FINALS

STAT CON CASES VII

UNION MFG. v REPUBLIC BANK (1972)

JURISPRUDENCE:

FULL TEXT:

In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower court and now
appellee, was able to avoid liability upon proof that there was a violation of a warranty. There was no denial thereof from the
insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the effort of the Republic Bank, the main plaintiff and
now the sole appellant, to recover on such policy as mortgagee, by virtue of the cover note in the insurance policy providing that
it is entitled to the payment of loss or damages as its interest may appear, was in vain. The defect being legally incurable, its
appeal is likewise futile. We affirm.

As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union Manufacturing Co., Inc.
obtained certain loans, overdrafts and other credit accommodations from the Republic Bank in the total sum of P415,000.00
with interest at 9% per annum from said date and to secure the payment thereof, said Union Manufacturing Co., Inc. executed a
real and chattel mortgages on certain properties, which are more particularly described and listed at the back of the mortgage
contract ...; (2) That as additional condition of the mortgage contract, the Union Manufacturing Co., Inc. undertook to secure
insurance coverage over the mortgaged properties for the same amount of P415,000.00 distributed as follows: (a) Buildings,
P30,000.00; (b) Machineries, P300,000.00; and (c) Merchandise Inventory, P85,000.00, giving a total of P415,000.00; (3) That
as Union Manufacturing Co., Inc. failed to secure insurance coverage on the mortgaged properties since January 12, 1962,
despite the fact that Cua Tok, its general manager, was reminded of said requirement, the Republic Bank procured from the
defendant, Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for P500,000.00 over the properties of the
Union Manufacturing Co., Inc., as described in defendant's 'Cover Note' dated September 25, 1962, with the annotation that
loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the
printed conditions of said defendant's Fire Insurance Policy Form; (4) That on September 27, 1962, Fire Insurance Policy No.
43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union Manufacturing Co., Inc., for which the
corresponding premium in the sum of P8,328.12, which was reduced to P6,688.12, was paid by the Republic Bank to the
defendant, Philippine Guaranty Co., Inc. ...; (5) That upon the expiration of said fire policy on September 25, 1963, the same
was renewed by the Republic Bank upon payment of the corresponding premium in the same amount of P6,663.52 on
September 26, 1963; (6) That in the corresponding voucher ..., it appears that although said renewal premium was paid by the
Republic Bank, such payment was for the account of Union Manufacturing Co., Inc. and that the cash voucher for the payment
of the first premium was paid also by the Republic Bank but for the account Union Manufacturing Co., Inc.; (7) That sometime
on September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co., Inc.; (8) That on October 6, 1964, the
Union Manufacturing Co., Inc. filed its fire claim with the defendant Philippine Guaranty Co., Inc., thru its adjuster, H. H. Bayne
Adjustment Co., which was denied by said defendant in its letter dated November 27, 1964 ..., on the following grounds: 'a.
Policy Condition No. 3 and/or the 'Other Insurance Clause' of the policy violated because you did not give notice to us the other
insurance which you had taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and Manila Insurance for
P200,000.00 with the result that these insurances, of which we became aware of only after the fire, were not endorsed on our
policy; and (b) Policy Condition No. 11 was not complied with because you have failed to give to our representatives the
required documents and other proofs with respect to your claim and matters touching on our liability, if any, and the amount of
such liability'; (9) That as of September, 1962, when the defendant Philippine Guaranty Co., issued Fire Insurance Policy No.
43170 ... in the sum of P500,000.00 to cover the properties of the Union Manufacturing Co., Inc., the same properties were
already covered by Fire Policy No. 1533 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1961
to October 7, 1962 ...; and by insurance policies Nos. F-2314 ... and F-2590 ... of the Oceanic Insurance Agency for the total
sum of P300,000.00 and for periods respectively, from January 27, 1962 to January 27, 1963, and from June 1, 1962 to June 1,
1963; and (10) That when said defendant's Fire Insurance Policy No. 43170 was already in full force and effect, the Union
Manufacturing Co., Inc. without the consent of the defendant, Philippine Guaranty Co., Inc., obtained other insurance policies
totalling P305,000.00 over the same properties prior to the fire, to wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd.,
for P80,000.00 for the period from May 27, 1964 to May 27, 1965 ...; (2) Fire Policy No. 3702 of the Sincere Insurance
Company for P25,000.00 for the period from October 7, 1963 to October 7, 1964 ...; and (3) Fire Policy No. 6161 of Manila
Insurance Co. for P200,000.00 for the period from May 15, 1964 to May 15, 1965 ... ." There is in the cover note and in the fire
insurance policy​ ​the following warranty: "[Co- Insurance Declared]: Nil."

Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject to the terms
and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus: "However, inasmuch as the
Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it did not reveal the existence of other
insurance policies over the same properties, as required by the warranty appearing on the face of the policy issued by the
defendant and that on the other hand said Union Manufacturing Co., Inc. represented that there were no other insurance
policies at the time of the issuance of said defendant's policy, and it appearing furthermore that while the policy of the defendant
was in full force and effect the Union Manufacturing Co., Inc. secured other fire insurance policies without the written consent of
the defendant endorsed on the policy, the conclusion is inevitable that both the Republic Bank and Union Manufacturing Co.,
Inc. cannot recover from the same policy of the defendant because the same is null and void." The tone of confidence apparent
in the above excerpts from the lower court decision is understandable. The conclusion reached by the lower court finds support
in authoritative precedents. It is far from easy, therefore, for appellant Republic Bank to impute to such a decision a failure to
abide by the law. Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated.

It is to ​Santa Ana v. Commercial Union Assurance Co.​, a 1930 decision, that one turns to for the first explicit formulation as to
the controlling principle. As was made clear in the opinion of this Court, penned by Justice Villa-Real: "Without deciding whether
notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an
insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it
is one of the conditions specified in the fire insurance policy, the policy is null and void." The next year, in ​Ang Giok Chip v.
Springfield Fire & Marine Ins. Co.​, the conformity of the insured to the terms of the policy, implied from the failure to express
any disagreement with what is provided for, was stressed in these words of the ponente​, Justice Malcolm: "It is admitted that
the policy before us was accepted by the plaintiff. The receipt of this policy by the insured without objection binds both the
acceptor and the insured to the terms thereof. The insured may not thereafter be heard to say that he did not read the policy or
know its terms, since it is his duty to read his policy and it will be assumed that he did so." 9 As far back as 1915, in ​Young v.
Midland Textile Insurance Company,​ it was categorically set forth that as a condition precedent to the right of recovery, there
must be compliance on the part of the insured with the terms of the policy. As stated in the opinion of the Court through Justice
Johnson: "If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of
performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts
for the parties. The function and duty of the courts consist simply in enforcing and carrying out the contracts actually made.
While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of
insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and
popular sense." More specifically, there was a reiteration of this Santa Ana ruling in a decision by the then Justice, later Chief
Justice, Bengzon, in ​General Insurance & Surety Corp. v. Ng Hua​. Thus: "The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec. 69,
Insurance Act) Such misrepresentation is fatal in the light of our views in ​Santa Ana v. Commercial Union Assurance Company,
Ltd. ... . The materiality of non-disclosure of other insurance policies is not open to doubt." As a matter of fact, in a 1966
decision, ​Misamis Lumber Corp. v. Capital Ins. & Surety Co., Inc.​, Justice J.B.L. Reyes, for this Court, made manifest anew its
adherence to such a principle in the face of an assertion that thereby a highly unfavorable provision for the insured would be
accorded recognition. This is the language used: "The insurance contract may be rather onerous ('one sided', as the lower court
put it), but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and
which is the law between the contracting parties."

There is no escaping the conclusion then that the lower court could not have disposed of this case in a way other than it did.
Had it acted otherwise, it clearly would have disregarded pronouncements of this Court, the compelling force of which cannot
be denied. There is, to repeat, no justification for a reversal.

WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs.

CALANOC v COURT OF APPEALS (1955)

JURISPRUDENCE:
INSURANCE LAW; ACCIDENTAL DEATH; AMBIGUOUS TERMS IN INSURANCE POLICY, How CONSTRUED.—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 against the one who has caused
the obscurity. (Article 1377, new Civil Code.) 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 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 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.”

FULL TEXT:

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 bound 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 who 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 declined 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
circumstances 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 exempt 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 excluded 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 against 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, equivocal, 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 a 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.

QUA CHEE GAN v LAW UNION AND ROCK INSURANCE (1955)

JURISPRUDENCE:
INSURANCE; BREACH OF WARRANTY; WHEN INSURER BARRED FROM CLAIMING POLICIES VOID “AB INITIO."—The
insurer is barred by estoppel to claim violation of the so-called fire hydrant warranty where, knowing fully well that the number
of hydrants demanded in the warranty never existed from the very beginning, it nevertheless issued the policies subject to such
warranty, and received the corresponding premiums.
AMBIGUITIES IN THE TERMS OF THE CONTRACT, How CONSTRUED.—The contract of insurance is one of perfect good
faith (uberrimae fidei) not for the insured alone, but equally so for the insurer; in fact, it is more so for the latter, since its
dominant bargaining position carries with it stricter responsibility. By reason of the exclusive control of the insurance company
over the terms and phraseology of the insurance contract, the ambiguity must be strictly interpreted against the insurer and
liberally in favor of the insured, especially to avoid a forfeiture.
WARRANTY AGAINST STORAGE OF GASOLINE.—In the present case, gasoline is not specifically mentioned among the
prohibited articles listed in the so-called “hemp warranty.” The clause relied upon by the insurer speaks of ​“oils” and is
decidedly ambiguous and uncertain; for in ordinary parlance, “oils” mean “lubricants” and not gasoline or kerosene. Besides,
the gasoline kept by the insured was only incidental to his business, being no more than a customary 2 days supply for the five
or six motor vehicles used for transporting of the stored merchandise, and it is well settled rule that the keeping of inflammable
oils on the premises, though prohibited by the policy, does not void it if such keeping is incidental to the business.

FULL TEXT:

Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First Instance of said province, seeking to
recover the proceeds of certain fire insurance policies totalling P370,000, issued by the Law Union & Rock Insurance Co., Ltd.,
upon certain bodegas and merchandise of the insured that were burned on June 21, 1940. The records of the original case
were destroyed during the liberation of the region, and were reconstituted in 1946. After a trial that lasted several years, the
Court of First Instance rendered a decision in favor of the plaintiff, the dispositive part whereof reads as follows:

Wherefore, judgment is rendered for the plaintiff and against the defendant condemning the latter to pay the former —

(a) Under the first cause of action, the sum of P146,394.48;

(b) Under the second cause of action, the sum of P150,000;

(c) Under the third cause of action, the sum of P5,000;

(d) Under the fourth cause of action, the sum of P15,000; and

(e) Under the fifth cause of action, the sum of P40,000;

all of which shall bear interest at the rate of 8% per annum in accordance with Section 91 (b) of the Insurance Act from
September 26, 1940, until each is paid, with costs against the defendant.

The complaint in intervention of the Philippine National Bank is dismissed without costs. (Record on Appeal, 166-167.)

From the decision, the defendant Insurance Company appealed directly to this Court.

The record shows that before the last war, plaintiff-appellee owned four warehouses or bodegas (designated as Bodegas Nos.
1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks of copra and hemp, baled and loose, in which the
appellee dealt extensively. They had been, with their contents, insured with the defendant Company since 1937, and the lose
made payable to the Philippine National Bank as mortgage of the hemp and crops, to the extent of its interest. In June, 1940,
the insurance stood as follows:

Policy No. Property Insured Amount

2637164 (Exhibit "LL") Bodega No. 1 (Building) P15,000.00

2637165 (Exhibit "JJ") Bodega No. 2 (Building) 10,000.00

Bodega No. 3 (Building) 25,000.00

 Bodega No. 4 (Building) 10,000.00

Hemp Press — moved by steam engine 5,000.00

2637345 (Exhibit "X") Merchandise contents (copra and empty sacks of Bodega 150,000.00
No. 1)

2637346 (Exhibit "Y") Merchandise contents (hemp) of Bodega No. 3 150,000.00

2637067 (Exhibit Merchandise contents (loose hemp) of Bodega No. 4 5,000.00

"GG")

Total
P370,000.00

Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted for almost one week, gutted and
completely destroyed Bodegas Nos. 1, 2 and 4, with the merchandise stored there. Plaintiff-appellee informed the insurer by
telegram on the same date; and on the next day, the fire adjusters engaged by appellant insurance company arrived and
proceeded to examine and photograph the premises, pored over the books of the insured and conducted an extensive
investigation. The plaintiff having submitted the corresponding fire claims, totalling P398,562.81 (but reduced to the full amount
of the insurance, P370,000), the Insurance Company resisted payment, claiming violation of warranties and conditions, filing of
fraudulent claims, and that the fire had been deliberately caused by the insured or by other persons in connivance with him.

