1.
May 8, 1996, Felipe Acebedo, IFTIs representative received a
DANZAS CORPORATION and G.R. No. 141462
ALL TRANSPORT NETWORK,
INC.,
Petitioners, Present:
PANGANIBAN, J., Chairman,
- v e r s u s - CORONA,
HON. ZEUS C. ABROGAR,
Presiding Judge of Br. 150 of
Makati City, SEABOARD
EASTERN INSURANCE CO.,
INC. and PHILIPPINE
SKYLANDERS, INC.,
Respondents. Promulgated :
x------------------------------------------x
DECISION
CORONA, J.:
Petitioner Danzas Corporation, through its agent, petitioner
All Transport Network brings to us this petition for review on
certiorari[1] questioning the decision[2] and resolution[3] of the
Court of Appeals which affirmed two orders issued by the
Regional Trial Court, Makati City, Branch 150.[4]
The facts of the case follow.[5]
On February 22, 1994, petitioner Danzas took a shipment of
nine packages of ICS watches for transport to Manila. The
consignee, International Freeport Traders, Inc. (IFTI) secured
Marine Risk Note No. 0000342 from private respondent
Seaboard.
On March 2, 1994, the Korean Airlines plane
carrying the goods arrived in Manila and discharged the goods
to the custody of private respondent Philippine Skylanders,
Inc. for safekeeping. On withdrawal of the shipment from
private respondent Skylanders warehouse, IFTI noted that one
package containing 475 watches was shortlanded while the
remaining eight were found to have sustained tears on sides
and the retape of flaps. On further examination and inventory
of the cartons, it was discovered that 176 Guess watches were
missing. Private respondent Seaboard, as insurer, paid the
losses to IFTI.
On February 23, 1995, Seaboard, invoking its right of
subrogation, filed a complaint against Skylanders, petitioner
and its authorized representative, petitioner All Transport
Network, Inc. (ATN), praying for actual damages in the
amount of P612,904.97 plus legal interest, attorneys fees and
cost of suit. Petitioners impleaded Korean Airlines (KAL) as
third-party defendant.
While the case was pending, IFTIs treasurer, Mary
Eileen Gozon accepted the proposal of KAL to settle
consignees claim by paying the amount of US $522.20. On
check from KAL and correspondingly signed a release form.
On July 2, 1996, petitioners filed a motion to dismiss
the case on the ground that private respondent Seaboards
demand had been paid or otherwise extinguished by KAL.
On December 9, 1996, the trial court issued an order
denying the motion to dismiss. Petitioners, private respondent
Skylanders and KAL filed separate motions for
reconsideration. Prior to the resolution of these motions, the
trial court allowed private respondent Skylanders to present
evidence in a preliminary hearing on November 14, 1997,
after which the court set a date to hear the presentation of
rebuttal evidence.
On December 5, 1997, petitioners filed a
manifestation and motion for reconsideration of the order of
the trial court dated November 14, 1997, questioning the
propriety of the preliminary hearing.
On February 18, 1998, the trial court issued an order
denying: (1) the motion for reconsideration of the December
9, 1996 order filed by petitioners, private respondent
Skylanders and KAL; (2) the motion to dismiss filed by
Skylanders and (3) petitioners motion for reconsideration of
the November 14, 1997 order.
On April 6, 1998, petitioners filed in the Court of
Appeals a special civil action for certiorari under Rule 65 of
the Rules of Court. On March 5, 1999, the CA dismissed the
petition.[6] Petitioners filed[7] a motion for reconsideration but
this was denied.[8]
Hence, this petition.
Petitioners principal contention is that private
respondents right of subrogation was extinguished when IFTI
received payment from KAL in settlement of its obligation.
They also claim that public respondent committed grave abuse
of discretion by refusing to dismiss the case on that ground.
Finally, they claim that, by granting private respondent
Skylanders a preliminary hearing on an affirmative defense
other than one of the grounds stated in Section 1, Rule 16 of
the 1997 Rules of Civil Procedure, public respondent
committed another grave abuse of discretion.
For its part, private respondent Seaboard argues that
the payment made by the tortfeasor did not relieve it of
liability because at the time of payment, its (Seaboards) suit
against petitioners was already ongoing. It also insists that
because the assailed order was interlocutory, it was not a
proper subject for certiorari.[9]
Private respondent Skylanders likewise contends that
the order denying dismissal cannot be the subject of certiorari
in the absence of grave abuse of discretion. It also defends the
trial courts order granting a preliminary hearing, saying that,
assuming the trial court had erroneously granted such a
hearing, such error was merely one of judgment and not of
jurisdiction as to merit certiorari.[10]
 The petition has no merit.
It is true that the doctrine in Manila Mahogany
Manufacturing Corporation v. Court of Appeals[11]remains the
controlling doctrine on the issue of whether the tortfeasor, by
settling with the insured, defeats the right to subrogation of the
insurer. According to Manila Mahogany:
Since the insurer can be subrogated
to only such rights as the insured may have,
should the insured, after receiving payment
from the insurer, release the wrongdoer who
caused the loss, the insurer loses his rights
against the latter. But in such a case, the
insurer will be entitled to recover from the
insured whatever it has paid to the latter,
unless the release was made with the
consent of the insurer.
This is buttressed by a later decision, Pan Malayan
Insurance Corporation v. Court of Appeals,[12] in which we
cited a number of exceptions to the rule laid down in Article
2207 of the Civil Code.[13] Under the first of these exceptions,
if the assured by his own act releases the wrongdoer or third
party liable for the loss or damage from liability, the insurers
right of subrogation is defeated.
However, certain factual differences pointed out by
private respondent Seaboard render this doctrine inapplicable.
In Manila Mahogany, the tortfeasor San Miguel Corporation
paid the insured without knowing that the insurer had already
made such payment. KAL was not similarly situated, being
fully aware of the prior payment made by the insurer to the
consignee. Private respondent Seaboard asserts that, being in
bad faith, KAL should bear the consequences of its actions. [14]
While Manila Mahogany is silent on whether the
existence of good faith or bad faith on the tortfeasors part
affects the insurers right of subrogation, there exists a wealth
of U.S. jurisprudence holding that whenever the wrongdoer
settles with the insured without the consent of the insurer and
with knowledge of the insurers payment and right of
subrogation, such right is not defeated by the
settlement.[15] Because this doctrine is actually consistent with
the facts of Mahogany and helps fill a slight gap left by our
ruling in that case, we adopt it now. The trial court correctly
refused to dismiss the case. In that respect, therefore, the trial
court did not commit grave abuse of discretion which would
justify certiorari.
We likewise find that no grave abuse of discretion
was committed by public respondent when it granted private
respondent Skylanders motion for a preliminary hearing.
In California and Hawaiian Sugar Company v.
Pioneer Insurance and Surety Corporation, [16] we held that a
preliminary hearing was not mandatory but was rather subject
to the discretion of the trial court. We found in that instance
that the trial court had committed grave abuse of discretion in
refusing the partys motion for a preliminary hearing on the
ground that the case was premature, not having been
submitted for arbitration. A preliminary hearing could have
settled the entire case, thereby helping decongest the dockets.
It was therefore the refusal to allow the most efficient and
expeditious process which we condemned.
In the instant case, we are not convinced that public
respondents act of allowing a preliminary hearing constituted
grave abuse of discretion.
In Land Bank of the Philippines v. the Court of
Appeals[17] we discussed the meaning of grave abuse of
discretion:
Grave abuse of discretion implies such
capricious and whimsical exercise of
judgment as is equivalent to lack of
jurisdiction or, in other words, where the
power is exercised in an arbitrary manner by
reason of passion, prejudice, or personal
hostility, and it must be so patent or gross as
to amount to an evasion of a positive duty or
to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of
law.
The special civil action for
certiorari is a remedy designed for the
correction of errors of jurisdiction and
not errors of judgment. The raison
detre for the rule is when a court exercises
its jurisdiction, an error committed while so
engaged does not deprive it of the
jurisdiction being exercised when the error
is committed. If it did, every error
committed by a court would deprive it of its
jurisdiction and every erroneous judgment
would be a void judgment. In such a
scenario, the administration of justice would
not survive. Hence, where the issue or
question involved affects the wisdom or
legal soundness of the decisionnot the
jurisdiction of the court to render said
decisionthe same is beyond the province
of a special civil action for certiorari.
(emphasis supplied)
Public respondents order granting the preliminary
hearing does not at all fit the description above. At worst, it
was an error in judgment which is beyond the domain of
certiorari.
WHEREFORE, in view of the foregoing, the
petition is hereby DENIED. The decision and resolution of
the Court of Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.
2.
G.R. No. L-52732 August 29, 1988
F.F. CRUZ and CO., INC., petitioner,
vs.
THE COURT OF APPEALS, GREGORIO MABLE as
substituted by his wife LUZ ALMONTE MABLE and
children DOMING, LEONIDAS, LIGAYA, ELENA,
GREGORIO, JR., SALOME, ANTONIO, and
BERNARDO all surnamed MABLE, respondents.
Luis S. Topacio for petitioner.
Mauricio M. Monta for respondents.
CORTES, J.:
This petition to review the decision of the Court of Appeals
puts in issue the application of the common law doctrine of res
ipsa loquitur.
The essential facts of the case are not disputed.
The furniture manufacturing shop of petitioner in Caloocan
City was situated adjacent to the residence of private
respondents. Sometime in August 1971, private respondent
Gregorio Mable first approached Eric Cruz, petitioner's plant
manager, to request that a firewall be constructed between the
shop and private respondents' residence. The request was
repeated several times but they fell on deaf ears. In the early
morning of September 6, 1974, fire broke out in petitioner's
shop. Petitioner's employees, who slept in the shop premises,
tried to put out the fire, but their efforts proved futile. The fire
spread to private respondents' house. Both the shop and the
house were razed to the ground. The cause of the conflagration
was never discovered. The National Bureau of Investigation
found specimens from the burned structures negative for the
presence of inflammable substances.
Subsequently, private respondents collected P35,000.00 on the
insurance on their house and the contents thereof.
On January 23, 1975, private respondents filed an action for
damages against petitioner, praying for a judgment in their
favor awarding P150,000.00 as actual damages, P50,000.00 as
moral damages, P25,000.00 as exemplary damages,
P20,000.00 as attorney's fees and costs. The Court of First
Instance held for private respondents:
WHEREFORE, the Court hereby renders
judgment, in favor of plaintiffs, and against
the defendant:
1. Ordering the defendant to pay to the
plaintiffs the amount of P80,000.00 for
damages suffered by said plaintiffs for the
loss of their house, with interest of 6% from
the date of the filing of the Complaint on
January 23, 1975, until fully paid;
2. Ordering the defendant to pay to the
plaintiffs the sum of P50,000.00 for the loss
of plaintiffs' furnitures, religious images,
silverwares, chinawares, jewelries, books,
kitchen utensils, clothing and other
valuables, with interest of 6% from date of
the filing of the Complaint on January 23,
1975, until fully paid;
3. Ordering the defendant to pay to the
plaintiffs the sum of P5,000.00 as moral
damages, P2,000.00 as exemplary damages,
and P5,000.00 as and by way of attorney's
fees;
4. With costs against the defendant;
5. Counterclaim is ordered dismissed, for
lack of merit. [CA Decision, pp. 1-2; Rollo,
pp. 29-30.]
On appeal, the Court of Appeals, in a decision promulgated on
November 19, 1979, affirmed the decision of the trial court
but reduced the award of damages:
WHEREFORE, the decision declaring the
defendants liable is affirmed. The damages
to be awarded to plaintiff should be reduced
to P70,000.00 for the house and P50,000.00
for the furniture and other fixtures with legal
interest from the date of the filing of the
complaint until full payment thereof. [CA
Decision, p. 7; Rollo, p. 35.]
A motion for reconsideration was filed on December 3, 1979
but was denied in a resolution dated February 18, 1980.
Hence, petitioner filed the instant petition for review on
February 22, 1980. After the comment and reply were filed,
the Court resolved to deny the petition for lack of merit on
June 11, 1980.
However, petitioner filed a motion for reconsideration, which
was granted, and the petition was given due course on
September 12, 1980. After the parties filed their memoranda,
the case was submitted for decision on January 21, 1981.
Petitioner contends that the Court of Appeals erred:
1. In not deducting the sum of P35,000.00, which private
respondents recovered on the insurance on their house, from
the award of damages.
2. In awarding excessive and/or unproved damages.
3. In applying the doctrine of res ipsa loquitur to the facts of
the instant case.
The pivotal issue in this case is the applicability of the
common law doctrine of res ipsa loquitur, the issue of
damages being merely consequential. In view thereof, the
errors assigned by petitioner shall be discussed in the reverse
order.
1. The doctrine of res ipsa loquitur, whose application to the
instant case petitioner objects to, may be stated as follows:
Where the thing which caused the injury
complained of is shown to be under the
management of the defendant or his servants
and the accident is such as in the ordinary
course of things does not happen if those
who have its management or control use
proper care, it affords reasonable evidence,
in the absence of explanation by the
defendant, that the accident arose from want
of care. [Africa v. Caltex (Phil.), Inc., G.R.
No. L-12986, March 31, 1966, 16 SCRA
448.]
Thus, in Africa, supra, where fire broke out in a Caltex service
station while gasoline from a tank truck was being unloaded
into an underground storage tank through a hose and the fire
spread to and burned neighboring houses, this Court, applying
the doctrine of res ipsa loquitur, adjudged Caltex liable for the
loss.
The facts of the case likewise call for the application of the
doctrine, considering that in the normal course of operations
of a furniture manufacturing shop, combustible material such
as wood chips, sawdust, paint, varnish and fuel and lubricants
for machinery may be found thereon.
It must also be noted that negligence or want of care on the
part of petitioner or its employees was not merely presumed.
The Court of Appeals found that petitioner failed to construct
a firewall between its shop and the residence of private
respondents as required by a city ordinance; that the fire could
have been caused by a heated motor or a lit cigarette; that
gasoline and alcohol were used and stored in the shop; and
that workers sometimes smoked inside the shop [CA Decision,
p. 5; Rollo, p. 33.]
Even without applying the doctrine of res ipsa loquitur,
petitioner's failure to construct a firewall in accordance with
city ordinances would suffice to support a finding of
negligence.
Even then the fire possibly would not have
spread to the neighboring houses were it not
for another negligent omission on the part of
defendants, namely, their failure to provide a
concrete wall high enough to prevent the
flames from leaping over it. As it was the
concrete wall was only 2-1/2 meters high,
and beyond that height it consisted merely
of galvanized iron sheets, which would
predictably crumble and melt when
subjected to intense heat. Defendant's
negligence, therefore, was not only with
respect to the cause of the fire but also with
respect to the spread thereof to the
neighboring houses.[Africa v. Caltex (Phil.),
Inc., supra; Emphasis supplied.]
In the instant case, with more reason should petitioner be
found guilty of negligence since it had failed to construct a
firewall between its property and private respondents'
residence which sufficiently complies with the pertinent city
ordinances. The failure to comply with an ordinance providing
for safety regulations had been ruled by the Court as an act of
negligence [Teague v. Fernandez, G.R. No. L-29745, June 4,
1973, 51 SCRA 181.]
The Court of Appeals, therefore, had more than adequate basis
to find petitioner liable for the loss sustained by private
respondents.
2. Since the amount of the loss sustained by private
respondents constitutes a finding of fact, such finding by the
Court of Appeals should not be disturbed by this Court [M.D.
Transit & Taxi Co., Inc. v. Court of Appeals, G.R. No. L-
23882, February 17, 1968, 22 SCRA 559], more so when there
is no showing of arbitrariness.
In the instant case, both the CFI and the Court of Appeals
were in agreement as to the value of private respondents'
furniture and fixtures and personal effects lost in the fire (i.e.
P50,000.00). With regard to the house, the Court of Appeals
reduced the award to P70,000.00 from P80,000.00. Such
cannot be categorized as arbitrary considering that the
evidence shows that the house was built in 1951 for
P40,000.00 and, according to private respondents, its
reconstruction would cost P246,000.00. Considering the
appreciation in value of real estate and the diminution of the
real value of the peso, the valuation of the house at P70,000.00
at the time it was razed cannot be said to be excessive.
