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INSURANCE-POLICY DIGESTS ISSUE:

RCBC VS CA 1. RCBCs right to intervene in the action between Alfredo


C. Sebastian (the creditor) and GOYU (the debtor), where
FACTS: the subject insurance policies were attached in favor of
GOYU applied for credit facilities and accommodations Sebastian.
with RCBC. A credit facility in the amount of P30 million
2. The extent of GOYUs outstanding obligation with
was initially granted. Upon GOYUs application and Uys
RCBC which the proceeds of the 8 insurance policies will
and Laos recommendation, RCBCs executive committee
discharge and liquidate, or put differently, the actual
increased GOYUs credit facility to P50 million, then to
amount of GOYUs liability to RCBC.
P90 million, and finally to P117 million.
3. MICO’s liability for damages when it denied the claim
As security for its credit facilities with RCBC, GOYU
executed two real estate mortgages and two chattel RULING:
mortgages in favor of RCBC. Under each of these four
1. RCBC has a right to intervene.
mortgage contracts, GOYU committed itself to insure the
mortgaged property with an insurance company approved It is settled that a mortgagor and a mortgagee have
by RCBC, and subsequently, to endorse and deliver the separate and distinct insurable interests in the same
insurance policies to RCBC. mortgaged property, such that each one of them may
insure the same property for his own sole benefit. There
GOYU obtained in its name a total of ten insurance
is no question that GOYU could insure the mortgaged
policies from MICO. Alchester Insurance Agency, Inc.,
property for its own exclusive benefit. In the present case,
the insurance agent where GOYU obtained the Malayan
although it appears that GOYU obtained the subject
insurance policies, issued nine endorsements in favor of
insurance policies naming itself as the sole payee, the
RCBC seemingly upon instructions of GOYU.
intentions of the parties as shown by their
One of GOYUs factory buildings in Valenzuela was contemporaneous acts, must be given due consideration
gutted by fire. Consequently, GOYU submitted its claim in order to better serve the interest of justice and equity.
for indemnity on account of the loss insured
It is to be noted that nine endorsement documents were
against. MICO denied the claim on the ground that the
prepared by Alchester in favor of RCBC. The Court is in
insurance policies were either attached pursuant to writs
a quandary how Alchester could arrive at the idea of
of attachments/garnishments issued by various courts or
endorsing any specific insurance policy in favor of any
that the insurance proceeds were also claimed by other
particular beneficiary or payee other than the insured had
creditors of GOYU alleging better rights to the proceeds
not such named payee or beneficiary been specifically
than the insured. GOYU filed a complaint for specific
disclosed by the insured itself. It is also significant that
performance and damages.
GOYU voluntarily and purposely took the insurance
RCBC, one of GOYUs creditors, also filed with MICO its policies from MICO, a sister company of RCBC, and not
formal claim over the proceeds of the insurance policies, just from any other insurance company. Alchester would
but said claims were also denied for the same reasons that not have found out that the subject pieces of property were
MICO denied GOYUs claims. mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been for
Interlocutory order- RTC confirmed that GOYUs other
GOYU, Alchester would not have known of GOYUs
creditors obtained their respective writs of attachments
intention of obtaining insurance coverage in compliance
from various courts, and ordered that the proceeds of the
with its undertaking in the mortgage contracts with
ten insurance policies be deposited with the said court.
RCBC, and verily, Alchester would not have endorsed the
Accordingly, MICO deposited the amount.
policies to RCBC had it not been so directed by GOYU.
RTC: ruled in favor of GOYU. All parties interposed their
The doctrine of estoppel is applied in favor of RCBC.
respective appeals. GOYU was unsatisfied with the
amounts awarded in its favor. MICO and RCBC disputed RCBC, in good faith, relied upon the endorsement
the trial courts findings of liability on their part. The Court documents sent to it as this was only pursuant to the
of Appeals partly granted GOYUs appeal, but sustained stipulation in the mortgage contracts. We find such
the findings of the trial court with respect to MICO and reliance to be justified under the circumstances of the
RCBCs liabilities. case. GOYU failed to seasonably repudiate the authority
of the person or persons who prepared such the insurance policies to be taken by GOYU to cover the
endorsements. Over and above this, GOYU continued, in mortgaged properties.
the meantime, to enjoy the benefits of the credit facilities
This Court can not over stress the fact that upon receiving
extended to it by RCBC. After the occurrence of the loss
its copies of the endorsement documents prepared by
insured against, it was too late for GOYU to disown the
Alchester, GOYU, despite the absence of its written
endorsements for any imagined or contrived lack of
conformity thereto, obviously considered said
authority of Alchester to prepare and issue said
endorsement to be sufficient compliance with its
endorsements. If there had not been actually an implied
obligation under the mortgage contracts since RCBC
ratification of said endorsements by virtue of GOYUs
accordingly continued to extend the benefits of its credit
inaction in this case, GOYU is at the very least estopped
facilities and GOYU continued to benefit therefrom. Just
from assailing their operative effects. To permit GOYU
as plain too is the intention of the parties to constitute
to capitalize on its non-confirmation of these
RCBC as the beneficiary of the various insurance policies
endorsements while it continued to enjoy the benefits of
obtained by GOYU.The intention of the parties will have
the credit facilities of RCBC which believed in good faith
to be given full force and effect in this particular case. The
that there was due endorsement pursuant to their
insurance proceeds may, therefore, be exclusively applied
mortgage contracts, is to countenance grave
to RCBC, which under the factual circumstances of the
contravention of public policy, fair dealing, good faith,
case, is truly the person or entity for whose benefit the
and justice.
policies were clearly intended.
