PRUDENTIAL GUARANTEE and ASSURANCE, INC., petitioner, vs. TRANS-ASIA SHIPPING LINES, INC.

,
respondent.
25
TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. PRUDENTIAL GUARANTEE and ASSURANCE, INC.,
respondent.
Actions; Appeals; Pleadings and Practice; In a petition for review, only questions of law, and not questions of fact,
may be raised.—It must be emphasized that in a petition for review, only questions of law, and not questions of fact,
may be raised. This rule may be disregarded only when the findings of fact of the Court of Appeals are contrary to
the findings and conclusions of the trial court, or are not supported by the evidence on record. In the case at bar, we
find an incongruence between the findings of fact of the Court of Appeals and the court a quo, thus, in our
determination of the issues, we are constrained to assess the evidence adduced by the parties to make appropriate
findings of facts as are necessary.
Same; Evidence; Burden of Proof; The party which alleges a fact as a matter of defense has the burden of proving it.
—It must be emphasized that the party which alleges a fact as a matter of de-
_______________

* FIRST DIVISION.
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SUPREME COURT REPORTS ANNOTATED
Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
fense has the burden of proving it. PRUDENTIAL, as the party which asserted the claim that TRANS-ASIA
breached the warranty in the policy, has the burden of evidence to establish the same. Hence, on the part of
PRUDENTIAL lies the initiative to show proof in support of its defense; otherwise, failing to establish the same, it
remains self-serving. Clearly, if no evidence on the alleged breach of TRANS-ASIA of the subject warranty is
shown, a fortiori, TRANSASIA would be successful in claiming on the policy. It follows that PRUDENTIAL bears
the burden of evidence to establish the fact of breach.
Same; Same; Same; Burden of Evidence; In the course of trial in a civil case, once plaintiff makes out a prima facie
case in his favor, the duty or the burden of evidence shifts to defendant to controvert plaintiff’s prima facie case,
otherwise, a verdict must be returned in favor of plaintiff.—In our rule on evidence, TRANS-ASIA, as the plaintiff
below, necessarily has the burden of proof to show proof of loss, and the coverage thereof, in the subject insurance
policy. However, in the course of trial in a civil case, once plaintiff makes out a prima facie case in his favor, the
duty or the burden of evidence shifts to defendant to controvert plaintiff’s prima facie case, otherwise, a verdict must
be returned in favor of plaintiff. TRANS-ASIA was able to establish proof of loss and the coverage of the loss,
i.e.,25 October 1993: Fire on Board. Thereafter, the burden of evidence shifted to PRUDENTIAL to counter
TRANS-ASIA’s case, and to prove its special and affirmative defense that TRANS-ASIA was in violation of the
particular condition on CLASSED AND CLASS MAINTAINED.
Insurance Law; Maritime Law; Bureau Veritas is a classification society recognized in the marine industry.—As
found by the Court of Appeals and as supported by the records, Bureau Veritas is a classification society recognized
in the marine industry. As it is undisputed that TRANS-ASIA was properly classed at the time the contract of
insurance was entered into, thus, it becomes incumbent upon PRUDENTIAL to show evidence that the status of
TRANS-ASIA as being properly CLASSED by Bureau Veritas had shifted in violation of the warranty.
Unfortunately, PRUDENTIAL failed to support the allegation.
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Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
Same; Same; Warranties; It is generally accepted that a warranty is a statement or promise set forth in the policy, or
by reference incorporated therein, the untruth or non-fulfillment of which in any respect, and without reference to
whether the insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the
insurer; For the breach of warranty to avoid a policy, the same must be duly shown by the party alleging the same.—
We are not unmindful of the clear language of Sec. 74 of the Insurance Code which provides that, “the violation of a
material warranty, or other material provision of a policy on the part of either party thereto, entitles the other to

1
rescind.” It is generally accepted that “[a] warranty is a statement or promise set forth in the policy, or by reference
incorporated therein, the untruth or non-fulfillment of which in any respect, and without reference to whether the
insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer.”
