ALPHA INSURANCE AND SURETY CO. vs.

ARSENIA SONIA CASTOR

ISSUE:
July 2, 2014 Leave a comment
Whether or not the loss of respondents vehicle is excluded under the insurance policy
G.R. No. 198174, September 2, 2013 (PERALTA, J.)
HELD:
FACTS:
NO. The words loss and damage mean different things in common ordinary usage. The word loss refers to the act or fact of losing, or
Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with Alpha Insurance and Surety Co (Alpha). The
contract of insurance obligates the petitioner to pay the respondent the amount of P630,000 in case of loss or damage to said vehicle during
the period covered.

failure to keep possession, while the word damage means deterioration or injury to property. Therefore, petitioner cannot exclude the loss of
Castors vehicle under the insurance policy under paragraph 4 of Exceptions to Section III, since the same refers only to malicious damage,
or more specifically, injury to the motor vehicle caused by a person under the insureds service. Paragraph 4 clearly does not contemplate
loss of property.

On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle to nearby auto-shop for a tune up. However,
Lanuza no longer returned the motor vehicle and despite diligent efforts to locate the same, said efforts proved futile. Resultantly, respondent
promptly reported the incident to the police and concomitantly notified petitioner of the said loss and demanded payment of the insurance
proceeds.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens Memorial Park
Corporation vs. Philippine American Life Insurance Company, this Court ruled that it must be remembered that an insurance contract is a
contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latters

Alpha, however, denied the demand of Castor claiming that they are not liable since the culprit who stole the vehicle is employed with Castor.

interest.

Under the Exceptions to Section III of the Policy, the Company shall not be liable for (4) any malicious damage caused by the insured, any
member of his family or by A PERSON IN THE INSUREDS SERVICE.

Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional Trial Court of Quezon City. The trial court
rendered its decision in favor of Castor which decision is affirmed in toto by the Court of Appeals. Hence, this Petition for Review on Certiorari.

G.R. No. L-36413 September 26, 1988

MALAYAN INSURANCE CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS (THIRD DIVISION) MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE MILL, INC. and PANGASINAN
TRANSPORTATION CO., INC., respondents.
Freqillana Jr. for petitioner.
B.F. Estrella & Associates for respondent Martin Vallejos.

Vicente Erfe Law Office for respondent Pangasinan Transportation Co., Inc.
Nemesio Callanta for respondent Sio Choy and San Leon Rice Mill, Inc.

deceased driver, Juan P. Campollo, it should be liable for the acts of its employee, pursuant to Art. 2180 of the Civil Code. The herein petitioner
prayed that judgment be rendered against the San Leon Rice Mill, Inc., making it liable for the amounts claimed by the plaintiff and/or ordering
said San Leon Rice Mill, Inc. to reimburse and indemnify the petitioner for any sum that it may be ordered to pay the plaintiff.
After trial, judgment was rendered as follows:

PADILLA, J.:

WHEREFORE, in view of the foregoing findings of this Court judgment is hereby rendered in favor of the plaintiff and
against Sio Choy and Malayan Insurance Co., Inc., and third-party defendant San Leon Rice Mill, Inc., as follows:

Review on certiorari of the judgment * of the respondent appellate court in CA-G.R. No. 47319-R, dated 22 February 1973, which affirmed,
with some modifications, the decision, ** dated 27 April 1970, rendered in Civil Case No. U-2021 of the Court of First Instance of Pangasinan.

(a) P4,103 as actual damages;

The antecedent facts of the case are as follows:

(b) P18,000.00 representing the unearned income of plaintiff Martin C. Vallejos for the period of three (3) years;

On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy Private Car Comprehensive
Policy No. MRO/PV-15753, effective from 18 April 1967 to 18 April 1968, covering a Willys jeep with Motor No. ET-03023 Serial No. 351672,
and Plate No. J-21536, Quezon City, 1967. The insurance coverage was for "own damage" not to exceed P600.00 and "third-party liability" in
the amount of P20,000.00.