3. While this Court finds that petitioner is liable for damages
to private respondents as found by the Court of Appeals, the
fact that private respondents have been indemnified by their
insurer in the amount of P35,000.00 for the damage caused to
their house and its contents has not escaped the attention of the
Court. Hence, the Court holds that in accordance with Article
2207 of the Civil Code the amount of P35,000.00 should be
deducted from the amount awarded as damages. Said article
provides:
Art. 2207. If the plaintiffs property has been
insured, and he has received indemnity from
the insurance company for the injury or loss
arising out of the wrong or breach of
contract complained of, the insurance
company is subrogated to the rights of the
insured against the wrongdoer or the person
who violated the contract. If the amount paid
by the insurance company does not fully
cover the injury or loss, the aggrieved party
shall be entitled to recover the deficiency
 from the person causing the loss or injury.
(Emphasis supplied.]
The law is clear and needs no interpretation. Having been
indemnified by their insurer, private respondents are only
entitled to recover the deficiency from petitioner.
On the other hand, the insurer, if it is so minded, may seek
reimbursement of the amount it indemnified private
respondents from petitioner. This is the essence of its right to
be subrogated to the rights of the insured, as expressly
provided in Article 2207. Upon payment of the loss incurred
by the insured, the insurer is entitled to be subrogated pro
tanto to any right of action which the insured may have
against the third person whose negligence or wrongful act
caused the loss [Fireman's Fund Insurance Co. v. Jamila &
Co., Inc., G.R. No. L-27427, April 7, 1976, 70 SCRA 323.]
Under Article 2207, the real party in interest with regard to the
indemnity received by the insured is the insurer [Phil. Air
Lines, Inc. v. Heald Lumber Co., 101 Phil. 1031, (1957).]
Whether or not the insurer should exercise the rights of the
insured to which it had been subrogated lies solely within the
former's sound discretion. Since the insurer is not a party to
the case, its identity is not of record and no claim is made on
its behalf, the private respondent's insurer has to claim his
right to reimbursement of the P35,000.00 paid to the insured.
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals is hereby AFFIRMED with the following
modifications as to the damages awarded for the loss of
private respondents' house, considering their receipt of
P35,000.00 from their insurer: (1) the damages awarded for
the loss of the house is reduced to P35,000.00; and (2) the
right of the insurer to subrogation and thus seek
reimbursement from petitioner for the P35,000.00 it had paid
private respondents is recognized.
SO ORDERED.
3.
G.R. No. L-52756 October 12, 1987
MANILA MAHOGANY MANUFACTURING
CORPORATION, petitioner,
vs.
COURT OF APPEALS AND ZENITH INSURANCE
CORPORATION, respondents.
PADILLA, J:
Petition to review the decision * of the Court of Appeals, in
CA-G.R. No. SP-08642, dated 21 March 1979, ordering
petitioner Manila Mahogany Manufacturing Corporation to
pay private respondent Zenith Insurance Corporation the sum
of Five Thousand Pesos (P5,000.00) with 6% annual interest
from 18 January 1973, attorney's fees in the sum of five
hundred pesos (P500.00), and costs of suit, and the resolution
of the same Court, dated 8 February 1980, denying petitioner's
motion for reconsideration of it's decision.
From 6 March 1970 to 6 March 1971, petitioner insured its
Mercedes Benz 4-door sedan with respondent insurance
company. On 4 May 1970 the insured vehicle was bumped
and damaged by a truck owned by San Miguel Corporation.
For the damage caused, respondent company paid petitioner
five thousand pesos (P5,000.00) in amicable settlement.
Petitioner's general manager executed a Release of Claim,
subrogating respondent company to all its right to action
against San Miguel Corporation.
On 11 December 1972, respondent company wrote Insurance
Adjusters, Inc. to demand reimbursement from San Miguel
Corporation of the amount it had paid petitioner. Insurance
Adjusters, Inc. refused reimbursement, alleging that San
Miguel Corporation had already paid petitioner P4,500.00 for
the damages to petitioner's motor vehicle, as evidenced by a
cash voucher and a Release of Claim executed by the General
Manager of petitioner discharging San Miguel Corporation
from "all actions, claims, demands the rights of action that
now exist or hereafter [sic] develop arising out of or as a
consequence of the accident."
Respondent insurance company thus demanded from
petitioner reimbursement of the sum of P4,500.00 paid by San
Miguel Corporation. Petitioner refused; hence, respondent
company filed suit in the City Court of Manila for the
recovery of P4,500.00. The City Court ordered petitioner to
pay respondent P4,500.00. On appeal the Court of First
Instance of Manila affirmed the City Court's decision in toto,
which CFI decision was affirmed by the Court of Appeals,
with the modification that petitioner was to pay respondent the
total amount of P5,000.00 that it had earlier received from the
respondent insurance company.
Petitioner now contends it is not bound to pay P4,500.00, and
much more, P5,000.00 to respondent company as the
subrogation in the Release of Claim it executed in favor of
respondent was conditioned on recovery of the total amount of
damages petitioner had sustained. Since total damages were
valued by petitioner at P9,486.43 and only P5,000.00 was
received by petitioner from respondent, petitioner argues that
it was entitled to go after San Miguel Corporation to claim the
additional P4,500.00 eventually paid to it by the latter, without
having to turn over said amount to respondent. Respondent of
course disputes this allegation and states that there was no
qualification to its right of subrogation under the Release of
Claim executed by petitioner, the contents of said deed having
expressed all the intents and purposes of the parties.
To support its alleged right not to return the P4,500.00 paid by
San Miguel Corporation, petitioner cites Art. 2207 of the Civil
Code, which states:
 If the plaintiff's property has been insured,
and he has received indemnity from the
insurance company for the injury or loss
arising out of the wrong or breach of
contract complained of the insurance
company shall be subrogated to the rights of
the insured against the wrongdoer or the
person who has violated the contract. If the
amount paid by the insurance company does
not fully cover the injury or loss the
aggrieved party shall be entitled to recover
the deficiency from the person causing the
loss or injury.
Petitioner also invokes Art. 1304 of the Civil Code, stating.
A creditor, to whom partial payment has
been made, may exercise his right for the
remainder, and he shall be preferred to the
person who has been subrogated in his place
in virtue of the partial payment of the same
credit.
We find petitioners arguments to be untenable and without
merit. In the absence of any other evidence to support its
allegation that a gentlemen's agreement existed between it and
respondent, not embodied in the Release of Claim, such ease
of Claim must be taken as the best evidence of the intent and
purpose of the parties. Thus, the Court of Appeals rightly
stated:
Petitioner argues that the release claim it
executed subrogating Private respondent to
any right of action it had against San Miguel
Corporation did not preclude Manila
Mahogany from filing a deficiency claim
against the wrongdoer. Citing Article 2207,
New Civil Code, to the effect that if the
amount paid by an insurance company does
not fully cover the loss, the aggrieved party
shall be entitled to recover the deficiency
from the person causing the loss, petitioner
claims a preferred right to retain the amount
coming from San Miguel Corporation,
despite the subrogation in favor of Private
respondent.
Although petitioners right to file a
deficiency claim against San Miguel
Corporation is with legal basis, without
prejudice to the insurer's right of
subrogation, nevertheless when Manila
Mahogany executed another release claim
(Exhibit K) discharging San Miguel
Corporation from "all actions, claims,
demands and rights of action that now exist
or hereafter arising out of or as a
consequence of the accident" after the
insurer had paid the proceeds of the policy-
the compromise agreement of P5,000.00
being based on the insurance policy-the
insurer is entitled to recover from the
insured the amount of insurance money paid
(Metropolitan Casualty Insurance Company
of New York vs. Badler, 229 N.Y.S. 61, 132
Misc. 132 cited in Insurance Code and
Insolvency Law with comments and
annotations, H.B. Perez 1976, p. 151). Since
petitioner by its own acts released San
Miguel Corporation, thereby defeating
private respondents, the right of subrogation,
the right of action of petitioner against the
insurer was also nullified. (Sy Keng & Co.
vs. Queensland Insurance Co., Ltd., 54 O.G.
391) Otherwise stated: private respondent
may recover the sum of P5,000.00 it had
earlier paid to petitioner. 1
As held in Phil. Air Lines v. Heald Lumber Co., 2
If a property is insured and the owner
receives the indemnity from the insurer, it is
provided in [Article 2207 of the New Civil
Code] that the insurer is deemed
subrogated to the rights of the insured
against the wrongdoer and if the amount
paid by the insurer does not fully cover the
loss, then the aggrieved party is the one
entitled to recover the deficiency. ... Under
this legal provision, the real party in interest
with regard to the portion of the indemnity
paid is the insurer and not the
insured 3 (Emphasis supplied)
The decision of the respondent court ordering petitioner to pay
respondent company, not the P4,500.00 as originally asked
for, but P5,000.00, the amount respondent company paid
petitioner as insurance, is also in accord with law and
jurisprudence. In disposing of this issue, the Court of Appeals
held:
... petitioner is entitled to keep the sum of
P4,500.00 paid by San Miguel Corporation
under its clear right to file a deficiency claim
for damages incurred, against the
wrongdoer, should the insurance company
not fully pay for the injury caused (Article
2207, New Civil Code). However, when
petitioner released San Miguel Corporation
from any liability, petitioner's right to retain
the sum of P5,000.00 no longer existed,
thereby entitling private respondent to
recover the same. (Emphasis supplied)
As has been observed:
... The right of subrogation can only exist
after the insurer has paid the otherwise the
insured will be deprived of his right to full
indemnity. If the insurance proceeds are not
sufficient to cover the damages suffered by
the insured, then he may sue the party
 responsible for the damage for the the [sic]
remainder. To the extent of the amount he
has already received from the insurer enjoy's
[sic] the right of subrogation.
Since the insurer can be subrogated to only
such rights as the insured may have, should
the insured, after receiving payment from
the insurer, release the wrongdoer who
caused the loss, the insurer loses his rights
against the latter. But in such a case, the
insurer will be entitled to recover from the
insured whatever it has paid to the latter,
unless the release was made with the
consent of the insurer. 4(Emphasis supplied.)
And even if the specific amount asked for in the complaint is
P4,500.00 only and not P5,000.00, still, the respondent Court
acted well within its discretion in awarding P5,000.00, the
total amount paid by the insurer. The Court of Appeals rightly
reasoned as follows:
It is to be noted that private respondent, in
its companies, prays for the recovery, not of
P5,000.00 it had paid under the insurance
policy but P4,500.00 San Miguel
Corporation had paid to petitioner. On this
score, We believe the City Court and Court
of First Instance erred in not awarding the
proper relief. Although private respondent
prays for the reimbursement of P4,500.00
paid by San Miguel Corporation, instead of
P5,000.00 paid under the insurance policy,
the trial court should have awarded the
latter, although not prayed for, under the
general prayer in the complaint "for such
further or other relief as may be deemed just
or equitable, (Rule 6, Sec. 3, Revised Rules
of Court; Rosales vs. Reyes Ordoveza, 25
Phil. 495 ; Cabigao vs. Lim, 50 Phil. 844;
Baguiro vs. Barrios Tupas, 77 Phil 120).
WHEREFORE, premises considered, the petition is DENIED.
The judgment appealed from is hereby AFFIRMED with costs
against petitioner.
SO ORDERED.
4.
G.R. No. L-15895 November 29, 1920
RAFAEL ENRIQUEZ, as administrator of the estate of
the late Joaquin Ma. Herrer, plaintiff-appellant,
vs.
SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
Jose A. Espiritu for appellant.
Cohn, Fisher and DeWitt for appellee.
MALCOLM, J.:
This is an action brought by the plaintiff ad administrator of
the estate of the late Joaquin Ma. Herrer to recover from the
defendant life insurance company the sum of pesos 6,000 paid
by the deceased for a life annuity. The trial court gave
judgment for the defendant. Plaintiff appeals.
The undisputed facts are these: On September 24, 1917,
Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life
annuity. Two days later he paid the sum of P6,000 to the
manager of the company's Manila office and was given a
receipt reading as follows:
MANILA, I. F., 26 de septiembre, 1917.
PROVISIONAL RECEIPT Pesos 6,000
Recibi la suma de seis mil pesos de Don Joaquin Herrer de
Manila como prima dela Renta Vitalicia solicitada por dicho
Don Joaquin Herrer hoy, sujeta al examen medico y
aprobacion de la Oficina Central de la Compaia.
The application was immediately forwarded to the head office
of the company at Montreal, Canada. On November 26, 1917,
the head office gave notice of acceptance by cable to Manila.
(Whether on the same day the cable was received notice was
sent by the Manila office of Herrer that the application had
been accepted, is a disputed point, which will be discussed
later.) On December 4, 1917, the policy was issued at
Montreal. On December 18, 1917, attorney Aurelio A. Torres
wrote to the Manila office of the company stating that Herrer
desired to withdraw his application. The following day the
local office replied to Mr. Torres, stating that the policy had
been issued, and called attention to the notification of
November 26, 1917. This letter was received by Mr. Torres on
the morning of December 21, 1917. Mr. Herrer died on
December 20, 1917.
As above suggested, the issue of fact raised by the evidence is
whether Herrer received notice of acceptance of his
application. To resolve this question, we propose to go directly
to the evidence of record.
The chief clerk of the Manila office of the Sun Life Assurance
Company of Canada at the time of the trial testified that he
prepared the letter introduced in evidence as Exhibit 3, of date
November 26, 1917, and handed it to the local manager, Mr.
E. E. White, for signature. The witness admitted on cross-
examination that after preparing the letter and giving it to he
manager, he new nothing of what became of it. The local
manager, Mr. White, testified to having received the
cablegram accepting the application of Mr. Herrer from the
home office on November 26, 1917. He said that on the same
day he signed a letter notifying Mr. Herrer of this acceptance.
The witness further said that letters, after being signed, were
sent to the chief clerk and placed on the mailing desk for
transmission. The witness could not tell if the letter had every
actually been placed in the mails. Mr. Tuason, who was the
chief clerk, on November 26, 1917, was not called as a
witness. For the defense, attorney Manuel Torres testified to
having prepared the will of Joaquin Ma. Herrer, that on this
occasion, Mr. Herrer mentioned his application for a life
annuity, and that he said that the only document relating to the
transaction in his possession was the provisional receipt.
Rafael Enriquez, the administrator of the estate, testified that
he had gone through the effects of the deceased and had found
no letter of notification from the insurance company to Mr.
Herrer.
Our deduction from the evidence on this issue must be that the
letter of November 26, 1917, notifying Mr. Herrer that his
application had been accepted, was prepared and signed in the
local office of the insurance company, was placed in the
ordinary channels for transmission, but as far as we know, was
never actually mailed and thus was never received by the
applicant.
Not forgetting our conclusion of fact, it next becomes
necessary to determine the law which should be applied to the
facts. In order to reach our legal goal, the obvious signposts
along the way must be noticed.
Until quite recently, all of the provisions concerning life
insurance in the Philippines were found in the Code of
Commerce and the Civil Code. In the Code of the Commerce,
there formerly existed Title VIII of Book III and Section III of
Title III of Book III, which dealt with insurance contracts. In
the Civil Code there formerly existed and presumably still
exist, Chapters II and IV, entitled insurance contracts and life
annuities, respectively, of Title XII of Book IV. On the after
July 1, 1915, there was, however, in force the Insurance Act.
No. 2427. Chapter IV of this Act concerns life and health
insurance. The Act expressly repealed Title VIII of Book II
and Section III of Title III of Book III of the code of
Commerce. The law of insurance is consequently now found
in the Insurance Act and the Civil Code.
While, as just noticed, the Insurance Act deals with life
insurance, it is silent as to the methods to be followed in order
that there may be a contract of insurance. On the other hand,
the Civil Code, in article 1802, not only describes a contact of
life annuity markedly similar to the one we are considering,
but in two other articles, gives strong clues as to the proper
disposition of the case. For instance, article 16 of the Civil
Code provides that "In matters which are governed by special
laws, any deficiency of the latter shall be supplied by the
provisions of this Code." On the supposition, therefore, which
is incontestable, that the special law on the subject of
insurance is deficient in enunciating the principles governing
acceptance, the subject-matter of the Civil code, if there be
any, would be controlling. In the Civil Code is found article
1262 providing that "Consent is shown by the concurrence of
offer and acceptance with respect to the thing and the
consideration which are to constitute the contract. An
acceptance made by letter shall not bind the person making the
offer except from the time it came to his knowledge. The
contract, in such case, is presumed to have been entered into at
the place where the offer was made." This latter article is in
opposition to the provisions of article 54 of the Code of
Commerce.
