Del Rosario v Equitable G.R. No.
L-16215 June 29, 1963
J. Paredes
Facts:
Equitables insurance policy covered indemnities for bodily
injuries and deaths, however, it never specificed an amount to
be given in case of a persons death by drowning. It specified
amounts from 1,000 to 3,000 for other causes of death,
however.
Francisico del Rosario died from drowning after jumping from a
sinking ship. The insurer, Equitable, agreed to pay Php 1,000 as
the claim for an accident. His attorney, howvever, contended
that he amount should be greater under section 2, Php 1500.
The issue was resolved in the Insurance Commison, where it
was held that Section 1, under the provisions applied. (Php
1,000 as indemnity) The lawyer still didint agree and instituted
a suit. The trail court held that the company had the discretion
to pay from Php 1,000 to 3,000 for death by drowning since
there was no fixed amount for this type of death. The amended
decision ordered the company to pay Php 2,000
Issue: What should the amount be?
Held: Judgment affirmed. Still 2,000.
Ratio:
The interpretation of obscure stipulations in a contract should
not favor the party who cause the obscurity.
Ambigious terms in a policy are to be construed strictly
against, the insurer, and liberally in favor of the insured for the
payment of indemnity where forfeiture is involved. The
company takes great care in the wording and has legal advisers
who create the contracts to the benefit of the company.
Trial court ruling are well considered because they are
supported by doctrines on insurance resolving cases against the
party who caused the ambiguity in the wording of the
contracts terms. This was also due to the fact that the insured
didnt have much of a say in formulating the contract.
Misamis v Capital Insurance GR L-21380 May 20, 1966
Facts:
Misamis Lumber Company insured its Ford Falcon to Capital
Insurance for P 14,000. One day, the cars crank and flywheel
broke when it passed over a water hole in Aurora Boulevard.
Misamis sent it to be repaired at the cost of 302 pesos.
However, Capital did not want to pay the entire amount
because the repair limit in the contract stipulated up to 150
pesos only. Misamis filed suit.
The lower court ruled against the insurance corporation
because the company did not show that the cost was excessive.
Also , the court ruled that absolving the company of the excess
amount would make the contract one sided.
Issue: Is the insurance company liable for more than the
amount in the repair limit?
Held: No. Insurance company only ordered to pay 150 pesos.
Ratio:
Paragraph 4, subpar a. of the insurance contract is clear and
specific. It authorizes up to 150 pesos only as a repair limit.
The lower court did not heed the express stipulation in the
agreement. The policy specifically noted the mechanics for
repair in par. 2 and the limits of the liability in par 4. The
company didnt notify the insurance provider before it did the
repairs. Also, even if the contract is onerous, this doesnt justify
its abrogation.
Verendia v CA, GR 75605
FACTS:
Rafael (Rex) Verendia's residential building was insured with
Fidelity and Surety Insurance Company, Country Bankers
Insurance and Development Insurance with Monte de Piedad &
Savings Bank as beneficiary
December 28, 1980 early morning: the building was completely
destroyed by fire
Fidelity refused the claim stating that there was a
misrepresentation since the lessee was not Roberto Garcia but
Marcelo Garcia
trial court: favored Fidelity
CA: reversed
ISSUE: W/N there was false declaration which would forfeit his
benefits under Section 13 of the policy
HELD: YES.
Section 13 thereof which is expressed in terms that are clear
and unambiguous, that all benefits under the policy shall be
forfeited "If the claim be in any respect fraudulent, or if any
false declaration be made or used in support thereof, or if any
fraudulent means or devises are used by the Insured or anyone
acting in his behalf to obtain any benefit under the policy"
Robert Garcia then executed an affidavit before the National
Intelligence and Security Authority (NISA) to the effect that he
was not the lessee of Verendia's house and that his signature
on the contract of lease was a complete forgery.
Worse yet, by presenting a false lease contract, Verendia,
reprehensibly disregarded the principle that insurance
contracts are uberrimae fidae and demand the most abundant
good faith.
Verendia vs. Court of Appeals
Third Division, Melo (J): 4 concur
Facts: Fidelity and Surety Insurance Company of the Philippines
issued its Fire Insurance Policy F-18876
effective between 23 June 1980 and 23 June 1981 covering
Rafael (Rex) Verendia's residential building
located at Tulip Drive, Beverly Hills, Antipolo, Rizal in the
amount of P385,000.00. Designated as
beneficiary was the Monte de Piedad & Savings Bank. Verendia
also insured the same building with two other
companies, namely, The Country Bankers Insurance for
P56,000.00 under Policy No. PDB-80-1913 expiring
on 12 May 1981, and The Development Insurance for
P400,000.00 under Policy F-48867 expiring on 30 June
1981. While the three fire insurance policies were in force, the
insured property was completely destroyed by
fire on the early morning of 28 December 1980. Fidelity was
accordingly informed of the loss and despite
demands, refused payment under its policy, thus prompting
Verendia to file a complaint with the then Court of
First Instance of Quezon City, praying for payment of
P385,000.00, legal interest thereon, plus attorney's fees
and litigation expenses. The complaint was later amended to
include Monte de Piedad as an "unwilling
defendant." Answering the complaint, Fidelity, among other
things, averred that the policy was avoided by
reason of over-insurance, that Verendia maliciously
represented that the building at the time of the fire was
leased under a contract executed on 25 June 1980 to a certain
Roberto Garcia, when actually it was a Marcelo
Garcia who was the lessee. On 24 May 1983, the trial court
rendered a decision, per Judge Rodolfo A. Ortiz,
ruling in favor of Fidelity. In sustaining the defenses set up by
Fidelity, the trial court ruled that Paragraph 3
of the policy was also violated by Verendia in that the insured
failed to inform Fidelity of his other insurance
coverages with Country Bankers Insurance and Development
Insurance. Verendia appealed to the then
Intermediate Appellate Court and in a decision promulgated on
31 March 1986, (CA-GR CV 02895, Coquia,
Zosa, Bartolome, and Ejercito (P), JJ.), the appellate court
reversed for the following reasons: (a) there was no
misrepresentation concerning the lease for the contract was
signed by Marcelo Garcia in the name of Roberto
Garcia; and (b) Paragraph 3 of the policy contract requiring
Verendia to give notice to Fidelity of other
contracts of insurance was waived by Fidelity as shown by its
conduct in attempting to settle the claim of
Verendia. Fidelity received a copy of the appellate court's
decision on 4 April 1986, but instead of directly
filing a motion for reconsideration within 15 days therefrom,
Fidelity filed on 21 April 1986, a motion for
extension of 3 days within which to file a motion for
reconsideration. The motion for extension was not filed
on 19 April 1986 which was the 15th day after receipt of the
decision because said 15th day was a Saturday
and of course, the following day was a Sunday. The motion for
extension was granted by the appellate court
on 30 April 1986, but Fidelity had in the meantime filed its
motion for reconsideration on 24 April 1986.
Verendia filed a motion to expunge from the record Fidelity's
motion for reconsideration on the ground that
the motion for extension was filed out of time because the 15th
day from receipt of the decision which fell on
a Saturday was ignored by Fidelity, for indeed, so Verendia
contended, the Intermediate Appellate Court has
personnel receiving pleadings even on Saturdays. The motion
to expunge was denied on 17 June 1986 and
after a motion for reconsideration was similarly brushed aside
on 22 July 1986, a petition (GR 75605) was
initiated. Subsequently, or more specifically on 21 October
1986, the appellate court denied Fidelity's motion
for reconsideration and account thereof. Fidelity filed on 31
March 1986, the petition for review on certiorari
(GR 76399). The two petitions, inter-related as they are, were
consolidated and thereafter given due course.
Issue: Whether Verandia forfeited all benefits due to his
presentation of a false declaration to support his
claim.
Held: The contract of lease upon which Verendia relies to
support his claim for insurance benefits, was
entered into between him and one Robert Garcia, married to
Helen Cawinian, on 25 June 1980, a couple of
days after the effectivity of the insurance policy. When the
rented residential building was razed to the ground
on 28 December 1980, it appears that Robert Garcia (or
Roberto Garcia) was still within the premises.
However, according to the investigation report prepared by
Pat. Eleuterio M. Buenviaje of the Antipolo
police, the building appeared to have "no occupant" and that
Mr. Roberto Garcia was "renting on the otherside
Commercial Law Insurance Law, 2006 ( 1 )
Narratives (Berne Guerrero)
(sic) portion of said compound.". These pieces of evidence belie
Verendia's uncorroborated testimony that
Marcelo Garcia whom he considered as the real lessee, was
occupying the building when it was burned.
Robert Garcia disappeared after the fire. It was only on 9
October 1981 that an adjuster was able to locate
him. Robert Garcia then executed an affidavit before the
National Intelligence and Security Authority (NISA)
to the effect that he was not the lessee of Verendia's house and
that his signature on the contract of lease was a
complete forgery. Thus, on the strength of these facts, the
adjuster submitted a report dated 4 December 1981
recommending the denial of Verendia's claim. Ironically, during
the trial, Verendia admitted that it was not
Robert Garcia who signed the lease contract. According to
Verendia, it was signed by Marcelo Garcia cousin
of Robert, who had been paying the rentals all the while.
Verendia, however, failed to explain why Marcelo
had to sign his cousin's name when he in fact was paying for the
rent and why Verendia himself, the lessor,
allowed such a ruse. Fidelity's conclusions on these proven facts
appear, therefore, to have sufficient bases:
Verendia concocted the lease contract to deflect responsibility
for the fire towards an alleged "lessee", inflated
the value of the property by the alleged monthly rental of
P6,500 when in fact, the Provincial Assessor of
Rizal had assessed the property's fair market value to be only
P40,300.00, insured the same property with two
other insurance companies for a total coverage of around
P900,000, and created a dead-end for the adjuster by
the disappearance of Robert Garcia. Basically a contract of
indemnity, an insurance contract is the law
between the parties. Its terms and conditions constitute the
measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right to
recovery from the insurer. As it is also a contract of
adhesion, an insurance contract should be liberally construed
in favor of the insured and strictly against the
insurer company which usually prepares it. Considering,
however, the foregoing discussion pointing to the
fact that Verendia used a false lease contract to support his
claim under Fire Insurance Policy F-18876, the
terms of the policy should be strictly construed against the
insured. Verendia failed to live by the terms of the
policy, specifically Section 13 thereof which is expressed in
terms that are clear and unambiguous, that all
benefits under the policy shall be forfeited "if the claim be in
any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any
fraudulent means or devises are used by the Insured
or anyone acting in his behalf to obtain any benefit under the
policy". Verendia, having presented a false
declaration to support his claim for benefits in the form of a
fraudulent lease contract, he forfeited all benefits
therein by virtue of Section 13 of the policy in the absence of
proof that Fidelity waived such provision.
Worse yet, by presenting a false lease contract, Verendia
reprehensibly disregarded the principle that
insurance contracts are uberrimae fidae and demand the most
abundant good faith.
Qua v Law Union. G.R. No. L-4611 December 17, 1955
J. Reyes
Facts:
Qua owned 4 warehouses used for the storage of copra and
hemp. They were insured with the Law Union.
Fire broke out and completely destroyed 3 bodegas. The
plaintiff submitted claims totalling P398,562.81. The Insurance
Company resisted payment on the grounds that the fire had
been deliberately caused by the insured or by other persons in
connivance with him.
Que Chee Gan and his brother were tried for arson, but were
acquitted by the trial court. As regards the insurance claim, the
trial court ruled in favor of Qua and entitled him to recover
more than Php 300,000 for indemnities from the insurance
company. Hence, the company appealed to the SC.
In its first assignment of error, the insurance company alleged
that the trial Court should have held that the policies were
avoided for breach of warranty. The contract noted that fire
hydrants were required in a particular measurement of space
(every 150 feet). Hence, they argued that since the bodegas
insured had an external wall perimeter of 500 meters, the
appellee should have 11 fire hydrants in the compound, and
that he actually had only 2, with a further pair.
Issues:
1. WON the insurance company can void the policies it had
issued
2. WON the insured violated the "Hemp Warranty" provisions
of the policy against the storage of gasoline
3. WON the insured planned the destruction of the bodega
Held: No. No. No.
Ratio:
1. The insurer, who at the time of issuance, has knowledge of
existing facts which would invalidate the contract from the
beginning, such 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. Also,
an insurance company intends to executed 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.
The appellant is barred estoppel to claim violation of the so-
called fire hydrants warranty, because it knew the number of
hydrants demanded therein never existed from the very
beginning and issued the policies.
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
abhorrent to fair-minded men.
The appellant company 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%, thereby
giving the insurance company a double benefit. 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.
Receipt of Premiums or Assessments after 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 premium 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.
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
2. The ambiguity must be held strictly against the insurer and
liberally in favor of the insured, specially to avoid a forfeiture.
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.
Appellee admitted that there were 36 cans of gasoline in the
building designed. It However, 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", and is uncertain because, "Oils" usually mean
"lubricants" and not gasoline or kerosene.
If the company intended to rely upon a condition of that
character, it ought to have been plainly expressed in the policy.
The contract of insurance is one of perfect good faith not for
the insured alone, but equally so for the insurer; in fact, it is
mere so for the latter, since its dominant bargaining position
carries with it stricter responsibility.
Also, 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. "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."
3. It was unlikely that Qua burned the warehouse to defraud
the company because he had the resources to pay off the
National Bank in a short time. Also, 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."
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 relied on its adjuster investigator 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 those who actually saw the contents of the
bodegas shortly before the fire, while inspecting them for the
mortgagee Bank.
Paramount Insurance v Remondeulaz
Facts: Respondents insured with petitioner their 1994 Toyota
Corolla sedan under a comprehensive motor vehicle insurance
policy for one year. During the effectivity of said insurance,
respondents car was unlawfully taken. Hence, they
immediately reported the theft to the PNP who made them
accomplish a complaint sheet. In said complaint sheet,
respondents alleged that a certain Ricardo Sales (Sales) took
possession of the subject vehicle to add accessories and
improvements thereon, however, Sales failed to return the
subject vehicle within the agreed three-day period. As a result,
respondents notified petitioner to claim for the reimbursement
of their lost vehicle. However, petitioner refused to pay.
Accordingly, respondents lodged a complaint for a sum of
money against petitioner before the RTC of Makati City praying
for the payment of the insured value of their car plus damages.
After presentation of respondents evidence, petitioner filed a
Demurrer to Evidence. Acting thereon, the trial court dismissed
the complaint filed by respondents. Not in conformity with the
trial courts Order, respondents interposed an appeal to the
Court of Appeals. In its Decision, the appellate court reversed
and set aside the Order issued by the trial court. Consequently,
petitioner filed a petition for review on certiorari before this
Court. Issue: whether or not petitioner is liable under the
insurance policy for th e loss of respondents vehicle. Held:
Adverse to petitioners claim, respondents policy clearly
undertook to indemnify the insured against loss of or damage
to the scheduled vehicle when caused by theft.
Held: Apropos, we now resolve the issue of whether the loss of
respondents vehicle falls within the concept of the theft
clause under the insurance policy. In People v. Bustinera, this
Court had the occasion to interpret the theft clause of an
insurance policy. In this case, the Court explained that when
one takes the motor vehicle of another without the latters
consent even if the motor vehicle is later returned, there is
theft there being intent to gain as the use of the thing
unlawfully taken constitutes gain. Also, in Malayan Insurance
Co., Inc. v. Court of Appeals, this Court held that the taking of a
vehicle by another person without the permission or authority
from the owner thereof is sufficient to place it within the ambit
of the word theft as contemplated in the policy, and is
therefore, compensable. The principal distinction between the
two crimes is that in theft the thing is taken while in estafa the
accused receives the property and converts it to his own use or
benefit. However, there may be theft even if the accused has
possession of the property. If he was entrusted onlv with the
material or physical (natural) or de facto possession of the
thing, his misappropriation of the same constitutes theft, but if
he has the juridical possession of the thing, his conversion of
the same constitutes embezzlement or estafa. In the instant
case, Sales did not have juridical possession over the vehicle.
Here, it is apparent that the taking of respondents' vehicle by
Sales is without any consent or authority from the former.
Records would show that respondents entrusted possession of
their vehide only to the extent that Sales will introduce repairs
and not to permanently deprive them of possession thereof.
Since, Theft can also be committed through misappropriation,
the fact that Sales failed to return the subject vehicle to
respondents constitutes Qualified Theft. Hence, since
respondents' car is undeniably covered by a Comprehensive
Motor Vehicle Insurance Policy that allows for recovery in cases
of theft, petitioner is liable under the policy for the loss of
respondents' vehicle under the "theft clause." All told, Sales' act
of depriving respondents of their motor vehicle at, or soon after
the transfer of physical possession of the movable property,
constitutes theft under the insurance policy, which is
compensable. WHEREFORE, the instant petition is DENIED. The
Decision and Resolution of the Court of Appeals are hereby
AFFIRMED in toto.