(c) P5,000.00 as moral damages;

During the effectivity of said insurance policy, and more particularly on 19 December 1967, at about 3:30 o'clock in the afternoon, the insured
jeep, while being driven by one Juan P. Campollo an employee of the respondent San Leon Rice Mill, Inc., collided with a passenger bus
belonging to the respondent Pangasinan Transportation Co., Inc. (PANTRANCO, for short) at the national highway in Barrio San Pedro,
Rosales, Pangasinan, causing damage to the insured vehicle and injuries to the driver, Juan P. Campollo, and the respondent Martin C.
Vallejos, who was riding in the ill-fated jeep.
As a result, Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO before the
Court of First Instance of Pangasinan, which was docketed as Civil Case No. U-2021. He prayed therein that the defendants be ordered to pay
him, jointly and severally, the amount of P15,000.00, as reimbursement for medical and hospital expenses; P6,000.00, for lost income;
P51,000.00 as actual, moral and compensatory damages; and P5,000.00, for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy was then operated at an excessive speed and bumped the PANTRANCO bus
which had moved to, and stopped at, the shoulder of the highway in order to avoid the jeep; and that it had observed the diligence of a good
father of a family to prevent damage, especially in the selection and supervision of its employees and in the maintenance of its motor vehicles.
It prayed that it be absolved from any and all liability.
Defendant Sio Choy and the petitioner insurance company, in their answer, also denied liability to the plaintiff, claiming that the fault in the
accident was solely imputable to the PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-claim against the herein petitioner wherein he alleged that he had actually paid
the plaintiff, Martin C. Vallejos, the amount of P5,000.00 for hospitalization and other expenses, and, in his cross-claim against the herein
petitioner, he alleged that the petitioner had issued in his favor a private car comprehensive policy wherein the insurance company obligated
itself to indemnify Sio Choy, as insured, for the damage to his motor vehicle, as well as for any liability to third persons arising out of any
accident during the effectivity of such insurance contract, which policy was in full force and effect when the vehicular accident complained of
occurred. He prayed that he be reimbursed by the insurance company for the amount that he may be ordered to pay.
Also later, the herein petitioner sought, and was granted, leave to file a third-party complaint against the San Leon Rice Mill, Inc. for the reason
that the person driving the jeep of Sio Choy, at the time of the accident, was an employee of the San Leon Rice Mill, Inc. performing his duties
within the scope of his assigned task, and not an employee of Sio Choy; and that, as the San Leon Rice Mill, Inc. is the employer of the

(d) P2,000.00 as attomey's fees or the total of P29,103.00, plus costs.

The above-named parties against whom this judgment is rendered are hereby held jointly and severally liable. With
respect, however, to Malayan Insurance Co., Inc., its liability will be up to only P20,000.00.
As no satisfactory proof of cost of damage to its bus was presented by defendant Pantranco, no award should be
made in its favor. Its counter-claim for attorney's fees is also dismissed for not being proved. 1
On appeal, the respondent Court of Appeals affirmed the judgment of the trial court that Sio Choy, the San Leon Rice Mill, Inc. and the
Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to the plaintiff Martin C. Vallejos. It ruled, however, that
the San Leon Rice Mill, Inc. has no obligation to indemnify or reimburse the petitioner insurance company for whatever amount it has been
ordered to pay on its policy, since the San Leon Rice Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the insurance
company. 2
Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's judgment, or, in the alternative, to order the San Leon Rice Mill, Inc. to reimburse
petitioner any amount, in excess of one-half (1/2) of the entire amount of damages, petitioner may be ordered to pay jointly and severally with
Sio Choy.
The Court, acting upon the petition, gave due course to the same, but "only insofar as it concerns the alleged liability of respondent San Leon
Rice Mill, Inc. to petitioner, it being understood that no other aspect of the decision of the Court of Appeals shall be reviewed, hence, execution
may already issue in favor of respondent Martin C. Vallejos against the respondents, without prejudice to the determination of whether or not
petitioner shall be entitled to reimbursement by respondent San Leon Rice Mill, Inc. for the whole or part of whatever the former may pay on
the P20,000.00 it has been adjudged to pay respondent Vallejos." 3
However, in order to determine the alleged liability of respondent San Leon Rice Mill, Inc. to petitioner, it is important to determine first the
nature or basis of the liability of petitioner to respondent Vallejos, as compared to that of respondents Sio Choy and San Leon Rice Mill, Inc.