If no mistake has been made in announcing the successive
steps by which we reach a conclusion, then the only duty
remaining is for the court to apply the law as it is found. The
legislature in its wisdom having enacted a new law on
insurance, and expressly repealed the provisions in the Code
of Commerce on the same subject, and having thus left a void
in the commercial law, it would seem logical to make use of
the only pertinent provision of law found in the Civil code,
closely related to the chapter concerning life annuities.
The Civil Code rule, that an acceptance made by letter shall
bind the person making the offer only from the date it came to
his knowledge, may not be the best expression of modern
commercial usage. Still it must be admitted that its
enforcement avoids uncertainty and tends to security. Not only
this, but in order that the principle may not be taken too
lightly, let it be noticed that it is identical with the principles
announced by a considerable number of respectable courts in
the United States. The courts who take this view have
expressly held that an acceptance of an offer of insurance not
actually or constructively communicated to the proposer does
not make a contract. Only the mailing of acceptance, it has
been said, completes the contract of insurance, as the locus
poenitentiae is ended when the acceptance has passed beyond
the control of the party. (I Joyce, The Law of Insurance, pp.
235, 244.)
In resume, therefore, the law applicable to the case is found to
be the second paragraph of article 1262 of the Civil Code
providing that an acceptance made by letter shall not bind the
person making the offer except from the time it came to his
knowledge. The pertinent fact is, that according to the
provisional receipt, three things had to be accomplished by the
insurance company before there was a contract: (1) There had
to be a medical examination of the applicant; (2) there had to
be approval of the application by the head office of the
company; and (3) this approval had in some way to be
communicated by the company to the applicant. The further
admitted facts are that the head office in Montreal did accept
the application, did cable the Manila office to that effect, did
actually issue the policy and did, through its agent in Manila,
actually write the letter of notification and place it in the usual
channels for transmission to the addressee. The fact as to the
letter of notification thus fails to concur with the essential
elements of the general rule pertaining to the mailing and
delivery of mail matter as announced by the American courts,
namely, when a letter or other mail matter is addressed and
mailed with postage prepaid there is a rebuttable presumption
of fact that it was received by the addressee as soon as it could
have been transmitted to him in the ordinary course of the
mails. But if any one of these elemental facts fails to appear, it
is fatal to the presumption. For instance, a letter will not be
presumed to have been received by the addressee unless it is
shown that it was deposited in the post-office, properly
addressed and stamped. (See 22 C.J., 96, and 49 L. R. A. [N.
S.], pp. 458, et seq., notes.)
We hold that the contract for a life annuity in the case at bar
was not perfected because it has not been proved satisfactorily
that the acceptance of the application ever came to the
knowledge of the applicant.lawph!l.net
Judgment is reversed, and the plaintiff shall have and recover
from the defendant the sum of P6,000 with legal interest from
November 20, 1918, until paid, without special finding as to
costs in either instance. So ordered.
5.
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY,
LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, defendants-appellants.
MARTIN, J.:
This is a novel question in insurance law: Can a common-law
wife named as beneficiary in the life insurance policy of a
legally married man claim the proceeds thereof in case of
death of the latter?
On September 1, 1968, Buenaventura Cristor Ebrado was
issued by The Life Assurance Co., Ltd., Policy No. 009929 on
a whole-life for P5,882.00 with a, rider for Accidental Death
for the same amount Buenaventura C. Ebrado designated T.
Ebrado as the revocable beneficiary in his policy. He to her as
his wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result
of an t when he was hit by a failing branch of a tree. As the
policy was in force, The Insular Life Assurance Co., Ltd.
liable to pay the coverage in the total amount of P11,745.73,
representing the face value of the policy in the amount of
P5,882.00 plus the additional benefits for accidental death also
in the amount of P5,882.00 and the refund of P18.00 paid for
the premium due November, 1969, minus the unpaid
premiums and interest thereon due for January and February,
1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the
proceeds of the Policy as the designated beneficiary therein,
although she admits that she and the insured Buenaventura C.
Ebrado were merely living as husband and wife without the
benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of
the deceased insured. She asserts that she is the one entitled to
the insurance proceeds, not the common-law wife, Carponia T.
Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the
insurer, The Insular Life Assurance Co., Ltd. commenced an
action for Interpleader before the Court of First Instance of
Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was
held on July 8, 1972, after which, a pre-trial order was entered
reading as follows: +.wph!1
During the pre-trial conference, the parties
manifested to the court. that there is no
possibility of amicable settlement. Hence,
the Court proceeded to have the parties
submit their evidence for the purpose of the
pre-trial and make admissions for the
purpose of pretrial. During this conference,
parties Carponia T. Ebrado and Pascuala
Ebrado agreed and stipulated: 1) that the
deceased Buenaventura Ebrado was
married to Pascuala Ebrado with whom she
has six (legitimate) namely; Hernando,
Cresencio, Elsa, Erlinda, Felizardo and
Helen, all surnamed Ebrado; 2) that during
the lifetime of the deceased, he was insured
with Insular Life Assurance Co. Under
Policy No. 009929 whole life plan, dated
September 1, 1968 for the sum of P5,882.00
with the rider for accidental death benefit as
evidenced by Exhibits A for plaintiffs and
Exhibit 1 for the defendant Pascuala and
Exhibit 7 for Carponia Ebrado; 3) that
during the lifetime of Buenaventura Ebrado,
he was living with his common-wife,
Carponia Ebrado, with whom she had 2
children although he was not legally
separated from his legal wife; 4) that
Buenaventura in accident on October 21,
1969 as evidenced by the death Exhibit 3
and affidavit of the police report of his death
Exhibit 5; 5) that complainant Carponia
Ebrado filed claim with the Insular Life
Assurance Co. which was contested by
Pascuala Ebrado who also filed claim for the
proceeds of said policy 6) that in view ofthe
adverse claims the insurance company filed
this action against the two herein claimants
Carponia and Pascuala Ebrado; 7) that there
is now due from the Insular Life Assurance
Co. as proceeds of the policy P11,745.73; 8)
that the beneficiary designated by the
insured in the policy is Carponia Ebrado and
the insured made reservation to change the
beneficiary but although the insured made
the option to change the beneficiary, same
was never changed up to the time of his
death and the wife did not have any
 opportunity to write the company that there
was reservation to change the designation of
the parties agreed that a decision be
rendered based on and stipulation of facts as
to who among the two claimants is entitled
to the policy.
Upon motion of the parties, they are given
ten (10) days to file their simultaneous
memoranda from the receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered judgment
declaring among others, Carponia T. Ebrado disqualified from
becoming beneficiary of the insured Buenaventura Cristor
Ebrado and directing the payment of the insurance proceeds to
the estate of the deceased insured. The trial court
held: +.wph!1 Insurance Law, the contract of life insurance is governed by
It is patent from the last paragraph of Art.
739 of the Civil Code that a criminal
conviction for adultery or concubinage is not
essential in order to establish the
disqualification mentioned therein. Neither
is it also necessary that a finding of such
guilt or commission of those acts be made in
a separate independent action brought for
the purpose. The guilt of the donee
(beneficiary) may be proved by
preponderance of evidence in the same
proceeding (the action brought to declare the
nullity of the donation).
It is, however, essential that such adultery or
concubinage exists at the time defendant
Carponia T. Ebrado was made beneficiary in
the policy in question for the disqualification
and incapacity to exist and that it is only
necessary that such fact be established by
preponderance of evidence in the trial. Since
it is agreed in their stipulation above-quoted
that the deceased insured and defendant
Carponia T. Ebrado were living together as
husband and wife without being legally
married and that the marriage of the insured
with the other defendant Pascuala Vda. de
Ebrado was valid and still existing at the
time the insurance in question was
purchased there is no question that
defendant Carponia T. Ebrado is disqualified
from becoming the beneficiary of the policy
in question and as such she is not entitled to
the proceeds of the insurance upon the death
of the insured.
From this judgment, Carponia T. Ebrado appealed to the Court
of Appeals, but on July 11, 1976, the Appellate Court certified
the case to Us as involving only questions of law.
We affirm the judgment of the lower court.
1. It is quite unfortunate that the Insurance Act (RA 2327, as
amended) or even the new Insurance Code (PD No. 612, as
amended) does not contain any specific provision grossly
resolutory of the prime question at hand. Section 50 of the
Insurance Act which provides that "(t)he insurance shag be
applied exclusively to the proper interest of the person in
whose name it is made" 1 cannot be validly seized upon to
hold that the mm includes the beneficiary. The word "interest"
highly suggests that the provision refers only to the "insured"
and not to the beneficiary, since a contract of insurance is
personal in character. 2Otherwise, the prohibitory laws against
illicit relationships especially on property and descent will be
rendered nugatory, as the same could easily be circumvented
by modes of insurance. Rather, the general rules of civil law
should be applied to resolve this void in the Insurance Law.
Article 2011 of the New Civil Code states: "The contract of
insurance is governed by special laws. Matters not expressly
provided for in such special laws shall be regulated by this
Code." When not otherwise specifically provided for by the
the general rules of the civil law regulating contracts. 3 And
under Article 2012 of the same Code, "any person who is
forbidden from receiving any donation under Article 739
cannot be named beneficiary of a fife insurance policy by the
person who cannot make a donation to him. 4 Common-law
spouses are, definitely, barred from receiving donations from
each other. Article 739 of the new Civil Code
provides: +.wph!1
The following donations shall be void:
1. Those made between persons who were
guilty of adultery or concubinage at the time
of donation;
Those made between persons found guilty of
the same criminal offense, in consideration
thereof;
3. Those made to a public officer or his
wife, descendants or ascendants by reason of
his office.
In the case referred to in No. 1, the action
for declaration of nullity may be brought by
the spouse of the donor or donee; and the
guilt of the donee may be proved by
preponderance of evidence in the same
action.
2. In essence, a life insurance policy is no different from a
civil donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality. A beneficiary
is like a donee, because from the premiums of the policy
which the insured pays out of liberality, the beneficiary will
receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil
Code should equally operate in life insurance contracts. The
mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in
the life insurance policy of the person who cannot make the
donation. 5 Under American law, a policy of life insurance is
considered as a testament and in construing it, the courts will,
so far as possible treat it as a will and determine the effect of a
clause designating the beneficiary by rules under which wins
are interpreted. 6
3. Policy considerations and dictates of morality rightly justify
the institution of a barrier between common law spouses in
record to Property relations since such hip ultimately
encroaches upon the nuptial and filial rights of the legitimate
family There is every reason to hold that the bar in donations
between legitimate spouses and those between illegitimate
ones should be enforced in life insurance policies since the
same are based on similar consideration As above pointed out,
a beneficiary in a fife insurance policy is no different from a
donee. Both are recipients of pure beneficence. So long as
manage remains the threshold of family laws, reason and
morality dictate that the impediments imposed upon married
couple should likewise be imposed upon extra-marital
relationship. If legitimate relationship is circumscribed by
these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities. Thus,
in Matabuena v. Cervantes, 7 this Court, through Justice
Fernando, said: +.wph!1 4. We do not think that a conviction for adultery or
If the policy of the law is, in the language of
the opinion of the then Justice J.B.L. Reyes
of that court (Court of Appeals), 'to prohibit
donations in favor of the other consort and
his descendants because of and undue and
improper pressure and influence upon the
donor, a prejudice deeply rooted in our
ancient law;" por-que no se enganen
desponjandose el uno al otro por amor que
han de consuno' (According to) the Partidas
(Part IV, Tit. XI, LAW IV), reiterating the
rationale 'No Mutuato amore invicem
spoliarentur' the Pandects (Bk, 24, Titl. 1,
De donat, inter virum et uxorem); then there
is very reason to apply the same prohibitive
policy to persons living together as husband
and wife without the benefit of nuptials. For
it is not to be doubted that assent to such
irregular connection for thirty years
bespeaks greater influence of one party over
the other, so that the danger that the law
seeks to avoid is correspondingly increased.
Moreover, as already pointed out by Ulpian
(in his lib. 32 ad Sabinum, fr. 1), 'it would
not be just that such donations should
subsist, lest the condition 6f those who
incurred guilt should turn out to be better.'
So long as marriage remains the cornerstone
of our family law, reason and morality alike
demand that the disabilities attached to
marriage should likewise attach to
concubinage.
It is hardly necessary to add that even in the
absence of the above pronouncement, any
other conclusion cannot stand the test of
scrutiny. It would be to indict the frame of
the Civil Code for a failure to apply a
laudable rule to a situation which in its
essentials cannot be distinguished.
Moreover, if it is at all to be differentiated
the policy of the law which embodies a
deeply rooted notion of what is just and
what is right would be nullified if such
irregular relationship instead of being visited
with disabilities would be attended with
benefits. Certainly a legal norm should not
be susceptible to such a reproach. If there is
every any occasion where the principle of
statutory construction that what is within the
spirit of the law is as much a part of it as
what is written, this is it. Otherwise the basic
purpose discernible in such codal provision
would not be attained. Whatever omission
may be apparent in an interpretation purely
literal of the language used must be
remedied by an adherence to its avowed
objective.
concubinage is exacted before the disabilities mentioned in
Article 739 may effectuate. More specifically, with record to
the disability on "persons who were guilty of adultery or
concubinage at the time of the donation," Article 739 itself
provides: +.wph!1
In the case referred to in No. 1, the action
for declaration of nullity may be brought by
the spouse of the donor or donee; and the
guilty of the donee may be proved by
preponderance of evidence in the same
action.
The underscored clause neatly conveys that no criminal
conviction for the offense is a condition precedent. In fact, it
cannot even be from the aforequoted provision that a
prosecution is needed. On the contrary, the law plainly states
that the guilt of the party may be proved "in the same acting
for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates upon the guilt of the
consort for the offense indicated. The quantum of proof in
criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law
relationship between the insured and the beneficiary has been
conveniently supplied by the stipulations between the parties
in the pre-trial conference of the case. It case agreed upon and
stipulated therein that the deceased insured Buenaventura C.
Ebrado was married to Pascuala Ebrado with whom she has
six legitimate children; that during his lifetime, the deceased
insured was living with his common-law wife, Carponia
Ebrado, with whom he has two children. These stipulations are
nothing less than judicial admissions which, as a consequence,
no longer require proof and cannot be
contradicted. 8 A fortiori, on the basis of these admissions, a
judgment may be validly rendered without going through the
rigors of a trial for the sole purpose of proving the illicit
liaison between the insured and the beneficiary. In fact, in that
pretrial, the parties even agreed "that a decision be rendered
based on this agreement and stipulation of facts as to who
among the two claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is
hereby affirmed. Carponia T. Ebrado is hereby declared
disqualified to be the beneficiary of the late Buenaventura C.
Ebrado in his life insurance policy. As a consequence, the
proceeds of the policy are hereby held payable to the estate of
the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.
6.
G.R. No. L-8151 December 16, 1955
VIRGINIA CALANOC, petitioner,
vs.
COURT OF APPEALS and THE PHILIPPINE
AMERICAN LIFE INSURANCE CO., respondents.
Lucio Javillonar for petitioner.
J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo
A. Reyes for respondents.
BAUTISTA ANGELO, J.:
This suit involves the collection of P2,000 representing the
value of a supplemental policy covering accidental death
which was secured by one Melencio Basilio from the
Philippine American Life Insurance Company. The case
originated in the Municipal Court of Manila and judgment
being favorable to the plaintiff it was appealed to the court of
first instance. The latter court affirmed the judgment but on
appeal to the Court of Appeals the judgment was reversed and
the case is now before us on a petition for review.
Melencio Basilio was a watchman of the Manila Auto Supply
located at the corner of Avenida Rizal and Zurbaran. He
secured a life insurance policy from the Philippine American
Life Insurance Company in the amount of P2,000 to which
was attached a supplementary contract covering death by
accident. On January 25, 1951, he died of a gunshot wound on
the occasion of a robbery committed in the house of Atty.