GOYU cannot seek relief under Section 53 of the
The proceeds of the 8 insurance policies endorsed to
Insurance Code which provides that the proceeds of
RCBC aggregate to P89,974,488.36. Being exclusively
insurance shall exclusively apply to the interest of the
payable to RCBC by reason of the endorsement by
person in whose name or for whose benefit it is made. The
Alchester to RCBC, which we already ruled to have the
peculiarity of the circumstances obtaining in the instant
force and effect of an endorsement by GOYU itself, these
case presents a justification to take exception to the strict
8 policies can not be attached by GOYUs other creditors
application of said provision, it having been sufficiently
up to the extent of the GOYUs outstanding obligation in
established that it was the intention of the parties to
RCBCs favor.
designate RCBC as the party for whose benefit the
insurance policies were taken out. Consider thus the Section 53 of the Insurance Code ordains that the
following: insurance proceeds of the endorsed policies shall be
applied exclusively to the proper interest of the person for
1. It is undisputed that the insured pieces of property were
whose benefit it was made. In this case, to the extent of
the subject of mortgage contracts entered into between
GOYUs obligation with RCBC, the interest of GOYU in
RCBC and GOYU in consideration of and for securing
the subject policies had been transferred to RCBC
GOYUs credit facilities from RCBC. The mortgage
effective as of the time of the endorsement. These policies
contracts contained common provisions whereby GOYU,
may no longer be attached by the other creditors of
as mortgagor, undertook to have the mortgaged property
GOYU, like Alfredo Sebastian in the present G.R. No.
properly covered against any loss by an insurance
128834, which may nonetheless forthwith be dismissed
company acceptable to RCBC.
for being moot and academic in view of the results
2. GOYU voluntarily procured insurance policies to cover reached herein. Only the two other policies amounting to
the mortgaged property from MICO, no less than a sister P19,646,224.92 may be validly attached, garnished, and
company of RCBC and definitely an acceptable insurance levied upon by GOYUs other creditors. To the extent of
company to RCBC. GOYUs outstanding obligation with RCBC, all the rest of
the other insurance policies above-listed which were
3. Endorsement documents were prepared by MICOs
endorsed to RCBC, are, therefore, to be released from
underwriter, Alchester Insurance Agency, Inc., and copies
attachment, garnishment, and levy by the other creditors
thereof were sent to GOYU, MICO, and RCBC. GOYU
of GOYU.
did not assail, until of late, the validity of said
endorsements. 2. The Court of Appeals simply echoed the declaration of
the trial court finding that GOYUS total obligation to
4. GOYU continued until the occurrence of the fire, to
RCBC was only P68,785,060.04 as of April 27, 1992,
enjoy the benefits of the credit facilities extended by
thus sanctioning the trial courts exclusion of Promissory
RCBC which was conditioned upon the endorsement of
Note No. 421-92 (renewal of Promissory Note No. 908-
91) and Promissory Note No. 420-92 (renewal of cannot accept the lower courts finding that RCBC had
Promissory Note No. 952-91) on the ground that their thereby ipso facto effectively waived collection of any
execution is highly questionable for not only are these additional interests, surcharges, and penalties from
dated after the fire, but also because the signatures of GOYU. Assurances of assistance are one thing, but
either GOYU or any its representative are conspicuously waiver of additional interests, surcharges, and penalties is
absent. Accordingly, the Court of Appeals speculated another.
thusly:
3. MICO is not liable for damages
Hence, this Court is inclined to conclude that said
Given the factual milieu spread hereover, we rule that it
promissory notes were pre-signed by plaintiff in blank
was error to hold MICO liable in damages for denying or
terms, as averred by plaintiff, in contemplation of the
withholding the proceeds of the insurance claim to
speedy grant of future loans, for the same practice of
GOYU.
procedure has always been adopted in its previous
dealings with the bank. Firstly, by virtue of the mortgage contracts as well as the
endorsements of the insurance policies, RCBC has the
The Court of Appeals erred in placing much significance
right to claim the insurance proceeds, in substitution of
on the fact that the excluded promissory notes are dated
the property lost in the fire. Having assigned its rights,
after the fire. It failed to consider that said notes had for
GOYU lost its standing as the beneficiary of the said
their origin transactions consummated prior to the
insurance policies.
fire. Thus, careful attention must be paid to the fact that
Promissory Notes No. 420-92 and 421-92 are Secondly, for an insurance company to be held liable for
mere renewals of Promissory Notes No. 908-91 and 952- unreasonably delaying and withholding payment of
91, loans already availed of by GOYU. insurance proceeds, the delay must be wanton,
oppressive, or malevolent. It is generally agreed,
The two courts below erred in failing to see that the
however, that an insurer may in good faith and honesty
promissory notes which they ruled should be excluded for
entertain a difference of opinion as to its liability.
bearing dates which are after that of the fire, are
Accordingly, the statutory penalty for vexatious refusal of
mere renewals of previous ones. The proceeds of the loan
an insurer to pay a claim should not be inflicted unless the
represented by these promissory notes were admittedly
evidence and circumstances show that such refusal was
received by GOYU. There is ample factual and legal basis
willful and without reasonable cause as the facts appear
for giving GOYUs judicial admission of liability in the
to a reasonable and prudent man. The case at bar does not
amount of P116,301,992.60 full force and effect
show that MICO wantonly and in bad faith delayed the
It should, however, be quickly added that whatever release of the proceeds. The problem in the determination
amount RCBC may have recovered from the other of who is the actual beneficiary of the insurance policies,
insurers of the mortgaged property will, nonetheless, have aggravated by the claim of various creditors who wanted
to be applied as payment against GOYUs obligation. But, to partake of the insurance proceeds, not to mention the
contrary to the lower courts findings, payments effected importance of the endorsement to RCBC, to our mind, and
by GOYU prior to January 21, 1993 should no longer be as now borne out by the outcome herein, justified MICO
deducted. Such payments had obviously been duly in withholding payment to GOYU.
considered by GOYU, in its aforequoted letter dated
March 9, 1993, wherein it admitted that its past due
account totaled P116,301,992.60 as of January 21, 1993.