With counsel for the insurance company acting as private prosecutor, Que Chee Gan, with his brother, Qua Chee Pao, and
some employees of his, were indicted and tried in 1940 for the crime of arson, it being claimed that they had set fire to the
destroyed warehouses to collect the insurance. They were, however, acquitted by the trial court in a final decision dated July 9,
1941 (Exhibit WW). Thereafter, the civil suit to collect the insurance money proceeded to its trial and termination in the Court
below, with the result noted at the start of this opinion. The Philippine National Bank's complaint in intervention was dismissed
because the appellee had managed to pay his indebtedness to the Bank during the pendency of the suit, and despite the fire
losses.

In its first assignment of error, the insurance company alleges that the trial Court should have held that the policies were
avoided for breach of warranty, specifically the one appearing on a rider pasted (with other similar riders) on the face of the
policies (Exhibits X, Y, JJ and LL). These riders were attached for the first time in 1939, and the pertinent portions read as
follows:

Memo. of Warranty​. — The undernoted Appliances for the extinction of fire being kept on the premises insured hereby, and it
being declared and understood that there is an ample and constant water supply with sufficient pressure available at all
seasons for the same, it is hereby warr​anted​ that the said appliances shall be maintained in efficient working order during the
currency of this policy, by reason whereof a discount of 2 1/2 per cent is allowed on the premium chargeable under this policy.

Hydrants in the compound, not less in number than one for each 150 feet of external wall measurement of building, protected,
with not less than 100 feet of hose piping and nozzles for every two hydrants kept under cover in convenient places, the
hydrants being supplied with water pressure by a pumping engine, or from some other source, capable of discharging at the
rate of not less than 200 gallons of water per minute into the upper story of the highest building protected, and a trained brigade
of not less than 20 men to work the same.'

It is argued that since the bodegas insured had an external wall perimeter of 500 meters or 1,640 feet, the appellee should
have eleven (11) fire hydrants in the compound, and that he actually had only two (2), with a further pair nearby, belonging to
the municipality of Tabaco.

We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim violation of the
so-called fire hydrants warranty, for the reason that knowing fully all that the number of hydrants demanded therein never
existed from the very beginning, the appellant nevertheless issued the policies in question subject to such warranty, and
received the corresponding premiums. It would be perilously close to conniving at fraud upon the insured to allow appellant to
claims now as void ab initio the policies that it had issued to the plaintiff without warning of their fatal defect, of which it was
informed, and after it had misled the defendant into believing that the policies were effective.
The insurance company was aware, even before the policies were issued, that in the premises insured there were only two fire
hydrants installed by Qua Chee Gan and two others nearby, owned by the municipality of TAbaco, contrary to the requirements
of the warranty in question. Such fact appears from positive testimony for the insured that appellant's agents inspected the
premises; and the simple denials of appellant's representative (Jamiczon) can not overcome that proof. That such inspection
was made is moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to which the
insured was entitled, since the discount depended on the number of hydrants, and the fire fighting equipment available (See
"Scale of Allowances" to which the policies were expressly made subject). The law, supported by a long line of cases, is
expressed by American Jurisprudence (Vol. 29, pp. 611-612) to be as follows:

It is usually held that where the insurer, at the time of issuance of a policy of insurance, has knowledge of existing facts which,
if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the
contract inconsistent with the facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law
is charitable enough to assume, in the absence of any showing to the contrary, that an insurance company intends to execute a
valid contract in return for the premium received; and when the policy contains a condition which renders it voidable at its
inception, and this result is known to the insurer, it will be presumed to have intended to waive the conditions and to execute a
binding contract, rather than to have deceived the insured into thinking he is insured when in fact he is not, and to have taken
his money without consideration. (29 Am. Jur., Insurance, section 807, at pp. 611-612.)

The reason for the rule is not difficult to find.

The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept one's money for a policy of
insurance which it then knows to be void and of no effect, though it knows as it must, that the assured believes it to be valid
and binding, is so contrary to the dictates of honesty and fair dealing, and so closely related to positive fraud, as to the
abhorent to fairminded men. It would be to allow the company to treat the policy as valid long enough to get the preium on it,
and leave it at liberty to repudiate it the next moment. This cannot be deemed to be the real intention of the parties. To hold that
a literal construction of the policy expressed the true intention of the company would be to indict it, for fraudulent purposes and
designs which we cannot believe it to be guilty of (Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543-544).

The inevitableness of the conduct observed by the insurance company in this case is heightened by the fact that after the
insured had incurred the expense of installing the two hydrants, the company collected the premiums and issued him a policy
so worded that it gave the insured a discount much smaller than that he was normally entitledto. According to the "Scale of
Allowances," a policy subject to a warranty of the existence of one fire hydrant for every 150 feet of external wall entitled the
insured to a discount of 7 1/2 percent of the premium; while the existence of "hydrants, in compound" (regardless of number)
reduced the allowance on the premium to a mere 2 1/2 per cent. This schedule was logical, since a greater number of hydrants
and fire fighting appliances reduced the risk of loss. But the appellant company, in the particular case now before us, so
worded the policies that while exacting the greater number of fire hydrants and appliances, it kept the premium discount at the
minimum of 2 1/2 per cent, thereby giving the insurance company a double benefit. No reason is shown why appellant's
premises, that had been insured with appellant for several years past, suddenly should be regarded in 1939 as so hazardous
as to be accorded a treatment beyond the limits of appellant's own scale of allowances. Such abnormal treatment of the
insured strongly points at an abuse of the insurance company's selection of the words and terms of the contract, over which it
had absolute control.

These considerations lead us to regard the parol evidence rule, invoked by the appellant as not applicable to the present case.
It is not a question here whether or not the parties may vary a written contract by oral evidence; but whether testimony is
receivable so that a party may be, by reason of inequitable conduct shown, estopped from enforcing forfeitures in its favor, in
order to forestall fraud or imposition on the insured.

Receipt of Premiums or Assessments afte Cause for Forfeiture Other than Nonpayment.​ — It is a well settled rule of law that
an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a preium on the
policy, estopped to take advantage of the forfeiture. It cannot treat the policy as void for the purpose of defense to an action to
recover for a loss thereafter occurring and at the same time treat it as valid for the purpose of earning and collecting further
premiums." (29 Am. Jur., 653, p. 657.)

It would be unconscionable to permit a company to issue a policy under circumstances which it knew rendered the policy void
and then to accept and retain premiums under such a void policy. Neither law nor good morals would justify such conduct and
the doctrine of equitable estoppel is peculiarly applicable to the situation. (McGuire vs. Home Life Ins. Co. 94 Pa. Super Ct.
457.)

Moreover, taking into account the well known rule that ambiguities or obscurities must be strictly interpreted against the party
that caused them,the "memo of warranty" invoked by appellant bars the latter from questioning the existence of the appliances
called for in the insured premises, since its initial expression, "the undernoted appliances for the extinction of fire ​being kept on
the premises insured hereby​, . . . it is hereby warr​anted
​ . . .", admists of interpretation as an admission of the existence of such
appliances which appellant cannot now contradict, should the parol evidence rule applies.

The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must be equally rejected, since the
appellant's argument thereon is based on the assumption that the insured was bound to maintain no less than eleven hydrants
(one per 150 feet of wall), which requirement appellant is estopped from enforcing. The supposed breach of the water pressure
condition is made to rest on the testimony of witness Serra, that the water supply could fill a 5-gallon can in 3 seconds;
appellant thereupon inferring that the maximum quantity obtainable from the hydrants was 100 gallons a minute, when the
warranty called for 200 gallons a minute. The transcript shows, however, that Serra repeatedly refused and professed inability
to estimate the rate of discharge of the water, and only gave the "5-gallon per 3-second" rate because the insistence of
appellant's counsel forced the witness to hazard a guess. Obviously, the testimony is worthless and insufficient to establish the
violation claimed, especially since the burden of its proof lay on appellant.

As to maintenance of a trained fire brigade of 20 men, the record is preponderant that the same was organized, and drilled
from time to give, altho not maintained as a permanently separate unit, which the warranty did not require. Anyway, it would be
unreasonable to expect the insured to maintain for his compound alone a fire fighting force that many municipalities in the
Islands do not even possess. There is no merit in appellant's claim that subordinate membership of the business manager (Co
Cuan) in the fire brigade, while its direction was entrusted to a minor employee unders the testimony improbable. A business
manager is not necessarily adept at fire fighting, the qualities required being different for both activities.

Under the second assignment of error, appellant insurance company avers, that the insured violated the "Hemp Warranty"
provisions of Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since appellee admitted that there were 36 cans
(latas) of gasoline in the building designed as "Bodega No. 2" that was a separate structure not affected by the fire. It is well to
note that gasoline is not specifically mentioned among the prohibited articles listed in the so-called "hemp warranty." The cause
relied upon by the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a
flashpoint below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance, "Oils" mean "lubricants"
and not gasoline or kerosene. And how many insured, it may well be wondered, are in a position to understand or determine
"flash point below 003o Fahrenheit. Here, again, by reason of the exclusive control of the insurance company over the terms
and phraseology of the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured,
specially to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180).

Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by experts who know and
can anticipate the hearing 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.)

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 see no reason why the prohibition of keeping gasoline in the premises could not be expressed clearly and unmistakably, in
the language and terms that the general public can readily understand, without resort to obscure esoteric expression (now
derisively termed "gobbledygook"). We reiterate the rule stated in Bachrach vs. British American Assurance Co. (17 Phil. 555,
561):

If the company intended to rely upon a condition of that character, it ought to have been plainly expressed in the policy.

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 concentrations 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 Baloilles"
contracts by adherence" (​con tracts 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 examples) 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 Coee, Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934,
27 February 1942).

Si pudiera estimarse que la condicion 18 de la poliza de seguro envolvia alguna oscuridad, habra de ser tenido en cuenta que
al seguro es, practicamente un contrato de los llamados de adhesion y por consiguiente en caso de duda sobre la significacion
de las clausulas generales de una poliza — redactada por las compafijas sin la intervencion alguna de sus clientes — se ha de
adoptar de acuerdo con el articulo 1268 del Codigo Civil, la interpretacion mas favorable al asegurado, ya que la obscuridad es
imputable a la empresa aseguradora, que debia haberse explicado mas claram​ante​. (Dec. Trib. Sup. of Spain 13 Dec. 1934)

The contract of insurance is one of perfect good faith (​uferrimal fidei​) not for the insured alone, but equally so for the insurer; in
fact, it is merely so for the latter, since its dominant bargaining position carries with it stricter responsibility.

Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was only incidental to his business, being
no more than a customary 2 day's supply for the five or six motor vehicles used for transporting of the stored merchandise (t. s.
n., pp. 1447-1448). "It is well settled that the keeping of inflammable oils on the premises though prohibited by the policy does
not void it if such keeping is incidental to the business." Bachrach vs. British American Ass. Co., 17 Phil. 555, 560); and
"according to the weight of authority, even though there are printed prohibitions against keeping certain articles on the insured
premises the policy will not be avoided by a violation of these prohibitions, if the prohibited articles are necessary or in
customary use in carrying on the trade or business conducted on the premises." (45 C. J. S., p. 311; also 4 Couch on
Insurance, section 966b). It should also be noted that the "Hemp Warranty" forbade storage only "in the building to which this
insurance applies and/or in any building communicating therewith", and it is undisputed that no gasoline was stored in the
burned bodegas, and that "Bodega No. 2" which was not burned and where the gasoline was found, stood isolated from the
other insured bodegas.

The charge that the insured failed or refused to submit to the examiners of the insurer the books, vouchers, etc. demanded by
them was found unsubstantiated by the trial Court, and no reason has been shown to alter this finding. The insured gave the
insurance examiner all the date he asked for (Exhibits AA, BB, CCC and Z), and the examiner even kept and photographed
some of the examined books in his possession. What does appear to have been rejected by the insured was the demand that
he should submit "a ​list of ​all books, ​vouchers, receipts and other records" (Age 4, Exhibit 9-c); but the refusal of the insured in
this instance was well justified, since the demand for a list of all the vouchers (which were not in use by the insured) and
receipts was positively unreasonable, considering that such listing was superfluous because the insurer was not denied access
to the records, that the volume of Qua Chee Gan's business ran into millions, and that the demand was made just after the fire
when everything was in turmoil. That the representatives of the insurance company were able to secure all the date they
needed is proved by the fact that the adjuster Alexander Stewart was able to prepare his own balance sheet (Exhibit L of the
criminal case) that did not differ from that submitted by the insured (Exhibit J) except for the valuation of the merchandise, as
expressly found by the Court in the criminal case for arson. (Decision, Exhibit WW).

