cannot fault the respondent Judge therefore.

We reject the contention of the petitioner that the question regarding delay in the adjudication of the
rights of the original contending parties, while recognized as factors in allowing or disallowing
intervention, should assume a secondary role to the primary and imperative requirement that the
legal interest of the would-be intervenor in the matter under litigation must be clearly shown and that
once the legal interest of the would be intervenor is clearly shown, the fact that his intervention may
work to delay a little the main conflict between the parties should not by itself justify the denial of
intervention.
Petitioner's contention is untenable. The first paragraph of Section 2, Rule 12 prescribes the time to
intervene and also who may intervene, that is, one who has legal interest in the matter in litigation, or
in the success of either of the parties or an interest against both or when he is so situated as to be
adversely affected by a distribution or other disposition of property in the custody of the court or of an
officer thereof Paragraph (b) of the same section directs what matter are to be considered in
exercising discretion to snow or disallow a motion for intervention, which are whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the original parties and
whether or not the intervenor's rights may be fully protected in a separate proceeding. Clearly, for the
Court to permit intervention, it must be shown that movant is possession of legal interest in the
matter in litigation or otherwise qualified under the first paragraph of Section 2, and the Court must
also consider the matters mentioned in paragraph (b) thereof. The latter are not and should not be
taken as secondary to the former for both must concur since they are equally important, requisite and
necessary for consideration in the exercise of discretion by the Court to allow or disallow intervention.
We cannot invest nor render primary or secondary importance to either of these requirements for the
law does not make any distinction. Each case must be decided according to its facts and merits,
subject to the discretion of the Court.
From the particular facts and circumstances of the case at bar, We are satisfied that the respondent
Judge has not abused his discretion in denying petitioner's Motion to Intervene. We agree with the
holding of the respondent Court that since movant Ivor Robert Dayton Gibson appears to be only one
of several re-insurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it is
highly probable that other re- insurers may likewise intervene. The record shows that aside from the
petitioner there are sixty-three (63) other syndicate members of Lloyds, the twenty-six (26) companies
in the " I.L.U. " group holding a 34.705 % reinsurance interest and the two (2) "Other Companies"
holding the balance of the reinsurances, as listed in Annex "A", Sur-Rejoinder to Lepanto's Rejoinder,
pp. 136-138, Records. The high probability that these other re-insurers like the petitioner herein may
likewise intervene if the latter's motion is granted is not an arbitrary assumption of the Court.
Considering petitioner's assertion that he will have the opportunity to show, among others, that the
losses and damages purportedly sustained by Lepanto occurred not from the perils of the seas but
from perils of the ships; that Lepanto is not the real party in interest; that it has no cause of action;
and, neither has it complied with its obligations under the policy which makes the filing of the
complaint premature (p. 118, Records, Reply to Opposition) if petitioner is allowed to intervene, We
hold that there is good and sufficient basis for the Court a quoto declare that. the trial between
Lepanto and Malayan would be definitely disrupted and would certainly unduly delay the proceedings
between the parties especially at the stage where Lepanto had already rested its case and that the
issues would also be compounded as more parties and more matters will have to be litigated. In other
words, the Court's discretion is justified and reasonable.