The net obligation of GOYU, after deductions, is thus
reduced to P107,246,887.90 as of January 21, 1993
On the issue of payment of surcharges and penalties, we
partly agree that GOYUs pitiful situation must be taken
into account. We do not agree, however, that payment of
any amount as surcharges and penalties should altogether
be deleted. Even assuming that RCBC, through its
responsible officers, herein petitioners Eli Lao and Uy
Chun Bing, may have relayed its assurance for assistance
to GOYU immediately after the occurrence of the fire, we
ABOITIZ SHIPPING CORP. VS. PHIL. loaded on any vessel of the defendant should be entitled
AMERICAN GEN INS to considerable weight.
FACTS: The records of this case show that private respondent
executed a continuous and open insurance coverage
Marinduque Mining Industrial Corporation (Marinduque
covering goods of Marinduque imported into and
for short) shipped on board SS Arthur Maersk from
exported from the Philippines which took effect after
Boston, U.S.A. a shipment of one (1) skid carton parts for
September 1, 1975, as contained in Marine Open Policy
valves as evidenced by bill of lading.
No. 100184. A similar insurance coverage was also
When the cargo arrived in Manila, it was received and executed by petitioner in favor of Marinduque for all its
deposited in the office of Aboitiz Shipping Corporation goods shipped or moved within the territorial limits of the
(Aboitiz for short) at Pier 4, North Harbor, Manila for Philippines also effective after September 1, 1975 and
transhipment to Nonoc Island for which it issued bill of contained in Marine Open Policy No. 100185.
lading No. 23.
The questioned shipment is covered by this continuing
Marinduque, as consignee of the cargo, made a report to open insurance coverage from the time it was loaded
the effect that said cargo was pilfered on the night of July aboard the SS Arthur Maersk in Boston, U.S.A. to the
3, 1980 while there was heavy rain at the Aboitiz terminal time it was delivered to the possession of petitioner at its
and that of the total value of the cargo of $42,209.33, only offices at Pier 4 in Manila until it was pilfered when the
$7,412.00 worth remains of the cargo with the great majority of the cargo was lost on July 3, 1980.
recommendation that the claim be made against Aboitiz.
The trial court in dismissing the complaint apparently
The services of the Manila Adjusters and Surveyors Co. relied on Marine Risk Note No. 017545 which was issued
(Manila Adjusters for brevity) were engaged by the Phil- by private respondent only on July 28, 1980 after the
American General Insurance Co., Inc. (Phil Am for short) shipment in question was already pilfered . Obviously the
which came out with the report that the cargo in question trial court mistook said Marine Risk Note as an insurance
was delivered at Pier 4, North Harbor on July 3, 1980 policy when it is not. It is only an acknowledgment or
which cargo, when inspected on July 5, 1980 showed that declaration of the private respondent confirming the
it was pilfered. specific shipment covered by its Marine Open Policy, the
evaluation of the cargo and the chargeable premium.
Marinduque filed a claim against Aboitiz in the amount
of P246,430.80 representing the value of the pilfered The contention of the petitioner that it could not be liable
cargo. On the same day Marinduque filed a claim for the for the pilferage of the cargo as it was stolen even before
same amount against the Phil-Am on the latter's policy. it was loaded on its vessel is untenable. Petitioner
received the cargo when it arrived in Manila at its offices
Phil-Am paid Marinduque the sum of P246,430.80 as at Pier 4, North Harbor and it was while in its possession
insurer of the cargo. Phil-Am then filed a complaint in the and before loading it in its vessel that the cargo was
Regional Trial Court (RTC) of Manila against Aboitiz for pilfered. Its liability is clear.
the recovery of the same amount alleging that it has been
subrogated to the rights of Marinduque. Petitioner also decries the proceedings before the lower
court as ex-parte without affording it due process. The
RTC- complaint was dismissed records however show that the petitioner was declared in
CA- reversed and held Aboitiz liable. default and thus the evidence for Marinduque was
received ex-parte in accordance with the rules. Petitioner
ISSUE: W/N Aboitiz is liable to pay had only itself to blame under the circumstances.
RULING:
The main thrust of the petition is that the findings of the
trial court that the insurance policy covering the cargo was
issued at the time when the cargo was already pilfered and
that the coverage under Marine Policy No. 100105 PAG
never began and that Marine Policy No. 100184 did not
attach to the shipment because the shipment was never
DEVELOPMENT INSURANCE CORP VS. IAC Accordingly, the private respondent is entitled to an
indemnity of only P67,629.31, the rest of the loss to be
FACTS: shouldered by it alone. In support of this contention, the
A fire occurred in the building of the private respondent petitioner cites Condition 17 of the policy.
and it sued for recovery of damages from the petitioner on
However, there is no evidence on record that the building
the basis of an insurance contract between them. The
was worth P5,800,000.00 at the time of the loss; only the
petitioner allegedly failed to answer on time and was
petitioner says so and it does not back up its self-serving
declared in default by the trial court. A judgment of
estimate with any independent corroboration. On the
default was subsequently rendered on the strength of the
contrary, the building was insured at P2,500,000.00, and
evidence submitted ex parte by the private respondent,
this must be considered, by agreement of the insurer and
which was allowed full recovery of its claimed damages.
the insured, the actual value of the property insured on the
On learning of this decision, the petitioner moved to lift
day the fire occurred. This valuation becomes even more
the order of default, invoking excusable neglect, and to
believable if it is remembered that at the time the building
vacate the judgment by default. Its motion was denied. It
was burned it was still under construction and not yet
then went to the respondent court, which affirmed the
completed.
decision of the trial court in toto. The petitioner is now
before us, hoping presumably that it will fare better here The Court notes that Policy RY/F-082 is an open policy.
than before the trial court and the Intermediate Appellate
As defined in the aforestated provision, which is now
Court.
Section 60 of the Insurance Code, "an open policy is one
ISSUE: Liability of the petitioner in which the value of the thing insured is not agreed upon
but is left to be ascertained in case of loss. " This means
RULING: that the actual loss, as determined, will represent the total
The petitioner herein is really in default. indemnity due the insured from the insurer except only
that the total indemnity shall not exceed the face value of
The petitioner's claim that the insurance covered only the the policy.
building and not the elevators is absurd, to say the least.