How valuations may differ honestly, without fraud being involved, was strikingly illustrated in the decision of the arson case
(Exhibit WW) acquiting Qua Choc Gan, appellee in the present proceedings. The decision states (Exhibit WW, p. 11):

Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en Tabaco asi como su existencia de copra y
abaca en las bodega al tiempo del incendio dur​ante el periodo comprendido desde el 1.o de enero al 21 de junio de 1940 y ha
encontrado que Qua Choc Gan ha sufrico una perdida de P1,750.76 en su negocio en Tabaco. Segun Steward al llegar a este
conclusion el ha tenidoen cuenta el balance de comprobacion Exhibit 'J' que le ha entregado el mismo acusado Que Choc Gan
en relacion con sus libros y lo ha encontrado correcto a excepcion de los precios de abaca y copra que alli aparecen que no
estan de acuerdo con los precios en el mercado. Esta comprobacion aparece en el balance mercado exhibit J que fue
preparado por el mismo testigo.

In view of the discrepancy in valuations between the insured and the adjuster Stewart for the insurer, the Court referred the
controversy to a government auditor, Apolonio Ramos; but the latter reached a different result from the other two. Not only that,
but Ramos reported two different valuations that could be reached according to the methods employed (Exhibit WW, p. 35):

La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos buenos para promovar el comercio y la finanza, pero
en el caso presente ha resultado un tanto cumplicada y acomodaticia, como lo prueba el resultado del examen hecho por los
contadores Stewart y Ramos, pues el juzgado no alcanza a ver como habiendo examinado las mismas partidas y los mismos
libros dichos contadores hayan de llegara dos conclusiones que difieron sustancialmente entre si. En otras palabras, no
solamente la comprobacion hecha por Stewart difiere de la comprobacion hecha por Ramos sino que, segun este ultimo, su
comprobacion ha dado lugar a dos resultados diferentes dependiendo del metodo que se emplea.

Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. The insurer attempted to bolster its case
with alleged photographs of certain pages of the insurance book (destroyed by the war) of insured Qua Chee Gan (Exhibits
26-A and 26-B) and allegedly showing abnormal purchases of hemp and copra from June 11 to June 20, 1940. The Court
below remained unconvinced of the authenticity of those photographs, and rejected them, because they were not mentioned
not introduced in the criminal case; and considering the evident importance of said exhibits in establishing the motive of the
insured in committing the arson charged, and the absence of adequate explanation for their omission in the criminal case, we
cannot say that their rejection in the civil case constituted reversible error.

The next two defenses pleaded by the insurer, — that the insured connived at the loss and that the fraudulently inflated the
quantity of the insured stock in the burnt bodegas, — are closely related to each other. Both defenses are predicted on the
assumption that the insured was in financial difficulties and set the fire to defraud the insurance company, presumably in order
to pay off the Philippine National Bank, to which most of the insured hemp and copra was pledged. Both defenses are fatally
undermined by the established fact that, notwithstanding the insurer's refusal to pay the value of the policies the extensive
resources of the insured (Exhibit WW) enabled him to pay off the National Bank in a short time; and if he was able to do so, no
motive appears for attempt to defraud the insurer. While the acquittal of the insured in the arson case is not ​res judicata on the
present civil action, the insurer's evidence, to judge from the decision in the criminal case, is practically identical in both cases
and must lead to the same result, since the proof to establish the defense of connivance at the fire in order to defraud the
insurer "cannot be materially less convincing than that required in order to convict the insured of the crime of arson"(Bachrach
vs. British American Assurance Co., 17 Phil. 536).

As to the defense that the burned bodegas could not possibly have contained the quantities of copra and hemp stated in the
fire claims, the insurer's case rests almost exclusively on the estimates, inferences and conclusionsAs to the defense that the
burned bodegas could not possibly have contained the quantities of copra and hemp stated in the fire claims, the insurer's case
rests almost exclusively on the estimates, inferences and conclusions of its adjuster investigator, Alexander D. Stewart, who
examined the premises during and after the fire. His testimony, however, was based on inferences from the photographs and
traces found after the fire, and must yield to the contradictory testimony of engineer Andres Bolinas, and specially of the then
Chief of the Loan Department of the National Bank's Legaspi branch, Porfirio Barrios, and of Bank Appraiser Loreto Samson,
who actually saw the contents of the bodegas shortly before the fire, while inspecting them for the mortgagee Bank. The lower
Court was satisfied of the veracity and accuracy of these witnesses, and the appellant insurer has failed to substantiate its
charges aganst their character. In fact, the insurer's repeated accusations that these witnesses were later "suspended for
fraudulent transactions" without giving any details, is a plain attempt to create prejudice against them, without the least support
in fact.

Stewart himself, in testifying that it is impossible to determine from the remains the quantity of hemp burned (t. s. n., pp. 1468,
1470), rebutted appellant's attacks on the refusal of the Court below to accept its inferences from the remains shown in the
photographs of the burned premises. It appears, likewise, that the adjuster's calculations of the maximum contents of the
destroyed warehouses rested on the assumption that all the copra and hemp were in sacks, and on the result of his
experiments to determine the space occupied by definite amounts of sacked copra. The error in the estimates thus arrived at
proceeds from the fact that a large amount of the insured's stock were in loose form, occupying less space than when kept in
sacks; and from Stewart's obvious failure to give due allowance for the compression of the material at the bottom of the piles (t.
s. n., pp. 1964, 1967) due to the weight of the overlying stock, as shown by engineer Bolinas. It is probable that the errors were
due to inexperience (Stewart himself admitted that this was the first copra fire he had investigated); but it is clear that such
errors render valueles Stewart's computations. These were in fact twice passed upon and twice rejected by different judges (in
the criminal and civil cases) and their concordant opinion is practically conclusive.

The adjusters' reports, Exhibits 9-A and 9-B, were correctly disregarded by the Court below, since the opinions stated therein
were based on ​ex parte investigations made at the back of the insured; and the appellant did not present at the trial the original
testimony and documents from which the conclusions in the report were drawn.lawphi1.net

Appellant insurance company also contends that the claims filed by the insured contained false and fraudulent statements that
avoided the insurance policy. But the trial Court found that the discrepancies were a result of the insured's erroneous
interpretation of the provisions of the insurance policies and claim forms, caused by his imperfect knowledge of English, and
that the misstatements were innocently made and without intent to defraud. Our review of the lengthy record fails to disclose
reasons for rejecting these conclusions of the Court below. For example, the occurrence of previous fires in the premises
insured in 1939, altho omitted in the claims, Exhibits EE and FF, were nevertheless revealed by the insured in his claims
Exhibits Q (filed simultaneously with them), KK and WW. Considering that all these claims were submitted to the same agent,
and that this same agent had paid the loss caused by the 1939 fire, we find no error in the trial Court's acceptance of the
insured's explanation that the omission in Exhibits EE and FF was due to inadvertance, for the insured could hardly expect
under such circumstances, that the 1939 would pass unnoticed by the insurance agents. Similarly, the 20 per cent overclaim on
70 percent of the hemo stock, was explained by the insured as caused by his belief that he was entitled to include in the claim
his expected profit on the 70 percent of the hemp, because the same was already contracted for and sold to other parties
before the fire occurred. Compared with other cases of over-valuation recorded in our judicial annals, the 20 per cent excess in
the case of the insured is not by itself sufficient to establish fraudulent intent. Thus, in Yu Cua vs. South British Ins. Co., 41 Phil.
134, the claim was fourteen (14) times (1,400 per cent) bigger than the actual loss; in Go Lu vs. Yorkshire Insurance Co., 43
Phil., 633, eight (8) times (800 per cent); in Tuason vs. North China Ins. Co., 47 Phil. 14, six (6) times (600 per cent); in Tan It
vs. Sun Insurance, 51 Phil. 212, the claim totalled P31,860.85 while the goods insured were inventoried at O13,113. Certainly,
the insured's overclaim of 20 per cent in the case at bar, duly explained by him to the Court ​a quo​, appears puny by
comparison, and can not be regarded as "more than misstatement, more than inadvertence of mistake, more than a mere error
in opinion, more than a slight exaggeration" (Tan It vs. Sun Insurance Office, ​ante)​ that would entitle the insurer to avoid the
policy. It is well to note that the overchange of 20 per cent was claimed only on a ​part (70 percent) of the hemp stock; had the
insured acted with fraudulent intent, nothing prevented him from increasing the value of all of his copra, hemp and buildings in
the same proportion. This also applies to the alleged fraudulent claim for burned empty sacks, that was likewise explained to
our satisfaction and that of the trial Court. The rule is that to avoid a policy, the false swearing must be wilful and with intent to
defraud (29 Am. Jur., pp. 849-851) which was not the cause. Of course, the lack of fraudulent intent would not authorize the
collection of the expected profit under the terms of the polices, and the trial Court correctly deducte the same from its award.

We find no reversible error in the judgment appealed from, wherefore the same is hereby affirmed. Costs against the appellant.
So ordered.

TY v FIRST NATIONAL SURETY AND ASSURANCE CO. (1961)

JURISPRUDENCE:

Insurance; Partial disability.—​ Where the insured, an operator mechanic of a factory, suffered injuries which caused the
temporary total disability of his left hand, due to the fractures of the index, middle and fourth fingers thereof, he cannot recover
on the insurance policies which provide that partial disability of either hand means amputation through the bones of the wrist.

Same.​—The insurance contract is the law between the parties. As the terms of the policies are clear, express and specific,
that only amputation of the left hand should be considered as a loss thereof, an interpretation that would include the mere
fracture or other temporary disability, not covered by the policies, would be unwarranted.

FULL TEXT:

Appeal from a judgment of the Court of First Instance of Manila, Hon. Gregorio S. Narvasa, presiding, dismissing the actions
filed in the above-entitled cases.

The facts found by the trial court, which are not disputed in this appeal, are as follows:

At different times within a period of two months prior to December 24, 1953, the plaintiff herein Diosdado C. Ty, employed as
operator mechanic foreman in the Broadway Cotton Factory, in Grace Park, Caloocan, Rizal, at a monthly salary of P185.00,
insured himself in 18 local insurance companies, among which being the eight above named defendants, which issued to him
personal accident policies, upon payment of the premium of P8.12 for each policy. Plaintiff's beneficiary was his employer,
Broadway Cotton Factory, which paid the insurance premiums.

On December 24, 1953, a fire broke out which totally destroyed the Broadway Cotton Factory. Fighting his way out of the
factory, plaintiff was injured on the left hand by a heavy object. He was brought to the Manila Central University hospital, and
after receiving first aid there, he went to the National Orthopedic Hospital for treatment of his injuries which were as follows:

1. Fracture, simple, proximal phalanx index finger, left;

2. Fracture, compound, comminuted, proximal phalanx, middle finger, left and 2nd phalanx, simple;

3. Fracture, compound, comminute phalanx, 4th finger, left;

4. Fracture, simple, middle phalanx, middle finger, left;

5. Lacerated wound, sutured, volar aspect, small finger, left;

6. Fracture, simple, chip, head, 1st phalanx, 5th digit, left. He underwent medical treatment in the Orthopedic Hospital from
December 26, 1953 to February 8, 1954. The above-described physical injuries have caused temporary total disability of
plaintiff's left hand. Plaintiff filed the corresponding notice of accident and notice of claim with all of the above named
defendants to recover indemnity under Part II of the policy, which is similarly worded in all of the policies, and which reads
pertinently as follows:

INDEMNITY FOR TOTAL OR PARTIAL DISABILITY

If the Insured sustains any Bodily Injury which is effected solely through violent, external, visible and accidental means, and
which shall not prove fatal but shall result, independently of all other causes and within sixty (60) days from the occurrence
thereof, in Total or Partial Disability of the Insured, the Company shall pay, subject to the exceptions as provided for hereinafter,
the amount set opposite such injury:

PARTIAL DISABILITY

LOSS OF:

xxx xxx xxx

Either hand ............................................................................ P650.00

xxx xxx xxx

... The loss of a hand shall mean the loss by amputation through the bones of the wrist....

Defendants rejected plaintiff's claim for indemnity for the reason that there being no severance of amputation of the left hand,
the disability suffered by him was not covered by his policy. Hence, plaintiff sued the defendants in the Municipal Court of this
City, and from the decision of said Court dismissing his complaints, plaintiff appealed to this Court. (Decision of the Court of
First Instance of Manila, pp. 223-226, Records).

In view of its finding, the court absolved the defendants from the complaints. Hence this appeal.