CALANOC vs CA and THE PHILIPPINE AMERICAN LIFE INSURANCE
CO. G.R. No. L-8151 December 16, 1955
FACTS:
Basilio was a watchman of the Manila Auto Supply, 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
(he was on the site, few blocks away from the premises of the
Manila Auto Supply because of the policemans invitation to
accompany them in checking the lawyers house which the
lawyer suspected of being robbed). Virginia, 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 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.
ISSUE:
Whether the insurer is liable to the insured under the
supplementary contract
HELD:
Yes the insurer is liable under the supplementary contract .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.
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 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. It
cannot be said 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, the fact remains
that the happening was a pure accident on the part of the
victim.
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.
Biagtan vs. The Insular Life Assurance Company, LTD
|Makalintal, J. March 29, 1972|
NATUR
Appeal from CFIs decision
!ACT"
- Juan Biagtan was insured with Insular for P5k and a
supplementary contract AccidentalDeath Benefit clause for
another P5k if the death of the Insured resulted directly
from!odily in"ury effected solely through e#ternal and $iolent
means sustained in anaccident % % % and independently of all
other causes% &he clause' howe$er' e#presslypro$ided that
it would not apply where death resulted from an in"ury
intentionally inflicted!y a third party% - (ne night' a !and of
ro!!ers entered their house% Juan went out of his room and he
wasmet with ) knife sta!s% *e died% &he ro!!ers were
con$icted of ro!!ery with homicide% - &he family was claiming
the additional P5k from Insular under the Accidental
DeathBenefit clause% Insular refused on the ground that the
death resulted from in"uriesintentionally inflicted !y +
rd
parties and was therefore not co$ered% - Biagtans filed against
Insular% , I ruled in fa$or of Biagtans%
I""U " # AR$U% NT"
!" the in#$ries %ere intentionall& inflicted '& a third part&( )es
Held: The trial court committed a plain error in drawing the
conclusion it did from the admitted facts. Nine wounds were
inflicted upon the deceased, all by means of thrust with sharp-
pointed instruments wielded by the robbers. This is a physical
fact as to which there is no dispute. So is the fact that five of
those wounds caused the death of the insured. Whether the
robbers had the intent to kill or merely to scare the victim or to
ward off any defense he might offer, it cannot be denied that
the act itself of inflicting the injuries was intentional. It should
be noted that the exception in the accidental benefit clause
invoked by the appellant does not speak of the purpose
whether homicidal or not of a third party in causing the injuries,
but only of the fact that such injuries have been "intentionally"
inflicted - this obviously to distinguish them from injuries which,
although received at the hands of a third party, are purely
accidental. This construction is the basic idea expressed in the
coverage of the clause itself, namely, that "the death of the
insured resulted directly from bodily injury effected solely
through external and violent means sustained in an accident *
* * and independently of all other causes." A gun which
discharges while being cleaned and kills a bystander; a hunter
who shoots at his prey and hits a person instead; an athlete in
a competitive game involving physical effort who collides with
an opponent and fatally injures him as a result: these are
instances where the infliction of the injury is unintentional and
therefore would be within the coverage of an accidental death
benefit clause such as that in question in this case. But where
a gang of robbers enter a house and coming face to face with
the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are not
intentionally inflicted, regardless of whether they prove fatal or
not. As it was, in the present case they did prove fatal, and the
robbers have been accused and convicted of the crime of
robbery with homicide.
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied
upon by the trial court in support of its decision. The facts in
that case, however, are different from those obtaining here.
The insured there was a watchman in a certain company, who
happened to be invited by a policeman to come along as the
latter was on his way to investigate a reported robbery going
on in a private house. As the two of them, together with the
owner of the house, approached and stood in front of the main
gate, a shot was fired and it turned out afterwards that the
watchman was hit in the abdomen, the wound causing his
death. Under those circumstances this Court held that it could
not be said that the killing was intentional for there was the
possibility that the malefactor had fired the shot to scare the
people around for his own protection and not necessarily to kill
or hit the victim. A similar possibility is clearly ruled out by the
facts in the case now before Us. For while a single shot fired
from a distance, and by a person who was not even seen aiming
at the victim, could indeed have been fired without intent to kill
or injure, nine wounds inflicted with bladed weapons at close
range cannot conceivably be considered as innocent insofar as
such intent is concerned. The manner of execution of the crime
permits no other conclusion.
Court decisions in the American jurisdiction, where similar
provisions in accidental death benefit clauses in insurance
policies have been construed, may shed light on the issue
before Us. Thus, it has been held that "intentional" as used in
an accident policy excepting intentional injuries inflicted by the
insured or any other person, etc., implies the exercise of the
reasoning faculties, consciousness, and volition.[1] Where a
provision of the policy excludes intentional injury, it is the
intention of the person inflicting the injury that is controlling.[2]
If the injuries suffered by the insured clearly resulted from the
intentional act of a third person the insular is relieved from
liability as stipulated.[3]
In the case of Hutchcraft's Ex'r. vs. Travelers' Ins. Co., 87 Ky.
300, 8 S.W. 570, 12 Am. St. Rep. 484, the insured was waylaid
and assassinated for the purpose of robbery. Two (2) defenses
were interposed to the action to recover indemnity, namely:
(1) that the insured having been killed by intentional means, his
death was not accidental, and (2) that the proviso in the policy
expressly exempted the insurer from liability in case the insured
died from injuries intentionally inflicted by another person. In
rendering judgment for the insurance company the Court held
that while the assassination of the insured Was as to him an
unforeseen event and therefore accidental, "the clause of the
proviso that excludes the (insurer's) liability, in case death or
injury is intentionally inflicted by any other person, applies to
this case."
In Butero vs. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St.
Rep. 61, 71 S.W. 811, the insured was shot three times by a
person unknown late on a dark and stormy night, while working
in the coal shed of a railroad company. The policy did not cover
death resulting from "intentional injuries inflicted by the
insured or any other person." The inquiry was as to the question
whether the shooting that caused the insured's death was
accidental or intentional; and the Court found that under the
facts, showing that the murderer knew his victim and that he
fired with intent to kill, there could be no recovery under the
policy which excepted death from intentional injuries inflicted
by any person.
WHEREFORE, the decision appealed from is reversed and the
complaint dismissed
Finman General Assurance Corporation vs. Court of Appeals [GR
100970, 2 September 1992]
Second Division, Nocon (J): 4 concur
Facts: On 22 October 1986, deceased Carlie Surposa was
insured with Finman General Assurance
Corporation under Finman General Teachers Protection Plan
Master Policy 2005 and Individual Policy 08924
with his parents, spouses Julia and Carlos Surposa, and brothers
Christopher, Charles, Chester and Clifton, all
surnamed Surposa, as beneficiaries. While said insurance policy
was in full force and effect, the insured,
Carlie Surposa, died on 18 October 1988 as a result of a stab
wound inflicted by one of 3 unidentified men
without provocation and warning on the part of the former as
he and his cousin, Winston Surposa, were
waiting for a ride on their way home along Rizal-Locsin Streets,
Bacolod City after attending the celebration of the "Maskarra
Annual Festival." Thereafter, Julia Surposa and the other
beneficiaries of said insurance
policy filed a written notice of claim with Finman which denied
said claim contending that murder and assault
are not within the scope of the coverage of the insurance
policy. On 24 February 1989, Surposa filed a
complaint with the Insurance Commission which subsequently
rendered a decision, ordering Finman liable to
pay Surposa the sum of P15,000.00 representing the proceeds
of the policy with interest from the date of the
filing of the complaint until fully satisfied. As no evidence was
submitted to prove the claim for mortuary aid
in the sum of P1,000.00, the same was not entertained. On 11
July 1991, the appellate court affirmed said
decision. Finman filed the petition for certiorari.
Issue: Whether the death was committed with deliberate intent
which, by the very nature of a personal
accident insurance policy, cannot be indemnified.
Held: NO. 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. 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 the policies insuring against death
or injury from accident. Herein, it cannot be pretended that
Carlie Surposa died in the course of an assault or
murder as a result of his voluntary act considering the very
nature of these crimes. In the first place, the
insured and his companion were on their way home from
attending a festival. They were confronted by
unidentified persons. The record is barren of any circumstance
showing how the stab wound was inflicted.
Nor can it be pretended that the malefactor aimed at the
insured precisely because the killer wanted to take his
life. In any event, while the act may not exempt the unknown
perpetrator from criminal liability, the fact
remains that the happening was a pure accident on the part of
the victim. The insured died from an event that
took place without his foresight or expectation, an event that
proceeded from an unusual effect of a known
cause and, therefore, not expected. Neither can it be said that
there was a capricious desire on the part of the
accused to expose his life to danger considering that he was just
going home after attending a festival.
Furthermore, the personal accident insurance policy involved
specifically enumerated only 10 circumstances
wherein no liability attaches to Finamn for any injury, disability
or loss suffered by the insured as a result of
any of the stipulated causes. The principle of "expresso unius
exclusio alterius" the mention of one thing
implies the exclusion of another thing is therefore applicable
in the present case since murder and assault,
not having been expressly included in the enumeration of the
circumstances that would negate liability in said
insurance policy cannot be considered by implication to
discharge Finman from liability for any injury,
disability or loss suffered by the insured. Thus, the failure of
Finman to include death resulting from murder
or assault among the prohibited risks leads inevitably to the
conclusion that it did not intend to limit or
exempt itself from liability for such death.
De la Cruz v. Capital Insurance
FACTS:
Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc
Mines, Inc. in Baguio, was the holder of an accident insurance
policy "against death or disability caused by accidental means"
January 1, 1957: For the celebration of the New Year, the
Itogon-Suyoc Mines, Inc. sponsored a boxing contest for
general entertainment wherein Eduardo, a non-professional
boxer participated
In the course of his bout with another non-professional boxer
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. He died due to hemorrhage, intracranial.
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
The Capital Insurance and Surety co., inc denied stating that the
death caused by his participation in a boxing contest was not
accidental
RTC: favored Simon
ISSUE: W/N the cause of death was accident
HELD:YES.
Eduardo slipped, which was unintentional
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
happen by chance or fortuitously, without intention and design,
and which is unexpected, unusual, and unforeseen
event that takes place without one's foresight or expectation
event that proceeds from an unknown cause, or is an unusual
effect of a known cause and, therefore, not expected
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
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 is not
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
Sun Insurance Office Ltd. vs. Court of Appeals [GR 92383, 17 July
1992]
First Division, Cruz (J): 3 concur
Facts: Sun Insurance Office Ltd. issued Personal Accident Policy
05687 to Felix Lim, Jr. with a face value of
P200,000.00. Two months later, he was dead with a bullet
wound in his head. As beneficiary, his wife Nerissa
Lim sought payment on the policy but her claim was rejected.
Sun Insurance agreed that there was no suicide.
It argued, however, that there was no accident either. Pilar
Nalagon, Lim's secretary, was the only eyewitness to his death.
It happened on 6 October 1982, at about 10 p.m., after his
mother's birthday party. According to
Nalagon, Lim was in a happy mood (but not drunk) and was
playing with his handgun, from which he had
previously removed the magazine. As she watched the
television, he stood in front of her and pointed the gun
at her. She pushed it aside and said it might be loaded. He
assured her it was not and then pointed it to his
temple. The next moment there was an explosion and Lim
slumped to the floor. He was dead before he fell.
The widow sued Sun Insurance in the Regional Trial Court of
Zamboanga City and was sustained. Sun
Insurance was sentenced to pay her P200,000.00, representing
the face value of the policy, with interest at the
legal rate; P10,000.00 as moral damages; P5,000.00 as
exemplary damages; P50,000.00 as actual and
compensatory damages; and P5,000.00 as attorney's fees, plus
the cost of the suit. This decision was affirmed
on appeal, and the motion for reconsideration was denied. Sun
Insurance then came to the Supreme Court.
Issue: Whether the insured willfully exposed himself to
needless peril and thus removed himself from the
coverage of the insurance policy.
Held: NO. An accident is an event which happens without any
human agency or, if happening through human
agency, an event which, under the circumstances, is unusual to
and not expected by the person to whom it
happens. It has also been defined as an injury which happens
by reason of some violence or casualty to the
insured without his design, consent, or voluntary co-operation.
Herein, the incident that resulted in Lim's
death was indeed an accident. On the other hand, the parties
agree that Lim did not commit suicide.
Nevertheless, Sun Insurance contends that the insured willfully
exposed himself to needless peril and thus
removed himself from the coverage of the insurance policy. It
should be noted at the outset that suicide and
willful exposure to needless peril are in pari materia because
they both signify a disregard for one's life. The
only difference is in degree, as suicide imports a positive act of
ending such life whereas the second act
indicates a reckless risking of it that is almost suicidal in intent.
The posture -- that by the mere act of
pointing the gun to his temple, Lim had willfully exposed
himself to needless peril and so came under the
exception -- is arguable. But what is not is that Lim had removed
the magazine from the gun and believed it
was no longer dangerous. He expressed assured her that the
gun was not loaded. It is submitted that Lim did
not willfully expose himself to needless peril when he pointed
the gun to his temple because the fact is that he
thought it was not unsafe to do so. The act was precisely
intended to assure Nalagon that the gun was indeed
harmless. Lim was unquestionably negligent and that
negligence cost him his own life. But it should not
prevent his widow from recovering from the insurance policy
he obtained precisely against accident. There is
nothing in the policy that relieves the insurer of the
responsibility to pay the indemnity agreed upon if the
insured is shown to have contributed to his own accident.
Indeed, most accidents are caused by negligence.
There are only four exceptions expressly made in the contract
to relieve the insurer from liability, and none of
these exceptions is applicable in the present case. It bears
noting that insurance contracts are as a rule
supposed to be interpreted liberally in favor of the assured.
There is no reason to deviate from this rule,
especially in view of the circumstances of the case.
G.R. No. 116940 June 11, 1997
The Phil. American Gen. Insurance Co., Inc. vs Court of Appeals
and Felman Shipping Lines
Facts:
July 6, 1983 Coca-cola loaded on board MV Asilda, owned and
operated by Felman, 7,500 cases of 1-liter Coca-Cola soft drink
bottles to be transported to Zamboanga City to Cebu. The
shipment was insured with Philamgen.
July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola
filed a claim with respondent Felman for recovery of damages.
Felman denied thus prompted cocacola to file an insurance
claim with Philamgen. Philamgen later on claimed its right of
subrogation against Felman which disclaimed any liability for
the loss.
Philamgen alleged that the sinking and loss were due to the
vessel's unseaworthiness, that the vessel was improperly
manned and its officers were grossly negligent. Felman filed a
motion to dismiss saying that there is no right of subrogation in
favor of Philamgen was transmitted by the shipper.
RTC dismissed the complaint of Philamgen. CA set aside the
dismissal and remanded the case to the lower court for trial on
the merits. Felman filed a petition for certiorari but was denied.
RTC rendered judgment in favor of Felman. it ruled that the
vessel was seaworthy when it left the port of Zamboanga as
evidenced by the certificate issued by the Phil. Coast Guard and
the ship owners surveyor. Thus, the loss is due to a fortuitous
event, in which, no liability should attach unless there is
stipulation or negligence.
On appeal, CA rendered judgment finding the vessel
unseaworthy for the cargo for being top-heavy and the
cocacola bottles were also improperly stored on deck.
Nonetheless, the CA denied the claim of Philamgen, saying that
Philamgen was not properly subrogated to the rights and
interests of the shipper plus the filing of notice of abandonment
had absolved the ship owner from liability under the limited
liability rule.
Issues: (a) Whether the vessel was seaworthy, (b) whether
limited liability rule should apply and (c) whether Philamgen
was properly subrogated to the rights against Felman.
Ruling:
(a) The vessel was unseaworthy. The proximate cause thru the
findings of the Elite Adjusters, Inc., is the vessel's being top-
heavy. Evidence shows that days after the sinking coca-cola
bottles were found near the vicinity of the sinking which would
mean that the bottles were in fact stowed on deck which the
vessel was not designed to carry substantial amount of cargo
on deck. The inordinate loading of cargo deck resulted in the
decrease of the vessel's metacentric height thus making it
unstable.
(b) Art. 587 of the Code of Commerce is not applicable, the
agent is liable for the negligent acts of the captain in the care
of the goods. This liability however can be limited through
abandonment of the vessel, its equipment and freightage.
Nonetheless, there are exceptions wherein the ship agent could
still be held answerable despite the abandonment, as where
the loss or injury was due to the fault of the ship owner and the
captain. The international rule is that the right of abandonment
of vessels, as legal limitation of liability, does not apply to cases
where the injury was occasioned by the fault of the ship owner.