We also hold that respondent Judge committed no reversible error in further sustaining the fourth
ground of Lepanto's Opposition to the Motion to Intervene that the rights, if any, of petitioner are not
prejudiced by the present suit and win be fully protected in a separate action against him and his coinsurers by Malayan.
Petitioner contends that this rights would not be fully protected in a separate proceeding because "(a)
decision in favor of Lepanto, declaring Malayan liable on its insurance policies would necessarily and
injuriously affect the interests of petitioner, (which) interest as a re-insurer of Malayan's risk is not only
inchoate but material, direct and immediate and for such interest to be in any manner prejudiced
without first giving petitioner a chance to be heard would be violative of due process. Upon the other
hand, a decision in favor of Malayan, recognizing it as not liable under its insurance policies, could
subject petitioner to the danger of having to admit that Malayan had not breached its insurance
contract with the entity (Lloyds) of which petitioner is the leading syndicate member." (Petitioner's
Memorandum p. 230, Records). Petitioner also asserts that "by the very nature of a contract of
reinsurance and considering that the re-insurer is obliged 'to pay as may be paid thereon' (referring to
the original policies), although this is subject to other stipulations and conditions of the reinsurance
contract, it will serve better the ends of justice if a full disclosure of all pertinent facts and issues is
made with the participation of the movant at this trial where his interests have been and are already
inevitably at stake." (Petition, p. 18, Records).
On the contrary, Lepanto insists that petitioner win have his day in court and his rights can be fully
protected in a separate proceeding. According to Lepanto, if it loses the case against Malayan,
petitioner cannot possibly be liable to Malayan for indemnity on the reinsurances. If Lepanto wins,
then petitioner, the sixty-three (63) other syndicate members of Lloyds, the twenty-six (26) companies
in the "I.L.U." group holding a 34.705% reinsurance interest and the two (2) "Other Companies"
holding the balance of the reinsurances are free either to pay Malayan or to resist Malayan and thus
force Malayan to sue in whatever country most of them, qualitatively and not quantitatively, may be
served with summons.
Petitioner's contention that he has to pay once Malayan is finally adjudged to pay Lepanto because of
the very nature of a contract of reinsurance and considering that the re-insurer is obliged 'to pay as
may be paid thereon' (referring to the original policies), although this is subject to other stipulations
and conditions of the reinsurance contract, is without merit. The general rule in the law of reinsurance
is that the re-insurer is entitled to avail itself of every defense which the re-insured (which is Malayan)
might urge in an action by the person originally insured (which is Lepanto). Specifically, the rule is
stated thus t.hqw
Sec. 1238. In an action on a contract of reinsurance, as a general rule the
reinsurer is entitled to avail itself of every defense which the reinsured might urge in
an action by the person originally insured; ...
The same rule is stated otherwise in 44 An-L Jur. 2d, Sec. 1862, p. 793, as follows: t.hqw
Moreover, where an action is brought against the reinsurer by the reinsured, the
former may assert any defense that the latter might have made in an action on the
policy of original insurance. (Eagle Ins. Co. vs. Lafayette, Ins. Co., 9 Ind. 443)

As to the effect of the clause "to pay as may be paid thereon" contained in petitioner's re-insurance
contract, Arnould, on the Law of Marine Insurance and Average, 13th Ed., Vol. 1, Section 327, p. 315,
states the rule, thus:t.hqw
It has been decided that this clause does not preclude the reinsurer from insisting
upon proper proof that a loss strictly within the terms of the original policy has taken
place.
This clause does not enable the original underwriter to recover from his re-insurer to
an extent beyond the subscription of the latter.
It is significant and revealing that petitioner himself admits in his Memorandum, p. 231, Records, that
"(o)f course, petitioner, if finally sued in London, (he) could avail himself of remedies available to him."
He adds that "such a procedure, if not entirely time-consuming, would actually beg the issue on hand.
Petitioner believes that his defenses on the claims ventilated in the court a quo can be appreciated
only here; elsewhere in view of the peculiar circumstances surrounding Lepanto's claims the basic
issue win be obfuscated and perhaps even obliterated by arguments on procedural niceties." However,
such a procedural problem is no legal ground to compel allowance of and insist on his intervention.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby dismiss. No costs.

through the Insurance Commissioner, under Section 14. Private respondent Yupangco Cotton Mills
contend on the other hand that petitioners are within our courts cognitive powers, having submitted
voluntarily to their jurisdiction by filing motions to dismiss [2] the private respondents suit below.
The antecedent facts, as found by the appellate court, are as follows:
Respondent Yupangco Cotton Mills filed a complaint against several foreign reinsurance companies
(among which are petitioners) to collect their alleged percentage liability under contract treaties
between the foreign insurance companies and the international insurance broker C.J. Boatright, acting
as agent for respondent Worldwide Surety and Insurance Company. Inasmuch as petitioners are not
engaged in business in the Philippines with no offices, places of business or agents in the Philippines,
the reinsurance treaties having been rendered abroad, service of summons upon motion of
respondent Yupangco, was made upon petitioners through the office of the Insurance
Commissioner. Petitioners, by counsel on special appearance, seasonably filed motions to dismiss
disputing the jurisdiction of respondent Court and the extra-territorial service of
summons. Respondent Yupangco filed its opposition to the motion to dismiss, petitioners filed their
reply, and respondent Yupangco filed its rejoinder. In an order dated April 30, 1990 respondent Court
denied the motions to dismiss and directed petitioners to file their answer. On May 29, 1990,
petitioners filed their notice of appeal. In an order dated June 4, 1990, respondent court denied due
course to the appeal.[3]

SO ORDERED.