This Court has little patience with puerile arguments that The actual loss has been ascertained in this case and, to
affront common sense, let alone basic legal principles repeat, this Court will respect such factual determination
with which even law students are familiar. The in the absence of proof that it was arrived at arbitrarily.
circumstance that the building insured is seven stories There is no such showing. Hence, applying the open
high and so had to be provided with elevators-a legal policy clause as expressly agreed upon by the parties in
requirement known to the petitioner as an insurance their contract, we hold that the private respondent is
company-makes its contention all the more ridiculous. entitled to the payment of indemnity under the said
contract in the total amount of P508,867.00.
No less preposterous is the petitioner's claim that the
elevators were insured after the occurrence of the fire, a The refusal of its vice-president to receive the private
case of shutting the barn door after the horse had escaped, respondent's complaint, as reported in the sheriff's return,
so to speak. This pretense merits scant attention. Equally was the first indication of the petitioner's intention to
undeserving of serious consideration is its submission that prolong this case and postpone the discharge of its
the elevators were not damaged by the fire, against the obligation to the private respondent under this agreement.
report of The arson investigators of the INP and, indeed, That intention was revealed further in its subsequent acts-
its own expressed admission in its answer where it or inaction-which indeed enabled it to avoid payment for
affirmed that the fire "damaged or destroyed a portion of more than five years from the filing of the claim against it
the 7th floor of the insured building and more particularly in 1980. The petitioner has temporized long enough to
a Hitachi elevator control panel." avoid its legitimate responsibility; the delay must and
does end now.
CONNECTED RULING:
The petitioner argues that since at the time of the fire the
building insured was worth P5,800,000.00, the private
respondent should be considered its own insurer for the
difference between that amount and the face value of the
policy and should share pro rata in the loss sustained.
EAGLE STAR INS. VS, CHIA YU Examining the policy sued upon in the present case, we
find that its prescriptive clause, if given effect in
FACTS: accordance with the terms of the policy, would reduce the
Atkin, Kroll & Co., loaded on the S. S. Roeph Silverlight period allowed the insured for bringing his action to less
owned and operated by Leigh Hoegh & Co., A/S, of San than one year. This is so because the said clause makes
Francisco California, 14 bales of assorted underwear the prescriptive period begin from the happening of the
valued at P8,085.23 consigned to Chia Yu in the City of loss and at the same time provides that the no suit on the
Manila. The shipment was insured against all risks by policy shall be sustainable in any court unless the insured
Eagle Star Ins. Co. of San Francisco, California, under a shall have first fully complied with all the terms and
policy issued to the shipper and by the latter assigned to conditions of the policy, among them that which requires
the consignee. The vessel arrived in Manila on February that, as so as the loss is determined, written claim therefor
10, 1946, and on March 4 started discharging its cargo be filed with the carrier and that the letter to the carrier
into the custody of the Manila Terminal Co., Inc., which and the latter's reply should be attached to the claim
was then operating the arrastre service for the Bureau of papers to be sent to the insurer. It is obvious that
Customs. But the 14 bales consigned to Chia Yu only 10 compliance with this condition precedent will necessarily
were delivered to him as the remaining 3 could not be consume time and thus shorten the period for bringing suit
found. Three of those delivered were also found damaged to less than one year if the period is to begin, as stated in
to the extent of 50 per cent. the policy, from "the happening of the loss." Being
contrary to the law of the forum, such stipulation cannot
Chia Yu claimed indemnity for the missing and damaged be given effect.
bales. But the claim was declined, first, by the carrier and
afterward by the insurer, whereupon Chia Yu brought the It may perhaps be suggested that the policy clause relied
present action against both, including their respective on by the insurer for defeating plaintiff's action should be
agents in the Philippines. given the construction that would harmonize it with
section 61-A of the Insurance Act by taking it to mean that
Chia Yu claimed indemnity for the missing and damaged the time given the insured for bringing his suit is twelve
bales. But the claim was declined, first, by the carrier and months after the cause of action accrues. But the question
afterward by the insurer, whereupon Chia Yu brought the then would be: When did the cause of action accrue? On
present action against both, including their respective that question we agree with the court below that plaintiff's
agents in the Philippines. Two years after delivery of the cause of action did not accrue until his claim was finally
damaged bales and the date when the missing bales should rejected by the insurance company. This is because,
have been delivered, the action was resisted by the before such final rejection, there was no real necessity for
defendants principally on the ground of prescription. But bringing suit. As the policy provides that the insured
the trial court found for plaintiff and rendered judgment should file his claim, first, with the carrier and then with
in his favor for the sum claimed plus legal interest and the insurer, he had a right to wait for his claim to be finally
costs. The judgment was affirmed by the Court of decided before going to court. The law does not
Appeals, and the case is now before us on appeal encourage unnecessary litigation
by certiorari.
At this junction it should be explained that while the
ISSUE: decision of the Court of Appeals states that the claim
W/N plaintiff’s action has prescribed against the insurance company "was finally rejected o
April 22, 1947, as correctly concluded by the court
RULING: NO. below," it is obvious from the context and we find it to be
a fact that the date meant was April 22, 1948, for this was
On the part of the carrier the defense of prescription is
the date when, according to the finding of the trial court,
made to rest on the following stipulation of the bill of
the insurance company in London rejected the claim.
lading:
Having been filed within twelve months form that date,
In any event the carrier and the ship shall be
the action cannot be deemed to have prescribed even on
discharged from all liability in respect of loss or
the supposition that the period given the insured for
damage unless suit is brought within one year
bringing suit under the prescriptive clause of the policy is
after the delivery of the goods or the date when
twelve months after the accrual of the cause of action.
the goods should have been delivered.
