Misamis Lumber v.

Capital Insurance
GR L-21380
May 20, 1966
Topic: Stipulations limiting insurers liability is valid.
Facts: Plaintiff-appellee Misamis Lumber Corporation (formerly Lanao Timber Mills, Inc.) insured its Ford
Falcon motor car for P14,000 with the defendant-appellant Capital Insurance & Surety Company, Inc. The
provisions of the policy included that the insured may authorize the repair of the motor vehicle
necessitated by damage for which the insurer company may be liable provided that (a) the estimated cost
of such repair does not exceed the authorized repair limit, and (b) a detailed estimate of the cost is
forwarded to the company without delay. It was provided that the authorized repair limit is P150.
Sometime in November 1961, at around eleven oclock in the evening, the insured car, while traveling
along Aurora Boulevard, passed over a water hole which the driver did not see because an incoming car
did not dim its light. The crankcase and the flywheel housing of the car broke when it hit a hollow block
lying alongside the water hole. At the instance of the plaintiff, the car was towed and repaired by Morosi
Motors for a cost of P302.27.
Few days after, when the repairs of the car had already been made, the plaintiff Misamis Lumber made a
report of the accident to the defendant Capital Insurance. The latter refused to pay the whole amount,
claiming it should only pay P150. Misamis Lumber then filed a suit in the municipal court.
CFI Manila: ruled in favor of Misamis Lumber
The defendant company then filed a direct appeal to the SC.
Issue: W/N the defendant company shall pay in excess of the authorized repair limit of P150 for the
damage incurred by the insureds vehicle
Held/Ratio: No, the insurer defendant company shall not pay in excess of the authorized limit pursuant
to the insurance contract adhered to by the parties. The insurance policy stipulated that, if the insured
authorizes the repair of the damaged motor vehicle, the liability of the insurer is limited to P150. The
literal meaning of this stipulation must control, it being the actual contract, expressly and plainly provided
for in the policy. The insurance contract may be rather onerous (one-sided as the lower court put it),
but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or
adhered to and which is the law between the contracting parties.
Ruling: The lower courts decision is modified by ordering the defendant company to pay not more than
P150.