To this day, trial on the merits of the collection suit has not proceeded as in the present petition,
petitioners continue vigorously to dispute the trial courts assumption of jurisdiction over them.

AVON INSURANCE PLC, BRITISH RESERVE INSURANCE. CO. LTD., CORNHILL INSURANCE PLC,
IMPERIO REINSURANCE CO. (UK) LTD., INSTITUTE DE RESEGURROS DO BRAZIL,
INSURANCE CORPORATION OF IRELAND PLC, LEGAL AND GENERAL ASSURANCE
SOCIETY LTD., PROVINCIAL INSURANCE PLC, QBL INSURANCE (UK) LTD., ROYAL
INSURANCE CO. LTD., TRINITY INSURANCE CO. LTD., GENERAL ACCIDENT FIRE AND
LIFE ASSURANCE CORP. LTD., COOPERATIVE INSURANCE SOCIETY and PEARL
ASSURANCE CO. LTD., petitioners, vs. COURT OF APPEALS, REGIONAL TRIAL COURT
OF MANILA, BRANCH 51, YUPANGCO COTTON MILLS, WORLDWIDE SURETY &
INSURANCE CO., INC., respondents.

It will be remembered that in the plaintiffs complaint, [4] it was contended that on July 6, 1979 and
on October 1, 1980, Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance
Co. Inc., several of its properties for the periods July 6, 1979 to July 6, 1980 as under Policy No. 20719
for a coverage of P100,000,000.00 and from October 1, 1980 to October 1, 1981, under Policy No.
25896, also for P100,000,000.00. Both contracts were covered by reinsurance treaties between
Worldwide Surety and Insurance and several foreign reinsurance companies, including the
petitioners. The reinsurance arrangements had been made through international broker C.J. Boatright
and Co. Ltd., acting as agent of Worldwide Surety and Insurance.

DECISION
TORRES, JR., J.:
Just how far can our court assert jurisdiction over the persons of foreign entities being charged
with contractual liabilities by residents of the Philippines?
Appealing from the Court of Appeals October 11, 1990 Decision [1] in CA-G.R. No. 22005,
petitioners claim that the trial courts jurisdiction does not extend to them, since they are foreign
reinsurance companies that are not doing business in the Philippines. Having entered into reinsurance
contracts abroad, petitioners are beyond the jurisdictional ambit of our courts and cannot be rendered
summons through extraterritorial service, as under Section 17, Rule 14 of the Rules of Court, nor

As fate would have it, on December 16, 1979 and May 2, 1981, with in the respective effectivity
periods of Policies 20719 and 25896, the properties therein insured were razed by fire , thereby giving
rise to the obligation of the insurer to indemnify the Yupangco Cotton Mills.Partial payments were
made by Worldwide Surety and Insurance and some of the reinsurance companies.
On May 2, 1983, Worldwide Surety and Insurance, in a deed of Assignment, acknowledge a
remaining balance of P19,444,447.75 still due Yupangco Cotton Mills, and assigned to the latter all
reinsurance proceeds still collectible from all the foreign reinsurance companies.Thus, in its interest as
assignee and original insured, Yupangco Cotton Mills instituted this collection suit against the
petitioners.
Service of summons upon the petitioners was made by notification to the Insurance
Commissioner, pursuant to Section 14, Rule 14 of the Rules of Court. [5]

In a Petition for Certiorari filed with the Court of Appeals, petitioners submitted that respondent
Court has no jurisdiction over them, being all foreign corporations not doing business in the Philippines
with no office, place of business or agents in the Philippines. The remedy of Certiorari was resorted to
by petitioners on the premise that if petitioners had filed an answer to the complaint as ordered by the
respondent court, they would risk abandoning the issue of jurisdiction. Moreover, extra-territorial
service of summons on petitioners is null and void because the complaint for collection is not one
affecting plaintiffs status and not relating to property within the Philippines.

