G.R. No.

L-15862

July 31, 1961

PAULO ANG and SALLY C. ANG, plaintiffs-appellees, vs. FUL ON F!R" !NSURANC" CO., " AL., defendants. FUL ON F!R" !NSURANC" CO., defendant-appellant. Santiago Ranada for plaintiffs-appellees. Benjamin S. Valte for defendant-appellant. LA#RA$OR, J.% The present action was instituted by the spouses Paulo Ang and Sally C. Ang against the Fulton Fire Insurance Co pany and the Para ount Surety and Insurance Co pany, Inc. to recover fro the the face value of a fire insurance policy issued in plaintiffs! favor covering a store owned and operated by the in "aoag, Ilocos #orte. Fro a $udg ent of the court ordering the defendant Fulton Fire Insurance Co. to pay the plaintiffs the su of P%&,&&&.&&, with interest, and an additional su of P',&&&.&& as attorney!s fees, and costs, the defendants have appealed directly to this Court. (n Septe ber ), %)*+, defendant Fulton Fire Insurance Co pany issued a policy #o. F-,-+&+,&, in favor of P. . S /epart ent Store 0Sally C. Ang1 over stoc2s of general erchandise, consisting principally of dry goods, contained in a building occupied by the plaintiffs at "aoag, Ilocos #orte. The pre iu is P*&&.&& annually. The insurance was issued for one year, but the sa e was renewed for another year on Septe ber +%, %)*,. (n /ece ber %-, %)*,, the store containing the goods insured was destroyed by fire. (n /ece ber +&, following, plaintiffs e3ecuted the first clai for . The clai together with all the necessary papers relating thereto, were forwarded to he 4anila Ad$ust ent Co pany, the defendants! ad$usters and received by the latter on 5ane 6, %)**. (n 5anuary %', %)**, the 4anila Ad$ust ent Co pany accepted receipt of the clai and re7uested the sub ission of the boo2s of accounts of the insured for the year %)*+-%)*, and a clearance fro the Philippine Constabulary and the police. (n April 8, %)*8, the Fulton Fire Insurance Co pany wrote the plaintiffs that their clai was denied. This denial of the clai was received by the plaintiffs on April %), %)*8. (n 5anuary %+, %)**, plaintiff Paulo Ang and ten others were charged for arson in Cri inal Case #o. %,') in the 5ustice of the Peace Court of "aoag,

Ilocos #orte. The case was re anded for trial to the Court of First Instance of Ilocos #orte and there doc2eted as Cri inal Case #o. '&%-. The said court in a decision dated /ece ber ), %)*-, ac7uitted plaintiff Paulo Ang of the cri e of arson. The present action was instituted on 4ay *, %)*6. The action was originally instituted against both the Fulton Fire Insurance Co pany and the Para ount Surety and Insurance Co pany, Inc., but on 5une %8, %)*6, upon otion of the Para ount Surety, the latter was dropped fro the co plaint. (n 4ay '8, %)*6, the defendant Fulton Fire Insurance Co pany filed an answer to the co plaint, ad itting the e3istence of the contract of insurance, its renewal and the loss by fire of the depart ent store and the erchandise contained therein, but denying that the loss by the fire was accidental, alleging that it was occasioned by the willful act of the plaintiff Paulo Ang hi self. It clai s that under paragraph %+ of the policy, if the loss or da age is occasioned by the willful act of the insured, or if the claim is made and rejected but no action is commenced within 12 months after such rejection, all benefits under the policy would be forfeited, and that since the clai of the plaintiffs was denied and plaintiffs received notice of denial on April %6, %)*8, and they brought the action only on 4ay *, %)*6, all the benefits under the policy have been forfeited. (n February %', %)*), plaintiffs filed a reply to the above answer of the Fulton Fire Insurance, alleging that on 4ay %%, %)*8, plaintiffs had instituted Civil Case #o. '),) in the Court of First Instance of 4anila, to assert the clai 9 that this case was dis issed without pre$udice on Septe ber +, %)*- and that deducting the period within which said action was pending, the present action was still within the %' onth period fro April %', %)*8. The court below held that the bringing of the action in the Court of First Instance of 4anila on 4ay %%, %)*8, tolled the running of the %' onth period within which the action ust be filed. Said the court on this point: True, indeed, plaintiffs co itted a procedural ista2e in first suing the agent instead of its principal, the herein defendant, as correctly pointed out by counsel for the defendant, for !;n agente residente de una co pania de seguros e3tran$era 7ue co ercia en las Islas Filipinos no es responsable co o andante ni co o