Ojeda at the corner of Oroquieta and Zurbaan streets. Virginia
Calanoc, the widow, was paid the sum of P2,000, face value of
the policy, but when she demanded the payment of the
additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main
defense, that the deceased died because he was murdered by a
person who took part in the commission of the robbery and
while making an arrest as an officer of the law which
contingencies were expressly excluded in the contract and
have the effect of exempting the company from liability.
The pertinent facts which need to be considered for the
determination of the questions raised are those reproduced in
the decision of the Court of Appeals as follows:
The circumstances surrounding the death of Melencio
Basilio show that when he was killed at about seven
o'clock in the night of January 25, 1951, he was on
duty as watchman of the Manila Auto Supply at the
corner of Avenida Rizal and Zurbaran; that it turned
out that Atty. Antonio Ojeda who had his residence at
the corner of Zurbaran and Oroquieta, a block away
from Basilio's station, had come home that night and
found that his house was well-lighted, but with the
windows closed; that getting suspicious that there
were culprits in his house, Atty. Ojeda retreated to
look for a policeman and finding Basilio in khaki
uniform, asked him to accompany him to the house
with the latter refusing on the ground that he was not
a policeman, but suggesting that Atty. Ojeda should
ask the traffic policeman on duty at the corner of
Rizal Avenue and Zurbaran; that Atty. Ojeda went to
the traffic policeman at said corner and reported the
matter, asking the policeman to come along with him,
to which the policeman agreed; that on the way to the
Ojeda residence, the policeman and Atty. Ojeda
passed by Basilio and somehow or other invited the
latter to come along; that as the tree approached the
Ojeda residence and stood in front of the main gate
which was covered with galvanized iron, the fence
itself being partly concrete and partly adobe stone, a
shot was fired; that immediately after the shot, Atty.
Ojeda and the policeman sought cover; that the
policeman, at the request of Atty. Ojeda, left the
premises to look for reinforcement; that it turned out
afterwards that the special watchman Melencio
Basilio was hit in the abdomen, the wound causing
his instantaneous death; that the shot must have come
from inside the yard of Atty. Ojeda, the bullet passing
through a hole waist-high in the galvanized iron gate;
that upon inquiry Atty. Ojeda found out that the
savings of his children in the amount of P30 in coins
kept in his aparador contained in stockings were
taken away, the aparador having been ransacked; that
a month thereafter the corresponding investigation
conducted by the police authorities led to the arrest
and prosecution of four persons in Criminal Case No.
15104 of the Court of First Instance of Manila for
'Robbery in an Inhabited House and in Band with
Murder'.
It is contended in behalf of the company that Basilio was
killed which "making an arrest as an officer of the law" or as a
result of an "assault or murder" committed in the place and
therefore his death was caused by one of the risks excluded by
the supplementary contract which exempts the company from
liability. This contention was upheld by the Court of Appeals
and, in reaching this conclusion, made the following
comment:
 From the foregoing testimonies, we find that the
deceased was a watchman of the Manila Auto
Supply, and, as such, he was not boud to leave his
place and go with Atty. Ojeda and Policeman
Magsanoc to see the trouble, or robbery, that
occurred in the house of Atty. Ojeda. In fact,
according to the finding of the lower court, Atty.
Ojeda finding Basilio in uniform asked him to
accompany him to his house, but the latter refused on
the ground that he was not a policeman and suggested
to Atty. Ojeda to ask help from the traffic policeman
on duty at the corner of Rizal Avenue and Zurbaran,
but after Atty. Ojeda secured the help of the traffic
policeman, the deceased went with Ojeda and said
traffic policeman to the residence of Ojeda, and while
the deceased was standing in front of the main gate of
said residence, he was shot and thus died. The death,
therefore, of Basilio, although unexpected, was not
caused by an accident, being a voluntary and
intentional act on the part of the one wh robbed, or
one of those who robbed, the house of Atty. Ojeda.
Hence, it is out considered opinion that the death of
Basilio, though unexpected, cannot be considered
accidental, for his death occurred because he left his
post and joined policeman Magsanoc and Atty. Ojeda
to repair to the latter's residence to see what happened
thereat. Certainly, when Basilio joined Patrolman
Magsanoc and Atty. Ojeda, he should have realized
the danger to which he was exposing himself, yet,
instead of remaining in his place, he went with Atty.
Ojeda and Patrolman Magsanoc to see what was the
trouble in Atty. Ojeda's house and thus he was fatally
shot.
We dissent from the above findings of the Court of Appeals.
For one thing, Basilio was a watchman of the Manila Auto
Supply which was a block away from the house of Atty. Ojeda
where something suspicious was happening which caused the
latter to ask for help. While at first he declied the invitation of
Atty. Ojeda to go with him to his residence to inquire into
what was going on because he was not a regular policeman, he
later agreed to come along when prompted by the traffic
policeman, and upon approaching the gate of the residence he
was shot and died. The circumstance that he was a mere
watchman and had no duty to heed the call of Atty. Ojeda
should not be taken as a capricious desire on his part to expose
his life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. In volunteering to
extend help under the situation, he might have thought, rightly
or wrongly, that to know the truth was in the interest of his
employer it being a matter that affects the security of the
neighborhood. No doubt there was some risk coming to him in
pursuing that errand, but that risk always existed it being
inherent in the position he was holding. He cannot therefore be
blamed solely for doing what he believed was in keeping with
his duty as a watchman and as a citizen. And he cannot be
considered as making an arrest as an officer of the law, as
contended, simply because he went with the traffic policeman,
for certainly he did not go there for that purpose nor was he
asked to do so by the policeman.
Much less can it be pretended that Basilio died in the course of
an assault or murder considering the very nature of these
crimes. In the first place, there is no proof that the death of
Basilio is the result of either crime for the record is barren of
any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now pending
in court as regards the incident but before that is done
anything that might be said on the point would be a mere
conjecture. Nor can it be said that the killing was intentional
for there is the possibility that the malefactor had fired the shot
merely to scare away the people around for his own protection
and not necessarily to kill or hit the victim. In any event, while
the act may not excempt the triggerman from liability for the
damage done, the fact remains that the happening was a pure
accident on the part of the victim. The victim could have been
either the policeman or Atty. Ojeda for it cannot be pretended
that the malefactor aimed at the deceased precisely because he
wanted to take his life.
We take note that these defenses are included among the risks
exluded in the supplementary contract which enumerates the
cases which may exempt the company from liability. While as
a general rule "the parties may limit the coverage of the policy
to certain particular accidents and risks or causes of loss, and
may expressly except other risks or causes of loss therefrom"
(45 C. J. S. 781-782), however, it is to be desired that the
terms and phraseology of the exception clause be clearly
expressed so as to be within the easy grasp and understanding
of the insured, for if the terms are doubtful or obscure the
same must of necessity be interpreted or resolved aganst the
one who has caused the obscurity. (Article 1377, new Civil
Code) And so it has bene generally held that the "terms in an
insurance policy, which are ambiguous, equivacal, or
uncertain . . . are to be construed strictly and most strongly
against the insurer, and liberally in favor of the insured so as
to effect the dominant purpose of indemnity or payment to the
insured, especially where a forfeiture is involved" (29 Am.
Jur., 181), and the reason for this rule is that he "insured
usually has no voice in the selection or arrangement of the
words employed and that the language of the contract is
selected with great care and deliberation by experts and legal
advisers employed by, and acting exclusively in the interest of,
the insurance company." (44 C. J. S., p. 1174.)
Insurance is, in its nature, complex and difficult for
the layman to understand. Policies are prepared by
experts who know and can anticipate the bearings
and possible complications of every contingency. So
long as insurance companies insist upon the use of
ambiguous, intricate and technical provisions, which
conceal rather than frankly disclose, their own
intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in
favor of the insured. (Algoe vs. Pacific Mut. L. Ins.
Co., 91 Wash. 324, LRA 1917A, 1237.)lawphi1.net
An insurer should not be allowed, by the use of
obscure phrases and exceptions, to defeat the very
purpose for which the policy was procured. (Moore
vs. Aetna Life Insurance Co., LRA 1915D, 264.)
We are therefore persuaded to conclude that the circumstances
unfolded in the present case do not warrant the finding that the
death of the unfortunate victim comes within the purview of
the exception clause of the supplementary policy and, hence,
do not exempt the company from liability.
Wherefore, reversing the decision appealed from, we hereby
order the company to pay petitioner-appellant the amount of
P2,000, with legal interest from January 26, 1951 until fully
paid, with costs.
xxx...............xxx...............xxx
7.
[G.R. No. 112360. July 18, 2000]
RIZAL SURETY & INSURANCE
COMPANY, petitioner, vs. COURT OF APPEALS
and TRANSWORLD KNITTING MILLS,
INC., respondents.
DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court seeking to annul and
set aside the July 15, 1993 Decision[1] and October
22, 1993 Resolution[2] of the Court of Appeals[3] in
CA-G.R. CV NO. 28779, which modified the
Ruling[4] of the Regional Trial Court of Pasig, Branch
161, in Civil Case No. 46106.
The antecedent facts that matter are as follows:
On March 13, 1980, Rizal Surety & Insurance
Company (Rizal Insurance) issued Fire Insurance
Policy No. 45727 in favor of Transworld Knitting
Mills, Inc. (Transworld), initially for One Million
(P1,000,000.00) Pesos and eventually increased to
One Million Five Hundred Thousand
(P1,500,000.00) Pesos, covering the period from
August 14, 1980 to March 13, 1981.
Pertinent portions of subject policy on the buildings
insured, and location thereof, read:
"On stocks of finished and/or unfinished
products, raw materials and supplies of
every kind and description, the properties of
the Insureds and/or held by them in trust, on
commission or on joint account with others
and/or for which they (sic) responsible in
case of loss whilst contained and/or stored
during the currency of this Policy in the
premises occupied by them forming part of
the buildings situate (sic) within own
Compound at MAGDALO STREET,
BARRIO UGONG, PASIG, METRO
MANILA, PHILIPPINES, BLOCK NO.
601.
Said building of four-span lofty one storey
in height with mezzanine portions is
constructed of reinforced concrete and
hollow blocks and/or concrete under
galvanized iron roof and occupied as hosiery
mills, garment and lingerie factory,
transistor-stereo assembly plant, offices,
warehouse and caretaker's quarters.
'Bounds in front partly by one-storey
concrete building under galvanized iron
roof occupied as canteen and guardhouse,
partly by building of two and partly one
storey constructed of concrete below, timber
above undergalvanized iron roof occupied
as garage and quarters and partly by open
space and/or tracking/ packing, beyond
which is the aforementioned Magdalo
Street; on its right and left by driveway,
thence open spaces, and at the rear by open
spaces.'"[5]
The same pieces of property insured with the
petitioner were also insured with New India
Assurance Company, Ltd., (New India).
On January 12, 1981, fire broke out in the compound
of Transworld, razing the middle portion of its four-
span building and partly gutting the left and right
sections thereof. A two-storey building (behind said
four-span building) where fun and amusement
machines and spare parts were stored, was also
destroyed by the fire.
Transworld filed its insurance claims with Rizal
Surety & Insurance Company and New India
Assurance Company but to no avail.
On May 26, 1982, private respondent brought against
the said insurance companies an action for collection
of sum of money and damages, docketed as Civil
Case No. 46106 before Branch 161 of the then Court
of First Instance of Rizal; praying for judgment
ordering Rizal Insurance and New India to pay the
amount of P2,747, 867.00 plus legal
interest, P400,000.00 as attorney's fees, exemplary
damages, expenses of litigation of P50,000.00 and
costs of suit.[6]
Petitioner Rizal Insurance countered that its fire
insurance policy sued upon covered only the contents
of the four-span building, which was partly burned,
and not the damage caused by the fire on the two-
storey annex building.[7]
On January 4, 1990, the trial court rendered its
decision; disposing as follows:
"ACCORDINGLY, judgment is hereby
rendered as follows:
(1)Dismissing the case as against The New
India Assurance Co., Ltd.;
(2) Ordering defendant Rizal Surety And
Insurance Company to pay Transwrold (sic)
Knitting Mills, Inc. the amount of P826,
500.00 representing the actual value of the
losses suffered by it; and
(3) Cost against defendant Rizal Surety and
Insurance Company.
SO ORDERED."[8]
Both the petitioner, Rizal Insurance Company, and
private respondent, Transworld Knitting Mills, Inc.,
went to the Court of Appeals, which came out with
its decision of July 15, 1993 under attack, the decretal
portion of which reads:
"WHEREFORE, and upon all the foregoing,
the decision of the court below is
MODIFIED in that defendant New India
Assurance Company has and is hereby
required to pay plaintiff-appellant the
amount of P1,818,604.19 while the other
Rizal Surety has to pay the plaintiff-
appellant P470,328.67, based on the actual
losses sustained by plaintiff Transworld in
the fire, totalling P2,790,376.00 as against
the amounts of fire insurance coverages
respectively extended by New India in the
amount of P5,800,000.00 and Rizal Surety
and Insurance Company in the amount of
P1,500,000.00.
No costs.
SO ORDERED."[9]
On August 20, 1993, from the aforesaid judgment of
the Court of Appeals New India appealed to this
Court theorizing inter alia that the private respondent
could not be compensated for the loss of the fun and
amusement machines and spare parts stored at the
two-storey building because it (Transworld) had no
insurable interest in said goods or items.
On February 2, 1994, the Court denied the appeal
with finality in G.R. No. L-111118 (New India
Assurance Company Ltd. vs. Court of Appeals).
Petitioner Rizal Insurance and private respondent
Transworld, interposed a Motion for Reconsideration
before the Court of Appeals, and on October 22,
1993, the Court of Appeals reconsidered its decision
of July 15, 1993, as regards the imposition of interest,
ruling thus:
"WHEREFORE, the Decision of July 15,
1993 is amended but only insofar as the
imposition of legal interest is concerned,
that, on the assessment against New India
Assurance Company on the amount of
P1,818,604.19 and that against Rizal Surety
& Insurance Company on the amount of
P470,328.67, from May 26, 1982 when the
complaint was filed until payment is made.
The rest of the said decision is retained in all
other respects.
SO ORDERED."[10]
Undaunted, petitioner Rizal Surety & Insurance
Company found its way to this Court via the present
Petition, contending that:
I.....SAID DECISION (ANNEX A) ERRED
IN ASSUMING THAT THE ANNEX
BUILDING WHERE THE BULK OF THE
BURNED PROPERTIES WERE STORED,
WAS INCLUDED IN THE COVERAGE
OF THE INSURANCE POLICY ISSUED
BY RIZAL SURETY TO TRANSWORLD.
II.....SAID DECISION AND
RESOLUTION (ANNEXES A AND B)
ERRED IN NOT CONSIDERING THE
PICTURES (EXHS. 3 TO 7-C-RIZAL
SURETY), TAKEN IMMEDIATELY
AFTER THE FIRE, WHICH CLEARLY
SHOW THAT THE PREMISES
OCCUPIED BY TRANSWORLD, WHERE
THE INSURED PROPERTIES WERE
LOCATED, SUSTAINED PARTIAL
DAMAGE ONLY.
III. SAID DECISION (ANNEX A) ERRED
IN NOT HOLDING THAT
TRANSWORLD HAD ACTED IN
 PALPABLE BAD FAITH AND WITH
MALICE IN FILING ITS CLEARLY
UNFOUNDED CIVIL ACTION, AND IN
NOT ORDERING TRANSWORLD TO
PAY TO RIZAL SURETY MORAL AND
PUNITIVE DAMAGES (ART. 2205,
CIVIL CODE), PLUS ATTORNEY'S FEES
AND EXPENSES OF LITIGATION (ART.
2208 PARS. 4 and 11, CIVIL CODE).[11]
The Petition is not impressed with merit.
It is petitioner's submission that the fire insurance
policy litigated upon protected only the contents of
the main building (four-span),[12]and did not include
those stored in the two-storey annex building. On the
other hand, the private respondent theorized that the
so called "annex" was not an annex but was actually
an integral part of the four-span building[13] and
therefore, the goods and items stored therein were
covered by the same fire insurance policy.