The appearance of counsel for petitioners being explicitly by special appearance without waiving
objections to the jurisdiction over their persons or the subject matter and the motions do dismiss
having excluded non-jurisdictional grounds, there is no voluntary submission to the jurisdiction of the
trial court.[6]
For its part, private respondent Yupangco counter-submits:

The Court of Appeals found the petition devoid of merit, stating that:

1. Foreign corporations, such as petitioners, not doing business in the Philippines, can be sued in the
Philippine Courts, not withstanding petitioners claim to the contrary.

1. Petitioners were properly served with summons and whatever defect, if any, in the
service of summons were cured by their voluntary appearance in court, via motion to
dismiss.

2. While the complaint before the Honorable Trial Court is for a sum of money, not affecting status or
relating to property, petitioners (then defendants) can submit themselves voluntarily to the
jurisdiction of Philippine Courts, even if there is no extra-judicial (sic) service of summons upon them.

2. Even assuming that petitioners have not yet voluntarily appeared as co-defendants in
the case below even after having filed the motion to dismiss adverted to, still the
situation does not deserve dismissal of the complaint as far as they are concerned,
since as held by this Court in Linger Fisher GMBH vs. IAC, 125 SCRA 253.

3. The voluntary appearance of the petitioners (then defendants) before the Honorable Trial Court
amounted, in effect, to voluntary submission to its jurisdiction over their persons. [7]

A case should not be dismissed simply because an original summons was wrongfully served. It should
be difficult to conceive for example, that when a defendant personally appears before a court
complaining that he had not been validly summoned, that the case filed against him should be
dismissed. An alias summons can be actually served on said defendant.
3. Being reinsurers of respondent Worlwide Surety and Insurance of the risk which the latter
assumed when it issued the fire insurance policies in dispute in favor of respondent
Yupangco, petitioners cannot now validly argue that they do not do business in this
country. At the very least, petitioners must be deemed to have engaged in business in
the Philippines no matter how isolated or singular such business might be, even on the
assumption that among the local domestic insurance corporations of this country, it is
only in favor of Worldwide Surety and Insurance that they have ever reinsured any risk
arising from reinsurance within the territory.
4. The issue of whether or not petitioners are doing business in the country is a matter best
reffered to a trial on the merits of the case and so should be addressed there.
Maintaining its submission that they are beyond the jurisdiction of the Philippine Courts,
petitioners are now before us, stating:
Petitioners, being foreign corporations, as found by the trial court, not doing business in the
Philippines with no office, place of business or agents in the Philippines, are not subject to the
jurisdiction of the Philippine courts.
The complaint for sum of money being a personal action not affecting status or relating to property,
extraterritorial service of summons on petitioners all not doing business in the Philippines is null and
void.

In the decisions of the courts below, there is much left to speculation and conjecture as to
whether or not the petitioners were determined to be doing business in the Philippines or not.
To qualify the petitioners business of reinsurance within the Philippine forum, resort must be
made to established principles in determining what is meant by doing business in the Philippines. In
Communication Materials and Design, Inc. et. al vs. Court of Appeals,[8] it was observed that:
There is no exact rule of governing principle as to what constitutes doing or engaging in or transacting
business. Indeed, such case must be judged in the light of its peculiar circumstances, upon its
peculiar facts and upon the language of the statute applicable. The true test, however, seems to be
whether the foreign corporation is continuing the body or substance of the business or enterprise for
which it was organized.
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
'soliciting orders, purchases, service contracts opening offices, whether called liaison offices of
branches; appointing representatives or distributors who are domiciled in the Philippines or who in any
calendar year stay in the Philippines for a period or periods totaling one hundred eighty (180) days or
more; participating in the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity or commercial dealings
or arrangements and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to and in progressive prosecution of, commercial gain or of
purpose and object of the business organization.
The term ordinarily implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the exercise of the functions
normally incident to and in progressive prosecution of the purpose and object of its organization. [9]