Therefore, the two (2) principal issues to be resolved are (1) whether the trial court, as upheld by the Court of Appeals, was correct in holding
petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. "solidarily liable" to respondent Vallejos; and (2) whether petitioner is entitled
to be reimbursed by respondent San Leon Rice Mill, Inc. for whatever amount petitioner has been adjudged to pay respondent Vallejos on its
insurance policy.
As to the first issue, it is noted that the trial court found, as affirmed by the appellate court, that petitioner and respondents Sio Choy and San
Leon Rice Mill, Inc. are jointly and severally liable to respondent Vallejos.
We do not agree with the aforesaid ruling. We hold instead that it is only respondents Sio Choy and San Leon Rice Mill, Inc, (to the exclusion
of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded to Vallejos.
It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys jeep, pursuant to Article 2184 of the
Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle,
could have, by the use of due diligence, prevented the misfortune it is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
On the other hand, it is noted that the basis of liability of respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the former being the employer
of the driver of the Willys jeep at the time of the motor vehicle mishap, is Article 2180 of the Civil Code which reads:
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease when the persons herein mentioned proved that they observed all
the diligence of a good father of a family to prevent damage.
It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to respondent
Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily. 4
On the other hand, the basis of petitioner's liability is its insurance contract with respondent Sio Choy. If petitioner is adjudged to pay
respondent Vallejos in the amount of not more than P20,000.00, this is on account of its being the insurer of respondent Sio Choy under the
third party liability clause included in the private car comprehensive policy existing between petitioner and respondent Sio Choy at the time of
the complained vehicular accident.

In Guingon vs. Del Monte, 5 a passenger of a jeepney had just alighted therefrom, when he was bumped by another passenger jeepney. He
died as a result thereof. In the damage suit filed by the heirs of said passenger against the driver and owner of the jeepney at fault as well as
against the insurance company which insured the latter jeepney against third party liability, the trial court, affirmed by this Court, adjudged the
owner and the driver of the jeepney at fault jointly and severally liable to the heirs of the victim in the total amount of P9,572.95 as damages
and attorney's fees; while the insurance company was sentenced to pay the heirs the amount of P5,500.00 which was to be applied as partial
satisfaction of the judgment rendered against said owner and driver of the jeepney. Thus, in said Guingon case, it was only the owner and the
driver of the jeepney at fault, not including the insurance company, who were held solidarily liable to the heirs of the victim.
While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the
insurer, 6 however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be
held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured
is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as incorrectly held by the trial court, be made
"solidarily" liable with the two principal tortfeasors namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were
solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can be
directly sued by a third party this will result in a violation of the principles underlying solidary obligation and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation against one of the solidary debtors. 7 On the other hand, insurance is
defined as "a contract whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an
unknown or contingent event." 8
In the case at bar, the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills Inc. solidarily liable to respondent
Vallejos for a total amount of P29,103.00, with the qualification that petitioner's liability is only up to P20,000.00. In the context of a solidary
obligation, petitioner may be compelled by respondent Vallejos to pay the entire obligation of P29,013.00, notwithstanding the qualification
made by the trial court. But, how can petitioner be obliged to pay the entire obligation when the amount stated in its insurance policy with
respondent Sio Choy for indemnity against third party liability is only P20,000.00? Moreover, the qualification made in the decision of the trial
court to the effect that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay P29,103.00 is made solidary, is an
evident breach of the concept of a solidary obligation. Thus, We hold that the trial court, as upheld by the Court of Appeals, erred in holding
petitioner, solidarily liable with respondents Sio Choy and San Leon Rice Mill, Inc. to respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the decision of the trial court, ruled that petitioner is not entitled to be reimbursed by
respondent San Leon Rice Mill, Inc. on the ground that said respondent is not privy to the contract of insurance existing between petitioner and
respondent Sio Choy. We disagree.
The appellate court overlooked the principle of subrogation in insurance contracts. Thus
... Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs. Moses, 287 U.S. 530, 77 L. ed. 477).
Upon payment of the loss, 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 (44 Am. Jur. 2nd 745, citing
Standard Marine Ins. Co. vs. Scottish Metropolitan Assurance Co., 283 U.S. 284, 75 L. ed. 1037).
The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after
reimbursement or compensation, it becomes the loss of the insurer (44 Am. Jur. 2d, 746, note 16, citing Newcomb vs.
Cincinnati Ins. Co., 22 Ohio St. 382).
Although many policies including policies in the standard form, now provide for subrogation, and thus determine the
rights of the insurer in this respect, the equitable right of subrogation as the legal effect of payment inures to the

insurer without any formal assignment or any express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746).
Stated otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment
to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not
dependent upon , nor does it grow out of any privity of contract (emphasis supplied) or upon written assignment of
claim, and payment to the insured makes the insurer assignee in equity (Shambley v. Jobe-Blackley Plumbing and
Heating Co., 264 N.C. 456, 142 SE 2d 18). 9