Felman was negligent, it cannot therefore escape liability.
(c) Generally, in marine insurance policy, the assured impliedly
warrants to the assurer that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly
written on the face of the policy. However, the implied
warranty of seaworthiness can be excluded by terms in writing
in the policy of the clearest language. The marine policy issued
by Philamgen to cocacola has dispensed that the
"seaworthiness of the vessel as between the assured and the
underwriters in hereby admitted."
The result of the admission of seaworthiness by Philamgen may
mean two things: (1) the warranty of seaworthiness is fulfilled
and (2) the risk of unseaworthiness is assumed by the insurance
company. This waiver clause would mean that Philamgen has
accepted the risk of unseaworthiness, therefore Philamgen is
liable.
On the matter of subrogation, it is provided that;
Art. 2207. If the plaintiff's property has been insured, and
he has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from
the person causing the loss or injury.
Pan Malayan Insurance Corp. vs CA: The right of subrogation is
not dependent upon, nor does it grow out of any privity of
contract or upon payment by the insurance company of the
insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola
Bottlers Philippines, Inc., gave the former the right to bring an
action as subrogee against FELMAN. Having failed to rebut the
presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable.
Delsan Transport Lines vs. CA (GR 127897, 15 November 2001)
Facts: Caltex Philippines entered into a contract of
affreightment with Delsan Transport Lines, Inc. for a
period of 1 year whereby the said common carrier agreed to
transport Caltexs industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country.
Under the contract, petitioner took on board its
vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of
Caltex to be delivered to the Caltex Oil
Terminal in Zamboanga City. The shipment was insured with
American Home Assurance Corporation. On 14
August 1986, MT Maysun set sail from Batangas for Zamboanga
City. Unfortunately, the vessel sank in the
early morning of 16 August 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil.
Subsequently, American Home Assurance paid Caltex the sum
of P5,096,635.57 representing the insured
value of the lost cargo. Exercising its right of subrogation under
Article 2207 of the New Civil Code,
American Home Assurance demanded of Delsan Transport the
same amount it paid to Caltex.
Due to its failure to collect from Delsan Transport despite prior
demand, American Home Assurance filed a
complaint with the RTC Makati City, Branch 137, for collection
of a sum of money. After the trial and upon
analyzing the evidence adduced, the trial court rendered a
decision on 29 November 1990 dismissing the
complaint against Delsan Transport without pronouncement as
to cost. The trial court found that the vessel,
MT Maysun, was seaworthy to undertake the voyage as
determined by the Philippine Coast Guard per Survey
Certificate Report M5-016-MH upon inspection during its
annual dry-docking and that the incident was
caused by unexpected inclement weather condition or force
majeure, thus exempting the common carrier
from liability for the loss of its cargo.
The decision of the trial court, however, was reversed, on
appeal, by the Court of Appeals on 16 June 1996,
which gave credence to the weather report by the Philippine
Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA). The subsequent motion for
reconsideration of Delsan Transport was
denied by the appellate court on 21 January 1997. Hence, the
petition for review on certiorari.
The Supreme Court denied the instant petition, and affirmed
the Decision dated 17 June 1996 of the Court of
Appeals; with costs against Delsan Transport.
1. PAGASA Weather report for 15 August 1986
The weather report issued by the Philippine Atmospheric,
Geophysical and Astronomical Services
Administration (PAGASA for brevity) showed that from 2:00
oclock to 8:00 oclock in the morning on
August 16, 1986, the wind speed remained at 10 to 20 knots
per hour while the waves measured from .7 to
two (2) meters in height only in the vicinity of the Panay Gulf
where the subject vessel sank, in contrast to
Delsan Transports allegation that the waves were 20 feet high.
2. Payment of insured value of lost cargo operates as waiver to
enforce term of implied warranty
against Caltex, not an automatic admission of vessels
seaworthiness
The payment made by American Home Assurance for the
insured value of the lost cargo operates as
waiver of its right to enforce the term of the implied warranty
against Caltex under the marine insurance
policy. However, the same cannot be validly interpreted as an
automatic admission of the vessels
seaworthiness by American Home Assurance as to foreclose
recourse against the petitioner for any liability
under its contractual obligation as a common carrier. The fact
of payment grants American Home Assurance
subrogatory right which enables it to exercise legal remedies
that would otherwise be available to Caltex as
owner of the lost cargo against the petitioner common carrier.
3. Right of Subrogation; Article 2207 NCC
Article 2207 of the New Civil Code provides that if the
plaintiffs property has been insured, and he
has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person
causing the loss or injury.
4. Rationale for right of subrogation
The right of subrogation has its roots in equity. It is designed to
promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice and good
conscience ought to pay. It is not dependent upon, nor does it
grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon payment by
the insurance company of the insurance
claim. Herein, the payment made by the insurer to the assured
operates as an equitable assignment to the
former of all the remedies which the latter may have against
the common carrier.
5. Diligence required of common carriers; Liability, exception;
Presumption of negligence
From the nature of their business and for reasons of public
policy, common carriers are bound to
observe extraordinary diligence in the vigilance over the goods
and for the safety of passengers transported by
them, according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the
insured goods, common carriers shall be responsible unless the
same is brought about, among others, by
flood, storm, earthquake, lightning or other natural disaster or
calamity. In all other cases, if the goods are
lost, destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence.
6. Claim of force majeure rebutted by PAGASA report
Herein, from the testimonies of Jaime Jarabe and Francisco
Berina, captain and chief mate,
respectively of the ill-fated vessel, it appears that a sudden and
unexpected change of weather condition
occurred in the early morning of 16 August 1986; that at around
3:15 a.m. a squall (unos) carrying strong
winds with an approximate velocity of 30 knots per hour and
big waves averaging 18 to 20 feet high,
repeatedly buffeted MT Maysun causing it to tilt, take in water
and eventually sink with its cargo. This tale of
strong winds and big waves by the said officers of Delsan
Transport however, was effectively rebutted and
belied by the weather report from PAGASA, the independent
government agency charged with monitoring
weather and sea conditions, showing that from 2:00 to 8:00
a.m. on 16 August 1986, the wind speed remained
at 10 to 20 knots per hour while the height of the waves ranged
from 0.7 to 2 meters in the vicinity of Cuyo
East Pass and Panay Gulf where the subject vessel sank. There
was no squall or bad weather or extremely
poor sea condition in the vicinity when the said vessel sank.
7. Ship captain not expected to testify against interest of
employer
Herein, Delsan Transports witnesses, Jaime Jarabe and
Francisco Berina, ship captain and chief
mate, respectively, of the said vessel, could not be expected to
testify against the interest of their employer,
the common carrier.
8. Evidence certificates at time of drydocking and Coast Guard
inspection not conclusive as to
condition of vessel at the time of commencement of voyage;
Seaworthiness not established by
certificates
Evidence certificates, showing that at the time of dry-docking
and inspection by the Philippine Coast
Guard the vessel MT Maysun was fit for voyage, do not
necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage. At
the time of dry-docking and inspection, the ship
may have appeared fit. The certificates issued, however, do not
negate the presumption of unseaworthiness
triggered by an unexplained sinking. Of certificates issued in
this regard, authorities are likewise clear as to
their probative value. Seaworthiness relates to a vessels actual
condition. Neither the granting of
classification or the issuance of certificates establishes
seaworthiness.
9. Certificates of seaworthiness does not satisfy the vessel
owners obligation
Diligence in securing certificates of seaworthiness does not
satisfy the vessel owners obligation. Also
securing the approval of the shipper of the cargo, or his
surveyor, of the condition of the vessel or her stowage
does not establish due diligence if the vessel was in fact
unseaworthy, for the cargo owner has no obligation in
relation to seaworthiness.
10. Exoneration of officers by Board of Marine Inquiry concerns
only their administrative liability,
not civil liabililty
The exoneration of MT Maysuns officers and crew by the Board
of Marine Inquiry merely concerns
their respective administrative liabilities. It does not in any way
operate to absolve the petitioner common
carrier from its civil liability arising from its failure to observe
extraordinary diligence in the vigilance over
the goods it was transporting and for the negligent acts or
omissions of its employees, the determination of
which properly belongs to the courts. Herein, Delsan Transport
is liable for the insured value of the lost cargo
of industrial fuel oil belonging to Caltex for its failure to rebut
the presumption of fault or negligence as
common carrier occasioned by the unexplained sinking of its
vessel, MT Maysun, while in transit.
11. Subrogation receipt merely establish relationship of parties
thereto; When right of subrogation
accrues
The presentation in evidence of the marine insurance policy is
not indispensable in this case before
the insurer may recover from the common carrier the insured
value of the lost cargo in the exercise of its
subrogatory right. The subrogation receipt, by itself, is
sufficient to establish not only the relationship of the
insurer and the assured shipper of the lost cargo of industrial
fuel oil, but also the amount paid to settle the
insurance claim. The right of subrogation accrues simply upon
payment by the insurance company of the
insurance claim.
12. Home Insurance Corp. vs. CA; Liability of a hauler
In the absence of proof of stipulations to the contrary, the
hauler can be liable only for any damage
that occurred from the time it received the cargo until it finally
delivered it to the consignee. Ordinarily, it
cannot be held responsible for the handling of the cargo before
it actually received it. The insurance contract,
which was not presented in evidence in that case would have
indicated the scope of the insurers liability, if
any, since no evidence was adduced indicating at what stage in
the handling process the damage to the cargo
was sustained.
13. Home Insurance Corp. vs. CA not applicable
The presentation of the insurance policy was necessary in the
case of Home Insurance Corporation v.
CA because the shipment therein (hydraulic engines) passed
through several stages with different parties
involved in each stage. First, from the shipper to the port of
departure; second, from the port of departure to
the M/S Oriental Statesman; third, from the M/S Oriental
Statesman to the M/S Pacific Conveyor; fourth,
from the M/S Pacific Conveyor to the port of arrival; fifth, from
the port of arrival to the arrastre operator;
sixth, from the arrastre operator to the hauler, Mabuhay
Brokerage Co., Inc.; and lastly, from the hauler to the
consignee. Herein, the presentation of the insurance policy is
not applicable, for there is no doubt that the
cargo of industrial fuel oil belonging to Caltex was lost while on
board Delsan Transports vessel, MT
Maysun, which sank while in transit in the vicinity of Panay Gulf
and Cuyo East Pass in the early morning of
16 August 1986.
FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE
TIRE AND RUBBER COMPANY OF THE PHILIPPINES,plaintiffs-
appellants,vs.JAMILA & COMPANY, INC. and FIRST QUEZON CITY
INSURANCE CO., INC.,defendants-appellees.
Facts:JamilaScouts Security Agency contracted to supply
security guards to Firestone; that Jamila assumed responsibility
for the acts of its security guards; that First Quezon City
Insurance Co., Inc. executed a bond in the sum of
P20,000.00 to guarantee Jamila's obligations under that
contract; that on May 18, 1963 properties of Firestone
valued at P11,925.00 were lost allegedly due to the acts of its
employees who connived with Jamila's security guard; that
Fireman's Fund, as insurer, paid to Firestone the amount
ofthe loss; that Fireman's Fund was subrogated to
Firestone's right to get reimbursement from Jamila, and that
Jamila and its surety, First Quezon City Insurance Co., Inc., failed
to pay the amount of the loss in spite of repeated demands.
Issue:Whether the complaint of Firestone and Fireman's Fund
states a cause of action against Jamila.
Ruling:Yes. Fireman's Fund's action against Jamilais squarely
sanctioned by article 2207. As the insurer, Fireman's Fund
is entitled to go after the person or entity that violated its
contractual commitment to answer for the loss insured
against. Subrogation is a normal incident of indemnity
insurance. Upon payment of the loss, the insurer is entitled
to be subrogatedpro tantoto any right of action which the
insured may have against the third person whose
negligence or wrongful act caused the loss.

PAN MALAYAN INSURANCE CORPORATION, petitioner, vs.
COURT OF APPEALS, ERLINDA FABIE AND
HER UNKNOWN DRIVER, respondents.
FACTS:
On December 10, 1985, PANMALAY filed a complaint for
damages with the RTC of Makati against private respondents
Erlinda Fabie and her driver. PANMALAY averred the following:
that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-
431 and registered in the name of Canlubang Automotive
Resources Corporation [CANLUBANG]; that on May 26, 1985,
due to the "carelessness, recklessness, and imprudence" of the
unknown driver of a pick-up with plate no. PCR-220, the insured
car was hit and suffered damages in the amount of P42,052.00;
that PANMALAY defrayed the cost of repair of the insured car
and, therefore, was subrogated to the rights of CANLUBANG
against the driver of the pick-up and his employer, Erlinda
Fabie; and that, despite repeated demands, defendants, failed
and refused to pay the claim of PANMALAY. private
respondents filed a Motion to Dismiss alleging that PANMALAY
had no cause of action against them. They argued that payment
under the "own damage" clause of the insurance policy
precluded subrogation under Article 2207 of the Civil Code,
since indemnification thereunder was made on the assumption
that there was no wrongdoer or no third party at fault.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed for no cause of action PANMALAY's
complaint for damages against private respondents Erlinda
Fabie and her driver
(2) CA: affirmed trial court.
ISSUE:
Whether or not the insurer PANMALAY may institute an action
to recover the amount it had paid its assured in settlement of
an insurance claim against private respondents as the parties
allegedly responsible for the damage caused to the insured
vehicle.
RULING:
PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-settled
principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other than
the assured, then the insurer, upon payment to the assured,
will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured
operates as an equitable that the insurer has been obligated to
pay. Payment by the insurer to the assured operates as an
equitable or negligence of a third party. CANLUBANG is
apparently of the same understanding. Based on a police report
assignment to the former of all remedies that the latter may
have against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon payment of
the insurance claim by the insurer.
The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third
party liable for the loss or damage, from liability, the insurer's
right of subrogation is defeated
(2) where the insurer pays the assured the value of the lost
goods without notifying the carrier who has in good faith
settled the assured's claim for loss, the settlement is binding on
both the assured and the insurer, and the latter cannot bring
an action against the carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a
risk covered by the policy, thereby effecting "voluntary
payment", the former has no right of subrogation against the
third party liable for the loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could
not be deemed subrogated to the rights of its assured under
Article 2207 of the Civil Code, PANMALAY would still have a
cause of action against private respondents. In the pertinent
case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan,
supra., the Court ruled that the insurer who may have no rights
of subrogation due to "voluntary" payment may nevertheless
recover from the third party responsible for the damage to the
insured property under Article 1236 of the Civil Code.
WHEREFORE, in view of the foregoing, the present petition is
GRANTED. Petitioner's complaint for damages against private
respondents is hereby REINSTATED. Let the case be remanded
to the lower court for trial on the merits.
SVERIGES ANGFARTYGS ASSURANS FORENING, PLAINTIFF-
APPELLANT, VS. QUA CHEE GAN, DEFENDANT-APPELLEE.
On August 23 and 24, 1947, defendant Qua Chee Gan, a sole
proprietorship, shipped on board the S.S. NAGARA as per bills
of lading Exhs. A and B 2,032,000 kilos of bulk copra at Siain,
Quezon, consigned to DAL International Trading Co., in Gdynia,
Poland. The vessel first called at the port of Karlshamn,
Sweden, where it unload-ed 696,419 kilos of bulk copra. Then,
it proceeded to Gdynia where it unloaded the remaining copra
shipment. The actual outturn weights in the latter port showed
that only 1,569,429 kilos were discharged.
Because of the alleged confirmed cargo shortage, the Polish
cargo insurers had to indemnify the consignee for the value
thereof. Thereafter, the former sued the ship-owner, the
Swedish East Asia Company, in Gothenburg, Swe-den. The
latter, in turn, sued defendant and had it summoned to
Gothenburg. Defendant However refused to submit to that
court's jurisdiction and its objection was sustained.
In March, 1951, a settlement was effected between the Polish
cargo insurers and the shipowner. Plaintiff, as the indemnity
insurer for the latter, paid approximate-ly $60,733.53 to the
Polish insurers. On August 16, 1954, claiming to have bee
subrogated to the rights of the carrier, plaintiff sued defendant
before the Court of First Instance of Manila to recover U.S.
&60,733.53 plus 17% exchange tax, with legal interest, as the
value of the al-leged cargo shortshipment and P10,000 as
attorney's fees. Defendant answered in due time and
countered with a P15,000 counterclaim for attorney's fees.
On August 1, 1955, defendant filed a motion to dismiss on the
ground of prescription under the Carriage of Goods by Sea Act.