The main contention of appellant in these cases is that in order that he may recover on the insurance policies issued him for the
loss of his left hand, it is not necessary that there should be an amputation thereof, but that it is sufficient if the injuries prevent
him from performing his work or labor necessary in pursuance of his occupation or business. Authorities are cited to the effect
that "total disability" in relation to one's occupation means that the condition of the insurance is such that common prudence
requires him to desist from transacting his business or renders him incapable of working. (46 C.J.S., 970). It is also argued that
obscure words or stipulations should be interpreted against the person who caused the obscurity, and the ones which caused
the obscurity in the cases at bar are the defendant insurance companies.

While we sympathize with the plaintiff or his employer, for whose benefit the policies were issued, we can not go beyond the
clear and express conditions of the insurance policies, all of which define partial disability as loss of either hand by ​amputation
through the bones of the wrist." There was no such amputation in the case at bar. All that was found by the trial court, which is
not disputed on appeal, was that the physical injuries "caused temporary total disability of plaintiff's left hand." Note that the
disability of plaintiff's hand was merely temporary, having been caused by fracture of the index, the middle and fourth fingers of
the left hand.

We might add that the agreement contained in the insurance policies is the law between the parties. As the terms of the policies
are clear, express and specific that only amputation of the left hand should be considered as a loss thereof, an interpretation
that would include the mere fracture or other temporary disability not covered by the policies would certainly be unwarranted.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the plaintiff-appellant.

DELA CRUZ v CAPITAL INS. AND SURETY CO. (1966)

JURISPRUDENCE:
Insurance; Meaning of “accident” and “accidental".​—The terms “accident” and “accidental”, as used in insurance contracts, have
not acquired any technical meaning. They are construed by the courts in their ordinary and common acceptation. Thus, the
terms have been taken to mean that which happens by chance or fortuitously, without intention and design, and which is
unexpected, unusual and unforeseen. An accident is an event that takes place without one’s foresight or expectation—an event
that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected.
Same; Tendency to eliminate the distinction between the terms “accidental” and “accidental means."​—The tendency of court
decisions in the United States in recent years is to eliminate the fine distinction between the terms “accidental” and “accidental
means” and to consider them as legally synonymous.
Same; Rule as to death or injury resulting from accident or accidental means.​—The generally accepted rule is that death or
injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the
insured’s voluntary act, unaccompanied by anything unforeseen except the death or injury. There is no accident when a
deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which
produces or brings about the result of injury or death. In other words, where the death or injury is not the natural or probable
result of the insured’s voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the
resulting death is within the protection of policies insuring against death or injury from accident.
Same; Application of the rule.— ​ Where the participation. of the insured in the boxing contest was voluntary, but the injury was
sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring and
without this unfortunate incident, perhaps he could not have received that blow in the head and would not have died, and his
death may be regarded as accidental, although boxing is attended with some risks of external injuries.
Same; Liability for risks not enumerated in the contract.​—The failure of the defendant insurance company to include death
resulting from a boxing match or other sports among the prohibitive risks leads to the conclusion that it did not intend to limit or
exempt itself from liability for such death.

FULL TEXT:

This is an appeal by the Capital Insurance & Surety Company, Inc. from the decision of the Court of First Instance of
Pangasinan (in Civ Case No. U-265), ordering it to indemnify therein plaintiff Simon de la Cruz for the death of the latter's son,
to pay the burial expenses, and attorney's fees.

Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was the holder of an accident insurance
policy (No. ITO-BFE-170) underwritten by the Capital Insurance & Surety Co., Inc., for the period beginning November 13, 1956
to November 12, 1957. On January 1, 1957, in connection with the celebration of the New Year, the Itogon-Suyoc Mines, Inc.
sponsored a boxing contest for general entertainment wherein the insured Eduardo de la Cruz, a non-professional boxer
participated. In the course of his bout with another person, likewise a non-professional, of the same height, weight, and size,
Eduardo slipped and was hit by his opponent on the left part of the back of the head, causing Eduardo to fall, with his head
hitting the rope of the ring. He was brought to the Baguio General Hospital the following day. The cause of death was reported
as hemorrhage, intracranial, left.

Simon de la Cruz, the father of the insured and who was named beneficiary under the policy, thereupon filed a claim with the
insurance company for payment of the indemnity under the insurance policy. As the claim was denied, De la Cruz instituted the
action in the Court of First Instance of Pangasinan for specific performance. Defendant insurer set up the defense that the death
of the insured, caused by his participation in a boxing contest, was not accidental and, therefore, not covered by insurance.
After due hearing the court rendered the decision in favor of the plaintiff which is the subject of the present appeal.

It is not disputed that during the ring fight with another non-professional boxer, Eduardo slipped, which was unintentional. At this
opportunity, his opponent landed on Eduardo's head a blow, which sent the latter to the ropes. That must have caused the
cranial injury that led to his death. Eduardo was insured "against death or disability caused by accidental means". Appellant
insurer now contends that while the death of the insured was due to head injury, said injury was sustained because of his
voluntary participation in the contest. It is claimed that the participation in the boxing contest was the "means" that produced the
injury which, in turn, caused the death of the insured. And, since his inclusion in the boxing card was voluntary on the part of the
insured, he cannot be considered to have met his death by "accidental means".1äwphï1.ñët

The terms "accident" and "accidental", as used in insurance contracts, have not acquired any technical meaning, and are
construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen
by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident is an
event that takes place without one's foresight or expectation — an event that proceeds from an unknown cause, or is an
unusual effect of a known cause and, therefore, not expected.​1

Appellant however, would like to make a distinction between "accident or accidental" and "accidental means", which is the term
used in the insurance policy involved here. It is argued that to be considered within the protection of the policy, what is required
to be accidental is the ​means that caused or brought the death and not the death itself. It may be mentioned in this connection,
that the tendency of court decisions in the United States in recent years is to eliminate the fine distinction between the terms
"accidental" and "accidental means" and to consider them as legally synonymous.​2 But, even if we take appellant's theory, the
death of the insured in the case at bar would still be entitled to indemnification under the policy. The generally accepted rule is
that, death or injury does not result from accident or accidental means within the terms of an

accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death
or injury.​3 There is no accident when a deliberate act is performed unless some additional, unexpected, independent, and
unforeseen happening occurs which produces or brings about the result of injury or death.​4 In other words, where the death or
injury is not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in the doing of the act
which produces the injury, the resulting death is within the protection of policies insuring against death or injury from accident.

In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when he
slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. Without this unfortunate
incident, that is, the unintentional slipping of the deceased, perhaps he could not have received that blow in the head and would
not have died. The fact that boxing is attended with some risks of external injuries does not make any injuries received in the
course of the game not accidental. In boxing as in other equally physically rigorous sports, such as basketball or baseball, death
is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can only be accidental or produced by some
unforeseen happening or event as what occurred in this case.

Furthermore, the policy involved herein specifically excluded from its coverage —

(e) Death or disablement consequent upon the Insured engaging in football, hunting, pigsticking, steeplechasing, polo-playing,
racing of any kind, mountaineering, or motorcycling.

Death or disablement resulting from engagement in boxing contests was not declared outside of the protection of the insurance
contract. Failure of the defendant insurance company to include death resulting from a boxing match or other sports among the
prohibitive risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such death.​5

Wherefore, in view of the foregoing considerations, the decision appealed from is hereby affirmed, with costs against appellant.
so ordered.

HOME INSURANCE CO. v EASTERN SHIPPING LINES (1983)

JURISPRUDENCE:
Corporation Law; Statutes; The Corporation Law should be given an interpretation that would foster friendly commercial
intercourse among countries.​ —To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our
courts.The Corporation Law must be given a reasonable, not unduly harsh, interpretation which does not hamper the
development of trade relations and which fosters friendly commercial intercourse among countries.
Same; Contracts; Insurance Law; A foreign insurance corporation not licensed to do business in the Philippines.—​And insofar as
litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any debt, claim, or
demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation with no
capacity to sue is null and void ab initio.
Same; Contracts; Insurance Law; A contract entered into by a foreign insurance corporation not license to do business in the
Philippines is not void.— ​ “In another case, the court said: ‘The very fact that the prohibition against maintaining an action in the
courts of the state was inserted in the statute ought to be conclusive proof that the legislature did not intend or understand that
contracts made without compliance with the law were void. The statute does not fix any time within which foreign corporations
shall comply with the Act. If such contracts were void, no suits could be prosecuted on them in any court. x x x The primary
purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction
of the courts of this state. The statute was not intended to exclude foreign corporations from the state. It does not, in terms,
render invalid contracts made in this state by non-complying corporations. The better reason, the wiser and fairer policy, and the
greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or
implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts x x
x are enforceable x x x upon compliance with the law.’Our jurisprudence leans towards the latter view. Apart from the objectives
earlier cited from ​Marshall Wells Co. v. Henry W. Elser & Co.​ (supra), it has long been the rule that a foreign corporation actually
doing business in the Philippines without a license to do so may be sued in our courts.
Same; Same; Same; The present Corporation Code attaches a penal sanction and denies access to courts and administrative
tribunals to foreign corporations doing business here without license.​ —It is, therefore, not necessary to declare the contract null
and void even as against the erring foreign corporation. The penal sanction for the violation and the denial of access to our
courts and administrative bodies are sufficient from the viewpoint of legislative policy.
Same; Same; Same; Lack of capacity to sue by foreign corporation at the time of execution of contract cured by its subsequent
registration here.​ —Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subsequent
registration is also strengthened by the procedural aspects of these cases.
Same; Same; Same; Actions; Practice and Pleadings; Where plaintiff corporation alleges it has capacity to sue, it is not sufficient
for the purpose of attacking such capacity to deny the same for lack of knowledge; defendant must supply particulars within his
knowledge of such lack of capacity to sue.​—We find the general denials inadequate to attack the foreign corporations lack of
capacity to sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that “a party desiring
to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity
shall do so by specific denial, which shall include such supporting particulars as are particularly within the pleader’s knowledge.
At the very least, the private respondents should have stated particulars in their answers upon which a specific denial of the
petitioner’s capacity to sue could have been based or which could have supported its denial for lack of knowledge. And yet, even
if the plaintiff’s lack of capacity to sue was not properly raised as an issue by the answers, the petitioner introduced documentary
evidence that it had the authority to engage in the insurance business at the time it filed the complaints.

FULL TEXT:

Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of First Instance of Manila,
Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein,
now appellant, had failed to prove its capacity to sue.

There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the facts are found in the
decision of the respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development Corporation, shipped on
board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is
owned and operated by defendant Eastern Shipping Lines (CARRIER). The shipment was covered by Bill of Lading No. O-MA-9,
with arrival notice to Phelps Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was
insured with plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy No. AS-73633.

xxx xxx xxx

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CONSIGNEE ultimately
received at its warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly
cut, and which had to be considered as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to
weight 263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to
Exhibit "A", or 1,209,56 lbs., according to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the
CARRIER (Exhibit "J-1"), and the TRANSPORTATION COMPANY (Exhibit "K- l").

For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the amount of P3,260.44, by
virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for payment
against the CARRIER and the TRANSPORTATION COMPANY for reimbursement of the aforesaid amount but each refused to
pay the same. ...

The facts of L-34383 are found in the decision of the lower court as follows:

On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30 packages of Service Parts of
Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN" owned by the defendant, N. V. Nedlloyd Lijnen, and
represented in the Philippines by its local agent, the defendant Columbian Philippines, Inc. (CARRIER). The shipment was
covered by Bill of Lading No. 22 for transportation to, and delivery at, Manila, in favor of the consignee, international Harvester
Macleod, Inc. (CONSIGNEE). The shipment was insured with plaintiff company under its Cargo Policy No. AS-73735 "with
average terms" for P98,567.79.

xxx xxx xxx

The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in bad order. What the
CONSIGNEE ultimately received at its warehouse was the same number of 29 packages with 9 packages in bad order. Out of
these 9 packages, 1 package was accepted by the CONSIGNEE in good order due to the negligible damages sustained. Upon
inspection at the consignee's warehouse, the contents of 3 out of the 8 cases were also found to be complete and intact, leaving
5 cases in bad order. The contents of these 5 packages showed several items missing in the total amount of $131.14; while the
contents of the undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the CONSIGNEE under its
Insurance Cargo Policy the amount of P2,426.98, by virtue of which plaintiff became subrogated to the rights and actions of the
CONSIGNEE. Demands were made on defendants CARRIER and CONSIGNEE for reimbursement thereof but they failed and
refused to pay the same.

In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:

The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through its agent, Mr. VICTOR H.
BELLO, of legal age and with office address at Oledan Building, Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:

Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or information sufficient to
form a belief as to the truth thereof.

Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the allegations of the complaint,
regarding the capacity of plaintiff-appellant. The pertinent paragraph of this answer reads as follows:

Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods, Inc., filed their answers.
They denied the petitioner-appellant's capacity to sue for lack of knowledge or information sufficient to form a belief as to the
truth thereof.

As earlier stated, the respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff failed to
prove its capacity to sue. The court reasoned as follows:

In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a) defendant Eastern Shipping Lines
should pay plaintiff the sum of P1,630.22 with interest at the legal rate from January 5, 1968, the date of the institution of the
Complaint, until fully paid; b) defendant Angel Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with
interest at the legal rate from January 5, 1968 until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc.
should be ordered dismissed; and d) each defendant to pay one-half of the costs.

The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect the public interest. Hence,
although defendants have not raised the question of plaintiff's compliance with that provision of law, the Court has resolved to
take the matter into account.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction upon which it bases its
complaint is an isolated one, or that it is licensed to transact business in this country, failing which, it will be deemed that it has
no valid cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases
filed by plaintiff before this Court, of which judicial cognizance can be taken, and under the ruling in Far East International Import
and Export Corporation vs. Hankai Koayo Co.​ , 6 SCRA 725, it has to be held that plaintiff is doing business in the Philippines.
Consequently, it must have a license under Section 68 of the Corporation Law before it can be allowed to sue.

The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of this Court, entitled
'Home Insurance Co. vs. N. V. Nedlloyd Lijnen​, of which judicial cognizance can also be taken:

Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967, issued by the Office of the Insurance
Commissioner authorizing plaintiff to transact insurance business in this country. By virtue of Section 176 of the Insurance Law,
it has to be presumed that a license to transact business under Section 68 of the Corporation Law had previously been issued to
plaintiff. No copy thereof, however, was submitted for a reason unknown. The date of that license must not have been much
anterior to July 1, 1967. The preponderance of the evidence would therefore call for the finding that the insurance contract
involved in this case, which was executed at Makati, Rizal, on February 8, 1967, was contracted before plaintiff was licensed to
transact business in the Philippines.

This Court views Section 68 of the Corporation Law as reflective of a basic public policy. Hence, it is of the opinion that, in the
eyes of Philippine law, the insurance contract involved in this case must be held void under the provisions of Article 1409 (1) of
the Civil Code, and could not be validated by subsequent procurement of the license. That view of the Court finds support in the
following citation:

According to many authorities, a constitutional or statutory prohibition against a foreign corporation doing business in the state,
unless such corporation has complied with conditions prescribed, is effective to make the contracts of such corporation void, or
at least unenforceable, and prevents the maintenance by the corporation of any action on such contracts. Although the usual
construction is to the contrary, and to the effect that only the remedy for enforcement is affected thereby, a statute prohibiting a
non-complying corporation from suing in the state courts on any contract has been held by some courts to render the contract
void and unenforceable by the corporation, even after its has complied with the statute." (36 Am. Jur. 2d 299-300).

xxx xxx xxx

The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract involved herein was executed on January
20, 1967, the instant case should also be dismissed.

We resolved to consolidate the two cases when we gave due course to the petition.
The petitioner raised the following assignments of errors:

First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY OF
PLAINTIFF-APPELLANT.

Second Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT
PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.

On the basis of factual and equitable considerations, there is no question that the private respondents should pay the obligations
found by the trial court as owing to the petitioner. Only the question of validity of the contracts in relation to lack of capacity to
sue stands in the way of the petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in
single acts or solitary transactions and not engaged in business is likewise not in issue. The petitioner was engaged in business
without a license. The private respondents' obligation to pay under the terms of the contracts has been proved.

When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct its
insurance business in the Philippines. It could already filed suits.

Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign insurance company duly
authorized to do business in the Philippines through its agent Mr. Victor H. Bello. However, when the insurance contracts which
formed the basis of these cases were executed, the petitioner had not yet secured the necessary licenses and authority. The
lower court, therefore, declared that pursuant to the basic public policy reflected in the Corporation Law, the insurance contracts
executed before a license was secured must be held null and void. The court ruled that the contracts could not be validated by
the subsequent procurement of the license.

The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than those of the Philippine
Islands shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose
from the chief of the ​Mercantile Register of the Bureau of Commerce and Industry, ​(Now Securities and Exchange Commission.
See RA 5455) upon order of the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust
corporations, and banking institutions of all kinds, and upon order of the Secretary of Commerce and ​Communications (Now
Secretary of Trade. See 5455, section 4 for other requirements) in case of all other foreign corporations. ...

xxx xxx xxx

Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippine
Islands shall be permitted to transact business in the Philippine Islands or maintain by itself or assignee any suit for the recovery
of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding. Any
officer, director, or agent of the corporation or any person transacting business for any foreign corporation not having the license
prescribed shag be punished by imprisonment for not less than six months nor more than two years or by a fine of not less than
two hundred pesos nor more than one thousand pesos, or by both such imprisonment and fine, in the discretion of the court.

As early as 1924, this Court ruled in the leading case of ​Marshall Wells Co. v. Henry W. Elser & Co. (46 Phil. 70) that the object
of Sections 68 and 69 of the Corporation Law was to subject the foreign corporation doing business in the Philippines to the
jurisdiction of our courts. The Marshall Wells Co. decision referred to a litigation over an isolated act for the unpaid balance on a
bill of goods but the philosophy behind the law applies to the factual circumstances of these cases. The Court stated:

xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning
Counsel would have the law read thus: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for
the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in section 68 of the law."
Plaintiff, on the contrary, desires for the court to consider the particular point under discussion with reference to all the law, and
thereafter to give the law a common sense interpretation.

The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts.
The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a
domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The
implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain
an isolated order for business from the Philippines, from securing redress in the Philippine courts, and thus, in effect, to permit
persons to avoid their contracts made with such foreign corporations. The effect of the statute preventing foreign corporations
from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not
be unduly extended or improperly applied. It should not be construed to extend beyond the plain meaning of its terms,
​ merican Book Co. [1904],
considered in connection with its object, and in connection with the spirit of the entire law. (State ​vs. A
69 Kan, 1; American De Forest Wireless Telegraph Co. ​vs. ​Superior Court of City & Country of San Francisco and Hebbard
[1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap. 184.)

Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disastrously embarrass trade, or
of giving to the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the
option of barring from the courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted
with the option of construing the law to mean that any corporation in the United States, which might want to sell to a person in
the Philippines must send some representative to the Islands before the sale, and go through the complicated formulae provided
by the Corporation Law with regard to the obtaining of the license, before the sale was made, in order to avoid being swindled by
Philippine citizens, or of construing the law to mean that no foreign corporation doing business in the Philippines can maintain
any suit until it shall possess the necessary license;-confronted with these options, can anyone doubt what our decision will be?
The law simply means that no foreign corporation shall be permitted "to transact business in the Philippine Islands," as this
phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not
be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a
result which should be and can be easily avoided. (Sioux Remedy Co. ​vs. Cope and Cope, ​supra; Perkins, Philippine Business
Law, p. 264.)

To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our courts. The Corporation Law
must be given a reasonable, not an unduly harsh, interpretation which does not hamper the development of trade relations and
which fosters friendly commercial intercourse among countries.

The objectives enunciated in the 1924 decision are even more relevant today when we view commercial relations in terms of a
world economy, when the tendency is to re-examine the political boundaries separating one nation from another insofar as they
define business requirements or restrict marketing conditions.

We distinguish between the denial of a right to take remedial action and the penal sanction for non-registration.

Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal
sanction-imprisonment for not less than six months nor more than two years or payment of a fine not less than P200.00 nor more
than P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any
debt, claim, or demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation
with no capacity to sue is null and void ab initio.

We are not unaware of the conflicting schools of thought both here and abroad which are divided on whether such contracts are
void or merely voidable. Professor Sulpicio Guevarra in his book ​Corporation Law (​ Philippine Jurisprudence Series, U.P. Law
Center, pp. 233-234) cites an Illinois decision which holds the contracts void and a Michigan statute and decision declaring them
merely voidable:

xxx xxx xxx

Where a contract which is entered into by a foreign corporation without complying with the local requirements of doing business
is rendered void either by the express terms of a statute or by statutory construction, a subsequent compliance with the statute
by the corporation will not enable it to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1
[1930]. See also Diamond Glue Co. v. U.S. Glue Co., ​supra see note 18.) But where the statute merely prohibits the
maintenance of a suit on such contract (without expressly declaring the contract "void"), it was held that a failure to comply with
the statute rendered the contract ​voidable and not void, and compliance at any time before suit was sufficient. (Perkins Mfg. Co.
v. Clinton Const. Co., ​supra.​) Notwithstanding the above decision, the Illinois statute provides, among other things that a foreign
corporation that fails to comply with the conditions of doing business in that state cannot maintain a suit or action, etc. The court
said: 'The contract upon which this suit was brought, having been entered into in this state when appellant was not permitted to
transact business in this state, is in violation of the plain provisions of the statute, and is therefore null and void, and no action
can be maintained thereon at any time, even if the corporation shall, at some time after the making of the contract, qualify itself
to transact business in this state by a compliance with our laws in reference to foreign corporations that desire to engage in
business here. (United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)

A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain any action in this state
upon any contract made by it in this state after the taking effect of this Act, ​until it shall have fully complied with the requirement
of this Act, and procured a certificate to that effect from the Secretary of State," It was held that the above statute does not
render contracts of a foreign corporation that fails to comply with the statute void, but they may be enforced only after
compliance therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan v. U.S. Fidelity & G. Co.,
Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).

It has also been held that where the law provided that a corporation which has not complied with the statutory requirements
"shall not maintain an action until such compliance". "At the commencement of this action the plaintiff had not filed the certified
copy with the country clerk of Madera County, but it did file with the officer several months before the defendant filed his
amended answer, setting up this defense, as that at the time this defense was pleaded by the defendant the plaintiff had
complied with the statute. The defense pleaded by the defendant was therefore unavailable to him to prevent the plaintiff from
thereafter maintaining the action. Section 299 does not declare that the plaintiff shall not commence an action in any county
unless it has filed a certified copy in the office of the county clerk, but merely declares that it shall not ​maintain an action until it
has filled it. To maintain an action is not the same as to commence an action, but implies that the action has already been
commenced.​" (See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]).

In another case, the court said: "The very fact that the prohibition against maintaining an action in the courts of the state was
inserted in the statute ought to be conclusive proof that the legislature did not intend or understand that contracts made without
compliance with the law were void. The statute does not fix any time within which foreign corporations shall comply with the Act.
If such contracts were void, no suits could be prosecuted on them in any court. ... The primary purpose of our statute is to
compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state.
The statute was not intended to exclude foreign corporations from the state. It does not, in terms, render invalid contracts made
in this state by non-complying corporations. The better reason, the wiser and fairer policy, and the greater weight lie with those
decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting
the validity of enforceability of contracts made by qualified foreign corporations, the contracts ... are enforceable ... upon
compliance with the law." (Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from ​Marshall Wells Co. v. Henry W. Elser
& Co ​(supra), it has long been the rule that a foreign corporation actually doing business in the Philippines without license to do
so may be sued in our courts. The defendant American corporation in ​General Corporation of the Philippines v. Union Insurance
Society of Canton Ltd et al. (​ 87 Phil. 313) entered into insurance contracts without the necessary license or authority. When
summons was served on the agent, the defendant had not yet been registered and authorized to do business. The registration
and authority came a little less than two months later. This Court ruled:

Counsel for appellant contends that at the time of the service of summons, the appellant had not yet been authorized to do
business. But, as already stated, section 14, Rule 7 of the Rules of Court makes no distinction as to corporations with or without
authority to do business in the Philippines. The test is whether a foreign corporation was actually doing business here.
Otherwise, a foreign corporation illegally doing business here because of its refusal or neglect to obtain the corresponding
license and authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid service and
thereby impugn the jurisdiction of the local courts. It would indeed be anomalous and quite prejudicial, even disastrous, to the
citizens in this jurisdiction who in all good faith and in the regular course of business accept and pay for shipments of goods from
America, relying for their protection on duly executed foreign marine insurance policies made payable in Manila and duly
endorsed and delivered to them, that when they go to court to enforce said policies, the insurer who all along has been engaging
in this business of issuing similar marine policies, serenely pleads immunity to local jurisdiction because of its refusal or neglect
to obtain the corresponding license to do business here thereby compelling the consignees or purchasers of the goods insured
to go to America and sue in its courts for redress.

There is no question that the contracts are enforceable. The requirement of registration affects only the remedy.

Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the ambiguity caused by the
wording of Section 69 of the old Corporation Law.