However, it is similarly indubitable that for the breach of a warranty to avoid a policy, the same must be duly shown
by the party alleging the same. We cannot sustain an allegation that is unfounded. Consequently, PRUDENTIAL,
not having shown that TRANS-ASIA breached the warranty condition, CLASSED AND CLASS MAINTAINED, it
remains that TRANSASIA must be allowed to recover its rightful claims on the policy.
Same; Same; Same; Waivers; Breach of warranty or of a condition renders the contract defeasible at the option of
the insurer, but if he so elects, he may waive his privilege and power to rescind by the mere expression of an
intention to do so in which event his liability under the policy continues as before.—We do not find that the Court of
Appeals was in error when it held that PRUDENTIAL, in renewing TRANS-ASIA’s insurance policy for two
consecutive years after the loss covered by Policy No. MH93/1363, was considered to have waived TRANS-ASIA’s
breach of the subject warranty, if any. Breach of a warranty or of a condition renders the contract defeasible at the
option of the insurer; but if he so elects, he may waive his privilege and power to rescind by the mere expression of
an intention so to do. In that event his liability under the policy continues as before. There can be no clearer
intention of the waiver of the alleged breach than the renewal of the policy insurance granted by PRUDENTIAL to
TRANS-ASIA in MH94/1595 and MH95/1788, issued in the years 1994 and 1995, respectively. To our mind, the
argument is made even more credulous by PRUDENTIAL’s lack of proof to sup-
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SUPREME COURT REPORTS ANNOTATED
Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
port its allegation that the renewals of the policies were taken only after a request was made to TRANS-ASIA to
furnish them a copy of the certificate attesting that “M/V Asia Korea” was CLASSED AND CLASS
MAINTAINED. Notwithstanding PRUDENTIAL’s claim that no certification was issued to that effect, it renewed
the policy, thereby, evidencing an intention to waive TRANS-ASIA’s alleged breach. Clearly, by granting the
renewal policies twice and successively after the loss, the intent was to benefit the insured, TRANSASIA, as well as
to waive compliance of the warranty.
Same; Same; Loan and Trust Receipts; Notwithstanding its designation, the tenor of the “Loan and Trust Receipt”
evidences that the real nature of the transaction between the parties was that the amount indicated therein was not
intended as a loan whereby the insured is obligated to pay the insurer, but rather, the same was a partial payment or
an advance on the policy of the claims due the former.—The Court of Appeals held that the real character of the
transaction between the parties as evidenced by the “Loan and Trust Receipt” is that of an advance payment by
PRUDENTIAL of TRANSASIA’s claim on the insurance, thus: x x x We agree. Notwithstanding its designation,
the tenor of the “Loan and Trust Receipt” evidences that the real nature of the transaction between the parties was
that the amount of P3,000,000.00 was not intended as a loan whereby TRANS-ASIA is obligated to pay
PRUDENTIAL, but rather, the same was a partial payment or an advance on the policy of the claims due to
TRANS-ASIA.
Same; Same; Same; Words and Phrases; The clear import of the phrase “at the expense of and under the exclusive
direction and control” as used in the “Loan and Trust Receipt” grants solely to the insurer the power to prosecute,
even as the same is carried in the name of the insured, thereby making the latter merely an agent of the former, the
principal, in the prosecution of the suit against parties who may have occasioned the loss.—We find that per the
“Loan and Trust Receipt,” even as TRANS-ASIA agreed to “promptly prosecute suit against such persons,
corporation or corporations through whose negligence the aforesaid loss was caused or who may otherwise be
responsible therefore, with all due diligence” in its name, the prosecution of the claims against such third persons are
to be carried on “at the expense of and under the exclusive direction and control of PRUDENTIAL GUARANTEE
AND ASSURANCE INC.” The clear
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Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
import of the phrase “at the expense of and under the exclusive direction and control” as used in the “Loan and Trust
Receipt” grants solely to PRUDENTIAL the power to prosecute, even as the same is carried in the name of TRANS-

2
ASIA, thereby making TRANS-ASIA merely an agent of PRUDENTIAL, the principal, in the prosecution of the
suit against parties who may have occasioned the loss.