The lower court sustained the motion and plaintiff appealed
here. We reversed the order of dismissals and remanded the
case for further proceedings.[1]
After trial the lower court September 28, 1963, rendered its
decisions dismissing the complaint and awarding P10,000 as
attorney's fees to defendant. It ruled (a) that there was no
shortshipment on defendant's part (b) that plaintiff's insurance
policy did not cover the shortshipment and (c) defendant was
merely acting as an agent of Louis Dreyfus & Co., who was the
real shipper.
Taking issue with all the foregoing, plaintiff has interposed the
present appeal to Us on questions of fact and law, the amount
involved exceeding P200,000.00.
Was the non-presentation of the insurance policy fa-tal to
plaintiff's case? The lower court ruled so, reasoning that unless
the same as the best evidence were presented, it could not be
conclusively determined if "liability for shortshipment" was a
covered risk. And the rule is that an insurer who pays the
insured for loss or liability not covered by the policy is not
subrogated to the latter.[2] However, even assuming that there
was unwarranted - or "volunteer" - payment, plaintiff could still
recover what it paid - in effect - to the carrier from defendants
shipper under Art. 1236 of the Civil Code which allows a third
person who pays on behalf of another to recover from the
latter, although there is no subrogation. But since the payment
here was without the knowledge and consent of defendant,
plaintiff's right of recovery is defeasible by the former's
defenses since the Code is clear that the recovery only up to
the amount by which the defendant was benefited.
This brings Us to the crux of them case: Was there a
shortshipment? To support its case, plaintiff theorizes that
defendant had two shipments at Siain, Quezon province: (1)
812,800 kilos for Karlshamn and (2) 2,032,000 kilos for Gdynia.
The Karlshamn shipment was asserted to have been covered by
a separate bill of lading which however was allegedly lost
subsequently. Thus, the 696,419 kilos of copra unloaded in
Karlshamn was not part of the Gdynia shipment and cannot
explain the confirmed shortage at the latter port.
Plaintiff's cause of action suffers from several fa-tal defects and
inconsistencies. The alleged shipment of 812,800 kilos for
Karlshamn is contradicted by plaintiff's admission in paragraphs
2 and 3 of its complaint that defendant shipped only 2,032,000
kilos copra at Siain, purportedly for both Gdynia and
Karlshamn.[3] Needless to state, plaintiff is bound by such
judicial admission.[4] Moreover, the alleged existence of the
Karlshamn bills of lading is negative by the fact that Exhibits A
and B - the bills of lading presented by plaintiff - show that the
2,032,000 kilos of copra loaded in Siain were for Gdynia only.
Further destroying its case is the testimony of plaintiff's own
witness, Mr. Claro Pasicolan, who on direct examination
affirmed[5] that these two exhibits constituted the complete
set of documents which them shipping agent in charge of the
vessel S.S. NAGARA issued covering the copra cargo loaded at
Slain. In view of this admission and for want of evidentiary
support, plaintiff's be-lated claim that there is another
complete set of documents can not be seriously taken.
Lastly, if there really was a separate bill of lading for the
Karlshamn shipment, plaintiff could not have failed to present
a copy thereof. Mr. Pasicolan testi-fied[6] that the shipping
agent makes 20 copies of the documents of which three signed
ones are given to the shipper and the rest, marked as non-
negotiable bills of lading - like Exhibits A and B - are kept on its
file. For the three signed copies to be lost, We may believe, but
not for all the remaining 17 other copies. Under the
circumstances, it his more reasonable to hold that there was no
separate shipment intended for Karlshamn, Sweden.
As a corollary to the foregoing conclusion, it stands to reason
that the copra unloaded in Karlshamn formed part of the same
- and only - shipment of defendant intended for Gdynia. Now
the fact that the sum total of the cargo unloaded at Karlshamn
and Gdynia would exceed what appears to have been loaded at
Sian by as much as 233,848 kilos can only show that defendant
really overshipped, not shortshipped. And while this would not
tally with defendant's claim of having weighed the copra cargo
100% at Siain, thus exposing a flaw in defendant's case, yet it is
elementary that plaintiff must rely on the strength of it own
case to recover, and not bank on the weakness of the defense.
Plaintiff here failed to establish its case by preponderance on
evidence.
On the question whether defendant is the real shipped or
merely an agent of Louis Dreyfus & Co., suffice it to say that
although on Exhibit A and B his name appears as the shipper,
yet the very loading certificate, Exhibit 3 [5-Deposition of
Horle], issued and signed by the Chief Mate, and Master of the
S.S. NAGARA shows that defendant was acting merely for
account of Louis Dreyfus & Co. The other documentary
exhibits[7] confirm this. Anyway, in whatever capacity
defendant is considered, it cannot be liable since no
shortshipment was shown.
Plaintiff's action against defendant cannot, however, be
considered as clearly unfounded as to warrant an award of
attorney's fees as damages to defendant under par. 4, Art. 2208
of the Civil Code. The facts do not show that plaintiff's cause of
action was so frivolous or untenably as to amount to gross and
evident bad faith.[8]
WHEREFORE, but for the award of attorney's fees to defendant
which is eliminated, the decision appealed from is, in all other
respects, hereby affirmed. Costs against plaintiff-appellant.
RIZAL SURETY v. MANILA RAILROAD COMPANY
FERNANDO, J.:
In this suit for the recovery of the amount paid by the plaintiff,
Rizal Surety and Insurance Company, to the consignee based on
the applicable Civil Code provision,[1] which speaks to the
effect that the Insurance Company "shall be subrogated to the
rights of the insured," it is its contention that it is entitled to the
amount paid by it in full, by virtue of the insurance contract.
The lower court, however, relying on the limited liability clause
on a management contract with the defendants, could not go
along with such a theory. Hence this appeal.
The facts were stipulated. The more pertinent follows: That on
or about November 29, 1960, the vessel, SS Flying Trader,
loaded on board at Genoa, Italy for shipment to Manila,
Philippines, among other cargoes, 6 cases OMH, Special Single
Colour Offset Press Machine, for which Bill of Lading No. 1 was
issued, consigned to Suter, Inc.; that such vessel arrived at the
Port of Manila, Philippines on or about January 16, 1961 and
subsequently discharged complete and in good order the
aforementioned shipment into the custody of defendant
Manila Port Service as arrastre operator; that in the course of
the handling, one of the six cases identified as Case No. 2143
containing the OMR, Special Single Colour Offset Press, while
the same was being lifted and loaded by the crane of the Manila
Port Service into the consignee's truck, it was dropped by the
crane and as a consequence, the machine was heavily damaged
for which plaintiff as insurer paid to the consignee, Suter, Inc.
the amount of P16,500.00, representing damages by way of
costs of replacement parts and repairs to put the machine in
working condition, plus the sum of P180.70 which plaintiff paid
to the International Adjustment Bureau as adjuster's fee for the
survey conducted on the damaged cargo or a total of
P16,680.70 representing plaintiff's liability under the insurance
contract; and that the arrastre charges in this particular
shipment was paid on the weight or measurement basis
whichever is higher, and not on the value thereof.[2]
Clause 15 of the management contract which as admitted by
the plaintiff appeared "at the dorsal part of the Delivery Permit"
and was used in taking delivery of the subject ship-ment from
the defendants' (Manila Port Service and Manila Railroad Co.)
custody and control, issued in the name of con-signee's
broker," contained what was referred to as "an important
notice." Such permit "is presented subject to all the terms and
conditions of the Management Contract between the Bureau
of Customs and Manila Port Service and amendments thereto
or alterations thereof, particularly but not limited to paragraph
15 thereof limiting the Company liability to P500.00 per
package, unless the value of the goods is otherwise, specified,
declared or manifested and the corresponding arrastre charges
have been paid, * * *."[3]
On the above facts and relying on Bernabe & Co. v. Delgado
Brothers, Inc.,[4] the lower court rendered the judgment
"ordering defendants, jointly and severally, to pay plaintiff the
amount of Five Hundred Pesos (P500.00), with legal interest
thereon from January 13, 1962, the date of the filing of the
complaint, with costs against said defendants."[5]
As noted at the outset, in this appeal, the point is pressed that
under the applicable Civil Code provision, plaintiff-appellant
Insurance Company could recover in full. The literal language
of Article 2207, however, does not warrant such an
interpretation. It is there made clear that in the event that the
property has been insured and the Insurance Company has paid
the indemnity for the injury or loss sustained, it "shall be
subrogated to the rights of the insured against the wrong-doer
or the person who has violated the contract."
Plaintiff-appellant Insurance Company, therefore, cannot
recover from defendants an amount greater than that to which
the consignee could lawfully lay claim. The management
contract is clear. The amount is limited to Five Hundred ,Pesos
(P500.00). Such a stipulation has invariably received the
approval of this Court from the leading case of Bernabe & Co.
v. Delgado Bros., Inc.[6] Such a decision was quoted with
approval in the following subsequent cases: Atlantic Mutual
Insurance Co. v. Manila Port Service,[7] Insurance Service Co. of
North America v. Manila Port Service,[8] Insurance Company of
North America v. U.S. Lines, Co.,[9] and Insurance Company of
North America v. Manila Port Service.[10]
In one of them, Atlantic Mutual Insurance Company v. Manila
Port Service, this Court, through the then Justice, now Chief
Justice, Concepcion, restated the 'doctrine thus: "Plaintiff
maintains that, not being a party to the manage-ment contract,
the consignee - into whose shoes plaintiff had stepped in
consequence of said payment - is not subject to the provisions
of said stipulation, and that the same is furthermore invalid.
The lower court correctly rejected this pretense because,
having taken delivery of the shipment afore-mentioned by
virtue of a delivery permit, incorporating there-to, by
reference, the provisions of said management contract,
particularly paragraph 15 thereof, the gist of which was set
forth in the permit, the consignee became bound by said
provisions, and because it could have avoided the application
of said maximum limit of P500.00 per package by stating the
true value thereof in its claim for delivery of the goods in
question, which, admittedly, the consignee failed to do * *
*."[11]
Plaintiff-appellant Rizal Surety and Insurance Company having
been subrogated merely to the rights of the consignee its
recovery necessarily should be limited to what was recoverable
by the insured. The lower court therefore did not err when in
the decision appealed from, it limited the amount which
defendants were jointly and severally to pay plaintiff-appellant
to "Five Hundred Pesos (P500.00) with legal interest thereon
from January 31, 1962, the date of the filing of the complaint,
* * *."
WHEREFORE, the decision appealed from is affirmed. With
costs against Rizal Surety and Insurance Company.
ST. PAUL FIRE & MARINE INSURANCE CO. vs. MACONDRAY &
CO., INC., BARBER STEAMSHIP LINES, INC., WILHELM
WILHELMSEN MANILA PORT SERVICE and/or MANILA
RAILROAD COMPANY(J.Antonio;1976)RELEVANT
PROVISIONS:FACTS: 06/29/1960Winthrop Products, Inc., of
NY,U.S.A., shipped aboard the SS Tai Ping, owned and operated
by Wilhelm Wilhelmsen,218 cartons and drums of drugs and
medicine, with the freight prepaid, which were consigned to
Winthrop-Stearns Inc., Manila, Philippines. Barber Steamship
Lines, Inc., agent of Wilhelm Wilhelmsen issued Bill of Lading
No. 34, in the name of Winthrop Products, Inc. as shipper, with
arrival notice in Manila to consignee. The shipment was
insured by the shipper against loss and/or damage with the St.
Paul Fire & Marine Insurance Company 08/07/1960SS Tai
Ping arrived at the Port of Manila and discharged its aforesaid
shipment into the custody of Manila Port Service; 1 drum and
several cartons of medicinewere in bad condition (but most of
the shipment was in good condition) Consignee filed claim of
the value of the damaged drum and cartons of medicine from
the carrierand Manila Port Service, who both refused to
pay. Consignee then filed its claim with the insurer (St. Paul)
who,on the basis of such claim, paid to the consignee the
insured value of the lost and damaged goods, including other
expenses in connection therewith, in the total amount of
$1,134.46 08/05/1961Insurer (as subrogee of the rights of
the consignee) instituted with CFI Manila the present action
against the defendants for the recovery of said amount of
$1,134.46, plus costs All defendants said they were not agents
of the carrying vessel and they only delivered the shipment in
the state they receive them in, in their defense
Lower Court Judgement: (1) Macondray & Co., Inc., Barber
Steamship Lines, Inc. and Wilhelm Wilhelmsen = jointly pay
P300.00 w/ legal interest thereon from the filing of the
complaint until fully paid; (2) Manila Railroad Company and
Manila Port Service = jointly pay P809.67 w/ legalinterest
thereon from the filing of the complaint until fully paid Plaintiff
appealed saying they should be paid $1,134.46 or its equivalent
in pesos at the rate of P3.90 (rate at the date of the decision)
instead of P2.00 (rate at the date of discharge of the cargo) for
every US
$ISSUES: 1.WoN in case of loss or damage, the liability of the
carrier to the consignee is limited to the C.I.F. value of the
goods which were lost or damaged
2.Whether the insurer who has paid the claim in dollars to the
consignee should be reimbursed in its peso equivalent on the
date of discharge of the cargo or on the date of the decision.
HELD:1.YES. The purpose of the bill of lading is to provide for
the rights and liabilities of the parties inreference to the
contract to carry. The stipulation in the bill of lading limiting the
common carrier's liability to the value of the goods appearing
in the bill, unless the shipper or owner declares a greater value,
is valid and binding. This limitation of the carrier's liability is
sanctioned by the freedom of the contracting parties to
establish such stipulations, clauses, terms, or conditions as they
may deem convenient, provided they are not contrary to law,
morals, good customs and public policy. A stipulation fixing or
limiting the sum that may be recovered from the carrier on the
loss or deterioration of the goods is valid, provided it is (a)
reasonable and just under the circumstances, and (b) has been
fairly and freely agreed upon. In this case, the liabilities of the
defendants-appellees with respect to the lost or damaged
shipments are expressly limited to the C.I.F. value of the goods
as per contract of sea carriage embodied in the bill of lading.As
an insurer, Plaintiffsubrogated merely to the rights of the
assured, thus it can recover only the amount that is recoverable
by the latter. Since the right of the assured, in case of loss or
damage to the goods, is limited or restricted by the provisions
in the bill of lading, a suit by the insurer as subrogee necessarily
is subject to like limitations and restrictions.
2.DATE OF DISCHARGE OF THE CARGO.The obligation of the
carrier to pay for the damage commenced on the date it failed
to deliver the shipment in good condition to the consignee. The
C.I.F. Manila value of the goods which were lost or damaged,
according to the claim of the consignee dated September 26,
1960 is $226.37 and $324.3 or P456.14 and P653.53,
respectively, in Philippine Currency. The peso equivalent was
based by the consignee on the exchange rate of P2.015 to $1.00
which was the rate existing at that time.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG,
PA/AMERICAN INTERNATIONAL UNDERWRITER (PHIL.) INC.
PETITIONER, VS. STOLT-NIELSEN PHILIPPINES, INC. AND COURT
OF APPEALS, RESPONDENTS.
DECISION
MELENCIO-HERRERA, J.:
We uphold the ruling of respondent Court of Appeals that the
claim or dispute herein is arbitrable.
On 9 January 1985, United Coconut Chemicals, Inc. (hereinafter
referred to as SHIPPER) shipped 404.774 metric tons of distilled
C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned
by Stolt-Nielsen Philippines Inc. (hereinafter referred to as
CARRIER), from Bauan, Batangas, Philippines, consigned to
"Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker
Bill of Lading B/L No. BAT-1. The shipment was insured under a
marine cargo policy with Petitioner National Union Fire
Insurance Company of Pittsburg (hereinafter referred to as
INSURER), a non-life American insurance corporation, through
its settling agent in the Philippines, the American International
Underwriters (Philippines), Inc., the other petitioner herein.
It appears that the Bill of Lading issued by the CARRIER
contained a general statement of incorporation of the terms of
a Charter Party between the SHIPPER and Parcel Tankers, Inc.,
entered into in Greenwich, Connecticut, U.S.A.
Upon receipt of the cargo by the CONSIGNEE in the
Netherlands, it was found to be discolored and totally
contaminated. The claim filed by the SHIPPER-ASSURED with
the CARRIER having been denied, the INSURER indemnified the
SHIPPER pursuant to the stipulation in the marine cargo policy
covering said shipment.
On 21 April 1986, as subrogee of the SHIPPER-ASSURED, the
INSURER filed suit against the CARRIER, before the Regional
Trial Court of Makati, Branch 58 (RTC), for recovery of the sum
of P1,619,469.21, with interest, representing the amount the
INSURER had paid the SHIPPER-ASSURED. The CARRIER moved
to dismiss/suspend the proceedings on the ground that the RTC
had no jurisdiction over the claim the same being an arbitrable
one; that as subrogee of the SHIPPER-ASSURED, the INSURER is
subject to the provisions of the Bill of Lading, which includes a
provision that the shipment is carried under and pursuant to
the terms of the Charter Party, dated 21 December 1984,
between the SHIPPER-ASSURED and Parcel Tankers, Inc.
providing for arbitration.