A single act or transaction made in the Philippines, however, could not qualify a foreign
corporation to be doing business in the Philippines, if such singular act is not merely incidental or
casual, but indicates the foreign corporations intention to do business in the Philippines. [10]
There is no sufficient basis in the records which would merit the institution of this collection suit
in the Philippines. More specifically, there is nothing to substantiate the private respondents
submission that the petitioners had engaged in business activities in this country.This is not an
instance where the erroneous service of summons upon the defendant can be cured by the issuance
and service of alias summons, as in the absence of showing that petitioners had been doing business
in the country, they cannot be summoned to answer for the charges leveled against them.
The Court is cognizant of the doctrine is Signetics Corp. vs. Court of Appeals[11] that for the
purpose of acquiring jurisdiction by way of summons on a defendant foreign corporation, there is no
need to prove first the fact that defendant is doing business in the Philippines. The plaintiff only has to
allege in the complaint that the defendant has an agent in the Philippines for summons to be validly
served thereto, even without prior evidence advancing such factual allegation.
As it is, private respondent has made no allegation or demonstration of the existence of
petitioners domestic agent, but avers simply that they are doing business not only abroad but in the
Philippines as well. It does not appear at all that the petitioners had performed any act which would
give the general public the impression that it had been engaging, or intends to engage in its ordinary
and usual business undertakings in the country. The reinsurance treaties between the petitioners and
Worldwide Surety and Insurance were made through an international insurance brokers, and not
through any entity of means remotely connected with the Philippines. Moreover there is authority to
the effect that a reinsurance company is not doing business in a certain state merely because the
property of lives which are insured by the original insurer company are located in that state. [12] The
reason for this is that a contract or reinsurance is generally a separate and distinct arrangement from
the original contract of insurance, whose contracted risk is insured in the reinsurance agreement.
[13]
Hence, the original insured has generally no interest in the contract of reinsurance. [14]
A foreign corporation, is one which owes its existence to the laws of another state, [15] and
generally has no legal existence within the state in which it is foreign. In Marshall Wells Co. vs. Elser,
[16]
it was held that corporations have no legal status beyond the bounds of sovereignty by which they
are created. Nevertheless, it is widely accepted that foreign corporations are, by reason of state
comity, allowed to transact business in other states and to sue in the courts of such fora. In the
Philippines foreign corporations are allowed such privileges, subject to certain restrictions, arising from
the states sovereign right of regulation.
Before a foreign corporation can transact business in the country, it must first obtain a license to
transact business here[17] and secure the proper authorizations under existing law.
If a foreign corporation engages in business activities without the necessary requirements, it
opens itself to court actions against it, but it shall not be allowed maintain or intervene in an action,
suit or proceeding for its own account in any court or tribunal or agency in the Philippines. [18]

The purpose of the law in requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations doing business in the Philippines to the
jurisdiction of the courts, [19] otherwise, a foreign corporation illegally doing business here because of
its refusal or neglect to obtain the required license and authority to do business may successfully
though unfairly plead such neglect or illegal act so as to avoid service and thereby impugn the
jurisdiction of the local courts.
The same danger does not exist among foreign corporations that are indubitably not doing
business in the Philippines. Indeed, if a foreign corporation does not do business here, there would be
no reason for it to be subject to the States regulation. As we observed, in so far as State is concerned,
such foreign corporation has no legal existence. Therefore, to subject such corporation to the courts
jurisdiction would violate the essence of sovereignty.
In the alternative, private respondent submits that foreign corporations not doing business in the
Philippines are not exempt from suits leveled against them in courts, citing the case of Facilities
Management Corporation vs. Leonardo Dela Osa, et. al.[20] where we ruled that indeed, if a foreign
corporation, not engaged in business in the Philippines, is not barred from seeking redress from Courts
in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in the
Philippines Courts for acts done against a person or persons in the Philippines.
We are not persuaded by the position taken by the private respondent. In Facilities Management
case, the principal issue presented was whether the petitioner had been doing business in the
Philippines, so that service of summons upon its agent as under Section 14, Rule 14 of the Rules of
Court can be made in order that the Court of First Instance could assume jurisdiction over it. The court
ruled that the petitioner was doing business in the Philippines, and that by serving summons upon its
resident agent, the trial court had effectively acquired jurisdiction. In that case, the court made no
prescription as the absolute suability of foreign corporations not doing business in the country, but
merely discounts the absolute exemption of such foreign corporations from liabilities particularly
arising from acts done against a person or persons in the Philippines.
As we have found, there is no showing that petitioners had performed any act in the country that
would place it within the sphere of the courts jurisdiction. A general allegation standing alone, that a
party is doing business in the Philippines does not make it so. A conclusion of fact or law cannot be
derived from the unsubstantiated assertions of parties notwithstanding the demands of convenience
or dispatch in legal actions, otherwise, the Court would be guilty of sorcery; extracting substance out
of nothingness. In addition, the assertion that a resident of the Philippines will be inconvenienced by
an out-of-town suit against a foreign entity, is irrelevant and unavailing to sustain the continuance of a
local action, for jurisdiction is not dependent upon the convenience or inconvenience of a party. [21]
It is also argued that having filed a motion to dismiss in the proceedings before the trial court,
petitioners have thus acquiesced to the courts jurisdiction, and they cannot maintain the contrary at
this juncture.
This argument is at the most, flimsy.