VELASCO, JR.,
CHICO-NAZARIO,* and
BRION, JJ.
THE PHILIPPINE AMERICAN Promulgated:
LIFE INSURANCE COMPANY,
Respondent. April 9, 2008
x-----------------------------------------------------------------------------------------x

It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of riot exceeding P20,000.00, shall become the subrogee of
the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter has against respondent San Leon Rice Mill, Inc.
Article 1217 of the Civil Code gives to a solidary debtor who has paid the entire obligation the right to be reimbursed by his co-debtors for the
share which corresponds to each.

DECISION
VELASCO, JR., J.:

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.

The Case

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest
for the payment already made. If the payment is made before the debt is due, no interest for the intervening period
may be demanded.
xxx xxx xxx
In accordance with Article 1217, petitioner, upon payment to respondent Vallejos and thereby becoming the subrogee of solidary debtor Sio
Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to the respondent Martin C.
Vallejos for the amount of P29,103.00. Vallejos may enforce the entire obligation on only one of said solidary debtors. If Sio Choy as solidary
debtor is made to pay for the entire obligation (P29,103.00) and petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said
entire obligation, petitioner would be entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be reimbursed by the latter in
the amount of P14,551.50 (which is 1/2 of P29,103.00 )

Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26, 2004 Decision [1] of the

Court of Appeals (CA) in CA-G.R. CV No. 57810 is the query: May the inaction of the insurer on the insurance application be considered as

approval of the application?

WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed by the Court of Appeals, is hereby AFFIRMED, with the
modification above-mentioned. Without pronouncement as to costs.
The Facts

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City

On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as

SECOND DIVISION
ETERNAL GARDENS MEMORIAL G.R. No. 166245
PARK CORPORATION,
Petitioner,
Present:
CARPIO MORALES,
- versus - Acting Chairperson,
TINGA,

Creditor Group Life Policy No. P-1920 [2] with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of

Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended

by submitting a letter dated December 29, 1982, [4] containing a list of insurable balances of its lot buyers for October 1982. One of those

upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis.

included in the list as new business was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died.

The relevant provisions of the policy are:

Eternal sent a letter dated August 20, 1984[5] to Philamlife, which served as an insurance claim for Chuangs death. Attached to the claim were

ELIGIBILITY.
Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is indebted to the Assured for
the unpaid balance of his loan with the Assured, and is accepted for Life Insurance coverage by the Company on its
effective date is eligible for insurance under the Policy.

the following documents: (1) Chuangs Certificate of Death; (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (3)

EVIDENCE OF INSURABILITY.
No medical examination shall be required for amounts of insurance up to P50,000.00. However, a declaration of good
health shall be required for all Lot Purchasers as part of the application. The Company reserves the right to require
further evidence of insurability satisfactory to the Company in respect of the following:
1. Any amount of insurance in excess of P50,000.00.
2. Any lot purchaser who is more than 55 years of age.
LIFE INSURANCE BENEFIT.
The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan
(including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of
P100,000.00, whichever is smaller. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured
under the Policy.

Certificate of Claimant; (4) Certificate of Attending Physician; and (5) Assureds Certificate.

In reply, Philamlife wrote Eternal a letter on November 12, 1984, [6] requiring Eternal to submit the following documents relative to

its insurance claim for Chuangs death: (1) Certificate of Claimant (with form attached); (2) Assureds Certificate (with form attached); (3)

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured.
However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. [3]

Application for Insurance accomplished and signed by the insured, Chuang, while still living; and (4) Statement of Account showing the unpaid

balance of Chuang before his death.

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each

Eternal transmitted the required documents through a letter dated November 14, 1984,[7] which was received by Philamlife
purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied

on November 15, 1984.