The INSURER opposed the dismissal/suspension of the
proceedings on the ground that it was not legally bound to
submit the claim for arbitration inasmuch as the arbitration
clause provided in the Charter Party was not incorporated into
the Bill of Lading, and that the arbitration clause is void for
being unreasonable and unjust. On 28 July 1987, the RTC[1]
denied the Motion, but subsequently reconsidered its action on
19 November 1987, and deferred resolution on the Motion to
Dismiss/Suspend Proceedings until trial on the merits "since the
ground alleged in said motion does not appear to be
indubitable."
The CARRIER then resorted to a Petition for Certiorari and
Prohibition with prayer for Preliminary Injunction and/or
Temporary Restraining Order before the respondent Appellate
Court seeking the annulment of the 19 November 1987 RTC
Order. On 12 April 1989, the respondent Court[2] promulgated
the Decision now under review, with the following dispositive
tenor:
"WHEREFORE, the order of respondent Judge dated November
19, 1987 deferring resolution on petitioner Stolt-Nielsen's
Motion to Dismiss/Suspend Proceedings is hereby SET ASIDE;
private respondent NUFIC (the INSURER) is ordered to refer its
claims for arbitration; and respondent Judge is directed to
suspend the proceedings in Civil Case No. 13498 pending the
return of the corresponding arbitral award."
On 21 August 1989, we resolved to give due course and
required the parties to submit their respective Memoranda,
which they have done, the last filed having been Noted on 23
October 1989.
First, herein petitioner-INSURER alleges that the RTC Order
deferring resolution of the CARRIER'S Motion to Dismiss
constitutes an interlocutory order, which can not be the subject
of a special civil action on certiorari and prohibition.
Generally, this would be true. However, the case before us falls
under the exception. While a Court Order deferring action on
a motion to dismiss until the trial is interlocutory and cannot be
challenged until final judgment, still, where it clearly appears
that the trial Judge or Court is proceeding in excess or outside
of its jurisdiction, the remedy of prohibition would lie since it
would be useless and a waste of time to go ahead with the
proceedings (University of Sto. Tomas vs. Villanueva, 106 Phil.
439, [1959] citing Philippine International Fair, Inc., et al., vs.
Ibanez, et al., 94 Phil. 424 [1954]; Enrique vs. Macadaeg, et al.,
84 Phil. 674 [1949]; San Beda College vs. CIR, 97 Phil. 787.
[1955]). Even a cursory reading of the subject Bill of Lading, in
relation to the Charter Party, reveals the Court's patent lack of
jurisdiction to hear and decide the claim.
We proceed to the second but more crucial issue: Are the
terms of the Charter Party, particularly the provision on
arbitration, binding on the INSURER?
The INSURER postulates that it cannot be bound by the Charter
Party because, as insurer, it is subrogee only with respect to the
Bill of Lading; that only the Bill of Lading should regulate the
relation among the INSURER, the holder of the Bill of Lading,
and the CARRIER; and that in order to bind it, the arbitral clause
in the Charter Party should have been incorporated into the Bill
of Lading.
We rule against that submission.
The pertinent portion of the Bill of Lading in issue provides in
part:
"This shipment is carried under and pursuant to the terms of
the Charter dated December 21st 1984 at Greenwich,
Connecticut, U.S.A. between Parcel Tankers, Inc. and United
Coconut Chemicals, Inc. as Charterer and all the terms
whatsoever of the said Charter except the rate and payment of
freight specified therein apply to and govern the rights of the
parties concerned in this shipment. Copy of the Charter may
be obtained from the Shipper or Charterer." (Emphasis ours)
While the provision on arbitration in the Charter Party reads:
"H. Special Provisions.
xxx xxx
4. Arbitration. Any dispute arising from the making,
performance or termination of this Charter Party shall be
settled in New York, Owner and Charterer each appointing an
arbitrator, who shall be a merchant, broker or individual
experienced in the shipping business; the two thus chosen, if
they cannot agree, shall nominate a third arbitrator who shall
be an admiralty lawyer. Such arbitration shall be conducted in
conformity with the provisions and procedure of the United
States arbitration act, and a judgment of the court shall be
entered upon any award made by said arbitrator. Nothing in
this clause shall be deemed to waive Owner's right to lien on
the cargo for freight, deed of freight, or demurrage."
Clearly, the Bill of Lading incorporates by reference the terms
of the Charter Party. It is settled law that the charter may be
made part of the contract under which the goods are carried by
an appropriate reference in the Bill of Lading (Wharton Poor,
Charter Parties and Ocean Bills of Lading (5th ed., p. 71). This
should include the provision on arbitration even without a
specific stipulation to that effect. The entire contract must be
read together and its clauses interpreted in relation to one
another and not by parts. Moreover, in cases where a Bill of
Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also
the holder of the bill of lading, "the bill of lading operates as the
receipt for the goods, and as document of title passing the
property of the goods, but not as varying the contract between
the charterer and the shipowner" (In re Marine Sulphur Queen,
460 F 2d 89, 103 [2d Cir. 1972]; Ministry of Commerce vs.
Marine Tankers Corp. 194 F Supp 161, 163 [S.D.N.Y. 1960];
Greenstone Shipping Co., S.A. vs. Transworld Oil Ltd., 588 F
Supp [D.E1. 1984]). The Bill of Lading becomes, therefore, only
a receipt and not the contract of carriage in a charter of the
entire vessel, for the contract is the Charter Party (Shell Oil Co.
vs. M/T Gilda, 790 F 2d 1209, 1212 [5th Cir. 1986]; Home
Insurance Co. vs. American Steamship Agencies, Inc., G. R. No.
L-25599, 4 April 1968, 23 SCRA 24), and is the law between the
parties who are bound by its terms and condition provided that
these are not contrary to law, morals, good customs, public
order and public policy (Article 1306, Civil Code).
As the respondent Appellate Court found, the INSURER "cannot
feign ignorance of the arbitration clause since it was already
charged with notice of the existence of the charter party due to
an appropriate reference thereof in the bill of lading and, by the
exercise of ordinary diligence, it could have easily obtained a
copy thereof either from the shipper or the charterer."
We hold, therefore, that the INSURER cannot avoid the binding
effect of the arbitration clause. By subrogation, it became privy
to the Charter Party as fully as the SHIPPER before the latter
was indemnified, because as subrogee, it stepped into the
shoes of the SHIPPER-ASSURED and is subrogated merely to the
latter's rights. It can recover only the amount that is
recoverable by the assured. And since the right of action of the
SHIPPER-ASSURED is governed by the provisions of the Bill of
Lading, which includes by reference the terms of the Charter
Party, necessarily, a suit by the INSURER is subject to the same
agreements (see St. Paul Fire and Marine Insurance Co. vs.
Macondary, G.R. No. L-27796, 25 March 1976, 70 SCRA 122).
Stated otherwise, as the subrogee of the SHIPPER, the INSURER
is contractually bound by the terms of the Charter party. Any
claim of inconvenience or additional expense on its part should
not render the arbitration clause unenforceable.
Arbitration, as an alternative mode of settling disputes, has long
been recognized and accepted in our jurisdiction (Chapter 2,
Title XIV, Book IV, Civil Code). Republic Act No. 876 (The
Arbitration Law) also expressly authorizes arbitration of
domestic disputes. Foreign arbitration as a system of settling
commercial disputes of an international character was likewise
recognized when the Philippines adhered to the United Nations
"Convention on the Recognition and the Enforcement of
Foreign Arbitral Awards of 1958," under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international
arbitration agreements between parties of different
nationalities within a contracting state. Thus, it pertinently
provides:
"1. Each Contracting State shall recognize an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or which
may arise between them in respect of a defined legal
relationship, whether contractual or not, concerning a subject
matter capable of settlement by arbitration.
"2. The term 'agreement in writing' shall include an arbitral
clause in a contract or an arbitration agreement, signed by the
parties or contained in an exchange of letters or telegrams.
"3. The court of a Contracting State, when seized of an action
in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the
request of one of the parties, refer the parties to arbitration,
unless it finds that the said agreement is null and void,
inoperative or incapable of being performed."
It has not been shown that the arbitral clause in question is null
and void, inoperative, or incapable of being performed. Nor has
any conflict been pointed out between the Charter Party and
the Bill of Lading.
In fine, referral to arbitration in New York pursuant to the
arbitration clause, and suspension of the proceedings in Civil
Case no. 13498 below, pending the return of the arbitral award,
is, indeed called for.
WHEREFORE, finding no reversible error in respondent
Appellate Court's 12 April 1989 Decision, the instant Petition for
Review on Certiorari is DENIED and the said judgment is hereby
AFFIRMED. Costs against petitioners.
Cebu Shipyard v William G.R. No. 132607. May 5, 1999
J. Purisima
Facts:
Cebu Shipyard and Engineering Works, Inc. repaired marine
vessels while the Prudential is in the non-life insurance
business. William Lines, Inc., the owner of M/V Manila City, a
luxury passenger-cargo vessel, which caught fire and sank. At
the time of the incident, subject vessel was insured with
Prudential for P45M for hull and machinery. CSEW was insured
for only Php 10 million for the shiprepairers liability policy.
They entered into a contract where negligence was the only
factor that could make CSEW liable for damages. Moreover,
liability of CSEW was limited to only Php 1million for damages.
The Hull Policy included an Additional Perils (INCHMAREE)
Clause covering loss of or damage to the vessel through the
negligence of, among others, ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs.
The officers and cabin crew stayed at the ship while it was being
repaired. After the vessel was transferred to the docking quay,
it caught fire and sank, resulting to its total loss.
William brought suit against CSEW alleging that it was through
the latters negligence that the ship caught fire and sank.
Prudential was impleaded as co-plaintiff after it had paid the
value of insured items. It was subrogated to 45 million, or the
value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for
the ship indemnity, 65 million for loss of income, and more than
13 million in other damages. The CA affirmed the TC decision.
CSEW contended that the cause of the fire was due to Williams
hotworks on the said portion of the ship which they didnt ask
CSEW permission for.
Prudential, on the other hand, blamed the negligence of the
CSEW workers in the instance when they didnt mind rubber
insulation wire coming out of the air-conditioning unit that was
already burning.
Hence this MFR.
Issue:
1. WON CSEW had management and supervisory control of
the ship at the time the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the
crew
3. WON Prudential has the right of subrogation against its own
insured
4. WON the provisions limiting CSEWs liability for negligence to
a maximum of Php 1 million are valid
Held: Yes. Yes. Yes. No. Petition denied.
Ratio:
1. The that factual findings by the CA are conclusive on the
parties and are not reviewable by this Court. They are entitled
to great weight and respect when the CA affirmed the factual
findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused
the total loss of subject M/V Manila City was due to the
negligence of the employees and workers of CSEW.
Furthermore, in petitions for review on certiorari, only
questions of law may be put into issue. Questions of fact cannot
be entertained.
2. For the doctrine of res ipsa loquitur to apply to a given
situation, the following conditions must concur: (1) the
accident was of a kind which does not ordinarily occur unless
someone is negligent; and (2) that the instrumentality or
agency which caused the injury was under the exclusive control
of the person charged with negligence.
The facts and evidence reveal the presence of these conditions.
First, the fire would not have happened in the ordinary course
of things if reasonable care and diligence had been exercised.
Second, the agency charged with negligence, as found by the
trial court and the CA and as shown by the records, is CSEW,
which had control over subject vessel when it was docked for
annual repairs.
What is more, in the present case the trial court found direct
evidence to prove that the workers didnt exercise due
diligence in the care of subject vessel. The direct evidence
substantiates the conclusion that CSEW was really negligent
even without applying such doctrine.
3. Petitioner contends that Prudential is not entitled to be
subrogated to the rights of William Lines, Inc., theorizing that
(1) the fire which gutted M/V Manila City was an excluded risk
and (2) it is a co-assured under the Marine Hull Insurance
Policy. This was wrong. The one who caused the fire has already
been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the
former was subrogated to the right of the latter to
indemnification from CSEW. As aptly ruled by the Court of
Appeals, the law says:
Art. 2207. If the plaintiffs property has been insured, and he
has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from
the person causing the loss or injury.
When Prudential paid the latter the total amount covered by its
insurance policy, it was subrogated to the right of the latter to
recover the insured loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of
subrogation as it is deemed a co-assured under the subject
insurance policy with reliance on Clause 20 of the Work Order
which states:
20. The insurance on the vessel should be maintained by the
customer and/or owner of the vessel during the period the
contract is in effect.
Clause 20 of the Work Order in question is clear in the sense
that it requires William Lines to maintain insurance on the
vessel during the period of dry-docking or repair. However, the
fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The
intention of the parties to make each other a co-assured under
an insurance policy is to be read from the insurance contract or
policy itself and not from any other contract or agreement
because the insurance policy denominates the beneficiaries of
the insurance. The hull and machinery insurance procured by
William Lines, Inc. from Prudential named only William Lines,
Inc. as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-
assured under subject policy. The claim of CSEW that it is a co-
assured is unfounded.
Then too, in the Additional Perils Clause of the same Marine
Insurance Policy, it is provided that this insurance also covers
loss of or damage to vessel directly caused by the negligence of
charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW
were deemed a co-assured under the policy, it would nullify any
claim of William Lines, Inc. from Prudential for any loss or
damage caused by the negligence of CSEW. Certainly, no
shipowner would agree to make a shiprepairer a co-assured
under such insurance policy; otherwise, any claim for loss or
damage under the policy would be invalidated.
4. Although in this jurisdiction, contracts of adhesion have been
consistently upheld as valid per se; as binding as an ordinary
contract, the Court recognizes instances when reliance on such
contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded.
Thus, in ruling on the validity and applicability of the stipulation
limiting the liability of CSEW for negligence to P1M only, the
facts and circumstances vis-a-vis the nature of the provision
sought to be enforced should be considered, bearing in mind
the principles of equity and fair play.
It is worthy to note that M/V Manila City was insured with
Prudential for P45M. Upon thorough investigation by its hull
surveyor, M/V Manila City was found to be beyond economical
salvage and repair. The evaluation of the average adjuster also
reported a constructive total loss. The said claim of William
Lines, Inc., was then found to be valid and compensable such
that Prudential paid the latter the total value of its insurance
claim. Furthermore, it was ascertained that the replacement
cost of the vessel, amounts to P55M.
Considering the circumstances, it would unfair to limit the
liability of petitioner to One Million Pesos only. To allow CSEW
to limit its liability to P1M notwithstanding the fact that the
total loss suffered by the assured and paid for by Prudential
amounted to P45M would sanction the exercise of a degree of
diligence short of what is ordinarily required because, then, it
would not be difficult for petitioner to escape liability by the
simple expedient of paying an amount very much lower than
the actual damage suffered by William.
Manila Mahogany Manufacturing Corporation v.
Court of Appeals and Zenith Insurance Corp.
[G.R. No. L-52756 October 12, 1987]
FACTS
Petitioner Manila Mahogany insured its Mercedes Benz 4-door
sedan with respondent Zenith Insurance, which was bumped
and damaged by a truck owned by San Miguel Corporation. For
the damage caused, respondent company paid petitioner five
thousand pesos (P5,000.00) in amicable settlement.
Petitioner's general manager executed a Release of Claim,
subrogating respondent company to all its right to action
against San Miguel Corporation. Respondent company wrote
Insurance Adjusters, Inc. to demand reimbursement from San
Miguel Corporation of the amount it had paid petitioner.
Insurance Adjusters, Inc. refused reimbursement, alleging that
San Miguel Corporation had already paid petitioner P4,500.00
for the damages to petitioner's motor vehicle, as evidenced by
a cash voucher and a Release of Claim. Respondent insurance
company thus demanded from petitioner reimbursement of
the sum of
paid by San Miguel Corporation. Petitioner refused. Hence,
respondent company filed suit in the City Court of Manila for
the recovery of said money.
ISSUE
Whether or not petitioner Manila Mahogany should
reimburse private respondent Zenith Insurance on the
ground that San Miguel Corporation already paid the former.
RULING
Yes. When Manila Mahogany executed Release of Claim
discharging San Miguel Corporation from "all actions, claims,
demands and rights of action that now exist or hereafter arising
out of or as a consequence of the accident" after the insurer
had paid the proceeds of the policy- the compromise
agreement of P5,000.00 being based on the insurance policy-
the insurer is entitled to recover from the insured the amount
of insurance money paid. Since petitioner by its own acts
released San Miguel Corporation, thereby defeating private
respondents, the right of subrogation, the right of action of
petitioner against the insurer was also nullified.