Resolution of the issues posited here hinges on the
proper interpretation of the stipulation in subject fire
insurance policy regarding its coverage, which reads:
"xxx contained and/or stored during the
currency of this Policy in the premises
occupied by them forming part of the
buildings situate (sic) within own
Compound xxx"
Therefrom, it can be gleaned unerringly that the fire
insurance policy in question did not limit its coverage
to what were stored in the four-span building. As
opined by the trial court of origin, two requirements
must concur in order that the said fun and amusement
machines and spare parts would be deemed protected
by the fire insurance policy under scrutiny, to wit:
"First, said properties must be contained
and/or stored in the areas occupied by
Transworld and second, said areas must
form part of the building described in the
policy xxx"[14]
'Said building of four-span
lofty one storey in height
with mezzanine portions is
constructed of reinforced
concrete and hollow
blocks and/or concrete
under galvanized iron roof
and occupied as hosiery
mills, garment and lingerie
factory, transistor-stereo
assembly plant, offices,
ware house and caretaker's
quarter.'
The Court is mindful of the well-entrenched doctrine
that factual findings by the Court of Appeals are
conclusive on the parties and not reviewable by this
Court, and the same carry even more weight when
the Court of Appeals has affirmed the findings of fact
arrived at by the lower court.[15]
In the case under consideration, both the trial court
and the Court of Appeals found that the so called
"annex " was not an annex building but an integral
and inseparable part of the four-span building
described in the policy and consequently, the
machines and spare parts stored therein were covered
by the fire insurance in dispute. The letter-report of
the Manila Adjusters and Surveyor's Company,
which petitioner itself cited and invoked, describes
the "annex" building as follows:
"Two-storey building constructed of partly
timber and partly concrete hollow blocks
under g.i. roof which is adjoining and
intercommunicating with the repair of the
first right span of the lofty storey building
and thence by property fence wall." [16]
Verily, the two-storey building involved, a permanent
structure which adjoins and intercommunicates with
the "first right span of the lofty storey
building",[17] formed part thereof, and meets the
requisites for compensability under the fire insurance
policy sued upon.
So also, considering that the two-storey building
aforementioned was already existing when subject
fire insurance policy contract was entered into on
January 12, 1981, having been constructed sometime
in 1978,[18] petitioner should have specifically
excluded the said two-storey building from the
coverage of the fire insurance if minded to exclude
the same but if did not, and instead, went on to
provide that such fire insurance policy covers the
products, raw materials and supplies stored within the
premises of respondent Transworld which was an
integral part of the four-span building occupied by
Transworld, knowing fully well the existence of such
building adjoining and intercommunicating with the
right section of the four-span building.
After a careful study, the Court does not find any
basis for disturbing what the lower courts found and
arrived at.
Indeed, the stipulation as to the coverage of the fire
insurance policy under controversy has created a
doubt regarding the portions of the building insured
thereby. Article 1377 of the New Civil Code
provides:
"Art.1377. The interpretation of obscure
words or stipulations in a contract shall not
favor the party who caused the obscurity"
Conformably, it stands to reason that the doubt
should be resolved against the petitioner, Rizal
Surety Insurance Company, whose lawyer or
managers drafted the fire insurance policy contract
under scrutiny. Citing the aforecited provision of law
in point, the Court in Landicho vs. Government
Service Insurance System,[19] ruled:
"This is particularly true as regards
insurance policies, in respect of which it is
settled that the 'terms in an insurance policy,
which are ambiguous, equivocal, or
uncertain x x x are to be construed strictly
and most strongly against the insurer, and
liberally in favor of the insured so as to
effect the dominant purpose of indemnity or
payment to the insured, especially where
forfeiture is involved' (29 Am. Jur., 181),
and the reason for this is that the 'insured
usually has no voice in the selection or
arrangement of the words employed and that
the language of the contract is selected with
great care and deliberation by experts and
legal advisers employed by, and acting
exclusively in the interest of, the insurance
company.' (44 C.J.S., p. 1174)."" [20]
Equally relevant is the following disquisition of the
Court in Fieldmen's Insurance Company, Inc. vs.
Vda. De Songco,[21] to wit:
"'This rigid application of the rule on
ambiguities has become necessary in view of
current business practices. The courts
cannot ignore that nowadays monopolies,
cartels and concentration of capital,
endowed with overwhelming economic
power, manage to impose upon parties
dealing with them cunningly prepared
'agreements' that the weaker party may not
change one whit, his participation in the
'agreement' being reduced to the alternative
to 'take it or leave it' labelled since
Raymond Saleilles 'contracts by adherence'
(contrats [sic] d'adhesion), in contrast to
these entered into by parties bargaining on
an equal footing, such contracts (of which
policies of insurance and international bills
of lading are prime example) obviously call
for greater strictness and vigilance on the
part of courts of justice with a view to
protecting the weaker party from abuses and
imposition, and prevent their becoming
traps for the unwary (New Civil Code,
Article 24; Sent. of Supreme Court of Spain,
13 Dec. 1934, 27 February 1942.)'" [22]
The issue of whether or not Transworld has an
insurable interest in the fun and amusement machines
and spare parts, which entitles it to be indemnified
for the loss thereof, had been settled in G.R. No. L-
111118, entitled New India Assurance Company,
Ltd., vs. Court of Appeals, where the appeal of New
India from the decision of the Court of Appeals under
review, was denied with finality by this Court on
February 2, 1994.
The rule on conclusiveness of judgment, which
obtains under the premises, precludes the relitigation
of a particular fact or issue in another action between
the same parties based on a different claim or cause
of action. "xxx the judgment in the prior action
operates as estoppel only as to those matters in issue
or points controverted, upon the determination of
which the finding or judgment was rendered. In fine,
the previous judgment is conclusive in the second
case, only as those matters actually and directly
controverted and determined and not as to matters
merely involved therein."[23]
Applying the abovecited pronouncement, the Court,
in Smith Bell and Company (Phils.), Inc. vs. Court of
Appeals,[24] held that the issue of negligence of the
shipping line, which issue had already been passed
upon in a case filed by one of the insurers, is
conclusive and can no longer be relitigated in a
similar case filed by another insurer against the same
shipping line on the basis of the same factual
circumstances. Ratiocinating further, the Court
opined:
"In the case at bar, the issue of which vessel
('Don Carlos' or 'Yotai Maru') had been
negligent, or so negligent as to have
proximately caused the collision between
them, was an issue that was actually,
directly and expressly raised, controverted
and litigated in C.A.-G.R. No. 61320-R.
Reyes, L.B., J., resolved that issue in his
Decision and held the 'Don Carlos' to have
been negligent rather than the 'Yotai Maru'
and, as already noted, that Decision was
affirmed by this Court in G.R. No. L-48839
in a Resolution dated 6 December 1987. The
Reyes Decision thus became final and
executory approximately two (2) years
before the Sison Decision, which is assailed
in the case at bar, was promulgated.
Applying the rule of conclusiveness of
judgment, the question of which vessel had
been negligent in the collision between the
two (2) vessels, had long been settled by this
Court and could no longer be relitigated in
C.A.-G.R. No. 61206-R. Private respondent
Go Thong was certainly bound by the ruling
or judgment of Reyes, L.B., J. and that of
this Court. The Court of Appeals fell into
clear and reversible error when it
disregarded the Decision of this Court
affirming the Reyes Decision."[25]
 The controversy at bar is on all fours with the Vicente J. Francisco and Jose R. Francisco for plaintiff-
aforecited case. Considering that private respondent's appellee.
insurable interest in, and compensability for the loss K. V. Faylona for defendant-appellant.
of subject fun and amusement machines and spare
parts, had been adjudicated, settled and sustained by PAREDES, J.:
the Court of Appeals in CA-G.R. CV NO. 28779, and
by this Court in G.R. No. L-111118, in a Resolution,
On February 7, 1957, the defendant Equitable Insurance and
dated February 2, 1994, the same can no longer be Casualty Co., Inc., issued Personal Accident Policy No. 7136
relitigated and passed upon in the present case. on the life of Francisco del Rosario, alias Paquito Bolero, son
Ineluctably, the petitioner, Rizal Surety Insurance
of herein plaintiff-appellee, binding itself to pay the sum of
Company, is bound by the ruling of the Court of
P1,000.00 to P3,000.00, as indemnity for the death of the
Appeals and of this Court that the private respondent
insured. The pertinent provisions of the Policy, recite:
has an insurable interest in the aforesaid fun and
amusement machines and spare parts; and should be
indemnified for the loss of the same. Part I. Indemnity For Death

So also, the Court of Appeals correctly adjudged If the insured sustains any bodily injury which is
petitioner liable for the amount of P470,328.67, it effected solely through violent, external, visible and
being the total loss and damage suffered by accidental means, and which shall result,
Transworld for which petitioner Rizal Insurance is independently of all other causes and within sixty
liable.[26] (60) days from the occurrence thereof, in the Death
of the Insured, the Company shall pay the amount set
opposite such injury:
All things studiedly considered and viewed in proper
perspective, the Court is of the irresistible conclusion,
and so finds, that the Court of Appeals erred not inSection 1. Injury sustained other than those specified below unless
holding the petitioner, Rizal Surety Insuranceexcepted hereinafter. . . . . . . . P1,000.00
Company, liable for the destruction and loss of the
insured buildings and articles of the privateSection 2. Injury sustained by the wrecking or disablement of a
respondent. railroad passenger car or street railway car in or on which the
Insured is travelling as a farepaying passenger. . . . . . . . P1,500.00
WHEREFORE, the Decision, dated July 15, 1993,
Section 3. Injury sustained by the burning of a church, theatre, public
and the Resolution, dated October 22, 1993, of the
library or municipal administration building while the Insured is
Court of Appeals in CA-G.R. CV NO. 28779 are
therein at the commencement of the fire. . . . . . . . P2,000.00
AFFIRMED in toto. No pronouncement as to costs.
Section 4. Injury sustained by the wrecking or disablement of a
SO ORDERED. regular passenger elevator car in which the Insured is being
conveyed as a passenger (Elevator in mines excluded) P2,500.00

Section 5. Injury sustained by a stroke of lightning or by a cyclone. .

...... P3,000.00

xxx xxx xxx

Part VI. Exceptions

This policy shall not cover disappearance of the

Insured nor shall it cover Death, Disability, Hospital
fees, or Loss of Time, caused to the insured:

. . . (h) By drowning except as a consequence of the

wrecking or disablement in the Philippine waters of a
8. passenger steam or motor vessel in which the Insured
is travelling as a farepaying passenger; . . . .
G.R. No. L-16215 June 29, 1963
A rider to the Policy contained the following:
SIMEON DEL ROSARIO, plaintiff-appellee,
vs. IV. DROWNING
THE EQUITABLE INSURANCE AND CASUALTY CO.,
INC., defendant-appellant.
It is hereby declared and agreed that exemption clause Letter
(h) embodied in PART VI of the policy is hereby waived by
the company, and to form a part of the provision covered by
the policy.
On February 24, 1957, the insured Francisco del
Rosario, alias Paquito Bolero, while on board the motor
launch "ISLAMA" together with 33 others, including his
beneficiary in the Policy, Remedios Jayme, were forced to
jump off said launch on account of fire which broke out on
said vessel, resulting in the death of drowning, of the insured
and beneficiary in the waters of Jolo. 1wph1.t dismiss, was presented by plaintiff, and other pleadings were
On April 13, 1957, Simeon del Rosario, father of the insured,
and as the sole heir, filed a claim for payment with defendant
company, and on September 13, 1957, defendant company
paid to him (plaintiff) the sum of P1,000.00, pursuant to
Section 1 of Part I of the policy. The receipt signed by plaintiff
reads
RECEIVED of the EQUITABLE
INSURANCE & CASUALTY CO., INC.,
the sum of PESOS ONE THOUSAND
(P1,000.00) Philippine Currency, being
settlement in full for all claims and demands
against said Company as a result of an
accident which occurred on February 26,
1957, insured under out ACCIDENT Policy
No. 7136, causing the death of the Assured.
In view of the foregoing, this policy is
hereby surrendered and CANCELLED.
LOSS COMPUTATION
Amount of Insurance P1,000.00
__________
vvvvv
On the same date (September 13, 1957), Atty. Vicente J.
Francisco, wrote defendant company acknowledging receipt
by his client (plaintiff herein), of the P1,000.00, but informing
said company that said amount was not the correct one. Atty.
Francisco claimed
The amount payable under the policy, I believe
should be P1,500.00 under the provision of Section 2,
part 1 of the policy, based on the rule of pari
materia as the death of the insured occurred under the
circumstances similar to that provided under the
aforecited section.
Defendant company, upon receipt of the letter, referred the
matter to the Insurance Commissioner, who rendered an
opinion that the liability of the company was only P1,000.00,
pursuant to Section 1, Part I of the Provisions of the policy
(Exh. F, or 3). Because of the above opinion, defendant
insurance company refused to pay more than P1,000.00. In the
meantime, Atty. Vicente Francisco, in a subsequent letter to
the insurance company, asked for P3,000.00 which the
Company refused, to pay. Hence, a complaint for the recovery
of the balance of P2,000.00 more was instituted with the Court
of First Instance of Rizal (Pasay City, Branch VII), praying for
it further sum of P10,000.00 as attorney's fees, expenses of
litigation and costs.
Defendant Insurance Company presented a Motion to Dismiss,
alleging that the demand or claim is set forth in the complaint
had already been released, plaintiff having received the full
amount due as appearing in policy and as per opinion of the
Insurance Commissioner. An opposition to the motion to
subsequently file by the parties. On December 28, 1957, the
trial court deferred action on the motion to dismiss until
termination of the trial of the case, it appearing that the ground
thereof was not indubitable. In the Answer to the complaint,
defendant company practically admitted all the allegations
therein, denying only those which stated that under the policy
its liability was P3,000.00.
On September 1, 1958, the trial court promulgated an
Amended Decision, the pertinent portions of which read
xxx xxx xxx
Since the contemporaneous and subsequent acts of
the parties show that it was not their intention that the
payment of P1,000.00 to the plaintiff and the signing
of the loss receipt exhibit "1" would be considered as
releasing the defendant completely from its liability
on the policy in question, said intention of the parties
should prevail over the contents of the loss receipt
"1" (Articles 1370 and 1371, New Civil Code).
". . . . Under the terms of this policy, defendant
company agreed to pay P1,000.00 to P3,000.00 as
indemnity for the death of the insured. The insured
died of drowning. Death by drowning is covered by
the policy the pertinent provisions of which reads as
follows:
xxx xxx xxx
"Part I of the policy fixes specific amounts
as indemnities in case of death resulting
from "bodily injury which is effected solely
thru violence, external, visible and
accidental means" but, Part I of the Policy is
not applicable in case of death by drowning
because death by drowning is not one
resulting from "bodily injury which is
affected solely thru violent, external, visible
and accidental means" as "Bodily Injury"
means a cut, a bruise, or a wound and
drowning is death due to suffocation and not
to any cut, bruise or wound."
xxx xxx xxx
 Besides, on the face of the policy Exhibit "A" itself,
death by drowning is a ground for recovery apart
from the bodily injury because death by bodily injury
is covered by Part I of the policy while death by
drowning is covered by Part VI thereof. But while the
policy mentions specific amounts that may be
recovered for death for bodily injury, yet, there is not
specific amount mentioned in the policy for death
thru drowning although the latter is, under Part VI of
the policy, a ground for recovery thereunder. Since
the defendant has bound itself to pay P1000.00 to
P3,000.00 as indemnity for the death of the insured
but the policy does not positively state any definite
amount that may be recovered in case of death by
drowning, there is an ambiguity in this respect in the
policy, which ambiguity must be interpreted in favor
of the insured and strictly against the insurer so as to
allow greater indemnity.
xxx xxx xxx
. . . plaintiff is therefore entitled to recover P3,000.00.
The defendant had already paid the amount of
P1,000.00 to the plaintiff so that there still remains a
balance of P2,000.00 of the amount to which plaintiff
is entitled to recover under the policy Exhibit "A".
The plaintiff asks for an award of P10,000.00 as
attorney's fees and expenses of litigation. However,
since it is evident that the defendant had not acted in
bad faith in refusing to pay plaintiff's claim, the Court
cannot award plaintiff's claim for attorney's fees and
expenses of litigation.