Same; Same; Same; The liberality in the tenor of the “Loan and Trust Receipt” in favor of the insured leads to the
conclusion that the amount indicated therein was a form of an advance payment on the insured’s claim.—Per the
subject “Loan and Trust Receipt,” the obligation of TRANS-ASIA to repay PRUDENTIAL is highly speculative
and contingent, i.e., only in the event and to the extent that any net recovery is made by TRANS-ASIA from any
person on account of loss occasioned by the fire of 25 October 1993. The transaction, therefore, was made to benefit
TRANS-ASIA, such that, if no recovery from third parties is made, PRUDENTIAL cannot be repaid the amount.
Verily, we do not think that this is constitutive of a loan. The liberality in the tenor of the “Loan and Trust Receipt”
in favor of TRANS-ASIA leads to the conclusion that the amount of P3,000,000.00 was a form of an advance
payment on TRANS-ASIA’s claim on MH93/1353.
Same; Insurance Code; Damages; Attorney’s Fees; Section 244 of the Insurance Code grants damages consisting of
attorney’s fees and other expenses incurred by the insured after a finding by the Insurance Commissioner or the
Court, as the case may be, of an unreasonable denial or withholding of the payment of the claims due; Section 244
does not require a showing of bad faith in order that attorney’s fees be granted.—The Court of Appeals denied the
grant of attorney’s fees. It held that attorney’s fees cannot be awarded absent a showing of bad faith on the part of
PRUDENTIAL in rejecting TRANS-ASIA’s claim, notwithstanding that the rejection was erroneous. According to
the Court of Appeals, attorney’s fees can be awarded only in the cases enumerated in Article 2208 of the Civil Code
which finds no application in the instant case. We disagree. Sec. 244 of the Insurance Code grants damages
consisting of attorney’s fees and other expenses incurred by the insured after a finding by the Insurance
Commissioner or the Court, as the case may be, of an unreasonable denial or withholding of the payment of the
claims due. Moreover, the law imposes an interest of twice the ceiling pre-
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SUPREME COURT REPORTS ANNOTATED
Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
scribed by the Monetary Board on the amount of the claim due the insured from the date following the time
prescribed in Section 242 or in Section 243, as the case may be, until the claim is fully satisfied. Finally, Section 244
considers the failure to pay the claims within the time prescribed in Sections 242 or 243, when applicable, as prima
facie evidence of unreasonable delay in payment. To the mind of this Court, Section 244 does not require a showing
of bad faith in order that attorney’s fees be granted. As earlier stated, under Section 244, a prima facie evidence of
unreasonable delay in payment of the claim is created by failure of the insurer to pay the claim within the time fixed
in both Sections 242 and 243 of the Insurance Code. As established in Section 244, by reason of the delay and the
consequent filing of the suit by the insured, the insurers shall be adjudged to pay damages which shall consist of
attorney’s fees and other expenses incurred by the insured.
Same; Same; Same; Interests; Marine Insurance; Section 244 of the Insurance Code is categorical in imposing an
interest twice the ceiling prescribed by the Monetary Board due the insured, from the date following the time
prescribed in Section 242 or in Section 243, as the case may be, until the claim is fully satisfied.—Section 244 of the
Insurance Code is categorical in imposing an interest twice the ceiling prescribed by the Monetary Board due the
insured, from the date following the time prescribed in Section 242 or in Section 243, as the case may be, until the
claim is fully satisfied. In the case at bar, we find Section 243 to be applicable as what is involved herein is a marine
insurance, clearly, a policy other than life insurance. Section 243 is hereunder reproduced: SEC. 243. The amount of
any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be
paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made
either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or
made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid
within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein
will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of
twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that
the claim is fraudulent.