ACCFA VS ALPHA INS. & SURETY CO. that does not import that the surety company will refuse
to pay. In so far, therefore, as condition eight of the bond
FACTS: requires action to be filed within one year from the filing
According to the allegations of the complaint, in order to of the claim for loss, such stipulation contradicts the
guarantee the Asingan Farmers' Cooperative Marketing public policy expressed in Section 61-A of the Philippine
Association, Inc. (FACOMA) against loss on account of Insurance Act. Condition eight of the bond, therefore, is
"personal dishonesty, amounting to larceny or estafa of its null and void, and the appellant is not bound to comply
Secretary-Treasurer, Ricardo A. Ladines, the appellee, with its provisions.
Alpha Insurance & Surety Company had issued a bond for
The discouraging of unnecessary litigation must be
the sum of Five Thousand Pesos (P5,000.00) with said
deemed a rule of public policy, considering the unrelieved
Ricardo Ladines as principal and the appellee as solidary
congestion in the courts.
surety. On the same date, the Asingan FACOMA assigned
its rights to the appellant, Agricultural Credit Cooperative As a consequence of the foregoing, condition eight of the
and Financing Administration (ACCFA for short), with Alpha bond is null and void, and action may be brought
approval of the principal and the surety. within the statutory period of limitation for written
contracts.
During the effectivity of the bond, Ricardo Ladines
converted and misappropriated, to his personal benefit,
some P11,513.22 of the FACOMA funds, of which
P6,307.33 belonged to the ACCFA. Upon discovery of
the loss, ACCFA immediately notified in writing the
survey company on 10 October 1958, and presented the
proof of loss within the period fixed in the bond; but
despite repeated demands the surety company refused and
failed to pay. Whereupon, ACCFA filed suit against
appellee on 30 May 1960.
Defendant Alpha Insurance & Surety Co., Inc., (now
appellee) moved to dismiss the complaint for failure to
state a cause of action, giving as reason that (1) the same
was filed more than one year after plaintiff made claim
for loss, contrary to the eighth condition of the bond.
CFI- at first dismissed but upon MR, reversed its decision.
ISSUE: W/N the action has already prescribed
RULING: NO
SEC. 61-A — A condition, stipulation or agreement in
any policy of insurance, limiting the time for commencing
an action thereunder to a period of less than one year from
the time when the cause of action accrues is void.
Since a "cause of action" requires, as essential elements,
not only a legal right of the plaintiff and a correlative
obligation of the defendant but also "an act or omission of
the defendant in violation of said legal right" (Maao Sugar
Central vs. Barrios, 79 Phil. 666), the cause of action does
not accrue until the party obligated refuses, expressly or
impliedly, to comply with its duty (in this case, to pay the
amount of the bond). The year for instituting action in
court must be reckoned, therefore, from the time of
appellee's refusal to comply with its bond; it can not be
counted from the creditor's filing of the claim of loss, for
TRAVELLER’S INSURANCE & SURETY CORP Rodrigo Dumlao as the driver of the Lady Love taxicab
VS. CA that bumped private respondents mother. Subsequently,
private respondent amended his complaint to include
FACTS: petitioner as the compulsory insurer of the said taxicab
A 78-year old woman by the name of Feliza Vineza de under Certificate of Cover No. 1447785-3.
Mendoza was on her way to hear mass at the Tayuman
Petitioner mainly contends that it did not issue an
Cathedral. While walking along Tayuman corner
insurance policy as compulsory insurer of the Lady Love
Gregorio Perfecto Streets, she was bumped by a taxi that
Taxi and that, assuming arguendo that it had indeed
was running fast. Several persons witnessed the accident,
covered said taxicab for third-party liability insurance,
among whom were Rolando Marvilla, Ernesto Lopez and
private respondent failed to file a written notice of claim
Eulogio Tabalno. After the bumping, the old woman was
with petitioner as required by Section 384 of P.D. No.
seen sprawled on the pavement. Right away, the good
612, otherwise known as the Insurance Code.
Samaritan that he was, Marvilla ran towards the old
woman and held her on his lap to inquire from her what RTC AND CA- ruled in favor of private respondent.
had happened, but obviously she was already in shock and
ISSUE: W/N the contention of petitioner is meritorious
could not talk. At this moment, a private jeep
stopped. With the driver of that vehicle, the two helped RULING: YES.
board the old woman on the jeep and brought her to the
Mary Johnston Hospital in Tondo. The right of the person injured to sue the insurer of the
party at fault (insured), depends on whether the contract
Three (3) witnesses who were at the scene at the time of insurance is intended to benefit third persons also or on
identified the taxi involved, though not necessarily the the insured. And the test applied has been this: Where the
driver thereof. Marvilla saw a lone taxi speeding away contract provides for indemnity against liability to third
just after the bumping which, when it passed by him, said persons, then third persons to whom the insured is liable
witness noticed to be a Lady Love Taxi with Plate No. can sue the insurer. Where the contract is for indemnity
438, painted maroon, with baggage bar attached on the against actual loss or payment, then third persons cannot
baggage compartment and with an antenae[sic] attached proceed against the insurer, the contract being solely to
at the right rear side.The same descriptions were revealed reimburse the insured for liability actually discharged by
by Ernesto Lopez, who further described the taxi to have him thru payment to third persons, said third persons
x x x reflectorized decorations on the edges of the glass at recourse being thus limited to the insured alone.
the back. x x x A third witness in the person of Eulogio
Tabalno x x x made similar descriptions although, Since private respondent failed to attach a copy of the
because of the fast speed of the taxi, he was only able to insurance contract to his complaint, the trial court could
detect the last digit of the plate number which is 8. x x x not have been able to apprise itself of the real nature and
[T]he police proceeded to the garage of Lady Love Taxi pecuniary limits of petitioners liability. More importantly,
and then and there they took possession of such a taxi and the trial court could not have possibly ascertained the right
later impounded it in the impounding area of the agency of private respondent as third person to sue petitioner as
concerned. x x x [T]he eyewitnesses x x x were insurer of the Lady Love taxicab because the trial court
unanimous in pointing to that Lady Love Taxi with Plate never saw nor read the insurance contract and learned of
No. 438, obviously the vehicle involved herein. its terms and conditions.