DANZAS CORPORATION and ALL TRANSPORT NETWORK, INC., vs.
HON. ZEUS C. ABROGAR, Presiding Judge of Br. 150 of Makati
City, SEABOARD EASTERN INSURANCE CO., INC. and PHILIPPINE
SKYLANDERS, INC., Respondents. FACTS: On February 1994,
petitioner Danzas took a shipment of nine packages of ICS
watches for transport to Manila. On March 1994, the Korean
Airlines plane carrying the goods arrived in Manila and
discharged the goods to the custody of private respondent
Philippine Skylanders, Inc. for safekeeping. On withdrawal of
the shipment from private respondent Skylanders warehouse,
International Freeport Traders, Inc. (IFTI) noted that one
package containing 475 watches was shortlanded while the
remaining eight were found to have sustained tears on sides
and the retape of flaps. On further examination and inventory
of the cartons, it was discovered that 176 Guess watches were
missing. Seaboard, private respondent herein, as insurer, paid
the losses to IFTI. On February 23, 1995, Seaboard, invoking its
right of subrogation, filed a complaint against Skylanders and
Transport Network, Inc. (ATN), praying for actual damages.
Petitioners impleaded Korean Airlines (KAL) as third-party
defendant. While the case was pending, IFTIs treasurer, Mary
Eileen Gozon accepted the proposal of KAL to settle consignees
claim by paying the amount of US $522.20. Later, on July 2,
1996, petitioners filed a motion to dismiss the case on the
ground that private respondent Seaboards demand had been
paid or otherwise extinguished by KAL. On February 18, 1998,
the trial court issued an order denying: (1) the motion for
reconsideration of the December 9, 1996 order filed by
petitioners, private
Page 2
respondent Skylanders and KAL; (2) the motion to dismiss filed
by Skylanders and (3) petitioners motion for reconsideration of
the November 14, 1997 order. On April 6, 1998, petitioners
filed in the Court of Appeals a special civil action for certiorari
under Rule 65 of the Rules of Court. On March 5, 1999, the CA
dismissed the petition. Hence, this petition. ISSUE: Whether or
not the private respondents (Seaboard) right of subrogation
was extinguished when IFTI received payment from KAL in
settlement of its obligation. HELD: No. The court ruled based in
the case of Manila Mahogany supra, the tortfeasor San Miguel
Corporation paid the insured without knowing that the insurer
had already made such payment. KAL was not similarly situated,
being fully aware of the prior payment made by the insurer to
the consignee. Private respondent Seaboard asserts that, being
in bad faith, KAL should bear the consequences of its actions.
While Manila Mahogany is silent on whether the existence of
good faith or bad faith on the tortfeasors part affects the
insurers right of subrogation, there exists a wealth of U.S.
jurisprudence holding that whenever the wrongdoer settles
with the insured without the consent of the insurer and with
knowledge of the insurers payment and right of subrogation,
such right is not defeated by the settlement. Because this
doctrine is actually consistent with the facts of Mahogany and
helps fill a slight gap left by our ruling in that case, we adopt it
now. The trial court correctly refused to dismiss the case.
F.F. Cruz v CA, GR L-52732 F.F. Cruz v CA, GR L-52732
This petition to review the decision of the Court of Appeals puts
in issue the application of the common law doctrine of res ipsa
loquitur.
The essential facts of the case are not disputed.
The furniture manufacturing shop of petitioner in Caloocan City
was situated adjacent to the residence of private respondents.
Sometime in August 1971, private respondent Gregorio Mable
first approached Eric Cruz, petitioner's plant manager, to
request that a firewall be constructed between the shop and
private respondents' residence. The request was repeated
several times but they fell on deaf ears. In the early morning of
September 6, 1974, fire broke out in petitioner's shop.
Petitioner's employees, who slept in the shop premises, tried to
put out the fire, but their efforts proved futile. The fire spread
to private respondents' house. Both the shop and the house
were razed to the ground. The cause of the conflagration was
never discovered. The National Bureau of Investigation found
specimens from the burned structures negative for the
presence of inflammable substances.
Subsequently, private respondents collected P35,000.00 on the
insurance on their house and the contents thereof.
On January 23, 1975, private respondents filed an action for
damages against petitioner, praying for a judgment in their
favor awarding P150,000.00 as actual damages, P50,000.00 as
moral damages, P25,000.00 as exemplary damages, P20,000.00
as attorney's fees and costs. The Court of First Instance held for
private respondents:
WHEREFORE, the Court hereby renders judgment, in favor of
plaintiffs, and against the defendant:
1. Ordering the defendant to pay to the plaintiffs the
amount of P80,000.00 for damages suffered by said plaintiffs
for the loss of their house, with interest of 6% from the date of
the filing of the Complaint on January 23, 1975, until fully paid;
2. Ordering the defendant to pay to the plaintiffs the sum
of P50,000.00 for the loss of plaintiffs' furnitures, religious
images, silverwares, chinawares, jewelries, books, kitchen
utensils, clothing and other valuables, with interest of 6% from
date of the filing of the Complaint on January 23, 1975, until
fully paid;
3. Ordering the defendant to pay to the plaintiffs the sum
of P5,000.00 as moral damages, P2,000.00 as exemplary
damages, and P5,000.00 as and by way of attorney's fees;
4. With costs against the defendant;
5. Counterclaim is ordered dismissed, for lack of merit.
[CA Decision, pp. 1-2; Rollo, pp. 29-30.]
On appeal, the Court of Appeals, in a decision promulgated on
November 19, 1979, affirmed the decision of the trial court but
reduced the award of damages:
WHEREFORE, the decision declaring the defendants liable is
affirmed. The damages to be awarded to plaintiff should be
reduced to P70,000.00 for the house and P50,000.00 for the
furniture and other fixtures with legal interest from the date of
the filing of the complaint until full payment thereof. [CA
Decision, p. 7; Rollo, p. 35.]
A motion for reconsideration was filed on December 3, 1979
but was denied in a resolution dated February 18, 1980. Hence,
petitioner filed the instant petition for review on February 22,
1980. After the comment and reply were filed, the Court
resolved to deny the petition for lack of merit on June 11, 1980.
However, petitioner filed a motion for reconsideration, which
was granted, and the petition was given due course on
September 12, 1980. After the parties filed their memoranda,
the case was submitted for decision on January 21, 1981.
Petitioner contends that the Court of Appeals erred:
1. In not deducting the sum of P35,000.00, which private
respondents recovered on the insurance on their house, from
the award of damages.
2. In awarding excessive and/or unproved damages.
3. In applying the doctrine of res ipsa loquitur to the facts
of the instant case.
The pivotal issue in this case is the applicability of the common
law doctrine of res ipsa loquitur, the issue of damages being
merely consequential. In view thereof, the errors assigned by
petitioner shall be discussed in the reverse order.
1. The doctrine of res ipsa loquitur, whose application to
the instant case petitioner objects to, may be stated as follows:
Where the thing which caused the injury complained of is
shown to be under the management of the defendant or his
servants and the accident is such as in the ordinary course of
things does not happen if those who have its management or
control use proper care, it affords reasonable evidence, in the
absence of explanation by the defendant, that the accident
arose from want of care. [Africa v. Caltex (Phil.), Inc., G.R. No. L-
12986, March 31, 1966, 16 SCRA 448.]
Thus, in Africa, supra, where fire broke out in a Caltex service
station while gasoline from a tank truck was being unloaded
into an underground storage tank through a hose and the fire
spread to and burned neighboring houses, this Court, applying
the doctrine of res ipsa loquitur, adjudged Caltex liable for the
loss.
The facts of the case likewise call for the application of the
doctrine, considering that in the normal course of operations of
a furniture manufacturing shop, combustible material such as
wood chips, sawdust, paint, varnish and fuel and lubricants for
machinery may be found thereon.
It must also be noted that negligence or want of care on the
part of petitioner or its employees was not merely presumed.
The Court of Appeals found that petitioner failed to construct a
firewall between its shop and the residence of private
respondents as required by a city ordinance; that the fire could
have been caused by a heated motor or a lit cigarette; that
gasoline and alcohol were used and stored in the shop; and that
workers sometimes smoked inside the shop [CA Decision, p. 5;
Rollo, p. 33.]
Even without applying the doctrine of res ipsa loquitur,
petitioner's failure to construct a firewall in accordance with
city ordinances would suffice to support a finding of negligence.
Even then the fire possibly would not have spread to the
neighboring houses were it not for another negligent omission
on the part of defendants, namely, their failure to provide a
concrete wall high enough to prevent the flames from leaping
over it. As it was the concrete wall was only 2-1/2 meters high,
and beyond that height it consisted merely of galvanized iron
sheets, which would predictably crumble and melt when
subjected to intense heat. Defendant's negligence, therefore,
was not only with respect to the cause of the fire but also with
respect to the spread thereof to the neighboring houses. [Africa
v. Caltex (Phil.), Inc., supra; Emphasis supplied.]
In the instant case, with more reason should petitioner be
found guilty of negligence since it had failed to construct a
firewall between its property and private respondents'
residence which sufficiently complies with the pertinent city
ordinances. The failure to comply with an ordinance providing
for safety regulations had been ruled by the Court as an act of
negligence [Teague v. Fernandez, G.R. No. L-29745, June 4,
1973, 51 SCRA 181.]
The Court of Appeals, therefore, had more than adequate basis
to find petitioner liable for the loss sustained by private
respondents.
2. Since the amount of the loss sustained by private
respondents constitutes a finding of fact, such finding by the
Court of Appeals should not be disturbed by this Court [M.D.
Transit & Taxi Co., Inc. v. Court of Appeals, G.R. No. L-23882,
February 17, 1968, 22 SCRA 559], more so when there is no
showing of arbitrariness.
In the instant case, both the CFI and the Court of Appeals were
in agreement as to the value of private respondents' furniture
and fixtures and personal effects lost in the fire (i.e.
P50,000.00). With regard to the house, the Court of Appeals
reduced the award to P70,000.00 from P80,000.00. Such
cannot be categorized as arbitrary considering that the
evidence shows that the house was built in 1951 for P40,000.00
and, according to private respondents, its reconstruction would
cost P246,000.00. Considering the appreciation in value of real
estate and the diminution of the real value of the peso, the
valuation of the house at P70,000.00 at the time it was razed
cannot be said to be excessive.
3. While this Court finds that petitioner is liable for
damages to private respondents as found by the Court of
Appeals, the fact that private respondents have been
indemnified by their insurer in the amount of P35,000.00 for
the damage caused to their house and its contents has not
escaped the attention of the Court. Hence, the Court holds that
in accordance with Article 2207 of the Civil Code the amount of
P35,000.00 should be deducted from the amount awarded as
damages. Said article provides:
Art. 2207. If the plaintiffs property has been insured,
and he has received indemnity from the insurance company for
the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company is subrogated to the
rights of the insured against the wrongdoer or the person who
violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved
party shall be entitled to recover the deficiency from the person
causing the loss or injury. (Emphasis supplied.]
The law is clear and needs no interpretation. Having been
indemnified by their insurer, private respondents are only
entitled to recover the deficiency from petitioner.
On the other hand, the insurer, if it is so minded, may seek
reimbursement of the amount it indemnified private
respondents from petitioner. This is the essence of its right to
be subrogated to the rights of the insured, as expressly
provided in Article 2207. Upon payment of the loss incurred by
the insured, the insurer is entitled to be subrogated pro tanto
to any right of action which the insured may have against the
third person whose negligence or wrongful act caused the loss
[Fireman's Fund Insurance Co. v. Jamila & Co., Inc., G.R. No. L-
27427, April 7, 1976, 70 SCRA 323.]
Under Article 2207, the real party in interest with regard to the
indemnity received by the insured is the insurer [Phil. Air Lines,
Inc. v. Heald Lumber Co., 101 Phil. 1031, (1957).] Whether or
not the insurer should exercise the rights of the insured to
which it had been subrogated lies solely within the former's
sound discretion. Since the insurer is not a party to the case, its
identity is not of record and no claim is made on its behalf, the
private respondent's insurer has to claim his right to
reimbursement of the P35,000.00 paid to the insured.
WHEREFORE, in view of the foregoing, the decision of the Court
of Appeals is hereby AFFIRMED with the following
modifications as to the damages awarded for the loss of private
respondents' house, considering their receipt of P35,000.00
from their insurer: (1) the damages awarded for the loss of the
house is reduced to P35,000.00; and (2) the right of the insurer
to subrogation and thus seek reimbursement from petitioner
for the P35,000.00 it had paid private respondents is
recognized.
White Gold v Pioneer G.R. No. 154514. July 28, 2005
Facts: White Gold procured a protection and indemnity
coverage for its vessels from The Steamship Mutual through
Pioneer Insurance and Surety Corporation. White Gold was
issued a Certificate of Entry and Acceptance. Pioneer also
issued receipts. When White Gold failed to fully pay its
accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the unpaid balance.
White Gold on the other hand, filed a complaint before the
Insurance Commission claiming that Steamship Mutual and
Pioneer violated provisions of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that
there was no need for Steamship Mutual to secure a license
because it was not engaged in the insurance business and that
it was a P & I club. Pioneer was not required to obtain another
license as insurance agent because Steamship Mutual was not
engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished
between P & I Clubs vis--vis conventional insurance. The
appellate court also held that Pioneer merely acted as a
collection agent of Steamship Mutual.
Hence this petition by White Gold.
Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance
business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for
Steamship Mutual?
Held: Yes. Petition granted.
Ratio:
White Gold insists that Steamship Mutual as a P & I Club is
engaged in the insurance business. To buttress its assertion, it
cites the definition as an association composed of shipowners
in general who band together for the specific purpose of
providing insurance cover on a mutual basis against liabilities
incidental to shipowning that the members incur in favor of
third parties.
They argued that Steamship Mutuals primary purpose is to
solicit and provide protection and indemnity coverage and for
this purpose, it has engaged the services of Pioneer to act as its
agent.
Respondents contended that although Steamship Mutual is a P
& I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who
have come together to provide mutual protection against
liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is a form of insurance against third party liability,
where the third party is anyone other than the P & I Club and
the members. By definition then, Steamship Mutual as a P & I
Club is a mutual insurance association engaged in the marine
insurance business.
The records reveal Steamship Mutual is doing business in the
country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a
resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. Steamship Mutual even renewed
its P & I Club cover until it was cancelled due to non-payment
of the calls. Thus, to continue doing business here, Steamship
Mutual or through its agent Pioneer, must secure a license from
the Insurance Commission.
Since a contract of insurance involves public interest, regulation
by the State is necessary. Thus, no insurer or insurance
company is allowed to engage in the insurance business
without a license or a certificate of authority from the Insurance
Commission.
2. Pioneer is the resident agent of Steamship Mutual as
evidenced by the certificate of registration issued by the
Insurance Commission. It has been licensed to do or transact
insurance business by virtue of the certificate of authority
issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate
license to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company,
it needs a separate license to act as insurance agent for
Steamship Mutual. Section 299 of the Insurance Code clearly
states:
SEC. 299 No person shall act as an insurance agent or as an
insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any
agent thereof, without first procuring a license so to act from
the Commissioner
Philam v Arnaldo G.R. No. 76452 July 26, 1994
Facts:
One Ramon Paterno complained about the unfair practices
committed by the company against its agents, employees and
consumers. The Commissioner called for a hearing where
Paterno was required to specify which acts were illegal. Paterno
then specified that the fees and charges stated in the Contract
of Agency between Philam and its agents be declared void.
Philam, on the other hand, averred that there Paterno must
submit a verified formal complaint and that his letter didnt
contain information Philam was seeking from him. Philam then
questioned the Insurance Commissions jurisdiction over the
matter and submitted a motion to quash. The commissioner
denied this. Hence this petition.
Issue: Whether or not the resolution of the legality of the
Contract of Agency falls within the jurisdiction of the Insurance
Commissioner.
Held: No. Petition granted.
Ratio:
According to the Insurance code, the Insurance Commissioner
was authorized to suspend, directors, officers, and agents of
insurance companies. In general, he was tasked to regulate the
insurance business, which includes:
(2) The term "doing an insurance business" or "transacting
an insurance business," within the meaning of this Code, shall
include
(a) making or proposing to make, as insurer, any insurance
contract;
(b) making, or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to any
other legitimate business or activity of the surety; (c) doing any
kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business
within the meaning of this Code; (d) doing or proposing to do
any business in substance equivalent to any of the foregoing in
a manner designed to evade the provisions of this Code.