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Same; Same; Same; Same; There is no gainsaying that the term “double interest” as used in Sections 243 and 244
can only be interpreted to mean twice 12% per annum or 24% per annum interest.—PRUDENTIAL assails the
award of interest, granted by the Court of Appeals, in favor of TRANS-ASIA in the assailed Decision of 6 No-
vember 2001. It is PRUDENTIAL’s stance that the award is extortionate and grossly unsconscionable. In support
thereto, PRUDENTIAL makes a reference to TRANS-ASIA’s prayer in the Complaint filed with the court a quo
wherein the latter sought, “interest double the prevailing rate of interest of 21% per annum now obtaining in the
banking business or plus 42% per annum pursuant to Article 243 of the Insurance Code x x x.” The contention fails
to persuade. It is settled that an award of double interest is lawful and justified under Sections 243 and 244 of the
Insurance Code. In Finman General Assurance Corporation v. Court of Appeals, 361 SCRA 214 (2001), this Court
held that the payment of 24% interest per annum is authorized by the Insurance Code. There is no gainsaying that
the term “double interest” as used in Sections 243 and 244 can only be interpreted to mean twice 12% per annum or
24% per annum interest, thus: The term “ceiling prescribed by the Monetary Board” means the legal rate of interest
of twelve per centum per annum (12%) as prescribed by the Monetary Board in C.B. Circular No. 416, pursuant to
P.D. No. 116, amending the Usury Law; so that when Sections 242, 243 and 244 of the Insurance Code provide that
the insurer shall be liable to pay interest “twice the ceiling prescribed by the Monetary Board,” it means twice 12%
per annum or 24% per annum interest on the proceeds of the insurance.
Same; Same; Same; Same; Under Section 243, the insurer has until the 30th day after proof of loss and
ascertainment of the loss or damage to pay its liability under the insurance, and only after such time can the insurer
be held to be in delay, thereby necessitating the imposition of double interest.—The Court of Appeals, in imposing
double interest for the duration of the delay of the payment of the unpaid balance due TRANS-ASIA, computed the
same from 13 August 1996 until such time when the amount is fully paid. Although not raised by the parties, we
find the computation of the duration of the delay made by the appellate court to be patently erroneous. To be sure,
Section 243 imposes interest on the proceeds of the policy for the duration of the delay at the rate of twice the
ceiling prescribed by the Monetary Board. Significantly, Section 243 mandates the pay-
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SUPREME COURT REPORTS ANNOTATED
Prudential Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc.
ment of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy,
within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made
either by agreement between the insured and the insurer or by arbitration. It is clear that under Section 243, the
insurer has until the 30th day after proof of loss and ascertainment of the loss or damage to pay its liability under the
insurance, and only after such time can the insurer be held to be in delay, thereby necessitating the imposition of
double interest. In the case at bar, it was not disputed that the survey report on the ascertainment of the loss was
completed by the adjuster, Richard Hoggs International (Phils.), Inc. on 13 August 1996. PRUDENTIAL had thirty
days from 13 August 1996 within which to pay its liability to TRANS-ASIA under the insurance policy, or until 13
September 1996. Therefore, the double interest can begin to run from 13 September 1996 only.
Same; Same; Same; Same; Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78 (1994), emphasized
beyond cavil that when the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, regardless of whether the obligation involves a loan or forbearance of money, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance
of credit.—This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78 (1994), inscribed the rule
of thumb in the application of interest to be imposed on obligations, regardless of their source. Eastern emphasized
beyond cavil that when the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, regardless of whether the obligation involves a loan or forbearance of money, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance
of credit. We find application of the rule in the case at bar proper, thus, a rate of 12% per annum from the finality of
judgment until the full satisfaction thereof must be imposed on the total amount of liability adjudged to
PRUDENTIAL. It is clear that the interim period from the finality of judgment until the satisfaction of the same is
deemed equivalent to a forbearance of credit, hence, the imposition of the aforesaid interest.
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PETITIONS for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Arturo D. Lim Law Offices for petitioners in G.R. No. 151890 and respondent in G.R. No. 151991.
     Camacho and Associates for respondent in G.R. No. 151890 and petitioner in G.R. No. 151991. Prudential
Guarantee and Assurance, Inc. vs. Trans-Asia Shipping Lines, Inc., 491 SCRA 411, G.R. No. 151890, G.R. No.
151991 June 20, 2006