Policy of John Uy Chuang, plus legal rate of interest, until fully paid; and, to pay the sum of P10,000.00 as attorneys
fees.
SO ORDERED.
After more than a year, Philamlife had not furnished Eternal with any reply to the latters insurance claim. This prompted Eternal to

demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.[8]

In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter dated May 20, 1986,[9] a portion of which

reads:

The RTC found that Eternal submitted Chuangs application for insurance which he accomplished before his death, as testified to

by Eternals witness and evidenced by the letter dated December 29, 1982, stating, among others: Encl: Phil-Am Life Insurance Application

Forms & Cert.[10] It further ruled that due to Philamlifes inaction from the submission of the requirements of the group insurance on December

The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial
Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No application for Group
Insurance was submitted in our office prior to his death on August 2, 1984.
In accordance with our Creditors Group Life Policy No. P-1920, under Evidence of Insurability provision, a declaration
of good health shall be required for all Lot Purchasers as party of the application. We cite further the provision on
Effective Date of Coverage under the policy which states that there shall be no insurance if the application is not
approved by the Company. Since no application had been submitted by the Insured/Assured, prior to his death, for
our approval but was submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was not covered
under the Policy. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was
therefore aware of these pertinent provisions.

29, 1982 to Chuangs death on August 2, 1984, as well as Philamlifes acceptance of the premiums during the same period, Philamlife was

deemed to have approved Chuangs application. The RTC said that since the contract is a group life insurance, once proof of death is

submitted, payment must follow.

With regard to our acceptance of premiums, these do not connote our approval per se of the insurance coverage but
are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. We will
however, return all the premiums which have been paid in behalf of John Uy Chuang.
Philamlife appealed to the CA, which ruled, thus:

Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife, docketed as Civil
WHEREFORE, the decision of the Regional Trial Court of Makati in Civil Case No. 57810 is REVERSED
and SET ASIDE, and the complaint is DISMISSED. No costs.
Case No. 14736. The trial court decided in favor of Eternal, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of Plaintiff ETERNAL, against Defendant
PHILAMLIFE, ordering the Defendant PHILAMLIFE, to pay the sum of P100,000.00, representing the proceeds of the

SO ORDERED.[11]

on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion.[12] (Emphasis supplied.)
The CA based its Decision on the factual finding that Chuangs application was not enclosed in Eternals letter dated December 29, 1982. It

In the instant case, the factual findings of the RTC were reversed by the CA; thus, this Court may review them.
further ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance Code. Thus, the CA

Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance
concluded, there being no application form, Chuang was not covered by Philamlifes insurance.

application of Chuang before his death. In Eternals letter dated December 29, 1982, a list of insurable interests of buyers for October 1982
Hence, we have this petition with the following grounds:
The Honorable Court of Appeals has decided a question of substance, not therefore determined by this
Honorable Court, or has decided it in a way not in accord with law or with the applicable jurisprudence, in holding that:
was attached, including Chuang in the list of new businesses. Eternal added it was noted at the bottom of said letter that the corresponding
I.
II.

The application for insurance was not duly submitted to respondent PhilamLife before the death of John
Chuang;
There was no valid insurance coverage; and

III. Reversing and setting aside the Decision of the Regional Trial Court dated May 29, 1996.

The Courts Ruling

As a general rule, this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts,

considering their findings of facts are conclusive and binding on this Court. However, such rule is subject to exceptions, as enunciated

in Sampayan v. Court of Appeals:

(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the
[CA] went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings [of the CA] are contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in
the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised

Phil-Am Life Insurance Application Forms & Cert. were enclosed in the letter that was apparently received by Philamlife on January 15, 1983.

Finally, Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his

death.

On the other hand, Philamlife claims that the evidence presented by Eternal is insufficient, arguing that Eternal must present evidence showing

that Philamlife received a copy of Chuangs insurance application.

The evidence on record supports Eternals position.

The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that the insurance forms for the

facts or circumstances of weight and substance have been overlooked, misapprehended, or misinterpreted, [14] that, if considered, might affect

attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together

the result of the case.[15]

with the attachments. Such receipt is an admission by Philamlife against its own interest. [13] The burden of evidence has shifted to Philamlife,

An examination of the testimonies of the witnesses mentioned by Philamlife, however, reveals no overlooked facts of substance and value.

which must prove that the letter did not contain Chuangs insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed

Philamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was, as shown by the testimony

to have received Chuangs insurance application.

of Edilberto Mendoza:
Atty. Arevalo:
Q Where is the original of the application form which is required in case of new coverage?