IN VIEW OF THE FOREGOING, the Court hereby
reconsiders and sets aside its decision dated July 21,
1958 and hereby renders judgment, ordering the
defendant to pay plaintiff the sum of Two Thousand
(P2,000.00) Pesos and to pay the costs.
The above judgment was appealed to the Court of Appeals on
three (3) counts. Said Court, in a Resolution dated September
29, 1959, elevated the case to this Court, stating that the
genuine issue is purely legal in nature.
All the parties agree that indemnity has to be paid. The
conflict centers on how much should the indemnity be. We
believe that under the proven facts and circumstances, the
findings and conclusions of the trial court, are well taken, for
they are supported by the generally accepted principles or
rulings on insurance, which enunciate that where there is an
ambiguity with respect to the terms and conditions of the
policy, the same will be resolved against the one responsible
thereof. It should be recalled in this connection, that generally,
the insured, has little, if any, participation in the preparation of
the policy, together with the drafting of its terms and
Conditions. The interpretation of obscure stipulations in a
contract should not favor the party who cause the obscurity
(Art. 1377, N.C.C.), which, in the case at bar, is the insurance
company.
. . . . And so it has been generally held that the "terms
in an insurance policy, which are ambiguous,
equivocal or uncertain . . . are to be construed strictly
against, the insurer, and liberally in favor of the
insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially
where a forfeiture is involved," (29 Am. Jur. 181) and
the reason for this rule is that the "insured usually has
no voice in the selection or arrangement of the words
employed and that the language of the contract is
selected with great care and deliberation by expert
and legal advisers employed by, and acting
exclusively in the interest of, the insurance company"
(44 C.J.S. 1174). Calanoc v. Court of Appeals, et al.,
G.R. No. L-8151, Dec. 16, 1955.
. . . . Where two interpretations, equally fair, of
languages used in an insurance policy may be made,
that which allows the greater indemnity will prevail.
(L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla.
82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5
Ann. Cas. 749).
At any event, the policy under consideration, covers death or
disability by accidental means, and the appellant insurance
company agreed to pay P1,000.00 to P3,000.00. is indemnity
for death of the insured.
In view of the conclusions reached, it would seem unnecessary
to discuss the other issues raised in the appeal.
The judgment appealed from is hereby affirmed. Without
costs.
9.
G.R. No. L-23491 July 31, 1968
TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET
AL., plaintiffs-appellees,
vs.
THE CAPITAL INSURANCE & SURETY CO.,
INC., defendant-appellant.
Vergara and Dayot for plaintiffs-appellees.
Achacoso, Nera and Ocampo for defendant-appellant.
FERNANDO, J.:
The principal legal question in this appeal from a lower court
decision, ordering defendant-appellant The Capital Insurance
& Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi
Co., Inc. as well as plaintiffs-appellees, widow and children of
the deceased Alfredo Monje, who, in his lifetime, was
employed as a taxi driver of such plaintiff-appellee, "the sum
of P5,000.00 with interest thereon at the legal rate from the
filing of the complaint until fully paid," with P500.00 as
attorney's fees and the costs of the suit, is whether or not a
provision in the insurance contract that defendant-appellant
will indemnify any authorized driver provided that [he] is not
entitled to any indemnity under any other policy, it being
shown that the deceased was paid his workman's
compensation from another insurance policy, should defeat
such a right to recover under the insurance contract subject of
this suit. The lower court answered in the negative. Its holding
cannot be successfully impugned.
The appealed decision stated at the outset that the motion for
judgment on the pleadings filed by the plaintiffs was granted,
the defendant having no objection and the issue presented
being capable of resolution without the need of presenting any
evidence. Then the decision continues: "Alfredo Monje,
according to the complaint, was employed as taxi driver by the
plaintiff Taurus Taxi Co., Inc. On December 6, 1962, the taxi
he was driving collided with a Transport Taxicab at the
intersection of Old Sta. Mesa and V. Mapa Streets, Manila,
resulting in his death. At the time of the accident, there was
subsisting and in force Commercial Vehicle Comprehensive
Policy No. 101, 737 ... issued by the defendant to the Taurus
Taxi Co., Inc. The amount for which each passenger,
including the driver, is insured is P5,000.00. After the issuance
of policy No. 101, 737, the defendant issued the Taurus Taxi
Co., Inc. Indorsement No. 1 which forms part of the policy ...
" 1 Reference was then made to plaintiff-appellee Felicitas
Monje being the widow of the taxi driver, the other plaintiffs-
appellees with the exception of the Taurus Taxi Co., Inc.,
being the children of the couple. After which it was noted that
plaintiff Taurus Taxi Co., Inc. made representations "for the
payment of the insurance benefit corresponding to her and her
children since it was issued in its name, benefit corresponding
to her and her children, ... but despite demands ... the
defendant refused and still refuses to pay them." 2
On the above facts, the liability apparently clear, the defenses
interposed by defendant insurance company being in the
opinion of the lower court without merit, the aforesaid
judgment was rendered. This being a direct appeal, to us on
questions of law, the facts as found by the lower court cannot
be controverted.
Defendant-appellant Capital Insurance & Surety Co. Inc.
alleged as the first error of the lower court its failure to hold
"that in view of the fact that the deceased Alfredo Monje was
entitled to indemnity under another insurance policy issued by
Ed. A. Keller Co., Ltd., the heirs of the said deceased are not
entitled to indemnity under the insurance policy issued by
appellant for the reason that the latter policy contains a
stipulation that "the company will indemnify any authorized
driver provided that such authorized driver is not entitled to
indemnity under any other policy." " 3 In the discussion of the
above error, defendant-appellant stated the following: "The
facts show that at the time of his death, the deceased Alfredo
Monje, as authorized driver and employee of plaintiff Taurus
Taxi Co., Inc., was entitled to indemnity under another
insurance policy, then subsisting, which was Policy No. 50PH-
1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi
Co., Inc. As a matter of fact, the indemnity to which the
deceased Alfredo Monje was entitled under the said Policy
No. 50PH-1605 was paid by Ed. A. Keller Co., Ltd. to the
heirs of Alfredo Monje on December 28, 1962, as evidenced
by the records of W.C.C. Case No. A88637 entitled "Felicitas
V. Monje, et al. vs. Taurus Taxi Co., Inc.", Regional Office
No. 4, Department of Labor, Manila ... " 4
The above defense, based on a fact which was not disputed,
was raised and rightfully rejected by the lower court. From its
own version, defendant-appellant would seek to escape
liability on the plea that the workman's compensation to which
the deceased driver was rightfully entitled was settled by the
employer through a policy issued by another insurance firm.
What was paid therefore was not indemnity but compensation.
Since what is prohibited by the insurance policy in question is
that any "authorized driver of plaintiff Taurus Taxi Co., Inc."
should not be "entitled to any indemnity under any policy", it
would appear indisputable that the obligation of defendant-
appellant under the policy had not in any wise been
extinguished. It is too well-settled to need the citation of
authorities that what the law requires enters into and forms
part of every contract. The Workmen's Compensation Act,
explicitly requires that an employee suffering any injury or
death arising out of or in the course of employment be
compensated. The fulfillment of such statutory obligation
cannot be the basis for evading the clear, explicit and
mandatory terms of a policy.
In the same way as was held in Benguet Consolidated, Inc. v.
Social Security System 5 that sickness benefits under the Social
Security Act may be recovered simultaneously with disability
benefits under the Workmen's Compensation Act, the previous
payment made of the compensation under such legislation is
no obstacle by virtue of a clause like that invoked by
defendant-appellant to the payment of indemnity under the
insurance policy.
Assuming however that there is a doubt concerning the
liability of defendant-appellant insurance firm, nonetheless, it
should be resolved against its pretense and in favor of the
insured. It was the holding in Eagle Star Insurance, Ltd. v.
Chia Yu 6 that courts are to regard "with extreme jealousy"
limitations of liability found in insurance policies and to
construe them in such a way as to preclude the insurer from
non-compliance with his obligation. In other words, to quote a
noted authority on the subject, "a contract of insurance
couched in language chosen by the insurer is, if open to the
construction contended for by the insured, to be construed
most strongly, or strictly, against the insurer and liberally in
favor of the contention of the insured, which means in
accordance with the rule contra proferentem."7 Enough has
been said therefore to dispose of the first assigned error.
The point is made in the second alleged error that the lower
court ought to have held "that by joining the heirs of Alfredo
Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc.
committed a breach of policy condition and thus forfeited
whatever benefits, if any, to which it might be entitled under
appellant's policy." 8 The basis for such an allegation is one of
the conditions set forth in the policy. Thus: " "5. No
admission, offer, promise or payment shall be made by or on
behalf of the insured without the written consent of the
Company which shall be entitled if it so desires to take over
and conduct in his name the defense or settlement of any claim
or to prosecute in his name for its own benefit any claim for
indemnity or damages or otherwise and shall have full
discretion in the conduct of any proceedings and in the
settlement of any claim and the Insured shall give all such
information and assistance as the Company may require ... " 9
Such a plea is even less persuasive. It is understandable then
why the lower court refused to be swayed by it. The plaintiff
Taurus Taxi Co., inc. had to join the suit on behalf of the real
beneficiaries, the heirs of the deceased driver, who are the
other plaintiffs as it was a party to the policy.
Moreover, as noted in the decision appealed from: "The
institution of the action cannot possibly be construed as an
admission, offer, promise, or payment by the company, for it
merely seeks to enforce, by court action, the only legal remedy
available to it, its rights under the contract of insurance to
which it is a party. To consider, furthermore, the
commencement of an action by the insured, alone or with
others, as a breach of the policy, resulting in forfeiture of the
benefits thereunder, to place in the hands of the insurer the
power to nullify at will the whole contract of insurance by the
simple expedient of refusing to make payment and compelling
the insured to bring a suit to enforce the policy." 10
To so construe the policy to yield a contrary result is to put a
premium on technicality. If such a defense is not frowned
upon and rejected, the time will come when the confidence on
the part of the public in the good faith of insurance firms
would be minimized, if not altogether lost. Such a deplorable
consequence ought to be avoided and a construction of any
stipulation that would be fraught with such a risk repudiated.
What the lower court did then cannot be characterized as error.
The third error assigned, namely, that the lower court should
have considered the filing of the complaint against defendant-
appellant as unjust and unwarranted, is, in the light of the
above, clearly without merit.
WHEREFORE, the appealed decision of the lower court
ordering defendant-appellant "to pay the plaintiffs the sum of
P5,000.00 with interest thereon at the legal rate from the filing
of the complaint until fully paid, P500.00 as attorney's
fees," 11 with costs is affirmed. Costs against defendant-
appellant.
10.
G.R. No. L-54171 October 28, 1980
JEWEL VILLACORTA, assisted by her husband,
GUERRERO VILLACORTA, petitioner,
vs.
THE INSURANCE COMMISSION and EMPIRE
INSURANCE COMPANY, respondents.
TEEHANKEE, Acting C.J.:
The Court sets aside respondent Insurance Commission's
dismissal of petitioner's complaint and holds that where the
insured's car is wrongfully taken without the insured's consent
from the car service and repair shop to whom it had been
entrusted for check-up and repairs (assuming that such taking
was for a joy ride, in the course of which it was totally
smashed in an accident), respondent insurer is liable and must
pay insured for the total loss of the insured vehicle under the
theft clause of the policy.
The undisputed facts of the case as found in the appealed
decision of April 14, 1980 of respondent insurance
commission are as follows:
Complainant [petitioner] was the owner of a
Colt Lancer, Model 1976, insured with
respondent company under Private Car
Policy No. MBI/PC-0704 for P35,000.00
Own Damage; P30,000.00 Theft; and
P30,000.00 Third Party Liability,
effective May 16, 1977 to May 16, 1978. On
May 9, 1978, the vehicle was brought to the
Sunday Machine Works, Inc., for general
check-up and repairs. On May 11, 1978,
while it was in the custody of the Sunday
Machine Works, the car was allegedly taken
by six (6) persons and driven out to
Montalban, Rizal. While travelling along
Mabini St., Sitio Palyasan, Barrio Burgos,
going North at Montalban, Rizal, the car
figured in an accident, hitting and bumping a
gravel and sand truck parked at the right side
of the road going south. As a consequence,
the gravel and sand truck veered to the right
side of the pavement going south and the car
veered to the right side of the pavement
going north. The driver, Benito Mabasa, and
one of the passengers died and the other four
sustained physical injuries. The car, as well,
suffered extensive damage. Complainant,
thereafter, filed a claim for total loss with
the respondent company but claim was
denied. Hence, complainant, was compelled
to institute the present action.
The comprehensive motor car insurance policy for P35,000.00
issued by respondent Empire Insurance Company admittedly
undertook to indemnify the petitioner-insured against loss or
damage to the car (a) by accidental collision or overturning, or
collision or overturning consequent upon mechanical
breakdown or consequent upon wear and tear; (b) by fire,
external explosion, self-ignition or lightning or burglary,
housebreaking or theft; and (c) by malicious act.
Respondent insurance commission, however, dismissed
petitioner's complaint for recovery of the total loss of the
vehicle against private respondent, sustaining respondent
insurer's contention that the accident did not fall within the
provisions of the policy either for the Own Damage or Theft
coverage, invoking the policy provision on "Authorized
Driver" clause. 1
Respondent commission upheld private respondent's
contention on the "Authorized Driver" clause in this wise: "It
must be observed that under the above-quoted provisions, the
policy limits the use of the insured vehicle to two (2) persons
only, namely: the insured himself or any person on his
(insured's) permission. Under the second category, it is to be
noted that the words "any person' is qualified by the phrase
... on the insured's order or with his
permission.' It is therefore clear that if the
person driving is other than the insured, he
must have been duly authorized by the
insured, to drive the vehicle to make the
insurance company liable for the driver's
negligence. Complainant admitted that she
did not know the person who drove her
vehicle at the time of the accident, much less
consented to the use of the same (par. 5 of
the complaint). Her husband likewise
admitted that he neither knew this driver
Benito Mabasa (Exhibit '4'). With these
declarations of complainant and her
husband, we hold that the person who drove
the vehicle, in the person of Benito Mabasa,
is not an authorized driver of the
complainant. Apparently, this is a violation
of the 'Authorized Driver' clause of the
policy.
Respondent commission likewise upheld private respondent's
assertion that the car was not stolen and therefore not covered
by the Theft clause, ruling that "The element of 'taking' in
Article 308 of the Revised Penal Code means that the act of
depriving another of the possession and dominion of a
movable thing is coupled ... with the intention. at the time of
the 'taking', of withholding it with the character of permanency
(People vs. Galang, 7 Appt. Ct. Rep. 13). In other words, there
must have been shown a felonious intent upon the part of the
taker of the car, and the intent must be an intent permanently
to deprive the insured of his car," and that "Such was not the
case in this instance. The fact that the car was taken by one of
the residents of the Sunday Machine Works, and the
withholding of the same, for a joy ride should not be construed
to mean 'taking' under Art. 308 of the Revised Penal Code. If
at all there was a 'taking', the same was merely temporary in
nature. A temporary taking is held not a taking insured against
(48 A LR 2d., page 15)."
The Court finds respondent commission's dismissal of the
complaint to be contrary to the evidence and the law.
First, respondent commission's ruling that the person who
drove the vehicle in the person of Benito Mabasa, who,
according to its finding, was one of the residents of the
Sunday Machine Works, Inc. to whom the car had been
entrusted for general check-up and repairs was not an
"authorized driver" of petitioner-complainant is too restrictive
and contrary to the established principle that insurance
contracts, being contracts of adhesion where the only
participation of the other party is the signing of his signature
or his "adhesion" thereto, "obviously call for greater strictness
and vigilance on the part of courts of justice with a view of
protecting the weaker party from abuse and imposition, and
prevent their becoming traps for the unwary. 2
The main purpose of the "authorized driver" clause, as may be
seen from its text, supra, is that a person other than the insured
owner, who drives the car on the insured's order, such as his
regular driver, or with his permission, such as a friend or
member of the family or the employees of a car service or
repair shop must be duly licensed drivers and have no
disqualification to drive a motor vehicle.