Section 133 of the present Corporation Code provides:

SEC. 133. ​Doing business without a license.​-No foreign corporation transacting business in the Philippines without a license, or
its successors or assigns, shag be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency in the Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.

The old Section 69 has been reworded in terms of non-access to courts and administrative agencies in order to maintain or
intervene in any action or proceeding.

The prohibition against doing business without first securing a license is now given penal sanction which is also applicable to
other violations of the Corporation Code under the general provisions of Section 144 of the Code.

It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign corporation. The penal
sanction for the violation and the denial of access to our courts and administrative bodies are sufficient from the viewpoint of
legislative policy.

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subsequent registration is also
strengthened by the procedural aspects of these cases.

The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to do business in the
Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati. These
are all the averments required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its capacity to sue.
The private respondents countered either with ​an admission of the plaintiff's jurisdictional averments or with a general denial
based on lack of knowledge or information sufficient to form a belief as to the truth of the averments.

We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive
averment that it is authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence
of any party or the capacity of any party to sue or be sued in a representative capacity shall do so by specific denial, which shag
include such supporting particulars as are particularly within the pleader's knowledge. At the very least, the private respondents
should have stated particulars in their answers upon which a specific denial of the petitioner's capacity to sue could have been
based or which could have supported its denial for lack of knowledge. And yet, even if the plaintiff's lack of capacity to sue was
not properly raised as an issue by the answers, the petitioner introduced documentary evidence that it had the authority to
engage in the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed and set aside.

In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22 with interest at the legal
rate from January 5, 1968 until fully paid and respondent Angel Jose Transportation Inc. is ordered to pay the petitioner the sum
of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the
costs. The counterclaim of Angel Jose Transportation Inc. is dismissed.

In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the petitioner the sum of
P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The
complaint against Guacods, Inc. is dismissed.

CO v REPUBLIC (1960)

JURISPRUDENCE:
CITIZENSHIP; NATURALIZATION; BELIEF IN THE LAWS OF THE PHILIPPINES; WHEN NOT SUFFICIENT TO COMPLY
WITH THE REQUIREMENT.—In answer to the question whether he believed in the principles underlying the constitution, the
petitioner answered that he believed in the laws of the Philippines, and when asked what those laws he believed in were, he
gave an answer which conveyed the meaning that he believed in democracy or in a democratic form of government. ​Held: Such
belief is not sufficient to comply with the requirement of the law that one must believe in the principles underlying the
constitution. The scope of the word ​law in ordinary legal parlance does not necessarily include the constitution which is the
fundamental law of the land, nor does it cover all principles underlying the constitution. Thus, the constitution expressly
declares as one of its fundamental policies that the Philippines renounces war as an instrument of national policy; that the
defense of the State is the prime duty of the government; that the duty and right of the parents to rear their children for civic
efficiency shall receive the support of the State, and that the promotion of social justice shall be its main concern. In so stating
that he believed merely in the laws of the Philippines, he did not necessarily refer to those principles embodied in the
constitution which are referred to in the law.
REQUIREMENT OF PROPER AND IRREPROACHABLE CONDUCT; FAILURE TO REGISTER WIFE AND CHILD WITH
BUREAU OF IMMIGRATION; EFFECT.—A petitioner for naturalization who has not complied with his duty to register his wife
and child with the Bureau of Immigration as required by the Alien Registration Act has failed to conduct himself in a proper and
irreproachable manner in his relation with the government.
FAILURE TO FILE an INCOME TAX RETURN; EFFECT.—The failure of the petitioner to file an income tax return, although the
total amount of his earnings is more than what is required by law for one to file an income tax return, is an indication that he has
not conducted himself properly in his relation with the government.

FULL TEXT:

This is a petition for naturalization which, after hearing was granted, the court ordering that after the lapse of two years from the
date the decision becomes final and all the requisites provided for in Republic Act No. 503 have been complied with, a
certificate of naturalization be issued to petitioner.

Petitioner was born on March 13, 1931 in Bangued, Abra. He is the son of Go Cham and Yu Suan, both Chinese. He owes his
allegiance to the Nacionalist Government of China. He is married to Leonor Go, the marriage having been celebrated in the
Catholic church of Bangued, Abra. He speaks and writes English as well as the Ilocano and Tagalog dialects. He graduated
from the Abra Valley College, and finished his primary studies in the "Colegio" in Bangued, Abra, both schools being
recognized by the government. He has a child two months old. He has never been accused of any crime involving moral
turpitude. He is not opposed to organized government, nor is he a member of any subversive organization. He does not believe
in, nor practice, polygamy. Since his birth, he has never gone abroad. He mingles with the Filipinos. He prefers a democratic
form of government and stated that if his petition is granted he would serve the government either in the military or civil
department.

He is a merchant dealing in the buy and sell of tobacco. He also is part owner of a store known as "Go Tian Store" in Bangued,
Abra. In his tobacco business, he has a working capital of P10,000.00 which he claims to have been accumulated thru savings.
He contributes to civic and charitable organizations like the Jaycees, Rotary, Red Cross and to town fiestas. He likes the
customs of the Filipinos because he has resided in the Philippines for a long time. During the year 1956, he claims to have
earned P1,000.00 in his tobacco business. He expects to make P2,000.00 more from the same business without however
specifying to what years said income would correspond. With respect to the store of which he claims to be a part owner, he
stated that his father gave him a sum of less than P3,000.00 representing one-fourth of the sales. Aside from being a co-owner
of said store, he receives a monthly salary of P120.00 as a salesman therein.

He took a course in radio mechanics and completed the same in 1955. He has no vice of any kind. He claims that he has never
been deliquent in the payment of taxes. But he admitted that he did not file his income tax return when he allegedly received an
amount of not less than P3,000 from his father which he claims to have invested in his tobacco business. On
cross-examination, when the fiscal asked him if he believed in the principle underlying the Philippine constitution, he answered
that "he believes in the laws of the Philippines." However, he did not state what principles of the Constitution he knew, although
when asked what laws of the Philippines he believes in, he answered "democracy". Asked why he did not file his income tax
return, he stated that his father had already filed his income tax return. He merely promised, that he would file his. He
presented his alien certificate of registration, but did not present the alien certificates of registration of his wife and child.

The government is now appealing the decision of the trial court on the ground that it erred in finding that petitioner has all the
qualifications for naturalization and none of the disqualifications mentioned in the law.

The government contends that from the evidence itself introduced by petitioner it would appear that he failed to comply with
some of the requirements prescribed by law in order to qualify him to become a Filipino citizen. Thus, it is claimed, he has not
stated that he believes in the principles underlying the constitution and that it was only on cross-examination, when the fiscal
asked him whether he believed in the principles underlying the constitution, that he answered that "He believes in the laws of
the Philippines", and that when he was asked what those laws he believes in, he gave an answer which conveys the meaning
that he believes in democracy or in a democratic form of government. It is contended that such belief is not sufficient to comply
with the requirement of the law that one must believe in the principles underlying our constitution.

There is merit in this claim. Indeed, the scope of the word law ​in ordinary legal parlance does not necessarily include the
constitution which is the fundamental law of the land, nor does it cover all the principles underlying our constitution. Thus, our
constitution expressly declares as one of its fundamental policies that the Philippines renounces war as an instrument of
national policy, that the defense of the State is the prime duty of the government, that the duty and right of the parents to rear
their children for civic efficiency shall receive the support of the State, and that the promotion of social justice shall be its main
concern. In so stating that he believes merely in our laws, he did not necessarily refer to those principles embodied in our
constitution which are referred to in the law.

Our law also requires that petitioner must have conducted himself in a proper and irreproachable manner during the entire
period of his residence in the Philippines in his relation with the constituted government as well as with the community in which
he is living. It is contended that petitioner has also failed to comply with this legal requirement for he failed to register his wife
and child with the Bureau of Immigration as required by the Alien Registration Act. He has, therefore, failed to conduct himself
in a proper and irreproachable manner in his relation with our government.

It furthermore appears that he failed to file his income tax return despite the fact that he has a fixed salary of P1,440.00 a year
and made a profit of P1,000.00 in his tobacco business, and received an amount less than P3,000 from his father as one-fourth
of the proceeds of the sale of the store, the total of which is more than what is required by law for one to file an income tax
return, a fact which indicates that he has not also conducted himself properly in his relation with our government. His reasoning
that he made that earning during the year in which this case was being heard is not convincing.

Considering that "naturalization laws should be rigidly enforced and strictly construed in favor of the government and against
the applicant" (Co Quing Reyes ​vs.​ Republic, 104 Phil., 889), we are constrained to hold that the trial court erred in granting the
petition for naturalization.

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

VELASCO v REPUBLIC (1960)

JURISPRUDENCE:

FULL TEXT:

This is a petition for naturalization filed before the Court of First Instance of Manila which, after trial, was denied for failure of
petitioner to meet the requirements of the law. Petitioner has appealed.

Petitioner was born in the Philippines on May 12, 1932 of spouses Peter Velasco and Miguela Tiu who became naturalized
citizens in 1956. He alleges that since his birth in Manila on May 12, 1932 he continuously resided in the Philippines,
particularly at 1441 Magdalena St., Manila; that he finished his elementary education at the Francisco Balagtas Elementary
School, and his high school at the Arellano University; that he pursued his collegiate studies at the University of the East where
he graduated in dentistry in 1954; that he is a citizen of the Republic of China in Formosa; that he has not followed the
citizenship of his father when the latter became naturalized as he was then already 23 years old; that he is single, although he
is engaged to be married to a Filipino girl by the name of Noemi Eugenio; that he is at present employed at the Wilson Drug
Store since February, 1957 with a monthly salary of P150.00; that previously he worked as a salesman of his father with a
salary of P2,400.00 per annum, even if his father was only an agent of Elizalde and Co.; that he knows how to speak and write
English and Tagalog; he is a Catholic by faith; and he has never been convicted of any crime involving moral turpitude; that he
does not believe in polygamy or in anarchy or the use of violence for the predominance of men's ideas; that he does not own
any real property although he allegedly has cash savings amounting to P3,500.00 at the Republic Savings Bank, P1,000.00
worth of shares of stocks of the Far Eastern University, P2,000.00 shares of stock of the Marinduque Iron Mines, and
P1,000.00 in cash; that he is not suffering from any contagious disease; that he has mingled socially with the Filipinos; that he
has shown a desire to embrace the customs and traditions of the Filipinos; and that he desires to become a Filipino citizen
because he considered the Philippines as his country and the Filipinos as his countrymen.

His qualifications as to moral character were attested by Santiago Mariano, a sergeant of the Manila Police Department, and
Mrs. Paz J. Eugenio, a housekeeper, who admitted that she is the prospective mother-in-law of petitioner.

The trial court found that there are three names mentioned in the petition and in the documentary evidence submitted in
support thereof, namely, Richard Velasco, Richard C. Velasco, and Richard Chua Velasco, and that while petitioner states in
his petition that his full name is Richard Velasco, the signature thereon is Richard C. Velasco. Again, the court found that the
joint affidavit of said witnesses states that the affiants personally know and are acquainted with Richard Velasco while the
documentary evidence shows that his name is Richard Chua Velasco. On the other hand, petitioner testified that he has no
alias ​nor other names and has always been knows as Richard Velasco. No evidence was submitted to prove that they are one
and the same person.

The trial court likewise found that Mrs. Paz J. Eugenio, a character witness, is the prospective mother-in-law of petitioner, and
such as her testimony is biased. It also found that she and her companion witness Santiago Mariano were also the character
witnesses of brother of petitioner in his petition for naturalization, a circumstance which in its opinion indicates that petitioner
has a limited circle of Filipino friends. The court finally found that the present income of petitioner is only P150.00 a month
which, considering the present high cost of living and the low purchasing power of our peso, is neither lucrative now substantial
to meet the requirement of the law.
Because of the above facts and circumstances, the trial court declared petitioner not qualified to become a Filipino citizen.

We agree to the foregoing finding. Indeed, it appears from the evidence that petitioner was employed at the Wilson Drug Store
​ n February, 1957 with a salary of P150.00 a month, or ​barely a month before he filed the instant petition, and that said
only o
store is partly owned by his mother who has one-fifth capital investment therein. This leads one to believe that petitioner's
employment, even if true, is but a convenient arrangement planned out by him and his family in order to show a token
compliance with the requirement of the law that to become a Filipino citizen one must a lucrative income or occupation.

Considering that "naturalization laws should be rigidly enforced and strictly construed in favor of the government and against
the applicant" (Co Quing y Reyes ​vs.​ Republic, 104 Phil., 889), we are constrained to hold that the trial court did not err in
denying the petition for naturalization.

Wherefore, the decision appealed from is affirmed, with costs against appellant.