To reiterate, it was Philamlifes bounden duty to make sure that before a transmittal letter is stamped as received, the contents of the letter are

[Mendoza:]
A It is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is
submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the
marketing department of EternalGardens.

correct and accounted for.

Atty. Miranda:
We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not
[ask] for the number of copy.

Philamlifes allegation that Eternals witnesses ran out of credibility and reliability due to inconsistencies is groundless. The trial court is in the

Atty. Arevalo:
Q Where is the original?

best position to determine the reliability and credibility of the witnesses, because it has the opportunity to observe firsthand the witnesses

[Mendoza:]
A As far as I remember I do not know where the original but when I submitted with that payment together with the new
clients all the originals I see to it before I sign the transmittal letter the originals are attached therein. [16]

demeanor, conduct, and attitude. Findings of the trial court on such matters are binding and conclusive on the appellate court, unless some
In other words, the witness admitted not knowing where the original insurance application was, but believed that the application

was transmitted to Philamlife as an attachment to a transmittal letter.

As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms

were accomplished and the testimony of Mendoza on who actually filled out the application form, these are minor inconsistencies that do not

affect the credibility of the witnesses. Thus, we ruled in People v. Paredes that minor inconsistencies are too trivial to affect the credibility of

This question must be answered in the affirmative.

As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. P-1920

dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

witnesses, and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed.

[17]

We reiterated the above ruling in Merencillo v. People:

Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecutions evidence
as a whole or reflect on the witnesses honesty. The test is whether the testimonies agree on essential facts and
whether the respective versions corroborate and substantially coincide with each other so as to make a consistent
and coherent whole.[18]

In the present case, the number of copies of the insurance application that Chuang executed is not at issue, neither is whether the insurance

application presented by Eternal has been falsified. Thus, the inconsistencies pointed out by Philamlife are minor and do not affect the

credibility of Eternals witnesses.

However, the question arises as to whether Philamlife assumed the risk of loss without approving the application.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the
Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the
Company.
An examination of the above provision would show ambiguity between its two sentences. The first sentence appears
to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with
Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same
can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the

insured and strictly against the insurer in order to safeguard the latters interest. Thus, in Malayan Insurance Corporation v. Court of Appeals,

this Court held that:

Indemnity and liability insurance policies are construed in accordance with the general rule of resolving
any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of
insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against
the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude
the insurer from noncompliance with its obligations.[19] (Emphasis supplied.)

In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated the above ruling, stating that:

When the terms of insurance contract contain limitations on liability, courts should construe them in such
a way as to preclude the insurer from non-compliance with his obligation. Being a contract of adhesion, the terms of
an insurance contract are to be construed strictly against the party which prepared the contract, the insurer. By
reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract,
ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid
forfeiture.[20]

understandable to laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are imbued with public

Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920 dated December 10,
1980, must be construed in favor of the insured and in favor of the effectivity of the insurance contract.
interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a partys purchase of a memorial
protect the interest of insurance applicants, insurance companies must be obligated to act with haste upon insurance applications, to either

lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until
deny or approve the same, or otherwise be bound to honor the application as a valid, binding, and effective insurance contract. [21]

terminated by Philamlife by disapproving the insurance application. The second sentence of Creditor Group Life Policy No. P-1920 on the
WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision in CA-G.R. CV No. 57810 is REVERSED andSET ASIDE. The

Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the
May 29, 1996 Decision of the Makati City RTC, Branch 138 is MODIFIED. Philamlife is hereby ORDERED:

mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the
(1) To pay Eternal the amount of PhP 100,000 representing the proceeds of the Life Insurance Policy of Chuang;

insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.
(2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100,000 from the time of extra-judicial demand by Eternal

As a final note, to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. Insurance
until Philamlifes receipt of the May 29, 1996 RTC Decision on June 17, 1996;

contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. More often
(3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100,000 from June 17, 1996 until full payment of this

than not, insurance contracts are contracts of adhesion containing technical terms and conditions of the industry, confusing if at all
award; and

(4) To pay Eternal attorneys fees in the amount of PhP 10,000.

No costs.

SO ORDERED.