A car owner who entrusts his car to an established car service
and repair shop necessarily entrusts his car key to the shop
owner and employees who are presumed to have the insured's
permission to drive the car for legitimate purposes of checking
or road-testing the car. The mere happenstance that the
employee(s) of the shop owner diverts the use of the car to his
own illicit or unauthorized purpose in violation of the trust
reposed in the shop by the insured car owner does not mean
that the "authorized driver" clause has been violated such as to
bar recovery, provided that such employee is duly qualified to
drive under a valid driver's license.
The situation is no different from the regular or family driver,
who instead of carrying out the owner's order to fetch the
children from school takes out his girl friend instead for a joy
ride and instead wrecks the car. There is no question of his
being an "authorized driver" which allows recovery of the loss
although his trip was for a personal or illicit purpose without
the owner's authorization.
Secondly, and independently of the foregoing (since when a
car is unlawfully taken, it is the theft clause, not the
"authorized driver" clause, that applies), where a car is
admittedly as in this case unlawfully and wrongfully taken by
some people, be they employees of the car shop or not to
whom it had been entrusted, and taken on a long trip to
Montalban without the owner's consent or knowledge, such
taking constitutes or partakes of the nature of theft as defined
in Article 308 of the Revised Penal Code, viz. "Who are liable
for theft. Theft is committed by any person who, with
intent to gain but without violence against or intimidation of
persons nor force upon things, shall take personal property of
another without the latter's consent," for purposes of
recovering the loss under the policy in question.
The Court rejects respondent commission's premise that there
must be an intent on the part of the taker of the car
"permanently to deprive the insured of his car" and that since
the taking here was for a "joy ride" and "merely temporary in
nature," a "temporary taking is held not a taking insured
against."
The evidence does not warrant respondent commission's
findings that it was a mere "joy ride". From the very
investigator's report cited in its comment, 3 the police found
from the waist of the car driver Benito Mabasa Bartolome who
smashed the car and was found dead right after the incident
"one cal. 45 Colt. and one apple type grenade," hardly the
materials one would bring along on a "joy ride". Then, again,
it is equally evident that the taking proved to be quite
permanent rather than temporary, for the car was totally
smashed in the fatal accident and was never returned in
serviceable and useful condition to petitioner-owner.
Assuming, despite the totally inadequate evidence, that the
taking was "temporary" and for a "joy ride", the Court sustains
as the better view that which holds that when a person, either
with the object of going to a certain place, or learning how to
drive, or enjoying a free ride, takes possession of a vehicle
belonging to another, without the consent of its owner, he is
guilty of theft because by taking possession of the personal
property belonging to another and using it, his intent to gain is
evident since he derives therefrom utility, satisfaction,
enjoyment and pleasure. Justice Ramon C. Aquino cites in his
work Groizard who holds that the use of a thing constitutes
gain and Cuello Calon who calls it "hurt de uso. " 4
The insurer must therefore indemnify the petitioner-owner for
the total loss of the insured car in the sum of P35,000.00 under
the theft clause of the policy, subject to the filing of such
claim for reimbursement or payment as it may have as
subrogee against the Sunday Machine Works, Inc.
ACCORDINGLY, the appealed decision is set aside and
judgment is hereby rendered sentencing private respondent to
pay petitioner the sum of P35,000.00 with legal interest from
the filing of the complaint until full payment is made and to
pay the costs of suit.
SO ORDERED.
11.
G.R. No. L-35529 July 16, 1984
NORA CANSING SERRANO, petitioner,
vs.
COURT OF APPEALS and SOCIAL SECURITY
COMMISSION, respondents.
MAKASIAR, J., Chairman:
This petition for certiorari seeks to review the decision of the
then Court of Appeals (now Intermediate Appellate Court
under BP 129) dated August 31, 1972, affirming the validity
of the resolution of the Social Security Commission denying
favorable consideration of the claim for benefits of the
petitioner under the Group Redemption Insurance plan of the
Social Security System (SYSTEM). The dispositive portion of
the respondent Court's decision reads as follows:
WHEREFORE, the Court hereby upholds
the validity of the appealed resolution No.
1365, dated December 24, 1968, of appellee
Social Security Commission; without
pronouncement as to costs (p. 31, Rec.).
The undisputed facts are as follows:
On or about January 1, 1965, upon application of the
SYSTEM, Group Mortgage Redemption Policy No. GMR-1
was issued by Private Life Insurance Companies operating in
the Philippines for a group life insurance policy on the lives of
housing loan mortgagors of the SYSTEM. Under this Group
Mortgage Redemption scheme, a grantee of a housing loan of
the SYSTEM is required to mortgage the house constructed
out of the loan and the lot on which it stands. The SYSTEM
takes a life insurance on the eligible mortgagor to the extent of
the mortgage indebtedness such that if the mortgagor dies, the
proceeds of his life insurance under the Group Redemption
Policy will be used to pay his indebtedness to the SYSTEM
and the deceased's heirs will thereby be relieved of the burden
of paying for the amortization of the deceased's still unpaid
loan to the SYSTEM (p. 25, rec.).
Petitioner herein is the widow of the late Bernardo G. Serrano,
who, at the time of his death, was an airline pilot of Air
Manila, Inc. and as such was a member of the Social Security
System.
On November 10, 1967, the SYSTEM approved the real estate
mortgage loan of the late Bernardo G. Serrano for P37,400.00
for the construction of the applicant's house (pp. 25-26, rec.).
On December 26, 1967, a partial release in the amount of
P35,400.00 was effected and devoted to the construction of the
house (p. 2, rec.). As a consequence, a mortgage contract was
executed in favor of the SYSTEM by the late Captain Serrano
with his wife as co-mortgagor.
On March 8, 1968, Captain Serrano died in a plane crash and
because of his death, the SYSTEM closed his housing loan
account to the released amount of P35,400.00 (p. 26, rec.).
On December 2, 1968, the petitioner sent a letter addressed to
the Chairman of the Social Security Commission requesting
that the benefits of the Group Mortgage Redemption Insurance
be extended to her.
The letter of the petitioner was referred to the Administrator of
the SYSTEM, who recommended its disapproval on the
ground that the late Captain Serrano was not yet covered by
the Group Mortgage Redemption Insurance policy at the time
of his death on March 8, 1968. In its resolution No. 1365 dated
December 24, 1968, the Social Security Commission sustained
the said stand of the SYSTEM and thereby formally denied
the request of the petitioner (p. 26, rec.).
On appeal to the then Court of Appeals, the respondent Court
affirmed the decision of the Social Security Commission.
Hence, this petition.
The only issue to be resolved is the correctness of the
interpretation given by the respondent Commission which was
upheld by the respondent Court as to the applicability of the
Mortgage Redemption Insurance plan particularly on when
coverage on the life of the mortgagor commences.
Article II (Insurance Coverage) of the Group Mortgage
Redemption Police No. GMR-1 provides:
Section 1. Eligibility. Every mortgagor
who is not over age 65 nearest birthday at
the time the Mortgage Loan is granted (or,
in the case of a Mortgagor applying for
insurance coverage on a Mortgage Loan
granted before the Date of Issue, at the time
he makes such application) and who would
not be over 75 nearest birthday on the date
on which the original term of the Mortgage
Loan expires shall be eligible for insurance
coverage under this Policy, provided that if
the total indebtedness to the Creditor under
the new Mortgage Loan and the outstanding
balance of any prior Mortgage Loan or
Loans insured hereunder, exceeds
P70,000.00, he will be eligible for insurance
coverage up to this maximum limit only.
Co-makers or co-signers of mortgage
contract are not eligible for coverage under
this Policy.
Section 2. Mode of Acceptance. Any
Mortgagor who is eligible for coverage on
or after the Date of Issue shall
be automatically insured, subject to the
amount of insurance limit in Section 1
hereof, without proof of insurability
provided that he is not more than age 60
nearest birthday at the time the Mortgage
Loan is granted. Such a mortgagor who is
over age 60 nearest birthday at the time the
Mortgage Loan is granted may be accepted
for insurance only subject to the submission
of evidence of insurability satisfactory to the
Subscribing Companies.
Any eligible Mortgagor who was already a
Mortgagor before the Date of Issue shall be
automatically insured, subject to the amount
of insurance limit in Section 1 hereof,
without proof of insurability provided that
he is not more than age 60 nearest birthday
on the Date of Issue and that he makes
written application to the Creditor for
coverage within ninety (90) days from the
Date of Issue. If such a Mortgagor applies
for coverage after ninety (90) days from the
Date of Issue. he may be accepted for
insurance upon written application therefor,
subject to the submission of evidence of
insurability to the Subscribing Companies.
Section 3. Effective Date of Insurance.
The insurance on the life of each eligible
Mortgagor Loan or partial release of
Mortgage Loan accepted for coverage who
becomes a Mortgagor on or after the Date of
Issue shall take effect from the beginning of
the amortization period of such Mortgage
Loan or partial release of Mortgage Loan.
The beginning of the amortization period as
used herein shall mean the first day of the
month preceding the month in which the
first monthly amortization payment falls
due.
It is hereby understood that before any
release on any approved Mortgage Loan is
made by the Creditor, the requisites binding
the Mortgagor and the Creditor as regards to
said Mortgage Loan shall have been
completed
xxx xxx xxx
(pp. 59-60, rec.; emphasis supplied).
A careful analysis of the provisions leads to the conclusion
that the respondent Court of Appeals erred in construing the
effectivity date of insurance coverage from the beginning of
the amortization period of the loan.
WE REVERSE.
There can be no doubt as to the eligibility of the late Captain
Serrano for coverage under Section 1 of Article II of the
Group Mortgage Redemption Insurance Policy as he was a
mortgagor of the Social Security System not over the age of
65 nearest his birthday at the time when the mortgage loan
was granted to him (p. 26, rec.). This fact was admitted not
only by the Social Security Commission but also accepted by
the Court of Appeals.
The problem manifests itself in Sections 2 and 3 of the same
article of the Group Mortgage Redemption Insurance Policy.
Section 2 provides that "any mortgagor who is eligible for
coverage on or after the Date of Issue shall be automatically
insured, ..." (emphasis supplied); while Section 3 provides that
the insurance "shall take effect from the beginning of the
amortization period of such Mortgage loan or partial release
of Mortgage Loan " (emphasis supplied).
Section 2 of Article II of the Group Mortgage Redemption
Insurance Policy provides that insurance coverage shall be
"automatic" and limited only by the amount of insurance and
age requirement. While the same section has for its title the
mode of acceptance, what is controlling is the meaning of the
provision itself. The said section can only convey the Idea that
the mortgagor who is eligible for coverage on or after the date
of issue shall be automatically insured. The only condition is
that the age requirement should be satisfied, which had been
complied with by the deceased mortgagor in the instant case.
Under said Section 2, mortgage redemption insurance is not
just automatic; it is compulsory for all qualified borrowers.
This is the same automatic redemption insurance applied to all
qualified borrowers by the GSIS (Government Service
Insurance System) and the DBP (Development Bank of the
Philippines). Indeed, the Mortgage Redemption Insurance
Policy of the GSIS provides:
Sec. 2. ... This policy is granted subject to
the terms and conditions set forth at the back
hereof and in consideration of the
application therefor and shall take effect on
the date of the first date of the
aforementioned loan (p. 126, CA rec.;
emphasis supplied).
WE take judicial notice of the Mortgage Contract being issued
by the Social Security System in connection with applications
for housing loans, specifically Section 16 thereof:
Section 16. (a) The loan shall be secured
against the death of the borrower through
the Mortgage Redemption Insurance Plan;
(b) Coverage shall take effect on the date of
the first release voucher of the loan and
shall continue until the real estate mortgage
loan is fully paid; ... (emphasis supplied).
However, Section 3 of Article II presents an ambiguity. The
effective date of coverage can be interpreted to mean that the
insurance contract takes effect "from the beginning of the
amortization period of such Mortgage Loan" or "partial release
of Mortgage Loan."
Applying Article 1374 of the new Civil Code, the mortgagor
in the instant case was already covered by the insurance upon
the partial release of the loan.
Article 1374, NCC, reads thus:
The various stipulations of a contract shall
be interpreted together, attributing to the
doubtful ones that sense which may result
from all of them taken jointly.
The ambiguity in Section 3 of Article II should be resolved in
favor of the petitioner. "The interpretation of obscure words or
stipulations in a contract shall not favor the party who caused
the obscurity" (Article 1377, Civil Code). WE have held that
provisions, conditions or exceptions tending to work a
forfeiture of insurance policies should be construed most
strongly against those for whose benefit they are inserted, and
most favorably toward those against whom they are intended
to operate (Trinidad vs. Orient Protective Ass., 67 Phil. 181).
While the issuance of the Group Mortgage Redemption
Insurance is a contract between the Social Security System
and the Private Life Insurance Companies, the fact is that the
SYSTEM entered into such a contract to afford protection not
only to itself should the mortgagor die before fully paying the
loan but also to afford protection to the mortgagor. WE take
note of the following:
I. Insurance Coverage.
1. Fire insurance. The SSS-financed
house shall be covered by fire insurance
equal to its appraised value or the amount of
the loan, whichever is lesser.
2. Mortgage Redemption Insurance.
Coverage shall be compulsory for any
mortgagor who is not more than 60 years
old.
The insured indebtedness on the mortgage
as provided in the policy shall be deemed
paid upon the death of a mortgagor covered
under the MRI (Employees' Benefits &
Social Welfare, 1983 Rev. Ed., CBSI, pp.
50-51; emphasis supplied).
It is imperative to dissect the rationale of the insurance scheme
envisioned by the Social Security System. The Mortgage
Redemption Insurance device is not only for the protection of
the SYSTEM but also for the benefit of the mortgagor. On the
part of the SYSTEM, it has to enter into such form of contract
so that in the event of the unexpected demise of the mortgagor
during the subsistence of the mortgage contract, the proceeds
from such insurance will be applied to the payment of the
mortgage debt, thereby relieving the heirs of the mortgagor
from paying the obligation. The SYSTEM insures the payment
to itself of the loan with the insurance proceeds. It also negates
any future problem that can crop up should the heirs be not in
a position to pay the mortgage loan. In short, the process of
amortization is hastened and possible litigation in the future is
avoided. In a similar vein, ample protection is given to the
mortgagor under such a concept so that in the event of his
death; the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage
indebtedness.
The interpretation of the Social Security Commission goes
against the very rationale of the insurance scheme. It cannot
unjustly enrich itself at the expense of another (Nemo cum
alterius detrimento protest). "Every person must, in the
exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and
good faith" (Article 19, Civil Code). Simply put, the SYSTEM
cannot be allowed to have the advantage of collecting the
insurance benefits from the private life insurance companies
and at the same time avoid its responsibility of giving the
benefits of the Mortgage Redemption Insurance plan to the
mortgagor. The very reason for the existence of the Social
Security System is to extend social benefits. For SSS to be
allowed to deny benefits to its members, is certainly not in
keeping with its policy "... to establish, develop, promote and
perfect a sound and viable tax-exempt social security service
suitable to the needs of the people throughout the Philippines,
which shall provide to covered employees and their families
protection against the hazards of disability, sickness, old age,
and death with a view to promote their well-being in the spirit
of social justice" (The Social Security Law, R.A. No. 1161, as
amended).
To sustain the position of the SSS is to allow it to collect twice
the same amount first from the insurance companies which
paid to it the amount of the MRI and then from the heirs of the
deceased mortgagor. This result is unconscionable as it is
iniquitous.
It is very clear that the spirit of social justice permeates the
insurance scheme under the Group Mortgage Redemption
Insurance. It is a welcome innovation in these times when the
concept of social justice is not just an empty slogan nor a mere
shibboleth. Social justice is explicitly institutionalized and
guaranteed under the Constitution (Article II, Section 6, 1973
Constitution). The construction that would enhance the State's
commitment on social justice mandates Us to hold for the
petitioner.
Usually, among the items to be deducted by the SYSTEM
from the first release of the loan is the premium corresponding
to the mortgage redemption insurance (MRI). However, if the
premium corresponding to the amount to be deducted from the
first release of the loan was not paid by the borrower, the
deceased mortgagor, the said unpaid premium should be
refunded by the heirs of the borrower.