In civil cases, jurisdiction over the person of the defendant is acquired either by his voluntary
appearance in court and his submission to its authority or by service of summons. [22]
Fundamentally, the service of summons is intended to give official notice to the defendant or
respondent that an action had been commenced against it. The defendant or respondent is thus put
on guard as to the demands of the plaintiff as stated in the complaint. [23]The service of summons,
upon the defendant becomes an important element in the operation of a courts jurisdiction upon a
party to a suit, as service of summons upon the defendant is the means by which the court acquires
jurisdiction over his person.[24] Without service of summons, or when summons are improperly made,
both the trial and the judgment, being in violation of due process, are null and void, [25]unless the
defendant waives the service of summons by voluntarily appearing and answering the suit. [26]
When a defendant voluntarily appears, he is deemed to have submitted himself to the
jurisdiction of the court.[27] This is not, however, always the case. Admittedly, and without subjecting
himself to the courts jurisdiction, the defendant in an action can, by special appearance object to the
courts assumption on the ground of lack of jurisdiction. If he so wishes to assert this defense, he must
do so seasonably by motion for the purpose of objecting to the jurisdiction of the court, otherwise, he
shall be deemed to have submitted himself to that jurisdiction. [28] In the case of foreign corporations, it
has been held that they may seek relief against the wrongful assumption of jurisdiction by local
courts. In Time, Inc. vs. Reyes,[29] it was held that the action of a court in refusing to rule of deferring
its ruling on a motion to dismiss for lack or excess of jurisdiction is correctable by a writ of prohibition
or certiorari sued out in the appellate court even before trial on the merits is had. The same remedy is
available should the motion to dismiss be denied, and the court, over the foreign corporations
objections, theratens to impose its jurisdiction upon the same.

If the defendant, besides setting up in a motion to dismiss his objections to the jurisdiction of the
court, alleges at the same time any other ground for dismissing the action, or seeks an affirmative
refief in the motion,[30] he is deemed to have submitted himself to the jurisdiction of the court.
In this instance, however, the petitioners from the time they filed their motions to dismiss, their
submission have been consistently and unfailingly to object to the trial courts assumption of
jurisdiction, anchored on the fact that they are all foreign corporations not doing business in the
Philippines.
As we have consistently held, if the appearance of a party in a suit is precisely to question the
jurisdiction of the said tribunal over the person of the defendant, then this appearance is not
equivalent to service of summons, nor does is constitute an acquiescence to the courts jurisdiction.
[31]
Thus it cannot be argued that the petitioners had abandoned their objections to the jurisdiction of
the court, as their motions to dismiss in the trial court, and all their subsequent posturings, were all in
protest of the private respondent's insistence on holding them so answer a charge in a forum where
they believe they are not subject to. Clearly, to continue the proceedings in a case such as those
before Us would just be useless and a waste of time. [32]
ACCORDINGLY, the decision appealed from dated October 11, 1990, is SET ASIDE and the
instant petition is hereby GRANTED. The respondent Regional Trial Court of Manila, Branch 51 is
declared without jurisdiction to take cognizance of Civil Case No. 86-37932, and all its orders and
issuances in connection therewith are hereby ANNULLED and SET ASIDE. The respondent court is
hereby ORDERED to DESIST from maintaining further proceeding in the case aforestated.
SO ORDERED.