During the investigation, defendant Armando Abellon, Petitioner, understandably, did not volunteer to present
the registered owner of Lady Love Taxi bearing No. 438- any insurance contract covering the Lady Love taxicab
HA Pilipinas Taxi 1980, certified to the fact that the that fatally hit private respondents mother, considering
vehicle was driven last July 20, 1980 by one Rodrigo that petitioner precisely presented the defense of lack of
Dumlao x x x x x x It was on the basis of this affidavit of insurance coverage before the trial court. Neither did the
the registered owner that caused the police to apprehend trial court issue a subpoena duces tecum to have the
Rodrigo Dumlao, and consequently to have him insurance contract produced before it under pain of
prosecuted and eventually convicted of the offense x x contempt.
x. x x x [S]aid Dumlao absconded in that criminal case. We thus find hardly a basis in the records for the trial
Private respondent filed a complaint for damages against court to have validly found petitioner liable jointly and
Armando Abellon as the owner of the Lady Love Taxi and severally with the owner and the driver of the Lady Love
taxicab, for damages accruing to private respondent.
While it is true that where the insurance contract provides Commission or the Courts within one year from date of
for indemnity against liability to third persons, such third accident, otherwise the claimants right of action shall
persons can directly sue the insurer, however, the direct prescribe [emphasis and underscoring supplied].
liability of the insurer under indemnity contracts against
In the landmark case of Summit Guaranty and Insurance
third-party liability does not mean that the insurer can be
Co., Inc. v. De Guzman,[13] we ruled that the one year
held solidarily liable with the insured and/or the other
prescription period to bring suit in court against the
parties found at fault. The liability of the insurer is based
insurer should be counted from the time that the insurer
on contract; that of the insured is based on tort.
rejects the written claim filed therewith by the insured, the
The above principles take on more significance in the beneficiary or the third person interested under the
light of the counter-allegation of petitioner that, insurance policy.
assuming arguendo that it is the insurer of the Lady Love
It is significant to note that the aforecited Section 384 was
taxicab in question, its liability is limited to
amended by B.P. Blg. 874 to categorically provide that
only P50,000.00, this being its standard amount of
action or suit for recovery of damage due to loss or injury
coverage in vehicle insurance policies. It bears repeating
must be brought in proper cases, with the Commissioner
that no copy of the insurance contract was ever proffered
or the Courts within one year from denial of the claim,
before the trial court by the private respondent,
otherwise the claimants right of action shall prescribe
notwithstanding knowledge of the fact that the latters
[emphasis ours].
complaint against petitioner is one under a written
contract. Thus, the trial court proceeded to hold petitioner We have certainly ruled with consistency that the
liable for an award of damages exceeding its limited prescriptive period to bring suit in court under an
liability of P50,000.00. This only shows beyond doubt insurance policy, begins to run from the date of the
that the trial court was under the erroneous presumption insurers rejection of the claim filed by the insured, the
that petitioner could be found liable absent proof of the beneficiary or any person claiming under an insurance
contract and based merely on the proof of reckless contract. This ruling is premised upon the compliance by
imprudence on the part of the driver of the Lady Love the persons suing under an insurance contract, with the
taxicab that fatally hit private respondents mother. indispensable requirement of having filed the written
claim mandated by Section 384 of the Insurance Code
CONNECTED RULING: Petitioner did not tire in
before and after its amendment. Absent such written
arguing before the trial court and the respondent appellate
claim filed by the person suing under an insurance
court that, assuming arguendo that it had issued the
contract, no cause of action accrues under such insurance
insurance contract over the Lady Love taxicab, private
contract, considering that it is the rejection of that claim
respondents cause of action against petitioner did not
that triggers the running of the one-year prescriptive
successfully accrue because he failed to file with
period to bring suit in court, and there can be no
petitioner a written notice of claim within six (6) months
opportunity for the insurer to even reject a claim if none
from the date of the accident as required by Section 384
has been filed in the first place, as in the instant case.
of the Insurance Code.
At the time of the vehicular incident which resulted in the
death of private respondents mother, during which time
the Insurance Code had not yet been amended by Batas
Pambansa (B.P.) Blg. 874, Section 384 provided as
follows:
Any person having any claim upon the policy issued
pursuant to this chapter shall, without any unnecessary
delay, present to the insurance company concerned a
written notice of claim setting forth the amount of his loss,
and/or the nature, extent and duration of the injuries
sustained as certified by a duly licensed physician. Notice
of claim must be filed within six months from date of the
accident, otherwise, the claim shall be deemed
waived. Action or suit for recovery of damage due to loss
or injury must be brought in proper cases, with the
COASTWISE LITHERAGE CORP VS. CA negligence of its captain and crew, would remain in the
absence of stipulation.
FACTS:
Although a charter party may transform a common carrier
Pag-asa Sales, Inc. entered into a contract to transport
into a private one, the same however is not true in a
molasses from the province of Negros to Manila with
contract of affreightment on account of the
Coastwise Lighterage Corporation (Coastwise for
aforementioned distinctions between the two.
brevity), using the latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is Petitioner admits that the contract it entered into with the
likewise owned by Coastwise. consignee was one of affreightment. We agree. Pag-asa
Sales, Inc. only leased three of petitioner's vessels, in
Upon reaching Manila Bay, while approaching Pier 18,
order to carry cargo from one point to another, but the
one of the barges, "Coastwise 9", struck an unknown
possession, command and navigation of the vessels
sunken object.
remained with petitioner Coastwise Lighterage.
As a consequence, the molasses at the cargo tanks were
The records show that the damage to the barge which
contaminated and rendered unfit for the use it was
carried the cargo of molasses was caused by its hitting an
intended. This prompted the consignee, Pag-asa Sales,
unknown sunken object as it was heading for Pier 18. The
Inc. to reject the shipment of molasses as a total loss.
object turned out to be a submerged derelict vessel.