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andatario, en virtud de contratas de seguro e3pendidos a no bre de la co pania!, 04acias . Co. vs. <arner, =arnes . Co., ,+ Phil. %8%1. =ut the ista2e being erely procedural, and the defendant not having been isled by the error, !There is nothing sacred about process or pleadings, their for s or contents. Their sole purpose is to facilitate the application of $ustice to the rival clai s of contending parties. They were created not to hinder and delay, but to facilitate and pro ote the ad inistration of $ustice 0Alonso vs. >illa or, %8 Phil *-6.1 The co plaint, ?3h. !C!, was dis issed by the Court without pre$udice 0?3h. !@-%!1 on Septe ber +, %)*-, and otion for reconsideration dated Septe ber '%, %)*-. The instant co plaint was filed on 4ay 6, %)*6. The Aules of Court 0See %+' thereof1 is applicable in the co putation of ti e. #ow, as correctly pointed out by the plaintiffs! counsel, by si ple athe atical co putation, the present action was filed leas thin nine 0)1 onths after the notice of re$ection received by plaintiffs on April %), %)*8, because the filing of the original co plaint stopped the running of the period.B 0/ecision, pp. ,'-,+, A.(.A.1 In view of the reasons thus above 7uoted, the court rendered decision in favor of the plaintiffs. (n the appeal before this Court, defendant-appellant argues that the court below erred in holding that the filing of the previous suit tolled or suspended the running of the prescriptive period. The clause sub$ect of the issue is paragraph %+ of the policy, which reads as follows: %+. If the clai be in any respect fraudulent, or if any false declaration is ade or used in support thereof, or if any fraudulent eans or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy, or, if the loss or da age be occasioned by the willful act or with connivance of the Insured, or, if the clai be ade and re$ected and an action or suit be not co enced within twelve onths after such re$ection or 0in case of arbitration place in pursuance of the %6th condition of this Policy1 within twelve onths after the arbitrator or arbitrators or u pire shall have ade their award, all benefits under this Policy shall be forfeited. 0? phasis supplied1. 0/ecision. p. %&, A.(.A.1. The appellant cites in support of its contention the cases of E. Macias !o. "s. #arner$ Barnes !o.$ %td., ,+ Phil %**9 E. Macias !o. "s. !hina &ire 'nsurance !o., ,8 Phil. +,* and !astillo etc. "s. Metropolitan 'nsurance !o., ,- (.C. 0Septe ber, %)*%1. In answer to appellant!s contention, counsel for appellees contend that the action of the plaintiffs against the defendant had not yet prescribed at the ti e of the bringing of the action, because the period of prescription was interrupted by the filing of the first action against the Para ount Surety . Insurance Co., in accordance with Article %%** of the Civil Code. Counsel further argues that the basis of prescription of an action is the abandon ent by a person of his right of action or clai , so that any act of said person tending to show his intention not to abandon his right of action or clai , as the filing of the previous action in the case at bar, interrupts the period of prescription. Further ore, counsel argues, the dis issal of the previous action is without pre$udice, which eans that plaintiffs have the right to file another co plaint against the principal. The basic error co itted by the trial court is its view that the filing of the action against the agent of the defendant co pany was B erely a procedural ista2e of no significance or conse7uence, which ay be overloo2ed.B The condition contained in the insurance policy that clai s ust be presented within one year after re$ection is not erely a procedural re7uire ent. The condition is an i portant atter, essential to a pro pt settle ent of clai s against insurance co panies, as it de ands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is in the nature of a condition precedent to the liability of the insurer, or in other ter s, a resolutory cause, the purpose of which is to ter inate all liabilities in case the action is not filed by the insured within the period stipulated. The bringing of the action against the Para ount Surety . Insurance Co pany, the agent of the defendant Co pany cannot have any legal effect e3cept that of notifying the agent of the clai . =eyond such notification, the filing of the action can serve no other purpose. There is no law giving any effect to such action upon the principal. =esides, there is no condition in the policy that the action ust be filed against the

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agent, and this Court can not by interpretation, e3tend the clear scope of the agree ent beyond what is agreed upon by the parties. The case of E. Macias !o. "s. !hina &ire 'nsurance !o. has settled the issue presented by the appellees in the case at bar definitely against their clai . In that case, <e declared that the contractual station in an insurance policy prevails over the statutory li itation, as well as over the e3ceptions to the statutory li itations that the contract necessarily supersedes the statute 0of li itations1 and the li itation is in all phases governed by the for er. 0?. 4acias . Co. vs. China Fire Insurance . Co., ,8 Phil. pp. +,*-+*+1. As stated in said case and in accordance with the decision of the Supre e Court of the ;nited States in Aiddlesbarger vs. @artford Fire Insurance Co. 0- <all., +681, the rights of the parties flow fro the contract of insurance, hence they are not bound by the statute of li itations nor by e3e ptions thereto. In the words of our own law, their contract is the law between the parties, and their agree ent that an action on a clai denied by the insurer ust be brought within one year fro the denial, governs, not the rules on the prescription of actions. The $udg ent appealed fro is hereby set aside and the case dis issed, with costs against the plaintiffs-appellees.