BERKENKOTTER v CA (1973)

JURISPRUDENCE:
Appeal; Perfection of; Running of period to perfect appeal not suspended where motion ‘for extension filed within reglementary
period but not acted upon and extension period lapses without record 011 appeal filed; Exception.-lf the motion for extension
filed within the reglementary period is not acted upon and the extension period asked for lapses without the record on appeal
having been filed, the motion does not suspend the running of the period to appeal and the right to appeal is lost. However, if
the motion is granted, the extension requested is tacked to the original period, even if the favorable order is issued after the
expiration of the latter. In any event, the record on appeal must be filed within the extension asked, for once said period expires
and no record on appeal has yet been filed, the court loses jurisdiction to approve the extension unless the delay is due to
fraud, accident, mistake or excusable neglect.
Period for filing record on appeal and appeal bond may be extended by court upon application and before expiration of original
period.—T ​ he period within which the record on appeal and appeal bond should be perfected and filed, may, however, be
extended by order of the court, upon application made, prior to the expiration of the original period.
Approval by court of record on appeal filed within requested extension period although motion for extention not acted upon;
Effect of.—The mere absence of a formal order granting the motion for extension of time to file the record on appeal should not
be fatal to the petitioner if the record on appeal filed within the requested period was approved by the court a ​quo. The approval
thereof carries with it the approval of the motion for extension and the mere failure of the record on appeal to show such
approval should not defeat the right to appeal.
Interpretation of the provisions of the Rules of Court; When liberal interpretation justified.—Although there is no vested right in
technicalities, in meritorious cases, a liberal (not literal) interpretation of the rules becomes imperative and technicalities should
not be resorted to in derogation of the intent and purpose of the rules—the proper and just determination of a litigation.

FULL TEXT:

Petition to review the resolution of the Court of Appeals in its CA-G.R. No. 51763, dated February 28, 1973, which dismissed
petitioner's appeal from the judgment of the Court of First Instance of Negros Occidental, Branch VI, dismissing plaintiff's
complaint in its Civil Case No. 212-7377 entitled "B.E. Berkenkotter, Plaintiff, vs. Angustia Siokon, Pedro Rodriguez and Isidro
Climaco, Defendants". On June 11, 1969, judgment therein was originally rendered in favor of the plaintiff and against the
defendants by Judge Carlos Abierra, the dispositive portion of which reads as follows:

The preponderance of evidence is in favor of plaintiff and against defendants, the court not seeing its way clear into believing
any pretensions of the latter.

WHEREFORE, the Court renders judgment in favor of the plaintiff and against defendants as follows:

1. Declaring null and void the Deed of Absolute Sale executed by defendants Angustia Siokon and Pedro Rodriguez in favor of
Isidro Climaco on the ground that same is fictitious and fraudulent and the price very fantastic, and order the annulment and
cancellation of the Transfer Certificate of Title issued in favor of defendant Isidro Climaco,

2. Ordering the defendant, Angustia Siokon, to execute a Deed of the land in question in favor of plaintiff, and to transfer the
Certificate of Title in favor of the plaintiff;

3. Ordering the defendants jointly and severally to pay the plaintiff on the first cause of action P25,000.00, on the second cause
of action, P20,000.00, on the third cause of action, P15,000.00 as actual damages, and P10,000.00 as attorneys fees;

4. Ordering the defendants Angustia Siokon and Pedro Rodriguez, to pay plaintiff the sum of P300.00 per hectare per year for
the use and occupation of the premises from the time of the filling of this action until final delivery to the plaintiff, and to pay the
costs.

On September 1, 1969, the defendants filed a motion for reconsideration of the decision which was opposed by the plaintiff. On
October 24, 1969, defendant Climaco filed a reply to plaintiff's opposition to the motion for reconsideration. On August 13, 1970,
he filed a "motion to dismiss and/or new trial" and on December 19, 1970, he also filed a Supplement to the motion for
reconsideration and new trial.

On March 30, 1971, the same Judge Carlos Abiera rendered an Amended Decision completely reversing the decision of June
11, 1969, and sentencing the plaintiff, now petitioner, to pay total damages of P175,000.00 and attorney's fees of P5,000.00,
copy of which amended decision was received by plaintiff on November 15, 1971. On the twenty-ninth day thereafter, or on
December 14, 1971, plaintiff filed a motion for reconsideration of the Amended Decision, which was opposed by defendant. The
motion was denied by Judge Serafin A. Camilon on May 17, 1972, and a copy of the order of denial was received by plaintiff on
June 13, 1972.

On the same day, June 13, 1972, plaintiff filed a notice of appeal, an appeal bond and an ​ex parte motion for extension of time
(five days from June 13) within which to file the record on appeal which was filed two days later, or on June 15, 1972.

On July 14, 1972, defendants objected to the approval of record on appeal but the court through another Judge, Osterwaldo
Emilia, who succeeded Judge Abiera, approved the record on appeal, appeal bond and notice of appeal in an Order dated
November 14, 1972. The record on appeal was subsequently elevated to the Court of Appeals where the case is now docketed
as CA-G.R. No. 51763-R.

The order granting the motion for five-day extension to file the record on appeal does not appear in the record on appeal, but a
certificate by the Clerk of Court as to its approval is therein incorporated. (See p. 179, printed Record on Appeal.)

In the Court of Appeals defendant Climaco filed on January 17, 1973, a motion to dismiss the appeal on the ground that it was
not perfected within the 30-day reglementary period, the last day for its filing being June 14, 1972, and not June 15th which is
the 31st day. The defendant claims that plaintiff filed his record on appeal one day late as the court neither approved nor denied
the motion for extension of time to file the same, citing in support of his claim ​Escolin v. Garduno,​ 57 Phil. 611; ​Capinpin v. Ysip,
et al.​, G.R. No. L-14018, August 31, 1959; ​Alejandro v. Endencia,​ 64 Phil. 321. On the other hand, plaintiff resists the motion to
dismiss on the strength of the ruling in ​Baquiran v. CA,​ July 31, 1961, 2 SCRA, 873, and ​Layda v. Legaspi​, 39 Phil. 83. In a
resolution dated February 28, 1973, the Court of Appeals dismissed the case. Its order reads as follows:

For resolution is defendant appellee Isidro Climaco's motion dated January 17, 1973, to dismiss the appeal, together with
appellant's opposition thereto and appellee's reply to said opposition.

Since the record on appeal does not really show on its face that the motion for extension of time to file it had been approved, no
order to the effect having been incorporated or made reference to in the record on appeal, and since, absent such order, the
filing of the record on appeal on June 15, 1972, admittedly was out of time by one day, and this Court having to be bound by
decisions of the Supreme Court that have uniformly held this defect to be jurisdictional; in view thereof, it is constrained to
dismiss, as it now dismisses, this appeal.

Hence this petition for review. In view of the urgent nature of the case, this Court after receiving respondent's comment which it
treats as the answer to the petition, resolved to consider it as a special civil action of ​certiorari​ calling for immediate decision.

The issue in this case is whether the appeal was perfected on time. The specific question to settle is: Did the filing on June 13,
1972, of the ​ex parte motion for extension of five days within which to file the record on appeal, which was done on the 29th day
of the 30-day reglementary period, interrupt the running of said period, considering that the Court did not act on said motion but
subsequently approved the record on appeal in its Order of November 14, 1972, or 152 days after the lapse the 30-day period?

This Tribunal has repeatedly construed section 6, Rule 41, of the Rules of Court as mandatory and jurisdictional,
non-compliance with which justifies dismissal of appeal.​1 In the recent case of ​Sison v. Gatchalian, et al.,​ L-34709, June 15,
1973 this Court, literally adhered to the Rule and held:

This case is particularly worth emphasizing because the only defense, if defense it can be called, of private respondents, as
shown in their answer, is that "it is true that on the last day of the original period (April 28, 1971), the typewritten record on
appeal was not yet filed. But one day before the deadline, in lieu thereof, were filed (1) the notice of appeal (2) the appeal bond
and (3) the motion for extension of time to complete record on appeal, which motion was granted on this same day (April 27,
1971) it was filed. So, the last day to perfect appeal was then May 12, 1971. As the typewritten record on appeal (the only one
remaining of the three requirement of an appeal) was filed on May 3, 1971, same was perfected nine (9) days earlier than the
last day granted under the extension." As was emphasized however, by petitioner in her memorandum in lieu of oral argument:
"In their answer, private respondents have taken great pains to show that their appeal was perfected on time. But this
Honorable Court has already held that the actual perfection of the appeal is not material to the question. (See Government v.
Antonio 15 SCRA 119; Araneta v. Madrigal, 18 SCRA 446; Marsman v. Syquia, 44 SCRA 116.) This is obviously so because
the purpose of the requirement is to avoid additional work and unnecessary waste of time in having to examine the evidence
that may be submitted by the parties, which would contribute to delay and would consume time badly needed by the appellate
courts for more meritorious cases."

Continuing, the Court further stated:

Nor should there be any misgivings that to view the matter thus in accordance with what has been constantly held by this Court,
is, as alleged by private respondents, to put a premium on technicality. What is readily apparent is that we are not justified in
treating his appeal any differently. This is not to deny what was noted by Justice Teehankee in ​Workmens Insurance Co. Inc. v.
Augusto​, 40 SCRA 123, "For a party to seek exception for its failure to comply strictly with the statutory requirements for
perfecting its appeal, strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof
must be shown, in order to warrant the Court's suspension of the Rules. There are no such strong compelling reasons" that
would call for a relaxation of the iron-clad doctrine. The only issue on the merits as was made clear in the reply memorandum of
petitioner, "is whether or not the private respondents are purchasers in good faith as to a 36 square meter portion of a piece of
land."

However, the instant case is distinguishable from the above-cited case. Petitioner herein actually filed on June 13, 1972, (within
the 30-day reglementary period) his notice of appeal, appeal bond and an ​ex parte motion for extension of five days from June
13th to file the record on appeal. Before the expiration of the time asked, or on June 15, 1972, he filed his record on appeal
which was approved by the Court after defendant's objection and hearing thereof on November 14, 1972. Admittedly the court
neither approved nor denied the ex parte motion for extension of time to file record on appeal. In the case of ​Reyes v. Sta.
Maria​, L-29554, November 20, 1972, We held that if the motion for extension filed within the reglementary period is not acted
upon and the extension period asked for lapses without the record on appeal having been filed, the motion did not suspend the
running of the period and the right to appeal is lost. But the concurring opinion of Justice Barredo, joined by the then Chief
Justice, is very pertinent. He said:

As long as the motion is filed within the original period, the court does not lose its jurisdiction to act on it even after the expiration
of said period, but in such an event, the appellant assumes the risk of denial, for if the motion is denied, and such denial takes
place after the period for appeal has already lapsed, the filing of the motion is not considered as having suspended said period.
However, if the motion is granted, then the appeal may be deemed as made timely, provided the corresponding notice of appeal
have been filed within the prescribed period.

He went on to say:

Similarly, the mere filing within the original period for appeal of a motion for extension of time to submit the record on appeal
would not have the effect of extending the period for appeal if such motion is denied after the period has already lapsed.
However, if the motion is granted, the extension requested is tacked to the original period, even IF THE FAVORABLE ORDER
IS ISSUED AFTER THE EXPIRATION OF THE LATTER. In any event the record on appeal must be filed within the extension
asked (which petitioner in this case complied with), for once said period expires and no record on appeal has yet been filed, the
court loses jurisdiction to approve the extension unless the delay is due to fraud, accident, mistake or excusable neglect​.
(Emphasis Supplied)

We subscribe fully to this view and make it applicable here even if there was no formal grant of the motion for extension in view
of the subsequent approval of the record on appeal.

The petitioners-defendants in the ​Reyes v. Sta. Maria case were notified of the decision on July 3, 1967. On July 25, 1967, or
twenty-two (22) days thereafter, petitioners through counsel filed a notice of appeal and an urgent motion ​ex-parte to appeal as
pauper, together with an ​ex-parte motion for an extension of thirty days from August 3, 1967, the supposed last day of the
reglementary period, within which to file the record on appeal. When said motions were filed on July 25, 1967, the respondent
Judge had already left for vacation and no one presided in his court. Consequently, no action was taken on both motions during
the remaining eight (8) days for perfecting the appeal. Petitioners in the Reyes case failed to file their record on appeal within
the 30-day period they requested and the trial Judge denied both motions for lack of merit upon his return. In sustaining the
dismissal of the appeal, We stated:

Notwithstanding that the petitioners fixed the period of 30-days in their motion for extension to begin from August 3, 1967, yet
they failed to file their record on appeal within the period they requested. They cannot invoke the inaction of the court due to the
authorized absence of the Presiding Judge as justification for having a longer or indefinite period.