(Insurance Code, Sec. 2[2])
The contract of agency between Philamlife and its agents
wasnt included with the Commissoners power to regulate the
business. Hence, the Insurance commissioner wasnt vested
with jurisidiction under the rule expresio unius est exclusion
alterius.
The respondent contended that the commissioner had the
quasi-judicial power to adjudicate under Section 416 of the
Code. It stated:
The Commissioner shall have the power to adjudicate claims
and complaints involving any loss, damage or liability for which
an insurer may be answerable under any kind of policy or
contract of insurance, or for which such insurer may be liable
under a contract of suretyship, or for which a reinsurer may be
used under any contract or reinsurance it may have entered
into, or for which a mutual benefit association may be held
liable under the membership certificates it has issued to its
members, where the amount of any such loss, damage or
liability, excluding interest, costs and attorney's fees, being
claimed or sued upon any kind of insurance, bond, reinsurance
contract, or membership certificate does not exceed in any
single claim one hundred thousand pesos.
This was, however, regarding complaints filed by the insured
against the Insurance company.
Also, the insurance code only discusses the licensing
requirements for agents and brokers. The Insurance Code does
not have provisions governing the relations between insurance
companies and their agents.
Investment Planning Corporation of the Philippines v. Social
Security Commission- that an insurance company may have
two classes of agents who sell its insurance policies: (1) salaried
employees who keep definite hours and work under the control
and supervision of the company; and (2) registered
representatives, who work on commission basis.
The agents under the 2nd sentence are governed by the Civil
Code laws on agency. This means that the regular courts have
jurisdiction over this category.
PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF
INTERNAL REVENUE
FACTS: Petitioner is a domestic corporation whose primary
purpose is to establish, maintain, conduct and operate a
prepaid group practice health care delivery system or a health
maintenance organization to take care of the sick and disabled
persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the
organization. On January 27, 2000, respondent CIR sent
petitioner a formal deman letter and the corresponding
assessment notices demanding the payment of deficiency
taxes, including surcharges and interest, for the taxable years
1996 and 1997 in the total amount of P224,702,641.18. The
deficiency assessment was imposed on petitioners health care
agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code. Petitioner
protested the assessment in a letter dated February 23, 2000.
As respondent did not act on the protest, petitioner filed a
petition for review in the Court of Tax Appeals (CTA) seeking the
cancellation of the deficiency VAT and DST assessments. On
April 5, 2002, the CTA rendered a decision, ordering the
petitioner to PAY the deficiency VAT amounting to
P22,054,831.75 inclusive of 25% surcharge plus 20% interest
from January 20, 1997 until fully paid for the 1996 VAT
deficiency and P31,094,163.87 inclusive of 25% surcharge plus
20% interest from January 20, 1998 until fully paid for the 1997
VAT deficiency. Accordingly, VAT Ruling No. [231]-88 is declared
void and without force and effect. The 1996 and 1997
deficiency DST assessment against petitioner is hereby
CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST
from collecting the said DST deficiency tax. Respondent
appealed the CTA decision to the (CA) insofar as it cancelled the
DST assessment. He claimed that petitioners health care
agreement was a contract of insurance subject to DST under
Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held
that petitioners health care agreement was in the nature of a
non-life insurance contract subject to DST. Respondent is
ordered to pay the deficiency Documentary Stamp Tax.
Petitioner moved for reconsideration but the CA denied it.
ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc.
engaged in insurance business.
(2) Whether or not the agreements between petitioner and its
members possess all elements necessary in the insurance
contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the
insurance business. The SC said in June 12, 2008 decision that
it is irrelevant that petitioner is an HMO and not an insurer
because its agreements are treated as insurance contracts and
the DST is not a tax on the business but an excise on the
privilege, opportunity or facility used in the transaction of the
business. Petitioner, however, submits that it is of critical
importance to characterize the business it is engaged in, that is,
to determine whether it is an HMO or an insurance company,
as this distinction is indispensable in turn to the issue of
whether or not it is liable for DST on its health care agreements.
Petitioner is admittedly an HMO. Under RA 7878 an HMO is an
entity that provides, offers or arranges for coverage of
designated health services needed by plan members for a fixed
prepaid premium. The payments do not vary with the extent,
frequency or type of services provided. Section 2 (2) of PD 1460
enumerates what constitutes doing an insurance business or
transacting an insurance businesswhich are making or
proposing to make, as insurer, any insurance contract; making
or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate
business or activity of the surety; doing any kind of business,
including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the
meaning of this Code; doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits
to its members (with respect to its curative medical services),
but these are incidental to the principal activity of providing
them medical care. The insurance-like aspect of petitioners after the first payment, no further premiums were made.
business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services
rather than insurance services, it cannot be considered as being
in the insurance business.
FILIPINAS DE COMPANIA DE SEGUROS vs. CHRISTERN,
HUENFELD & CO
FACTS: Christern, Huenefeld and Company, a German
company, obtained a fire insurance policy from Filipinas
Compaia for the merchandise contained in a building located
in Binondo, Manila in the sum of P100,000. Filipinas Compaia
is an American controlled company. The building and the
insured merchandise were burned during the Japanese
occupation. Christern filed its claim amounting to P92,650.00
but Filipinas Compaia refused to pay alleging that Christern is
a corporation whose majority stockholders are Germans and
that during the Japanese occupation, America declared war
against Germany hence the insurance policy ceased to be
effective because the insured has become an enemy. Filipinas
Compaia was eventually ordered to pay Christern as ordered
by the Japanese government.
ISSUE:
Whether or not Christern, Huenefeld and Co is entitled to
receive the proceeds from the insurance claim.
HELD:
NO. There is no question that majority of the stockholders of
Christern were German subjects. This being so, Christern
became an enemy corporation upon the outbreak of the war
between the United States and Germany. The Philippine
Insurance Law (Act No. 2427, as amended,) in Section 8,
provides that anyone except a public enemy may be insured.
It stands to reason that an insurance policy ceases to be
allowable as soon as an insured becomes a public enemy.
The respondent having become an enemy corporation on
December 10, 1941, the insurance policy issued in its favor on
October 1, 1941, by the petitioner had ceased to be valid and
enforceable, and since the insured goods were burned after
December 10, 1941, and during the war, the respondent was
not entitled to any indemnity under said policy from the
petitioner. However, elementary rules of justice (in the absence
of specific provision in the Insurance Law) require that the
premium paid by the respondent for the period covered by its
policy from December 11, 1941, should be returned by the
petitioner
Constantino vs. Asia Life Insurance Co. [GR# L-1669 August 31,
1950] Peralta vs. Asia Life Insurance Co. [GR# L-1670 August 31,
1950]
Facts: FIRST CASE: Respondent Corporation was paid P 176.04
as annual premium by Arcadio Constantino in exchange for
policy no. 93212 on 1941 for P 3,000 which lasted for 20 years.
Petitioner Paz Constantino was made beneficiary. However
Thereafter the insured died on 1944. Later, due to the war
(Japanese occupation) Respondent Corporation had to close
down its branch in the country.
SECOND CASE: Similarly, Respondent Corporation issued on
1938 another insurance policy no. 78145 for Spouses Ruiz and
Peralta also for P 3,000, lasting for 20 years. Regular payments
were made however due also to the war, it became impossible
to transact further payments. The insured nevertheless was
able to borrow P 234 from the policy. Ruiz died on 1945. Peralta
was the beneficiary.
In both cases the plaintiffs demanded payment but was refused
due to Respondent Corporations refusal on the ground of non-
payment of the premiums. The lower court favored
Respondent.
Issues:
(1) Whether or not the beneficiaries are entitled to recover the
amount insured despite non-payment caused by the Japanese
occupation.
(2) Whether or not the periodic payments of the premiums,
those after the first, is not an obligation of the insured so that
it is not a debt enforceable by the action of the insurer.
Held:
(1) The beneficiaries are not entitled to recover for non-
payment despite the presence of war.
Contracts of insurance are contracts of indemnity within the
terms and condition found therein. An insurance company for
certain considerations guarantee the insured against loss or
damage as may be stipulated, and when called to pay, the
insurer may insist on the fulfillment of said stipulations. Failure
of the insured to do so disqualifies recovery for the loss. Thus
the terms of the policy determines the insurers liability.
Compliance to the terms of the policy is a must as it is a
condition precedent to the right of recovery. Therefore, from
the terms of the policy it is clear that non-payment of premium
produces avoidance (forfeiture of the policy).
Moreover, since act 2427, Philippine law on insurance and the
Civil Code) are mostly based from the Civil Code of California,
An intention to supplement our laws with the prevailing
principles of the US arises. Thus, Prof. Vance of Yaled declares
that the United States Rule must be followed, where the
contract is not merely suspended but is abrogated by reason of
non-payment of premiums since the time of payments is
peculiar to the essence of the contract. Further it would be
unjust to permit the insurer to retain the reserve value of the
policy or the excess of premiums paid over the actual risk when
the policy was still effective as held in the Statham Case which
was more logical and juridically sound. In said case it was hold
that promptness of payment is essential in the business of life
insurance since all calculations of the company is based on the
hypothesis of prompt payments. Forfeiture for non-payment is
necessary to protect said business from embarrassment
otherwise confusion would abound. And that delinquency
cannot be tolerated nor redeemed except at the option of the
company. Lastly parties contracted both for peace and war
times since the policies contained also wartime days. It follows
that the parties contemplated uninterrupted operation of the
contract even if armed conflict ensues.
(2) The annual premium is not a debt, nor is it an obligation
which the insurer can maintain an action against the insured;
nor its settlement governed by the rules on payment of debts.
A contract of insurance is sui generis. This means though the
insured may hold the insurer to the contract by the fulfillment
of the condition, the latter has no power or right to compel the
insured to maintain the contract relation longer than the
insured may desire. It is optional upon the insured.
FIDELA SALES DE GONZAGA, plaintiff-appellant, vs. THE CROWN
LIFE INSURANCE COMPANY, defendant-appellee.
FACTS: September 26, 1939: Crown Life Insurance Co. whose
home office is based in Toronto, Canada issued to Ramon
Gonzaga through its branch office in Manila a 20-year
endowment policy for P15,000 which had an annual premium
of P591. Payment was only until September 6, 1941 because of
the outbreak of the war since Crown is an enemy corp. order to
be closed during the Japanese occupation. However, despite
that it offered a privilege to accept premium payments in the
place of its employee in Ermita but of which Gonzaga did not
avail.
Through the automatic premium loan clause, it continued until
June 12, 1943. May 1, 1945: It reopened but still Gonzaga did
not pay although there was a reinstatement clause providing
certain conditions within three years from the date of lapse on
application of the insured
June 27, 1945: Gonzaga died from an accident. Crown refused
to pay because of the lapse of premium payment
RTC: against Gonzaga
ISSUE: W/N Gonzaga's widow can claim despite the absence of
premium payment during the outbreak of the war
HELD: NO. Affirmed
Non-payment at the day involves absolute forfeiture is
such be the terms of the contract
failure to notify the postal address during the war is
not an excuse
There is no duty when the law forbids and there is
no obligation without corresponding right enjoyed by
another
opening of an interim office partook of the nature of
the privilege to the policy holders to keep their policies
operative rather than a duty to them under the
contract
HELD [alternative]
No. Non-payment of premiums by reason of war puts an end
to the contract of insurance. Time is
material and of the essence of the contract. Non-payment at
the day involves absoute forfeiture if
such be the terms of the contract. Courts cannot with safety
vary the stipulation of the parties by
introducing equities for the relief of the insured against their
own negligence.
Where the offices of the insurer, being an enemy
corporation, were ordered closed by the Japanese, but
were opened clandestinely for the purposes of collecting the
premiums from policy holders, the failure of insurer to advise
the insured of the new address did not work as a forfeiture of
its right to have the premiums satisfied promptly.
PALILEO v. COSIO
FACTS:
On Dec. 18, 1951, Palileo obtained from Cosio a loan in
the sum of 12,000. Pursuant to their agreement,
Palileo paid to Cosio as interest on the loan a total of
P2,250 corresponding to 9 mos from Dec 18, 1951, on
the basis of P250 a month, which is more than the
maximum interest allowed by law. To secure the
payment of the aforesaid loan, defendant required
plaintiff to sign a a document known as Conditional
Sale of Residential Bldg purporting to convey to
defendant, with right to repurchase, a two-story
building of strong materials belonging to plaintiff. This
document did not express the true intention of the
parties, which was merely to place said property as
security for the payment of the loan. After the
execution of the document, defendant insured the
building against fire with the Associated Insurance &
Surety Co., Inc. for the sum of P15000, the insurance
policy having been issued in the name of defendant.
The building was partly destroyed by fire and, after
proper demand, defendant collected from the
insurance company an indemnity of P13,107. Plaintiff
demanded from defendant that she be credited with the
necessary amount to pay her obligation out of the
insurance proceeds but defendant refused to do so.
Upon these facts, the trial court held that the
defendant should credit the sum of P13,107 received
by him from the Associated Insurance & Surety Co.,
Inc. to the payment of plaintiffs obligation in the sum
of P12000, thus considering the agreement fully paid
and leaving a balance of P1107 from the insurance
collected by the defendant; and since plaintiff had paid
to defendant P2250 for 9 mos for interest which
exceeds the 12 percent per annum legal interest
(P1440 for one year), plaintiff overpaid P810,
defendant should refund plaintiff the total of P1107
plus P810 and to pay the costs.
ISSUE:
WON the trial court is justified in considering the
obligation of plaintiff fully compensated by the
insurance amount and in ordering defendant to refund
to plaintiff the sum of P1107 representing the
difference of the loan of 12K from the sum of P13107
collected by defendant from insurance notwithstanding
the fact that it was proven that the insurance was
taken for the benefit of the mortgagor?
HELD:
SC modified the judgment of the lower court as
follows: (1) the transaction had between the plaintiff
and defendant was merely an equitable mortgage
intended to secure the payment of the loan of 12K; (2)
that the proceeds of the insurance amounting to P13,
107 was properly collected by defendant who is not
required to account for it to the plaintiff; (3) that the
collection of said insurance proceeds shall not be
deemed to have compensated the obligation of the
plaintiff to the defendant, but bars the latter from
claiming its payment from the former; and (4)
defendant shall pay to the plaintiff the sum of P810
representing the overpayment made by plaintiff by
way of interest on the loan.
The rule is that where a mortgagee, independently of
the mortgagor, insures the mortgaged property in his
own name and for his own interest, he is entitled to
the insurance proceeds in case of loss, but in such
case, he is not allowed to retain his claim against the
mortgagor, but is passed by subrogation to the insurer
to the extent of the money paid. Or, stated in another
way, the mortgagee may insure his interest in the
property independently of the mortgagor. In that
event, upon the destruction of the property the
insurance money paid to the mortgagee will not inure
to the benefit of the mortgagor, and the amount due
under the mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain his claim
against the mortgagor, but it passes by subrogation to
the insurer, to the extent of the insurance money
paid.
The general rule and the weight of authority is, that
the insurer is thereupon subrogated to the rights of the
mortgagee under the mortgage. This is put upon the
analogy of the situation of the insurer to that of a
surety.
The correct solution, contrary to the trial courts ruling,
should be that the proceeds of the insurance should be
delivered to the defendant but that her claim against
the plaintiff should be considered assigned to the
insurance company who is deemed subrogated to the
rights of the defendant to the extent of the money paid
as indemnity.
SAN MIGUEL BREWERY vs. LAW UNION AND ROCK INSURANCE
CO., G.R. No. L-14300, January 19, 1920
FACTS:
San Miguel sought to recover from two insurance policies. It is
maintained however that San Miguels only interest in the
property insured is that it is a mortgage creditor. The property
was really owned by Harding who was included as a defendant.
The insurance companies don't deny liability but they maintain
that San Miguel is only entitled to the amount of the mortgage
credit. They also maintain that Harding is not entitled to any
proceeds in excess of the mortgage credit because he was not
party to the insurance contract.
HELD:
There is no cause of action in Henry Harding against the
insurance companies. He is not a party to the contracts of
insurance and cannot directly maintain an action thereon. His
claim is merely of an equitable and subsidiary nature and must
be made effective, if at all, through the San Miguel Brewery in
whose name the contracts are written. Now the Brewery, as
mortgagee of the insured property, undoubtedly had an
insurable interest therein; but it could not, in any event, recover
upon these policies an amount in excess of its mortgage credit.
In this connection it will be remembered that Antonio Brias,
upon making application for the insurance, informed the
company with which the insurance was placed that the Brewery
was interested only as a mortgagee. It would, therefore, be
impossible for the Brewery mortgage on the insured property.
This conclusion is not only deducible from the principles
governing the operation effect of insurance contracts in
general but the point is clearly covered by the express
provisions of sections 16 and 50 of the Insurance Act (Act No.