Thereafter, Pag-asa Sales, Inc. filed a formal claim with
Petitioner contends that this navigational hazard was the
the insurer of its lost cargo, herein private respondent,
efficient cause of the accident. Further it asserts that the
Philippine General Insurance Company (PhilGen, for
fact that the Philippine Coastguard "has not exerted any
short) and against the carrier, herein petitioner, Coastwise
effort to prepare a chart to indicate the location of sunken
Lighterage. Coastwise Lighterage denied the claim and it
derelicts within Manila North Harbor to avoid
was PhilGen which paid the consignee, Pag-asa Sales,
navigational accidents" effectively contributed to the
Inc., the amount of P700,000.00, representing the value of
happening of this mishap. Thus, being unaware of the
the damaged cargo of molasses.
hidden danger that lies in its path, it became impossible
In turn, PhilGen then filed an action against Coastwise for the petitioner to avoid the same. Nothing could have
Lighterage before the Regional Trial Court of Manila, prevented the event, making it beyond the pale of even the
seeking to recover the amount of P700,000.00 which it exercise of extraordinary diligence.
paid to Pag-asa Sales, Inc. for the latter's lost cargo.
2. On the issue of subrogation, which petitioner contends
The RTC awarded the amount prayed for by PhilGen. On as inapplicable in this case, we once more rule against the
Coastwise Lighterage's appeal to the Court of Appeals, petitioner. We have already found petitioner liable for
the award was affirmed. breach of the contract of carriage it entered into with Pag-
asa Sales, Inc. However, for the damage sustained by the
ISSUE: loss of the cargo which petitioner-carrier was
1. W/N petitioner Coastwise Lighterage was transformed transporting, it was not the carrier which paid the value
into a private carrier, by virtue of the contract of thereof to Pag-asa Sales, Inc. but the latter's insurer,
affreightment which it entered into with the consignee, herein private respondent PhilGen.
Pag-asa Sales, Inc. Corollarily, if it were in fact Undoubtedly, upon payment by respondent insurer
transformed into a private carrier, did it exercise the PhilGen of the amount of P700,000.00 to Pag-asa Sales,
ordinary diligence to which a private carrier Inc., the consignee of the cargo of molasses totally
2. W/N the insurer was subrogated into the rights of the damaged while being transported by petitioner Coastwise
consignee against the carrier, upon payment by the insurer Lighterage, the former was subrogated into all the rights
of the value of the consignee's goods lost while on board which Pag-asa Sales, Inc. may have had against the
one of the carrier's vessels. carrier, herein petitioner Coastwise Lighterage.

RULING:
1. Accordingly, the charter party contract is one of
affreightment over the whole vessel, rather than a demise.
As such, the liability of the shipowner for acts or
SERVICEWIDE SPECIALISTS, INC VS. CA that he made the initial payment on the vehicle and that
he himself would pay its monthly amortization; that
FACTS: Garcia prepared and executed a "Deed of Sale with
petitioner Servicewide Specialists, Inc. (Servicewide) Assumption of Mortgage" where it appears that Tolosa
filed a complaint for replevin and/or sum of money with sold and transferred to Garcia the said jeepney.
damages before the then Court of First Instance of Manila,
Three days later, Bartina filed a "Third Party Claim" and
Branch V against private respondents Eduardo and Felisa
"Urgent Motion for Release" alleging ownership of the
Tolosa (Tolosa spouses) and one John Doe. Servicewide
jeepney. She claimed that she purchased the vehicle from
alleged that on January 15, 1981, the Tolosa spouses
Bian Motors and regularly paid its subsequent
purchased from Amante Motor Works one (1) Isuzu
installments to the Commercial Credit Corporation of Las
passenger-type jeepney with Motor No. C240-317331
Pias. On February 21, 1983, the trial court released the
and Serial No. CMCI-81063-C for the sum of P48,432.00
vehicle to Bartina on an indemnity bond of
to be paid in 24 monthly installments; that the spouses
P34,000.00. The court found that the documents
executed a promissory note and drew a deed of chattel
supporting Bartina's ownership of the jeepney were in due
mortgage over the vehicle in favor of Amante Motor
form and executed prior to the documents of the Tolosa
Works; that on the same day, Amante Motor Works, with
spouses.
notice to the Tolosas, assigned the promissory note and
chattel mortgage to Filinvest Finance and Leasing A decision was rendered by the trial court. It ruled in
Corporation, that Filinvest Finance and Leasing favor of Servicewide granting it the right to either
Corporation also assigned its rights and interest in said foreclose the mortgage on the subject vehicle or to
promissory note and chattel mortgage to Filinvest Credit demand from defendants, jointly and severally, payment
Corporation; that Servicewide later acquired the rights of P34,224.78 plus interest and damages.
and interests of Filinvest Credit Corporation over said
Eduardo Garcia appealed to the Court of Appeals.] In a
note and mortgage; that the Tolosa spouses failed to pay
decision dated October 27, 1994, the appellate court
the installments due on the purchase price despite several
found that no summons on the amended complaint had
demands. In its prayer, Servicewide demanded from the
been served on Garcia however, since Garcia filed several
spouses and John Doe, the person in possession of the
pleadings as a third-party defendant in the trial court, he
vehicle, the return of the vehicle or the payment of the
was deemed to have submitted himself to its
balance of P34,224.78 and damages
jurisdiction. Nonetheless, it found no sufficient evidence
the trial court issued an order for the seizure of the vehicle to hold Garcia solidarily liable with the Tolosa spouses on
subject of the complaint. the principal complaint. The Court of Appeals therefore
modified the trial court's decision and relieved Garcia
The Tolosa spouses filed their Answer on March 22,
from liability.