WHEREFORE, THE DECISION OF THE RESPONDENT
COURT OF APPEALS AFFIRMING RESOLUTION NO.
1365 OF RESPONDENT COMMISSION IS HEREBY SET
ASIDE. THE SOCIAL SECURITY SYSTEM IS HEREBY
DIRECTED TO RELEASE THE PETITIONER FROM
PAYING THE MORTGAGE LOAN. THE PETITIONER IS
HEREBY DIRECTED TO REFUND TO THE SSS THE
PREMIUM CORRESPONDING TO THE RELEASED
AMOUNT, IF THE SAME HAD NOT BEEN DEDUCTED
THEREFROM. NO COSTS.
SO ORDERED.
12.
G.R. No. L-36413 September 26, 1988
MALAYAN INSURANCE CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS (THIRD DIVISION)
MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE
MILL, INC. and PANGASINAN TRANSPORTATION
CO., INC., respondents.
Freqillana Jr. for petitioner.
B.F. Estrella & Associates for respondent Martin Vallejos.
Vicente Erfe Law Office for respondent Pangasinan
Transportation Co., Inc.
Nemesio Callanta for respondent Sio Choy and San Leon Rice
Mill, Inc.
PADILLA, J.:
Review on certiorari of the judgment * of the respondent
appellate court in CA-G.R. No. 47319-R, dated 22 February
1973, which affirmed, with some modifications, the
decision, ** dated 27 April 1970, rendered in Civil Case No.
U-2021 of the Court of First Instance of Pangasinan.
The antecedent facts of the case are as follows:
On 29 March 1967, herein petitioner, Malayan Insurance Co.,
Inc., issued in favor of private respondent Sio Choy Private
Car Comprehensive Policy No. MRO/PV-15753, effective
from 18 April 1967 to 18 April 1968, covering a Willys jeep
with Motor No. ET-03023 Serial No. 351672, and Plate No. J-
21536, Quezon City, 1967. The insurance coverage was for
"own damage" not to exceed P600.00 and "third-party
liability" in the amount of P20,000.00.
During the effectivity of said insurance policy, and more
particularly on 19 December 1967, at about 3:30 o'clock in the
afternoon, the insured jeep, while being driven by one Juan P.
Campollo an employee of the respondent San Leon Rice Mill,
Inc., collided with a passenger bus belonging to the respondent
Pangasinan Transportation Co., Inc. (PANTRANCO, for
short) at the national highway in Barrio San Pedro, Rosales,
Pangasinan, causing damage to the insured vehicle and
injuries to the driver, Juan P. Campollo, and the respondent
Martin C. Vallejos, who was riding in the ill-fated jeep.
As a result, Martin C. Vallejos filed an action for damages
against Sio Choy, Malayan Insurance Co., Inc. and the
PANTRANCO before the Court of First Instance of
Pangasinan, which was docketed as Civil Case No. U-2021.
He prayed therein that the defendants be ordered to pay him,
jointly and severally, the amount of P15,000.00, as
reimbursement for medical and hospital expenses; P6,000.00,
for lost income; P51,000.00 as actual, moral and
compensatory damages; and P5,000.00, for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy
was then operated at an excessive speed and bumped the
PANTRANCO bus which had moved to, and stopped at, the
shoulder of the highway in order to avoid the jeep; and that it
had observed the diligence of a good father of a family to
prevent damage, especially in the selection and supervision of
its employees and in the maintenance of its motor vehicles. It
prayed that it be absolved from any and all liability.
Defendant Sio Choy and the petitioner insurance company, in
their answer, also denied liability to the plaintiff, claiming that
the fault in the accident was solely imputable to the
PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-
claim against the herein petitioner wherein he alleged that he
had actually paid the plaintiff, Martin C. Vallejos, the amount
of P5,000.00 for hospitalization and other expenses, and, in his
cross-claim against the herein petitioner, he alleged that the
petitioner had issued in his favor a private car comprehensive
policy wherein the insurance company obligated itself to
indemnify Sio Choy, as insured, for the damage to his motor
vehicle, as well as for any liability to third persons arising out
of any accident during the effectivity of such insurance
contract, which policy was in full force and effect when the
vehicular accident complained of occurred. He prayed that he
be reimbursed by the insurance company for the amount that
he may be ordered to pay.
Also later, the herein petitioner sought, and was granted, leave
to file a third-party complaint against the San Leon Rice Mill,
Inc. for the reason that the person driving the jeep of Sio
Choy, at the time of the accident, was an employee of the San
Leon Rice Mill, Inc. performing his duties within the scope of
his assigned task, and not an employee of Sio Choy; and that,
as the San Leon Rice Mill, Inc. is the employer of the
deceased driver, Juan P. Campollo, it should be liable for the
acts of its employee, pursuant to Art. 2180 of the Civil Code.
The herein petitioner prayed that judgment be rendered against
the San Leon Rice Mill, Inc., making it liable for the amounts
claimed by the plaintiff and/or ordering said San Leon Rice
Mill, Inc. to reimburse and indemnify the petitioner for any
sum that it may be ordered to pay the plaintiff.
After trial, judgment was rendered as follows:
WHEREFORE, in view of the foregoing
findings of this Court judgment is hereby
rendered in favor of the plaintiff and against
Sio Choy and Malayan Insurance Co., Inc.,
and third-party defendant San Leon Rice
Mill, Inc., as follows:
(a) P4,103 as actual damages;
(b) P18,000.00 representing the unearned
income of plaintiff Martin C. Vallejos for
the period of three (3) years;
(c) P5,000.00 as moral damages;
(d) P2,000.00 as attomey's fees or the total
of P29,103.00, plus costs.
The above-named parties against whom this
judgment is rendered are hereby held jointly
and severally liable. With respect, however,
to Malayan Insurance Co., Inc., its liability
will be up to only P20,000.00.
As no satisfactory proof of cost of damage
to its bus was presented by defendant
Pantranco, no award should be made in its
favor. Its counter-claim for attorney's fees is
also dismissed for not being proved. 1
On appeal, the respondent Court of Appeals affirmed the
judgment of the trial court that Sio Choy, the San Leon Rice
Mill, Inc. and the Malayan Insurance Co., Inc. are jointly and
severally liable for the damages awarded to the plaintiff
Martin C. Vallejos. It ruled, however, that the San Leon Rice
Mill, Inc. has no obligation to indemnify or reimburse the
petitioner insurance company for whatever amount it has been
ordered to pay on its policy, since the San Leon Rice Mill, Inc.
is not a privy to the contract of insurance between Sio Choy
and the insurance company. 2
Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's
judgment, or, in the alternative, to order the San Leon Rice
Mill, Inc. to reimburse petitioner any amount, in excess of
one-half (1/2) of the entire amount of damages, petitioner may
be ordered to pay jointly and severally with Sio Choy.
The Court, acting upon the petition, gave due course to the
same, but "only insofar as it concerns the alleged liability of
respondent San Leon Rice Mill, Inc. to petitioner, it being
understood that no other aspect of the decision of the Court of
Appeals shall be reviewed, hence, execution may already issue
in favor of respondent Martin C. Vallejos against the
respondents, without prejudice to the determination of whether
or not petitioner shall be entitled to reimbursement by
respondent San Leon Rice Mill, Inc. for the whole or part of
whatever the former may pay on the P20,000.00 it has been
adjudged to pay respondent Vallejos." 3
However, in order to determine the alleged liability of
respondent San Leon Rice Mill, Inc. to petitioner, it is
important to determine first the nature or basis of the liability
of petitioner to respondent Vallejos, as compared to that of
respondents Sio Choy and San Leon Rice Mill, Inc.
Therefore, the two (2) principal issues to be resolved are (1)
whether the trial court, as upheld by the Court of Appeals, was
correct in holding petitioner and respondents Sio Choy and
San Leon Rice Mill, Inc. "solidarily liable" to respondent
Vallejos; and (2) whether petitioner is entitled to be
reimbursed by respondent San Leon Rice Mill, Inc. for
whatever amount petitioner has been adjudged to pay
respondent Vallejos on its insurance policy.
As to the first issue, it is noted that the trial court found, as
affirmed by the appellate court, that petitioner and respondents
Sio Choy and San Leon Rice Mill, Inc. are jointly and
severally liable to respondent Vallejos.
We do not agree with the aforesaid ruling. We hold instead
that it is only respondents Sio Choy and San Leon Rice Mill,
Inc, (to the exclusion of the petitioner) that are solidarily liable
to respondent Vallejos for the damages awarded to Vallejos.
It must be observed that respondent Sio Choy is made liable to
said plaintiff as owner of the ill-fated Willys jeep, pursuant to
Article 2184 of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the
owner is solidarily liable with his driver, if
the former, who was in the vehicle, could
have, by the use of due diligence, prevented
the misfortune it is disputably presumed that
a driver was negligent, if he had been found
guilty of reckless driving or violating traffic
regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle,
the provisions of article 2180 are applicable.
On the other hand, it is noted that the basis of liability of
respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the
former being the employer of the driver of the Willys jeep at
the time of the motor vehicle mishap, is Article 2180 of the
Civil Code which reads:
Art. 2180. The obligation imposed by article
2176 is demandable not only for one's own
acts or omissions, but also for those of
persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages
caused by their employees and household
helpers acting within the scope of their
assigned tasks, even though the former are
not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall
cease when the persons herein mentioned
proved that they observed all the diligence
of a good father of a family to prevent
damage.
It thus appears that respondents Sio Choy and San Leon Rice
Mill, Inc. are the principal tortfeasors who are primarily liable
to respondent Vallejos. The law states that the responsibility
of two or more persons who are liable for a quasi-delict is
solidarily. 4
On the other hand, the basis of petitioner's liability is its
insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not
more than P20,000.00, this is on account of its being the
insurer of respondent Sio Choy under the third party liability
clause included in the private car comprehensive policy
existing between petitioner and respondent Sio Choy at the
time of the complained vehicular accident.
In Guingon vs. Del Monte, 5 a passenger of a jeepney had just
alighted therefrom, when he was bumped by another
passenger jeepney. He died as a result thereof. In the damage
suit filed by the heirs of said passenger against the driver and
owner of the jeepney at fault as well as against the insurance
company which insured the latter jeepney against third party
liability, the trial court, affirmed by this Court, adjudged the
owner and the driver of the jeepney at fault jointly and
severally liable to the heirs of the victim in the total amount of
P9,572.95 as damages and attorney's fees; while the insurance
company was sentenced to pay the heirs the amount of
P5,500.00 which was to be applied as partial satisfaction of
the judgment rendered against said owner and driver of the
jeepney. Thus, in said Guingoncase, it was only the owner and
the driver of the jeepney at fault, not including the insurance
company, who were held solidarily liable to the heirs of the
victim.
While it is true that where the insurance contract provides for
indemnity against liability to third persons, such third persons
can directly sue the insurer, 6 however, the direct liability of
the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held solidarily
liable with the insured and/or the other parties found at fault.
The liability of the insurer is based on contract; that of the
insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to
respondent Vallejos, but it cannot, as incorrectly held by the
trial court, be made "solidarily" liable with the two principal
tortfeasors namely respondents Sio Choy and San Leon Rice
Mill, Inc. For if petitioner-insurer were solidarily liable with
said two (2) respondents by reason of the indemnity contract
against third party liability-under which an insurer can be
directly sued by a third party this will result in a violation
of the principles underlying solidary obligation and insurance
contracts.
In solidary obligation, the creditor may enforce the entire
obligation against one of the solidary debtors. 7 On the other
hand, insurance is defined as "a contract whereby one
undertakes for a consideration to indemnify another against
loss, damage, or liability arising from an unknown or
contingent event." 8
In the case at bar, the trial court held petitioner together with
respondents Sio Choy and San Leon Rice Mills Inc. solidarily
liable to respondent Vallejos for a total amount of P29,103.00,
with the qualification that petitioner's liability is only up to
P20,000.00. In the context of a solidary obligation, petitioner
may be compelled by respondent Vallejos to pay
the entire obligation of P29,013.00, notwithstanding the
qualification made by the trial court. But, how can petitioner
be obliged to pay the entire obligation when the amount stated
in its insurance policy with respondent Sio Choy for indemnity
against third party liability is only P20,000.00? Moreover, the
qualification made in the decision of the trial court to the
effect that petitioner is sentenced to pay up to P20,000.00 only
when the obligation to pay P29,103.00 is made solidary, is an
evident breach of the concept of a solidary obligation. Thus,
We hold that the trial court, as upheld by the Court of
Appeals, erred in holding petitioner, solidarily liable with
respondents Sio Choy and San Leon Rice Mill, Inc. to
respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the
decision of the trial court, ruled that petitioner is not entitled to
be reimbursed by respondent San Leon Rice Mill, Inc. on the
ground that said respondent is not privy to the contract of
insurance existing between petitioner and respondent Sio
Choy. We disagree.
The appellate court overlooked the principle of subrogation in
insurance contracts. Thus
... Subrogation is a normal incident of
indemnity insurance (Aetna L. Ins. Co. vs.
Moses, 287 U.S. 530, 77 L. ed. 477). Upon
payment of the loss, the insurer is entitled to
be subrogated pro tanto to any right of
action which the insured may have against
the third person whose negligence or
wrongful act caused the loss (44 Am. Jur.
2nd 745, citing Standard Marine Ins. Co. vs.
Scottish Metropolitan Assurance Co., 283
U.S. 284, 75 L. ed. 1037).
The right of subrogation is of the highest
equity. The loss in the first instance is that of
the insured but after reimbursement or
compensation, it becomes the loss of the
insurer (44 Am. Jur. 2d, 746, note 16, citing
Newcomb vs. Cincinnati Ins. Co., 22 Ohio
St. 382).
Although many policies including policies
in the standard form, now provide for
subrogation, and thus determine the rights of
the insurer in this respect, the equitable right
of subrogation as the legal effect of payment
inures to the insurer without any formal
assignment or any express stipulation to that
effect in the policy" (44 Am. Jur. 2nd 746).
Stated otherwise, when the insurance
company pays for the loss, such payment
operates as an equitable assignment to the
insurer of the property and all remedies
which the insured may have for the recovery
thereof. That right is not dependent upon ,
nor does it grow out of any privity of
contract (emphasis supplied) or upon
written assignment of claim, and payment to
the insured makes the insurer assignee in
equity (Shambley v. Jobe-Blackley
Plumbing and Heating Co., 264 N.C. 456,
142 SE 2d 18). 9
It follows, therefore, that petitioner, upon paying respondent
Vallejos the amount of riot exceeding P20,000.00, shall
become the subrogee of the insured, the respondent Sio Choy;
as such, it is subrogated to whatever rights the latter has
against respondent San Leon Rice Mill, Inc. Article 1217 of
the Civil Code gives to a solidary debtor who has paid the
entire obligation the right to be reimbursed by his co-debtors
for the share which corresponds to each.
Art. 1217. Payment made by one of the
solidary debtors extinguishes the obligation.
If two or more solidary debtors offer to pay,
the creditor may choose which offer to
accept.
He who made the payment may claim from
his co-debtors only the share which
corresponds to each, with the interest for the
payment already made. If the payment is
made before the debt is due, no interest for
the intervening period may be demanded.
xxx xxx xxx
In accordance with Article 1217, petitioner, upon payment to
respondent Vallejos and thereby becoming the subrogee of
solidary debtor Sio Choy, is entitled to reimbursement from
respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy
and San Leon Rice Mill, Inc. are solidarily liable to the
respondent Martin C. Vallejos for the amount of P29,103.00.
Vallejos may enforce the entire obligation on only one of said
solidary debtors. If Sio Choy as solidary debtor is made to pay
for the entire obligation (P29,103.00) and petitioner, as insurer
of Sio Choy, is compelled to pay P20,000.00 of said entire
obligation, petitioner would be entitled, as subrogee of Sio
Choy as against San Leon Rice Mills, Inc., to be reimbursed
by the latter in the amount of P14,551.50 (which is 1/2 of
P29,103.00 )
WHEREFORE, the petition is GRANTED. The decision of
the trial court, as affirmed by the Court of Appeals, is hereby
AFFIRMED, with the modification above-mentioned. Without
pronouncement as to costs.
SO ORDERED.