In the case at bar, petitioner filed his record on appeal within the period of time requested and although no order of approval nor
denial of the ​ex parte motion for extension was issued, the Order of the Court on November 14, 1972, approving the notice of
appeal, appeal bond and record on appeal amounts to and should be construed as a ratification or approval of the motion for
extension. It has always been the view of this Court ​that the period within which the record on appeal and appeal bond should
be perfected and filed, may, however, be extended by order of the court, upon application made, prior to the expiration of the
original period.​ (Galima et al. v. Court of Appeals, et al., L-21046, January 31, 1966; Alvero v. De la Rosa, 76 Phil. 428; Vivo v.
Arca, L-21589, April 30, 1965; Caisip v. Cabangon, L-14684, August 26, 1960; Sy It v. Tiangco, L-18376, February 27, 1962).
What decisively matters is that the motion for extension of time to file the record on appeal is filed before the expiration of the
30-day period prescribed by the rules. In ​Valero v. CA, et al​, L-36667, June 29, 1973, this Court, through Mr. Justice Barredo,
sustained the petitioner's claim that he appealed on time, considering that the record on appeal was filed within the extended
period given to her upon motion filed before the expiration of the reglementary period but approval of which was granted
thereafter. It may not be amiss to state here that although there is no vested right in technicalities (Alonso v. Villamor, 16 Phil.
315), in meritorious cases like the present case a liberal (not literal) interpretation of the rules becomes imperative and
technicalities should not be resorted to in derogation of the intent and purpose of the rules — the proper and just determination
of a litigation (Ronquillo vs. Marasigan, 5 SCRA 312). As Mr. Justice Teehankee, in his concurring opinion in ​Sison v.
Gatchalian,​ June 15, 1973, aptly said:

It should finally be stated that in most, if not all, cases wherein the Court applied the rule and sustained dismissal of the appeal
for failure to show on the face of the record on appeal the timeliness of the appeal, the Court invariably did so after satisfying
itself of the existence of a rational basis for the result reached by the trial court in the decision sought to be reviewed by the lost
appeal. Applying the same paramount consideration of substantial justice, the Court proceeded on the balancing principle that
"mandamus to compel approval and certification of an appeal even if otherwise well grounded, procedurally speaking, has to be
denied where it is evident that there is no merit in the appeal and it would serve no useful purpose to reinstate the same."

A reading of the record on appeal discloses that petitioner has a meritorious case and, therefore, the "element of rigidity should
not be affixed to procedural precepts and made to cover the matter." (Carillo v. Allied Workers Asso. 24 SCRA 566) The mere
absence of a formal order granting the motion for extension of time to file the record on appeal should not be fatal to the
petitioner if the record on appeal filed within the requested extension period was approved by the Court a quo. As previously
stated, the approval thereof carries with it the approval of the motion for extension and the mere failure of the record on appeal
to show such approval should not defeat the right to appeal. No trial Judge in his right mind and who is aware of the serious
responsibilities of his office, would approve a record on appeal that was not timely filed. There every reason, therefore, to apply
the principle of substantial justice to the instant case for the following consideration first, the court is given the discretion to
extend the period for filing the record on appeal, notice of appeal and appeal bond, provided the notice for extension of time is
filed within the 30-day reglementary period; second, there is every reason to assume that the record on appeal was "filed on
time" because it was approved after due hearing by the Court in its Order dated November 14, 1972; and last, but not the least,
considering the merits of the case, to dismiss petitioners appeal would not serve the ends of justice.

WHEREFORE, the petition is granted and the respondent Court's order of February 28, 1973, dismissing petitioner's appeal is
set aside, and the Court of Appeals shall give due course to petitioner's appeal. No costs.

DEL ROSARIO v HAMOY (1987)

JURISPRUDENCE:
Remedial Law; Taxation; Documentary Stamp Tax; Interpretation of Secs. 238 & 250 of Old Tax Code now identical to Sec.
214 of NIRC of 1986 as amended, was reversed; documentary stamp may be affixed at the time the taxable document is
presented in evidence; ​Lack of documentary stamp does not invalidate a document.—​In reversing the interpretation of the
provisions of sections 238 and 250 of the old Tax Codes above copied which are identical to those of section 214 of the
National Internal Code of 1986, as amended, the law now obtaining, this Court held: xxx xxx xxx What the probate court
should have done was to require the petitioner or proponent to affix the requisite thirty-centavo documentary stamp to the
notarial acknowledgment of the will which is the taxable portion of that document. That procedure may be implied from the
provision of section 238 that the non-admissibility of the document, which does not bear the requisite documentary stamp,
subsists only “until the requisite stamp or stamps shall have been affixed thereto and cancelled.” Thus, it was held that the
documentary stamp may be affixed at the time the taxable document is presented in evidence (Del Castillo vs. Madrilena, 49
Phil. 749). If the promissory note does not bear a documentary stamp, the court should have allowed plaintiff’s tender of a
stamp of supply the deficiency. (Rodriguez vs. Martinez, 5 Phil. 67, 71. Note the holding in Azarraga vs. Rodriguez, 9 Phil.
637, that the lack of the documentary stamp on a document does not invalidate such document.
Pleadings and Rules; Statutory Construction; Rules of Court mandates a liberal construction of the rules and the pleadings to
​ he respondent Judge lost sight of the fact that even the Rules of Court themselves, fortified by
effect substantial justice.—T
jurisprudence, mandate a liberal construction of the rules and the pleadings in order to effect substantial justice. After all,
“Overriding all the foregoing technical considerations is the trend of the rulings of this Court to afford every party-litigant the
amplest opportunity for the proper and just determination of his cause, freed from the constraints of technicalities.

FULL TEXT:

For want of a one-peso documentary stamp in a special power of attorney for pre-trial purposes, in lieu of the personal
appearance of the plaintiff, the petitioner in this case, the respondent Judge declared him non-suited and dismissed the
complaint "for failure of the plaintiff to appear for pre-trial conference. We do not agree. The respondent Judge manifestly
erred. He acted with indecent haste. He could have easily required the counsel for the plaintiff to buy the required one-peso
documentary stamp outside the courtroom and affix the same to the special power of attorney and that respite would not have
taken ten minutes. Had he been less technical and more sensible, the present proceedings and the consequent waste of time
of this Court and of his own would have been avoided.

The respondent trial Judge had three chances to rectify his grave error but he missed all of them. He was adamant. By such
rigidity he denied the petitioner substantial justice.

(1) He procrastinated when the plaintiff and his counsel immediately after the hearing on the same morning of July 25, 1986,
made oral representations with him inside his chamber for the reconsideration of his order declaring the plaintiff non-suited
and dismissing the complaint. The plaintiff, through his counsel, explained that he was actually inside the courtroom while his
lawyer and the defendants' counsel, were arguing, but he (plaintiff) was too timorous to interrupt the proceedings and make
known his presence to his counsel or to the court. Despite the immediacy of the representations and the plausibility of this
explanation considering the plaintiff's nescience, being merely an agricultural tenant and can hardly write his name, the
respondent Judge still required him to file a written motion and set it for hearing "in accordance with the Rules of Court."

(2) Complying, the plaintiff's counsel forthwith filed the written motion, duly supported by an Affidavit of Merit of the plaintiff, on
the same day, July 25, 1986, and set it for hearing as ordered by the respondent Judge. This motion for reconsideration was
denied "for lack of merit" on August 29, 1986. The order of denial states in part:

xxx xxx xxx

A judicious appraisal of the facts alleged in the motion for reconsideration and in the accompanying affidavit of merit fail to
convince the Court to reconsider the Order. As admitted by the plaintiff, he was inside the Courtroom when the case was
caned for pre-trial conference and when his counsel, Atty. Alejandro Saavedra and defendants' counsel Atty. Navarro Belar
Navarro were arguing about the insufficiency of the special power of attorney, but he never made known his presence to the
Court or to his counsel or to the defendants. He approached his counsel and presented himself to him when they were already
outside the Courtroom and after the case was already dismissed. To the mind of the Court, the foregoing circumstances
detailed by the plaintiff do not constitute excusable negligence or mistake.

xxx xxx xxx

(3) Undaunted, seven days later, on September 5, 1986, the petitioner filed a second motion for reconsideration verified by
his counsel, setting it for hearing on September 19, 1986, which was promptly denied on the same day of the hearing.

​ n overkill to be sure, the respondent Judge issued a court order which reads:
And, on October 7, 1986, as a ​coup de grace, a

xxx xxx xxx

The Court having denied the second motion for reconsideration for not being allowed by Section 4 of the Interim Rules as per
Order entered on September 19, 1986, the case at bar is therefore considered closed and terminated.

SO ORDERED.

xxx xxx xxx

The respondent Judge lost sight of the fact that even the Rules of Court themselves, fortified by jurisprudence, mandate a
liberal construction of the rules and the pleadings in order to effect substantial justice. After an, "[O]verriding all the foregoing
technical considerations is the trend of the rulings of this Court to afford every party-litigant the amplest opportunity for the
proper and just determination of his cause, freed from the constraints of technicalities.
In a recent case where the trial court, as in this instance, declared the petitioner non-suited for failure to appear at the pre-trial
conference, and consequently dismissed the complaint, this Court reiterated the doctrine of liberality in the construction of the
rules of procedure to be followed by all courts.

While it is true under Section 1, Rule 20 of the Rules of Court, it is mandatory for the parties and their counsel to appear at the
pretrial to consider ​inter-alia "​ the possibility of an amicable settlement, the simplification of the issues, the possibility of
obtaining stipulations or admissions of facts, totally or partially, and such other matters as may aid in the prompt disposition of
the action," and that a party who fails to appear at the pre-trial may be non-suited or considered as in default, this rule was by
no means intended as an implacable bludgeon but as a tool to assist the trial courts in the orderly and expeditious conduct of
trials. Time and again WE have emphasized that the rule should be liberally construed in order to promote their object and
assist the parties in obtaining not only speedy, but more importantly, just and inexpensive determination of every action and
proceeding.

Practically on all fours with this case is ​Gabucan vs. Hon. Judge Luis D. Manta, et al., in which the petition for the probate of a
notarial will was dismissed on the sole ground that the will did not bear a thirty-cents documentary stamp, and, hence,
according to the respondent Judge, it was not admissible in evidence, citing section 238 of the Tax Code, now section 250 of
the 1977 Tax Code, which reads:

xxx xxx xxx

SEC. 238. ​Effect of failure to stamp taxable document​. — An instrument, document, or paper which is required by law to be
stamped and which has been signed, issued, accepted, or transferred without being duly stamped, shall not be recorded, ​nor
shall it or any copy thereof or any record of transfer of the same be admitted or used in evidence ​in any court until the requisite
stamp or stamps shall have been affixed thereto and cancelled.

No notary public or other officer authorized to administer oaths shall add his jurat or acknowledgment to any document subject
to documentary stamp tax unless the proper documentary stamps are affixed thereto and cancelled.

In reversing the interpretation of the provisions of sections 238 and 250 of the old Tax Codes above copied which are Identical
to those of section 214 of the National Internal Code of 1986, as amended, the law now obtaining, this Court held:

xxx xxx xxx

What the probate court should have done was to require the petitioner or proponent to affix the requisite thirty-cents
documentary stamp to the notarial acknowledgment of the will which is the taxable portion of that document.

That procedure may be implied from the provision of section 238 that the non-admissibility of the document, which does not
bear the requisite documentary stamp, subsists only "until the requisite stamp or stamps shall have been affixed thereto and
cancelled."

Thus, it was held that the documentary stamp may be affixed at the time the taxable document is presented in evidence (Del
Castillo vs. Madrilena, 49 Phil. 749). If the promissory note does not bear a documentary stamp, the court should have allowed
plaintiff's tender of a stamp of supply the deficiency. (Rodriguez vs. Martinez, 5 Phil. 67, 71. Note the holding in Azarraga vs.
Rodriguez, 9 Phil. 637, that the lack of the documentary stamp on a document does not invalidate such document. See Cia.
General de Tabacos vs. Jeanjaquet, 12 Phil. 195, 201-2 and Delgado and Figueroa vs. Amenabar, 16 Phil. 403, 405-6.)

This is as it should be because the quality of justice is not strained.

WHEREFORE, the orders of the trial court complained of the first dated July 25, 1986 declaring the petitioner non-suited and
dismissing his complaint, and those dated August 29, 1986 and October 7, 1986, denying the petitioner's motions for
reconsideration are hereby ANNULLED and SET ASIDE. Civil Case No. 3331 is hereby remanded to the respondent trial court
for further proceedings. No costs.

Let a copy of this Decision be attached to the personal record of the respondent judge.

SO ORDERED.