1982. They claimed that they purchased one jeepney unit
from Bian Motor Sales Corporation (Bian Motors), not ISSUE:
Amante Motors Works; that in January 1981, they
ordered another unit from the same corporation through RULING:
the proddings of its President and General Manager, Garcia and Bian Motors did not file an "Answer" to the
Eduardo Garcia; that Garcia informed the spouses that the complaint. The records of the case do not show that both
additional unit shall be "house financed" by Bian Motors; or either of them were served any summons on the
that Eduardo Tolosa noticed that the vendor indicated in amended complaint.This is precisely why Garcia raised
the deed of sale was not Bian Motors but Amante Motor the issue of lack of jurisdiction. Garcia and Bian Motors
Works; that Garcia explained to Tolosa that he (Garcia) however filed an "Answer to Third Party Complaint" and
was to make full payment on the jeepney to Amante "Answer to Complaint in Intervention."
Motor Works and that he (Tolosa) was to pay Garcia the
monthly installments thereon; that Tolosa never received It must be stressed that the third-party complaint filed by
any notice from Bian Motors about the jeepney unit he the Tolosas was dismissed twice by the trial court - first
ordered; that on December 17, 1981, Tolosa received a at the pretrial of October 7,1985 for the principal
receipt from Filinvest Finance and Leasing Corporation complaint and second at the pretrial of March 1, 1988 for
about the payment he allegedly made on a jeepney unit he the complaint-in-intervention. The second dismissal was
purchased from Amante Motor Works; that Garcia with prejudice. The complaint-in-intervention was, upon
informed him he was in possession of the jeepney and said
motion of the parties-in-intervention, also dismissed by therein had different motor and chassis number. The deed
the trial court on May 24, 1988. reveals that what the Tolosas sold to Garcia was a red
jeepney with Motor No. C240-32833 and Chassis No.
A dismissal or discontinuance of an action operates to
CMCI-82062-C.[38]
annul orders, rulings or judgments previously made in the
case.[32] It also annuls all proceedings had in connection The documentary evidence of Bartina merely shows that
therewith and renders all pleadings ineffective.[33] A the jeepney subject of the complaint was indeed sold to
dismissal or nonsuit leaves the situation as though no suit her by Bian Motors represented by Juliet Garcia, Eduardo
had ever been brought. Further proceedings in the action Garcia's daughter. There is nothing to show that Eduardo
are arrested and what has been done therein is also Garcia sold to Bartina the same vehicle that he previously
annulled, so that the action is as if it had never been.[34] It sold to the Tolosas.
carries down with it previous proceeding and orders in the
We also hold that the compromise between Bartina and
action, and all pleadings of both parties, and all issues
Garcia and Bian Motors cannot be taken as an admission
with respect to the plaintiff's claim.[35]
of Garcia's liability. In civil cases, an offer of
The records do not show that petitioner adopted the compromise is not an admission of any liability.[39] With
"Answer to Third Party Complaint" and the "Answer to more reason, a compromise agreement should not be
Complaint in Intervention" filed by Bian Motors and treated as an admission of liability on the part of the
Garcia, and the testimony of Bartina as part of its evidence parties vis-a-vis a third person. The compromise
in the trial court. It cannot rely on them on appeal for settlement of a claim or cause of action is not an
evidence not formally offered before the trial court cannot admission that the claim is valid, but merely admits that
be considered.[36] To consider them at this stage will deny there is a dispute, and that an amount is paid to be rid of
the other parties their right to rebut them. the controversy,[40] nor is a compromise with one person
an admission of any liability to someone else.[41] The
Assuming arguendo that the said pleadings of Garcia and
policy of the law should be, and is, to encourage
Bian Motors and the evidence of Bartina can be
compromises.[42] When they are made, the rights of third
considered in favor of petitioner, still, they do not
parties are not in any way affected thereby.[43]
sufficiently prove Garcia's liability on the matter.
On the whole, petitioner's evidence consists of the
For one, the motor vehicle described in the "Answer to
promissory note, the deed of chattel mortgage and the
Third-Party Complaint" has different motor and serial
deed of assignment and the notice and demand letter. The
numbers from the vehicle subject of the complaint. The
promissory note in favor of Amante Motor Works was
subject vehicle is a galvanized silver jeepney with Motor
signed by the Tolosa spouses.[44] This same promissory
No. C240-317331 and Serial No. CMCI-81063-C while
note provides that any payment thereon shall be made "to
the vehicle in said pleading is a red stainless jeepney with
the order of Filinvest Finance and Leasing
Motor No. C-221-443144 and Serial No. CMCI-81795-
Corporation.[45] Both spouses also signed as mortgagors
C.[37] What Garcia and Bian Motors admittedly sold to the
the deed of chattel mortgage of the said jeepney in favor
Tolosas was not the subject vehicle.
of Amante Motor Works. Amante Motor Works assigned
In the "Answer to the Complaint in Intervention," Garcia in the same deed all its rights over the chattel mortgage to
and Bian Motors admitted that they acquired from the Filinvest Finance and Leasing Corporation.[46] Filinvest
Tolosas the "vehicle subject of the complaint in Finance and Leasing Corporation likewise assigned its
consideration of one Celeste jeepney valued at rights and interest over the promissory note and deed of
P56,000.00." The vehicle subject of the complaint was the chattel mortgage to Filinvest Credit Corporation which in
one found in the possession of Bartina. Under the two turn assigned it to petitioner.[47] The Tolosa spouses
pleadings, however, what Garcia and Bian Motors sold to defaulted on the obligation and refused to pay the
the Tolosa spouses was a different vehicle from the one installments due despite notice to them. By no stretch of
they acquired from said spouses and which they allegedly logic can they prove Garcia's solidary liability.
sold to Bartina. A double sale of the same jeepney could
not rise because there appears to be two different jeepneys
in the pleadings.
Even in the "Deed of Sale with Assumption of Mortgage"
where the Tolosa spouses allegedly sold to Garcia the
jeepney subject of the complaint the vehicle described