2427). In the first of the sections cited, it is declared that "the
measure of an insurable interest in property is the extent to
which the insured might be damnified by loss or injury thereof"
(sec. 16); while in the other it is stated that "the insurance shall
be applied exclusively to the proper interest of the person in
whose name it is made unless otherwise specified in the policy"
(sec. 50).
These provisions would have been fatal to any attempt at
recovery even by D. P. Dunn, if the ownership of the property
had continued in him up to the time of the loss; and as regards
Harding, an additional insuperable obstacle is found in the fact
that the ownership of the property had been charged, prior to
the loss, without any corresponding change having been
effected in the policy of insurance. In section 19 of the
Insurance Act we find it stated that "a change of interest in any
part of a thing insured unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to
an equivalent extent, until the interest in the thing and the
interest in the insurance are vested in the same person." Again
in section 55 it is declared that "the mere transfer of a thing
insured does not transfer the policy, but suspends it until the
same person becomes the owner of both the policy and the
thing insured."
Undoubtedly these policies of insurance might have been so
framed as to have been "payable to the Sane Miguel Brewery,
mortgagee, as its interest may appear, remainder to
whomsoever, during the continuance of the risk, may become
the owner of the interest insured." (Sec 54, Act No. 2427.) Such
a clause would have proved an intention to insure the entire
interest in the property, not merely the insurable interest of the
San Miguel Brewery, and would have shown exactly to whom
the money, in case of loss, should be paid. But the policies are
not so written.
Geagonia v CA G.R. No. 114427 February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country Bankers fire
insurance policy for P100,000.00. The 1 year policy and covered
thestock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any
insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or
properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless notice be given and
the particulars of such insurance or insurances be stated
therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided however, that this
condition shall not apply when the total insurance or insurances
in force at the time of the loss or damage is not more than
P200,000.00."
The petitioners stocks were destroyed by fire. He then filed a
claim which was subsequently denied because the petitioners
stocks were covered by two other fire insurance policies for Php
200,000 issued by PFIC. The basis of the private respondent's
denial was the petitioner's alleged violation of Condition 3 of
the policy.
Geagonia then filed a complaint against the private respondent
in the Insurance Commission for the recovery of P100,000.00
under fire insurance policy and damages. He claimed that he
knew the existence of the other two policies. But, he said that
he had no knowledge of the provision in the private
respondent's policy requiring him to inform it of the prior
policies and this requirement was not mentioned to him by the
private respondent's agent.
The Insurance Commission found that the petitioner did not
violate Condition 3 as he had no knowledge of the existence of
the two fire insurance policies obtained from the PFIC; that it
was Cebu Tesing Textiles w/c procured the PFIC policies w/o
informing him or securing his consent; and that Cebu Tesing
Textile, as his creditor, had insurable interest on the stocks.
The Insurance Commission then ordered the respondent
company to pay complainant the sum of P100,000.00 with
interest and attorneys fees.
CA reversed the decision of the Insurance Commission because
it found that the petitioner knew of the existence of the two
other policies issued by the PFIC.
Issues:
1. WON the petitioner had not disclosed the two insurance
policies when he obtained the fire insurance and thereby
violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the
prior policies issued by the PFIC. His letter of 18 January 1991
to the private respondent conclusively proves this knowledge.
His testimony to the contrary before the Insurance
Commissioner and which the latter relied upon cannot prevail
over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies
since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in
policies which tend to work a forfeiture of insurance policies
should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those
against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy
is not totally free from ambiguity and must be meticulously
analyzed. Such analysis leads us to conclude that (a) the
prohibition applies only to double insurance, and (b) the nullity
of the policy shall only be to the extent exceeding P200,000.00
of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such
condition shall not apply if the total insurance in force at the
time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer's liability up
to a loss not exceeding P200,000.00. What it had in mind was
to discourage over-insurance. Indeed, the rationale behind the
incorporation of "other insurance" clause in fire policies is to
prevent over-insurance and thus avert the perpetration of
fraud. When a property owner obtains insurance policies from
two or more insurers in a total amount that exceeds the
property's value, the insured may have an inducement to
destroy the property for the purpose of collecting the
insurance. The public as well as the insurer is interested in
preventing a situation in which a fire would be profitable to the
insured.
Saura Import Export Co. v. Philippine International Surety -
Cancellation of Policy
Facts:
> On Dec. 26, 1952, Saura mortgaged to PNB its registered
parcel of land in Davao to secure the payment of a promissory
note of P27T.
> A building of strong materials which was also owned by Saura,
was erected on the parcel of land and the building had always
been covered by insurance even before the execution of the
mortgage contract.
> Pursuant to the mortgage agreement which required Saura
to insure the building and its contents, it obtained a fire
insurance for P29T from PISC for a period of 1 year starting Oct.
2, 1954.
> The mortgage also required Saura to endorse the insurance
policy to PNB. The memo stated: Loss if any, payable to PNG as
their interest may appear, subject to the terms, conditions and
warranties of this policy.
> The policy was delivered to PNB by Saura.
> On Oct. 15, 1954, barely 13 days after the issuance of the fire
insurance, PISC canceled the same, effective as of the date of
issue. Notice of the cancellation was sent to PNB in writing and
was received by the bank on Nov. 8, 1954.
> On Apr. 6, 1955, the building and its contents worth P4,685
were burned. On April 11, 1985, Saura filed a claim with PISC
and mortgagee bank.
> Upon presentation of notice of loss with PNB, Saura learned
for the first time that the policy had been previously canceled
by PISC, when Sauras folder in the banks file was opened and
the notice of the cancellation by PISC was found.
Issue: Whether or not there was proper cancellation of the
policy?
Held: NO. The policy in question does NOT provide for the
notice of cancellation, its form or period. The Insurance Law
does not likewise provide for such notice. This being the case,
it devolves upon the Court to apply the generally accepted
principles of insurance, regarding cancellation of the insurance
policy by the insurer.
Actual notice of cancellation in a clear and unequivocal manner,
preferably in writing should be given by the insurer to the
insured so that the latter might be given an opportunity to
obtain other insurance for his own protection. The notice
should be personal to the insurer and not to and/or through
any unauthorized person by the policy. Both the PSIC and the
PNB failed, wittingly or unwittingly to notify Saura of the
cancellation made.
The insurer contends that it gave notice to PNB as mortgagee
of the property and that was already substantial compliance
with its duty to notify the insured of the cancellation of the
policy. But notice to the bank, as far as Saura herein is
concerned, is not effective notice. PISC is then ordered to pay
Saura P29T, the amount involved in the policy subject matter of
this case.
Saura Import Export Co. v. Philippine International Surety
[alternative]:
FACTS: Saura Import & Export Co Inc., mortgaged to the Phil.
National Bank, a parcel of land. The mortgage was amended to
guarantee an increased amount, bringing the total mortgaged
debt to P37,000 On the land mortgage is a building owned by
Saura Import & Export Co Inc. which was insured with Philippine
International Surety (Insurer) even before the mortgage
contract so it was required to endorse to mortgagee PNB
October 15, 1954: Barely 13 days after the issuance of the fire
insurance policy, the insurer cancelled it. Notice of the
cancellation was given to PNB (mortgagee). But Saura (insured)
was not informed. April 6, 1955: The building and all its
contents worth P40,685.69 were burned so Saura filed a claim
with the Insurer and mortgagee Bank
RTC: dismissed
ISSUE: W/N Philippine International Surety should be held liable
for the claim because notice to only the mortgagee is not
substantial
HELD:YES. Appealed from is hereby reversed. Philippine
International Surety Co., Inc., to pay Saura Import & Export Co.,
Inc., P29,000 It was the primary duty of Philippine International
Surety to notify the insured, but it did not If a mortgage or lien
exists against the property insured, and the policy contains a
clause stating that loss, if any, shall be payable to such
mortgagee or the holder of such lien as interest may appear,
notice of cancellation to the mortgagee or lienholder alone is
ineffective as a cancellation of the policy to the owner of the
property.
liability attached principally the insurance company, for its
failure to give notice of the cancellation of the policy to Saura
PHILIPPINE NATIONAL BANK vs. THE HONORABLE COURT OF
APPEALS, PRAGMACIO VITUG AND MAXIMO VITUGG.R. No. L-
57757 August 31, 1987
Nature of the action: Petition to review on certiorari of the
decision of the Court of Appeals in CA-G.R. No. 60903 which is
an action for reconveyance and damages.
Doctrine: The presumption (of conjugality of properties) applies
to property acquired during the lifetime of the husband and
wife. In this case, it appears on the face of the title that the
properties were acquired by Donata Montemayor when she
was already a widow. When the property is registered in the
name of a spouse only and there is no showing as to when the
property was acquired by said spouse, this is an indication that
the property belongs exclusively to said spouse. And this
presumption under Article 160 of the Civil Code cannot prevail
when the title is in the name of only one spouse and the rights
of innocent third parties are involved.
Facts:
1.Donata Montemayor, through her son, Salvador M. Vitug,
mortgaged to the PNB several parcels of land toguarantee the
loan granted by the PNB to Salvador Jaramilla and Pedro Bacani
in the amount of P40,900.00 whichwas duly registered in the
Office of the Register of Deeds of Pampanga.
2.Donata also mortgaged in favor of PNB certain properties
covered by TCT Nos. 2887 and 2888-Pampanga toguarantee
the payment of the loan account of her son Salvador Vitug in
the amount of P35,200.00, which mortgagewas duly registered
in the Register of Deeds of Pampanga.
3.The above-mentioned TCTs covering said properties were all
in the name of Donata, of legal age, Filipino, widowand a
resident of Lubao, Pampanga at the time they were mortgaged
to PNBand were free from all hens andencumbrances.
4.Salvador Vitug failed to pay his account so the bank
foreclosed the mortgaged properties covered by TCT Nos.2887
and 2888. They were sold at public auction on May 20, 1968 in
which the PNB was the highest bidder. Thetitles thereto were
thereafter consolidated in the name of PNB.
5.Likewise, Salvador Jaramilla and Pedro Bacani failed to settle
their accounts with the PNB so the latter foreclosedthe
properties covered by TCT No. 2889 which were sold at public
auction and likewise PNB was the buyer thereof.On August 30,
1968, a certificate of sale was issued by the Register of Deeds
covering said properties in favor ofthe PNB. When the title of
the PNB was consolidated a new title was issued in its name.
6.PNB sold the properties covered by TCT Nos. 2887 and 2888
Pampanga to Jesus M. Vitug, Anunciacion V. deGuzman,
Prudencia V. Fajardo, Salvador Vitug and Aurora V. Gutierrez in
those names the corresponding titleswere issued.
7.During the lifetime of Clodualdo Vitug he married two times.
His first wife was Gervacia Flores with whom he had 3children,
namely, Victor, Lucina and Julio all surnamed Vitug. Victor now
dead is survived by his 5 children:Leonardo, Juan, Candida
Francisco and Donaciano, an surnamed Vitug. Juan Vitug is also
dead and is survived byhis only daughter Florencia Vitug.
8.The second wife of Clodualdo Vitug was Donata Montemayor
with whom he had 8 children, namely, Pragmacio,Maximo,
Jesus, Salvador, Prudencio and Anunciacion, all surnamed
Vitug, the late Enrique Vitug represented by hiswife Natalia
Laquian, and the late Francisco Vitug who is survived by 11
children, namely, Antonio, Francisco,Aurora, Pedro, Honorio,
Corazon, Anselmo, Benigno, Eligio Jesus and Luz.
9.Clodualdo Vitug died intestate on May 20, 1929 so his estate
was settled and distributed in Special Proceeding No.422 in the
Court of First Instance of Pampanga wherein Donata
Montemayor was the Administratrix.
10.Meanwhile, on May 12,1958, Donata executed a contract of
lease of Lot No. 24, which is covered by TCT No. 2887-R in favor
of her children Pragmacio and Maximo both surnamed Vitug.
This lease was extended on August 31,1963. By virtue of a
general power of attorney executed by Donata Montemayor on
Sept. 19, 1966 in favor ofPragmacio Vitug, the latter executed
a contract of lease on Sept. 19, 1967 of the said lot in favor of
Maximo Vitug.
11.Pragmacio Vitug and Maximo Vitug filed an action for
partition and reconveyance with damages in the Court of
FirstInstance of Pampanga against Marcelo Mendiola, special
administrator of the intestate estate of DonataMontemayor
who died earlier, Jesus Vitug, Sr., Salvador, Natalia, Prudencia,
Anunciacion, all surnamed Vitug,Antonio, Francisco, Aurora,
Pedro, Honorio, Corazon, Anselmo, Benigno, Eligio Jesus and
Luz, all surnamedFajardo and the PNB.
12.The subject of the action is 30 parcels of land which they
claim to be the conjugal property of the spouses
DonataMontemayor and Clodualdo Vitug of which they claim a
share of 2/11 of 1/2 thereof. They assailed the mortgage tothe
PNB and the public auction of the properties as null and void.
They invoked the case of Vitug vs. Montemayor,L-5297 decided
by this Court on Oct. 20, 1953 which is an action for partition
and liquidation of the said 30 parcelsof land wherein the
properties were found to be conjugal in nature.
13.The lower court dismissed the complaint with costs against
the plaintiffs and ordered them to pay attorney'sfees of
P5,000.00 to the defendant's counsel.
14.Plaintiffs then interposed an appeal to the Court of Appeals,
wherein in due course a decision was rendered on May20,
1981, the dispositive part of which reads as follows:
WHEREFORE, in the light of the foregoing, the
decisionappealed from is hereby reversed and set aside, and
another one entered in accordance with the tenor of the
prayerof appellant's complaint with the modification that the
sale at public auction of the 22 parcels be considered validwith
respect to the 1/2 thereof. No costs.
15.Hence the herein petition for certiorari filed by the
PNB.Issue: Does the presumption of conjugality of properties
acquired by the spouses during coverture provided for inArticle
160 of the Civil Code apply to property covered by a Torrens
certificate of title in the name of the widow?
Held: No!The petition is impressed with merit.
1.When the subject properties were mortgaged to the PNB
they were registered in the name of Donata
Montemayor,widow. Relying on the torrens certificate of title
covering said properties the mortgage loan applications of
Donatawere granted by the PNB and the mortgages were duly
constituted and registered in the office of the Register ofDeeds.
2.In processing the loan applications of Donata Montemayor,
the PNB had the right to rely on what appears in thecertificates
of title and no more. On its face the properties are owned by
Donata Montemayor, a widow. The PNBhad no reason to doubt
nor question the status of said registered owner and her
ownership thereof. Indeed, thereare no liens and
encumbrances covering the same.
8.Moreover, as correctly held by the lower court. Pragmacio
and Maximo Vitug as occupants and lessees of theproperty in
question cannot now dispute the ownership of their mother
over the same who was their lessor.
WHEREFORE, the subject decision of the respondent Court of
Appeals is hereby REVERSED and set aside andanother decision
is hereby rendered DISMISSING the complaint and ordering
private respondents to pay attomey'sfees and expenses of
litigation to petitioner PNB in the amount of P20,000.00 and the
costs of the suit. SO ORDERED.

3.The well-known rule in this jurisdiction is that a person

dealing with a registered land has a right to rely upon theface
of the torrens certificate of title and to dispense with the need
of inquiring further, except when the partyconcerned has
actual knowledge of facts and circumstances that would impel
a reasonably cautious man makesuch inquiry.

4.A torrens title concludes all controversy over ownership of

the land covered by a final degree of registration. Oncethe title
is registered the owner may rest assured without the necessity
of stepping into the portals of the court orsitting in the mirador
de su casa to avoid the possibility of losing his land.

5.Article 160 of the Civil Code provides as follows: Art. 160. All
property of the marriage is presumed to belong tothe conjugal
partnership, unless it be proved that it pertains exclusively to
the husband or to the wife.

6.The presumption applies to property acquired during the

lifetime of the husband and wife. In this case, itappears on the
face of the title that the properties were acquired by Donata
Montemayor when she wasalready a widow. When the
property is registered in the name of a spouse only and there is
no showing asto when the property was acquired by said
spouse, this is an indication that the property
belongsexclusively to said spouse. And this presumption under
Article 160 of the Civil Code cannot prevail whenthe title is in
the name of only one spouse and the rights of innocent third
parties are involved.

7.Pragmacio and Maximo Vitug are now estopped from

questioning the title of Donata Montemayor to the
saidproperties. They never raised the conjugal nature of the
property nor took issue as to the ownership of their
mother,Donata Montemayor, over the same. They were in
possession of the property for a long time and they knew that
thesame were mortgaged by their mother to the PNB and
thereafter were sold at public auction, but they did not
doanything. It is only after 17 years that they remembered to
assert their rights. Certainly, they are guilty of laches.